Exhibit 4.22
________________________________________________________________________________
SALE AND SERVICING
AGREEMENT
AMONG
CPS AUTO RECEIVABLES TRUST 2007-TFC, AS
ISSUER,
CPS RECEIVABLES TWO CORP., AS
SELLER,
CONSUMER PORTFOLIO SERVICES, INC.,
INDIVIDUALLY AND AS SERVICER
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS
BACKUP SERVICER AND TRUSTEE
DATED AS OF APRIL 1, 2007
________________________________________________________________________________
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS................................................................................2
SECTION 1.1 Definitions..................................................................2
ARTICLE II CONVEYANCE OF RECEIVABLES................................................................31
SECTION 2.1 Conveyance of Receivables...................................................31
SECTION 2.2 Conveyance of Subsequent Receivables........................................32
SECTION 2.3 Transfers Intended as Sales.................................................36
SECTION 2.4 Further Encumbrance of Trust Property.......................................36
SECTION 2.5 Conveyance of Additional Servicing Compensation.............................37
ARTICLE III THE RECEIVABLES.........................................................................37
SECTION 3.1 Representations and Warranties of Seller....................................37
SECTION 3.2 Repurchase upon Breach......................................................44
SECTION 3.3 Custody of Receivables Files................................................45
SECTION 3.4 Acceptance of Receivable Files by Trustee...................................46
SECTION 3.5 Access to Receivable Files..................................................47
SECTION 3.6 Trustee to Deliver Monthly Receivable File Report...........................48
SECTION 3.7 Trustee to Maintain Secure Facilities.......................................48
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES..............................................48
SECTION 4.1 Duties of the Servicer......................................................48
SECTION 4.2 Collection of Receivable Payments; Modifications of Receivables;
Lockbox Agreements .........................................................49
SECTION 4.3 Realization Upon Receivables................................................51
SECTION 4.4 Insurance...................................................................52
SECTION 4.5 Maintenance of Security Interests in Vehicles...............................52
SECTION 4.6 Additional Covenants of Servicer............................................53
SECTION 4.7 Purchase of Receivables Upon Breach of Covenant.............................54
SECTION 4.8 Servicing Fee...............................................................54
SECTION 4.9 Servicer's Certificate......................................................55
SECTION 4.10 Annual Statement as to Compliance, Notice of Servicer Termination Event.....55
SECTION 4.11 Annual Independent Accountants' Report......................................55
SECTION 4.12 Access to Certain Documentation and Information Regarding Receivables.......56
SECTION 4.13 Verification of Servicer's Certificate......................................57
SECTION 4.14 Retention and Termination of Servicer.......................................59
SECTION 4.15 Fidelity Bond...............................................................59
SECTION 4.16 Optional Purchase of Certain Receivables....................................59
ARTICLE V TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO SECURITYHOLDERS..............................60
SECTION 5.1 Establishment of Trust Accounts.............................................60
SECTION 5.2 Capitalized Interest Account................................................62
SECTION 5.3 Certain Reimbursements to the Servicer......................................63
SECTION 5.4 Application of Collections..................................................63
SECTION 5.5 Withdrawals from Series 2007-TFC Spread Account.............................63
SECTION 5.6 Additional Deposits.........................................................64
SECTION 5.7 Distributions...............................................................64
SECTION 5.8 Note Distribution Account...................................................68
SECTION 5.9 Certain Rights of the Residual Certificateholders...........................70
SECTION 5.10 Pre-Funding Account.........................................................71
SECTION 5.11 Statements to Securityholders...............................................72
SECTION 5.12 Optional Deposits by the Note Insurer; Notice of Waivers....................74
ARTICLE VI THE NOTE POLICY..........................................................................75
SECTION 6.1 Claims Under Note Policy....................................................75
SECTION 6.2 Preference Claims...........................................................76
SECTION 6.3 Surrender of Note Policy....................................................77
ARTICLE VII [RESERVED]..............................................................................77
ARTICLE VIII THE SELLER.............................................................................77
SECTION 8.1 Representations of the Seller...............................................77
SECTION 8.2 Sale Treatment..............................................................80
SECTION 8.3 [Reserved]..................................................................80
SECTION 8.4 Liability of Seller; Indemnities............................................80
SECTION 8.5 Merger or Consolidation of, or Assumption of the Obligations of, Seller.....81
SECTION 8.6 Limitation on Liability of Seller and Others................................82
SECTION 8.7 Seller May Own Residual Pass-through Certificates or Notes..................82
ARTICLE IX THE SERVICER.............................................................................82
SECTION 9.1 Representations of Servicer.................................................82
SECTION 9.2 Liability of Servicer; Indemnities..........................................84
SECTION 9.3 Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer or Backup Servicer.................................................86
SECTION 9.4 Limitation on Liability of Servicer, Backup Servicer and Others.............87
SECTION 9.5 Delegation of Duties........................................................87
SECTION 9.6 Servicer and Backup Servicer Not to Resign..................................88
ARTICLE X DEFAULT...................................................................................88
SECTION 10.1 Servicer Termination Event..................................................88
SECTION 10.2 Consequences of a Servicer Termination Event................................90
SECTION 10.3 Appointment of Successor....................................................91
SECTION 10.4 Notification to Securityholders.............................................92
SECTION 10.5 Waiver of Past Defaults.....................................................93
SECTION 10.6 Action Upon Certain Failures of the Servicer................................93
ARTICLE XI TERMINATION..............................................................................93
SECTION 11.1 Optional Purchase of All Receivables........................................93
ARTICLE XII ADMINISTRATIVE DUTIES OF THE SERVICER...................................................94
SECTION 12.1 Administrative Duties.......................................................94
SECTION 12.2 Records.....................................................................97
SECTION 12.3 Additional Information to be Furnished to the Issuer........................97
ARTICLE XIII MISCELLANEOUS PROVISIONS...............................................................97
SECTION 13.1 Amendment...................................................................97
SECTION 13.2 Protection of Title to Trust................................................99
SECTION 13.3 Notices....................................................................101
SECTION 13.4 Assignment.................................................................101
SECTION 13.5 Limitations on Rights of Others............................................102
SECTION 13.6 Severability...............................................................102
SECTION 13.7 Separate Counterparts......................................................102
SECTION 13.8 Headings...................................................................102
SECTION 13.9 Governing Law..............................................................102
SECTION 13.10 Assignment to Trustee......................................................103
SECTION 13.11 Nonpetition Covenants......................................................103
SECTION 13.12 Limitation of Liability of Owner Trustee and Trustee.......................103
SECTION 13.13 Independence of the Servicer...............................................104
SECTION 13.14 No Joint Venture...........................................................104
SECTION 13.15 Note Insurer as Controlling Party..........................................104
SECTION 13.16 Acknowledgment of Roles....................................................105
SECTION 13.17 Intention of Parties Regarding Delaware Securitization Act.................105
SCHEDULES
Schedule A-Schedule of Receivables
Schedule B-Location for Delivery of Receivable Files
EXHIBITS
Exhibit A - Form of Subsequent Transfer Agreement
Exhibit B - Form of Servicer's Certificate
Exhibit C - Form of Release Request
Exhibit D - Form of Servicing Officer's Certificate
Exhibit E - Form of Monthly Securityholder Statement
Exhibit F-1 - Form of Trustee's Certificate Pursuant to
Section 3.2 or 3.4
Exhibit F-2 - Form of Trustee's Certificate Pursuant to
Section 4.7, 4.16 or 11.1
Exhibit G -Schedule of Successor Servicing Fees, Expenses and
Distributions
Exhibit H -1- Fee Schedule - CPS Auto Receivables Trust 2007-TFC
Exhibit H-2 - Fee Schedule - CPS Cayman Residual Trust 2007-TFC
SALE AND SERVICING AGREEMENT dated as of April 1, 2007, among CPS AUTO
RECEIVABLES TRUST 2007-TFC, a Delaware statutory trust, as Issuer, CPS
RECEIVABLES TWO CORP., a Delaware corporation, as Seller, CONSUMER PORTFOLIO
SERVICES, INC., a California corporation, individually and as Servicer, WELLS
FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Backup
Servicer and Trustee.
WHEREAS the Issuer desires to purchase a portfolio of receivables
arising in connection with motor vehicle retail installment sale contracts
initially acquired by the Applicable Purchasers (defined below) through motor
vehicle dealers and independent finance companies;
WHEREAS the Seller has purchased such receivables from CPS (defined
below) and is willing to sell such receivables to the Issuer;
WHEREAS the Issuer desires to purchase additional receivables arising
in connection with motor vehicle retail installment sale contracts to be
acquired by CPS on or after the Closing Date;
WHEREAS the Seller has agreements to purchase such additional
receivables from CPS and is willing to sell such receivables to the Issuer; and
WHEREAS the Servicer is willing to service all such receivables.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS
SECTION 1.1 DEFINITIONS. (a) Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.11.
"Actuarial Receivable" means any Receivable providing for the
amortization of the Receivable over a series of fixed level monthly payments.
Each Actuarial Receivable provides for the payment by the Obligor of a specified
total number of payments, payable in monthly installments on the related due
date, which total represents the principal amount financed and finance charges
in an amount calculated on the basis of a stated APR for the term of such
Receivable.
"Addition Notice" means, with respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.2 of this Agreement, notice of
the Seller's election to transfer Subsequent Receivables to the Trust, such
notice to designate the related Subsequent Transfer Date and the approximate
principal amount of Subsequent Receivables to be transferred on such Subsequent
Transfer Date.
2
"Additional Servicing Compensation" shall mean, with respect to a
Receivable, any late fees, prepayment charges and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables
collected (from whatever source) on the Receivables.
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition, the term "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling," "controlled
by" and "under common control with" have meanings correlative to the foregoing.
"Aggregate Extension Percentage Limitation" has the meaning assigned to
such term in Section 4.2.
"Aggregate Note Balance" means, as of any date of determination, the
sum of the Class A-1 Note Balance and the Class A-2 Note Balance.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable prior to the end of the
related Collection Period and (ii) any Receivable that became a Purchased
Receivable prior to the end of the related Collection Period) as of the date of
determination.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service and warranty contracts, other items
customarily financed as part of retail automobile installment sale contracts or
promissory notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Applicable Purchaser" means, (a) with respect to the CPS Receivables,
CPS, (b) with respect to the SeaWest Receivables, SeaWest, and (c) with respect
to the TFC Receivables, TFC.
"Assumption Date" has the meaning specified in Section 10.3(a).
3
"Backup Servicer" means Wells Fargo Bank, National Association, in its
capacity as Backup Servicer under this Agreement.
"Backup Servicing Fee" means the fee payable to the Backup Servicer so
long as CPS is the Servicer, on each Payment Date in an amount equal to the
greater of (a) $2,000 or (b) one-twelfth of 0.03% of the aggregate Collateral
Balance as of the first day of the related Collection Period; provided, however,
that on the first Payment Date the Backup Servicer will be entitled to receive
an amount equal to the greater of (a) $2,000 or (b) the product of (i) the
percentage equivalent of a fraction the numerator of which is the number days
from the Closing Date to but excluding the first Payment Date and the
denominator of which is 360, (ii) 0.03% and (iii) the Original Aggregate Note
Balance.
"Basic Documents" means this Agreement, the Certificate of Trust, the
Trust Agreement, the Indenture, the Receivables Purchase Agreement, each
Subsequent Receivables Purchase Agreement, each Subsequent Transfer Agreement,
the Master Spread Account Agreement, the Spread Account Supplement, the
Insurance Agreement, the Indemnification Agreement, the Servicing Assumption
Agreement, the Lockbox Agreement, the Premium Letter, the Placement Agency
Agreement, the Notes, the Residual Pass-through Certificates, any trust
agreement, indenture or other agreement to which the Seller, CPS or the Trust or
any of their respective Affiliates is a party entered into in connection with a
transfer of any interest in the Residual Pass-through Certificates, any
securities representing direct or indirect interests in the Residual
Pass-through Certificates and other documents and certificates delivered in
connection with the foregoing.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York, the State of Minnesota,
the State in which the executive offices of the Servicer are located and the
State in which the principal place of business of the Note Insurer is located
shall be authorized or obligated by law, executive order, or governmental decree
to be closed.
"Capitalized Interest Account" means the account designated as such,
established and maintained pursuant to Sections 5.1 and 5.2.
"Capitalized Interest Account Initial Deposit" means $240,944.35.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Cayman Indenture" means the Indenture dated May 9, 2007, between the
Cayman Trustee, in its capacity as trustee of the Cayman Trust, as issuer, and
Wells Fargo Bank, National Association, as trustee, as the same may be amended
or supplemented from time to time in accordance with the terms thereof.
"Cayman Indenture Trustee" means the Person acting as trustee under the
Cayman Indenture, its successors in interest and any successor trustee under the
Cayman Indenture.
4
"Cayman Trust" means Cayman Residual Trust 2007-TFC, a trust organized
under the laws of the Cayman Islands.
"Cayman Trust Agreement" means the trust agreement between the Seller
and Wilmington Trust (Cayman), Ltd. pursuant to which the Cayman Trust is
created, as the same may be amended, amended and restated or otherwise modified
in accordance with its terms from time to time.
"Cayman Trustee" means the Person acting as trustee of the Cayman
Trust, its successors in interest and any successor trustee under the Cayman
Trust Agreement.
"Cayman Trustee Fees" means, for any Collection Period, the sum of (A)
one-twelfth of the fee set forth on EXHIBIT H-2 payable to Wells Fargo Bank,
National Association as Cayman Indenture Trustee and backup administrator; (B)
the fees payable to the Cayman Trust pursuant to Article VIII of the Cayman
Trust Agreement; (C) reasonable out-of-pocket expenses (including reasonable
counsel fees and expenses) of the Cayman Trustee and the Cayman Indenture
Trustee; and (D) any such unpaid fees and expenses for prior Collection Periods.
"Certificate Register" has the meaning assigned to such term in the
Trust Agreement.
"Certificate Registrar" has the meaning assigned to such term in the
Trust Agreement.
"Class" means the Class A-1 Notes or the Class A-2 Notes, as the
context requires.
"Class A-1 Final Scheduled Payment Date" means the Payment Date
occurring in May 2008.
"Class A-1 Interest Rate" means 5.3624% per annum.
"Class A-1 Note Balance" on the Closing Date will equal the Original
Class A-1 Note Balance and on any date thereafter will equal the Original Class
A-1 Note Balance reduced by all distributions of principal previously made in
respect of the Class A-1 Notes.
"Class A-1 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-2 Final Scheduled Payment Date" means the Payment Date
occurring in December 2013.
"Class A-2 Interest Rate" means 5.25% per annum.
"Class A-2 Note Balance" on the Closing Date will equal the Original
Class A-2 Note Balance and on any date thereafter will equal the Original Class
A-2 Note Balance reduced by all distributions of principal previously made in
respect of the Class A-2 Notes.
5
"Class A-2 Notes" has the meaning assigned to such term in the
Indenture.
"Clean-up Call Receivables" means, collectively, (i) CPS Receivables
acquired by CPS (or one of its wholly-owned subsidiaries) pursuant to the
exercise of optional purchase rights under the CPS Auto Receivables Trust
2001-A, 2002-A, 2002-B, 2002-C and 2003-A securitization transactions, (ii) TFC
Receivables acquired by CPS (or one of its wholly-owned subsidiaries) pursuant
to the exercise of optional purchase rights under the TFC Automobile Receivables
Trust 2003-1 securitization transaction and the PCR Automobile Receivables Trust
2004-1 securitization transaction, (iii) SeaWest Receivables acquired by CPS (or
one of its wholly-owned subsidiaries) pursuant to the exercise of optional
purchase rights under the PCR Automobile Receivables Trust 2004-1 securitization
transaction, and (iv) any other Receivables designated as such in the related
Subsequent Transfer Agreement.
"Closing Date" means May 9, 2007.
"Code" has the meaning specified in Section 3.2.
"Collateral" has the meaning assigned to such term in the Indenture.
"Collateral Agent" means Wells Fargo Bank, National Association, in its
capacity as Collateral Agent under the Master Spread Account Agreement.
"Collateral Balance" means, as of any date of determination, the sum of
(i) the Pool Balance as of such date, and (ii) the Pre-Funded Amount as of such
date.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1.
"Collection Period" means, with respect to each Payment Date, the
calendar month preceding the calendar month in which such Payment Date occurs.
Any amount stated "as of the close of business on the last day of a Collection
Period" shall give effect to the following calculations as determined as of the
end of the day on such last day: (i) all applications of collections, and (ii)
all distributions.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" shall be determined in accordance with the
provisions of Section 13.15.
"Corporate Trust Office" means (i) with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee, which at the time of
execution of this agreement is Rodney Square North, 1100 N. Market Street,
Wilmington, Delaware 19890-0001, and (ii) with respect to the Trustee, the
principal corporate trust office of the Trustee, which at the time of execution
of this agreement is Sixth Street and Marquette Avenue, MAC N9311-161,
Minneapolis, Minnesota, 55479, Attention: Corporate Trust Services/Asset Backed
Administration - CPS 2007-TFC.
6
"CPS" means Consumer Portfolio Services, Inc., a California corporation
and its successors.
"CPS Contract Purchase Guidelines" means CPS's established "Contract
Purchase Guidelines," as the same may be amended from time to time.
"CPS Pool Balance" means, as of any date of determination, the
aggregate Principal Balance of the CPS Receivables (excluding CPS Receivables
that are Purchased Receivables or Liquidated Receivables).
"CPS Receivables" means Receivables initially purchased by CPS from a
Dealer.
"CPS Servicing Fee" means, with respect to the CPS Receivables and each
Payment Date, an amount equal to one-twelfth of the product of (a) the
applicable Servicing Fee Rate, and (b) the CPS Pool Balance as of the close of
business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Payment Date the CPS Servicing Fee shall
be an amount equal to the one-twelfth of the product of (a) the applicable
Servicing Fee Rate and (b) the Original CPS Pool Balance; provided further, that
the CPS Servicing Fee shall be zero for each Payment Date occurring after the
date, if any, on which CPS is terminated as Servicer pursuant to Section 10.2.
"Cram Down Loss" means, with respect to a Receivable (other than a
Liquidated Receivable), if a court of appropriate jurisdiction in an insolvency
proceeding issues a ruling that reduces the amount owed on a Receivable or
otherwise modifies or restructures the Scheduled Receivable Payments to be made
thereon, an amount equal to the sum of (a) the Principal Balance of the
Receivable immediately prior to such order minus the Principal Balance of such
Receivable as so reduced, modified or restructured, plus (b) if such court shall
have issued an order reducing the effective rate of interest on such Receivable,
an amount equal to the excess of (i) the net present value (using as a discount
rate a rate equal to the adjusted APR on such Receivable) of the Scheduled
Receivable Payments as so modified or restructured over (ii) the net present
value (using as a discount rate a rate equal to the original APR on such
Receivable) of the Scheduled Receivable Payments as so modified or restructured.
A Cram Down Loss will be deemed to have occurred on the date of issuance of such
order.
"Cumulative Net Loss Rate" has the meaning assigned thereto in the
Insurance Agreement.
"Cutoff Date" means the Initial Cutoff Date (in the case of the Initial
Receivables) or the applicable Subsequent Cutoff Date (in the case of a
Subsequent Receivable), as applicable.
"Dealer" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to the Applicable
Purchaser, who in turn sold such Receivable to the Seller, or a third party who
purchased a Receivable from a Dealer and who sold such Receivable to the
Applicable Purchaser under a Dealer Agreement or pursuant to a Dealer
Assignment.
7
"Dealer Agreement" means an agreement between a Dealer, or a third
party who purchased a Receivable from a Dealer, and the Applicable Purchaser
relating to the acquisition of Receivables from such Dealer by the Applicable
Purchaser.
"Dealer Assignment" means, with respect to a Receivable, the assignment
executed by a Dealer, or a third party who purchased a Receivable from a Dealer,
conveying such Receivable to the Applicable Purchaser.
"Defaulted Texas Receivables" means Receivables as to which more than
10% of a Scheduled Receivable Payment of more than ten dollars shall have become
90 or more days delinquent as of the end of a Collection Period, and which are
subject to purchase pursuant to Section 4.16(b).
"Deficiency Claim Amount" has the meaning set forth in Section 5.5(a).
"Deficiency Notice" has the meaning set forth in Section 5.5(a).
"Delinquency Ratio" has the meaning assigned such term in the Insurance
Agreement.
"Delivery" means, when used with respect to Trust Account Property:
(terms used in the following provisions that are not otherwise defined are used
as defined in Articles 8 and 9 of the UCC):
(i) in the case of such Trust Account Property consisting of
security entitlements not covered by the following paragraphs in this
definition of Delivery, by (1) causing the Trustee or related
securities intermediary to indicate by book entry that a financial
asset related to such securities entitlement has been credited to the
related Trust Account and (2) causing the Trustee or related securities
intermediary to indicate that the Trustee is the sole entitlement
holder of each such securities entitlement and causing the Trustee or
related securities intermediary to agree that it will comply with
entitlement orders originated by the Trustee with respect to each such
security entitlement without further consent by the Issuer;
(ii) in the case of each certificated security (other than a
clearing corporation security (as defined below)) or instrument by: (1)
the delivery of such certificated security or instrument to the Trustee
or related securities intermediary registered in the name of the
Trustee or related securities intermediary or its respective affiliated
nominee or endorsed to the Trustee or related securities intermediary
in blank; (2) causing the Trustee or related securities intermediary to
continuously indicate by book-entry that such certificated security or
8
instrument is credited to the related Trust Account; and (3) the
Trustee or related securities intermediary maintaining continuous
possession of such certificated security or instrument;
(iii) in the case of each uncertificated security (other than
a clearing corporation security (as defined below)), by causing: (1)
such uncertificated security to be continuously registered in the books
of the issuer thereof to the Trustee or related securities
intermediary; and (2) the Trustee or related securities intermediary to
continuously indicate by book-entry that such uncertificated security
is credited to the related Trust Account;
(iv) in the case of each security in the custody of or
maintained on the books of a clearing corporation (a "clearing
corporation security"), by causing: (1) the relevant clearing
corporation to credit such clearing corporation security to the
securities account of the Trustee or related securities intermediary at
such clearing corporation; and (2) the Trustee or related securities
intermediary to continuously indicate by book-entry that such clearing
corporation security is credited to the related Trust Account;
(v) in the case of each security issued or guaranteed by the
United States of America or agency or instrumentality thereof (other
than a security issued by the Government National Mortgage Association)
representing a full faith and credit obligation of the United States of
America and that is maintained in book-entry records of the Federal
Reserve Bank of New York ("FRBNY") (each such security, a "government
security"), by causing: (1) the creation of a security entitlement to
such government security by the credit of such government security to
the securities account of the Trustee or related securities
intermediary at the FRBNY; and (2) the Trustee or related securities
intermediary to continuously indicate by book-entry that such
government security is credited to the related Trust Account.
(vi) in each case of delivery contemplated pursuant to clauses
(ii) through (v) hereof, the Trustee shall make appropriate notations
on its records, and shall cause the same to be made on the records of
its nominees, indicating that such Trust Property which constitutes a
security is held in trust pursuant to and as provided in this
Agreement.
"Determination Date" means the earlier of (i) the seventh Business Day
of each calendar month and (ii) the fifth Business Day preceding the related
Payment Date.
"Draw Date" means with respect to any Payment Date, the third Business
Day immediately preceding such Payment Date.
"Eligible Account" means (i) a segregated trust account that is
maintained with a depository institution acceptable to the Note Insurer (so long
as an Insurer Default shall not have occurred and be continuing), or (ii) a
segregated direct deposit account maintained with a depository institution or
trust company organized under the laws of the United States of America, or any
9
of the States thereof, or the District of Columbia, having a certificate of
deposit, short-term deposit or commercial paper rating of at least "A-1+" by
Standard & Poor's and "Prime-1" by Moody's and (so long as an Insurer Default
shall not have occurred and be continuing) acceptable to the Note Insurer;
provided that the Note Insurer shall not be required to give its prior written
consent with respect to such an account maintained with Wells Fargo Bank,
National Association
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in registered form which
evidence:
(i) direct obligations of, and obligations fully
guaranteed as to the full and timely payment by, the United States of
America;
(ii) demand deposits, time deposits or certificates
of deposit of any depository institution or trust company incorporated
under the laws of the United States of America or any State thereof (or
any domestic branch of a foreign bank) and subject to supervision and
examination by Federal or State banking or depository institution
authorities; provided, however, that at the time of the investment or
contractual commitment to invest therein, the commercial paper or other
short-term unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such
depository institution or trust company) thereof shall be rated "A-1+"
by Standard & Poor's and "Prime-1" by Moody's;
(iii) commercial paper that, at the time of the
investment or contractual commitment to invest therein, is rated "A-1+"
by Standard & Poor's and "Prime-1" by Moody's;
(iv) bankers' acceptances issued by any depository
institution or trust company referred to in clause (ii) above;
(v) repurchase obligations with respect to any
security that is a direct obligation of, or fully guaranteed as to the
full and timely payment by, the United States of America or any agency
or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case
entered into with (a) a depository institution or trust company (acting
as principal) described in clause (ii) or (b) a depository institution
or trust company whose commercial paper or other short term unsecured
debt obligations are rated "A-1+" by Standard & Poor's and "Prime-1" by
Moody's and long term unsecured debt obligations are rated "AAA" by
Standard & Poor's and "Aaa" by Moody's;
(vi) with the prior written consent of the Note
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) money market mutual funds registered under the Investment
Company Act of 1940, as amended, having a rating, at the time of such
investment, from each of the Rating Agencies in the highest investment
category granted thereby; PROVIDED that the Note Insurer shall not be
required to give its prior written consent for Wells Fargo Money Market
Funds; and
10
(vii) any other investment as may be acceptable to
the Note Insurer, as evidenced by a writing to that effect, as may from
time to time be confirmed in writing to the Trustee by the Note Insurer
and as to which the Rating Agency Condition is satisfied;
provided that, in all cases the amounts paid with respect to such
instruments or securities not constituting principal must constitute either (i)
portfolio interest, as defined in Code Section 871(h)(2), (ii) interest on
deposits from a bank, within the meaning of Code Section 871(i)(2) or (iii)
payments of interest or dividends by a Person who is not a United States Person
and which interest or dividends is described in Code Section 862(a)(1) or (2);
provided, further, that an Eligible Investment must have a fixed principal
amount due at maturity and, if rated by S&P, must not have an "r" suffix
attached to the rating.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Trustee or any of their respective Affiliates.
"Eligible Servicer" means a Person approved to act as "Servicer" under
this Agreement by a Note Majority.
"ERISA" has the meaning specified in Section 3.2.
"Event of Default" has the meaning specified in the Indenture.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Payment Date" means with respect to the Class A-1
Notes, the Class A-1 Final Scheduled Payment Date and with respect to the Class
A-2 Notes, the Class A-2 Final Scheduled Payment Date.
"Financed Vehicle" means a new or used automobile, light truck, van,
minivan or motorcycle, together with all accessions thereto, securing an
Obligor's indebtedness under a Receivable.
"Funding Period" means the period beginning on and including the
Closing Date and ending on the first to occur of (a) the first date on which the
amount on deposit in the Pre-Funding Account (after giving effect to any
transfers therefrom in connection with the transfer of Subsequent Receivables to
the Issuer on such date) is less than $100,000, (b) the date on which an Event
of Default or a Servicer Termination Event occurs, (c) the date on which an
Insolvency Event occurs with respect to the Seller, and (d) June 30, 2007.
"Holder" means either a Noteholder or a Residual Certificateholder as
the context requires.
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"Indemnification Agreement" means the Indemnification Agreement among
the Note Insurer, CPS, the Seller and the Placement Agent, dated as of May 2,
2007, as such agreement may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof.
"Indenture" means the Indenture dated as of April 1, 2007, between the
Issuer and Wells Fargo Bank, National Association, as trustee, as the same may
be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
"Initial Cutoff Date" means the close of business on March 31, 2007.
"Initial Receivable" means each retail installment sale contract for a
Financed Vehicle which, as of the Closing Date, is listed on Schedule A (which
Schedule A may be in the form of microfiche) and all rights and obligations
thereunder except for Initial Receivables that shall have become Purchased
Receivables.
"Initial Spread Account Deposit" has the meaning specified in the
Spread Account Supplement.
"Initial Trust Property" means the property and proceeds conveyed
pursuant to Section 2.1, together with all monies received with respect to the
Initial Receivables after the Initial Cutoff Date, the Insurance Policies, the
Collection Account (including all Eligible Investments therein and all proceeds
therefrom), the Lockbox Account and certain other rights under this Agreement.
Although the Seller has pledged the Series 2007-TFC Spread Account to the
Collateral Agent pursuant to the Spread Account Supplement, the Series 2007-TFC
Spread Account shall not under any circumstances be deemed to be a part of or
otherwise includable in the Trust or the Initial Trust Property.
"Insolvency Event" means, with respect to a specified Person, (a) the
institution of a proceeding or the filing of a petition against such Person
seeking the entry of a decree or order for relief by a court having jurisdiction
in the premises in respect of such Person or any substantial part of its
property in an involuntary case under any applicable Federal or State
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Federal or State bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by, a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
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"Insurance Agreement" means the Insurance and Indemnity Agreement among
the Trust, CPS, the Seller, the Trustee and the Note Insurer, dated as of May 9,
2007, as such agreement may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof.
"Insurance Agreement Event of Default" means an "Event of Default" as
defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4 hereof)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Insurer Default" shall mean any one of the following events shall have
occurred and be continuing:
(i) the Note Insurer fails to make a payment required under
the Note Policy in accordance with its terms;
(ii) the Note Insurer (A) files any petition or commences any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York Department of Insurance Code or similar
Federal or State law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors or (C) has an order for
relief entered against it under the United States Bankruptcy Code or
any other similar Federal or State law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or
(iii) a court of competent jurisdiction or the New York
Department of Insurance or any other competent regulatory authority
enters a final and nonappealable order, judgment or decree (A)
appointing a custodian, trustee, agent or receiver for the Note Insurer
or for all or any material portion of its property or (B) authorizing
the taking of possession by a custodian, trustee, agent or receiver of
the Note Insurer (or the taking of possession of all or any material
portion of the property of the Note Insurer).
"Interest Accrual Period" means, with respect to any Payment Date other
than the first Payment Date, the period commencing on the immediately preceding
Payment Date and ending on the day prior to the day of the month on which such
Payment Date occurs.
"Interest Rate" means the Class A-1 Interest Rate or the Class A-2
Interest Rate, as applicable.
"Investment Earnings" means, with respect to any Payment Date and any
Trust Account, the investment earnings on amounts on deposit in such Trust
Account during the related Collection Period and deposited into the Collection
Account on such Payment Date pursuant to Section 5.1(b).
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"Issuer" means CPS Auto Receivables Trust 2007-TFC.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means any Receivable (i) which has been
liquidated by the Servicer through the sale of the Financed Vehicle or (ii) for
which the related Financed Vehicle has been repossessed and 90 days have elapsed
since the date of such repossession or (iii)(a) with respect to a CPS
Receivable, as to which more than 10% of a Scheduled Receivable Payment of more
than ten dollars shall have become 120 (or, if the related Financed Vehicle has
been repossessed, 210) or more days delinquent as of the end of a Collection
Period, and (b) with respect to a TFC Receivable or a SeaWest Receivable, as to
which more than 10% of a Scheduled Receivable Payment of more than ten dollars
shall have become 180 (or, if the related Financed Vehicle has been repossessed,
210) or more days delinquent as of the end of a Collection Period or (iv) with
respect to which proceeds have been received which, in the Servicer's judgment,
constitute the final amounts recoverable in respect of such Receivable. For
purposes of this definition, a Receivable shall be deemed a "Liquidated
Receivable" upon the first to occur of the events specified in items (i) through
(iv) of the previous sentence.
