<PAGE>
Exhibit 10.1
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT (as amended,
supplemented or otherwise modified from
time to time, this "AGREEMENT") dated as
of June 29, 2005, among PAGE FUNDING LLC, a
Delaware limited liability company
(the "PURCHASER"), CONSUMER PORTFOLIO
SERVICES, INC., a California corporation
(in its capacities as Seller, the "SELLER"
and as Servicer, the "SERVICER,"
respectively), WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking
association (in its capacities as Backup
Servicer, the "BACKUP SERVICER" and as
Trustee, the "TRUSTEE," respectively).
WHEREAS, the Purchaser, the Servicer, the Seller, the Backup
Servicer
and the Trustee entered into that Sale and
Servicing Agreement dated as of June
30, 2004 (the "ORIGINAL SALE AND SERVICING
AGREEMENT"), pursuant to which the
Purchaser purchased, from time to time,
receivables arising in connection with
motor vehicle retail installment sale
contracts acquired by the Seller from
motor vehicle dealers and independent
finance companies; and
WHEREAS, the Purchaser, the Servicer, the Seller, the Backup
Servicer,
the Trustee and the Noteholder desire to
amend and restate the Original Sale and
Servicing Agreement as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties
hereto agree as follows:
ARTICLE I
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DEFINITIONS
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SECTION 1.1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined
in
this Agreement, shall have the meanings set
forth in Annex A attached hereto.
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto
unless
otherwise defined therein.
(b) Accounting terms used but not defined or partly defined in
this Agreement, in any instrument governed hereby or in any
certificate
or other document made or delivered pursuant hereto, to the extent
not
defined, shall have the respective meanings given to them under
U.S.
generally accepted accounting principles as in effect on the date
of
this Agreement or any such instrument, certificate or other
document,
as applicable. To the extent that the definitions of accounting
terms
in this Agreement or in any such instrument, certificate or
other
document
are inconsistent with the meanings of such terms under U.S.
generally accepted accounting principles, the definitions contained
in
this Agreement or in any such instrument, certificate or other
document
shall control.
(c) The words "HEREOF," "HEREIN," "HEREUNDER" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of
this
Agreement.
(d) Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or
to
this Agreement unless otherwise specified; and the term
"INCLUDING"
shall mean "INCLUDING WITHOUT LIMITATION."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to
the
masculine as well as to the feminine and neuter genders of such
terms.
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(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in
connection
herewith means such agreement, instrument or statute as the same
may
from time to time be amended, modified or supplemented and includes
(in
the case of agreements or instruments) references to all
attachments
and instruments associated therewith; all references to a
Person
include its permitted successors and assigns.
SECTION 1.3. CALCULATIONS.
Other than as expressly set forth herein or in any of the other
Basic
Documents, all calculations of the amount
of the Servicing Fee, Backup Servicing
Fee and the Trustee Fee shall be made on
the basis of a 360-day year consisting
of twelve 30-day months. All calculations
of the Unused Facility Fee and the
Noteholder's Monthly Interest Distributable
Amount shall be made on the basis of
the actual number of days in the Accrual
Period and 360 days in the calendar
year. All references to the Principal
Balance of a Receivable as of the last day
of an Accrual Period shall refer to the
close of business on such day.
SECTION 1.4. MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this Agreement whether
a
breach of a representation, warranty or
covenant has or could have a material
adverse effect on a Receivable or the
interest therein of the Purchaser and the
Noteholder (or any similar or analogous
determination), such determination shall
be made by the Noteholder in its sole and
reasonable discretion.
ARTICLE II
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CONVEYANCE OF RECEIVABLES
-------------------------
SECTION 2.1. CONVEYANCE OF RECEIVABLES.
(a) In consideration of the Purchaser's delivery to or upon
the order of the Seller on any Funding Date of the Purchase
Price
therefor, the Seller does hereby sell, transfer, assign, set over
and
otherwise convey to the Purchaser, without recourse (subject to
the
obligations set forth herein) all right, title and interest of
the
Seller, whether now existing or hereafter arising, in, to and
under:
(i) the Receivables listed in the Schedule of
Receivables from time to time;
(ii) all monies received under the Receivables on and
after the related Cutoff Date and all Net Liquidation Proceeds
received with respect to the Receivables after the related
Cutoff Date;
(iii) the security interests in the Financed Vehicles
granted by Obligors pursuant to the related Contracts and any
other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title or,
with respect to such Receivables that finance a vehicle in the
States listed in Annex B, other evidence of title issued by
the applicable Department of Motor Vehicles or similar
authority in such States, with respect to such Financed
Vehicles;
(iv) any proceeds from claims on any Receivables
Insurance Policies or certificates relating to the Financed
Vehicles securing the Receivables or the Obligors thereunder;
(v) all proceeds from recourse against Dealers with
respect to the Receivables;
(vi) refunds for the costs of extended service
contracts with respect to Financed Vehicles securing the
Receivables, refunds of unearned premiums with respect to
credit life and credit accident and health insurance policies
or certificates covering an Obligor or Financed Vehicle under
a Receivable or his or her obligations with respect to a
Financed Vehicle and any recourse to Dealers for any of the
foregoing;
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(vii) the Receivable File related to each Receivable
and all other documents that the Seller keeps on file in
accordance with its customary procedures relating to the
Receivables for Obligors of the Financed Vehicles;
(viii) all amounts and property from time to time
held in or credited to the Collection Account or the Lockbox
Accounts;
(ix) all property (including the right to receive
future Net Liquidation Proceeds) that secures a Receivable
that has been acquired by or on behalf of the Purchaser
pursuant to a liquidation of such Receivable;
(x) each TFC/MFN Assignment; and
(xi) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind
and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion, voluntary
or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of
any and every kind and other forms of obligations and
receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of
any of the foregoing.
(b) The Seller shall transfer to the Purchaser the Receivables
and the other property and rights related thereto described in
PARAGRAPH (a) above only upon the satisfaction of each of the
conditions set forth below on or prior to the related Funding Date.
In
addition to constituting conditions precedent to any purchase
hereunder
and under each Assignment, the following shall also be
conditions
precedent to any Advance on any Funding Date under the terms of
the
Note Purchase Agreement:
(i) the Seller shall have provided the Purchaser,
Trustee and the Noteholder with an Addition Notice
substantially in the form of EXHIBIT G hereto (which shall
include supplements to the Schedule of Receivables) not later
than three Business Days prior to such Funding Date and shall
have provided any information reasonably requested by any of
the foregoing with respect to the Related Receivables;
(ii) the Seller shall, to the extent required by
SECTION 4.2 of this Agreement, have deposited in the
Collection Account all collections received after the Cutoff
Date in respect of the Related Receivables to be purchased on
such Funding Date;
(iii) as of each Funding Date, (A) the Seller shall
not be insolvent and shall not become insolvent as a result of
the transfer of Related Receivables on such Funding Date, (B)
the Seller shall not intend to incur or believe that it shall
incur debts that would be beyond its ability to pay as such
debts mature, (C) such transfer shall not have been made with
actual intent to hinder, delay or defraud any Person and (D)
the assets of the Seller shall not constitute unreasonably
small capital to carry out its business as then conducted;
(iv) the Facility Termination Date shall not have
occurred;
(v) the Servicer shall have established one or more
Lockbox Accounts acceptable to the Noteholder;
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(vi) each of the representations and warranties made
by the Seller pursuant to SECTION 3.1 and the other Basic
Documents with respect to the Related Receivables to be
purchased on such Funding Date shall be true and correct as of
the related Funding Date and the Seller shall have performed
all obligations to be performed by it hereunder or in any
Assignment on or prior to such Funding Date;
(vii) the Seller shall, at its own expense, on or
prior to the Funding Date, indicate in its computer files that
the Related Receivables to be purchased on such Funding Date
have been sold to the Purchaser pursuant to this Agreement or
an Assignment, as applicable;
(viii) the Seller shall have taken any action
required to maintain (i) the first priority perfected
ownership interest of the Purchaser in the Related Receivables
and Other Conveyed Property and (ii) the first priority
perfected security interest of the Trustee in the Collateral;
(ix) no selection procedures adverse to the interests
of the Noteholder shall have been utilized in selecting the
Related Receivables to be sold on such Funding Date;
(x) the addition of any such Related Receivables to
be purchased on such Funding Date shall not result in a
material adverse tax consequence to the Noteholder or the
Purchaser;
(xi) the Seller shall have delivered to the
Noteholder and the Trustee an Officers' Certificate confirming
the
satisfaction of each condition precedent specified in this
PARAGRAPH (B);
(xii) no Funding Termination Event, Servicer
Termination Event, or any event that, with the giving of
notice or the passage of time, would constitute a Funding
Termination Event or Servicer Termination Event, shall have
occurred and be continuing;
(xiii) the Trustee shall have confirmed receipt of
the related Receivable File for each Related Receivable
included in the Borrowing Base calculation and shall have
delivered a copy to the Noteholder of a Trust Receipt with
respect to the Receivable Files related to the Related
Receivables to be purchased on such Funding Date;
(xiv) the Seller shall have filed or caused to be
filed all necessary UCC-l financing statements (or amendments
thereto) necessary to maintain (in each case assuming for
purposes of this clause (xiv) that such perfection may be
achieved by making the appropriate filings), or taken any
other steps necessary to maintain, (1) the first, priority,
perfected ownership interest of Purchaser and (2) the first
priority, perfected security interest of the Trustee, with
respect to the Related Receivables and Other Conveyed Property
and the Collateral, respectively to be transferred on such
Funding Date;
(xv) the Seller shall have executed and delivered an
Assignment in the form of EXHIBIT F; and
(xvi) each of the conditions precedent to such
Advance set forth in the Indenture and the Note Purchase
Agreement shall have been satisfied.
