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EXHIBIT 10.12
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of November 15, 2005 (as
amended, supplemented, restated or otherwise modified from time to
time in
accordance with the terms hereof, this "AGREEMENT"), is made among
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FUNDING LLC, a Delaware limited liability company (the "ISSUER"),
CONSUMER
PORTFOLIO SERVICES, INC., a California corporation ("CPS" or the
"SERVICER"),
and BEAR, STEARNS INTERNATIONAL LIMITED, a limited liability
company incorporate
in England and Wales, as Note Purchaser (in such capacity, together
with any
successors in such capacity, the "NOTE PURCHASER").
R E C I T A L S
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1. Contemporaneously with the execution and delivery of this
Agreement, the Issuer and Wells Fargo Bank, National Association, a
national
banking association, as trustee (together with its successors in
trust
thereunder as provided in the Indenture referred to below, the
"TRUSTEE"), are
entering into the Indenture, of even date herewith (as the same may
be amended,
supplemented, restated or otherwise modified from time to time in
accordance
with the terms thereof, the "INDENTURE"), pursuant to which the
Issuer will
issue a class of Variable Funding Notes (the "NOTES").
2. The security for the Notes will include retail installment
sale contracts secured by the new and used automobiles, vans,
minivans and light
trucks financed thereby and certain other Conveyed Property. The
Receivables
will initially be serviced by CPS. The Notes will be secured by the
Receivables,
which will be pledged by the Issuer to the Trustee from time to
time pursuant to
the Indenture.
3. The
Issuer will acquire a pool of Receivables (the "INITIAL
RECEIVABLES") from CPS pursuant to a Sale and Servicing Agreement,
dated as of
November 15, 2005 (such date, the "INITIAL CUTOFF DATE" and such
agreement, the
"SALE AND SERVICING AGREEMENT"), among the Issuer, as purchaser,
CPS, as seller
and servicer (in such capacities, the "SELLER" and the
"SERVICER,"
respectively), and the Trustee. The Issuer will in turn pledge the
Initial
Receivables to the Trustee pursuant to the Indenture. From time to
time prior to
the Facility Termination Date pursuant to the Sale and Servicing
Agreement, the
Seller will sell, and the Issuer will purchase, additional pools of
Receivables
(the "ADDITIONAL RECEIVABLES" and, together with the Initial
Receivables, the
"RECEIVABLES") secured by the new and used automobiles, vans,
minivans and light
trucks financed thereby and certain other Conveyed Property. The
Initial
Receivables and the Additional Receivables will be described in the
schedules to
one or more assignments by the Seller to the Issuer (each, an
"ASSIGNMENT")
dated as of the cutoff date specified therein (such date, a "CUTOFF
DATE" and
each date of transfer, a "FUNDING DATE", in each case with respect
to the
related Receivables and other Collateral). The Issuer will in turn
pledge the
Additional Receivables to the Trustee pursuant to the Indenture. In
addition to
the Receivables, repayment of the Notes will be secured by a
security interest
in the other Collateral.
4. The Issuer wishes to issue the Notes in favor of the Note
Purchaser and obtain the agreement of the Note Purchaser to
purchase the Notes
and to purchase increases in the Notes from time to time (each, an
"ADVANCE"),
all of which Advances (including the Initial Advance) will
constitute Advances,
and all of which Advances (including the Initial Advance) will be
evidenced by
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the Notes purchased in connection herewith. Each Advance and all
Advance Amounts
with respect thereto will rank pari passu and will be secured by
all of the
Collateral regardless of whether a particular Receivable was
pledged to the
Trustee prior to, on the date of, or subsequent to the date of such
Advance or
Advance Amount without preference or priority of any kind. Subject
to the terms
and conditions of this Agreement and the other Basic Documents, the
Note
Purchaser is willing to purchase Advances from time to time in an
aggregate
outstanding amount up to the Maximum Invested Amount until the
Facility
Termination Date. CPS has joined in this Agreement to confirm
certain
representations, warranties and covenants made by it as Servicer
and as Seller
for the benefit of the Note Purchaser.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Agreement and unless
the
context requires a different meaning, capitalized terms used but
not defined
herein (including the preamble and the recitals hereto) shall have
the meanings
assigned to such terms in Annex A to the Sale and Servicing
Agreement. The
definitions of such terms are applicable to the singular as well as
the plural
form of such terms and to the masculine as well as the feminine and
neuter
genders of such terms:
ARTICLE II
PURCHASE AND SALE OF THE NOTE
SECTION 2.01 THE INITIAL NOTE PURCHASE. On the terms and conditions
set
forth in the Indenture, the Sale and Servicing Agreement and this
Agreement, and
in reliance on the covenants, representations and agreements set
forth herein
and therein, the Issuer shall issue and cause the Trustee to
authenticate and
deliver to the Note Purchaser the Notes on the Closing Date. The
Notes shall be
dated the Closing Date, registered in the name of "Bear, Stearns
Securities
Corp.", the nominee of the Note Purchaser, and duly authenticated
in accordance
with the provisions of the Indenture.