"Lockbox Account" means an account maintained on behalf of the Trustee
by the Lockbox Bank pursuant to Section 4.2(b).
"Lockbox Agreement" means the Multiparty Agreement Relating to Lockbox
Services and Blocked Account, dated as of May 9, 2007, by and among the Lockbox
Processor, the Lockbox Bank, the Servicer, the Trust and the Trustee, as such
agreement may be amended, supplemented or otherwise modified from time to time,
unless the Trustee shall cease to be a party thereunder, or such agreement shall
be terminated in accordance with its terms, in which event "Lockbox Agreement"
shall mean such other agreement, in form and substance acceptable to the
Controlling Party, among the Servicer, the Trustee, the Lockbox Bank and the
Lockbox Processor.
"Lockbox Bank" means, as of any date, Wells Fargo Bank, National
Association or another depository institution named by the Servicer and
acceptable to the Controlling Party at which the Lockbox Account is established
and maintained as of such date.
"Lockbox Processor" means Wells Fargo Bank, National Association and
its successors and assigns.
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"Majority Certificateholders" has the meaning assigned to such term in
the Trust Agreement.
"Mandatory Redemption Date" means the first Payment Date occurring on
or after the last day of the Funding Period.
"Master Spread Account Agreement" means the Master Spread Account
Agreement dated as of August 1, 2002 among the Note Insurer, the Seller, CPS
Auto Receivables Trust 2002-B and Wells Fargo Bank, National Association, as
successor-by-merger to Wells Fargo Bank Minnesota, National Association, as
successor to Bank One Trust Company, N.A. ("Bank One"), as supplemented by the
Spread Account Supplement, and as amended by Amendment No. 1 thereto dated as of
September 30, 2003, and as further amended by Amendment No. 2 thereto dated as
of October 31, 2003, each by and among the Note Insurer, the Seller, CPS Auto
Receivables Trust 2002-B, Bank One and Wells Fargo Bank, National Association,
as the same may be modified, further supplemented or otherwise amended in
accordance with the terms thereof.
"MFN" means MFN Financial Corporation, a Delaware Corporation.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable during the
Collection Period in which such Receivable became a Liquidated Receivable, net
of (i) reasonable expenses incurred by the Servicer in connection with the
collection of such Receivable and the repossession and disposition of the
Financed Vehicle and (ii) amounts that are required to be refunded to the
Obligor on such Receivable; provided, however, that the Net Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero.
"Non-Certificated Title States" means the States of Arizona, Kansas,
Kentucky, Maine, Maryland, Michigan, Minnesota, Montana, New York, Oklahoma,
Wisconsin and such other States in which the applicable Department of Motor
Vehicles or similar authority issues evidence of title to a Financed Vehicle in
a non-certificated form.
"Non-United States Investor" has the meaning assigned to such term in
the Trust Agreement.
"Note" has the meaning assigned to such term in the Indenture.
"Note Balance" means, with respect to the Class A-1 Notes, the Class
A-1 Note Balance and with respect to the Class A-2 Notes, the Class A-2 Note
Balance.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Insurer" means XL Capital Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York, or its
successors in interest.
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"Note Majority" means the Holders collectively evidencing more than 50%
of the aggregate outstanding Note Balance for each Class of Notes.
"Note Policy" means the Financial Guaranty Insurance Policy issued by
the Note Insurer for the benefit of the Holders of the Notes issued under the
Indenture, including any endorsements thereto.
"Note Policy Claim Amount" with respect to any Payment Date, has the
meaning specified in Section 6.1.
"Note Prepayment Amount" means an amount equal to 88.81% of the
Pre-Funded Amount on the Mandatory Redemption Date (after giving effect to any
application thereof to acquire Subsequent Receivables on the last day of the
Funding Period).
"Note Register" has the meaning assigned to such term in the Indenture.
"Note Registrar" has the meaning assigned to such term in the
Indenture.
"Noteholder" has the meaning assigned to such term in the Indenture.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Payment Date, for each Class of Notes, the excess of the Noteholders' Interest
Distributable Amount for such Class of Notes for the preceding Payment Date over
the amount that was actually deposited in the Note Distribution Account on such
preceding Payment Date on account of the Noteholders' Interest Distributable
Amount for such Class of Notes.
"Noteholders' Interest Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the aggregate Noteholders' Monthly Interest
Distributable Amount for all Classes of Notes for such Payment Date, (ii) the
aggregate Noteholders' Interest Carryover Shortfall for all Classes of Notes for
such Payment Date and (iii) interest on such aggregate Noteholders' Interest
Carryover Shortfall, to the extent permitted by law, at the applicable Interest
Rate from and including the preceding Payment Date to but excluding the current
Payment Date.
"Noteholders' Monthly Interest Distributable Amount" means:
(a) for the Class A-1 Notes (i) for the first Payment Date, an amount
equal to the product of (1) the Class A-1 Interest Rate, (2) the Original Class
A-1 Note Balance, and (3) a fraction, the numerator of which is the number of
days from and including the Closing Date to and including May 14, 2007, and the
denominator of which is 360; and (ii) for any Payment Date after the first
Payment Date, an amount equal to the product of (1) the Class A-1 Interest Rate,
(2) the Class A-1 Note Balance as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date) and (3) a fraction, the numerator of which is the number
of days for the related Interest Accrual Period and the denominator of which is
360; and
(b) for all other Classes of Notes (i) for the first Payment Date, an
amount equal to the product of (1) the Interest Rate for such Class of Notes,
(2) the Original Class Note Balance for such Class of Notes, and (3) a fraction,
16
the numerator of which is the number of days from and including the Closing Date
to and including May 14, 2007, and the denominator of which is 360; and (b) for
any Payment Date after the first Payment Date, an amount equal to the product of
(1) one-twelfth of the Interest Rate for such Class of Notes and (2) the Note
Balance for such Class of Notes as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date).
"Noteholders' Parity Deficit Amount" means, with respect to any Payment
Date, the excess, if any, of (x) the Aggregate Note Balance on such Payment
Date, after giving effect to the distribution of the Noteholders' Principal
Distributable Amount on such Payment Date, but excluding any amounts in respect
thereof withdrawn from the Series 2007-TFC Spread Account or paid under the Note
Policy over (y) the Collateral Balance at the end of the related Collection
Period.
"Noteholders' Principal Distributable Amount" means (i) with respect to
any Payment Date (other than the Final Scheduled Payment Date for any Class of
Notes), the lesser of (a) the Principal Distributable Amount and (b) the excess
of (I) the Aggregate Note Balance as of the close of business on the preceding
Payment Date over (II) the Requisite Percentage and (ii) on the Final Scheduled
Payment Date for any Class of Notes, the greater of (I) the Note Balance of such
Class of Notes or (II) the amount calculated pursuant to clause (i) above. On
any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of
the Indenture, the Noteholders' Principal Distributable Amount shall be the Note
Balance of each Class of Notes.
"Notes" means the Class A-1 Notes and the Class A-2 Notes,
collectively.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any vice chairman of the board, any vice president,
the treasurer, the controller or assistant treasurer or any assistant
controller, secretary or assistant secretary of CPS, the Seller or the Servicer,
as appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but
need not be counsel to the Seller or the Servicer, which counsel shall be
reasonably acceptable to the Trustee and the Note Insurer and which opinion
shall be acceptable in form and substance to the Trustee and, if such opinion or
a copy thereof is required by the provisions of this Agreement to be delivered
to the Note Insurer, to the Note Insurer.
"Original Aggregate Note Balance" means $100,617,000.
"Original Class A-1 Note Balance" means $32,000,000.
"Original Class A-2 Note Balance" means $68,617,000.
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"Original Collateral Balance" means the sum of (i) the Original Pool
Balance and (ii) the initial Pre-Funded Amount.
"Original CPS Pool Balance" means $41,768,073.46 which is the CPS Pool
Balance as of the Initial Cutoff Date.
"Original Pool Balance" means $79,056,066.87 which is the sum of the
Original CPS Pool Balance and the Original TFC Pool Balance as of the Initial
Cutoff Date.
"Original Residual Certificate Notional Balance" means $12,677,500.
"Original TFC Pool Balance" means $37,287,993.41, which is the TFC Pool
Balance as of the Initial Cutoff Date.
"Other Conveyed Property" means all property conveyed by the Seller to
the Trust pursuant to Sections 2.1(b) through (k) and Sections 2.2(a)(ii)
through (xi) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Payment Date" means, with respect to each Collection Period, the 15th
day of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day, commencing on May 15, 2007.
"Pending Litigation" means the litigation matters that are described
under "CPS - Recent Developments" in the Confidential Private Placement
Memorandum dated as of May 2, 2007.
"Percentage Interests" has the meaning assigned to such term in the
Trust Agreement.
"Person" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Placement Agency Agreement" means the Placement Agency Agreement
relating to the Notes dated May 2, 2007, among the Placement Agent, CPS and the
Seller.
"Placement Agent" means UBS Securities LLC.
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"Pool Balance" means, as of any date of determination, the sum of the
CPS Pool Balance, the SeaWest Pool Balance and the TFC Pool Balance.
"Post Office Box" means the separate post office box in the name of the
Trust established and maintained pursuant to Section 4.2.
"Preference Claim" has the meaning specified in Section 6.2(b).
"Pre-Funded Amount" means, with respect to any Payment Date, the amount
on deposit in the Pre-Funding Account (exclusive of Pre-Funding Earnings), which
initially shall be $35,579,813.94.
"Pre-Funding Account" has the meaning specified in Section 5.1.
"Pre-Funding Earnings" means any Investment Earnings on amounts on
deposit in the Pre-Funding Account.
"Premium Letter" has the meaning specified in the Insurance Agreement.
"Principal Balance" of a Receivable, as of the close of business on the
last day of a Collection Period means the Amount Financed minus the sum of the
following amounts without duplication: (i) in the case of a Rule of 78's
Receivable or an Actuarial Receivable, that portion of all Scheduled Receivable
Payments received on or before such day allocable to principal of such
Receivable using the actuarial or constant yield method; (ii) in the case of a
Simple Interest Receivable, that portion of all Scheduled Receivable Payments
actually received on or prior to such day allocable to principal using the
Simple Interest Method; (iii) any payment of the Purchase Amount with respect to
the Receivable allocable to principal; (iv) any Cram Down Loss in respect of
such Receivable; and (v) any prepayment in full or any partial prepayment
applied to reduce the principal balance of the Receivable; provided, however
that the Principal Balance of a Receivable that has become a Liquidated
Receivable shall equal zero.
"Principal Distributable Amount" means, with respect to any Payment
Date, the sum of (i) collections on Receivables (other than Liquidated
Receivables) allocable to principal including full and partial prepayments
received during the related Collection Period; (ii) the portion of the Purchase
Amount allocable to principal of each Receivable that became a Purchased
Receivable as of the last day of the related Collection Period and, at the
option of the Note Insurer, the Principal Balance of each Receivable that was
required to be but was not so purchased or repurchased (without duplication of
amounts referred to in clause (i) above); (iii) the Principal Balance of each
Receivable that first became a Liquidated Receivable during the related
Collection Period (without duplication of the amounts included in clauses (i)
and (ii) above); and (iv) the aggregate amount of Cram Down Losses with respect
to the Receivables that have occurred during the related Collection Period
(without duplication of amounts referred to in clauses (i) through (iii) above).
"Program" has the meaning specified in Section 4.11.
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"Purchase Amount" means, with respect to a Receivable, the amount, as
of the close of business on the last day of a Collection Period, required to
prepay in full such Receivable under the terms thereof, as reduced by the amount
of any Cram Down Loss, plus all accrued and unpaid interest thereon to the end
of the month of such purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer or CPS pursuant
to Section 4.7 or Section 4.16 or repurchased by the Seller or CPS pursuant to
Section 3.2, Section 3.4 or Section 11.1(a).
"Rating Agency" means each of Moody's and Standard & Poor's, and any
successors thereof. If no such organization or successor maintains a rating on
the Notes, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Note Insurer (so long
as an Insurer Default shall not have occurred and be continuing), notice of
which designation shall be given to the Trustee, the Owner Trustee and the
Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Note Insurer,
the Owner Trustee and the Trustee in writing that (a) such action will not
result in a reduction or withdrawal of the then current rating of the Notes
(including the ratings on the Notes without giving effect to the Note Policy) or
(b) if the Notes and all amounts owing to the Note Insurer under the Basic
Documents have been paid in full, such action will not result in a reduction or
withdrawal of the then current rating of the Residual Certificates, if the
Residual Certificates are then rated; or if the Residual Certificates are not
then rated, the Rating Agency Condition with respect to the Residual
Certificates will be satisfied if such action does not materially and adversely
affect the holders of the Residual Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds allocable to principal.
"Receivable" means an Initial Receivable and/or a Subsequent
Receivable, as applicable.
"Receivable Files" means the documents specified in Section 3.3(a).
"Receivables" means the Initial Receivables and/or the Subsequent
Receivables, as applicable.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of May 9, 2007, by and between the Seller and CPS, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof, relating to the purchase of the
Receivables by the Seller from CPS.
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"Record Date" means, with respect to the first Payment Date, the
Closing Date and with respect to any subsequent Payment Date, the last day of
calendar month preceding the calendar month in which such Payment Date occurs.
"Recoveries" means with respect to a Liquidated Receivable, the monies
collected from whatever source, during any Collection Period following the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the reasonable costs of liquidation plus any amounts required by law to be
remitted to the Obligor (without duplication of amounts netted against the
amounts realized in calculating the Net Liquidation Proceeds).
"Registrar of Titles" means, with respect to any State, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Release Request" has the meaning assigned thereto in Section 3.5.
"Requisite Percentage" means (i) on any Payment Date prior to the
Payment Date occurring in April 2009, the sum of (x) 83.75% of the CPS Pool
Balance and (y) 80.00% of the TFC/SeaWest Pool Balance as of the end of the
related Collection Period, (ii) on any Payment Date from and including the
Payment Date occurring in April 2009 to and including the Payment Date occurring
in September 2009, the sum of (x) 84.75% of the CPS Pool Balance and (y) 81.00%
of the TFC/SeaWest Pool Balance as of the end of the related Collection Period,
(iii) on any Payment Date from and including the Payment Date occurring in
October 2009 to and including the Payment Date occurring in March 2010, the sum
of (x) 85.75% of the CPS Pool Balance and (y) 82.00% of the TFC/SeaWest Pool
Balance as of the end of the related Collection Period and (iv) on any Payment
Date on and after the Payment Date occurring in April 2010, the sum of (x)
86.75% of the CPS Pool Balance and (y) 83.00% of the TFC/SeaWest Pool Balance as
of the end of the related Collection Period; provided, that, in the case of
clauses (ii), (iii) and (iv) above, if, as of the Determination Date related to
any such Payment Date, (A) the Noteholders' Principal Distributable Amount
(calculated without reference to this proviso) is not equal to the Principal
Distributable Amount, (B) after making the distributions pursuant to Section
5.7(a) on such Payment Date, the Specified Spread Account Requisite Amount is
not then satisfied, (C) as of the first Payment Date referenced in the
applicable clause (ii), (iii) or (iv) above, the Three Month Rolling Average
Extension Ratio is greater than or equal to 2.25%, 2.75% and 2.25%,
respectively, (D) as of the first Payment Date referenced in the applicable
clause (ii), (iii) or (iv) above, the Cumulative Net Loss Rate as of the end of
the Collection Period related to such first Payment Date is greater than or
equal to (I) in the case of clause (ii), the sum of (a) the product of the CPS
Pool Percentage and 9.50% and (b) the product of the TFC Pool Percentage and
11.50%, (II) in the case of clause (iii), the sum of (a) the product of the CPS
Pool Percentage and 11.35% and (b) the product of TFC Pool Percentage and 13.35%
and (III) in the case of clause (iv), the sum of (a) the product of the CPS Pool
Percentage and 12.75% and (b) the product of the TFC Pool Percentage and 14.75%,
(E) as of the first Payment Date referenced in the applicable clause (ii), (iii)
or (iv) above, the Three-Month Rolling Average Delinquency Ratio as of the end
of the Collection Period related to such first Payment Date is greater than or
21
equal to (I) in the case of clause (ii), the sum of (a) the product of the CPS
Pool Percentage and 8.50% and (b) the product of the TFC Pool Percentage and
15.50%, (II) in the case of clause (iii), the sum of (a) the product of the CPS
Pool Percentage and 9.00% and (b) the product of TFC Pool Percentage and 16.00%
and (III) in the case of clause (iv), the sum of (a) the product of the CPS Pool
Percentage and 9.50% and (b) the product of the TFC Pool Percentage and 16.50%,
or (F) any Trigger Event has occurred and is continuing, then the Requisite
Percentage shall not be increased from the Requisite Percentage employed on the
immediately preceding Payment Date.
"Requisite Reserve Amount" as of any date will equal the product of:
(A) 1/360th of the difference between
(i) the sum of (a) the weighted average of the
Interest Rates for the Notes and the Residual Certificate
Interest Rate, weighted in accordance with the outstanding
principal amount of each class of Class A Notes and the
Residual Certificate Notional Balance, respectively, (b) the
Trustee fee rate, (c) the Backup Servicing fee rate, if
applicable, (d) the premium rate for the Policy and (e) the
Supplemental Residual Certificate Distribution, if any,
expressed as a percentage; and
(ii) 1.75% per annum;
(B) the Pre-Funded Amount on such date (after giving effect to
any application thereof to acquire Subsequent Receivables on such Payment Date);
and
(C) the number of days remaining until and including the last
day of the Collection Period for the Payment Date in July 2007;
provided that, upon the expiration of the Funding Period, after the
payment of all amounts required to be paid on the immediately following Payment
Date (or on the Payment Date on which the Funding Period ends, if applicable),
the Requisite Reserve Amount will be zero.
"Residual Certificate Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Residual Certificate Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually distributed to the Residual Certificateholders on such preceding
Payment Date on account of the Residual Certificate Interest Distributable
Amount.
"Residual Certificate Interest Distributable Amount" means, with
respect to any Payment Date, the sum of (i) the Residual Certificate Monthly
Interest Distributable Amount for such Payment Date, (ii) the Residual
Certificate Interest Carryover Shortfall for such Payment Date and (iii)
interest on such Residual Certificate Interest Carryover Shortfall, to the
extent permitted by law, at the Residual Certificate Interest Rate from and
including the preceding Payment Date to but excluding the current Payment Date;
provided however, that the amount which may be distributed pursuant to Section
22
5.7(a)(vi) may not exceed the product of (a) one-twelfth of the Residual
Certificate Interest Rate and (b) the excess of (I) the Collateral Balance at
the beginning of the related Collection Period over (II) the Aggregate Note
Balance as of the close of business on the preceding Payment Date.
"Residual Certificate Interest Rate" means 10.00% per annum.
"Residual Certificate Monthly Interest Distributable Amount" means (a)
for the first Payment Date, an amount equal to the product of (i) the Residual
Certificate Interest Rate, (ii) the Original Residual Certificate Notional
Balance and (iii) a fraction, the numerator of which is the number of days from
and including the Closing Date to and including May 14, 2007, and the
denominator of which is 360, and (b) for any Payment Date after the first
Payment Date, an amount equal to the product of (i) one-twelfth of the Residual
Certificate Interest Rate and (ii) the Residual Certificate Notional Balance as
of the close of the preceding Payment Date after giving effect to all
distributions in reduction thereof on such preceding Payment Date.
"Residual Certificate Notional Balance" means, as of any Payment Date,
an amount equal to the Original Residual Certificate Notional Balance, less all
amounts distributed to the Residual Certificateholders pursuant to Section
5.7(a)(xiv) and Section 5.7(b) hereof.
"Residual Certificate Prepayment Amount" means an amount equal to
11.19% of the Pre-Funded Amount on the Mandatory Redemption Date (after giving
effect to any application thereof to acquire Subsequent Receivables on the last
day of the Funding Period).
"Residual Certificate Principal Distributable Amount" means, as of any
Payment Date, the lesser of (i) the amount of the Total Distribution Amount
remaining after the distributions pursuant to clauses (i) through (xiii) of
Section 5.7(a) have been made and (ii) the excess of (a) the Residual
Certificate Notional Balance as of the close of business on the preceding
Payment Date over (b) 11.0% of the Collateral Balance at the end of the related
Collection Period. The Residual Certificate Principal Distributable Amount for
each Payment Date occurring on and after the Payment Date on which the Class A-2
Note Balance has been reduced to zero will equal the lesser of (i) the Residual
Certificate Notional Balance and (ii) the amount of the Total Distribution
Amount remaining after the distributions pursuant to clauses (i) through (xiii)
of Section 5.7(a) have been made.
"Residual Certificateholder" means each person in whose name a Residual
Pass-through Certificate is registered on the Certificate Register.
"Residual Pass-through Certificate" has the meaning assigned to such
term in the Trust Agreement.
"Responsible Officer" has the meaning specified in the Trust Agreement.
"Rule of 78's Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
related retail installment sale contract as an add on finance charge) and the
portion allocable to the Amount Financed is determined according to the method
23
commonly referred to as the "Rule of 78's" method or the "sum of the months'
digits" method or any equivalent method.
"Schedule of Receivables" means the schedule of Initial Receivables
attached hereto as Schedule A and the schedule of Subsequent Receivables
attached to each Subsequent Transfer Agreement, collectively, as such schedules
may be amended or supplemented from time to time in accordance with the terms
hereof.
"Scheduled Receivable Payment" means, with respect to any Collection
Period for any Receivable, the amount set forth in such Receivable as required
to be paid by the Obligor in such Collection Period. If after the Closing Date,
the Obligor's obligation under a Receivable with respect to a Collection Period
has been modified so as to differ from the amount specified in such Receivable
(i) as a result of the order of a court in an insolvency proceeding involving
the Obligor, (ii) pursuant to the Servicemembers Civil Relief Act, or (iii) as a
result of modifications or extensions of the Receivable permitted by Section
4.2(a), the Scheduled Receivable Payment with respect to such Collection Period
shall refer to the Obligor's payment obligation with respect to such Collection
Period as so modified.
"SeaWest" means SeaWest Financial Corporation, a California
corporation.
"SeaWest Receivables" means Receivables initially acquired by SeaWest
or a subsidiary thereof from a Dealer.
"SeaWest Pool Balance" means, as of any date of determination, the
aggregate Principal Balance of the SeaWest Receivables (excluding SeaWest
Receivables that are Purchased Receivables or Liquidated Receivables).
"SeaWest Servicing Fee" means, with respect to the SeaWest Receivables
and each Payment Date, an amount equal to one-twelfth of the product of (a) the
applicable Servicing Fee Rate, and (b) the SeaWest Pool Balance as of the close
of business on the last day of the second preceding Collection Period; provided,
however, that the SeaWest Servicing Fee shall be zero for each Payment Date
occurring after the date, if any, on which CPS is terminated as Servicer
pursuant to Section 10.2.
"Section 341 Meeting" means a meeting held pursuant to Section 341(a)
of the United States Bankruptcy Code (as the same may be amended from time to
time).
"Section 341 Receivable" means a Receivable, the Obligor of which has
completed a Section 341 Meeting as of the applicable Cutoff Date.
"Securities" means the Notes and the Residual Pass-through
Certificates, collectively.
"Securityholders" means the Noteholders and the Residual
Certificateholders, collectively.
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"Seller" means CPS Receivables Two Corp., a Delaware corporation, and
its successors in interest to the extent permitted hereunder.
"Seller's Contract Purchase Guidelines" means the set of criteria that
the Seller has established for purchasing Contracts on a state-by-state basis as
reflected in rate cards and the approval authority summary, as the same may be
amended from time to time.
"Series 2007-TFC Spread Account" means the account designated as such,
established and maintained pursuant to the Master Spread Account Agreement.
"Servicer" means CPS, as the servicer of the Receivables, and each
successor Servicer pursuant to Section 10.3.
"Servicer Termination Event" means an event specified in Section 10.1.
"Servicer's Certificate" means a certificate completed and executed by
a Servicing Officer and delivered pursuant to Section 4.9, substantially in the
form of Exhibit B.
"Servicing Assumption Agreement" means the Servicing and Lockbox
Processing Assumption Agreement, dated as of May 9, 2007, among CPS, the Backup
Servicer and the Trustee, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Servicing Fee" means (a) with respect to the CPS Receivables, the CPS
Servicing Fee, (b) with respect to the TFC Receivables, the TFC Servicing Fee,
and (c) with respect to the SeaWest Receivables, the SeaWest Servicing Fee.
"Servicing Fee Rate" means (a) with respect to the CPS Receivables,
2.50% per annum, and (b) with respect to the TFC Receivables and the SeaWest
Receivables, 3.50% per annum.
"Servicing Officer" means any Person whose name appears on a list of
Servicing Officers delivered to the Trustee and the Note Insurer, as the same
may be amended from time to time.
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (expressed as
a fraction of a year, based on the actual number of days in the calendar month
and the actual number of days in the calendar year) elapsed since the preceding
payment of interest was made and the remainder of such payment is allocable to
principal.
"Simple Interest Receivable" means a Receivable under which the portion
of the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
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"Skip Receivable" means a Receivable (i) which is delinquent as of the
Closing Date; and (ii) where CPS (a) has concluded that the address or telephone
number of the related Obligor maintained by CPS as of the Closing Date is
incorrect and CPS has not been able to obtain revised contact information for
such Obligor and (b) has designated the status of the Receivable as "A07" or
"F07" in accordance with its servicing procedures.
"Specified Spread Account Requisite Amount" has the meaning specified
in the Spread Account Supplement.
"Spread Account Supplement" means the Series 2007-TFC Supplement to the
Master Spread Account Agreement dated as of May 9, 2007 among the Note Insurer,
the Seller, the Issuer and the Collateral Agent, as the same may be modified,
supplemented or otherwise amended in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. or its successor.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Subsequent Cutoff Date" means (i) the close of business on the last
day of the month preceding the month in which particular Subsequent Receivables
are conveyed to the Trust pursuant to this Agreement or (ii) if any such
Subsequent Receivable is originated in the month of the related Subsequent
Transfer Date, the date of origination.
"Subsequent Receivables" means the Receivables transferred to the
Issuer pursuant to Section 2.2, which shall be listed on Schedule A to the
related Subsequent Transfer Agreement.
"Subsequent Receivables Purchase Agreement" means an agreement by and
between the Seller and CPS pursuant to which the Seller will acquire Subsequent
Receivables from CPS during the Funding Period.
"Subsequent Spread Account Deposit" means, with respect to each
Subsequent Transfer Date, an amount equal to the sum of (i) 2.00% of the
aggregate Principal Balance of related Subsequent Receivables that are CPS
Receivables as of the related Subsequent Cutoff Date transferred to the Trust on
such Subsequent Transfer Date, and (ii) 5.50% of the aggregate Principal Balance
of related Subsequent Receivables that are TFC/SeaWest Receivables as of the
related Subsequent Cutoff Date transferred to the Trust on such Subsequent
Transfer Date.
"Subsequent Transfer Agreement" means an agreement among the Issuer,
the Seller and the Servicer, substantially in the form of Exhibit A.
"Subsequent Transfer Date" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than once per month, during
the Funding Period on which Subsequent Receivables are transferred to the Trust
pursuant to this Agreement.
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"Subsequent Trust Property" means the property and proceeds conveyed
pursuant to Section 2.2, together with all monies received with respect to the
related Subsequent Receivables after the related Subsequent Cutoff Date, the
Insurance Policies, the Collection Account (including all Eligible Investments
therein and all proceeds therefrom), the Lockbox Account and certain other
rights under this Agreement. Although the Seller has pledged the Series 2007-TFC
Spread Account to the Collateral Agent pursuant to this Agreement, the Series
2007-TFC Spread Account shall not under any circumstances be deemed to be a part
of or otherwise includable in the Trust or the Subsequent Trust Property.
"Successor Servicing Fee Schedule" means that certain Schedule of
Successor Servicing Fees, Expenses and Distributions attached hereto as EXHIBIT
G.
"Successor Servicing Fee" has the meaning specified in Section 4.8.
"Supplemental Residual Certificate Distribution" means for any Payment
Date, the sum of (i) the Cayman Trustee Fees on such Payment Date, if any, and
(ii) the product of (a) the Cayman Trustee Fees, (b) 1.0001183338593 and (c)
0.01183198580%.
"Targeted Principal Distributable Amount" means, with respect to any
Payment Date, the lesser of (i) the amount of the Total Distribution Amount
remaining after the distributions pursuant to priorities (i) through (x) under
Section 5.7(a) have been made and (ii) the excess of (a) the Aggregate Note
Balance (after giving effect to the Noteholders' Principal Distributable Amount
and the Noteholders' Parity Deficit Amount paid on such Payment Date) over (b)
the Requisite Percentage.
"Texas Franchise Tax" means any tax imposed by the State of Texas
pursuant to Tex. Tax Code Ann. ss. 171.001 (Vernon 2005), as amended by Tex.
H.B. 3, 79th Leg., 3d C.S. (2006).
"TFC" means The Finance Company, a Virginia corporation.
"TFC Contract Purchase Guidelines" means TFC's established "Contract
Purchase Guidelines," as the same may be amended from time to time.
"TFC Pool Balance" means, as of any date of determination, the
aggregate Principal Balance of the TFC Receivables (excluding TFC Receivables
that are Purchased Receivables or Liquidated Receivables).
"TFC Receivables" means Receivables initially originated or acquired by
TFC or a subsidiary thereof from a Dealer.
"TFC/SeaWest Pool Balance" means, as of any date of determination, the
sum of the TFC Pool Balance and the SeaWest Pool Balance.
"TFC/SeaWest Receivables" means the TFC Receivables and the SeaWest
Receivables, collectively.
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"TFC Servicing Fee" means, with respect to the TFC Receivables and each
Payment Date, an amount equal to one-twelfth of the product of (a) the
applicable Servicing Fee Rate, and (b) the TFC Pool Balance as of the close of
business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Payment Date the TFC Servicing Fee shall
be an amount equal to the one-twelfth of the product of (a) the applicable
Servicing Fee Rate and (b) the Original TFC Pool Balance; provided further, that
the TFC Servicing Fee shall be zero for each Payment Date occurring after the
date, if any, on which CPS is terminated as Servicer pursuant to Section 10.2.
"Three-Month Rolling Average Delinquency Ratio" means, for any date of
determination, the average of the Delinquency Ratios for each of the three
immediately preceding Collection Periods.
"Three-Month Rolling Average Extension Ratio" means, for any date of
determination, a rolling three month average of the ratio for each of the three
immediately preceding Collection Periods, expressed as a percentage, of (i) the
aggregate Principal Balance of the Receivables whose payments are extended
during the related Collection Period to (ii) the Pool Balance as of the first
day of the related Collection Period prior to giving effect to any payment
activity on such date.
"Total Distribution Amount" means, for each Payment Date, the sum of
the following amounts with respect to the related Collection Period: (i) all
collections on the Receivables; (ii) Net Liquidation Proceeds received during
the Collection Period with respect to Liquidated Receivables; (iii) all proceeds
from Recoveries with respect to Liquidated Receivables; (iv) all proceeds
received during the Collection Period from Insurance Policies (other than funds
used for the repair of the related Financed Vehicle or otherwise released by CPS
to the related Obligor in accordance with normal servicing procedures); (v)
Investment Earnings for the related Payment Date; (vi) all Purchase Amounts
deposited in the Collection Account during the related Collection Period, plus
the amount of any payments made by CPS to the Trust pursuant to its
indemnification obligations under the Basic Documents; (vii) following the
acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount
of money or property collected pursuant to Section 5.3 of the Indenture since
the preceding Payment Date by the Trustee or Controlling Party for distribution
pursuant to Section 5.7 hereof; (viii) any amounts released from the Series
2007-TFC Spread Account in accordance with the terms of the Master Spread
Account Agreement for payment pursuant to priorities (xi) through (xv) of
Section 5.7(a) hereof; (ix) any amounts withdrawn from the Capitalized Interest
Account in excess of the Requisite Reserve Amount on the May 2007, June 2007 and
July 2007 Payment Dates; and (x) the proceeds of any purchase or sale of the
assets of the Trust described in Sections 4.16 or 11.1 hereof.