Unless waived by the Noteholder in writing, the Seller covenants
that
in the event any of the foregoing
conditions precedent are not satisfied with
respect to any Related Receivable on the
date required as specified above, the
Seller will immediately repurchase such
Related Receivable from the Purchaser,
at a price equal to the Purchase Amount
thereof, in the manner specified in
SECTION 3.2 and SECTION 4.7. Except with
respect to ITEM (xiii) above, the
Trustee may rely on the accuracy of the
Officers' Certificate delivered pursuant
to ITEM (xi) above without independent
inquiry or verification.
(c) PAYMENT OF PURCHASE PRICE. In consideration for the sale
of the Related Receivables and Other Conveyed Property described
in
SECTION 2.1(a) or the related Assignment, the Purchaser shall, on
each
Funding Date on which Related Receivables are transferred
hereunder,
pay to or upon the order of the Seller the applicable Purchase
Price in
the following manner: (i) cash in an amount equal to the amount of
the
Advance received by the Purchaser under the Note on such Funding
Date
<PAGE>
and (ii) to the extent the Purchase Price for the related
Receivables
and Other Conveyed Property exceeds the amount of cash described
in
(i), such excess shall be treated as a capital contribution by
the
Seller to the Purchaser. On any Funding Date on which funds are
on
deposit in the Principal Funding Account, the Purchaser may direct
the
Trustee to withdraw therefrom an amount equal to the lesser of (i)
the
Purchase Price to be paid to the Seller for Related Receivables
and
Other Conveyed Property to be conveyed to the Purchaser and pledged
to
the Trustee on such Funding Date (or a portion thereof) and (ii)
the
amount on deposit in the Principal Funding Account, and, subject to
the
satisfaction of the conditions set forth in SECTION 2.1(B) after
giving
effect to
such withdrawal, pay such amount to or upon the order of the
Seller in consideration for the sale of the Related Receivables
and
Other Conveyed Property on such Funding Date.
SECTION 2.2. TRANSFERS INTENDED AS SALES.
It is the intention of the Seller that each transfer and
assignment
contemplated by this Agreement and each
Assignment shall constitute a sale of
the Related Receivables and Other Conveyed
Property from the Seller to the
Purchaser free and clear of all liens and
rights of others and it is intended
that the beneficial interest in and title
to the Related Receivables and Other
Conveyed Property shall not be part of the
Seller's estate in the event of the
filing of a bankruptcy petition by or
against the Seller under any bankruptcy
law. In the event that, notwithstanding the
intent of the Seller, the transfer
and assignment contemplated hereby or by
any Assignment is held not to be a
sale, this Agreement and each Assignment
shall constitute a grant of a security
interest in the property referred to in
SECTION 2.1 and each Assignment to the
Purchaser which security interest has been
assigned to the Trustee, acting on
behalf of the Noteholder.
SECTION 2.3. FURTHER ENCUMBRANCE OF RECEIVABLES AND OTHER
CONVEYED
PROPERTY.
(a) Immediately upon the conveyance to the Purchaser by the
Seller of the Related Receivables and any item of the related
Other
Conveyed Property pursuant to SECTION 2.1 and the related
Assignment,
all right, title and interest of the Seller in and to such
Related
Receivables and Other Conveyed Property shall terminate, and all
such
right, title and interest shall vest in the Purchaser.
(b) Immediately upon the vesting of any Related Receivables
and the related Other Conveyed Property in the Purchaser, the
Purchaser
shall have the sole right to pledge or otherwise encumber such
Related
Receivables and the related Other Conveyed Property. Pursuant to
the
Indenture, the Purchaser shall grant a security interest in the
Collateral to secure the repayment of the Note.
(c) The Trustee shall, at such time as (i) the Facility
Termination Date has occurred, (ii) there is no Note outstanding
and
(iii) all sums due to the Trustee pursuant to the Basic Documents
have
been paid, release any remaining portion of the Receivables and
the
Other Conveyed Property to the Purchaser.
ARTICLE III
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THE RECEIVABLES
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SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER.
(a) The Seller makes the following representations and
warranties as to the Receivables to the Purchaser and to the
Trustee
for the benefit of the Noteholder on which the Purchaser relies
in
acquiring the Receivables and on which the Noteholder has relied
in
purchasing the Note and will rely in paying the Advance Amount to
the
Purchaser. Such representations and warranties speak as of the
Closing
Date and as of each Funding Date; PROVIDED that to the extent
such
representations and warranties relate to the Related
Receivables
conveyed on any Funding Date, such representations and warranties
shall
speak as of the related Funding Date, but shall survive the
sale,
transfer and assignment of such Related Receivables to the
Purchaser
and the pledge thereof by the Purchaser to the Trustee pursuant to
the
Indenture.
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(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable
(1) has been originated in the United States of America by a
Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and without any
fraud or misrepresentation on the part of the Dealer, such
Dealer had all necessary licenses and permits to originate
such Receivables in the state where such Dealer was located,
has been fully and properly executed by the parties thereto,
has been purchased by the Seller, MFN or TFC directly from the
Dealer in connection with the sale of Financed Vehicles by the
Dealers and has been validly assigned by such Dealer to the
Seller, MFN or TFC in accordance with its terms, (2) has
created a valid, subsisting, and enforceable first priority
perfected security interest in favor of the Seller in the
Financed Vehicle, which security interest has been validly
assigned by the Seller to the Purchaser and by the Purchaser
to the Trustee, (3) contains customary and enforceable
provisions
such that the rights and remedies of the holder or
assignee thereof shall be adequate for realization against the
collateral of the benefits of the security including without
limitation a right of repossession following a default, (4)
provides for level weekly, bi-weekly, semi-monthly or monthly
payments that fully amortize the Amount Financed over the
original term (except for the last payment, which may be
different from the level payment but in no event shall exceed
three times such level payment) and yields interest at the
Annual Percentage Rate, (5) if such Receivable is a Rule of
78's Receivable, provides for, in the event that such contract
is prepaid, a prepayment that fully pays the Principal Balance
and includes a full month's interest, in the month of
prepayment, at the Annual Percentage Rate, (6) is a Rule of
78's Receivable or a Simple Interest Receivable, (7) was
originated by a Dealer to an Obligor and was sold by the
Dealer to the Seller, MFN or TFC without any fraud or
misrepresentation on the part of such Dealer or the Obligor,
(8) is denominated in U.S. dollars and (9) contains no future
funding obligation.
(ii) ADDITIONAL RECEIVABLES CHARACTERISTICS. As of
the related Funding Date, as applicable:
(A) each Related Receivable that is a CPS
Receivable has (1) an original term of 24 to 72
months; (2) an original Amount Financed of at least
$3,000 and not more than $35,000; and (3) had an APR
of at least 8% and not more than 30% (subject to
applicable laws);
(B) each Related Receivable that is a TFC
Receivable or Clean-up Call Receivable has (1) an
original term of 9 to 60 months; (2) an original
Amount Financed of at least $1,000 and not more than
$25,000; (3) had an APR of at least 9.90% and not
more than 30% (subject to applicable laws); (4) when
originated had an Obligor that was a member of the
U.S. armed forces; and (5) no Obligor that has been
the subject of a 341 Hearing.