SECTION 2.02 ADVANCES. Upon the Issuer's request, delivered in
accordance with the provisions of SECTION 2.03, subject to the
satisfaction of
all conditions precedent thereto and to the terms and conditions of
the Basic
Documents, and in reliance upon the representations and warranties
set forth
herein and therein, the Note Purchaser shall purchase Advances from
time to time
during the Term at the relevant Advance Amount; provided that no
Advance shall
be required or permitted to be purchased on any date if, after
giving effect to
such Advance, (a) the Invested Amount would exceed the Maximum
Invested Amount
or (b) a Borrowing Base Deficiency exists or would exist. Subject
to the terms
and conditions of this Agreement and the Indenture, the aggregate
principal
amount of the Notes outstanding may be increased, to a maximum
amount not to
exceed the Maximum Advance Amount, or decreased from time to
time.
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SECTION 2.03 ADVANCE AND PREPAYMENT PROCEDURES.
(a) Whenever the Issuer wishes the Note Purchaser to purchase
an Advance, the Issuer shall (or shall cause the Servicer to)
notify the Note
Purchaser by telephone, promptly followed by written notice, with
an electronic
copy of such notice sent to the Note Purchaser, substantially in
the form of
EXHIBIT B hereto (each such request, an "ADVANCE REQUEST"),
together with the
related Addition Notice, a Borrowing Base Certificate and a data
tape or other
electronic file containing information regarding the Related
Receivables to be
transferred on such Funding Date delivered to the Note Purchaser no
later than
2:00 p.m. (New York City time) four (4) Business Days prior to the
proposed
Funding Date. Each such Advance Request shall be irrevocable and
shall in each
case refer to this Agreement and specify the aggregate amount of
the requested
Advance to be purchased on such date, which amount shall be not
less than
$2,000,000. The Note Purchaser shall promptly thereafter (but in no
event later
than 11:00 a.m. New York City time on the proposed Funding Date)
notify the
Issuer whether the Note Purchaser has determined to purchase the
requested
Advance. On the Funding Date, subject to the other conditions set
forth herein,
in the Indenture, and in the Sale and Servicing Agreement, the Note
Purchaser
shall pay the Advance Amount for such Advance to or at the
direction of the
Issuer, by wire transfer in U.S. dollars of such amount in same day
funds to an
account designated by the Issuer or its designee on the related
Funding Date.
The Issuer hereby directs the Note Purchaser to pay the Advance
Amount for each
Advance to CPS for the benefit of the Issuer.
(b) No later than three (3) Business Days prior to a proposed
Funding Date, the Seller shall either (i) transmit to the Note
Purchaser or its
designee in electronic format or (ii) make scanned copies available
to the Note
Purchaser or its designee for review by the Note Purchaser or its
designee at
the Seller's offices during normal business hours, of a
statistically
significant sample of the credit files of the Related Receivables,
such sample
size to be determined and sample selected in the discretion of the
Note
Purchaser.
(c) The Notes may be prepaid in whole or in part in accordance
with Article X of the Indenture.
SECTION 2.04 THE NOTES. On each date an Advance is purchased,
increasing the outstanding principal amount of the Notes, and on
each date the
outstanding principal amount of the Notes is reduced, a duly
authorized officer,
employee or agent of the Note Purchaser shall make appropriate
notations in its
books and records of the amount of such Advance and the amount of
such
reduction, as applicable. Every such notation shall be dispositive
of the
accuracy of the information so recorded and shall be conclusive and
binding on
the Issuer absent manifest error.
SECTION
2.05 COMMITMENT TERM; OPTIONAL RENEWAL. The "TERM" of the
Commitment hereunder shall be for a period commencing on the
Closing Date and
ending on the Facility Termination Date. Thereafter, the Term may
be extended
for one or two additional 364-day periods in the respective
discretion, and upon
the mutual agreement. of the parties, which agreement may take the
form of
changing the specified "Facility Termination Date" together with
such other
terms upon which the parties may agree. Notwithstanding the
foregoing, nothing
contained in this SECTION 2.05 shall obligate any of the parties
hereto to
extend any Term unless it shall desire to do so in its sole
discretion.
SECTION 2.06 APPOINTMENT OF TRUSTEE UNDER INDENTURE. The Note
Purchaser
hereby acknowledges and approves the appointment of Wells Fargo
Bank, National
Association as the Trustee with respect to the Collateral pursuant
to Section
6.13 of the Indenture.