"Trigger Event" shall mean a Trigger Event I or a Trigger Event II, as
each such term is defined in the Insurance Agreement.
"Trust" means the Issuer.
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"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of March 15, 2007,
between the Seller, as depositor, and the Owner Trustee, as amended and restated
by the Amended and Restated Trust Agreement dated as of May 9, 2007, by and
between the Seller, as depositor, and the Owner Trustee, as the same may be
further amended or supplemented from time to time in accordance with the terms
thereof.
"Trust Officer" means, (i) in the case of the Trustee, any vice
president, any assistant vice president, any assistant secretary, any assistant
treasurer, any trust officer, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the Corporate Trust Office of the Owner Trustee or any
agent of the Owner Trustee under a power of attorney with direct responsibility
for the administration of this Agreement or any of the Basic Documents on behalf
of the Owner Trustee.
"Trust Property" means the Initial Trust Property and the Subsequent
Trust Property, collectively.
"Trustee" means the Person acting as trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
"Trustee Fee Schedule" means the schedule attached hereto as EXHIBIT
H-1.
"Trustee Fees" means the sum of (A) the fee payable to the Trustee on
each Payment Date in an amount equal to the greater of (a) $2,500 and (b)
one-twelfth of 0.045% of the Aggregate Note Balance as of the close of the
preceding Payment Date; provided, however, that on the first Payment Date the
Trustee will be entitled to receive an amount equal to the greater of (a) $2,500
and (b) the product of (i) the percentage equivalent of a fraction the numerator
of which is the number days from the Closing Date to but excluding the first
Payment Date and the denominator of which is 360, (ii) 0.045% and (iii) the
Original Aggregate Note Balance; (B) any amounts payable to the Trustee in its
capacity as custodian of the Receivable Files pursuant to the Trustee Fee
Schedule; and (C) any amounts payable to the Owner Trustee pursuant to Article
VIII of the Trust Agreement or to the Trustee pursuant to this Agreement.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
29
(b) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture or, if not defined
therein, in the Trust Agreement.
(c) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(d) Accounting terms used but not defined or partly defined in
this Agreement, in any instrument governed hereby or in any certificate or other
document made or delivered pursuant hereto, to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the definitions
of accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.
(e) 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.
(f) Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(g) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(h) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as the same may from time to time be
amended, modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments and instruments associated therewith;
all references to a Person include its permitted successors and assigns.
Whenever a determination is to be made under this Agreement as to
whether a given event action, course of conduct or set of facts or circumstances
could or would have a material adverse effect on the Issuer or Noteholders (or
any similar or analogous determination), such determination shall be made
without taking into account the insurance provided by the Note Policy. Whenever
a determination is to be made under this Agreement whether a breach of a
representation, warranty or covenant has or could have a material adverse effect
on a Receivable or the interest therein of the Issuer, the Noteholders or the
Note Insurer (or any similar or analogous determination), such determination
shall be made by the Controlling Party in its sole discretion.
30
ARTICLE II
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CONVEYANCE OF RECEIVABLES
SECTION 2.1 CONVEYANCE OF RECEIVABLES. In consideration of the Issuer's
delivery to or upon the order of the Seller on the Closing Date of the
Securities, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations set
forth herein) all right, title and interest of the Seller, whether now existing
or hereafter arising, in, to and under:
(a) the Initial Receivables listed in Schedule A hereto and
all monies received thereunder (other than the Additional Servicing
Compensation) after the Initial Cutoff Date and all Net Liquidation Proceeds and
Recoveries received with respect to such Initial Receivables after the Initial
Cutoff Date;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in the
Non-Certificated Title States, all other evidence of ownership with respect to
such Financed Vehicles issued by the applicable Department of Motor Vehicles or
similar authority;
(c) any proceeds from claims on any physical damage, credit
life and credit accident and health insurance policies or certificates relating
to the Financed Vehicles securing the Initial Receivables or the Obligors
thereunder;
(d) all proceeds from recourse against Dealers with respect to
the Initial Receivables;
(e) all of the Seller's rights, title and interest in its
rights and benefits, but none of its obligations or burdens under the
Receivables Purchase Agreement, including a direct right to cause CPS to
purchase Initial Receivables from the Issuer and to indemnify the Issuer
pursuant to the Receivables Purchase Agreement under the circumstances specified
therein;
(f) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the Initial Receivables, refunds of
unearned premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed Vehicle under
an Initial Receivable or his or her obligations with respect to a Financed
Vehicle and any recourse to Dealers for any of the foregoing;
(g) the Receivable File related to each Initial Receivable;
31
(h) all amounts and property from time to time held in or
credited to the Collection Account, the Pre-Funding Account, the Capitalized
Interest Account, the Lockbox Account and the Note Distribution Account;
(i) all property (including the right to receive future Net
Liquidation Proceeds) that secures an Initial Receivable that has been acquired
by or on behalf of CPS or the Seller, pursuant to a liquidation of such
Receivable;
(j) the proceeds of any and all of the foregoing; and
(k) all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing.
SECTION 2.2 CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Issuer's delivery on each related Subsequent
Transfer Date to or upon the order of the Seller of the amount described in
Section 5.10(a) to be delivered to the Seller, the Seller will, on the related
Subsequent Transfer Date, sell, transfer, assign, set over and otherwise convey
to the Issuer without recourse (subject to the obligations set forth herein) all
right, title and interest of the Seller in and to:
(i) the Subsequent Receivables listed in Schedule A
to the related Subsequent Transfer Agreement and all monies received
thereunder (other than the Additional Servicing Compensation) after the
related Subsequent Cutoff Date and all Net Liquidation Proceeds and
Recoveries received with respect to such Subsequent Receivables after
the related Subsequent Cutoff Date;
(ii) the security interests in the Financed Vehicles
granted by Obligors pursuant to the Subsequent Receivables and any
other interest of the Seller in such Financed Vehicles, including,
without limitation, the certificates of title or, with respect to such
Financed Vehicles in the Non-Certificated Title States, all other
evidence of ownership with respect to such Financed Vehicles issued by
the applicable Department of Motor Vehicles or similar authority;
(iii) any proceeds from claims on any physical
damage, credit life and credit accident and health insurance policies
or certificates relating to the Financed Vehicles securing the
Subsequent Receivables or the Obligors thereunder;
32
(iv) all proceeds from recourse against Dealers with
respect to the related Subsequent Receivables;
(v) all of the Seller's rights, title and interest in
its rights and benefits, but none of its obligations or burdens, under
the related Subsequent Receivables Purchase Agreement, including a
direct right to cause CPS to purchase Subsequent Receivables from the
Issuer under certain circumstances and to indemnify the Issuer pursuant
to the Subsequent Receivables Purchase Agreement;
(vi) refunds for the costs of extended service
contracts with respect to Financed Vehicles securing Subsequent
Receivables, refunds of unearned premiums with respect to credit life
and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle under a Subsequent Receivable
or his or her obligations with respect to a Financed Vehicle and any
recourse to Dealers for any of the foregoing;
(vii) the Receivable File related to each Subsequent
Receivable;
(viii) all amounts and property from time to time
held in or credited to the Collection Account, the Pre-Funding Account,
the Capitalized Interest Account, the Lockbox Account and the Note
Distribution Account;
(ix) all property (including the right to receive
future Net Liquidation Proceeds) that secured a Subsequent Receivable
that has been acquired by or on behalf of CPS or the Seller pursuant to
a liquidation of such Receivable;
(x) the proceeds of any and all of the foregoing; and
(xi) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or
other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of
any and every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part
of or are included in the proceeds of any of the foregoing.
(b) The Seller shall transfer to the Issuer the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the
Owner Trustee, the Note Insurer and the Rating Agencies with an
Addition Notice not later than five Business Days prior to such
Subsequent Transfer Date and shall have provided any information
reasonably requested by any of the foregoing with respect to the
related Subsequent Receivables;
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(ii) the Seller shall have delivered to the Owner
Trustee and the Trustee a duly executed Subsequent Transfer Agreement
which shall include supplements to Schedule A, listing the related
Subsequent Receivables;
(iii) the Seller shall, to the extent required by
Section 4.2 of this Agreement, have deposited in the Collection Account
all collections in respect of the related Subsequent Receivables;
(iv) as of each Subsequent Transfer Date, (A) the
Seller shall not be insolvent and shall not become insolvent as a
result of the transfer of Subsequent Receivables on such Subsequent
Transfer Date, (B) the Seller shall not intend to incur or believe that
it shall incur debts that would be beyond its ability to pay as such
debts mature, (C) such transfer shall not have been made with actual
intent to hinder, delay or defraud any Person and (D) the assets of the
Seller shall not constitute unreasonably small capital to carry out its
business as then conducted;
(v) the Funding Period shall not have terminated;
(vi) after giving effect to any transfer of
Subsequent Receivables on a Subsequent Transfer Date, the Receivables
then owned by the Trust shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cutoff Date
and the Subsequent Receivables on the related Subsequent Cutoff Dates):
(A) the weighted average APR of such Receivables will be greater than
or equal to 17.40%, (B) the weighted average remaining term of such
Receivables will be within a range of one to 72 months, (C) not more
than 91.00% of the aggregate Principal Balance of such Receivables will
represent financing of used Financed Vehicles, (D) each Receivable will
have a minimum APR of 8.00%; (E) each Receivable will have an original
term of no more than 72 months and no more than 31.50% of the aggregate
Principal Balance of such Receivables will have an original term in
excess of sixty (60) months; (F) no more than 15.00% of the aggregate
Principal Balance of such Receivables will have been originated in
Texas; (G) not less than 42.00% of the aggregate Principal Balance of
such Receivables will have been purchased under the Seller's "Alpha,"
"Super Alpha," "Alpha Plus" or "Preferred" programs; (H) no more than
5.00% of the aggregate Principal Balance of such Receivables will be
originated under the Seller's First Time Buyer program; (I) none of
such Receivables will have been originated by MFN or its subsidiaries;
(J) no more than 2.00% of the aggregate Principal Balance of such
Receivables will constitute Section 341 Receivables; (K) no more than
2.75% of the aggregate Principal Balance of such Receivables will
constitute SeaWest Receivables; and (L) the Trust, the Trustee, the
Owner Trustee and the Note Insurer shall have received written
confirmation from a firm of certified independent public accountants as
to the satisfaction of the criteria in clauses (A) through (K) above;
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(vii) each of the representations and warranties made
by the Seller pursuant to Section 3.1 with respect to the related
Subsequent Receivables to be transferred on such Subsequent Transfer
Date shall be true and correct as of the related Subsequent Transfer
Date, and the Seller shall have performed all obligations to be
performed by it hereunder on or prior to such Subsequent Transfer Date;
(viii) the Seller shall, at its own expense, on or
prior to the Subsequent Transfer Date indicate in its computer files
that the Subsequent Receivables identified in the Subsequent Transfer
Agreement have been sold to the Trust pursuant to this Agreement;
(ix) the Seller shall have taken any action required
to maintain the first priority perfected ownership interest of the
Issuer in the Owner Trust Estate and the first priority perfected
security interest of the Trustee in the Collateral;
(x) no selection procedures adverse to the interests
of the Noteholders or the Note Insurer shall have been utilized in
selecting the Subsequent Receivables;
(xi) the addition of any such Subsequent Receivables
shall not result in a material adverse tax consequence to the Trust or
the Noteholders;
(xii) the Seller shall have delivered (A) to the
Rating Agencies, the Note Insurer and each Placement Agent an Opinion
of Counsel with respect to the characterization of the transfer of such
Subsequent Receivables as a "true sale", which Opinion of Counsel may
be in the form of a "bring down" letter to the Opinion of Counsel
delivered to the Rating Agencies, the Note Insurer and each Placement
Agent on the Closing Date, and (B) to the Trustee and each Placement
Agent the Opinion of Counsel required by Section 13.2(i)(i), which
Opinion of Counsel may be in the form of a "bring down" letter to the
Opinion of Counsel delivered to the Trustee and each Placement Agent on
the Closing Date;
(xiii) each of the Seller, the Issuer and the Note
Insurer shall have received verbal verification from the Rating
Agencies that the addition of all such Subsequent Receivables will not
result in a qualification, modification or withdrawal of the then
current rating of each Class of Notes without regard to the Policy;
(xiv) the Note Insurer (so long as no Insurer Default
shall have occurred and be continuing), in its absolute and sole
discretion, shall have approved in writing the transfer of such
Subsequent Receivables to the Issuer and the Note Insurer shall have
been reimbursed for any fees and expenses incurred by the Note Insurer
in connection with the granting of such approval;
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(xv) the Servicer shall instruct the Trustee to
transfer the Subsequent Spread Account Deposit to the Collateral Agent
with respect to the related Subsequent Receivables transferred on such
Subsequent Transfer Date; and
(xvi) the Seller shall have delivered to the Note
Insurer and the Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b).
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Issuer, at a price equal to the Purchase Amount
thereof, in the manner specified in Section 3.2.
SECTION 2.3 TRANSFERS INTENDED AS SALES. It is the intention of the
Seller that each transfer and assignment contemplated by Sections 2.1 and 2.2 of
this Agreement shall constitute a sale of the Trust Property from the Seller to
the Issuer and the beneficial interest in and title to the Trust Property shall
not be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. In the event that,
notwithstanding the intent of the Seller as set forth in this Section 2.3 and in
Section 13.17, the transfer and assignment contemplated hereby is held not to be
a sale, this Agreement shall constitute a grant of (and the Seller does hereby
grant) a security interest in all of the Seller's right, title and interest in,
to and under the Trust Property to the Trust for the benefit of the
Securityholders and the Note Insurer and this Agreement shall constitute a
security agreement under New York law. The Seller shall take such actions as are
necessary from time to time in order to maintain the perfection and priority of
the Issuer's security interest in the Trust Property.
SECTION 2.4 FURTHER ENCUMBRANCE OF TRUST PROPERTY.
(a) Immediately upon the conveyance to the Trust by the Seller
of any item of the Trust Property pursuant to Sections 2.1 or 2.2, all right,
title and interest of the Seller in and to such item of Trust Property shall
terminate, and all such right, title and interest shall vest in the Trust, in
accordance with the Trust Agreement and Sections 3802 and 3805 of the Statutory
Trust Statute (as defined in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Property in the
Trust, the Trust shall have the sole right to pledge or otherwise encumber, such
Trust Property. Pursuant to the Indenture, the Trust shall grant a security
interest in the Trust Property to secure the repayment of the Notes. The
Residual Pass-through Certificates shall represent beneficial ownership
interests in the Trust Property, and the Residual Certificateholders shall be
entitled to receive distributions with respect thereto as set forth herein and
in the Master Spread Account Agreement.
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(c) Following the payment in full of the Notes and the release
and discharge of the Indenture, all covenants of the Issuer under Article III of
the Indenture shall, until all amounts due in respect of the Residual
Pass-through Certificates have been paid in full, remain as covenants of the
Issuer for the benefit of the Residual Certificateholders, enforceable by the
Residual Certificateholders to the same extent as such covenants were
enforceable by the Noteholders prior to the discharge of the Indenture. Any
rights of the Trustee under Article III of the Indenture, following the
discharge of the Indenture, shall vest in the Residual Certificateholders.
(d) The Trustee shall, at such time as there are no Notes
outstanding and all sums due to the Trustee and the Note Insurer pursuant to the
Basic Documents, have been paid, release any remaining portion of the Trust
Property to the Residual Certificateholders.
SECTION 2.5 CONVEYANCE OF ADDITIONAL SERVICING COMPENSATION. As of the
Closing Date and as of each Subsequent Transfer Date, as applicable, the Seller
does hereby sell, transfer, assign, set over and otherwise convey to the
Servicer, without recourse (subject to the obligations set forth herein) all
right, title and interest of the Seller, whether now existing or hereafter
arising, in, to and under all Additional Servicing Compensation.
ARTICLE III
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THE RECEIVABLES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF SELLER AS TO THE
RECEIVABLES. The Seller hereby makes the following representations and
warranties to the Note Insurer, the Issuer and the Trustee for the benefit of
the Securityholders on which the Issuer relies in acquiring the Receivables, and
on which the Trustee is deemed to have relied in executing and performing
pursuant to this Agreement, the Indenture and the other Basic Documents to which
it is a party and on which the Note Insurer relies in issuing the Note Policy.
The Seller also hereby makes the representations and warranties on Schedule C-1
hereto as to the SeaWest Receivables and Schedule C-2 hereto as to the TFC
Receivables and the CPS Receivables. All such representations and warranties
speak as of the execution and delivery of this Agreement and as of the Closing
Date (in the case of representations and warranties relating to the Initial
Receivables) and as of the related Subsequent Transfer Date (in the case of
representations and warranties relating to the Subsequent Receivables), but
shall survive the sale, transfer and assignment of the Receivables to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.
(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable
(1) has been originated in the United States of America by a Dealer for
the retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, has been fully and properly executed by the parties
thereto, has been purchased by the related Applicable Purchaser in
connection with the sale of Financed Vehicles by a Dealer and has been
validly assigned by such Dealer to such Applicable Purchaser, by such
Applicable Purchaser to CPS (either directly or through other
37
wholly-owned subsidiaries of CPS), by CPS to the Seller, by the Seller
to the Trust, (2) has created a valid, subsisting, and enforceable
first priority perfected security interest in favor of the related
Applicable Purchaser in the Financed Vehicle, which security interest
has been assigned by the Applicable Purchaser to CPS (either directly
or through other wholly-owned subsidiaries of CPS), which in turn has
assigned such security interest to the Seller, which in turn assigned
such security interest to the Trust, which in turn has pledged such
security interest to the Trustee for the benefit of the Securityholders
and the Note Insurer, (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) is either a Rule of 78s
Receivable or a Simple Interest Receivable, (5) was originated by the
related Dealer and was sold by such Dealer without any fraud or
misrepresentation on the part of such Dealer, (6) is denominated in
U.S. dollars, (7) has a final scheduled payment due no later than June
30, 2013; (8) was originated on or before the related Cutoff Date; and
(9) 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, the Applicable Purchaser, any
Dealer or anyone acting on their behalf in order to cause any
Receivable to satisfy such requirement;
(ii) COMPOSITION OF INITIAL RECEIVABLES. (A)
Approximately 89.86% of the Original Pool Balance represents financing
of used automobiles, light trucks, vans, motorcycles or minivans; the
remainder of the Original Pool Balance represents financing of new
vehicles; (B) approximately 47.41% of the Original Pool Balance are TFC
Receivables; (C) approximately 52.59% of the Original Pool Balance are
CPS Receivables; (D) approximately 11.23% of the Original CPS Pool
Balance are Clean-up Call Receivables; (E) approximately 1.86% of the
Original TFC Pool Balance are Clean-up Call Receivables; (F)
approximately 47.11% of the Original Pool Balance had Obligors that
were at the time of origination U.S. military personnel; (G)
approximately 25.94% of the Original Pool Balance were originated under
the CPS Alpha Program; (H) approximately 8.47% of the Original Pool
Balance were originated under the CPS Alpha Plus Program; (I)
approximately 0.07% of the Original Pool Balance were originated under
the CPS BAS Program; (J) approximately 3.24% of the Original Pool
Balance were originated under the CPS Delta Program; (K) approximately
2.54% of the Original Pool Balance were originated under the CPS First
Time Buyer Program; (L) approximately 46.53% of the Original Pool
Balance were originated under the TFC MIL Program; (M) approximately
1.34% of the Original Pool Balance were originated under the CPS
Preferred Program; (N) approximately 0.01% of the Original Pool Balance
were originated under the CPS Plus Program; (O) approximately 5.40% of
the Original Pool Balance were originated under the CPS Standard
Program; (P) approximately 5.59% of the Original Pool Balance were
originated under the CPS Super Alpha Program; (Q) approximately 0.06%
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of the Original Pool Balance were originated under the TFC TFCC
Program; (R) approximately 0.82% of the Original Pool Balance were
originated under the TFC TFCM Program; (S) approximately 1.29% of the
Original Pool Balance were Section 341 Receivables.
(iii) SCHEDULE OF RECEIVABLES; SELECTION PROCEDURES.
The information with respect to the Initial Receivables set forth in
Schedule A to this Agreement is true and correct in all material
respects as of the close of business on the Initial Cutoff Date; the
information with respect to the Subsequent Receivables set forth in
Schedule A to the related Subsequent Transfer Agreement is true and
correct in all material respects as of the close of business on the
related Subsequent Cutoff Date; no selection procedures adverse to the
Securityholders or the Note Insurer have been utilized in selecting the
Receivables; and the origination of each Receivable (other than any
Clean-up Call Receivable) satisfied in all material respects the CPS
Contract Purchase Guidelines or the TFC Contract Purchase Guidelines,
as applicable, as in effect on the Closing Date.
(iv) COMPLIANCE WITH LAW. Each Receivable, the sale
of the Financed Vehicle and the sale of any physical damage, credit
life and credit accident and health insurance and any extended
warranties or service contracts (A) complied at the time the related
Receivable was originated or made and at the execution of this
Agreement (or the applicable Subsequent Transfer Agreement) complies in
all material respects with all requirements of applicable Federal,
State, and local laws, and regulations thereunder including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Servicemembers Civil Relief Act, the Military Reservist
Relief Act, the Texas Consumer Credit Code, the California Automobile
Sales Finance Act and State adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code, and all other applicable
consumer credit laws and equal credit opportunity and disclosure laws,
and (B) without limiting the generality of the foregoing, is not
subject to liabilities or is not rendered unenforceable based on
general theories of contract limitation or relief including, without
limitation, theories based on unconscionable, deceptive, unfair, or
predatory sales or financing practices.
(v) NO GOVERNMENT OBLIGOR. None of the Receivables
are due from the United States of America or any State or from any
agency, department, or instrumentality of the United States of America
or any State.
(vi) SECURITY INTEREST IN FINANCED VEHICLE.
Immediately subsequent to the sale, assignment and transfer thereof to
the Trust, each Receivable shall be secured by a validly perfected
first priority security interest in the Financed Vehicle in favor of
the related Applicable Purchaser as secured party which security
interest has been validly assigned by such Applicable Purchaser to CPS
39
(either directly or through other wholly-owned subsidiaries of CPS),
validly assigned by CPS to the Seller, validly assigned by the Seller
to the Trust, and validly pledged by the Trust to the Trustee for the
benefit of the Securityholders and the Note Insurer, and such assigned
security interest is prior to all other liens upon and security
interests in such Financed Vehicle which now exist or may hereafter
arise or be created, except, as to priority, for any tax liens or
mechanics' liens which may arise after the Closing Date (in the case of
the Initial Receivables) or the related Subsequent Transfer Date (in
the case of the Subsequent Receivables).
(vii) Receivables IN FORCE. No Receivable has been
satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released from the lien granted by the related Receivable in whole or in
part.
(viii) NO DEFENSES. No right of rescission, setoff,
counterclaim or defense exists or has been asserted or threatened with
respect to any Receivable. The operation of the terms of any Receivable
or the exercise of any right thereunder will not render such Receivable
unenforceable in whole or in part and such Receivable is not subject to
any such right of rescission, setoff, counterclaim, or defense.
(ix) NO LIENS. As of the applicable Cutoff Date, (a)
there are no liens or claims existing or which have been filed for
work, labor, storage or materials relating to a Financed Vehicle that
shall be liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by the Receivable and (b)
there is no lien against the related Financed Vehicle for delinquent
taxes.
(x) NO DEFAULT; REPOSSESSION. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the applicable Cutoff Date, no default, breach, violation or event
permitting acceleration under the terms of any Receivable has occurred;
and no continuing condition that with notice or the lapse of time, or
both, would constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable has arisen; and none of
the Applicable Purchaser or the Seller has waived any of the foregoing
(except in a manner consistent with Section 4.2); and no Financed
Vehicle shall have been repossessed or assigned for repossession as of
the Closing Date (in the case of the Initial Receivables) or the
related Subsequent Transfer Date (in the case of the Subsequent
Receivables).
(xi) INSURANCE; OTHER. (A) Each Obligor has obtained
insurance covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage, and each Receivable requires the
Obligor to obtain and maintain such insurance naming the related
Applicable Purchaser and its successors and assigns as loss payee or an
additional insured, (B) each Receivable that finances the cost of
premiums for credit life and credit accident and health insurance is
40
covered by an insurance policy or certificate of insurance naming the
related Applicable Purchaser as policyholder (creditor) under each such
insurance policy and certificate of insurance and (C) as to each
Receivable that finances the cost of an extended service contract, the
respective Financed Vehicle which secures the Receivable is covered by
an extended service contract.
(xii) TITLE. It is the intention of the Seller that
the transfer and assignment herein contemplated constitute a sale of
the Receivables and the Other Conveyed Property from the Seller to the
Trust and that the beneficial interest in and title to such Receivables
and the Other Conveyed Property not be part of the Seller's estate in
the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law. No Receivable or Other Conveyed
Property has been sold, transferred, assigned, or pledged by the Seller
to any Person other than the Trust. Immediately prior to the transfer
and assignment herein contemplated, the Seller had good and marketable
title to each Receivable and the Other Conveyed Property and was the
sole owner thereof, free and clear of all liens, claims, encumbrances,
security interests, and rights of others, and, immediately upon the
transfer thereof, the Trust for the benefit of the Securityholders and
the Note Insurer shall have good and marketable title to each such
Receivable and will be the sole owner thereof, free and clear of all
liens, encumbrances, security interests, and rights of others, and the
transfer has been perfected under the UCC.
(xiii) LAWFUL ASSIGNMENT. No Receivable has been
originated in, or is subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Receivable under this
Agreement or pursuant to transfers of the Securities shall be unlawful,
void, or voidable. None of the Applicable Purchasers or the Seller has
entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the
Receivables.
(xiv) ALL FILINGS MADE. All filings (including,
without limitation, UCC filings) necessary in any jurisdiction to give
(i) the Issuer a first priority perfected security interest in the
Receivables and the Other Conveyed Property, and (ii) the Trustee a
first priority perfected security interest in the Trust Property have
been made, taken or performed.
(xv) CHATTEL PAPER. Each Contract constitutes
"tangible chattel paper" under the UCC.
(xvi) TITLE DOCUMENTS. (A) If the Receivable was
originated in a State in which notation of a security interest on the
title document of the related Financed Vehicle is required or permitted
to perfect such security interest, the title document of the related
Financed Vehicle for such Receivable shows, or if a new or replacement
title document is being applied for with respect to such Financed
Vehicle the title document (or, with respect to Receivables originated
in the Non-Certificated Title States, other evidence of title issued by
41
the applicable Department of Motor Vehicles or similar authority) will
be received within 180 days and will show, the related Applicable
Purchaser named as the original secured party under the related
Receivable as the holder of a first priority security interest in such
Financed Vehicle, and (B) if the Receivable was originated in a State
in which the filing of a financing statement under the UCC is required
to perfect a security interest in motor vehicles, such filings or
recordings have been duly made and show the related Applicable
Purchaser, named as the original secured party under the related
Receivable, and in either case, the Trust has the same rights as such
secured party has or would have (if such secured party were still the
owner of the Receivable) against all parties claiming an interest in
such Financed Vehicle, and such rights have been validly pledged to the
Trustee pursuant to the Indenture. With respect to each Receivable for
which the title document has not yet been returned from the Registrar
of Titles, CPS has received written evidence from the related Dealer
that such title document showing the related Applicable Purchaser, as
first lienholder has been applied for.
(xvii) VALID AND BINDING OBLIGATION OF OBLIGOR. Each
Receivable is the legal, valid and binding obligation in writing of the
Obligor thereunder and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
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.
(xviii) POST OFFICE BOX. On or prior to the next
billing period after the applicable Cutoff Date, CPS will notify each
Obligor to make payments with respect to the Receivables after such
Cutoff Date directly to the Post Office Box, and will provide each
Obligor with a monthly statement in order to enable such Obligors to
make payments directly to the Post Office Box.
(xix) LOCATION OF RECEIVABLE FILES. A complete
Receivable File with respect to each Receivable has been or prior to
the Closing Date or the related Subsequent Transfer Date, as
applicable, will be delivered to the Trustee at the location listed on
Schedule B hereto.
(xx) CASUALTY AND IMPOUNDING. No Financed Vehicle has
suffered a Casualty where the Servicer does not expect to receive
insurance proceeds and CPS has not received notice that any Financed
Vehicle has been impounded.
(xxi) ORIGINATION OF RECEIVABLES. Based on the
billing address of the Obligors and the Principal Balances as of the
Initial Cutoff Date, approximately 14.26%, 8.45%, 7.20%, 6.62%, 6.23%
and 5.56% of the Initial Receivables (by principal balance) had
Obligors residing in the States of Texas, California, Georgia,
Virginia, North Carolina and Florida, respectively.
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(xxii) MATURITY OF RECEIVABLES. Each Receivable has
an original term to maturity of not more than 72 months; the remaining
term to maturity of each Receivable was 72 months or less as of the
Initial Cutoff Date; the weighted average remaining term to maturity of
the Receivables was 53 months as of the Initial Cutoff Date.
(xxiii) PRINCIPAL BALANCE/NUMBER OF CONTRACTS. As of
the Initial Cutoff Date, the aggregate principal balance of the Initial
Receivables was $79,056,066.87. The Initial Receivables are evidenced
by 6,332 Contracts.
(xxiv) FULL AMOUNT ADVANCED. The full amount of each
Receivable has been advanced to each Obligor, and there are no
requirements for future advances thereunder. The Obligor with respect
to the Receivable does not have any option under the terms of the
related Contract to borrow from any person additional funds secured by
the Financed Vehicle.
(xxv) NO IMPAIRMENT. None of the Applicable
Purchasers or the Seller has done anything to convey any right to any
Person that would result in such Person having a right to payments due
under any Receivables or otherwise to impair the rights of the
Purchaser, the Issuer, the Securityholders or the Note Insurer in any
Receivable or the proceeds hereof.
(xxvi) RECEIVABLES NOT ASSUMABLE. No Receivable is
assumable by another Person in a manner in which would release the
Obligor thereof from such Obligor's obligations to the related
Applicable Purchaser or the Seller with respect to such Receivable.
(xxvii) SERVICING. The servicing of each Receivable
and the collection practices relating thereto have been lawful and in
accordance with the standards set forth in this Agreement; other than
the Servicer, TFC and the Backup Servicer, no other Person has the
right to service the Receivables.
(xxviii) CREATION OF SECURITY INTEREST. This
Agreement creates a valid and continuing security interest (as defined
in the UCC) in the Trust Property in favor of the Issuer for the
benefit of the Securityholders and the Note Insurer, which security
interest is prior to all other Liens and is enforceable as such as
against creditors of and purchasers from the Seller.
(xxix) PERFECTION OF SECURITY INTEREST IN TRUST
PROPERTY. The Seller has caused, the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security
interest in the Trust Property granted to the Issuer for the benefit of
the Securityholders and the Note Insurer hereunder pursuant to Section
2.3.