(C) each Related Receivable is not more than
30 days past due with respect to more than 10% of any
Scheduled Receivable Payment as of the related Cutoff
Date and no funds have been advanced by the Seller,
any Dealer or anyone acting on their behalf in order
to cause any Related Receivable to satisfy such
requirement;
(D) no Related Receivable (other than the
Clean-up Call Receivables) has been extended beyond
its original term, except in accordance with the
applicable Contract Purchase Guidelines regarding
deferments or extensions; and
(E) each Related Receivable (other than the
Clean-up Call Receivables) satisfies in all material
respects the applicable Contract Purchase Guidelines
as in effect on the Closing Date or as otherwise
amended from time to time (other than the Clean-up
Call Receivables); provided, that such amendments do
not have a material adverse effect on the Noteholder.
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(iii) SCHEDULE OF RECEIVABLES. The information with
respect to the Related Receivables set forth in Schedule A to
the related Assignment is true and correct in all material
respects as of the close of business on the related Cutoff
Date, and no selection procedures adverse to the Noteholder
have been utilized in selecting the Related Receivables to be
sold hereunder.
(iv) COMPLIANCE WITH LAW. Each Related Receivable,
the sale of the Financed Vehicle and the sale of any physical
damage, credit life and credit accident and health insurance
and any extended warranties or service contracts complied at
the time the Related Receivable was originated or made and at
the execution of the applicable Assignment complies in all
material respects with all requirements of applicable Federal,
State, and local laws, including, without limitation, Consumer
Laws, and regulations thereunder.
(v) NO GOVERNMENT OBLIGOR. None of the Related
Receivables are due from the United States of America or any
State or from any agency, department, or instrumentality of
the United States of America or any State.
(vi) SECURITY INTEREST IN FINANCED VEHICLE.
Immediately subsequent to the sale, assignment and transfer
thereof to the Purchaser, each Related Receivable shall be
secured by a validly perfected first priority security
interest in the Financed Vehicle in favor of the Seller as
secured party which has been validly assigned to the
Purchaser, and such assigned security interest is prior to all
other liens upon and security interests in such Financed
Vehicle which now exist or may hereafter arise or be created
(except, as to priority, for any tax liens or mechanics' liens
which may arise after the related Funding Date as a result of
an Obligor's failure to pay its obligations, as applicable).
(vii) RECEIVABLES IN FORCE. No Related Receivable has
been satisfied, subordinated or rescinded, nor has any related
Financed Vehicle been released from the lien granted by the
related Receivable in whole or in part.
(viii) NO WAIVER. Except as permitted under SECTION
4.2 and CLAUSE (IX) below, no provision of a Related
Receivable has been waived, altered or modified in any respect
since its origination. No Related Receivable has been modified
as a result of application of the Servicemembers Civil Relief
Act, as amended.
(ix) NO AMENDMENTS. Except as permitted under SECTION
4.2, no Related Receivable has been amended, modified, waived
or refinanced (other than the Clean-up Call Receivables)
except as such Related Receivable may have been amended to
grant extensions which shall not have numbered more than (a)
one extension of one calendar month in any calendar year or
(b) three such extensions in the aggregate and in accordance
with the applicable Contract Purchase Guidelines.
(x) NO DEFENSES. No right of rescission, setoff,
counterclaim or defense exists or has been asserted or
threatened with respect to any Related Receivable. The
operation of the terms of any Related Receivable or the
exercise of any right thereunder will not render such Related
Receivable unenforceable in whole or in part and such
Receivable is not subject to any such right of rescission,
setoff, counterclaim, or defense.
(xi) NO LIENS. As of the related Cutoff Date, (a)
there are no liens or claims existing or which have been filed
for work, labor, storage or materials relating to a Financed
Vehicle financed under a Related Receivable that shall be
liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by the Related
Receivable and (b) there is no lien against the Financed
Vehicle financed under a Related Receivable for delinquent
taxes.
(xii) NO DEFAULT; REPOSSESSION. Except for payment
delinquencies continuing for a period of not more than 30 days
as of the related Cutoff Date, no default, breach, violation
or event permitting acceleration under the terms of any
Related Receivable has occurred; and no continuing condition
that with notice or the lapse of time would constitute a
default, breach, violation or event permitting acceleration
<PAGE>
under the terms of any Related Receivable has arisen; and none
of the Seller, Mercury, TFCRC IV, TFCRC VI, MFN or TFC shall
waive or has waived any of the foregoing (except in a manner
consistent with SECTION 4.2) and no Financed Vehicle financed
under a Related Receivable shall have been repossessed.
(xiii) INSURANCE; OTHER. (A) Each Obligor under the
Related Receivables has obtained an insurance policy covering
the Financed Vehicle as of the execution of such Receivable
insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage, and either the Seller,
MFN or TFC, as applicable, and its respective successors and
assigns are named as loss payee or an additional insured of
such insurance policy, such insurance policy is in an amount
at least equal to the lesser of (i) the Financed Vehicle's
actual cash value or (ii) the remaining Principal Balance of
the Related Receivable, and each Related Receivable requires
the Obligor to obtain and maintain such insurance naming the
Seller, MFN or TFC, as applicable, and its respective
successors and assigns as loss payee or an additional insured,
(B) each Related Receivable that finances the cost of premiums
for credit life and credit accident and health insurance is
covered by an insurance policy or certificate of insurance
naming the Seller, MFN or TFC, as applicable, as policyholder
(creditor) under each such insurance policy and certificate of
insurance and (C) as to each Related Receivable that finances
the cost of an extended service contract, the respective
Financed Vehicle which secures the Related Receivable is
covered by an extended service contract. As of the related
Cutoff Date, no Financed Vehicle is or had previously been
insured under a policy of forced-placed insurance.
(xiv) TITLE. It is the intention of the Seller that
each transfer and assignment herein contemplated constitutes a
sale of the Related Receivables and the related Other Conveyed
Property from the Seller to the Purchaser and that the
beneficial interest in and title to such Related Receivables
and related Other Conveyed Property not be part of the
Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. No
Related Receivable or related Other Conveyed Property has been
sold, transferred, assigned, or pledged by the Seller to any
Person other than the Purchaser and by the Purchaser to any
Person other than the Trustee. Immediately prior to each
transfer and assignment herein contemplated, the Seller had
good and marketable title to each Related Receivable and
related Other Conveyed Property and was the sole owner
thereof, free and clear of all liens, claims, encumbrances,
security interests, and rights of others, and, immediately
upon the transfer thereof to the Purchaser and the concurrent
pledge to the Trustee under the Indenture, the Trustee for the
benefit of the Noteholder shall have a valid and enforceable
security interest in the Collateral, free and clear of all
liens, encumbrances, security interests, and rights of others,
and such transfer has been perfected under the UCC. No Dealer
has a participation in, or other right to receive, proceeds of
any Receivable.
(xv) LAWFUL ASSIGNMENT. No Related Receivable has
been originated in, or is subject to the laws of, any
jurisdiction under which the sale, transfer, and assignment of
such Related Receivable under this Agreement or pursuant to
transfers of the Note shall be unlawful, void, or voidable.
None of the Seller, MFN, Mercury, TFC, TFCRC IV or TFCRC VI
has entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any
portion of the Related Receivables.
(xvi) ALL FILINGS MADE. All filings (including,
without limitation, UCC filings or other actions) necessary in
any jurisdiction to give: (a) the Purchaser a first priority
perfected ownership interest in the Receivables and the Other
Conveyed Property, including, without limitation, the proceeds
of the Receivables (to the extent that the Purchaser can
obtain such first priority perfected security interest
pursuant to one or more filings) and (b) the Trustee, for the
benefit of the Noteholder, a first priority perfected security
interest in the Collateral have been made, taken or performed.
(xvii) RECEIVABLE FILE; ONE ORIGINAL. The Seller has
delivered
to the Trustee, at the location specified in
SCHEDULE B hereto, a complete Receivable File with respect to
each Related Receivable, and the Trustee has delivered to the
Purchaser and the Noteholder a copy of the Trust Receipt
therefor. There is only one original executed copy of each
Receivable.
<PAGE>
(xviii) CHATTEL PAPER. Each Related Receivable
constitutes "TANGIBLE CHATTEL PAPER" under the UCC.