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ARTICLE III
FEES
SECTION 3.01 FEES.
(a) On the Closing Date, the Issuer and the Servicer shall
jointly and severally pay or cause to be paid to the Note Purchaser
a
structuring fee equal to the product of (x) 0.50% and (y) the
Maximum Invested
Amount.
(b) On each Settlement Date, the Issuer and the Servicer will,
jointly and severally, pay or cause to be paid the Commitment Fee
to the Note
Purchaser pursuant to Section 5.8(a)(iv) of the Sale and Servicing
Agreement.
(c) The Issuer and the Servicer shall jointly and severally
pay or reimburse Note Purchaser on the Closing Date and thereafter
within 30
days following presentment of invoices for all its reasonable
out-of-pocket
fees, costs and expenses incurred in connection with the
development,
preparation and execution of, and any amendment, modification or
supplement to,
or any waiver under, any Basic Document and any other document
prepared in
connection therewith, and the consummation and administration of
the
transactions contemplated thereby, including, without limitation,
the reasonable
fees and disbursements of counsel to Note Purchaser with respect to
any of the
foregoing, including, without limitation, such fees and
disbursements incurred
in advising Note Purchaser from time to time as to its rights and
remedies under
any Basic Document. Such expenses related to the establishment of
this facility
shall be capped at $100,000 and shall be payable by the Issuer
whether or not
the transaction closes.
(d) The Issuer and the Seller each hereby, jointly and
severally, grant the Note Purchaser (including any of its
Affiliates) the right
to place a minimum of $300 million of investment grade notes
collateralized by
certain Eligible Receivables during the Term. On the closing date
for each such
securitization, the Issuer and the Seller, jointly and severally
hereby agree to
pay, and shall pay or cause to be paid, a placement fee to the Note
Purchaser
(or such Affiliate of the Note Purchaser) in an amount equal to
0.40% of the
aggregate par amount of the investment-grade notes sold pursuant to
such
securitization. If less than $300 million in par amount of such
investment grade
securities are sold through the Note Purchaser (or its Affiliate)
pursuant to
securitizations during the Term, the Issuer and the Seller jointly
and severally
hereby agree to pay, and shall pay or cause to be paid, the Minimum
Placement
Fee to the Note Purchaser (or such Affiliate). Such Minimum
Placement Fee will
be due and payable to the Note Purchaser (or its Affiliate) on the
Minimum
Placement Fee Payment Date whether or not the Seller provides the
Note Purchaser
(or its Affiliate) the opportunity to place such investment-grade
notes. The
Seller will pay all reasonable out-of-pocket expenses in connection
with each
such securitization transaction, including, without limitation,
rating agency
fees and legal due diligence expenses. In addition, the Seller
hereby grants the
Note Purchaser the exclusive right to act as placement agent for
sales of
non-investment grade securities issued in connection with each
such
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securitization for a placement fee for such transaction that will
be equal to
the greater of (x) the product of 200 basis points and the
aggregate par amount
of non-investment grade securities sold in such securitization and
(y) $100,000.
Such placement fee will be subject to the sale of such
non-investment grade
securities upon terms that are acceptable to the Seller in its sole
discretion.
SECTION 3.02 INCREASED COSTS, ETC. The Issuer agrees to reimburse
the
Note Purchaser for an increase in the cost of, or any reduction in
the amount of
any sum receivable by the Note Purchaser, including reductions in
the rate of
return on the Note Purchaser's capital, in respect of making,
continuing or
maintaining (or of its obligation to make, continue or maintain)
any Advances
that arise in connection with any change in, or the introduction,
adoption,
effectiveness, interpretation reinterpretation or phase-in, in each
case, after
the date hereof, of any law or regulation, directive, guideline,
accounting
rule, decision or request (whether or not having the force of law)
of any court,
central bank, regulator or other Governmental Authority, except for
such changes
with respect to increased capital costs and taxes which are
governed by SECTIONS
3.03 and 3.04, respectively. Each such demand shall be provided to
the Issuer in
writing and shall state, in reasonable detail, the reasons therefor
and the
additional amount required fully to compensate the Note Purchaser
for such
increased cost or reduced amount or return. Such additional amounts
shall be
payable by the Issuer to the Note Purchaser within five (5)
Business Days of its
receipt of such notice, and such notice shall, in the absence of
manifest error,
be conclusive and binding on the Issuer.