(xxx) NO OTHER SECURITY INTERESTS. Other than the
security interest granted to the Issuer for the benefit of the
Securityholders and the Note Insurer pursuant to Section 2.3, the
Seller has not pledged, assigned, sold, granted a security interest in,
or otherwise conveyed any of the Trust Property. The Seller has not
43
authorized the filing of and is not aware of any financing statements
filed against the Seller that include a description of collateral
covering the Trust Property other than any financing statement relating
to the security interest granted to the Issuer for the benefit of the
Securityholders and the Note Insurer hereunder or that has been
terminated. The Seller is not aware of any judgment or tax lien filings
against the Seller.
(xxxi) MFN RECEIVABLES. None of the Receivables were
originated by MFN or any of its subsidiaries.
The representations and warranties set forth above in paragraphs (xiv), (xv) and
(xvi) and paragraphs (xxviii) through (xxx) shall survive the termination of
this Agreement and may not be waived in whole or in part.
SECTION 3.2 REPURCHASE UPON BREACH.
(a) The Seller, the Servicer, the Note Insurer, the Trustee or
(upon actual knowledge of a Responsible Officer thereof) the Owner Trustee, as
the case may be, shall inform the other parties to this Agreement promptly, in
writing, upon the discovery of any breach of the Seller's representations and
warranties made pursuant to Section 3.1 (without regard to any limitations
therein as to the Seller's knowledge). Unless the breach shall have been cured
by the last day of the second Collection Period following the discovery thereof
by CPS, the Trustee or the Note Insurer or receipt by CPS of notice of such
breach from the Trustee, the Owner Trustee, the Note Insurer or the Seller, CPS
(pursuant to the Receivables Purchase Agreement) shall repurchase any Receivable
if the value of such Receivable is materially and adversely affected by the
breach as of the last day of such second Collection Period (or, at CPS's option,
the last day of the first Collection Period following the discovery) and, in the
event that the breach relates to a characteristic of the Receivables in the
aggregate, and if the interests of the Trust or the Securityholders are
materially and adversely affected by such breach, unless the breach shall have
been cured by the last day of such second Collection Period, CPS shall purchase
such aggregate Principal Balance of Receivables, such that following such
purchase such representation shall be true and correct with respect to the
remainder of the Receivables in the aggregate. In consideration of the purchase
of any Receivable, CPS shall remit the Purchase Amount, in the manner specified
in Section 5.6. The sole remedy of the Issuer, the Owner Trustee, the Trustee,
the Securityholders or the Note Insurer with respect to a breach of
representations and warranties pursuant to Section 3.1 shall be to enforce CPS's
obligation to purchase such Receivables pursuant to the Receivables Purchase
Agreement; provided, however, that CPS shall indemnify the Trustee, the Owner
Trustee, the Backup Servicer, the Collateral Agent, the Note Insurer, the Trust
and the Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach. Upon receipt of
the Purchase Amount and written instructions from the Servicer, the Trustee
shall release to CPS or its designee the related Receivables File and shall
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execute and deliver all reasonable instruments of transfer or assignment,
without recourse, as are prepared by the Seller and delivered to the Trustee and
necessary to vest in CPS or such designee title to the Receivable including a
Trustee's Certificate in the form of Exhibit F-1.
(b) If it is determined that consummation of the transactions
contemplated by this Agreement and the other transaction documents referenced in
this Agreement, the servicing and operation of the Trust pursuant to this
Agreement and such other documents, or the ownership of a Note or a Residual
Pass-through Certificate by a Holder constitutes a violation of the prohibited
transaction rules of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the Internal Revenue Code of 1986, as amended (the "Code")
or any successor statutes of similar impact, together with the regulations
thereunder, to which no statutory exception or administrative exemption applies,
such violation shall not be treated as a breach of the Seller's representations
and warranties made pursuant to Section 3.1 if not otherwise such a breach.
(c) Pursuant to Sections 2.1 and 2.2 of this Agreement, the
Seller has conveyed to the Trust all of the Seller's right, title and interest
in its rights and benefits, but none of its obligations or burdens, under the
Receivables Purchase Agreement and each Subsequent Receivables Purchase
Agreement, including the Seller's rights under the Receivables Purchase
Agreement and each Subsequent Receivables Purchase Agreement and the delivery
requirements, representations and warranties and the cure, repurchase and
indemnity obligations of CPS under the Receivables Purchase Agreement and each
Subsequent Receivables Purchase Agreement. The Seller hereby represents and
warrants to the Trust, the Note Insurer and the Trustee for the benefit of the
Securityholders that such assignment is valid, enforceable and effective to
permit the Trust to enforce such obligations of CPS under the Receivables
Purchase Agreement and each Subsequent Receivables Purchase Agreement.
(d) If the Insolvency Event related to a Section 341 Meeting
has not been discharged pursuant to Section 727 of the United States Bankruptcy
Code by the bankruptcy court presiding over such Insolvency Event within 120
days of the conveyance of the related Receivable by the Seller to the Issuer
pursuant to Section 2.1(a) or Section 2.2(a), the Seller shall repurchase such
Receivable as of the last day of the next occurring Collection Period at the
Purchase Amount.
SECTION 3.3 CUSTODY OF RECEIVABLES FILES.
(a) In connection with the sale, transfer and assignment of
the Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement the Trustee shall act as custodian of the following documents or
instruments in its possession which shall be delivered to the Trustee on or
before the Closing Date (with respect to each Initial Receivable) or the
applicable Subsequent Transfer Date (with respect to each Subsequent
Receivable):
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(i) The fully executed original of the Receivable
(together with any agreements modifying the Receivable, including
without limitation any extension agreements);
(ii) The original certificate of title in the name of
the Applicable Purchaser or such documents that such Applicable
Purchaser shall keep on file, in accordance with its customary
procedures, evidencing the security interest of such Applicable
Purchaser in the Financed Vehicle or, if not yet received, a copy of
the application therefor showing such Applicable Purchaser as secured
party, or a dealer guarantee of title.
(b) Upon payment in full of any Receivable, the Servicer will
notify the Trustee pursuant to a certificate of an officer of the Servicer
(which certificate shall include a statement to the effect that all amounts
received in connection with such payments which are required to be deposited in
the Collection Account pursuant to Section 4.2 have been so deposited) and shall
request delivery of the Receivable and Receivable File to the Servicer.
SECTION 3.4 ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE. The Trustee
acknowledges receipt of files which the Seller has represented are the
Receivable Files for the Initial Receivables. The Trustee has reviewed such
Receivable Files and has determined that it has received a file for each Initial
Receivable identified in Schedule A to this Agreement. Not less than four (4)
Business Days prior to each Subsequent Transfer Date, the Seller will cause to
be delivered to the Trustee the Receivable Files for the Subsequent Receivables
to be transferred to the Trust on such Subsequent Transfer Date. The Trustee
declares that it holds and will continue to hold such files and any amendments,
replacements or supplements thereto and all other Trust Assets as Trustee in
trust for the use and benefit of all present and future Securityholders. The
Trustee agrees to review each file delivered to it prior to the Closing Date (in
the case of the Initial Receivables) or the applicable Subsequent Transfer Date
(in the case of the Subsequent Receivables) to determine whether such Receivable
Files contain the documents referred to in Sections 3.3(a)(i) and (ii). If the
Trustee has found or finds that a file for a Receivable has not been received,
or that a file is unrelated to the Receivables identified in Schedule A to this
Agreement or that any of the documents referred to in Section 3.3(a)(i) or (ii)
are not contained in a Receivable File, the Trustee shall inform CPS, the
Seller, the Owner Trustee and the Note Insurer promptly, in writing, of the
failure to receive a file with respect to such Receivable (or of the failure of
any of the aforementioned documents to be included in the Receivable File) or
shall return to CPS as the Seller's designee any file unrelated to a Receivable
identified in Schedule A to this Agreement (in the case of the Initial
Receivables) or Schedule A to the related Subsequent Transfer Agreement (in the
case of the Subsequent Receivables), it being understood that the Trustee's
obligation to review the contents of any Receivable File shall be limited as set
forth in the preceding sentence. Unless such defect with respect to such
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Receivable File shall have been cured by the last day of the second Collection
Period following discovery thereof by the Trustee, the Trustee (at the direction
of the Note Insurer, if no Insurer Default shall have occurred and be
continuing) shall cause CPS to repurchase any such Receivable as of such last
day pursuant to the Receivables Purchase Agreement. In consideration of the
purchase of the Receivable, CPS shall remit the Purchase Amount, in the manner
specified in Section 5.6. The sole remedy of the Trustee, the Trust, or the
Securityholders with respect to a breach pursuant to this Section 3.4 shall be
to require CPS to purchase the applicable Receivables pursuant to this Section
3.4; provided, however, that CPS shall indemnify the Trustee, the Owner Trustee,
the Backup Servicer, the Collateral Agent, the Note Insurer, the Trust and the
Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach. Upon receipt of
the Purchase Amount and written instructions from the Servicer, the Trustee
shall release to CPS or its designee the related Receivable File and shall
execute and deliver all reasonable instruments of transfer or assignment,
without recourse, as are prepared by CPS and delivered to the Trustee and are
necessary to vest in CPS or such designee title to the Receivable including a
Trustee's Certificate in the form of Exhibit F-1. The Trustee shall make a list
of Receivables for which an application for a certificate of title but not an
original certificate of title or, with respect to Receivables originated in the
Non-Certificated Title States, another evidence of title issued by the
applicable Department of Motor Vehicles or similar authority in such States, is
included in the Receivable File as of the date of its review of the Receivable
Files and deliver a copy of such list to the Servicer, the Owner Trustee and the
Note Insurer. On the date which is 180 days following the Closing Date (in the
case of the Initial Receivables) or the applicable Subsequent Transfer Date (in
the case of the Subsequent Receivables) or, if such day is not a Business Day,
the next succeeding Business Day, the Trustee shall inform CPS and the other
parties to this Agreement and the Note Insurer of any Receivable for which the
related Receivable File on such date does not include an original certificate of
title or, with respect to Financed Vehicles in the Non-Certificated Title
States, for which the related Receivable File on such date does not include
evidence of title issued by the applicable Department of Motor Vehicles or
similar authority, and CPS shall repurchase any such Receivable as of the last
day of the current Collection Period.
SECTION 3.5 ACCESS TO RECEIVABLE FILES. The Trustee shall permit the
Servicer and the Note Insurer access to the Receivable Files at all reasonable
times during the Trustee's normal business hours. The Trustee shall, within two
Business Days of the request of the Servicer, the Owner Trustee or the Note
Insurer, execute such documents and instruments as are prepared by the Servicer,
the Owner Trustee or the Note Insurer and delivered to the Trustee, as the
Servicer, the Owner Trustee or the Note Insurer deems necessary to permit the
Servicer, in accordance with its customary servicing procedures, to enforce the
Receivable on behalf of the Trust and any related insurance policies covering
the Obligor, the Receivable or Financed Vehicle so long as such execution in the
Trustee's sole discretion does not conflict with this Agreement and will not
cause it undue risk or liability. The Trustee shall not be obligated to release
any document from any Receivable File unless it receives a release request
signed by a Servicing Officer in the form of EXHIBIT C hereto (the "RELEASE
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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 DELIVER MONTHLY RECEIVABLE FILE REPORT. Within
three Business Days after the end of a month in which the Trustee releases any
Receivable Files to the Servicer or after any subsequent month in which such
Receivable Files remain outstanding pursuant to Section 3.5 hereof, the Trustee
shall deliver to the Note Insurer and the Servicer a monthly report which
identifies all Receivable Files released to the Servicer and not yet returned to
the Trustee.
SECTION 3.7 TRUSTEE TO MAINTAIN SECURE FACILITIES. The Trustee shall
maintain or cause to be maintained continuous custody of the Receivable Files in
secure and fire resistant facilities in accordance with customary standards for
such custody.
ARTICLE IV
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ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1 DUTIES OF THE SERVICER. The Servicer, as agent for the
Trust, the Securityholders and the Note Insurer (to the extent provided herein)
shall manage, service, administer and make collections on the Receivables with
reasonable care, using that degree of skill and attention customary and usual
for institutions which service motor vehicle retail installment contracts
similar to the Receivables and, to the extent more exacting, that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. The Servicer's duties shall include collection and posting
of all payments, responding to inquiries of Obligors on such Receivables,
investigating delinquencies, sending payment statements to Obligors, reporting
tax information to Obligors, accounting for collections, furnishing monthly and
annual statements to the Trustee, the Owner Trustee and the Note Insurer with
respect to distributions. Without limiting the generality of the foregoing, and
subject to the servicing standards set forth in this Agreement, the Servicer is
authorized and empowered by the Trust to execute and deliver, on behalf of
itself, the Trust or the Securityholders, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables and/or the certificates of title or,
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with respect to Financed Vehicles in the Non-Certificated Title States, other
evidence of ownership with respect to such Financed Vehicles issued by the
applicable Department of Motor Vehicles or similar authority. If the Servicer
shall commence a legal proceeding to enforce a Receivable, the Trust shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection, such Receivable to the Servicer. If in any enforcement suit or legal
proceeding it shall be held that the Servicer may not enforce a Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce such Receivable, the Trust shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Securityholders. The Servicer shall prepare and furnish,
and the Trustee and the Owner Trustee shall execute, any powers of attorney and
other documents reasonably necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.
SECTION 4.2 COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due and shall follow such
collection procedures as it follows with respect to all comparable automotive
receivables that it services for itself or others; provided, however, that
promptly after the Closing Date the Servicer shall notify each Obligor to make
all payments with respect to the Receivables to the Post Office Box. The
Servicer will provide each Obligor with a monthly statement in order to notify
such Obligors to make payments directly to the Post Office Box. The Servicer
shall allocate collections between principal and interest in accordance with the
customary servicing procedures it follows with respect to all comparable
automotive receivables that it services for itself or others and in accordance
with the terms of this Agreement. Except as provided below, the Servicer, for so
long as CPS is the Servicer, may grant extensions to the extent that the
Three-Month Rolling Average Extension Ratio does not exceed (i) 2.5%, if the
most recent Collection Period tested was in the period from March through
September (inclusive), or (ii) 3.0%, if the most recent Collection Period tested
was in the period from October through February (inclusive) (the "Aggregate
Extension Percentage Limitation"); provided, however, that the Servicer, without
the prior written consent of the Note Insurer, may not (x) grant more than one
extension per calendar year with respect to a CPS Receivable or grant an
extension with respect to a CPS Receivable for more than one calendar month or
grant more than four extensions in the aggregate with respect to a CPS
Receivable (y) grant more than two (2) extensions per calendar year with respect
to a TFC Receivable or grant an extension with respect to a TFC Receivable for
more than one (1) calendar month or grant more than four (4) extensions in the
aggregate with respect to a TFC Receivables and (z) grant an extension with
respect to a SeaWest Receivable for more than one calendar month in any
six-month period or more than six calendar months in the aggregate for such
SeaWest Receivable; provided, further, however, that if the Servicer extends the
date for final payment by the Obligor of any Receivable beyond the last day of
the penultimate Collection Period preceding the Class A-2 Final Scheduled
Payment Date, it shall promptly purchase the Receivable from the Trust in
accordance with the terms of Section 4.7 hereof (and for purposes thereof, the
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Receivable shall be deemed to be materially and adversely affected by such
breach). In addition, if the Servicer grants extensions with respect to any
Receivables in excess of the Aggregate Extension Percentage Limitation, the
Servicer will promptly purchase such Receivables from the Trust in accordance
with the terms of Section 4.7 hereof (and for purposes thereof, such Receivables
shall be deemed to be materially and adversely affected by such breach). If the
Servicer is not CPS, the Servicer may not make any extension on a Receivable
without the prior written consent of the Note Insurer. The Servicer may in its
discretion waive any late payment charge or any other fees that may be collected
in the ordinary course of servicing a Receivable. Notwithstanding anything to
the contrary contained herein, the Servicer shall not agree to any alteration of
the interest rate on any Receivable or of the amount of any Scheduled Receivable
Payment on Receivables, other than to the extent that such alteration is
required by applicable law.
(b) The Servicer shall establish the Lockbox Account in the
name of the Trust for the benefit of the Trustee for the further benefit of the
Securityholders and the Note Insurer. Pursuant to the Lockbox Agreement, the
Trustee has authorized the Servicer to direct dispositions of funds on deposit
in the Lockbox Account to the Collection Account (but not to any other account),
and no other Person, except the Lockbox Processor and the Trustee, has authority
to direct the disposition of funds on deposit in the Lockbox Account. The
Lockbox Agreement shall provide that Lockbox Banks will comply with the
instructions originated by the Trustee relating to the disposition of funds on
deposit in the Lockbox Account. The Trustee shall have no liability or
responsibility with respect to the Lockbox Processor's directions or activities
as set forth in the preceding sentence. The Lockbox Account shall be established
pursuant to and maintained in accordance with the Lockbox Agreement and shall be
a demand deposit account initially established and maintained with the Lockbox
Bank or, at the request of the Note Insurer (unless an Insurer Default shall
have occurred and be continuing), an Eligible Account satisfying clause (i) of
the definition thereof; provided, however, that the Trustee shall give the
Servicer prior written notice of any change made at the request of the Note
Insurer in the location of the Lockbox Account. The Trustee shall establish and
maintain the Post Office Box at a United States Post Office Branch in the name
of the Trust for the benefit of the Securityholders and the Note Insurer.
(c) Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to the Lockbox Agreement, the Servicer
shall remain obligated and liable to the Trust, the Trustee and Securityholders
for servicing and administering the Receivables and the Other Conveyed Property
in accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue thereof.
(d) In the event CPS shall for any reason no longer be acting
as the Servicer hereunder, the Backup Servicer or a successor Servicer shall
thereupon assume all of the rights and obligations of the outgoing Servicer
under the Lockbox Agreement arising from and after such assumption. In such
event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to the Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
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The outgoing Servicer shall, upon request of the Trustee, but at the expense of
the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to the Lockbox Agreement and an accounting of amounts collected
and held by the Lockbox Bank and otherwise use its best efforts to effect the
orderly and efficient assignment of any Lockbox Agreement to the successor
Servicer. In the event that the Note Insurer (so long as an Insurer Default
shall not have occurred and be continuing) or a Note Majority (if an Insurer
Default shall have occurred and be continuing) or the Majority
Certificateholders (if the Note Balance has been reduced to zero, all amounts
due and owing to the Note Insurer have been paid in full and the Policy has
expired in accordance with its terms) shall elect to change the identity of the
Lockbox Bank, the Servicer, at its expense, shall cause the Lockbox Bank to
deliver, at the direction of the Note Insurer (so long as an Insurer Default
shall not have occurred and be continuing) or a Note Majority (if an Insurer
Default shall have occurred and be continuing) or the Majority
Certificateholders (if the Note Balance has been reduced to zero, all amounts
due and owing to the Note Insurer have been paid in full and the Policy has
expired in accordance with its terms) to the Trustee or a successor Lockbox
Bank, all documents and records relating to the Receivables and all amounts held
(or thereafter received) by the Lockbox Bank (together with an accounting of
such amounts) and shall otherwise use its best efforts to effect the orderly and
efficient transfer of the Lockbox arrangements. The outgoing Servicer shall
deliver prompt written notice to the Rating Agencies of any change or transfer
of the Lockbox arrangements.
(e) On each Business Day, pursuant to the Lockbox Agreement,
the Lockbox Processor will transfer any payments from Obligors received in the
Post Office Box to the Lockbox Account. Within two Business Days of receipt of
funds into the Lockbox Account, the Servicer shall cause the Lockbox Bank to
transfer funds from the Lockbox Account to the Collection Account. In addition,
the Servicer shall remit all payments by or on behalf of the Obligors received
by the Servicer with respect to the Receivables (other than Purchased
Receivables), and all Liquidation Proceeds no later than the Business Day
following receipt directly (without deposit into any intervening account) into
the Lockbox Account or the Collection Account. The Servicer shall not commingle
its assets and funds with those on deposit in the Lockbox Account.
SECTION 4.3 REALIZATION UPON RECEIVABLES. On behalf of the Trust, the
Securityholders and the Note Insurer, the Servicer shall use its best efforts,
consistent with the servicing procedures set forth herein, to repossess or
otherwise convert the ownership of the Financed Vehicle securing any Receivable
as to which the Servicer shall have determined eventual payment in full is
unlikely. The Servicer shall commence efforts to repossess or otherwise convert
the ownership of a Financed Vehicle or sell the related Receivable to an
unaffiliated third-party on or prior to the date that an Obligor has failed to
make more than 90% of a Scheduled Receivable Payment thereon in excess of $10
for 120 days or more; provided, however, that the Servicer may elect not to
commence such efforts within such time period if in its good faith judgment it
determines either that it would be impracticable to do so or that the proceeds
ultimately recoverable with respect to such Receivable would be increased by
forbearance. The Servicer shall follow such customary and usual practices and
51
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 Applicable Purchaser
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
Applicable Purchaser as policyholder (creditor) and (iii) as to each Receivable
that finances the cost of an extended service contract, the respective Financed
Vehicle which secures the Receivable is covered by an extended service contract.
(b) To the extent applicable, the Servicer shall not take any
action which would result in noncoverage under any of the insurance policies
referred to in Section 4.4(a) which, but for the actions of the Servicer, would
have been covered thereunder. The Servicer, on behalf of the Trust, shall take
such reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies shall be deposited in the Collection Account.
SECTION 4.5 MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by
this Agreement, the Servicer shall take such steps on behalf of the Trust as are
necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle, including but not limited to
obtaining the authorization of the Obligors and the recording, registering,
filing, re-recording, re-registering and refiling of all security agreements,
financing statements and continuation statements or instruments as are necessary
to maintain the security interest granted by the Obligors under the respective
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Receivables. The Trustee hereby authorizes the Servicer, and the Servicer
agrees, to take any and all steps necessary to re-perfect or continue the
perfection of such security interest on behalf of the Trust as necessary because
of the relocation of a Financed Vehicle or for any other reason. In the event
that the assignment of a Receivable to the Trust is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
State in which the Financed Vehicle is located, to perfect a security interest
in the related Financed Vehicle in favor of the Trust, the Servicer hereby
agrees that the Applicable Purchaser's designation as the secured party on the
certificate of title is in its capacity as Servicer as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of
Default, the Note Insurer may (so long as it is the Controlling Party) instruct
the Trustee and the Servicer to take or cause to be taken or, if the Note
Insurer is not the Controlling Party, upon the occurrence of a Servicer
Termination Event, the Trustee and the Servicer shall take or cause to be taken,
such action as may, in the opinion of counsel to the Trustee, which opinion
shall not be an expense of the Trustee, be necessary to perfect or re-perfect
the security interests in the Financed Vehicles securing the Receivables in the
name of the Trust by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the Trustee,
which opinion shall not be an expense of the Trustee, be necessary or prudent.
The opinions referenced in the previous sentence must be acceptable to the Note
Insurer (unless an Insurer Default shall have occurred and be continuing). The
Servicer hereby agrees to pay all expenses related to such perfection or
re-perfection and to take all action necessary therefor. In addition, prior to
the occurrence of an Insurance Agreement Event of Default, the Controlling Party
may instruct the Trustee and the Servicer to take or cause to be taken such
action as may, in the opinion of counsel to the Controlling Party, be necessary
to perfect or re-perfect the security interest in the Financed Vehicles
underlying the Receivables in the name of the Trust, including by amending the
title documents of such Financed Vehicles or by such other reasonable means as
may, in the opinion of counsel to the Controlling Party, be necessary or
prudent; provided, however, that if the Controlling Party requests that the
title documents be amended prior to the occurrence of an Insurance Agreement
Event of Default, the out-of-pocket expenses of the Servicer or the Trustee in
connection with such action shall be reimbursed to the Servicer or the Trustee,
as applicable, by the Controlling Party.
SECTION 4.6 ADDITIONAL COVENANTS OF SERVICER. The Servicer shall not
release the Financed Vehicle securing each Receivable from the security interest
granted by such Receivable in whole or in part except in the event of payment in
full by the Obligor thereunder or repossession, nor shall the Servicer impair
the rights of the Securityholders in such Receivables, nor shall the Servicer
amend a Receivable, except that extensions and waivers may be granted in
accordance with Section 4.2. The Servicer shall not create, incur or suffer to
exist any Lien or restriction on transferability of the Receivables nor, except
as contemplated by the Basic Documents, sign or file under the UCC of any
jurisdiction any financing statement that names CPS or the Servicer as debtor,
nor sign any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Receivables. The Servicer shall
take such actions as are necessary from time to time in order to maintain the
perfection and priority of the Issuer's security interest in the Trust Property.
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SECTION 4.7 PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Servicer, the Note Insurer, the Owner Trustee or the
Trustee of a breach of any of the covenants set forth in Section 4.2(a), 4.4,
4.5 or 4.6, the party discovering such breach shall give prompt written notice
to the others; provided, however, that the failure to give any such notice shall
not affect any obligation of the Servicer under this Section 4.7. Unless the
breach shall have been cured by the last day of the second Collection Period
following such discovery (or, at the Servicer's election, the last day of the
first following Collection Period), the Servicer shall purchase any Receivable
with respect to which the Securityholders' or the Note Insurers' interest
therein or in the related Financed Vehicle is materially and adversely affected
by such breach. In consideration of the purchase of such Receivable, the
Servicer shall remit the Purchase Amount in the manner specified in Section 5.6.
The sole remedy of the Trustee, the Trust, the Owner Trustee, the Note Insurer
or the Securityholders with respect to a breach of Section 4.2(a), 4.4, 4.5 or
4.6 shall be to require the Servicer to repurchase Receivables pursuant to this
Section 4.7; provided, however, that the Servicer shall indemnify the Trustee,
the Backup Servicer, the Collateral Agent, the Note Insurer, the Owner Trustee,
the Trust and the Securityholders against all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel, which
may be asserted against or incurred by any of them as a result of third party
claims arising out of the events or facts giving rise to such breach. If it is
determined that the management, administration and servicing of the Receivables
and operation of the Trust pursuant to this Agreement constitutes a violation of
the prohibited transaction rules of ERISA or the Code to which no statutory
exception or administrative exemption applies, such violation shall not be
treated as a breach of Section 4.2(a), 4.4, 4.5 or 4.6 if not otherwise such a
breach. Upon receipt of the Purchase Amount and written instructions from the
Servicer, the Trustee shall release to CPS or its designee the related
Receivables File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by the Seller and
delivered to the Trustee and necessary to vest in CPS or such designee title to
the Receivable including a Trustee's Certificate in the form of Exhibit F-2.
SECTION 4.8 SERVICING FEE. As consideration for the performance of its
duties hereunder, the Servicer shall be entitled to receive the Servicing Fee on
each Payment Date, which Servicing Fee shall be paid pursuant to Section
5.7(a)(ii) hereof. The Servicing Fee shall also include all Additional Servicing
Compensation, which shall not be a part of the Owner Trust Estate. On each
Payment Date occurring after the date, if any, on which CPS resigns as Servicer
pursuant to Section 9.6 or is terminated as Servicer pursuant to Section 10.2,
the Person then acting as successor Servicer (including the Backup Servicer, if
acting in such capacity) shall be entitled to receive (i) the Servicing Fee and
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(ii) a supplemental fee (the "Successor Servicing Fee") equal to the positive
difference, if any, between (A) the product of the number of Receivables
serviced by the successor Servicer during the related Collection Period and $13
and (B) the Servicing Fee, each in accordance with the priorities set forth in
Section 5.7(a) hereof.
SECTION 4.9 SERVICER'S CERTIFICATE. By 9:00 a.m., Minneapolis time, on
each Determination Date, the Servicer shall deliver to the Trustee, the Owner
Trustee, the Note Insurer, the Rating Agencies and the Seller a Servicer's
Certificate containing all information necessary to make the distributions
pursuant to Sections 5.7 and 5.8 (including, if required, withdrawals from the
Series 2007-TFC Spread Account) for the Collection Period preceding the date of
such Servicer's Certificate and all information necessary for the Trustee to
send statements to the Securityholders and the Note Insurer pursuant to Section
5.8(b) and all information necessary to enable the Backup Servicer to verify the
information specified in Section 4.13(b) and to complete the accounting required
by Section 5.9. Receivables to be purchased by the Servicer or to be purchased
by CPS shall be identified by the Servicer by account number with respect to
such Receivable (as specified in Schedule A).
SECTION 4.10 ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Owner Trustee, the
Trustee, the Backup Servicer, the Note Insurer and each Rating Agency, on or
before March 31 of each year beginning March 31, 2008, an Officer's Certificate,
dated as of December 31 of the preceding year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period (or, in the case
of the first such Officer's Certificate, from the Closing Date to December 31,
2007) and of its performance under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year (or, in the case of the first such Officer's Certificate,
from the Closing Date to December 31, 2007), or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof. The Trustee shall forward a copy
of such certificate as well as the report referred to in Section 4.11 to each
Noteholder and the Owner Trustee shall forward a copy to each Residual
Certificateholder.
(b) The Servicer shall deliver to the Owner Trustee, the
Trustee, the Backup Servicer, the Note Insurer, the Collateral Agent, and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than two (2) Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 10.1.
SECTION 4.11 ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. The Servicer shall
cause a firm of nationally recognized independent certified public accountants
(the "Independent Accountants"), who may also render other services to the
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Servicer or to the Seller, to deliver to the Trustee, the Owner Trustee, the
Backup Servicer, the Note Insurer and each Rating Agency, on or before March 31
of each year beginning March 31, 2008, a report dated as of December 31 of the
previous year (the "Accountants' Report") and reviewing the Servicer's
activities during the preceding 12-month period, addressed to the Board of
Directors of the Servicer, to the Owner Trustee, the Trustee, the Backup
Servicer and to the Note Insurer, to the effect that such firm has examined the
financial statements of the Servicer and issued its report therefor and that
such examination (1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
circumstances; (2) included tests relating to auto loans serviced for others in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers (the "Program"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement; (3)
included an examination of the delinquency and loss statistics relating to the
Servicer's portfolio of automobile and light truck installment sales contracts;
and (4) except as described in the report, disclosed no exceptions or errors in
the records relating to automobile and light truck loans serviced for others
that, in the firm's opinion, paragraph four of the Program requires such firm to
report. The accountant's report shall further state that (A) a review in
accordance with agreed upon procedures was made of two randomly selected
Servicer Certificates; (B) except as disclosed in the report, no exceptions or
errors in the Servicer Certificates were found; and (C) the delinquency and loss
information relating to the Receivables and the stated amount of Liquidated
Receivables, if any, contained in the Servicer Certificates were found to be
accurate. In the event such firm requires the Trustee, the Owner Trustee and/or
the Backup Servicer to agree to the procedures performed by such firm, the
Servicer shall direct the Trustee, the Owner Trustee and/or the Backup Servicer,
as applicable, in writing to so agree; it being understood and agreed that the
Trustee, the Owner Trustee and/or the Backup Servicer will deliver such letter
of agreement in conclusive reliance upon the direction of the Servicer, and
neither the Trustee, the Owner Trustee nor the Backup Servicer makes any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
The Report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Servicer shall provide to representatives of the Trustee, the
Owner Trustee, the Backup Servicer, the Note Insurer and the Rating Agencies
reasonable access to the documentation regarding the Receivables. In each case,
such access shall be afforded without charge but only upon reasonable request
and during normal business hours. Nothing in this Section shall derogate from
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.
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SECTION 4.13 VERIFICATION OF SERVICER'S CERTIFICATE.