(xix) TITLE DOCUMENTS. (A) If the Related Receivable
was originated in a State in which notation of a security
interest on the title document of the related Financed Vehicle
is required or permitted to perfect such security interest,
the title document of the related Financed Vehicle for such
Related Receivable shows, or if a new or replacement title
document is being applied for with respect to such Financed
Vehicle the title document (or, with respect to Related
Receivables that finance a vehicle in the States listed in
Annex B, other evidence of title issued by the applicable
Department of Motor Vehicles or similar authority in such
States) will be received within 180 days and will show, the
Seller (or, in the case of a TFC Receivable, TFC, and, in the
case of a Clean-up Call Receivable, MFN or TFC) named as the
original secured party under the Related Receivable as the
holder of a first priority security interest in such Financed
Vehicle, and (B) if the Related Receivable was originated in a
State in which the filing of a financing statement under the
UCC is required to perfect a security interest in motor
vehicles, such
filings or recordings have been duly made and
show the Seller (or, in the case of a TFC Receivable, TFC,
and, in the case of a Clean-up Call Receivable, MFN or TFC)
named as the original secured party under the Related
Receivable, and in either case, the Trustee has the same
rights as such secured party has or would have (if such
secured party were still the owner of the Receivable) against
all parties claiming an interest in such Financed Vehicle.
With respect to each Related Receivable for which the title
document has not yet been returned from the Registrar of
Titles, the Seller has received written evidence from the
related Dealer that such title document showing the Seller
(or, in the case of a TFC Receivable, TFC, and, in the case of
a Clean-up Call Receivable, MFN or TFC) as first lienholder
has been applied for.
(xx) VALID AND BINDING OBLIGATION OF OBLIGOR. Each
Related Receivable is the legal, valid and binding obligation
in writing of the Obligor thereunder and is enforceable in
accordance with its terms, except only as such enforcement may
be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally, and all
parties to such contract had full legal capacity to execute
and deliver such contract and all other documents related
thereto and to grant the security interest purported to be
granted thereby. Each Related Receivable is not subject to any
right of set-off by the Obligor.
(xxi) CHARACTERISTICS OF OBLIGORS. As of the date of
each Obligor's application for the loan from which each
Related Receivable that is a CPS Receivable arises, such
Obligor (a) did not have any material past due credit
obligations or any personal or real property repossessed or
wages garnished within one year prior to the date of such
application, unless such amounts have been repaid or
discharged through bankruptcy, (b) was not the subject of any
Federal, State or
other bankruptcy, insolvency or similar
proceeding pending on the date of application that has not
completed a 341 Hearing, (c) had not been the subject of more
than one Federal, State or other bankruptcy, insolvency or
similar proceeding, (d) was domiciled in the United States and
(e) was not self-employed.
(xxii) POST-OFFICE BOX. On or prior to the next
billing period after
the related Cutoff Date, the Servicer
will notify each Obligor to make payments with respect to its
respective Related Receivables after the related Cutoff Date
directly to the Post-Office Box, and will provide each Obligor
with a monthly statement in order to enable such Obligor to
make payments directly to the Post-Office Box.
(xxiii) CASUALTY. No Financed Vehicle financed under
a Related Receivable has suffered a Casualty.
<PAGE>
(xxiv) NO AGREEMENT TO LEND. The Obligor with respect
to each Related Receivable does not have any option under the
Receivable to borrow from any person any funds secured by the
Financed Vehicle.
(xxv) OBLIGATION TO DEALERS OR OTHERS. The Purchaser
and its assignees will assume no obligation to Dealers or
other originators or holders of the Related Receivables
(including, but not limited to under dealer reserves) as a
result of its purchase of the Related Receivables.
(xxvi) NO IMPAIRMENT. Neither Seller nor the
Purchaser has done anything to convey any right to any Person
that would result in such Person having a right to payments
due under any Related Receivables or otherwise to impair the
rights of the Purchaser, the Trustee or the Noteholder in any
Related Receivable or the proceeds thereof.
(xxvii) RECEIVABLES NOT ASSUMABLE. No Related
Receivable is
assumable by another Person in a manner which
would release the Obligor thereof from such Obligor's
obligations to the Purchaser or Seller with respect to such
Related Receivable.
(xxviii) SERVICING. The servicing of each Related
Receivable and the collection practices relating thereto have
been lawful and in accordance with the standards set forth in
this Agreement; and other than Seller, TFC and the Back-up
Servicer pursuant to the Basic Documents, no other person has
the right to service the Receivable.
(xxix) CREATION OF SECURITY INTEREST. This Agreement
creates a valid and continuing security interest (as defined
in the UCC) in the Receivables and the Other Conveyed Property
in favor of the Purchaser, which security interest is prior to
all other Liens and is enforceable as such as against
creditors of and purchasers from the Seller.
(xxx) PERFECTION OF SECURITY INTEREST IN THE
RECEIVABLES AND OTHER CONVEYED PROPERTY. The Seller has caused
the filing of all appropriate financing statements in the
proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the security interest in
the Receivables and the Other Conveyed Property granted to the
Purchaser hereunder pursuant to SECTION 2.1 and the related
Assignment.
(xxxi) NO OTHER SECURITY INTERESTS. Other than the
security interest granted to the Purchaser pursuant to SECTION
2.1 and the related Assignment, the Seller has not pledged,
assigned, sold, granted a security interest in, or otherwise
conveyed any of the Receivables or the Other Conveyed
Property, other than such security interests as are released
at or before the conveyance thereof. The Seller has not
authorized the filing of and is not aware of any financing
statements filed against the Seller that include a description
of collateral covering any portion of the Receivables and the
Other Conveyed Property other than any financing statement
relating to the security interest granted to the Purchaser
hereunder or that has been terminated or released as to the
Receivables and the Other Conveyed Property. The Seller is not
aware of any judgment or tax lien filings against the Seller.
(xxxii) NOTATIONS ON CONTRACTS; FINANCING STATEMENT
DISCLOSURE. The Servicer has in its possession copies of all
Contracts that constitute or evidence the Receivables. The
Contracts that constitute or evidence the Receivables do not
have any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other
than the Purchaser and/or the Trustee for the benefit of the
Noteholder. All financing statements filed or to be filed
against the Seller in favor of the Purchaser in connection
herewith describing the Receivables and the Other Conveyed
Property contain a statement to the following effect: "A
purchase of or security interest in any collateral described
in this financing statement will violate the rights of the
secured party."
<PAGE>
(xxxiii) RECORDS. On or prior to each Funding Date,
the Seller will have caused its records (including electronic
ledgers) relating to each Related Receivable to be conveyed by
it on such Funding Date to be clearly and unambiguously marked
to reflect that such Related Receivable was conveyed by it to
the Purchaser.
(xxxiv) COMPUTER INFORMATION. The computer diskette,
computer tape or other electronic transmission made available
by the Seller to the Purchaser on each Funding Date is, as of
the related Cutoff Date, complete and accurate and includes a
description of the same Receivables described in SCHEDULE A to
the related Assignment.
(xxxv) REMAINING PRINCIPAL BALANCE. As of the related
Cutoff Date, each Related Receivable has a remaining Principal
Balance of at least $3,000 and the Principal Balance of each
Receivable set forth in Schedule A to the related Assignment
is true and accurate in all respects.
SECTION 3.2. REPURCHASE UPON BREACH.
(a) The Seller, the Servicer, the Noteholder or the Trustee,
as the case may be, shall inform the other parties to this
Agreement
promptly, in writing, upon the discovery of any breach of the
Seller's
representations and warranties made pursuant to SECTION 3.1
(without
regard to any limitations therein as to the Seller's knowledge).
Unless
the breach shall have been cured by the last day of the next
Accrual
Period following the discovery thereof by the Trustee or receipt by
the
Trustee of notice from the Seller or the Servicer of such breach,
the
Seller shall repurchase any Receivable if the value of such
Receivable
is materially and adversely affected by the breach as of the last
day
of such next Accrual Period (or, at the Seller's option, the last
day
of the first Accrual Period following the discovery). In
consideration
of the purchase of any Receivable, the Seller shall remit the
Purchase
Amount, in the manner specified in SECTION 5.6. The sole remedy of
the
Purchaser, the Trustee or the Noteholder with respect to a breach
of
representations and warranties pursuant to SECTION 3.1 shall be
to
enforce the Seller's obligation to purchase such Receivables;
PROVIDED,
HOWEVER, that the Seller shall indemnify the Trustee, the
Backup
Servicer, the Purchaser and the Noteholder against all costs,
expenses,
losses, damages, claims and liabilities, including reasonable fees
and
expenses of counsel, which may be asserted against or incurred by
any
of them as a result of third party claims arising out of the events
or
facts giving rise to such breach. Upon receipt of the Purchase
Amount
in respect of any Defective Receivables and written instructions
from
the Servicer, the Trustee shall release to the Seller or its
designee
the related Receivables File and shall execute and deliver all
reasonable instruments of transfer or assignment, without recourse,
as
are prepared by the Seller and delivered to the Trustee and
necessary
to vest in the Seller or such designee title to such Defective
Receivables.