SECTION 3.03 INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation or
reinterpretation or
phase-in, in each case after the date hereof, of any law or
regulation,
directive, guideline, accounting rule, decision or request (whether
or not
having the force of law) of any court, central bank, regulator or
other
Governmental Authority affects or would affect the amount of
capital required or
reasonably expected to be maintained by the Note Purchaser or any
Person
controlling the Note Purchaser and the Note Purchaser reasonably
determines that
the rate of return on its or such controlling Person's capital as a
consequence
of its commitment or the purchases of Advances or the maintenance
of the Notes
by the Note Purchaser is reduced to a level below that which the
Note Purchaser
or such controlling Person would have achieved but for the
occurrence of any
such circumstance, then, in any such case after notice from time to
time by the
Note Purchaser to the Issuer, the Issuer shall pay to the Note
Purchaser an
incremental commitment fee sufficient to compensate the Note
Purchaser or such
controlling Person for such reduction in rate of return. A
statement of the Note
Purchaser as to any such additional amount or amounts (including
calculations
thereof in reasonable detail), in the absence of manifest error,
shall be
conclusive and binding on the Issuer; and PROVIDED, FURTHER, that
the initial
payment of such increased commitment fee shall include a payment
for accrued
amounts due under this SECTION 3.03 prior to such initial payment.
In
determining such additional amount, the Note Purchaser may use any
method of
averaging and attribution that it shall reasonably deem applicable
so long as it
applies such method to other similar transactions.
SECTION 3.04 TAXES. All payments by the Issuer of principal of,
and
interest on, the Notes and all other amounts payable hereunder
(including fees)
and/or thereunder shall be made free and clear of and without
deduction for any
present or future income, excise, stamp or franchise taxes and
other taxes,
fees, duties, withholdings or other charges of any nature
whatsoever imposed by
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any taxing authority, but excluding in the case of the Note
Purchaser, taxes
imposed by the United States on or measured by its overall net
income, overall
receipts or overall assets and franchise taxes imposed on it by the
jurisdiction
in which the Note Purchaser is organized or is operating or any
political
subdivision thereof (such non-excluded items being called "TAXES");
PROVIDED
THAT, notwithstanding anything herein to the contrary, the Issuer
shall not be
required to increase any amounts payable to the Note Purchaser with
respect to
any Taxes that are imposed on the Note Purchaser at the time of
acquisition of
the Notes by the Note Purchaser. In the event that any withholding
or deduction
from any payment to be made by the Issuer hereunder and/or
thereunder is
required in respect of any Taxes pursuant to any applicable law,
rule or
regulation, then the Issuer will:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Note Purchaser or its agent an
official receipt or other documentation evidencing such payment to
such
authority; and
(c) pay to the Note Purchaser or its agent such additional
amount or amounts as is necessary to ensure that the net amount
actually
received by the Note Purchaser will equal the full amount the Note
Purchaser
would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Note
Purchaser with respect to any payment received by the Note
Purchaser, the Note
Purchaser or such agent may pay such Taxes and the Issuer will
promptly upon
receipt of prior written notice stating the amount of such Taxes
pay such
additional amounts (including any penalties, interest or expenses)
as is
necessary in order that the net amount received by such person
after the payment
of such Taxes (including any Taxes on such additional amount) shall
equal the
amount the Note Purchaser would have received had not such Taxes
been asserted.
The Note Purchaser shall make all reasonable efforts to avoid the
imposition of
any Taxes that would give rise to an additional payment under this
SECTION 3.04.
If the Issuer fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Note
Purchaser the
required receipts or other required documentary evidence, the
Issuer shall
indemnify the Note Purchaser for any Taxes and incremental Taxes,
interest or
penalties that may become payable by the Note Purchaser as a result
of any such
failure. For purposes of this SECTION 3.04, a distribution
hereunder by the
agent for the Note Purchaser shall be deemed a payment by the
Issuer.
SECTION 3.05 MARK-TO-MARKET ADJUSTMENTS.
(a) In the event that a Borrowing Base Deficiency exists on
any date of determination as determined by the Note Purchaser in
its sole
discretion, the Issuer shall on the same Business Day of the
receipt of notice
from the Note Purchaser (or if notice is received after 10:01 a.m.
New York
time, then on the next Business Day), prepay the Invested Amount by
an amount
equal to such Borrowing Base Deficiency by paying such amount to or
at the
direction of the Note Purchaser. If a Borrowing Base Deficiency is
not fully
paid by the Issuer pursuant to the immediately preceding sentence,
then (i) on
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any Funding Date, the Note Purchaser shall net and set-off the
amount of any
outstanding Borrowing Base Deficiency against the amount of the
Advance to be
made on such Funding Date and (ii) on each Settlement Date as of
which any
portion of such Borrowing Base Deficiency shall remain outstanding,
any amount
otherwise payable to the Issuer on such Settlement Date pursuant to
Section
5.7(a)(viii) of the Sale and Servicing Agreement shall instead be
paid to the
Note Purchaser on such Settlement Date as a prepayment of the
Invested Amount
(the "Margin Call").