(a) On or before the fifth calendar day of each month, the
Servicer will deliver to the Trustee and the Backup Servicer a computer diskette
(or other electronic transmission) in a format acceptable to the Trustee and the
Backup Servicer containing information with respect to the Receivables as of the
close of business on the last day of the related Collection Period which
information is necessary for preparation of the Servicer's Certificate. The
Backup Servicer shall use such computer diskette (or other electronic
transmission) to verify certain information specified in Section 4.13(b)
contained in the Servicer's Certificate delivered by the Servicer, and the
Backup Servicer shall notify the Servicer and the Note Insurer of any
discrepancies on or before the second Business Day following the Determination
Date. In the event that the Backup Servicer reports any discrepancies, the
Servicer and the Backup Servicer shall attempt to reconcile such discrepancies
prior to the second Business Day prior to the related Payment Date, but in the
absence of a reconciliation, the Servicer's Certificate shall control for the
purpose of calculations and distributions with respect to the related Payment
Date. In the event that the Backup Servicer and the Servicer are unable to
reconcile discrepancies with respect to a Servicer's Certificate by the related
Payment Date, the Servicer shall cause a firm of independent certified public
accountants, at the Servicer's expense, to audit the Servicer's Certificate and,
prior to the fifth calendar day of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected in
the Servicer's Certificate for such next succeeding Determination Date. Other
than the duties specifically set forth in this Agreement, the Backup Servicer
shall have no obligations hereunder, including, without limitation, to
supervise, verify, monitor or administer the performance of the Servicer. The
Backup Servicer shall have no liability for any actions taken or omitted by the
Servicer. The duties and obligations of the Backup Servicer shall be determined
solely by the express provisions of this Agreement and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
Notwithstanding the fact that the Backup Servicer shall receive the data
referenced in this Section 4.13(a) on a monthly basis, at the request of the
Note Insurer, the Backup Servicer agrees to receive and the Servicer agrees to
deliver any such data with respect to the Receivables from the Servicer on a
more frequent basis, up to and including daily or weekly transmissions.
(b) The Backup Servicer shall review each Servicer's
Certificate delivered pursuant to Section 4.13(a) and shall:
(i) confirm that such Servicer's Certificate is
complete on its face;
(ii) load the computer diskette (which shall be in a
format acceptable to the Backup Servicer) received from the Servicer
pursuant to Section 4.13(a) hereof, confirm that such computer diskette
is in a readable form and calculate and confirm the Aggregate Principal
Balance for the most recent Payment Date;
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(iii) confirm, based solely on the information shown
on the Servicer's Certificate, that the Total Distribution Amount, the
Principal Distributable Amount, the Noteholders' Principal
Distributable Amount, the Note Prepayment Amount, the Noteholders'
Parity Deficit Amount, the Noteholders' Interest Distributable Amount
for each Class of Notes, the Residual Certificate Interest
Distributable Amount, the Residual Certificate Principal Distributable
Amount, the Residual Certificate Prepayment Amount, the Targeted
Principal Distributable Amount, the Backup Servicing Fee, the Servicing
Fee, the Trustee Fees, the Cayman Trustee Fees, the amount on deposit
in the Series 2007-TFC Spread Account, the amount on deposit in the
Pre-Funding Account, the amount on deposit in the Capitalized Interest
Account, the Three-Month Rolling Average Extension Ratio, the
Three-Month Rolling Average Delinquency Ratio, the Cumulative Net Loss
Rate and the Premium (as defined in the Insurance Agreement) in the
Servicer's Certificate are accurate based solely on the recalculation
of the Servicer's Certificate and without further investigation;
(iv) confirm the calculation of the Trigger Events
based solely upon the information contained on the applicable computer
diskette; and
(v) by the third Business Day following the Backup
Servicer's receipt of the Servicer's Certificate and following the
Backup Servicer's review of such Servicer's Certificate and the related
monthly tape, the Backup Servicer shall provide the Note Insurer with a
certificate (i) describing those activities it performed in its review
of the monthly tape and the Servicer's Certificate, (ii) listing those
parts of the Servicer's Certificate that it confirmed were correct,
(iii) listing those parts of the Servicer's Certificate that it found
to be incorrect, and (iv) describing any discrepancies,
inconsistencies, incorrect information or incorrect calculations that
were revealed by its review of the Servicer's Certificate and the
related monthly tape.
(c) On or prior to the Closing Date, the Backup Servicer will
cause an affiliate of the Back-up Servicer to data map to their servicing system
all servicing/loan file information, including all relevant borrower contact
information such as address and phone numbers as well as loan balance and
payment information, including comment histories and collection notes. On or
before the fifth calendar day of each month, the Servicer will provide to an
affiliate of the Backup Servicer an electronic transmission of all
servicing/loan information, including all relevant borrower contact information
such as address and phone numbers as well as loan balance and payment
information, including comment histories and collection notes, and the Backup
Servicer will cause such affiliate to review each file to ensure that it is in
readable form and verify that the data balances conform to the trial balance
reports received from the Servicer. Additionally, the Backup Servicer shall
cause such affiliate to store each such file.
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SECTION 4.14 RETENTION AND TERMINATION OF SERVICER. The Servicer hereby
covenants and agrees to act as such under this Agreement for an initial term
commencing on the Closing Date and ending on June 30, 2007, which term may be
extended by the Note Insurer for successive two-month terms (or, at the
discretion of the Note Insurer exercised pursuant to revocable written standing
instructions from time to time to the Servicer and the Trustee, for any
specified number of terms greater than one), until such time as the Notes have
been paid in full, all amounts due to the Residual Certificateholders and the
Note Insurer have been paid and until the termination of the Trust. Each such
notice (including each notice pursuant to standing instructions, which shall be
deemed delivered at the end of successive terms for so long as such instructions
are in effect) (a "Servicer Extension Notice") shall be delivered by the Note
Insurer to the Trustee and the Servicer. The Servicer hereby agrees that, upon
its receipt of any such Servicer Extension Notice, the Servicer shall become
bound, for the duration of the term covered by such Servicer Extension Notice,
to continue as the Servicer subject to and in accordance with the other
provisions of this Agreement. If an Insurer Default has occurred and is
continuing, the term of the Servicer's appointment hereunder shall be deemed to
have been extended until such time, if any, as such Insurer Default has been
cured unless such appointment is terminated sooner in accordance with the terms
of this Agreement. Until such time as an Insurer Default shall have occurred and
be continuing, the Trustee agrees that if as of the fifteenth day prior to the
last day of any term of the Servicer, the Trustee shall not have received any
Servicer Extension Notice from the Note Insurer, the Trustee shall, within five
days thereafter, give written notice of such non-receipt to the Note Insurer.
SECTION 4.15 FIDELITY BOND. The Servicer shall maintain a fidelity bond
in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
SECTION 4.16 OPTIONAL PURCHASE OF CERTAIN RECEIVABLES
(a) CPS shall have the right, but not the obligation, to
acquire Receivables on the last day of any Collection Period during the term of
the Trust at a price equal to at least the fair market value of such
Receivables, so long as the fair market value is not less than the related
aggregate Purchase Amount plus the costs and expenses of the Servicer, the Trust
and the Note Insurer (including any outstanding reimbursements) in connection
with such optional purchase. The aggregate Principal Balance of Receivables
repurchased under such option shall be limited to 1% of the Original Collateral
Balance. To exercise such option, CPS shall (subject to the proviso below)
deposit in the Collection Account pursuant to Section 5.6 (or remit to the
Servicer, if CPS is not then Servicer) an amount equal to the related aggregate
Purchase Amount for such Receivables and thereafter shall succeed to all
interests of the Trust in and to such Receivables. Upon notice of receipt of the
related aggregate Purchase Amount for such Receivables and written instructions
from the Servicer, the Trustee shall release to CPS or its designee the related
59
Receivables Files and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by CPS and delivered
to the Trustee and necessary to vest in CPS or such designee title to such
Receivables including a Trustee's Certificate in the form of EXHIBIT F-2.
(b) CPS shall have the right, which right may be assigned by
CPS to an Affiliate, but not the obligation, to repurchase on the last day of
any Collection Period any Defaulted Texas Receivables the related Obligors of
which reside in the State of Texas or the related Financed Vehicles of which are
located in the State of Texas at a price equal to at least the fair market value
of such Defaulted Texas Receivables, so long as the fair market value is not
less than the related aggregate Purchase Amount, plus the costs and expenses of
the Servicer, the Trust and the Note Insurer (including any outstanding
reimbursements) in connection with such optional purchase. To exercise such
option, CPS shall (subject to the proviso below) deposit in the Collection
Account pursuant to Section 5.6 (or remit to the Servicer, if CPS is not then
Servicer) an amount equal to the related aggregate Purchase Amount for such
Defaulted Texas Receivables and thereafter shall succeed to all interests of the
Trust in and to such Defaulted Texas Receivables. Upon notice of receipt of the
related aggregate Purchase Amount for such Defaulted Texas Receivables and
written instructions from the Servicer, the Trustee shall release to CPS or its
designee the related Receivables Files and shall execute and deliver all
reasonable instruments of transfer or assignment, without recourse, as are
prepared by the CPS and delivered to the Trustee and necessary to vest in CPS or
such designee title to such Defaulted Texas Receivables including a Trustee's
Certificate in the form of EXHIBIT F-2.
ARTICLE V
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TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO SECURITYHOLDERS
SECTION 5.1 ESTABLISHMENT OF TRUST ACCOUNTS.
(a) (i) The Trustee, on behalf of the Securityholders and the
Note Insurer, shall establish and maintain in its own name an Eligible Account
(the "Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Trustee on behalf of the
Securityholders and the Note Insurer. On the Closing Date, the Servicer will
deposit, on behalf of the Seller, in the Collection Account, an amount equal to
$3,178,223.97, such amount representing collections on the Receivables received
from and including the day after the Initial Cutoff Date through May 8, 2007,
but not previously deposited into the Collection Account.
(ii) The Trustee, on behalf of the Noteholders, shall establish and
maintain in its own name an Eligible Account (the "Note Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Trustee on behalf of the Noteholders and the Note
Insurer. The Note Distribution Account shall initially be established with the
Trustee.
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(iii) The Trustee, on behalf of the Noteholders, shall establish and
maintain in its own name an Eligible Account (the "Pre-Funding Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Trustee on behalf of the Securityholders and the
Note Insurer. The Pre-Funding Account shall initially be established with the
Trustee.
(iv) The Servicer shall cause the Trustee to establish and maintain an
Eligible Account (the "Capitalized Interest Account") with the Trustee, bearing
a designation clearly indicating that the funds deposited therein are held in
trust for the benefit of the Securityholders and the Note Insurer.
(v) Funds on deposit in the Collection Account, the Note Distribution
Account, the Pre-Funding Account and the Capitalized Interest Account
(collectively, the "Trust Accounts") shall be invested by the Trustee (or any
custodian with respect to funds on deposit in any such account) in Eligible
Investments selected in writing by the Servicer (pursuant to standing
instructions or otherwise). All such Eligible Investments shall be held by or on
behalf of the Trustee for the benefit of the Securityholders and the Note
Insurer. Other than as permitted by the Rating Agencies and the Note Insurer,
funds on deposit in any Trust Account shall be invested in Eligible Investments
that will mature so that such funds will be available at the close of business
on the Business Day immediately preceding the following Payment Date. Funds
deposited in a Trust Account on the day immediately preceding a Payment Date
upon the maturity of any Eligible Investments are not required to be invested
overnight. All Eligible Investments will be held to maturity.
(b) All investment earnings of moneys deposited in the Trust
Accounts shall be deposited (or caused to be deposited) by the Trustee in the
Collection Account for distribution pursuant to Section 5.7(a) and any loss
resulting from such investments shall be charged to such account. The Servicer
will not direct the Trustee to make any investment of any funds held in any of
the Trust Accounts unless the security interest granted and perfected in such
account will continue to be perfected in such investment, in either case without
any further action by any Person, and, in connection with any direction to the
Trustee to make any such investment, if requested by the Trustee, the Servicer
shall deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee,
to such effect.
(c) The Trustee shall not in any way be held liable by reason
of any insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Trustee's negligence or bad faith or its failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(d) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Trustee by 1:00
p.m. Eastern Time (or such other time as may be agreed by the Issuer and
Trustee) on any Business Day; or (ii) an Event of Default shall have occurred
and be continuing but the Notes shall not have been declared due and payable,
or, if such Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Trust Property are being
61
applied as if there had not been such a declaration; then the Trustee shall, to
the fullest extent practicable, invest and reinvest funds in the Trust Accounts
in one or more Eligible Investments described in clause (ii) of the definition
thereof.
(e) The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof (including all Investment Earnings on the Trust Accounts) and all such
funds, investments, proceeds and income shall be part of the Trust Property.
Except as otherwise provided herein, the Trust Accounts shall be under the sole
dominion and control of the Trustee for the benefit of the Securityholders and
the Note Insurer. If at any time any of the Trust Accounts ceases to be an
Eligible Account, the Servicer with the consent of the Note Insurer shall within
five Business Days establish a new Trust Account as an Eligible Account and
shall transfer any cash and/or any investments to such new Trust Account. The
Servicer shall promptly notify the Rating Agencies and the Owner Trustee of any
change in the location of any of the aforementioned accounts. In connection with
the foregoing, the Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Trustee, the Servicer shall notify the
Trustee in writing promptly upon any of such Trust Accounts ceasing to be an
Eligible Account.
(f) Notwithstanding anything to the contrary herein or in any
other document relating to a Trust Account, the "securities intermediary's
jurisdiction" (within the meaning of Section 8-110 of the UCC) or the "bank's
jurisdiction" (with the meaning of 9-304 of the UCC), as applicable, with
respect to each Trust Account shall be the State of New York.
(g) With respect to the Trust Account Property, the Trustee
agrees that:
(A) any Trust Account Property that is held in
deposit accounts shall be held solely in an Eligible Account;
and, each such Eligible Account shall be subject to the
exclusive custody and control of the Trustee and the Trustee
shall have sole signature authority with respect thereto; and
(B) any other Trust Account Property shall be
delivered to the Trustee in accordance with the definition of
"Delivery".
SECTION 5.2 CAPITALIZED INTEREST ACCOUNT.
(a) On or prior to the Closing Date, the Seller shall deposit
an amount equal to the Capitalized Interest Account Initial Deposit into the
Capitalized Interest Account.
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(b) On the Determination Date for each of the May 2007, June
2007 and July 2007 Payment Dates, to the extent that the Servicer's Certificate
indicates that the funds on deposit in the Capitalized Interest Account are in
excess of the Requisite Reserve Amount for such Payment Date, the Trustee shall
withdraw such excess from the Capitalized Interest Account and deposit such
amount in the Collection Account for distribution pursuant to Section 5.7(a) on
such Payment Date.
SECTION 5.3 CERTAIN REIMBURSEMENTS TO THE SERVICER. The Servicer will
be entitled to be reimbursed from amounts on deposit in the Collection Account
with respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Payment Date pursuant to Section 5.7(a)(ii) upon certification by the Servicer
of such amounts and the provision of such information to the Trustee and the
Note Insurer as may be necessary in the opinion of the Note Insurer to verify
the accuracy of such certification; provided, however, that the Servicer must
provide such certification within three months of its becoming aware of such
mistaken deposit, posting or returned check. In the event that the Note Insurer
has not received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this Section, the Controlling Party shall give the
Trustee notice to such effect, following receipt of which the Trustee shall not
make a distribution to the Servicer in respect of such amount pursuant to
Section 5.7(a)(ii), or, if prior thereto the Servicer has been reimbursed
pursuant to Section 5.7(a)(ii), the Trustee shall withhold such amounts from
amounts otherwise distributable to the Servicer on the next succeeding Payment
Date.
SECTION 5.4 APPLICATION OF COLLECTIONS. All collections for each
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied to interest and
principal in accordance with the Simple Interest Method.
SECTION 5.5 WITHDRAWALS FROM SERIES 2007-TFC SPREAD ACCOUNT.
(a) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Total Distribution Amount with respect
to such Determination Date is insufficient to make the payments required to be
made on the related Payment Date pursuant to Sections 5.7(a)(i) through (v) and
(vii) through (ix), provided however, that with respect to Section 5.7(a)(vii),
the amount which may be withdrawn from the Series 2007-TFC Spread Account shall
equal the Noteholders' Parity Deficit Amount, plus, if such Payment Date is the
Final Scheduled Payment for any Class of Notes, the unpaid Note Balance of such
Class of Notes (such deficiency being a "DEFICIENCY CLAIM AMOUNT"), then on the
fourth Business Day immediately preceding the related Payment Date, the Trustee
63
shall deliver to the Collateral Agent, the Owner Trustee, the Note Insurer, and
the Servicer, by hand delivery, telex or facsimile transmission, a written
notice (a "DEFICIENCY NOTICE") specifying the Deficiency Claim Amount for such
Payment Date. Such Deficiency Notice shall direct the Collateral Agent to remit
such Deficiency Claim Amount (to the extent of the funds available to be
distributed pursuant to the Master Spread Account Agreement) to the Trustee for
deposit in the Collection Account and distribution pursuant to Sections
5.7(a)(i) through (v) and (vii) through (ix), as applicable.
(b) Any Deficiency Notice shall be delivered by 3:00 p.m., New York
City time, on the fourth Business Day preceding such Payment Date. The amounts
distributed by the Collateral Agent to the Trustee pursuant to a Deficiency
Notice shall be deposited by the Trustee into the Collection Account pursuant to
Section 5.7(a).
SECTION 5.6 ADDITIONAL DEPOSITS. The Servicer or CPS, as the case may
be, shall deposit or cause to be deposited in the Collection Account the
aggregate Purchase Amount with respect to Purchased Receivables and all amounts
to be paid by CPS pursuant to its indemnification obligations under the Basic
Documents and the Servicer shall deposit or cause to be deposited therein all
amounts to be paid under Sections 4.16 and 11.1. All such deposits made pursuant
to Section 4.16 shall be made, in immediately available funds, on the Business
Day preceding the Determination Date. All such deposits made pursuant to Section
11.1 shall be made, in immediately available funds, on the Business Day
preceding the related Payment Date. On or before the third Business Day
preceding each Payment Date, the Trustee shall remit to the Collection Account
any amounts delivered to the Trustee by the Collateral Agent pursuant to Section
5.5.
SECTION 5.7 DISTRIBUTIONS.
(a) On each Payment Date, the Trustee (based on the
information contained in the Servicer's Certificate delivered on the related
Determination Date) shall make the following distributions in the following
order of priority:
(i) to the Backup Servicer so long as the Backup
Servicer is not acting as the successor Servicer, from the Total
Distribution Amount, any amount deposited in the Collection Account
pursuant to Section 5.5(a) and any amount deposited in the Collection
Amount pursuant to Section 5.12(a) in respect of Backup Servicing Fees,
the Backup Servicing Fee and all unpaid Backup Servicing Fees from
prior Collection Periods;
(ii) to the Servicer, from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clause (i) above), any amount deposited in the Collection
Account pursuant to Section 5.5(a) and any amount deposited in the
Collection Account pursuant to Section 5.12(a) in respect of Servicing
Fees, the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods and all reimbursements to which the Servicer is
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entitled pursuant to Section 5.3 and an amount, not to exceed $35,000
per annum, for payment to the taxing authority of the State of Texas on
behalf of the Issuer for any Texas franchise or similar tax due and
owing by the Issuer (or with respect to the Receivables) and not timely
paid by CPS in accordance with the Receivables Purchase Agreement;
(iii) if the Backup Servicer becomes the successor
Servicer, to the Backup Servicer, from the Total Distribution Amount
(as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) and (ii) above), any amount deposited in the
Collection Account pursuant to Section 5.5(a) and any amount deposited
in the Collection Account pursuant to Section 5.12(a), to the extent
not previously paid by the predecessor Servicer pursuant to this
Agreement, reasonable transition expenses (up to a maximum of $50,000
for all such expenses incurred over the term of this Agreement)
incurred by the Backup Servicer in becoming the successor Servicer;
(iv) concurrently on a pro rata basis, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (iii) above),
(A) to the Trustee and the Owner Trustee pro
rata, any amount deposited in the Collection Account
pursuant to Section 5.5(a) and any amount deposited
in the Collection Account pursuant to Section 5.12(a)
in respect of Trustee Fees, the Trustee Fees and
reasonable out-of-pocket expenses thereof (including
reasonable counsel fees and expenses) and all unpaid
Trustee Fees and unpaid reasonable out-of-pocket
expenses (including reasonable counsel fees and
expenses) from prior Collection Periods;
(B) to the Residual Certificateholders pro
rata based on their respective Percentage Interests,
the Supplemental Residual Certificate Distribution;
provided, however, that expenses and other amounts payable to the
Trustee, the Owner Trustee and the Residual Certificateholders pursuant
to this clause (iv) shall be limited to a total of $50,000 per annum;
PROVIDED FURTHER, HOWEVER, (I) that if an Event of Default specified
under Section 5.1(a)(i) or (ii) of the Indenture has occurred and is
continuing or (II) if the Note Insurer (so long as an Insurer Default
shall not have occurred and be continuing) otherwise agrees in writing
to waive such $50,000 per annum limitation described in the first
proviso, in its sole discretion, then such expenses payable pursuant to
this priority (iv) shall not be so limited;
(v) to the Note Distribution Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (iv) above), and any amount
deposited in the Collection Account pursuant to Sections 5.5(a) and
5.12(a), the Noteholders' Interest Distributable Amount for such
Payment Date;
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(vi) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (v) above), the Residual
Certificate Interest Distributable Amount for such Payment Date,
subject to the limitation thereon contained in the proviso to the
definition thereof;
(vii) to the Note Distribution Account from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (vi) above) and any amount
deposited in the Collection Account pursuant to Sections 5.5(a) and
5.12(a), the sum of (A) the Noteholders' Principal Distributable Amount
and (B) the Noteholders' Parity Deficit Amount, if any;
(viii) to the Note Insurer, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (vii) above) and any
amount deposited in the Collection Account pursuant to Section 5.5(a),
any amounts owing to the Note Insurer under this Agreement and the
Insurance Agreement and not paid;
(ix) if any Person other than the Backup Servicer
becomes the successor Servicer, to such successor Servicer from the
Total Distribution Amount (as such Total Distribution Amount has been
reduced by payments pursuant to clauses (i) through (viii) above), any
amount deposited in the Collection Account pursuant to Section 5.5(a)
and any amount deposited in the Collection Account pursuant to Section
5.12(a), to the extent not previously paid by the predecessor Servicer
pursuant to this Agreement, reasonable transition expenses (up to a
maximum of $50,000 for all such expenses incurred over the term of this
Agreement) incurred by such successor Servicer in becoming the
successor Servicer;
(x) to the Collateral Agent, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (ix) above) for
deposit into the Series 2007-TFC Spread Account, the remaining Total
Distribution Amount until the amount in the Series 2007-TFC Spread
Account equals the Specified Spread Account Requisite Amount;
(xi) to the Note Distribution Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (x) above), the
Targeted Principal Distributable Amount, if any, for such Payment Date;
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(xii) (a) to the Backup Servicer and the Owner
Trustee, as applicable, from the Total Distribution Amount (as such
Total Distribution has been reduced by payments made pursuant to
clauses (i) through (xi) above), any amounts owing to the Backup
Servicer hereunder and any amounts to the Owner Trustee under the Trust
Agreement, to the extent not previously paid, (b) to any successor
Servicer (including the Backup Servicer, if the Backup Servicer is then
acting in such capacity), if any, from the Total Distribution Amount
(as such Total Distribution has been reduced by payments made pursuant
to clauses (i) through (xi) above), the Successor Servicing Fees due,
if any, and (c) to the Servicer from the Total Distribution Amount (as
such Total Distribution has been reduced by payments made pursuant to
clauses (i) through (xi) above) for payment to the taxing authority of
the State of Texas on behalf of the Issuer for any Texas franchise or
similar tax due and owing by the Issuer (or with respect to the
Receivables), the amount, if any, to be paid to such taxing authority
after giving effect to the distribution pursuant to clause (ii) above
and not timely paid by CPS in accordance with the Receivables Purchase
Agreement;
(xiii) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (xii) above), the
Residual Certificate Interest Distributable Amount remaining to be paid
after giving effect to the distribution pursuant to clause (vi) above;
(xiv) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (xiii) above), the
Residual Certificate Principal Distributable Amount, if any, for such
Payment Date; and
(xv) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, any remaining Total
Distribution Amount;
provided, however, that, (A) following an acceleration of the Notes or,
(B) if an Insurer Default shall have occurred and be continuing and an Event of
Default pursuant to Sections 5.1(a)(i), 5.1(a)(ii) or 5.1(a)(v) of the Indenture
shall have occurred and be continuing, the Total Distribution Amount shall be
paid pursuant to Section 5.6(a) of the Indenture.
(b) On the Payment Date on or immediately following the date
upon which the Funding Period terminates, the Trustee shall, after making all
other distributions on such Payment Date, withdraw (i) an amount equal to the
Note Prepayment Amount from the Collection Account and distribute such amount to
the Class A Noteholders pro rata on the basis of each class's share of the
then-current aggregate outstanding principal amount of the Class A Notes (prior
to any distributions of principal on the Class A Notes on such Payment Date),
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and (ii) an amount equal to the Residual Certificate Prepayment Amount from the
Collection Account and distribute such amount to the Residual Certificateholders
pro rata based on their respective Percentage Interests.
(c) In the event that the Collection Account is maintained
with an institution other than the Trustee, the Servicer shall instruct and
cause such institution to make all deposits and distributions pursuant to
Section 5.7(a) on the related Payment Date.
SECTION 5.8 NOTE DISTRIBUTION ACCOUNT.
(a) On each Payment Date, the Trustee shall distribute all
amounts on deposit in the Note Distribution Account to the Noteholders in
respect of the Notes to the extent of amounts due and unpaid on the Notes for
principal and interest in the following amounts and in the following order of
priority:
(i) to the Holders of the Notes, the Noteholders'
Interest Distributable Amount; provided that if there are not
sufficient funds in the Note Distribution Account to pay the entire
amount then due on each Class of Notes, the amount in the Note
Distribution Account shall be applied to the payment of such interest
on each Class of Notes pro rata on the basis of the amount of accrued
and unpaid interest due on each Class of Notes;
(ii) concurrently, to the Holders of each Class of
Notes on the Mandatory Redemption Date, pro rata, on the basis of each
Class' share of the Aggregate Note Balance, the Note Prepayment Amount;
(iii) to the Holders of the Class A-1 Notes, the sum
of (x) the Noteholders' Principal Distributable Amount and (y) the
Noteholders' Parity Deficit Amount, if any, until the Class A-1 Note
Balance is reduced to zero;
(iv) to the Holders of the Class A-1 Notes, the
Targeted Principal Distributable Amount, if any, for such Payment Date
until the Class A-1 Note Balance is reduced to zero;
(v) to the Holders of the Class A-2 Notes, the sum of
(x) the Noteholders' Principal Distributable Amount (as reduced by any
distributions made on such Payment Date pursuant to clause (iii) above)
and (y) the Noteholders' Parity Deficit Amount, if any, remaining after
distributions made on such Payment Date pursuant to clauses (iii) and
(iv) above, until the Class A-2 Note Balance is reduced to zero; and
then
(vi) to the Holders of the Class A-2 Notes, the
Targeted Principal Distributable Amount, if any, for such Payment Date
until the Class A-2 Note Balance is reduced to zero.
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(b) On each Payment Date, the Trustee shall provide or make
available electronically (or, upon written request, by first class mail or
facsimile) to each Noteholder the statement or statements provided to the
Trustee by the Servicer pursuant to Section 5.11 hereof on such Payment Date;
PROVIDED, HOWEVER, the Trustee shall have no obligation to provide such
information described in this Section 5.8(b) until it has received the requisite
information from the Servicer.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Noteholder, such tax shall
reduce the amount otherwise distributable to the Noteholder in accordance with
this Section 5.8. The Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Noteholders sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Noteholder shall be treated as cash distributed to such Noteholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If, after consultations with experienced counsel, the Trustee
determines that there is a reasonable likelihood that withholding tax is payable
with respect to a distribution (such as a distribution to a Non-United States
Investor), the Trustee may in its sole discretion withhold such amounts in
accordance with this clause (c). In the event that a Noteholder wishes to apply
for a refund of any such withholding tax, the Trustee shall reasonably cooperate
with such Noteholder in making such claim so long as such Noteholder agrees to
reimburse the Trustee for any out-of-pocket expenses incurred.
(d) Distributions required to be made to Noteholders on any
Payment Date shall be made to each Noteholder of record on the preceding Record
Date either by wire transfer, in immediately available funds, to the account of
such Noteholder at a bank or other entity having appropriate facilities
therefor, if (i) such Holder shall have provided to the Note Registrar
appropriate written instructions at least five Business Days prior to such
Payment Date and such Holder's Notes in the aggregate evidence a denomination of
not less than $1,000,000 or (ii) such Noteholder is the Seller, or an Affiliate
thereof, or, if not, by check mailed to such Noteholder at the address of such
holder appearing in the Note Register; provided, however, that, unless
Definitive Notes have been issued pursuant to Section 2.12 of the Indenture,
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), distributions
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Note (whether on the related Final Scheduled
Payment Date or otherwise) will be payable only upon presentation and surrender
of such Note at the office or agency maintained for that purpose by the Note
Registrar pursuant to Section 2.4 of the Indenture.
Each Noteholder, by its acceptance of its Note, will be deemed to have
consented to the provisions of Sections 5.7 and 5.8 relating to the priority of
payments, and will be further deemed to have acknowledged that no property
rights in any amount or the proceeds of any such amount shall vest in such
Noteholder until such amounts have been distributed to such Noteholder pursuant
to such provisions; PROVIDED, that the foregoing shall not restrict the right of
any Noteholder, upon compliance with the provisions hereof from seeking to
69
compel the performance of the provisions hereof by the parties hereto. Each
Noteholder, by its acceptance of its Note, will be deemed to have further agreed
that withdrawals of funds by the Collateral Agent from the Series 2007-TFC
Spread Account for application hereunder, shall be made in accordance with the
provisions of the Master Spread Account Agreement.
SECTION 5.9 CERTAIN RIGHTS OF THE RESIDUAL CERTIFICATEHOLDERS.On each
Payment Date, the Trustee shall provide or make available electronically (or,
upon written request, send by first class mail or facsimile) to each Residual
Certificateholder the statement or statements provided to the Trustee by the
Servicer pursuant to Section 5.11 hereof on such Payment Date; PROVIDED,
HOWEVER, the Trustee shall have no obligation to provide such information
described in this Section 5.9(a) until it has received the requisite information
from the Servicer.
(b) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Residual Certificateholder, such
tax shall reduce the amount otherwise distributable to such Residual
Certificateholder in accordance with Section 5.7(a). The Trustee is hereby
authorized and directed to retain from amounts otherwise distributable to the
Residual Certificateholders sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Trustee
from contesting any such tax in appropriate proceedings, and withholding payment
of such tax, if permitted by law, pending the outcome of such proceedings). The
amount of any withholding tax imposed with respect to a Residual
Certificateholder shall be treated as cash distributed to such Residual
Certificateholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If, after consultations with experienced counsel,
the Trustee determines that there is a reasonable likelihood that withholding
tax is payable with respect to a distribution (such as a distribution to a
Non-United States Investor), the Trustee may in its sole discretion withhold
such amounts in accordance with this clause (c). In the event that a Residual
Certificateholder wishes to apply for a refund of any such withholding tax, the
Trustee shall reasonably cooperate with such Residual Certificateholder in
making such claim so long as such Residual Certificateholder agrees to reimburse
the Trustee for any out-of-pocket expenses incurred.
(c) Distributions required to be made to Residual
Certificateholders on any Payment Date shall be made to each Residual
Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Residual
Certificateholder at a bank or other entity having appropriate facilities
therefor, if (i) such Residual Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Payment Date and such Residual Certificateholder's Residual
Pass-through Certificates in the aggregate evidence a denomination of not less
than $1,000,000 or (ii) such Residual Certificateholder is the Seller, or an
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Affiliate thereof, or, if not, by check mailed to such Residual
Certificateholder at the address of such holder appearing in the Certificate
Register. Notwithstanding the foregoing, the final distribution in respect of
any Residual Pass-through Certificate will be payable only upon presentation and
surrender of such Residual Pass-through Certificate at the office or agency
maintained for that purpose by the Certificate Registrar pursuant to Section 3.8
of the Trust Agreement.