(b) If the Insolvency Event related to a 341 Hearing has not
been discharged by the bankruptcy court or other similar court
presiding over such Insolvency Event within 90 days of the
conveyance
of the related Receivable by the Seller to the Purchaser pursuant
to
SECTION 2.1(a), the Seller shall repurchase such Receivable as of
the
last day of such next Accrual Period.
SECTION 3.3. CUSTODY OF RECEIVABLES FILES.
(a) In connection with each sale, transfer and assignment of
Receivables and related Other Conveyed Property to the
Purchaser
pursuant to this Agreement and each Assignment, and each pledge
thereof
by the Purchaser to the Trustee pursuant to the Indenture, the
Trustee
shall act as custodian of the following documents or instruments in
its
possession which shall be delivered to the Trustee on or before
the
Closing Date or the related Funding Date in accordance with SECTION
3.4
(with respect to each Receivable):
<PAGE>
(i) The fully executed original of the Receivable
(together with any agreements modifying or assigning the
Receivable, including without limitation any extension
agreements); and
(ii) The original certificate of title in the name of
the Obligor with a notation on such certificate of title
evidencing the Seller's, MFN's or TFC's security interest
therein, or such documents that the Seller shall keep on file,
in accordance with its customary procedures, evidencing the
security interest of the Seller, MFN or TFC, respectively, in
the Financed Vehicle or, if not yet received, a copy of the
application therefor showing the Seller or TFC, as applicable,
as secured party, or a dealer guarantee of title.
(b) Upon payment in full of any Receivable, the Servicer will
notify the Trustee pursuant to a certificate of a Servicing Officer
in
the form of EXHIBIT C and shall request delivery of the Receivable
and
Receivable File to the Servicer.
SECTION 3.4. ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE.
In connection with any Funding Date, the Seller shall cause to
be
delivered to the Trustee the Receivable
Files for the Related Receivables to be
purchased not less than four Business Days
prior to the related Funding Date.
The Trustee declares that it will hold and
will continue to hold such files and
any amendments, replacements or supplements
thereto and all Other Conveyed
Property as Trustee, custodian, agent and
bailee in trust for the use and
benefit of the Noteholder. The Trustee
shall within three Business Days after
receipt of such files, execute and deliver
to the Noteholder, a receipt
substantially in the form of EXHIBIT B
hereto (a "TRUST RECEIPT") for the
Receivable Files received by the Trustee.
By its delivery of a Trust Receipt,
the Trustee shall be deemed to have (a)
acknowledged receipt of the files (or
the Receivables) which the Seller has
represented are and contain the Receivable
Files for the Related Receivables purchased
by the Purchaser on the related
Funding Date, (b) reviewed such files or
Receivables and (c) determined that it
has received the items referred to in
SECTION 3.3(A)(I) and (II) for each
Related Receivable identified in SCHEDULE A
to the related Assignment. If in its
examination of the files delivered to it by
the Seller pursuant to this SECTION
3.4, the Trustee finds that a file for a
Receivable has not been received, or
that a file is unrelated to the Receivables
identified in SCHEDULE A to the
related Assignment or that any of the
documents referred to in SECTION 3.3(A)(I)
or (II) are not contained in a Receivable
File, the Trustee shall inform the
Purchaser, the Seller and the Noteholder
pursuant to an exception report
attached to the Trust Receipt as SCHEDULE I
of the failure to receive a file
with respect to such Receivable (or the
failure of any of the aforementioned
documents to be included in the Receivable
File) or shall return to the
Purchaser, as the Seller's designee any
file unrelated to a Receivable
identified in SCHEDULE A to the related
Assignment (it being understood that the
Trustee's obligation to review the contents
of any Receivable File shall be
limited as set forth in the preceding
sentence). Unless such defect with respect
to such Receivable File shall have been
cured by the last day of the next
Accrual Period following discovery thereof
by the Trustee, the Trustee shall
cause the Seller to repurchase any such
Receivable as of such last day. In
consideration of the purchase of the
Receivable, the Seller shall remit the
Purchase Amount for such Receivable, in the
manner specified in SECTION 5.6. The
sole remedy of the Trustee, the Purchaser
and the Noteholder with respect to a
breach pursuant to this SECTION 3.4 shall
be to require the Seller to purchase
the applicable Receivables pursuant to this
SECTION 3.4; PROVIDED, HOWEVER, that
the Seller shall indemnify the Trustee, the
Backup Servicer, the Purchaser and
the Noteholder against all costs, expenses,
losses, damages, claims and
liabilities, including reasonable fees and
expenses of counsel, which may be
asserted against or incurred by any of them
as a result of third party claims
arising out of the events or facts giving
rise to such breach. Upon receipt of
the Purchase Amount for a Receivable and
written instructions from the Servicer,
the Trustee shall release to the Seller or
its designee the related Receivable
File and shall execute and deliver all
reasonable instruments of transfer or
assignment, without recourse, as are
prepared by the Seller and delivered to the
Trustee and are necessary to vest in the
Seller or such designee title to the
Receivable. The Trustee shall make a list
of Receivables for which an
application for a certificate of title but
not an original certificate of title
or, with respect to Receivables that
finance a vehicle in the States listed in
Annex B, other evidence of title issued by
the applicable Department of Motor
Vehicles or similar authority in such
States, is included in the Receivable File
as of the date of its review of the
Receivable Files and deliver a copy of such
list to the Servicer and the Noteholder. On
the date which is 180 days following
the related Funding Date, and monthly
thereafter, the Trustee shall inform the
<PAGE>
Seller and the other parties to this
Agreement and the Noteholder of any
Receivable for which the related Receivable
File on such date does not include
an original certificate of title or, with
respect to Financed Vehicles in the
States listed in Annex B, other evidence of
title issued by the applicable
Department of Motor Vehicles or similar
authority in such States, and the Seller
shall repurchase any such Receivable as of
the last Business Day of the Accrual
Period in which the expiration of such 180
days occurs. In consideration of the
purchase of the Receivable, the Seller
shall remit the Purchase Amount for such
Receivable, in the manner specified in
SECTION 5.6.
SECTION 3.5. ACCESS TO RECEIVABLE FILES.
The Trustee shall permit the Servicer and Noteholder access to
the
Receivable Files at all reasonable times
during the Trustee's normal business
hours. The Trustee shall, within two
Business Days of the request of the
Servicer or the Noteholder, execute such
documents and instruments as are
prepared by the Servicer or the Noteholder
and delivered to the Trustee, as the
Servicer or the Noteholder deems necessary
to permit the Servicer, in accordance
with its customary servicing procedures, to
enforce the Receivable on behalf of
the Purchaser and any related insurance
policies covering the Obligor, the
Receivable or Financed Vehicle so long as
such execution in the Trustee's sole
discretion does not conflict with this
Agreement or the Indenture and will not
cause it undue risk or liability. The
Trustee shall not be obligated to release
any document from any Receivable File
unless it receives a release request
signed by a Servicing Officer in the form
of EXHIBIT C hereto (the "RELEASE
REQUEST"). Such Release Request shall
obligate the Servicer to return such
document(s) to the Trustee when the need
therefor no longer exists unless the
Receivable shall be liquidated, in which
case, the Servicer shall certify in the
Release Request that all amounts required
to be deposited in the Collection
Account with respect to such Receivable
have been so deposited.
SECTION 3.6. TRUSTEE TO OBTAIN FIDELITY INSURANCE.
The Trustee shall maintain a fidelity bond in the form and amount
as is
customary for entities acting as a trustee
of funds and documents in respect of
consumer contracts on behalf of
institutional investors.
SECTION 3.7. TRUSTEE TO MAINTAIN SECURE FACILITIES.
The Trustee shall maintain or cause to be maintained continuous
custody
of the Receivables Files in secure and fire
resistant facilities in accordance
with customary standards for such
custody.
ARTICLE IV
----------
ADMINISTRATION AND SERVICING OF RECEIVABLES
-------------------------------------------
SECTION 4.1. DUTIES OF THE SERVICER.