(b) The Servicer, the Seller and the Issuer shall cooperate
with the Note Purchaser and will execute and deliver, or cause to
be executed
and delivered, all such documents that may be reasonably necessary
to calculate
the Market Value, and will take all such other actions, as Note
Purchaser may
reasonably request from time to time in order to calculate the
Market Value. On
each Tuesday and each Thursday (provided such Tuesday or Thursday
is a Business
Day) of each calendar week during the Term, the Note Purchaser
shall advise the
Servicer of the Market Value, as calculated by the Note Purchaser
in its sole
discretion.
SECTION 3.06
ILLEGALITY; SUBSTITUTED INTEREST RATES.
Notwithstanding any other provisions herein, (a) if any
Requirement of Law or any change therein or in the interpretation
or application
thereof shall make it unlawful for the Note Purchaser to make or
maintain any
Notes at the LIBOR rate as contemplated by this Agreement, or (b)
in the event
that the Note Purchaser shall have determined (which determination
shall be
conclusive and binding upon the Issuer) that by reason of
circumstances
affecting the LIBOR interbank market neither adequate nor
reasonable means exist
for ascertaining the LIBOR rate, or (c) the Note Purchaser shall
have determined
(which determination shall be conclusive and binding on the Issuer)
that the
applicable LIBOR rate will not adequately and fairly reflect the
cost to the
Note Purchaser of maintaining or funding the Notes based on such
applicable
LIBOR rate (provided that the parties hereto acknowledge and agree
that the Note
Purchaser shall only make such determination if the published LIBOR
rate used by
the Note Purchaser does not accurately reflect the actual LIBOR
rate), (x) the
obligation of the Note Purchaser to make or maintain the Notes at
the LIBOR rate
shall forthwith be suspended and the Note Purchaser shall promptly
notify the
Issuer thereof (by telephone confirmed in writing) and (y) each
Note then
outstanding, if any, shall, from and including the date that is
forty-five (45)
days after the Issuer's receipt of notice from the Note Purchaser
of the
occurrence of any condition set forth in clauses (a), (b) or (c),
or at such
earlier date as may be required by law, until payment in full
thereof, bear
interest at the rate per annum equal to the greater of (i) the
Prime Rate and
(ii) the rate of interest (including the Applicable Margin) in
effect on the
date immediately preceding the date any event described in clause
(a), (b) or
(c) occurred (calculated on the basis of the actual number of days
elapsed in a
year of 360 days). If subsequent to such suspension of the
obligation of the
Note Purchaser to make or maintain the Notes at the LIBOR rate it
becomes lawful
for the Note Purchaser to make or maintain the Notes at the LIBOR
rate, or the
circumstances described in clause (b) or (c) above no longer exist,
the Note
Purchaser shall so notify the Issuer and its obligation to do so
shall be
reinstated effective as of the date it becomes lawful for the Note
Purchaser to
make or maintain the Notes at the LIBOR rate or the circumstances
described in
clause (b) or (c) above no longer exist.
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ARTICLE IV
OTHER PAYMENT TERMS
SECTION 4.01 TIME AND METHOD OF PAYMENT. Unless otherwise
specified
herein, all amounts payable to the Note Purchaser hereunder or with
respect to
the Note shall be made by wire transfer of immediately available
funds in
Dollars not later than 5:00 p.m., New York City time, on the due
date therefor.
Any funds received after that time will be deemed to have been
received on the
next Business Day.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The
Issuer
makes the following representations and warranties, on which Note
Purchaser
relies in purchasing the Notes and in making each Advance, and on
which the
Trustee relies in receiving a security interest in the Receivables
and the other
Collateral related thereto under the Indenture. Such
representations are made as
of the date of this Agreement and as of each Funding Date, and
shall survive the
issuance of the Notes, the making of each Advance and the grant of
a security
interest in the Receivables and the other Collateral related
thereto to the
Trustee under the Indenture.
(a) SALE AND SERVICING AGREEMENT. Each of the representations
and warranties of the Purchaser set forth in Section 7.1 of the
Sale and
Servicing Agreement is true and correct.
(b) OTHER OBLIGATIONS. The Issuer is not in default in the
performance, observance or fulfillment of any obligation, covenant
or condition
in any of the Basic Documents to which it is a party or in any
other agreement
or instrument to which it is a party or by which it is bound.