Each Residual Certificateholder, by its acceptance of its Residual
Pass-through Certificate, will be deemed to have consented to the provisions of
Sections 5.7, 5.8 and 5.9 relating to the priority of payments, and will be
further deemed to have acknowledged that no property rights in any amount or the
proceeds of any such amount shall vest in such Residual Certificateholder until
such amounts have been distributed to such Residual Certificateholder pursuant
to such provisions; PROVIDED, that the foregoing shall not restrict the right of
any Residual Certificateholder, upon compliance with the provisions hereof from
seeking to compel the performance of the provisions hereof by the parties
hereto. Each Residual Certificateholder, by its acceptance of its Residual
Pass-through Certificate, will be deemed to have further agreed that withdrawals
of funds by the Collateral Agent from the Series 2007-TFC Spread Account for
application hereunder, shall be made in accordance with the provisions of the
Master Spread Account Agreement.
Each Residual Certificateholder, by its acceptance of a Residual
Pass-through Certificate, further specifically acknowledges that it has no right
to or interest in any moneys at any time held pursuant to the Master Spread
Account Agreement prior to the release of such moneys as aforesaid, such moneys
being held in trust for the benefit of the Securityholders and the Note Insurer
as their interests may appear prior to such release. Notwithstanding the
foregoing, in the event that it is ever determined that any property held in the
Series 2007-TFC Spread Account constitutes a pledge of collateral, then the
provisions of the Master Spread Account Agreement shall be considered to
constitute a security agreement and the Residual Certificateholders hereby grant
to the Collateral Agent a first priority perfected security interest in such
amounts, to be applied as set forth in Section 3.03(b) of the Master Spread
Account Agreement. In addition, each Residual Certificateholder, by its
acceptance of a Residual Pass-through Certificate, hereby grants a first
priority perfected security interest in its interest in the Series 2007-TFC
Spread Account, if any, and any property held therein from time to time to the
Collateral Agent for the benefit of the Note Insurer pursuant to the Master
Spread Account Agreement, and agrees to execute and deliver such instruments of
conveyance, assignment, grant, confirmation, etc., as well as any financing
statements, in each case as the Note Insurer shall consider reasonably necessary
in order to perfect the Collateral Agent's Security Interest in the Collateral
(as such terms are defined in the Master Spread Account Agreement).
SECTION 5.10 PRE-FUNDING ACCOUNT.
(a) On the Closing Date, the Trustee will deposit, on behalf
of the Seller, the Pre-Funded Amount into the Pre-Funding Account from the
proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Trustee to withdraw from the Pre-Funding Account (i)
an amount equal to the excess of (a) the Principal Balance of the Subsequent
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Receivables transferred to the Issuer on such Subsequent Transfer Date over (b)
the Subsequent Spread Account Deposit for such Subsequent Transfer Date, and to
distribute such amount to or upon the order of the Seller upon satisfaction of
the conditions set forth in this Agreement with respect to such transfer; and
(ii) an amount equal to the Subsequent Spread Account Deposit on such Subsequent
Transfer Date and deposit such amount into the Series 2007-TFC Spread Account
upon satisfaction of the conditions set forth in this Agreement with respect to
such transfer.
(b) If the Pre-Funded Amount has not been reduced to zero on
the date on which the Funding Period ends, after giving effect to any reductions
in the Pre-Funded Amount on such date, the Servicer shall instruct the Trustee
to withdraw from the Pre-Funding Account on the Mandatory Redemption Date the
Pre-Funded Amount (exclusive of any Pre-Funding Earnings) and deposit an amount
equal to the Note Prepayment Amount into the Note Distribution Account and an
amount equal to the Residual Certificate Prepayment Amount into the Collection
Account.
(c) All Pre-Funding Earnings will be deposited in the
Collection Account on each Payment Date and deemed to be part of the Total
Distribution Amount.
SECTION 5.11 STATEMENTS TO SECURITYHOLDERS.
(a) On or prior to each Payment Date, the Servicer shall
provide to the Trustee and the Owner Trustee (with a copy to the Note Insurer
and the Rating Agencies) for the Trustee and the Owner Trustee to forward to
each Securityholder of record (in the case of the Trustee, pursuant to Sections
5.8(b) and 5.9(a) hereof) the statement or statements provided by the Servicer
in substantially the form attached hereto as Exhibit E setting forth at least
the following information as to the Notes and the Residual Pass-through
Certificates to the extent applicable:
(i) the amount of such distribution allocable to
principal of each Class of Notes and the Residual Certificate Principal
Distributable Amount;
(ii) the amount of such distribution allocable to
interest on or with respect to each Class of Notes and Residual
Certificate Interest Distributable Amount;
(iii) the Pool Balance, the CPS Pool Balance and the
TFC/SeaWest Pool Balance as of the close of business on the last day of
the related Collection Period;
(iv) the Note Balance for each Class of Notes after
giving effect to payments allocated to principal reported under clause
(i) above and the Residual Certificate Notional Balance after giving
effect to the Residual Certificate Principal Distributable Amount
reported under clause (i) above;
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(v) the amount of the Servicing Fee paid to the
Servicer with respect to the related Collection Period, and the amount
of any unpaid Servicing Fees and the change in such amount from the
prior Payment Date;
(vi) the amount of the Backup Servicing Fee, the
Trustee Fees and the Cayman Trustee Fees paid to the Backup Servicer,
the Trustee, the Owner Trustee and the Cayman Trust, as applicable, and
the Supplemental Residual Certificate Distribution, if any, in each
case with respect to the related Collection Period, and the amount of
any unpaid Backup Servicing Fees, Trustee Fees and Cayman Trustee Fees
and the amount of any unpaid Supplemental Residual Certificate
Distributions and the change in all such amounts from the prior Payment
Date;
(vii) the Noteholders' Interest Carryover Shortfall
for each Class of Notes and the Residual Certificate Interest Carryover
Shortfall for such Payment Date;
(viii) the amount, if any, paid to the Noteholders
under the Note Policy or from the Series 2007-TFC Spread Account for
such Payment Date;
(ix) the amount distributable to the Note Insurer on
such Payment Date;
(x) the aggregate amount in the Series 2007-TFC
Spread Account and the change in such amount from the previous Payment
Date and the Specified Spread Account Requisite Amount for such Payment
Date;
(xi) the number of Receivables and the aggregate
gross amount scheduled to be paid thereon, including unearned finance
and other charges, for which the related Obligors are delinquent in
making Scheduled Receivable Payments for (a) 31 to 60 days, (b) 61 to
90 days, and (c) 91 days or more;
(xii) the aggregate amount in the Capitalized
Interest Account and the change in such amount from the previous
Payment Date and the Requisite Reserve Amount for such Payment Date;
(xiii) the number and the aggregate Purchase Amounts
for Receivables purchased by CPS or purchased by the Servicer during
the related Collection Period and summary information as to losses and
delinquencies with respect to such Receivables;
(xiv) the Principal Balance of all Receivables that
have become Liquidated Receivables, net of Recoveries, during the
related Collection Period;
(xv) the cumulative Principal Balance of all
Receivables that have become Liquidated Receivables, net of Recoveries,
during the period from the Cutoff Date to the last day of the related
Collection Period;
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(xvi) for any Payment Date during the Funding Period,
the Pre-Funded Amount and the change in such amount from the previous
Payment Date;
(xvii) for the Mandatory Redemption Date, the amount
of any remaining Pre-Funded Amount that was not used to fund the
purchase of Subsequent Receivables;
(xviii) the amount, if any, paid by the Note Insurer
to the Trustee for deposit into the Collection Account pursuant to
Section 5.12;
(xix) the amount of any Texas Franchise Tax due and
owing by CPS under the Receivables Purchase Agreement to the taxing
authority of the State of Texas on or prior to the related Payment Date
or paid by CPS since the prior Payment Date; and
(xx) the Three-Month Rolling Average Extension Ratio,
the Cumulative Net Loss Rate, the Delinquency Ratio and the Three-Month
Rolling Average Delinquency Ratio.
(b) Within 60 days after the end of each calendar year, the
Servicer shall deliver to the Trustee a statement setting forth the amounts paid
during such preceding calendar year in respect of paragraphs (i), (ii), (v) and
(vi) above. The Trustee shall mail a copy of such statement to each person who
at any time during such preceding calendar year shall have been a Securityholder
of record and received any payment in respect of the Securities.
(c) The Trustee may make available to the Securityholders, via
the Trustee's Internet Website, all statements described herein and, with the
consent or at the direction of the Seller, such other information regarding the
Notes and/or the Receivables as the Trustee may have in its possession, but only
with the use of a password provided by the Trustee. The Trustee will make no
representation or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefor.
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 Class A Noteholders, the Insurer and the
parties to the Indenture and the Sale and Servicing Agreement from time to time.
In connection with providing access to the Trustee's Internet Website, the
Trustee may require registration and the acceptance of a disclaimer. The Trustee
shall not be liable for the dissemination of information in accordance with this
Agreement.
SECTION 5.12 OPTIONAL DEPOSITS BY THE NOTE INSURER; NOTICE OF WAIVERS.
(a) The Note Insurer shall at any time, and from time to time,
with respect to a Payment Date, have the option (but shall not be required,
except as provided in Section 6.1(a)) to deliver amounts to the Trustee for
deposit into the Collection Account for any of the following purposes: (i) to
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provide funds in respect of the payment of fees or expenses of any provider of
services to the Trust with respect to such Payment Date, or (ii) to include such
amount as part of the Total Distribution Amount for such Payment Date, in each
case only to the extent that without such amount a draw would be required to be
made on the Note Policy.
(b) If the Note Insurer waives the satisfaction of any of the
events that might trigger an Insurance Agreement Event of Default and so
notifies the Trustee in writing pursuant to Section 5.2(d) of the Insurance
Agreement, the Trustee shall notify Moody's and S&P of such waiver.
ARTICLE VI
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THE NOTE POLICY
SECTION 6.1 CLAIMS UNDER NOTE POLICY.
(a) In the event that the Trustee has delivered a Deficiency
Notice with respect to any Determination Date pursuant to Section 5.5 hereof,
the Trustee shall on the related Draw Date determine whether the application of
funds in accordance with Section 5.7, together with any amounts deposited by the
Note Insurer pursuant to Section 5.12 and the application of any Deficiency
Claim Amount pursuant to Section 5.5 would result in a shortfall in amounts
distributable pursuant to Sections 5.7(a)(v) and 5.7(a)(vii) on any Payment
Date; provided, however, in calculating such shortfall, the amount distributable
pursuant to Section 5.7(a)(vii) shall equal the Noteholders' Parity Deficit
Amount, or, if such Payment Date is the Final Scheduled Payment for any Class of
Notes, the greater of (i) the Noteholders' Parity Deficit Amount and (ii) the
unpaid Note Balance of such Class of Notes (any such shortfall, a "Note Policy
Claim Amount"). If the Note Policy Claim Amount for such Payment Date is greater
than zero, the Trustee shall furnish to the Note Insurer no later than 10:00
a.m. New York City time on the related Draw Date a completed Payment Notice (as
defined in clause (b) below) in the amount of the Note Policy Claim Amount.
Amounts paid by the Note Insurer pursuant to a claim submitted under this
Section 6.1 shall be deposited by the Trustee into the Note Distribution Account
for payment to Noteholders on the related Payment Date.
(b) Any notice delivered by the Trustee to the Note Insurer
pursuant to Section 6.1(a) shall specify the Note Policy Claim Amount claimed
under the Note Policy and shall constitute a "Payment Notice" (as defined in the
Note Policy). In accordance with the provisions of the Note Policy, the Note
Insurer is required to pay to the Trustee the Note Policy Claim Amount properly
claimed thereunder by 12:00 noon, New York City time, on the later of (i) the
first Business Day (as defined in the Note Policy) following receipt on a
Business Day of the Payment Notice, and (ii) the applicable Payment Date. Any
payment made under the Note Policy by the Note Insurer shall be applied solely
to the payment of the Notes, and for no other purpose.
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(c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Note Policy Claim Amount from the Note Insurer and (ii) deposit
the same in the Note Distribution Account for distribution to Noteholders. Any
and all Note Policy Claim Amounts disbursed by the Trustee from claims made
under the Note Policy shall not be considered payment by the Trust or from the
Series 2007-TFC Spread Account with respect to such Notes, and shall not
discharge the obligations of the Trust with respect thereto. The Note Insurer
shall, to the extent it makes any payment with respect to the Notes, become
subrogated to the rights of the recipients of such payments to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Notes by or on behalf of the Note Insurer, the Trustee and the Noteholders shall
assign to the Note Insurer all rights to the payment of interest or principal
with respect to the Notes which are then due for payment to the extent of all
payments made by the Note Insurer, and the Note Insurer may exercise any option,
vote, right, power or the like with respect to the Notes to the extent that it
has made payment pursuant to the Note Policy. To evidence such subrogation, the
Note Registrar shall note the Note Insurer's rights as subrogee upon the
register of Noteholders upon receipt from the Note Insurer of proof of payment
by the Note Insurer of any Noteholders' Interest Distributable Amount,
Noteholders' Parity Deficit Amount or Noteholders' Principal Distributable
Amount. The foregoing subrogation shall in all cases be subject to the rights of
the Noteholders to receive all Scheduled Payments (as defined in the Note
Policy).
(d) The Trustee shall keep a complete and accurate record of
all funds deposited by the Note Insurer into the Note Distribution Account and
the allocation of such funds to payment of interest on and principal paid in
respect of any Note. The Note Insurer shall have the right to inspect such
records at reasonable times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Note Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Basic Documents,
the Noteholders are not entitled to make any claims under the Note Policy or
institute proceedings directly against the Note Insurer.
SECTION 6.2 PREFERENCE CLAIMS.
(a) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any Scheduled Payment (as defined
in the Note Policy) paid on a Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall so notify
the Note Insurer, shall comply with the provisions of the Note Policy to obtain
payment by the Note Insurer of such avoided payment, and shall, at the time it
provides notice to the Note Insurer, notify Holders of the Notes by mail that,
in the event that any Noteholder's payment is so recoverable, such Noteholder
will be entitled to payment pursuant to the terms of the Note Policy. The
Trustee shall furnish to the Note Insurer its records evidencing the payments of
principal of and interest on Notes, if any, which have been made by the Trustee
and subsequently recovered from Noteholders, and the dates on which such
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payments were made. Pursuant to the terms of the Note Policy, the Note Insurer
will make such payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order (as
defined in the Note Policy) and not to the Trustee or any Noteholder directly
(unless a Noteholder has previously paid such payment to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy, in which case the
Note Insurer will make such payment to the Trustee for distribution to such
Noteholder upon proof of such payment reasonably satisfactory to the Note
Insurer).
(b) The Trustee shall promptly notify the Note Insurer of any
proceeding or the institution of any action (of which the Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Trustee hereby agrees that so long as
an Insurer Default shall not have occurred and be continuing, the Note Insurer
may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal at the expense of the Note Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 6.1(c), the Note Insurer
shall be subrogated to, and each Noteholder and the Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the trustee and
each Noteholder in the conduct of any proceeding with respect to a Preference
Claim, including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
SECTION 6.3 SURRENDER OF NOTE POLICY. The Trustee shall surrender the
Note Policy to the Note Insurer for cancellation upon the expiration of such
policy in accordance with the terms thereof.
ARTICLE VII
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[RESERVED]
ARTICLE VIII
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THE SELLER
SECTION 8.1 REPRESENTATIONS OF THE SELLER. The Seller makes the
following representations for the benefit of the Securityholders and on which
the Note Insurer shall be deemed to have relied in executing and delivering the
Note Policy, on which the Issuer is deemed to have relied in acquiring the
Receivables and on which the Trustee is deemed to have relied in executing and
performing pursuant to this Agreement, the Indenture and the other Basic
Documents to which it is a party. The representations speak as of the execution
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and delivery of this Agreement, as of the Closing Date, and as of each
Subsequent Transfer Date, and shall survive each sale of the Receivables to the
Issuer and the pledge thereof to the Trustee pursuant to the Indenture and the
issuance of the Notes and the Residual Pass-through Certificates.
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly
incorporated and is validly existing as a corporation solely under the laws of
the State of 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 sell the Receivables and the Other Conveyed
Property transferred to the Trust.
(b) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business or the consummation of the
transactions contemplated by the Basic Documents shall require such
qualifications.
(c) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and the Basic Documents to which
it is a party and to carry out its terms and their terms, respectively; the
Seller has full power and authority to sell and assign the Receivables and the
Other Conveyed Property to be sold and assigned to and deposited with the Trust
by it and has duly authorized such sale and assignment to the Trust by all
necessary corporate action; and the execution, delivery and performance of this
Agreement and the Basic Documents to which the Seller is a party have been duly
authorized by the Seller by all necessary corporate action.
(d) VALID SALE, BINDING OBLIGATIONS. This Agreement effects a
valid sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Seller and creditors of and purchasers from
the Seller; and this Agreement and the Basic Documents to which the Seller is a
party, when duly executed and delivered, shall constitute legal, valid and
binding obligations of the Seller enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Basic Documents and the fulfillment of
the terms of this Agreement and the Basic Documents shall not conflict with,
result in any breach of any of the terms and provisions of or constitute (with
or without notice, lapse of time or both) a default under the certificate of
incorporation or by-laws of the Seller, or any indenture, agreement, mortgage,
deed of trust or other instrument to which the Seller is a party or by which it
is bound, or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument, other than the Basic Documents, or violate
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any law, order, rule or regulation applicable to the Seller of any court or of
any Federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or any of its
properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Agreement, the Securities or any of the Basic
Documents, (B) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by this Agreement or any of
the Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement or any of the Basic
Documents, or (D) relating to the Seller and which might adversely affect the
Federal or State income, excise, franchise or similar tax attributes of the
Securities.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) FINANCIAL CONDITION. The Seller has a positive net worth
and is able to and does pay its liabilities as they mature. The Seller is not in
default under any obligation to pay money to any Person except for matters being
disputed in good faith which do not involve an obligation of the Seller on a
promissory note. The Seller will not use the proceeds from the transactions
contemplated by the Basic Documents to give any preference to any creditor or
class of creditors, and such transaction will not leave the Seller with
remaining assets which are unreasonably small compared to its ongoing
operations.
(i) FRAUDULENT CONVEYANCE. The Seller is not selling the
Receivables to the Trust with any intent to hinder, delay or defraud any of its
creditors; the Seller will not be rendered insolvent as a result of the sale of
the Receivables to the Trust.
(j) TAX RETURNS. The Seller has filed on a timely basis all
tax returns which are required to be filed by it and paid all taxes, including
any assessments received by it, to the extent that such taxes have become due
(other than taxes, the amount or validity of which are currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided by the books of the Seller).
(k) CERTIFICATES, STATEMENTS AND REPORTS. The officer's
certificates, statements, reports and other documents prepared by Seller and
furnished by Seller to the Note Insurer or the Trustee pursuant to this
Agreement or any other Basic Document to which it is a party, and in connection
with the transactions contemplated hereby or thereby, when taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
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fact necessary to make the statements contained herein or therein not
misleading.
(l) LEGAL COUNSEL, ETC. Seller consulted with its own legal
counsel and independent accountants to the extent it deems necessary regarding
the tax, accounting and regulatory consequences of the transactions contemplated
hereby, Seller is not participating in such transactions in reliance on any
representations of any other party, their affiliates, or their counsel with
respect to tax, accounting and regulatory matters.
(m) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at 16355 Laguna Canyon, Irvine, CA 92618 and its organizational number
is 3544934.
(n) SEPARATENESS COVENANTS. The Seller is in compliance in all
material respects with Article V of its Certificate of Incorporation relating to
the separateness of the Seller from any other Person.
SECTION 8.2 SALE TREATMENT. The Seller agrees to treat the conveyances
hereunder as secured financings for tax and accounting purposes and as a sale
for all other purposes (including without limitation legal and bankruptcy
purposes), on all relevant books, records, tax returns, financial statements and
other applicable documents.
SECTION 8.3 [RESERVED].
SECTION 8.4 LIABILITY OF SELLER; INDEMNITIES. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Note Insurer, the Securityholders, the Backup
Servicer and the Trustee from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions contemplated
in this Agreement and any of the Basic Documents (except any income taxes
arising out of fees paid to the Owner Trustee, the Trustee, the Backup Servicer
and the Note Insurer and except any taxes to which the Owner Trustee, or the
Trustee may otherwise be subject), including without limitation any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Issuer and the Securityholders, not including any
taxes asserted with respect to federal or other income taxes arising out of
distributions on the Notes and the Residual Pass-through Certificates) and costs
and expenses in defending against the same.
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(b) The Seller shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Trustee, the Note Insurer and the Securityholders
from and against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or State securities laws in connection with the
offering and sale of the Notes or the Residual Pass-through Certificates.
(c) The Seller shall indemnify, defend and hold harmless the
Owner Trustee, the Trustee, and the Backup Servicer and its officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities arising out of, or incurred in connection with
the acceptance or performance of the trusts and duties set forth herein and in
the Basic Documents except to the extent that such cost, expense, loss, claim,
damage or liability shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Owner Trustee.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Trustee and the termination of this
Agreement or the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation. If the Seller shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Seller, without interest.
SECTION 8.5 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that (i) the Seller shall have received the
written consent of the Note Insurer prior to entering into any such transaction,
(ii) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.1 shall have been breached and no Servicer
Termination Event, and no event which, after notice or lapse of time, or both,
would become a Servicer Termination Event shall have occurred and be continuing,
(iii) the Seller shall have delivered to the Owner Trustee, the Trustee and the
Note Insurer an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent, if any, provided for
in this Agreement relating to such transaction have been complied with, (iv) the
Rating Agency Condition shall have been satisfied with respect to such
transaction and (v) the Seller shall have delivered to the Owner Trustee, the
Trustee and the Note Insurer an Opinion of Counsel stating that, in the opinion
81
of such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been authorized and filed that are necessary fully
to preserve and protect the interest of the Owner Trustee and the Trustee,
respectively, in the Receivables and the Other Conveyed Property and reciting
the details of such filings or (B) no such action shall be necessary to preserve
and protect such interest. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii), (iii), (iv) and (v) above shall be conditions to the consummation of
the transactions referred to in clauses (a), (b) or (c) above.
SECTION 8.6 LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 8.7 SELLER MAY OWN RESIDUAL PASS-THROUGH CERTIFICATES OR NOTES.
The Seller and any Affiliate thereof may in its individual or any other capacity
become the owner or pledgee of Securities with the same rights as it would have
if it were not the Seller or an Affiliate thereof, except as expressly provided
herein or in any Basic Document. Securities so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority or distinction as among all of
the Securities; provided, however, that any Notes owned by the Seller or any
Affiliate thereof (other than the Cayman Trust), during the time such Securities
are so owned by them, shall be without voting rights for any purpose set forth
in the Basic Documents and such Securities shall not be entitled to the benefits
of the Note Policy. The Seller shall notify the Owner Trustee, the Trustee and
the Note Insurer promptly after it or any of its Affiliates become the owner of
a Security.
ARTICLE IX
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THE SERVICER
SECTION 9.1 REPRESENTATIONS OF SERVICER. The Servicer makes the
following representations for the benefit of the Securityholders and on which
the Note Insurer shall be deemed to have relied in executing and delivering the
Note Policy, on which the Issuer is deemed to have relied in acquiring the
Receivables and on which the Trustee is deemed to have relied in executing and
performing pursuant to this Agreement, the Indenture and the other Basic
Documents to which it is a party. The representations speak as of the execution
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and delivery of this Agreement, as of the Closing Date, and as of each
Subsequent Transfer Date, and shall survive the sale of the Receivables to the
Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
incorporated and is validly existing as a corporation solely under the laws of
the State of California, in good standing thereunder, with power, authority and
legal right to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and shall have, power, authority and legal right to acquire, own
and service the Receivables.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) or the consummation of the
transactions contemplated by the Basic Documents requires or shall require such
qualification.
(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.
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(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or any of the Basic
Documents, (B) seeking to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by this Agreement or any of
the Basic Documents, or (C) except for the Pending Litigation, seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Securities or any of the Basic Documents
or (D) relating to the Servicer and which might adversely affect the Federal or
State income, excise, franchise or similar tax attributes of the Securities.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) TAXES. The Servicer has filed on a timely basis all tax
returns which are required to be filed by it and paid all taxes, including any
assessments received by it, to the extent that such taxes have become due (other
than taxes, the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Servicer).
(i) CHIEF EXECUTIVE OFFICE. The Servicer hereby represents and
warrants to the Trustee that the Servicer's principal place of business and
chief executive office is, and for the four months preceding the date of this
Agreement has been, located at: 16355 Laguna Canyon, Irvine, CA 92618.
SECTION 9.2 LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such) shall be liable
hereunder only to the extent of the obligations in this Agreement specifically
undertaken by the Servicer and the representations made by the Servicer.
(i) The Servicer shall indemnify, defend and hold
harmless the Trust, the Trustee, the Owner Trustee, the Backup
Servicer, the Collateral Agent, the Note Insurer, and the
Securityholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, arising out of or resulting from the
use, ownership, repossession or operation by the Servicer or any
Affiliate or agent or sub-contractor thereof of any Financed Vehicle;
(ii) The Servicer (unless the Backup Servicer is the
Servicer) shall indemnify, defend and hold harmless the Trust, the
Trustee, the Owner Trustee, the Backup Servicer, the Collateral Agent,
the Note Insurer, and the Securityholders from and against any taxes
that may at any time be asserted against any of such parties with
respect to the transactions contemplated in this Agreement, including,
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without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege or license taxes (but not
including federal or other income taxes, including franchise taxes
(other than Texas Franchise Tax, if CPS is the Servicer) asserted with
respect to, and as of the date of, the sale of the Receivables and the
Other Conveyed Property to the Trust or the issuance and original sale
of the Securities and, in the case of the Issuer and the
Securityholders, not including any taxes asserted with respect to
federal or other income taxes arising out of distributions on the Notes
and Residual Pass-through Certificates) and costs and expenses in
defending against the same;
(iii) The Servicer shall indemnify, defend and hold
harmless the Trust, the Trustee, the Owner Trustee, the Backup
Servicer, the Collateral Agent, the Note Insurer, each Placement Agent,
their respective officers, directors, agents and employees and the
Securityholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense,
loss, claim, damage, or liability arose out of, or was imposed upon the
Trust, the Trustee, the Owner Trustee, the Backup Servicer, the Note
Insurer, each Placement Agent or the Securityholders or such officers,
directors, agents or employees through the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its
duties under this Agreement, by reason of reckless disregard of its
obligations and duties under this Agreement or as a result of a breach
of any representation or warranty made by the Servicer in this
Agreement (without regard to any exception relating to the Pending
Litigation).
(iv) The Servicer shall indemnify, defend, and hold
harmless the Trustee, the Owner Trustee, the Backup Servicer and the
Collateral Agent from and against all costs, expenses, losses, claims,
damages, and liabilities arising out of or incurred in connection with
the acceptance or performance of the trusts and duties herein contained
or in the Trust Agreement, if any, except to the extent that such cost,
expense, loss, claim, damage or liability: (A) shall be due to the
willful misfeasance, bad faith, or negligence (except for errors in
judgment) of the Trustee, the Owner Trustee, the Backup Servicer or the
Collateral Agent, as applicable or (B) relates to any tax other than
the taxes with respect to which the Servicer shall be required to
indemnify the Trustee, the Owner Trustee, the Backup Servicer or the
Collateral Agent.
(v) CPS shall indemnify, defend and hold harmless the
Trust, the Trustee, the Owner Trustee, the Backup Servicer, the
Collateral Agent, the Note Insurer and the Securityholders against any
and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from CPS's involvement in, or the effect on
any Receivable as a result of, the Pending Litigation.
(b) Notwithstanding the foregoing, the Servicer shall not be
obligated to defend, indemnify, and hold harmless any Noteholders for any
losses, claims, damages or liabilities incurred by any Securityholders arising
out of claims, complaints, actions and allegations relating to Section 406 of
ERISA or Section 4975 of the Code as a result of the purchase or holding of a
Security by such Noteholder with the assets of a plan subject to such provisions
of ERISA or the Code or the servicing, management and operation of the Trust.
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(c) For purposes of this Section 9.2, in the event of the
termination of the rights and obligations of the Servicer (or any successor
thereto pursuant to Section 9.3) as Servicer pursuant to Section 10.1, or a
resignation by such Servicer pursuant to this Agreement, such Servicer shall be
deemed to be the Servicer pending appointment of a successor Servicer pursuant
to Section 10.2. The provisions of this Section 9.2(c) shall in no way affect
the survival pursuant to Section 9.2(d) of the indemnification by the Servicer
provided by Section 9.2(a).
(d) Indemnification under this Section 9.2 shall survive the
termination of this Agreement and any resignation or removal of CPS as Servicer
and shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments pursuant to
this Section and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts to the Servicer, without
interest.
SECTION 9.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP Servicer.
(a) CPS shall not merge or consolidate with any other person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to CPS's business
unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity shall be capable of fulfilling the
duties of CPS contained in this Agreement. Any corporation (i) into which CPS
may be merged or consolidated, (ii) resulting from any merger or consolidation
in which CPS shall be a constituent corporation, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of CPS, or (iv)
succeeding to the business of CPS, in any of the foregoing cases shall execute
an agreement of assumption to perform every obligation of CPS under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to CPS under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; provided, however,
that nothing contained herein shall be deemed to release CPS from any
obligation. CPS shall provide notice of any merger, consolidation or succession
pursuant to this Section to the Owner Trustee, the Trustee, the Securityholders,
the Note Insurer and each Rating Agency. Notwithstanding the foregoing, CPS
shall not merge or consolidate with any other Person or permit any other Person
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to become a successor to CPS's business, unless (x) immediately after giving
effect to such transaction, no representation, warranty or covenant made
pursuant to Sections 9.1 or 4.6 shall have been breached (for purposes hereof,
such representations and warranties shall be deemed made as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an Insurance Agreement Event of Default shall have
occurred and be continuing, (y) CPS shall have delivered to the Owner Trustee,
the Trustee, the Rating Agencies and the Note Insurer an Officer's Certificate
and an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section and that
all conditions precedent, if any, provided for in this Agreement relating to
such transaction have been complied with, and (z) CPS shall have delivered to
the Owner Trustee, the Trustee, the Rating Agencies and the Note Insurer an
Opinion of Counsel, stating in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been authorized and filed that are necessary to preserve and protect the
interest of the Owner Trustee and the Trustee, respectively, in the Receivables
and the Other Conveyed Property and reciting the details of the filings or (B)
no such action shall be necessary to preserve and protect such interest.
(b) Any corporation (i) into which the Backup Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation in which
the Backup Servicer shall be a constituent corporation, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Backup
Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of the Backup Servicer under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Backup Servicer
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Backup Servicer from any
obligation.
SECTION 9.4 LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS. Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to the Trust or the Securityholders, except as provided in
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision shall
not protect the Servicer, the Backup Servicer or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence in the performance of
duties. CPS, the Backup Servicer and any director, officer, employee or agent of
CPS or the Backup Servicer may rely in good faith on the written advice of
counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement. In
addition, the Backup Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 9.5 DELEGATION OF DUTIES. The Servicer may at any time delegate
duties under this Agreement to sub-contractors who are in the business of
servicing automotive receivables with the prior written consent of the
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Controlling Party as determined pursuant to Section 13.15; provided, however,
that no such delegation or sub-contracting of duties by the Servicer shall
relieve the Servicer of its responsibility with respect to such duties.