The Servicer, as agent for the Purchaser and the Noteholder
shall
manage, service, administer and make
collections on the Receivables with
reasonable care, using that degree of skill
and attention customary and usual
for institutions which service motor
vehicle retail installment sale contracts
similar to the Receivables and, to the
extent more exacting, that the Servicer
exercises with respect to all comparable
automotive receivables that it services
for itself or others. In performing such
duties, the Servicer shall comply with
its current servicing policies and
procedures, as such servicing policies and
procedures may be amended from time to
time, so long as such amendments will not
materially adversely affect the interests
of the Noteholder, or otherwise with
the prior written consent of the Noteholder
(which consent shall not be
unreasonably withheld), and notice of such
amendments is given to the Noteholder
prior to the effectiveness thereof. The
Servicer's duties shall include
collection and posting of all payments,
responding to inquiries of Obligors on
such Receivables, investigating
delinquencies, sending payment statements to
Obligors, reporting tax information to
Obligors, accounting for collections,
furnishing monthly and annual statements to
the Trustee and the Noteholder with
respect to distributions. Without limiting
the generality of the foregoing, and
subject to the servicing standards set
forth in this Agreement including,
without limitation, the restrictions set
forth in SECTION 4.6, the Servicer is
authorized and empowered by the Purchaser
to execute and deliver, on behalf of
itself, the Purchaser or the Noteholder,
any and all instruments of satisfaction
or cancellation, or partial or full release
or discharge, and all other
comparable instruments, with respect to
such Receivables or to the Financed
<PAGE>
Vehicles securing such Receivables and/or
the certificates of title or, with
respect to Financed Vehicles in the States
listed in Annex B, other evidence of
title issued by the applicable Department
of Motor Vehicles or similar authority
in such States with respect to such
Financed Vehicles. If the Servicer shall
commence a legal proceeding to enforce a
Receivable, the Purchaser shall
thereupon be deemed to have automatically
assigned, solely for the purpose of
collection, such Receivable to the
Servicer. If in any enforcement suit or legal
proceeding it shall be held that the
Servicer may not enforce a Receivable on
the ground that it shall not be a real
party in interest or a holder entitled to
enforce such Receivable, the Purchaser
shall, at the Servicer's expense and
direction, take steps to enforce such
Receivable, including bringing suit in its
name or the name of the Noteholder. The
Servicer shall prepare and furnish, and
the Trustee shall execute, any powers of
attorney and other documents reasonably
necessary or appropriate to enable the
Servicer to carry out its servicing and
administrative duties hereunder.
SECTION 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS
OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable
efforts
to collect all payments called for under the terms and provisions
of
the Receivables as and when the same shall become due and shall
follow
such collection procedures as it follows with respect to all
comparable
automotive receivables that it services for itself or others;
PROVIDED,
HOWEVER, that promptly after the Closing Date (or the related
Funding
Date, as applicable) the Servicer shall notify each Obligor to make
all
payments with respect to the Receivables to the applicable
Post-Office
Box. The Servicer will provide each Obligor with a monthly
statement in
order to notify such Obligors to make payments directly to the
applicable Post-Office Box. The Servicer shall allocate
collections
between principal and interest in accordance with the customary
servicing procedures it follows with respect to all comparable
automotive receivables that it services for itself or others and
in
accordance with the terms of this Agreement. Except as provided
below,
the Servicer, for as long as the Seller is the Servicer, may
grant
extensions on a Receivable in accordance with the applicable
Contract
Purchase Guidelines, if any; PROVIDED, HOWEVER, that the Servicer
may
not grant (x) more than one (1) extension per calendar year
with
respect to a CPS Receivable or grant an extension with respect to a
CPS
Receivable for more than one (1) calendar month or grant more than
four
(4) extensions in the aggregate with respect to a CPS Receivable
and
(y) more than two (2) extensions per calendar year with respect to
a
TFC Receivable or Clean-up Call Receivable or grant an extension
with
respect to a TFC Receivable or Clean-up Call Receivables for more
than
one (1) calendar month or grant more than four (4) extensions in
the
aggregate with respect to a TFC Receivable or Clean-up Call
Receivable,
in each case without the prior written consent of the Noteholder.
In no
event shall the principal balance of a Receivable be reduced,
except in
connection with a settlement in the event the Receivable becomes
a
Defaulted Receivable. If the Servicer is not the Seller or the
Backup
Servicer, the Servicer may not make any extension on a
Receivable
without the prior written consent of the Noteholder. The Servicer
may
in its discretion waive any prepayment charge, late payment charge
or
any other similar fees that may be collected in the ordinary course
of
servicing a Receivable. Notwithstanding anything to the
contrary
contained herein, the Servicer shall not agree to any alteration of
the
interest rate on any Receivable or of the amount of any
Scheduled
Receivable Payment on Receivables, other than to the extent that
such
alteration is required by applicable law.
(b) The Servicer shall establish each Lockbox Account in the
name of the Purchaser for the benefit of the Trustee, acting on
behalf
of the Noteholder. Pursuant to each Lockbox Agreement, the Trustee
has
authorized the Servicer to direct dispositions of funds on deposit
in
the related Lockbox Account to the Collection Account (but not to
any
other account), and no other Person, except the Lockbox Processor
and
the Trustee, has authority to direct disposition of funds on
deposit in
such Lockbox Account. However, each Lockbox Agreement shall
provide
that the Lockbox Bank will comply with instructions originated by
the
Trustee relating to the disposition of the funds in the related
Lockbox
Account without further consent by the Seller, the Servicer or
the
Purchaser. The Trustee shall have no liability or responsibility
with
respect to the Lockbox Processor's directions or activities as
set
forth in the preceding sentence. Each Lockbox Account shall be
established pursuant to and maintained in accordance with the
related
Lockbox Agreement and shall be a demand deposit account
initially
established and maintained with Bank One, N.A., or at the request
of
the Noteholder an Eligible Account satisfying clause (i) of the
definition thereof; PROVIDED, HOWEVER, that the Trustee shall give
the
Servicer prior written notice of any change made at the request of
the
Noteholder in the location of a Lockbox Account. The Trustee
shall
<PAGE>
establish and maintain each Post-Office Box at a United States
Post
Office Branch in the name of the Purchaser for the benefit of
the
Noteholder
(c) Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to a Lockbox Agreement,
the
Servicer shall remain obligated and liable to the Purchaser,
the
Trustee and the Noteholder for servicing and administering the
Receivables and the Other Conveyed Property in accordance with
the
provisions of this Agreement without diminution of such obligation
or
liability by virtue thereof.
(d) In the event the Seller shall for any reason no longer be
acting as the Servicer hereunder, the Backup Servicer or a
successor
Servicer shall thereupon assume all of the rights and obligations
of
the outgoing Servicer under each Lockbox Agreement. In such event,
the
Backup Servicer or a successor Servicer shall be deemed to have
assumed
all of the outgoing Servicer's interest therein and to have
replaced
the outgoing Servicer as a party to a Lockbox Agreement to the
same
extent as if such Lockbox Agreement had been assigned to the
Backup
Servicer or a successor Servicer, except that the outgoing
Servicer
shall not thereby be relieved of any liability or obligations on
the
part of the outgoing Servicer to the Lockbox Bank under such
Lockbox
Agreement. The outgoing Servicer shall, upon request of the
Trustee,
but at the expense of the outgoing Servicer, deliver to the
Backup
Servicer or a successor Servicer all documents and records relating
to
the Lockbox Agreements and an accounting of amounts collected and
held
by the Lockbox Bank and otherwise use its best efforts to effect
the
orderly and efficient assignment of the Lockbox Agreements to
the
Backup Servicer or a successor Servicer. In the event that the
Noteholder shall elect to change the identity of the Lockbox Bank,
the
Servicer, at its expense, shall cause the Lockbox Bank to deliver,
at
the direction of the Noteholder, to the Trustee or a successor
Lockbox
Bank, all documents and records relating to the Receivables and
all
amounts held (or thereafter received) by the Lockbox Bank
(together
with an accounting of such amounts) and shall otherwise use its
best
efforts to effect the orderly and efficient transfer of the
Lockbox
arrangements.