(c) REGULATIONS T, U AND X. No proceeds of any Advance will be
used, directly or indirectly, by the Issuer for the purpose of
purchasing or
carrying any Margin Stock (as defined in Regulation U of the Board
of Governors
of the Federal Reserve System) or for the purpose of reducing or
retiring any
indebtedness that was originally incurred to purchase or carry
Margin Stock or
for any other purpose which might cause any Advance to be a
"purpose credit"
within the meaning of Regulation U. Neither the making of any
Advance hereunder,
nor the use of the proceeds thereof, will violate or otherwise
conflict with the
provisions of Regulations T, U or X of the Board of Governors of
the Federal
Reserve System.
(d) INVESTMENT COMPANY STATUS. The Issuer is not, nor will the
consummation of the transactions contemplated by the Basic
Documents cause the
Issuer to be, an "investment company" or an "affiliated person" of,
or
"promoter" or "principal underwriter" for, an "investment company,"
as such
terms are defined in the Investment Company Act of 1940, as amended
(the
"INVESTMENT COMPANY ACT"), or a company "controlled" by an
investment company
within the meaning of the Investment Company Act. The consummation
of the
transactions contemplated by the Basic Documents will not violate
any provision
of such Act or any rule, regulation or order issued by the
Securities and
Exchange Commission thereunder. The Issuer is not subject to
regulation under
any applicable law (other than Regulation X of the Board of
Governors of the
Federal Reserve System) that limits its ability to incur
Indebtedness.
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<PAGE>
(e) FULL DISCLOSURE. The information, reports, financial
statements, exhibits, schedules, officer's certificates and other
documents
furnished by or on behalf of the Issuer to the Seller, the
Servicer, the Note
Purchaser, the Trustee or the Backup Servicer in connection with
any particular
Advance or the negotiation, preparation, delivery or performance of
this
Agreement, the Notes, the Indenture, the Sale and Servicing
Agreement and the
other Basic Documents or included herein or therein or delivered
pursuant hereto
or thereto, taken as a whole, are true and correct (or, in the case
of
projections, are based on good faith reasonable estimates) on the
date as of
which such information is stated or certified and do not and will
not contain an
untrue statement of a material fact, or omit to state any material
fact
necessary to make the statements herein or therein contained, in
the light of
the circumstances under which they were made, not misleading. All
such financial
statements fairly present the financial condition of the Issuer as
of the date
specified therein (subject to normal year-end audit adjustments)
all in
accordance with GAAP. On such date, the Issuer had no material
contingent
liabilities, liabilities for taxes, or unusual or anticipated
losses from any
unfavorable commitments, except as referred to or reflected in such
financial
statements as of such date. There is no fact known to the Issuer,
after due
inquiry, that would have a Material Adverse Effect and that has not
been
disclosed herein, in the other Basic Documents or in a report,
financial
statement, exhibit, schedule, disclosure letter or other writing
furnished to
the Note Purchaser for use in connection with the transactions
contemplated
hereby or thereby.
(f) COLLATERAL SECURITY.
(i)
The Issuer owns and will own each item that it
pledges as Collateral, free and clear of any and all Liens
(including,
without limitation, any tax liens), other than Liens created in
favor
of the Trustee pursuant to the Indenture. No security
agreement,
financing statement or other public notice similar in effect
with
respect to all or any part of the Collateral is or will be on file
or
of record in any public office or authorized by the Issuer, except
such
as have been or may hereinafter be filed pursuant to the Basic
Documents and except such as shall be terminated as to the
Collateral
no later than concurrently with the pledge of such Collateral to
the
Trustee under the Indenture.
(ii) The Indenture is effective to create, as
collateral security for the Notes, a valid and enforceable Lien on
the
Collateral in favor of the Trustee.
(iii) Upon filing of the financing statement
delivered to the Note Purchaser and the Trustee by the Issuer on
or
prior to the Closing Date with the Secretary of State of the State
of
Delaware (which financing statement is in proper form for filing
in
such jurisdiction and accurately describes the Collateral), the
Lien
created pursuant to the Indenture will constitute a perfected
security
interest in the Collateral in favor of the Trustee, which Lien will
be
prior to all other Liens of all other Persons that may be perfected
by
filing a financing statement under Article 9 of the Uniform
Commercial
Code and which Lien is enforceable as such as against all other
Persons.
(iv) Upon delivery of Contracts evidencing the
Receivables to the Trustee in accordance with Section 2.1(a) of
the
Sale and Servicing Agreement, the Lien created pursuant to the
Indenture will constitute a perfected security interest in such
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Contracts in favor of the Trustee, which Lien will be prior to
all
other Liens of all other Persons that may be perfected by
possession of
such Contracts under Article 9 of the Uniform Commercial Code and
which
Lien is enforceable as such as against all other Persons.