SECTION 9.6 SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the
provisions of Section 9.3, neither the Servicer nor the Backup Servicer shall
resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except (i) upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Backup Servicer, as
the case may be, and the Note Insurer (so long as an Insurer Default shall not
have occurred and be continuing) or a Note Majority (if an Insurer Default shall
have occurred and be continuing) or, if the Notes are no longer outstanding, the
Majority Certificateholders, do not elect to waive the obligations of the
Servicer or the Backup Servicer, as the case may be, to perform the duties which
render it legally unable to act or to delegate those duties to another Person
or, (ii) in the case of the Backup Servicer, upon the prior written consent of
the Note Insurer. Any such determination permitting the resignation of the
Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered and acceptable to the Trustee, the Owner Trustee and the Note
Insurer (unless an Insurer Default shall have occurred and be continuing). No
resignation of the Servicer shall become effective until, so long as no Insurer
Default shall have occurred and be continuing, the Backup Servicer or an entity
acceptable to the Note Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if an Insurer Default shall have occurred and be
continuing, the Backup Servicer or a successor Servicer that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the
Servicer. No resignation of the Backup Servicer shall become effective until, so
long as no Insurer Default shall have occurred and be continuing, an entity
acceptable to the Note Insurer shall have assumed the responsibilities and
obligations of the Backup Servicer or, if an Insurer Default shall have occurred
and be continuing a Person that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Backup Servicer; provided, however, that
in the event a successor Backup Servicer is not appointed within 60 days after
the Backup Servicer has given notice of its resignation and has provided the
Opinion of Counsel required by this Section 9.6, the Backup Servicer may
petition a court for its removal.
ARTICLE X
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DEFAULT
SECTION 10.1 SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "SERVICER TERMINATION
EVENT":
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(a) Any failure by the Servicer to deliver to the Trustee for
distribution to the Securityholders and the Note Insurer or for deposit into the
Collection Account or the Series 2007-TFC Spread Account any payment required
under the terms of this Agreement, which failure continues unremedied for a
period of two Business Days (one Business Day with respect to the payment of
Purchase Amounts) after the earlier of knowledge thereof by the Servicer or
after written notice is received by the Servicer from the Trustee or the Note
Insurer (unless an Insurer Default shall have occurred and be continuing, in
which case from a Note Majority) or, after the Notes have been paid in full and
all amounts due to the Note Insurer have been paid in full, from Majority
Certificateholders, or after discovery of such failure by a Responsible Officer
of the Servicer; or
(b) Failure by the Servicer to deliver to the Trustee and the
Note Insurer (so long as an Insurer Default shall not have occurred and be
continuing), the Servicer's Certificate within three days after the date on
which such Servicer's Certificate is required to be delivered under Section 4.9,
or failure on the part of the Servicer to observe or perform its covenants and
agreements set forth in Section 9.3(a); or
(c) Failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in this
Agreement or, if the Servicer is CPS, failure of CPS to duly perform any other
covenants or agreements of CPS set forth in this Agreement, which failure (i)
materially and adversely affects the rights of Noteholders (determined without
regard to the availability of funds under the Note Policy), the Note Insurer
(unless an Insurer Default shall have occurred and be continuing) or the
Residual Certificateholders (after the Notes have been paid in full and all
other amounts owed to the Note Insurer have been paid in full and the Note
Policy has expired in accordance with its terms), and (ii) continues unremedied
for a period of 30 days after the earlier of knowledge thereof by the Servicer
or after the date on which written notice of such failure, requiring the same to
be remedied, shall have been given (1) to the Servicer by the Trustee or the
Note Insurer or (2) or, if an Insurer Default shall have occurred and be
continuing, to the Servicer, the Trustee and the Note Insurer by each of the
Holders of Notes evidencing not less than 25% of the aggregate outstanding Note
Balance of each Class of Notes or, after the Notes have been paid in full and
all amounts due to the Note Insurer have been paid in full, by the Majority
Certificateholders; or
(d) The occurrence of an Insolvency Event with respect to the
Servicer or, if CPS is then the Servicer, the Seller; or
(e) Failure on the part of the Servicer to observe its
covenants and agreements relating to (a) merger or consolidation or (b)
preservation of its ownership (or security interest) in repossessed Financed
Vehicles delivered for sale to Dealers; or
(f) Any representation, warranty or statement of the Servicer
made in this Agreement or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of the
time when the same shall have been made (excluding, however, any representation
or warranty set forth in this Agreement relating to the characteristics of the
Receivables), and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust, the Note Insurer or the
Securityholders and, within 30 days after the earlier of knowledge thereof by
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the Servicer or after written notice thereof shall have been given (1) to the
Servicer by the Collateral Agent, the Trustee or the Note Insurer or (2) if an
Insurer Default shall have occurred and be continuing, to the Servicer and to
the Trustee and the Note Insurer by each of the Holders of Notes evidencing not
less than 25% of the aggregate outstanding Note Balance of each Class of Notes
or, after the Notes have been paid in full and all amounts due to the Note
Insurer have been paid in full, by the Majority Certificateholders, the
circumstances or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have occurred and
be continuing, the Note Insurer shall not have delivered a Servicer Extension
Notice pursuant to Section 4.14; or
(h) So long as an Insurer Default shall not have occurred and
be continuing, an Insurance Agreement Event of Default shall have occurred; or
(i) Any other Event of Default shall have occurred; or
(j) A claim is made under the Note Policy.
SECTION 10.2 CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, the Note Insurer (or,
if an Insurer Default shall have occurred and be continuing either the Trustee
(to the extent it has knowledge thereof) or the Holders of Notes evidencing not
less than 25% of the aggregate outstanding Note Balance for each Class of Notes
or, after the Notes have been paid in full and all amounts due to the Note
Insurer have been paid in full, the Majority Certificateholders), by notice
given in writing to the Servicer (and to the Trustee if given by the Note
Insurer or the Noteholders) or by non-extension of the term of the Servicer as
referred to in Section 4.14 may terminate all of the rights and obligations of
the Servicer under this Agreement. The Servicer shall be entitled to its pro
rata share of the Servicing Fee for the number of days in the Collection Period
prior to the effective date of its termination. On or after the receipt by the
Servicer of such written notice or upon termination of the term of the Servicer,
all authority, power, obligations and responsibilities of the Servicer under
this Agreement, whether with respect to the Notes, the Residual Pass-through
Certificates, the Receivables or the Other Conveyed Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Controlling Party under Section 10.3); provided, however, that
the successor Servicer shall have no liability with respect to any obligation
which was required to be performed by the terminated Servicer prior to the date
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that the successor Servicer becomes the Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Servicer. The
successor Servicer is authorized and empowered by this Agreement to execute and
deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the Other Conveyed Property and related documents to show the Trust as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including, without limitation, the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the terminated Servicer for deposit, or have been deposited
by the terminated Servicer, in the Collection Account or thereafter received
with respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files that shall at the time be held by the terminated Servicer
and a computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including reasonable attorneys' fees and boarding fees) incurred in
connection with transferring any Receivable Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 10.2 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses. In addition, any successor
Servicer shall be entitled to payment from the immediate predecessor Servicer
for reasonable transition expenses incurred in connection with acting as
successor Servicer, and to the extent not so paid, such payment shall be made
pursuant to Section 5.7(a) hereof. Upon receipt of notice of the occurrence of
Servicer Termination Event, the Trustee shall give notice thereof to the Rating
Agencies. If requested by the Controlling Party, the successor Servicer shall
terminate the Lockbox Agreement and direct the Obligors to make all payments
under the Receivables directly to the successor Servicer (in which event the
successor Servicer shall process such payments in accordance with Section
4.2(e)), or to a lockbox established by the successor Servicer at the direction
of the Controlling Party, at the successor Servicer's expense. The terminated
Servicer shall grant the Trustee, the successor Servicer and the Controlling
Party reasonable access to the terminated Servicer's premises at the terminated
Servicer's expense.
SECTION 10.3 APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to Section 10.2, upon non-extension of the servicing term
as referred to in Section 4.14, or upon the resignation of the Servicer pursuant
to Section 9.6, the predecessor Servicer shall continue to perform its functions
as Servicer under this Agreement, in the case of termination, only until the
date specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the expiration of
such term, and, in the case of resignation, until the later of (x) the date 45
days from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
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unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of termination of the Servicer,
Wells Fargo Bank, National Association, as Backup Servicer, shall assume the
obligations of Servicer hereunder on the date specified in such written notice
(the "Assumption Date") pursuant to the Servicing Assumption Agreement or, in
the event that the Note Insurer shall have determined that a Person other than
the Backup Servicer shall be the successor Servicer in accordance with Section
10.2, on the date of the execution of a written assumption agreement by such
Person to serve as successor Servicer. Notwithstanding the Backup Servicer's
assumption of, and its agreement to perform and observe, all duties,
responsibilities and obligations of CPS as Servicer under this Agreement arising
on and after the Assumption Date, the Backup Servicer shall not be deemed to
have assumed or to become liable for, or otherwise have any liability, whether
provided for by the terms of this Agreement, arising by operation of law or
otherwise, for any duties, responsibilities, obligations or liabilities of CPS
or any predecessor Servicer (i) arising under Sections 4.7 and 9.2 of this
Agreement, regardless of when the liability, duty, responsibility or obligation
of CPS or any predecessor Servicer therefor arose, (ii) required to be performed
by CPS or any predecessor Servicer prior to the Assumption Date or any claim of
any third party based on any alleged action or inaction of CPS or any
predecessor Servicer, or (iii) with respect to the payment of any taxes required
to be paid by CPS or any predecessor Servicer. The indemnification obligations
of the Backup Servicer, upon becoming a successor Servicer, are expressly
limited to those instances of gross negligence or willful misconduct of the
Backup Servicer in its role as successor Servicer that occur after the
Assumption Date. Notwithstanding the above, if the Backup Servicer shall be
legally unable or unwilling to act as Servicer, and an Insurer Default shall
have occurred and be continuing, the Backup Servicer, the Trustee or a Note
Majority or, if the Note Balance has been reduced to zero and all amounts due
and owing to the Note Insurer have been paid in full and the Policy has expired
in accordance with its terms, the Majority Certificateholders may petition a
court of competent jurisdiction to appoint any Eligible Servicer as the
successor to the Servicer. Pending appointment pursuant to the preceding
sentence, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 9.6, no provision of this Agreement shall be
construed as relieving the Backup Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section
10.2, the resignation of the Servicer pursuant to Section 9.6 or the
non-extension of the servicing term of the Servicer, as referred to in Section
4.14. If upon the termination of the Servicer pursuant to Section 10.2 or the
resignation of the Servicer pursuant to Section 9.6, the Controlling Party
appoints a successor Servicer other than the Backup Servicer, the Backup
Servicer shall not be relieved of its duties as Backup Servicer hereunder.
(b) Any successor Servicer shall be entitled to receive the
compensation set forth in Section 5.7(a)(ii), (iii), (ix) and (xii).
SECTION 10.4 NOTIFICATION TO SECURITYHOLDERS. Upon any termination of,
or appointment of a successor to, the Servicer, the Trustee shall give prompt
written notice thereof to each Securityholder, the Owner Trustee and to the
Rating Agencies.
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SECTION 10.5 WAIVER OF PAST DEFAULTS. The Controlling Party may waive
any default by the Servicer in the performance of its obligations under this
Agreement and the consequences thereof (except a default in making any required
deposits to or payments from any of the Trust Accounts in accordance with the
terms of this Agreement). Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Termination Event arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement). No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
SECTION 10.6 ACTION UPON CERTAIN FAILURES OF THE SERVICER. In the event
that a Responsible Officer of the Trustee shall have actual knowledge of any
failure of the Servicer specified in Section 10.1 which would give rise to a
right of termination under such Section upon the Servicer's failure to remedy
the same after notice, the Trustee shall give notice thereof to the Servicer and
the Note Insurer. For all purposes of this Agreement (including, without
limitation, Section 6.2(b) and this Section 10.6), the Trustee shall not be
deemed to have knowledge of any failure of the Servicer as specified in Sections
10.1(c) through (i) unless notified thereof in writing by the Servicer, the Note
Insurer or by a Securityholder. The Trustee shall be under no duty or obligation
to investigate or inquire as to any potential failure of the Servicer specified
in Section 10.1.
ARTICLE XI
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TERMINATION
SECTION 11.1 OPTIONAL PURCHASE OF ALL RECEIVABLES.
(a) On any Payment Date on or after the last day of any
Collection Period as of which the Collateral Balance shall be less than or equal
to 10% of the Original Collateral Balance, the Servicer shall have the option to
purchase the Owner Trust Estate, other than the Trust Accounts (with the consent
of the Note Insurer if such purchase would result in a claim on the Note Policy
or would result in any amount owing under the Insurance Agreement remaining
unpaid). To exercise such option, the Servicer shall (subject to the proviso
below) deposit in the Collection Account pursuant to Section 5.6 an amount equal
to the fair market value of the Receivables (including Liquidated Receivables)
as of such date, plus the appraised value of any other property held by the
Trust, such value to be determined by an appraiser mutually agreed upon by the
Servicer, the Note Insurer and the Trustee, and shall succeed to all interests
in and to the Trust; provided, however, that the amount to be paid for such
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purchase shall be sufficient to pay the (i) the aggregate outstanding Note
Balance, (ii) the outstanding Residual Certificate Notional Balance, (iii)
accrued and unpaid interest on the Class A Notes, (iv) any accrued and unpaid
Residual Certificate Interest Distributable Amount, (v) any unpaid Supplemental
Residual Certificate Distribution, and (vi) the unpaid expenses of the Trust and
the Note Insurer (and any expense reimbursements due to any Person under the
Insurance Agreement), including without limitation expenses incurred by the
Trust and the Note Insurer in connection with the exercise of such repurchase
option. Upon receipt of an amount equal to the fair market value of the
Receivables and written instructions from the Servicer, the Trustee shall
release to CPS or its designee the related Receivables Files and shall execute
and deliver all reasonable instruments of transfer or assignment, without
recourse, as are prepared by the Seller and delivered to the Trustee and
necessary to vest in CPS or such designee title to the Receivables including a
Trustee's Certificate in the form of Exhibit F-2. To the extent such option to
purchase the Owner Trust Estate is rescinded pursuant to Section 10.1 of the
Indenture, the Securityholders shall on the related Payment Date receive the
payments of interest and principal that would be due to the Securityholders on
such Payment Date as if such option to purchase the Owner Trust Estate had never
been exercised.
(b) Notice of any termination of the Trust shall be given by
the Servicer, which notice shall include, among other things, the items
specified in Section 9.1(c) of the Trust Agreement, to the Owner Trustee, the
Trustee, the Note Insurer and the Rating Agencies as soon as practicable after
the Servicer has received notice thereof.
(c) Following the satisfaction and discharge of the Indenture
and the payment in full of the principal of and interest on the Notes, the
Residual Certificateholders will succeed to the rights of the Noteholders
hereunder and the Owner Trustee will succeed to the rights of, and assume the
obligations of, the Trustee under this Agreement.
ARTICLE XII
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ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1 ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Servicer shall
perform all its duties and the duties of the Issuer under the Indenture. In
addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture. The
Servicer shall monitor the performance of the Issuer and shall advise the Owner
Trustee when action is necessary to comply with the Issuer's duties under the
Indenture. The Servicer shall prepare for execution by the Issuer or shall cause
the preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
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the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.17, 5.1(b), 7.3, 8.3, 9.2, 9.3,
11.1 and 11.15 of the Indenture.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Servicer set
forth in this Agreement or any of the Basic Documents, the Servicer
shall perform such calculations and shall prepare for execution by the
Issuer or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to
this Agreement or any of the Basic Documents or under State and Federal
tax and securities laws, and at the request of the Owner Trustee shall
take all appropriate action that it is the duty of the Issuer to take
pursuant to this Agreement or any of the Basic Documents, including,
without limitation, pursuant to Sections 2.6 and 2.10 of the Trust
Agreement. In accordance with the directions of the Issuer or the Owner
Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or
the Owner Trustee and are reasonably within the capability of the
Servicer. The Servicer shall perform its administrative duties with
respect to the Issuer in accordance with the requirements enumerated in
Section 6.7 of the Trust Agreement. The Servicer shall monitor the
activities of the Issuer to assure compliance by the Issuer with the
requirements of Section 6.7 of the Trust Agreement. The Servicer shall
promptly take such action as may be required to correct any
noncompliance by the Issuer with the requirements of Section 6.7 of the
Trust Agreement.
(ii) Notwithstanding anything in this Agreement or
any of the Basic Documents to the contrary, the Servicer shall be
responsible for promptly notifying the Owner Trustee and the Trustee in
the event that any withholding tax is imposed on the Issuer's payments
(or allocations of income) to a Noteholder as contemplated by this
Agreement. Any such notice shall be in writing and specify the amount
of any withholding tax required to be withheld by the Owner Trustee or
the Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or
the Basic Documents to the contrary, the Servicer shall be responsible
for performance of the duties of the Issuer or the Seller set forth in
Section 5.1 of the Trust Agreement with respect to, among other things,
accounting and reports to Residual Certificateholders; provided,
however, that, once prepared by the Servicer, the Owner Trustee shall
retain responsibility for the distribution of any such reports or
accounting actually provided to the Owner Trustee and necessary to
enable each Residual Certificateholder to prepare its Federal and State
income tax returns.
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(iv) The Servicer shall perform the duties of the
Servicer specified in Section 10.2 of the Trust Agreement required to
be performed in connection with the resignation or removal of the Owner
Trustee, and any other duties expressly required to be performed by the
Servicer under this Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of
its other obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
(c) TAX MATTERS. The Servicer shall prepare and file, on
behalf of the Seller, all tax returns, tax elections, financial statements and
such annual or other reports of the Issuer as are necessary for preparation of
tax reports as provided in Article V of the Trust Agreement, including without
limitation, Internal Revenue Service Form 1099. All tax returns will be signed
by the person required or authorized to sign such returns under applicable law.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the Servicer shall
not take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Trustee of the proposed action and the Owner Trustee and, with
respect to items (i), (ii), (iii) and (iv) below, the Trustee shall not have
withheld consent or provided an alternative direction. For the purpose of the
preceding sentence, "non-ministerial matters" shall include:
(i) the amendment of or any supplement to the
Indenture;
(ii) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit brought by or
against the Issuer (other than in connection with the collection of the
Receivables);
(iii) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(iv) the appointment of successor Note Registrars,
successor Paying Agents and successor Trustees pursuant to the
Indenture or the appointment of successor Servicers or the consent to
the assignment by the Note Registrar, Paying Agent or Trustee of its
obligations under the Indenture; and
(v) the removal of the Trustee.
(e) EXCEPTIONS. Notwithstanding anything to the contrary in
this Agreement except as expressly provided herein or in the other Basic
Documents, the Servicer, in its capacity as such hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Securityholders under
the Basic Documents, (2) sell the Owner Trust Estate pursuant to Section 5.3 of
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the Indenture, (3) take any other action that the Issuer directs the Servicer
not to take on its behalf or (4) in connection with its duties hereunder assume
any indemnification obligation of any other Person.
(f) LIMITATION OF SUCCESSOR SERVICER'S OBLIGATIONS. If Wells
Fargo Bank, National Association is acting as successor Servicer, it shall not
be responsible for any obligations or duties of the Servicer under this Section
12.1, in which case the Note Insurer may contract with (or permit another party
to this Agreement to contract with) a third party to perform such obligations
and duties.
SECTION 12.2 RECORDS. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer,
the Trustee and the Note Insurer at any time during normal business hours.
SECTION 12.3 ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The Servicer
shall furnish to the Issuer from time to time such additional information
regarding the Collateral as the Issuer shall reasonably request.
ARTICLE XIII
------------
MISCELLANEOUS PROVISIONS
SECTION 13.1 AMENDMENT.
(a) This Agreement may be amended from time to time by the
parties hereto, with the consent of the Trustee (which consent may not be
unreasonably withheld), with the prior written consent of the Note Insurer (so
long as no Insurer Default has occurred and is continuing) but without the
consent of any of the Securityholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement, to comply with any changes in the
Code, or to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the provisions
of this Agreement or the Insurance Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the Owner
Trustee, the Note Insurer and the Trustee, adversely affect in any material
respect the interests of any Securityholder; provided further that if an Insurer
Default has occurred and is continuing, such action shall not materially and
adversely affect the interests of the Note Insurer. Any such amendment shall be
deemed to not adversely affect in any material respect the interests of any
Securityholder if the Rating Agency Condition is satisfied.
This Agreement may also be amended from time to time by the parties
hereto, with the consent of the Note Insurer (so long as no Insurer Default has
occurred and is continuing) and the Trustee, or, if an Insurer Default has
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occurred and is continuing, with the consent of a Note Majority, the Majority
Certificateholders and the Trustee, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Securityholders; provided,
however, that no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions that shall be required to be made for the benefit
of the Securityholders or (b) reduce the aforesaid percentage of the Note
Balance of any Class or the Percentage Interest, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes affected thereby and the Holders of all of the
outstanding Residual Pass-through Certificates affected thereby; provided
further, that if an Insurer Default has occurred and is continuing, such action
shall not materially and adversely affect the interests of the Note Insurer. Any
such amendment shall be deemed to not adversely affect in any material respect
the interests of any Securityholder if the Rating Agency Condition is satisfied.
Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Securityholder and the Rating Agencies.
It shall not be necessary for the consent of Securityholders pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Securityholders provided for in this Agreement) and of evidencing the
authorization of any action by Securityholders shall be subject to such
reasonable requirements as the Trustee or the Owner Trustee, as applicable, may
prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 13.2(i)(i)
has been delivered. The Owner Trustee, the Backup Servicer and the Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Issuer's, the Owner Trustee's, the Backup Servicer's or the Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.
(b) Notwithstanding anything to the contrary contained in
Section 13.1(a) above, the provisions of this Agreement relating to (i) the
Master Spread Account Agreement, the Series 2007-TFC Spread Account, the
Specified Spread Account Requisite Amount, a Trigger Event or any component
definition of a Trigger Event and (ii) any additional sources of funds which may
be added to the Series 2007-TFC Spread Account or uses of funds on deposit in
the Series 2007-TFC Spread Account may be amended in any respect by the Seller,
the Servicer, the Note Insurer and the Collateral Agent (the consent of which
shall not be withheld or delayed with respect to any amendment that does not
adversely affect the Collateral Agent) without the consent of, or notice to, the
Securityholders; provided that any such amendment satisfies the Rating Agency
Condition and the Servicer shall provide copies of any such amendment to the
Residual Certificateholders.
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(c) Notwithstanding the foregoing, no amendment shall be made
that would cause the Trust to fail to be classified as a Grantor Trust or a
United States Person (as such terms are defined under the Trust Agreement).
SECTION 13.2 PROTECTION OF TITLE TO TRUST.
(a) The Seller or Servicer or both shall authorize and file
such financing statements and cause to be authorized and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Issuer and the
interests of the Trustee in the Receivables and in the proceeds thereof. The
Seller shall deliver (or cause to be delivered) to the Note Insurer, the Owner
Trustee and the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity, jurisdiction of organization, form of organization or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of section 9-506(a) of the UCC, unless it shall
have given the Note Insurer, the Owner Trustee and the Trustee at least five
days' prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements. Promptly upon such filing, the Seller or the Servicer, as the case
may be, shall deliver an Opinion of Counsel to the Issuer, the Owner Trustee,
the Trustee and the Note Insurer, in form and substance reasonably satisfactory
to the Note Insurer, stating either (A) all financing statements and
continuation statements have been authorized and filed that are necessary fully
to preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) no such action shall
be necessary to preserve and protect such interest.
(c) Each of the Seller and the Servicer shall have an
obligation to give the Note Insurer, the Owner Trustee and the Trustee at least
60 days' prior written notice of any change in its jurisdiction of organization
if, as a result of such change, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment or new financing statement. The Servicer shall at all times
maintain its jurisdiction of organization within the United States of America.
Each of the Seller and Servicer shall at all times be organized solely under the
laws of one State.
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(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup archives)
that refer to a Receivable shall indicate clearly the interest of the Trust in
such Receivable and that such Receivable is owned by the Trust. Indication of
the Trust's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable shall
have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest in
automotive receivables to any prospective purchaser, lender or other transferee,
the Servicer shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been sold and is
owned by the Trust.
(g) The Servicer shall permit the Trustee, the Backup Servicer
and the Note Insurer and its agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Note
Insurer, the Owner Trustee or to the Trustee, within five Business Days, a list
of all Receivables (by contract number and name of Obligor) then held as part of
the Owner Trust Estate, together with a reconciliation of such list to the
Schedule of Receivables and to each of the Servicer's Certificates furnished
before such request indicating removal of Receivables from the Owner Trust
Estate.
(i) The Servicer shall deliver to the Note Insurer, the Owner
Trustee and the Trustee:
(i) promptly after the execution and delivery of this
Agreement and, if required pursuant to Section 13.1, of each amendment
waiver or consent, an Opinion of Counsel, in form and substance
satisfactory to the Note Insurer, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been authorized and filed that are necessary fully to
preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest;
and
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(ii) within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning more
than three months after the Cutoff Date, an Opinion of Counsel, dated
as of a date during such 90-day period, stating that, in the opinion of
such counsel, either (A) all financing statements and continuation
statements have been authorized and filed that are necessary fully to
preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 13.3 NOTICES. All demands, notices and communications upon or
to the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered,
electronically delivered, or mailed by certified mail, return receipt requested,
and shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to CPS Receivables Two Corp., 16355 Laguna Canyon, Irvine, CA 92618, (b)
in the case of the Servicer to Consumer Portfolio Services, Inc., 16355 Laguna
Canyon, Irvine, CA 92618, Attention: General Counsel, (c) in the case of the
Issuer or the Owner Trustee, at the Corporate Trust Office of the Owner Trustee,
(d) in the case of the Trustee or the Backup Servicer, at the Corporate Trust
Office, (e) in the case of the Note Insurer, to XL Capital Assurance Inc., 1221
Avenue of the Americas, New York, New York 10020-1001, Attention: Surveillance
(Telecopy: (212) 478-3400, confirmation (212) 478-3587); (f) in the case of
Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007; and (g) in the case of Standard &
Poor's, via electronic delivery to Servicer_reports@sandp.com; for any
information not available in electronic format, send hard copies to: Standard &
Poor's Ratings Services, 55 Water Street, 41st Floor, New York, New York
10041-0003, Attention: ABS Surveillance Group. Any notice required or permitted
to be mailed to a Securityholder shall be given by first class mail, postage
prepaid, at the address of such Securityholder as shown in the Certificate
Register or Note Register, as applicable. Any notice so mailed within the time
prescribed in the Agreement shall be conclusively presumed to have been duly
given, whether or not the Securityholder shall receive such notice.
SECTION 13.4 ASSIGNMENT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything to the contrary contained herein,
except as provided in Sections 8.5 and 9.3 and as provided in the provisions of
this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Seller or the Servicer without the prior written consent
of the Owner Trustee, the Trustee, the Backup Servicer, the Trustee and the Note
Insurer (or if an Insurer Default shall have occurred and be continuing, the
Holders of Notes evidencing not less than 66% of the Aggregate Note Balance),
and prompt written notice to the Rating Agencies.
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SECTION 13.5 LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Owner Trustee, the Residual Certificateholders (including the Seller),
the Trustee, the Noteholders and the Cayman Indenture Trustee, as third-party
beneficiaries. The Note Insurer and its successors and assigns shall be a
third-party beneficiary to the provisions of this Agreement, and shall be
entitled to rely upon and directly enforce such provisions of this Agreement, so
long as no Insurer Default shall have occurred and be continuing. Except as
expressly stated otherwise, any right of the Note Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Note Insurer in its sole and absolute discretion. The
Note Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a written
notice to the Owner Trustee and the Trustee. Nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 13.6 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.7 SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 13.8 HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 13.9 GOVERNING LAW. EXCEPT AS PROVIDED OTHERWISE IN SECTION
13.17, THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THIS AGREEMENT
AND ALL MATTERS ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT SHALL BE
GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES.
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SECTION 13.10 ASSIGNMENT TO TRUSTEE. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
Issuer Secured Parties of all right, title and interest of the Issuer in, to and
under the Receivables and Other Conveyed Property and/or the assignment of any
or all of the Issuer's rights and obligations hereunder to the Trustee.
SECTION 13.11 NONPETITION COVENANTS.
(a) Notwithstanding any prior termination of this Agreement,
none of the Servicer, the Seller or the Backup Servicer shall, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or State bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement,
none of the Servicer or the Backup Servicer shall, prior to the date that is one
year and one day after the termination of this Agreement in accordance with
Article XI, with respect to the Seller, acquiesce to, petition or otherwise
invoke or cause the Seller to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Seller
under any Federal or State bankruptcy, insolvency or similar law, appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator, or other
similar official of the Seller or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Seller.
SECTION 13.12 LIMITATION OF LIABILITY OF OWNER TRUSTEE AND TRUSTEE.
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
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(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been executed and delivered by Wells Fargo Bank, National
Association, not in its individual capacity but solely as Trustee and Backup
Servicer and in no event shall Wells Fargo Bank, National Association, have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.
(c) In no event shall Wells Fargo Bank, National Association,
in any of its capacities hereunder, be deemed to have assumed any duties of the
Owner Trustee under the Delaware Statutory Trust Statute, common law, or the
Trust Agreement.
SECTION 13.13 INDEPENDENCE OF THE SERVICER. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trustee and Backup Servicer or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
SECTION 13.14 NO JOINT VENTURE. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 13.15 NOTE INSURER AS CONTROLLING PARTY. Each Noteholder by
purchase of the Notes held by it acknowledges that the Trustee, as partial
consideration of the issuance of the Note Policy, has agreed that the Note
Insurer shall have certain rights hereunder for so long as no Insurer Default
shall have occurred and be continuing. So long as no Insurer Default has
occurred and is continuing whenever Noteholder action, consent or approval is
required under this Agreement, such action, consent or approval shall be deemed
taken or given on behalf of, and shall be binding upon, all Noteholders if the
Note Insurer agrees to take such action or give such consent or approval. So
long as an Insurer Default has occurred and is continuing, any provision giving
the Note Insurer the right to direct, appoint or consent to, approve of, or take
any action under this Agreement shall be inoperative during the period of such
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Insurer Default and such right shall instead vest in the Trustee acting, unless
otherwise specified, at the direction of a Note Majority. From and after such
time as the Notes have been paid in full and no amounts are owing to the Note
Insurer under the Insurance Agreement, any provision giving the Note Insurer or
the Noteholders the right to direct, appoint or consent to, approve of, or take
any action under this Agreement shall be inoperative and such right shall
instead vest in the Trustee acting at the direction of the Holders of the
Residual Pass-through Certificates, unless otherwise specified. The Note Insurer
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Note Policy) upon delivery of a written notice
to the Trustee. The Note Insurer may give or withhold any consent hereunder in
its sole and absolute discretion.
SECTION 13.16 ACKNOWLEDGMENT OF ROLES
The parties expressly acknowledge and consent to Wells Fargo Bank,
National Association acting in the multiple capacities of Backup Servicer,
Collateral Agent, Trustee and Cayman Indenture Trustee under the Basic
Documents. The parties agree that Wells Fargo Bank, National Association in such
multiple capacities shall not be subject to any claim, defense or liability
arising from its performance in any such capacity based on conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to
the extent that any such conflict or breach arises from the performance by Wells
Fargo Bank, National Association of any other such capacity or capacities in
accordance with this Agreement or any other Basic Documents to which it is a
party.