(e) On each Business Day, pursuant to the Lockbox Agreements,
the Lockbox Processor will transfer any payments from Obligors
received
in the Post-Office Box to the applicable Lockbox Account. The
Servicer
shall cause the Lockbox Bank to transfer cleared funds from the
Lockbox
Accounts to the Collection Account. In addition, the Servicer
shall
remit all payments by or on behalf of the Obligors received by
the
Servicer with respect to the Receivables (other than Purchased
Receivables), all Net Liquidation Proceeds and any amounts remitted
to
the Servicer by the Hedge Counterparty pursuant to the Hedge
Agreement
no later than two Business Days following receipt directly
(without
deposit into any intervening account) into the related Lockbox
Account
or the Collection Account. The Servicer shall not commingle its
assets
and funds with those on deposit in the Lockbox Accounts.
SECTION 4.3. REALIZATION UPON RECEIVABLES.
On behalf of the Purchaser and the Noteholder, the Servicer shall
use
its best efforts, consistent with the
servicing procedures set forth herein, to
repossess or otherwise convert the
ownership of the Financed Vehicle securing
any Receivable as to which the Servicer
shall have determined eventual payment
in full is unlikely. The Servicer shall
commence efforts to repossess or
otherwise convert the ownership of a
Financed Vehicle on or prior to the date
that an Obligor has failed to make more
than 90% of a Scheduled Receivable
Payment thereon in excess of $10 for 120
days or more; PROVIDED, HOWEVER, that
the Servicer may elect not to commence such
efforts within such time period if
in its good faith judgment it determines
either that it would be impracticable
to do so or that the proceeds ultimately
recoverable with respect to such
Receivable would be increased by
forbearance. The Servicer shall follow such
customary and usual practices and
procedures as it shall deem necessary or
advisable in its servicing of automotive
receivables, consistent with the
standards of care set forth in SECTION 4.2,
which may include reasonable efforts
to realize upon any recourse to Dealers and
selling the Financed Vehicle at
public or private sale. The foregoing shall
be subject to the provision that, in
any case in which the Financed Vehicle
shall have suffered damage, the Servicer
shall not expend funds in connection with
the repair or the repossession of such
Financed Vehicle unless it shall determine
in its discretion that such repair
and/or repossession will increase the
proceeds ultimately recoverable with
respect to such Receivable by an amount
greater than the amount of such
expenses.
<PAGE>
SECTION 4.4. INSURANCE.
(a) The Servicer, in accordance with the servicing procedures
and standards set forth herein, shall require that (i) each
Obligor
shall have obtained insurance covering the Financed Vehicle, as of
the
date of the execution of the Receivable, insuring against loss
and
damage due to fire, theft, transportation, collision and other
risks
generally covered by comprehensive and collision coverage and
each
Receivable requires the Obligor to maintain such physical loss
and
damage insurance naming the Seller and its successors and assigns
as an
additional insured, (ii) each Receivable that finances the cost
of
premiums for credit life and credit accident and health insurance
is
covered by an insurance policy or certificate naming the Seller
as
policyholder (creditor) and (iii) as to each Receivable that
finances
the cost of an extended service contract, the respective
Financed
Vehicle which secures the Receivable is covered by an extended
service
contract (each, a "RECEIVABLES INSURANCE POLICY").
(b) To the extent applicable, the Servicer shall not take any
action which would result in noncoverage under any Receivables
Insurance Policy which, but for the actions of the Servicer, would
have
been covered thereunder. The Servicer, on behalf of the
Purchaser,
shall take such reasonable action as shall be necessary to
permit
recovery under each Receivables Insurance Policy. Any amounts
collected
by the Servicer under any Receivables Insurance Policy,
including,
without limitation, proceeds thereof, shall be deposited in the
Collection Account within two (2) Business Days of receipt.
SECTION 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by
this Agreement, the Servicer shall take such steps on behalf of
the
Purchaser as are necessary to maintain perfection of the
security
interest created by each Receivable in the related Financed
Vehicle,
including but not limited to obtaining the authorization or
execution
by the Obligors and the recording, registering, filing,
re-recording,
re-registering and refiling of all security agreements,
financing
statements and continuation statements or instruments as are
necessary
to maintain the security interest granted by the Obligors under
the
respective Receivables. The Trustee hereby authorizes the Servicer,
and
the Servicer agrees, to take any and all steps necessary to
re-perfect
or continue the perfection of such security interest on behalf of
the
Purchaser and the Noteholder as necessary because of the relocation
of
a Financed Vehicle or for any other reason. In the event that
the
assignment of a Receivable to the Purchaser, and the pledge thereof
by
the Purchaser to the Trustee is insufficient, without a notation on
the
related Financed Vehicle's certificate of title, or without
fulfilling
any additional administrative requirements under the laws of the
state
in which the Financed Vehicle is located, to perfect a security
interest in the related Financed Vehicle in favor of the Trustee,
each
of the Trustee and the Seller hereby agrees that the designation of
the
Seller or TFC, as applicable, as the secured party on the
certificate
of title is in respect of the Seller's capacity as Servicer and
TFC's
capacity as subservicer, as applicable, as agent of the Trustee for
the
benefit of the Noteholder.
(b) Upon the occurrence of a Servicer Termination Event, the
Trustee, and the Servicer shall take or cause to be taken such
action
as may, in the opinion of counsel to the Trustee, which opinion
shall
not be an expense of the Trustee, be necessary to perfect or
re-perfect
the security interests in the Financed Vehicles securing the
Receivables in the name of the Trustee on behalf of the Noteholder
by
amending the title documents of such Financed Vehicles or by such
other
reasonable means as may, in the opinion of counsel to the
Trustee,
which opinion shall not be an expense of the Trustee, be necessary
or
prudent. The Seller hereby agrees to pay all expenses related to
such
perfection or re-perfection and to take all action necessary
therefor.
In addition, the Noteholder may instruct the Trustee and the
Servicer
to take or cause to be taken such action as may, in the opinion
of
counsel to the Noteholder, be necessary to perfect or re-perfect
the
security interest in the Financed Vehicles underlying the
Receivables
in the name of the Trustee on behalf of the Noteholder, including
by
amending the title documents of such Financed Vehicles or by such
other
reasonable means as may, in the opinion of counsel to the
Noteholder,
be necessary or prudent; PROVIDED, HOWEVER, that if the
Noteholder
<PAGE>
requests that the title documents be amended prior to the
occurrence of
a Servicer Termination Event, the Trustee or Servicer, as the case
may
be, shall carry out such action only to the extent that the
out-of-pocket expenses of the Servicer or the Trustee, as the case
may
be, shall be reimbursed by the Noteholder.
SECTION 4.6. ADDITIONAL COVENANTS OF SERVICER.
(a) The Servicer shall not release the Financed Vehicle
securing each Receivable from the security interest granted by
such
Receivable in whole or in part except in the event of payment in
full
by the Obligor thereunder or repossession or other liquidation of
the
Financed Vehicle, nor shall the Servicer impair the rights of
the
Noteholder in such Receivables, nor shall the Servicer amend or
otherwise modify a Receivable, except as permitted in accordance
with
SECTION 4.2.
(b) The Servicer shall obtain and/or maintain all necessary
licenses, approvals, authorizations, orders or other actions of
any
person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection
with
the execution, delivery and performance of this Agreement and the
other
Basic Documents.
(c) The Servicer shall not make any material changes to its
collection policies unless the Noteholder expressly consents in
writing
prior to such changes (which consent shall not be unreasonably
withheld).
(d) The Servicer shall provide written notice to the
Noteholder of any default, event of default or servicer
termination
event under any other warehouse financing facility or
securitization
that has occurred and which default, event of default or
servicer
termination shall not have been waived or otherwise cured within
the
applicable cure period.
SECTION 4.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT.
Upon discovery by any of the Servicer, the Purchaser or the Trustee
of
a breach of any of the covenants of the
Servicer set forth in SECTIONS 4.2(a),
4.4, 4.5 or 4.6, the party discovering such
breach shall give prompt written
notice to the others; provided, however,
that the failure to give any such
notice shall not affect any obligation of
the Servicer under this SECTION 4.7.
Unless the breach shall have been cured by
the last day of the next Accrual
Period following such discovery, the
Servicer shall purchase any Receivable
materially and adversely affected by such
breach. In consideration of the
purchase of such Receivable, the Servicer
shall remit the Purchase Amount for
such Receivable in the manner specified in
SECTION 5.6. The sole remedy of the
Trustee, the Purchaser or the Noteholder
with respect to a breach of SECTIONS
4.2(a), 4.4, 4.5 or 4.6 shall be to require
the Servicer to repurchase
Receivables pursuant to this SECTION 4.7;
PROVIDED, HOWEVER, that the Servicer
shall indemnify the Trustee, the Backup
Servicer, the Purchaser and the
Noteholder against all costs, expenses,
losses, damages, claims and liabilities,
including reasonable fees and expenses of
counsel, which may be asserted against
or incurred by any of them as a result of
third party claims arising out of the
events or facts giving rise to such
breach.