(g) OWNERSHIP OF PROPERTIES. The Issuer has good and
marketable title to any and all of its properties and assets,
subject only to a
Lien under the Indenture.
(h) LEGAL COUNSEL, ETC. The Issuer has consulted with its own
legal counsel and independent accountants to the extent it has
deemed necessary
regarding the tax, accounting and regulatory consequences of the
transactions
contemplated by this Agreement and the other Basic Documents, and
the Issuer is
not participating in such transactions in reliance on any
representations of the
Note Purchaser or its Affiliates, or its counsel, with respect to
tax,
accounting, regulatory or any other matters.
(i) THE INDENTURE. Each of the representations and warranties
of the Issuer contained in the Indenture is true and correct. No
party to any
Basic Document is in default under any of its obligations
thereunder.
(j) ELIGIBLE RECEIVABLES. All of the Receivables included in
the Borrowing Base are Eligible Receivables.
(k) NO FRAUDULENT CONVEYANCE. As of the Closing Date and
immediately after giving effect to each Borrowing, the fair value
of the assets
of the Issuer is greater than the fair value of its liabilities
(including,
without limitation, contingent liabilities of the Issuer), and the
Issuer is and
will be solvent, does and will pay its debts as they mature and
does not and
will not have an unreasonably small capital to engage in the
business in which
it is engaged and proposes to engage. The Issuer does not intend to
incur, or
believe that it has incurred, debts beyond its ability to pay such
debts as they
mature. The Issuer is not in default under any material obligation
to pay money
to any Person. The Issuer is not contemplating the commencement of
insolvency,
bankruptcy, liquidation or consolidation proceedings or the
appointment of a
receiver, liquidator, conservator, trustee or similar official in
respect of the
Issuer or any of its assets. The Issuer is not transferring any
Collateral with
any intent to hinder, delay or defraud any of its creditors. The
Issuer will not
use the proceeds from the transactions contemplated by this
Agreement or any
other Basic Document to give any preference to any creditor or
class of
creditors. The Issuer has given fair consideration and reasonably
equivalent
value in exchange for the sale of the Receivables by CPS under the
Sale and
Servicing Agreement.
(l) NO OTHER BUSINESS. The Issuer engages in no business
activities other than the purchase of the Receivables and the Other
Conveyed
Property, pledging the Receivables and the other Collateral to the
Trustee under
the Indenture, transferring Receivables and the Other Conveyed
Property in
connection with securitizations and in connection with whole-loan
sales, issuing
the Notes and other activities relating to the foregoing to the
extent permitted
by the organizational documents of the Issuer as in effect on the
date hereof,
or as amended with the prior written consent of Note Purchaser.
Without
limitation of the foregoing, the Issuer is not an issuer of
securities other
than the Notes or a borrower under any loan or financing agreement,
facility or
other arrangement other than the facility established pursuant to
this Agreement
and the other Basic Documents.
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(m) NO INDEBTEDNESS. The Issuer has no Indebtedness, other
than Indebtedness incurred under (or contemplated by) the terms of
the Notes,
the Indenture, the Sale and Servicing Agreement and this
Agreement.
(n) ERISA. The Issuer does not maintain any Plans, and the
Issuer agrees to notify the Note Purchaser in advance of forming
any Plans.
Neither the Issuer nor any Affiliate of the Issuer (other than MFN
under the MFN
Financial Corporation Pension Plan and CPS under its defined
contribution
(401(k)) plan) has any obligations or liabilities with respect to
any Plans or
Multiemployer Plans, nor have any such Persons had any obligations
or
liabilities with respect to any such Plans during the five year
period prior to
the date this representation is made or deemed made. The Issuer
will give notice
to the Note Purchaser if at any time it or any Affiliate has any
obligations or
liabilities with respect to any Plan or Multiemployer Plan. All
Plans maintained
by the Issuer or any Affiliate are in substantial compliance with
all applicable
laws (including ERISA). The Issuer is not an employer under any
Multiemployer
Plan.
SECTION 5.02 REPRESENTATIONS AND WARRANTIES OF CPS. CPS makes
the
following representations and warranties, on which the Issuer
relies in
purchasing the Receivables and the Other Conveyed Property related
thereto, and
on which the Note Purchaser relies in purchasing the Notes. Such
representations
and warranties are made as of the date of this Agreement and as of
each Funding
Date, and shall survive the sale by CPS to the Issuer of the
Receivables and the
Other Conveyed Property related thereto under the Sale and
Servicing Agreement,
the issuance of the Notes, the purchase of each Advance and the
grant of a
security interest in the Receivables and the other Collateral
related thereto by
the Issuer to the Trustee under the Indenture.