SECTION 13.17 INTENTION OF PARTIES REGARDING DELAWARE SECURITIZATION
ACT. It is the intention of the Seller and the Issuer that the transfer and
assignment of the Trust Property contemplated by Section 2.1 of this Agreement
shall constitute a sale of the Trust Property from the Seller to the Issuer,
conveying good title thereto free and clear of any liens, and the beneficial
interest in and title to the Trust Property shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy or similar law. In addition, for purposes of
complying with the requirements of the Asset-Backed Securities Facilitation Act
of the State of Delaware, 6 Del. C. ss. 2701A, et seq. (the "Securitization
Act"), each of the parties hereto hereby agrees that:
(a) any property, assets or rights purported to be
transferred, in whole or in part, by the Seller to the Issuer pursuant to this
Agreement shall be deemed to no longer be the property, assets or rights of the
Seller;
(b) none of the Seller, its creditors or, in any insolvency
proceeding with respect to the Seller or the Seller's property, a bankruptcy
trustee, receiver, debtor, debtor in possession or similar person, to the extent
the issue is governed by Delaware law, shall have any rights, legal or
equitable, whatsoever to reacquire (except pursuant to a provision of this
Agreement), reclaim, recover, repudiate, disaffirm, redeem or recharacterize as
property of the Seller any property, assets or rights purported to be
transferred, in whole or in part, by the Seller to the Issuer pursuant to this
Agreement;
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(c) in the event of a bankruptcy, receivership or other
insolvency proceeding with respect to the Seller or the Seller's property, to
the extent the issue is governed by Delaware law, such property, assets and
rights shall not be deemed to be part of the Seller's property, assets, rights
or estate; and
(d) the transaction contemplated by this Agreement shall
constitute a "securitization transaction" as such term is used in the
Securitization Act.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.
CPS AUTO RECEIVABLES TRUST 2007-TFC
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee on behalf of the Trust
By: /S/ DORRI E. WOLHAR
----------------------------------
Title: FINANCIAL SERVICES OFFICER
----------------------------------
CPS RECEIVABLES TWO CORP., as Seller
By: /S/ MARK CREATURA
----------------------------------
Title: VICE PRESIDENT
----------------------------------
CONSUMER PORTFOLIO SERVICES, INC., in its
individual capacity and in its capacity as
Servicer
By: /S/ ROBERT E. RIEDL
----------------------------------
Title: SR. VICE PRESIDENT & CIO
----------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely
as Backup Servicer and Trustee
By: /S/ MARIANNA C. STERSHIC
----------------------------------
Title: VICE PRESIDENT
----------------------------------
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SCHEDULE A
SCHEDULE OF RECEIVABLES
[AVAILABLE UPON REQUEST TO THE TRUSTEE]
SCH. A-1
SCHEDULE B
LOCATION FOR DELIVERY OF RECEIVABLE FILES
[AVAILABLE UPON REQUEST TO THE TRUSTEE]
SCH. B-1
SCHEDULE C-1
REPRESENTATIONS & WARRANTIES
(SEAWEST)
(a) APR. Each SeaWest Receivable has an Annual Percentage Rate
of not less than 12.95%.
(b) NO OBLIGOR BANKRUPTCY. As of the applicable Cutoff Date,
no Obligor was the subject to a Federal, State or other bankruptcy, insolvency
or similar proceeding.
(c) ORIGINATION DATE. Each SeaWest Receivable has an
origination date on or after December 1997.
(d) SCHEDULED RECEIVABLE PAYMENTS. Each SeaWest Receivable has
an original principal balance of not less than $1,158 nor more than $36,232.
(e) NO AGREEMENT TO LEND. The Obligor with respect to each
SeaWest Receivable does not have any option under the SeaWest Receivable to
borrow from any person any funds secured by the Financed Vehicle.
(f) REMAINING TERM. Each SeaWest Receivable has a remaining
term to maturity of not more than 35 months.
(g) CHARACTERISTICS OF SEAWEST RECEIVABLES. Each SeaWest
Receivable provides for level weekly, bi-weekly, semi-monthly or monthly
scheduled 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.
SCH. C-1
SCHEDULE C-2
REPRESENTATIONS & WARRANTIES
(TFC/CPS)
(a) CHARACTERISTICS OF TFC RECEIVABLES AND CPS RECEIVABLES.
Each TFC Receivable and CPS Receivable (1) provides for level monthly scheduled
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, (2) has an Annual Percentage Rate of not less than 8.00%
and not greater than 30.00%, (3) 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, (4) the
related Dealer had all necessary licenses and permits to originate such
Receivable in the state in which such Dealer was located, and (5) provides, in
the case of a prepayment, for the full payment of the Principal Balance thereof
plus accrued interest through the date of prepayment based on the APR of the
Receivable.
(b) ADDITIONAL RECEIVABLES CHARACTERISTICS. As of the Closing
Date (in the case of the TFC Receivables and CPS Receivables consisting of
Initial Receivables) or the applicable Subsequent Transfer Date (in the case of
TFC Receivables and CPS Receivables consisting of Subsequent Receivables):
(i) no such Receivable has been extended beyond its
original term, except in accordance with the Servicer's established
guidelines regarding deferments or extensions;
(ii) no Financed Vehicle financed under the
Receivables is on CPS's vehicle exclusion list, as the same may be
amended from time to time;
(iii) no Receivable is a Skip Receivable; and
(iv) each TFC Receivable (I) when originated had an
Obligor that was a member of the U.S. armed forces (other than any TFC
Receivable that is a Clean-up Call Receivable); and (II) did not have a
related Obligor that has been the subject of a Section 341 Meeting.
(c) NO WAIVER. Except as permitted under Section 4.2 and
clause (d) below, no provision of a Receivable has been waived.
(d) NO AMENDMENTS; NO EXTENSIONS. Except as permitted under
Section 4.2, no such Receivable (other than Clean-up Call Receivables) has been
amended, except as such Receivable may have been amended to grant extensions
which shall not have numbered more than (a) one extension of one calendar month
in any calendar year or (b) three such extensions in the aggregate; and no such
Receivable has been extended beyond its original term except in accordance with
the Servicer's servicing policy.
SCH. C-2
(e) RECEIVABLE FILE; ONE ORIGINAL. A complete Receivable File
with respect to such Receivable has been or prior to the Closing Date or the
related Subsequent Transfer Date, as applicable, will be delivered to the
Trustee at the location listed in Schedule B hereto. There is only one original
executed copy of each such Receivable.
(f) CHARACTERISTICS OF OBLIGORS. As of the date of each
Obligor's application for financing of the vehicle purchase from which the such
Receivable arises, such Obligor (a) with respect to CPS Receivables only, did
not have any material past due credit obligations or any personal or real
property repossessed or wages garnished within one year prior to the date of
such application, unless such amounts have been repaid or discharged through
bankruptcy (other than any Obligor that was the subject of a Federal, State or
other bankruptcy, involvency or similar proceeding pending on the date of
application that has completed a Section 341 Meeting), (b) was not the subject
of any Federal, State or other bankruptcy, insolvency or similar proceeding
pending on the date of application that has not completed a Section 341 Meeting
or been discharged, (c) had not been the subject of more than one Federal, State
or other bankruptcy, insolvency or similar proceeding, and (d) with respect to
the CPS Receivables only, was domiciled in the United States.
(g) ORIGINATION DATE. Each CPS Receivable that is an Initial
Receivable and not a Clean-up Call Receivable has an origination date on or
after February 1, 2005. Each TFC Receivable that is an Initial Receivable (other
Clean-up Call Receivables) has an origination date on or after June 1, 2004.
(h) SCHEDULED RECEIVABLE PAYMENTS. Each CPS Receivable that is
an Initial Receivable had an Amount Financed of not less than $4,000 nor more
than $36,000. Each TFC Receivable that is an Initial Receivable had an Amount
Financed of not less than $3,000 nor more than $22,000.
(i) ILLINOIS RECEIVABLES. (a) The Seller does not own a
substantial interest in the business of a Dealer within the meaning of Illinois
Sales Finance Agency Act Rules and Regulations, Section 160.230(1) and (b) with
respect to each such Receivable originated in the State of Illinois, (i) the
printed or typed portion of the related Form of Receivable complies with the
requirements of 815 ILCS 375/3(b) and (ii) the Seller has not, and for so long
as such Receivable is outstanding shall not, place or cause to be placed on the
related Financed Vehicle any collateral protection insurance in violation of 815
ILCS 180/10.
(j) CALIFORNIA RECEIVABLES. Each such Receivable originated in
the State of California has been, and at all times during the term of the Sale
and Servicing Agreement will be, serviced by the Servicer in compliance with
Cal. Civil Code ss. 2981, et seq.
(k) PERFECTION OF SECURITY INTEREST IN FINANCED VEHICLES. The
related Applicable Purchaser has taken all steps necessary to perfect its
security interest against the Obligors in the Financed Vehicle securing such
Receivable.
SCH. C-3
(l) NOTATIONS ON CONTRACTS; FINANCING STATEMENT DISCLOSURE.
The Servicer has in its possession a copy of the Contract that constitute or
evidence such Receivable. The Contract that constitutes or evidences such
Receivables does not have any marks or notations indicating that has been
pledged, assigned or otherwise conveyed to any Person other than the Issuer
and/or the Trustee for the benefit of the Securityholders and the Note Insurer.
All financing statements filed or to be filed against the Seller in favor of the
Issuer in connection herewith describing the Trust Property contain a statement
to the following effect: "A purchase of or security interest in any collateral
described in this financing statement will violate the rights of the secured
party."
(m) OBLIGOR BILLING ADDRESS. Each CPS Receivable had, or will
have, an Obligor whose billing address is in the United States.
(n) OBLIGOR CREDIT HISTORY. The Obligor with respect to each
CPS Receivable (i) did not (or, in the case of Subsequent Receivables, will not)
have any material past due credit obligations or any repossessions or
garnishments of property within one year before the date of application, unless
such amounts were repaid or discharged through bankruptcy (other than such an
Obligor that was then the subject of any Federal, State or other bankruptcy,
insolvency or similar proceeding and had completed a meeting held pursuant to
Section 341(a) of the Bankruptcy Code); (ii) was not (or, in the case of
Subsequent Receivables, will not be) the subject of any Federal, State or other
bankruptcy, insolvency or similar proceeding that had not completed a meeting
held pursuant to Section 341(a) of the Bankruptcy Code or had been discharged;
and (iii) had not (or, in the case of Subsequent Receivables, will not have)
been the subject of more than one such bankruptcy proceeding.
The representations and warranties set forth above in paragraphs (k) and (l)
shall survive the termination of the Sale and Servicing Agreement and may not be
waived in whole or in part.
SCH. C-4
EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
TRANSFER No. __ of Subsequent Receivables pursuant to the Sale and
Servicing Agreement, dated as of April 1, 2007, among CPS AUTO RECEIVABLES TRUST
2007-TFC, a Delaware statutory trust (the "Issuer"), CPS RECEIVABLES TWO CORP.,
a Delaware corporation (the "Seller"), CONSUMER PORTFOLIO SERVICES, INC. a
California corporation (the "Servicer"), and WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, in its capacity as Trustee (in such
capacity, the "Trustee"), and Backup Servicer (in such capacity, the "Backup
Servicer").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller wishes
to convey to the Issuer the Subsequent Receivables listed on Schedule A hereto;
and
WHEREAS the Issuer is willing to accept such conveyance subject to the
terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Servicer, the Backup
Servicer and the Trustee hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms used herein shall have the
meanings ascribed to them in the Sale and Servicing Agreement unless otherwise
defined herein.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, _____________, 2007.
"Subsequent Transfer Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, _____________, 2007.
"Clean-up Call Receivables" shall mean [____________________]
SECTION 2. SCHEDULE OF RECEIVABLES. Annexed hereto is a supplement to
Schedule A to the Sale and Servicing Agreement listing the Receivables that
constitute the Subsequent Receivables to be conveyed pursuant to this Subsequent
Transfer agreement on the Subsequent Transfer Date.
SECTION 3. CONVEYANCE OF SUBSEQUENT RECEIVABLES. In consideration of
the Issuer's delivery to or upon the order of the Seller of $____________, the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse (except as expressly provided in the Sale and Servicing
Agreement), all right, title and interest of the Seller in and to:
(a) the Subsequent Receivables listed in Schedule A to this
Subsequent Transfer Agreement and all monies received thereunder (other than the
Additional Servicing Compensation) after the related Subsequent Cutoff Date and
all Net Liquidation Proceeds and Recoveries received with respect to such
Subsequent Receivables after the related Subsequent Cutoff Date;
A-1
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in the
Non-Certificated Title States, all other evidence of ownership with respect to
such Financed Vehicles issued by the applicable Department of Motor Vehicles or
similar authority;
(c) any proceeds from claims on any physical damage, credit
life and credit accident and health insurance policies or certificates relating
to the Financed Vehicles securing the Subsequent Receivables or the Obligors
thereunder;
(d) all proceeds from recourse against Dealers with respect to
the related Subsequent Receivables;
(e) all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under the related
Subsequent Receivables Purchase Agreement, including a direct right to cause CPS
to purchase Subsequent Receivables from the Issuer under certain circumstances
and to indemnify the Issuer pursuant to the Subsequent Receivables Purchase
Agreement;
(f) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing Subsequent Receivables, refunds of
unearned premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed Vehicle under
a Subsequent Receivable or his or her obligations with respect to a Financed
Vehicle and any recourse to Dealers for any of the foregoing;
(g) the Receivable File related to each Subsequent Receivable;
(h) all amounts and property from time to time held in or
credited to the Collection Account, the Pre-Funding Account, the Capitalized
Interest Account, the Lockbox Account and the Note Distribution Account;
(i) all property (including the right to receive future Net
Liquidation Proceeds) that secured a Subsequent Receivable that has been
acquired by or on behalf of CPS or the Seller pursuant to a liquidation of such
Receivable;
(j) the proceeds of any and all of the foregoing; and
(k) all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing.
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It is the intention of the Seller that the transfer and assignment
contemplated by this Subsequent Transfer Agreement shall constitute a sale of
the Subsequent Receivables and Other Conveyed Property from the Seller to the
Issuer and the beneficial interest in and title to the Subsequent Receivables
and the Other Conveyed Property shall not be part of the Seller's estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. In the event that, notwithstanding the intent of the Seller, the
transfer and assignment contemplated hereby is held not to be a sale, this
Subsequent Transfer Agreement shall constitute a grant of a security interest in
the property referred to in this Section 3 for the benefit of the
Securityholders and the Note Insurer.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. In addition to
the representations and warranties set forth in Section 3.1 of the Sale and
Servicing Agreement, the Seller hereby represents and warrants to the Issuer and
for the benefit of the Securityholders and the Note Insurer, as of the date of
this Agreement and as of the Subsequent Transfer Date that:
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly
incorporated and is validly existing as a corporation solely under the laws of
the State of Delaware, in good standing thereunder, with power and authority to
own its properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant times,
and now has, power, authority and legal right to acquire, own and sell the
Subsequent Receivables and the related Other Conveyed Property transferred to
the Trust.
(b) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business or the consummation of the
transactions contemplated by the Basic Documents shall require such
qualifications.
(c) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Subsequent Transfer Agreement and the
Basic Documents to which it is a party and to carry out its terms and their
terms, respectively; the Seller has full power and authority to sell and assign
the Subsequent Receivables and the related Other Conveyed Property to be sold
and assigned to and deposited with the Trust by it and has duly authorized such
sale and assignment to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Subsequent Transfer Agreement and
the Basic Documents to which the Seller is a party have been duly authorized by
the Seller by all necessary corporate action.
(d) VALID SALE, BINDING OBLIGATIONS. This Subsequent Transfer
Agreement effects a valid sale, transfer and assignment of the Subsequent
Receivables and the related Other Conveyed Property, enforceable against the
Seller and creditors of and purchasers from the Seller; and this Subsequent
Transfer Agreement and the Basic Documents to which the Seller is a party, when
duly executed and delivered, shall constitute legal, valid and binding
obligations of the Seller enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
A-3
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 Subsequent Transfer Agreement and the Basic Documents and
the fulfillment of the terms of this Subsequent Transfer Agreement and the Basic
Documents shall not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or both) a
default under the certificate of incorporation or by-laws of the Seller, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Seller is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, other
than the Basic Documents, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any Federal or State regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Subsequent Transfer Agreement, the Securities
or any of the Basic Documents, (B) seeking to prevent the consummation of any of
the transactions contemplated by this Subsequent Transfer Agreement or any of
the Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Subsequent Transfer Agreement
or any of the Basic Documents, or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or similar tax
attributes of the Securities.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
(h) FINANCIAL CONDITION. The Seller has a positive net worth
and is able to and does pay its liabilities as they mature. The Seller is not in
default under any obligation to pay money to any Person except for matters being
disputed in good faith which do not involve an obligation of the Seller on a
promissory note. The Seller will not use the proceeds from the transactions
contemplated by the Basic Documents to give any preference to any creditor or
class of creditors, and such transaction will not leave the Seller with
remaining assets which are unreasonably small compared to its ongoing
operations.
(i) TAX RETURNS. The Seller has filed on a timely basis all
tax returns which are required to be filed by it and paid all taxes, including
any assessments received by it, to the extent that such taxes have become due
(other than taxes, the amount or validity of which are currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided by the books of the Seller).
A-4
(j) CERTIFICATES, STATEMENTS AND REPORTS. The officer's
certificates, statements, reports and other documents prepared by Seller and
furnished by Seller to the Note Insurer or the Trustee pursuant to this
Agreement or any other Basic Document to which it is a party, and in connection
with the transactions contemplated hereby or thereby, when taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
(k) LEGAL COUNSEL, ETC. Seller consulted with its own legal
counsel and independent accountants to the extent it deems necessary regarding
the tax, accounting and regulatory consequences of the transactions contemplated
hereby, Seller is not participating in such transactions in reliance on any
representations of any other party, their affiliates, or their counsel with
respect to tax, accounting and regulatory matters.
(l) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at 16355 Laguna Canyon, Irvine, CA 92618.
(m) SEPARATENESS COVENANTS. The Seller is in compliance in all
material respects with Article XV of its Certificate of Incorporation relating
to the separateness of the Seller from any other Person.
(n) PRINCIPAL BALANCE. The aggregate Principal Balance of the
Subsequent Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Issuer pursuant to this Subsequent Transfer Agreement as of the
Subsequent Cutoff Date is $____________.
SECTION 5. CONDITIONS PRECEDENT. The obligation of the Issuer to
acquire the Subsequent Receivables hereunder is subject to the satisfaction, on
or prior to the Subsequent Transfer Date, of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Seller in Section 4 of this
Subsequent Transfer Agreement and with respect to the Subsequent Receivables in
Section 3.1 of the Sale and Servicing Agreement shall be true and correct as of
the date of this Agreement and as of the Subsequent Transfer Date.
(b) SALE AND SERVICING AGREEMENT CONDITIONS. Each of the
conditions set forth in Section 2.2(b) of the Sale and Servicing Agreement shall
have been satisfied.
(c) ADDITIONAL INFORMATION. The Seller shall have delivered to
the Issuer such information as was reasonably requested by the Issuer to satisfy
itself as to (i) the accuracy of the representations and warranties set forth in
Section 4 of this Agreement and with respect to the Subsequent Receivables in
Section 3.1 of the Sale and Servicing Agreement and (ii) the satisfaction of the
conditions set forth in this Section 5.
A-5
SECTION 6. ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE. The Trustee
acknowledges receipt of files which the Seller has represented are the
Receivable Files for the Subsequent Receivables. The Trustee has reviewed such
Receivable Files and has determined that it has received a file for each
Subsequent Receivable identified in Schedule A to this Subsequent Transfer
Agreement. The Trustee declares that it holds and will continue to hold such
files and any amendments, replacements or supplements thereto and all other
Trust Assets as Trustee in trust for the use and benefit of all present and
future Securityholders.
SECTION 7. RATIFICATION OF AGREEMENT. As supplemented by this
Agreement, the Sale and Servicing Agreement is in all respects ratified and
confirmed and the Sale and Servicing Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.
SECTION 8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
SECTION 9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND THIS AGREEMENT AND ALL MATTERS ARISING OUT OF OR RELATING
IN ANY WAY TO THIS AGREEMENT SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 10. Limitation of Liability of Owner Trustee and Trustee
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been executed and delivered by Wells Fargo Bank, National
Association, not in its individual capacity but solely as Trustee and Backup
Servicer and in no event shall Wells Fargo Bank, National Association, have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.
A-6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the Subsequent Transfer Date.
CPS AUTO RECEIVABLES TRUST 2007-TFC
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee on behalf of the Trust
By:________________________________________
Name:______________________________________
Title:_____________________________________
CPS RECEIVABLES TWO CORP., Seller
By:________________________________________
Name:______________________________________
Title:_____________________________________
CONSUMER PORTFOLIO SERVICES, INC.,
Individually and in its capacity as Servicer
By:________________________________________
Name:______________________________________
Title:_____________________________________
WELLS FARGO BANK, NATIONAL ASSOCIATION, not
in its individual capacity, but solely as
Backup Servicer and Trustee
By:________________________________________
Name:______________________________________
Title:_____________________________________
A-7
EXHIBIT B
SERVICER'S CERTIFICATE
B-1
EXHIBIT C
REQUEST FOR RELEASE
TO:
Wells Fargo Bank, National Association
MAC N9328-011
Suite ABS
751 Kasota Avenue
Minneapolis, Minnesota 55414
Attention: Corporate Trust Services - Asset Backed Securities Vault
In connection with the servicing of the Receivables that are owned by
CPS Auto Receivables Trust 2007-TFC (the "Issuer") and are pledged by the Issuer
to the Trustee for the benefit of the Securityholders and the Note Insurer to
support the Issuer's Asset-Backed Notes, Series 2007-TFC, and pursuant to
Section 3.5 of the Sale and Servicing Agreement described below, the
undersigned, as Servicer of the Receivables, requests the Receivables Files
related to the Receivables described below for the reason indicated. The
undersigned shall return all documents to you when the undersigned's need
therefor no longer exists, except where the Receivable is paid in full or
otherwise disposed of (as indicated below). Capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned to such
terms in the Sale and Servicing Agreement, dated as of April 1, 2007, among the
Issuer, CPS Receivables Two Corp., as the seller, Consumer Portfolio Services,
Inc., individually and as the servicer (the "Servicer"), and Wells Fargo Bank,
National Association, as trustee and backup servicer.
CONTRACT NUMBERS AND OBLIGOR NAMES:
[[INSERT INFO. HERE]]
The undersigned hereby certifies that if this release is requested due
to payment in full of a Receivable, or repurchase upon breach, all amounts
received in connection therewith that are required to be deposited in the
Collection Account have been so deposited.
REASON FOR REQUESTING DOCUMENTS:
-- CONTRACT PAID IN FULL
-- REPURCHASE UPON BREACH
-- REPOSSESSION AND LIQUIDATION
-- DELIVERY TO COUNSEL FOR ENFORCEMENT
-- OTHER - EXPLAIN REASON AND REFERENCE TO
APPROPRIATE SECTION OF SALE AND SERVICING AGREEMENT
C-1
CONSUMER PORTFOLIO SERVICES, INC.,
as Servicer
By:___________________________
Name:______________________
Title:_____________________
CONTRACT NUMBERS______________
CUSTOMERS_____________________
C-2
EXHIBIT D
[RESERVED]
----------
D-1
EXHIBIT E
FORM OF MONTHLY SECURITYHOLDER STATEMENT
[AVAILABLE UPON REQUEST TO THE TRUSTEE]
E-1
EXHIBIT F-1
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTIONS 3.2 OR 3.4 OF
THE SALE AND SERVICING AGREEMENT
Wells Fargo Bank, National Association, as trustee (the "Trustee") of
the CPS Auto Receivables Trust 2007-TFC (the "Trust") under the Sale and
Servicing Agreement (the "Sale and Servicing Agreement"), dated as of April 1,
2007, among the Trust, CPS Receivables Two Corp., as Seller, Consumer Portfolio
Services, Inc., individually and as Servicer, and Wells Fargo Bank, National
Association, as Trustee and Backup Servicer, does hereby sell, transfer, assign,
and otherwise convey to Consumer Portfolio Services, Inc., without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables (as defined in the Sale and Servicing Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which are to be repurchased by Consumer Portfolio Services, Inc. pursuant to
Section 3.2 or Section 3.4 of the Sale and Servicing Agreement and all security
and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
20__.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
By:____________________________________
Name:__________________________________
Title:_________________________________
F-1-1
EXHIBIT F-2
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTIONS 4.7, 4.16 OR 11.1 OF
THE SALE AND SERVICING AGREEMENT
Wells Fargo Bank, National Association, as trustee (the "Trustee") of
the CPS Auto Receivables Trust 2007-TFC (the "Trust") under the Sale and
Servicing Agreement (the "Sale and Servicing Agreement"), dated as of April 1,
2007, among the Trust, CPS Receivables Two Corp., as Seller, Consumer Portfolio
Services, Inc. ("CPS"), individually and as Servicer, and Wells Fargo Bank,
National Association, as Trustee and Backup Servicer, does hereby sell,
transfer, assign, and otherwise convey to [CPS][the Servicer], without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables identified in the attached Servicer's Certificate
as "Purchased Receivables," which are to be repurchased by [CPS][the Servicer]
pursuant to Sections 4.7, 4.16 or 11.1 of the Sale and Servicing Agreement and
all security and documents relating thereto.
Capitalized terms used but not defined herein have the meaning assigned
to such terms in the Sale and Servicing Agreement.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
20__.
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Trustee
By:__________________________
Name:________________________
Title:_______________________
F-2-1
EXHIBIT G
SCHEDULE OF SUCCESSOR SERVICING FEES, EXPENSES & DISTRIBUTIONS
--------------------------------------------------------------
I. FEES
ACTIVE SERVICING
1. Boarding Fee $10.00 per loan
2. Monthly Fee $13.00 per loan
II. EXPENSES
A. TRANSITION EXPENSES
The Backup Servicer shall be reimbursed for all reasonable costs and expenses
incurred by the Backup Servicer during the Transfer Period specifically related
to the servicing transfer of the Receivables. Such items include, but are not
limited to, those related to travel, Obligor mailings, freight and file
shipping.
B. ACTIVE SERVICING
The Backup Servicer shall be reimbursed for all reasonable out-of-pocket
expenses relating to its duties hereunder and under the Existing Servicing
Agreement including, but not limited to, those associated with the recovery of
Financed Vehicles, liquidation of Financed Vehicles, legal proceedings related
to replevin actions or Obligor bankruptcies, mailing costs, title processing,
bank charges and insurance tracking.
III. DISTRIBUTIONS
ACTIVE SERVICING
All fees, expenses and other amounts due the Backup Servicer for each Collection
Period shall be reflected on the Servicer Certificate. All such amounts shall be
paid to the Backup Servicer on each Payment Date.
IV. MISCELLANEOUS
A. CLAIM FILING COSTS
In the event the Backup Servicer files credit enhancement insurance claims in
connection with any Receivable, the Backup Servicer shall receive $25.00 per
filing.
G-1
B. DEFICIENCY COLLECTIONS
Under separate agreement, the Backup Servicer may provide deficiency balance
collections services on a contingency fee basis.
G-2
EXHIBIT H-1
WELLS FARGO BANK, N.A.
SCHEDULE OF FEES
CPS AUTO RECEIVABLES TRUST 2007-TFC
I. ACCOUNT ACCEPTANCE FEE: $5,000
This fee covers all initial services including the examination of the
governing documents, acceptance of the transaction and establishment of
the necessary records and accounts. Fee payable at closing.
II. COUNSEL FEE: ACTUAL
Fees for counsel covers the review of both draft and final
documentation. Fee includes only an enforceability opinion. Should
other opinions be required, notice will be given in advance concerning
the billing of additional amounts. Any out-of-pockets will be billed in
addition to above. This fee is not contingent upon the transaction
closing.
III. ANNUAL ADMINISTRATION: 4.5 BASIS POINTS
$2,500 MONTHLY MINIMUM
A fee for the ordinary administration of the transaction will be
charged as indicated above. This fee covers trustee and paying agent
duties and all wire charges. The fee also includes the verification of
the monthly servicer report and the monthly duties of the back-up
servicer. Fee assumes various Collection, Reserve and other accounts
will be invested in "Permitted Investments" in money market mutual
funds. Fee assumes Wells Fargo will receive funds for distribution at
least one business day prior to distribution date with Wells Fargo
having use of the funds.
IV. CUSTODIAL DUTIES:
INITIAL FILE CHECK-IN: $2.00 PER LOAN
ANNUAL SAFEKEEPING: $2.00 PER LOAN (billed quarterly ($.50) based upon
the number of loans held as of the last day of each quarter)
FILE PULLS OR RELEASES: $2.50 PER LOAN
TRAILING DOCUMENTS: $1.25 PER LOAN
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Responsibilities include initial review of files and loan file
safekeeping. In addition to the above, the Issuer is responsible for
all delivery of fees for shipment of loans/files to Wells Fargo Bank.
V. BACK-UP SERVICER
BACK-UP SERVICER MONTHLY FEE 3 BASIS POINTS
---------------------------- $2,000 MONTHLY MINIMUM
The successor servicer shall receive an electronic transmission of
servicing information (such as address and telephone number, auto loan
principal balance and payment information, including any comment
histories and collection notes) and shall review each file to ensure
that it is in readable form and that it can be loaded onto the back-up
servicer's servicing system. The transmission will occur monthly until
the controlling party requires more frequent transmissions. The fee
also includes the verification of the monthly servicer report and the
monthly duties of the back-up servicer.
VI. MISCELLANEOUS:
The fees set forth above are subject to the review and acceptance of
final documentation are subject to change should circumstances warrant.
Additional out-of-pocket expenses may be billed in addition to the
above which can include, but are not limited to, travel expenses for
trust officers attending out-of-town closings and all company visits.
Any fees charged for services not specifically covered in this proposal
will be assessed in amounts commensurate with the services rendered.
This proposal assumes that the deal documents will contain appropriate
transition expenses and a successor servicing fee of $13 per loan per
month paid on a priority basis in the waterfall.
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EXHIBIT H-2
WELLS FARGO BANK, N.A.
SCHEDULE OF FEES
CPS CAYMAN RESIDUAL TRUST 2007-TFC
I. ACCOUNT ACCEPTANCE FEE: $2,000
This fee covers all initial services including the examination of the
governing documents, acceptance of the transaction and establishment of
the necessary records and accounts. Fee payable at closing.
II. COUNSEL FEE: ACTUAL
Fees for counsel covers the review of both draft and final
documentation. Fee includes only an enforceability opinion. Should
other opinions be required, notice will be given in advance concerning
the billing of additional amounts. Any out-of-pockets will be billed in
addition to above. This fee is not contingent upon the transaction
closing.
III. TRUSTEE AND BACK-UP ADMINISTRATOR FEE: $5,000
PER YEAR
A fee for the ordinary administration of the transaction will be
charged as indicated above. This fee covers trustee and paying agent
duties and all wire charges. The fee also includes the verification of
the monthly servicer report and the monthly duties of the back-up
servicer. Fee assumes Wells Fargo will receive funds for distribution
at least one business day prior to distribution date with Wells Fargo
having use of the funds. Fee includes safekeeping of the collateral -
Residual Certificates of the underlying deals.
IV. MISCELLANEOUS:
The fees set forth above are subject to the review and acceptance of
final documentation are subject to change should circumstances warrant.
Additional out-of-pocket expenses may be billed in addition to the
above which can include, but are not limited to, travel expenses for
trust officers attending out-of-town closings and all company visits.
Any fees charged for services not specifically covered in this proposal
will be assessed in amounts commensurate with the services rendered.
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