SECTION 4.8. SERVICING FEE.
The "SERVICING FEE" for each Settlement Date shall be equal to
the
product of one twelfth times the Servicing
Fee Percentage times the average of
the Aggregate Principal Balance of the
Eligible Receivables on the first day of
the related Accrual Period and on the last
day of such Accrual Period. The
Servicing Fee shall also include all late
fees, prepayment charges including, in
the case of a Rule of 78's Receivable that
is prepaid in full, to the extent not
required by law to be remitted to the
related Obligor, the difference between
the Principal Balance of such Rule of 78's
Receivable (plus accrued interest to
the date of prepayment) and the principal
balance of such Receivable computed
according to the "Rule of 78's", and other
administrative fees or similar
charges allowed by applicable law with
respect to Receivables, collected (from
whatever source) on the Receivables. If the
Backup Servicer becomes the
successor Servicer, the "Servicing Fee"
payable to the Backup Servicer as
successor Servicer shall be determined in
accordance with the Servicing and
Lockbox Processing Assumption
Agreement.
<PAGE>
SECTION 4.9. SERVICER'S CERTIFICATE.
No later than 12:00 noon New York City time on each Determination
Date,
the Servicer shall deliver (facsimile
delivery being acceptable) to the Trustee,
the Rating Agencies, the Noteholder and the
Purchaser, a certificate
substantially in the form of EXHIBIT A
hereto (a "SERVICER'S CERTIFICATE")
containing among other things, (i) all
information necessary to enable the
Trustee to make any withdrawal and deposit
required by SECTION 5.5 and to make
the distributions required by SECTION 5.7,
(ii) all information necessary for
the Trustee to send statements to the
Noteholder pursuant to SECTION 5.8(b) and
5.9, (iii) a listing of all Purchased
Receivables purchased as of the related
Accounting Date, identifying the
Receivables so purchased, (iv) the calculation
of the Borrowing Base, the CPS Borrowing
Base, the Clean-up Call Borrowing Base
and the TFC Borrowing Base, and (v) all
information necessary to enable the
Backup Servicer to verify the information
specified in SECTION 4.14(b) and to
complete the accounting required by SECTION
5.9.
SECTION 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF
SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Purchaser, to the
Trustee for delivery to the Noteholder, the Backup Servicer and
each
Rating Agency, on or before February 28 of each year beginning
February
28, 2005, an Officer's Certificate, dated as of December 31 of
the
preceding year, stating that (i) a review of the activities of
the
Servicer during the preceding 12-month period (or, in the case of
the
first such certificate, the period from the initial Cutoff Date
to
December 31, 2004) and of its performance under this Agreement has
been
made under such officer's supervision and (ii) to the best of
such
officer's knowledge, based on such review, the Servicer has
fulfilled
all its obligations under this Agreement throughout such year (or,
in
the case of the first such certificate, such shorter period), or,
if
there has been a default in the fulfillment of any such
obligation,
specifying each such default known to such officer and the nature
and
status thereof.
(b) The Servicer shall deliver to the Trustee, the Noteholder,
the Backup Servicer and each Rating Agency, promptly after
having
obtained knowledge thereof, but in no event later than two (2)
Business
Days thereafter, written notice in an Officer's Certificate of
any
event which with the giving of notice or lapse of time, or both,
would
become a
Servicer Termination Event under SECTION 10.1.
SECTION 4.11. INDEPENDENT ACCOUNTANTS' REPORTS.
The Servicer shall cause a firm of nationally recognized
independent
certified public accountants (the
"INDEPENDENT ACCOUNTANTS"), who may also
render other services to the Servicer or to
the Purchaser, to deliver to the
Trustee, the Backup Servicer, the
Noteholder and each Rating Agency, on or
before March 31 of each year beginning
March 31, 2005, a report dated as of
December 31 of the preceding year in form
and substance reasonably acceptable to
the Noteholder (the "ACCOUNTANTS' REPORT")
and reviewing the Servicer's
activities during the preceding 12-month
period (or, in the case of the first
such report, the period from the Cutoff
Date with respect to Receivables
transferred to the Purchaser on the initial
Funding Date to December 31, 2004),
addressed to the Board of Directors of the
Servicer, to the Trustee, the Backup
Servicer and to the Noteholder, to the
effect that such firm has examined the
financial statements of the Servicer and
issued its report therefor and that
such examination (1) was made in accordance
with generally accepted auditing
standards, and accordingly included such
tests of the accounting records and
such other auditing procedures as such firm
considered necessary in the
circumstances; (2) included tests relating
to auto loans serviced for others in
accordance with the requirements of the
Uniform Single Attestation Program for
Mortgage Bankers (the "PROGRAM"), to the
extent the procedures in the Program
are applicable to the servicing obligations
set forth in this Agreement; (3)
included an examination of the delinquency
and loss statistics relating to the
Servicer's portfolio of automobile and
light truck installment sale contracts;
and (4) except as described in the report,
disclosed no exceptions or errors in
the records relating to automobile and
light truck loans serviced for others
that, in the firm's opinion, paragraph four
of the Program requires such firm to
report. The accountant's report shall
further state that (1) a review in
accordance with agreed upon procedures was
made of two randomly selected
Servicer's Certificates; (2) except as
disclosed in the report, no exceptions or
errors in the Servicer's Certificates were
found; and (3) the delinquency and
<PAGE>
loss information relating to the
Receivables and the stated amount of Liquidated
Receivables, if any, contained in the
Servicer's Certificates were found to be
accurate. In the event such firm requires
the Trustee and/or the Backup Servicer
to agree to the procedures performed by
such firm, the Servicer shall direct the
Trustee and/or the Backup Servicer, as
applicable, in writing to so agree; it
being understood and agreed that the
Trustee and/or the Backup Servicer will
deliver such letter of agreement in
conclusive reliance upon the direction of
the Servicer, and neither the Trustee nor
the Backup Servicer makes any
independent inquiry or investigation as to,
and shall have no obligation or
liability in respect of, the sufficiency,
validity or correctness of such
procedures. The Report will also indicate
that the firm is independent of the
Servicer within the meaning of the Code of
Professional Ethics of the American
Institute of Certified Public
Accountants.
SECTION 4.12. INDEPENDENT ACCOUNTANTS' REVIEW OF RECEIVABLES
FILES.
Commencing on September 30, 2004 and, thereafter on each December
31,
March 31, June 30 and September 30 (or,
with respect to each such date, upon the
date of the closing of Seller's next
occurring "CPS Auto Receivables Trust" (or
similar) term securitization transaction,
provided that such review is not made
more than 120 days after the immediately
preceding review) prior to the Final
Scheduled Settlement Date, to the extent
that the Invested Amount on any day in
the calendar quarter then ending was
greater than $25 million (or such other
dates as the Noteholder may determine in
its reasonable discretion from time to
time by prior written notice to the Seller,
the Servicer and the Trustee), the
Seller at its own expense shall cause
Independent Accountants reasonably
acceptable to the Noteholder to conduct a
post-funding review of the Seller's
compliance with its stated underwriting
policies and verify certain
characteristics of the Receivables as of
each Funding Date. The Independent
Accountants shall within ten Business Days
complete such physical inspection and
limited review and execute and deliver to
Seller, the Servicer, the Trustee and
the Noteholder a report summarizing the
findings, which report shall be
delivered in any case within 120 days of
the previous report delivered in
accordance with this Section 4.12. If such
review reveals, in the Noteholder's
reasonable opinion, an unsatisfactory
number of exceptions, the Noteholder, in
its reasonable discretion, may require a
full review of a larger sample of the
Receivables by the Independent Accounts at
the expense of the Seller.
SECTION 4.13. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING
RECEIVABLES.
The Servicer shall provide to representatives of the Trustee,
the
Backup Servicer and the Noteholder
reasonable access to the documentation
regarding the Receivables. In each case,
such access shall be afforded without
charge but only upon reasonable request and
during normal business hours.
Nothing in this Section shall derogate from
the obligation of the Servicer to
observe any applicable law prohibiting
disclosure of information regarding the
Obligors, and the failure of the Servicer
to provide access as provided in this
Section as a result of such obligation
shall not constitute a breach of this
Section.
SECTION 4.14. VERIFICATION OF SERVICER'S CERTIFICATE.
(a) Conc