(a) SALE AND SERVICING AGREEMENT. Each of the representations,
warranties and covenants of the Seller and the Servicer in the Sale
and
Servicing Agreement is true and correct.
(b) INVESTMENT COMPANY STATUS. CPS is not, nor will the
consummation of the transactions contemplated by the Basic
Documents cause CPS
to be, an "investment company" or an "affiliated person" of, or
"promoter" or
"principal underwriter" for, an "investment company," as such terms
are defined
in the Investment Company Act or a company "controlled by" an
investment company
within the meaning of the Investment Company Act. The consummation
of the
transactions contemplated by this Agreement and each other Basic
Document to
which CPS is a party will not violate any provision of such Act or
any rule,
regulation or order issued by the Securities and Exchange
Commission thereunder.
CPS is not subject to regulation under any applicable law (other
than Regulation
X of the Board of Governors of the Federal Reserve System) that
limits its
ability to incur Indebtedness.
(c) NO MATERIAL ADVERSE EFFECT; NO DEFAULT. (i) CPS is not a
party to any indenture, loan or credit agreement or any lease or
other agreement
or instrument or subject to any charter or corporate restriction
that could
have, and no provision of applicable law or governmental regulation
has had or
would have a Material Adverse Effect and (ii) CPS is not in default
under or
with respect to any contract, agreement, lease or other instrument
to which CPS
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is a party and which is material to CPS's condition (financial or
otherwise),
business, operations or properties, and CPS has not delivered or
received any
notice of default thereunder, other than such defaults as have been
waived.
(d) REGULATIONS T, U AND X. No proceeds of any sale hereunder
will be used, directly or indirectly, by CPS for the purpose of
purchasing or
carrying any Margin Stock (as defined in Regulation U of the Board
of Governors
of the Federal Reserve System) or for the purpose of reducing or
retiring any
indebtedness that was originally incurred to purchase or carry
Margin Stock or
for any other purpose which might cause any sale hereunder to be a
"purpose
credit" within the meaning of Regulation U. Neither the making of
any Advance
hereunder, nor the use of the proceeds thereof, will violate or
otherwise
conflict with the provisions of Regulations T, U or X of the Board
of Governors
of the Federal Reserve System.
(e) SECURITY INTEREST. Notwithstanding the intent of the
parties set forth in Section 2.2 of the Sale and Servicing
Agreement, the Sale
and Servicing Agreement is effective to create valid and
enforceable Liens on
the Receivables and the Other Conveyed Property in favor of the
Issuer. Upon
filing of the financing statement delivered to the Note Purchaser
and the
Trustee by CPS on or prior to the Closing Date in each jurisdiction
(including,
without limitation, the State of California) in which required by
applicable law
(which financing statement is in proper form for filing in each
such
jurisdiction and accurately describes the Collateral), the Lien
created pursuant
to the Sale and Servicing Agreement will constitute a first
priority perfected
security interest in the Receivables and the Other Conveyed
Property in favor of
the Purchaser, which Lien will be prior to all other Liens and
which Lien is
enforceable as such as against all Persons.
(f) FULL DISCLOSURE. The information, reports, financial
statements, exhibits, schedules, officer's certificates and other
documents
furnished by or on behalf of CPS, the Servicer, the Seller or any
of their
respective Affiliates to the Issuer, the Purchaser, the Note
Purchaser, the
Trustee or the Backup Servicer in connection with any particular
Advance or the
negotiation, preparation, delivery or performance of this
Agreement, the Notes
and the other Basic Documents or included herein or therein or
delivered
pursuant hereto or thereto, taken as a whole, are true and correct
in every
material respect (or, in the case of projections, are based on good
faith
reasonable estimates) on the date as of which such information is
stated or
certified and do not and will not contain an untrue statement of a
material
fact, or omit to state any material fact necessary to make the
statements herein
or therein contained, in the light of the circumstances under which
they were
made, not misleading. All such financial statements fairly present
the financial
condition of CPS or such Affiliates as of the date specified
therein (subject to
normal year-end audit adjustments) all in accordance with GAAP. On
such date,
neither CPS nor any of its Affiliates had any material contingent
liabilities,
liabilities for taxes, or unusual or anticipated losses from any
unfavorable
commitments, except as referred to or reflected in such financial
statements as
of such date. There is no fact known to CPS or any of its
Affiliates, after due
inquiry, that would have a Material Adverse Effect and that has not
been
disclosed herein, in the other Basic Documents or in a report,
financial
statement, exhibit, schedule, disclosure letter or other writing
furnished to
the Note Purchaser for use in connection with the transactions
contemplated
hereby or thereby.
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(g) ERISA. Neither CPS nor any of its Affiliates maintain any Plans
(other than
C
