<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1998
REGISTRATION NO. 333-51113
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3*
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WFS FINANCIAL 1998-B OWNER TRUST
WFS FINANCIAL AUTO LOANS, INC.
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
<TABLE>
<S> <C> <C>
CALIFORNIA 9999 33-0149603
(STATE OR OTHER JURISDICTION OF (PRIMARY SIC (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
(949) 727-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES R. DOWLAN
PRESIDENT
WFS FINANCIAL AUTO LOANS, INC.
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
(949) 727-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ANDREW E. KATZ, ESQ. DALE W. LUM, ESQ.
MITCHELL, SILBERBERG & KNUPP LLP BROWN & WOOD LLP
11377 W. OLYMPIC BOULEVARD 555 CALIFORNIA STREET
LOS ANGELES, CALIFORNIA 90064-1683 SAN FRANCISCO, CALIFORNIA 94104-1715
(310) 312-2000 (415) 772-1200
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
================================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE**
- --------------------------------------------------------------------------------------------------------------------------------
Auto Receivable Backed Notes, Class A-1..... $125,000,000 100% $125,000,000 $36,875
- --------------------------------------------------------------------------------------------------------------------------------
Auto Receivable Backed Notes, Class A-2..... $160,000,000 100% $160,000,000 $47,200
- --------------------------------------------------------------------------------------------------------------------------------
Auto Receivable Backed Notes, Class A-3..... $200,000,000 100% $200,000,000 $59,000
- --------------------------------------------------------------------------------------------------------------------------------
Auto Receivable Backed Notes, Class A-4..... $102,400,000 100% $102,400,000 $30,208
- --------------------------------------------------------------------------------------------------------------------------------
Auto Receivable Backed Certificate.......... $72,600,000 100% $72,600,000 $21,417
================================================================================================================================
</TABLE>
* Originally filed on Form S-1.
** Estimated, pursuant to Rule 457(a) under the Securities Act, solely for the
purpose of calculating the registration fee on the basis of the proposed
maximum offering price per unit. Of this amount, $295.00 has been previously
paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 16, 1998
$660,000,000
WFS FINANCIAL 1998-B OWNER TRUST
$125,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-1
$160,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-2
$200,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-3
$102,400,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-4
$72,600,000 % AUTO RECEIVABLE BACKED CERTIFICATES
WFS FINANCIAL AUTO LOANS, INC. (SELLER)
WFS FINANCIAL INC (MASTER SERVICER)
The WFS Financial 1998-B Owner Trust Auto Receivable Backed Securities will
consist of four Classes of notes (respectively, the "Class A-1 Notes", the
"Class A-2 Notes", the "Class A-3 Notes" and the "Class A-4 Notes" and
collectively, the "Notes") and one Class of certificates (the "Certificates"
and, together with the Notes, the "Securities"). Principal, in the amounts set
forth herein, and interest at the Interest Rates and Pass-Through Rate specified
above for each Class of Notes and the Certificates will be distributed to the
related Securityholders on January 20, April 20, July 20 and October 20 of each
year (or, if any such day is not a Business Day, on the immediately succeeding
Business Day), beginning October 20, 1998. Distributions on the Certificates
will be subordinated to payments due on the Notes to the extent described
herein. Each Class of Notes and the Certificates will be payable in full on the
Final Distribution Dates specified herein for such Securities. The payment
priority of the Securities shall be in the order the Securities are listed
above.
The WFS Financial 1998-B Owner Trust (the "Trust") will be formed pursuant
to a Trust Agreement to be entered into among WFS Financial Auto Loans, Inc.
(the "Seller"), Financial Security Assurance Inc. ("Financial Security"), WFS
Investments, Inc. and Chase Manhattan Bank Delaware, as Owner Trustee. The
Seller is a wholly owned, limited purpose operating subsidiary of WFS Financial
Inc ("WFS"). The Certificates will be issued pursuant to the Trust Agreement and
will represent fractional undivided interests in the Trust. The Notes will be
issued and secured pursuant to an Indenture to be entered into among the Trust,
Financial Security and Bankers Trust Company, as Indenture Trustee, and will
represent obligations of the Trust. Financial Security will issue a financial
guaranty insurance policy for the exclusive benefit of the Notes (the "Note
Policy") and a financial guaranty insurance policy for the exclusive benefit of
the Certificates (the "Certificate Policy" and, together with the Note Policy,
the "Policies").
The material property of the Trust will include (i) a pool of retail
installment sales contracts and a limited number of installment loans (the
"Contracts") secured in both instances by new or used automobiles and light duty
trucks (the "Financed Vehicles"), (ii) the Policies and (iii) the funds in a
segregated trust account in the name of the Indenture Trustee (the "Spread
Account"). The Contracts were primarily originated by motor vehicle dealers and
purchased by WFS. WFS believes that at least 67% of the Contracts, based upon
the Cut-Off Date Aggregate Scheduled Balance, will have been originally
underwritten as prime Contracts and the remainder of the Contracts will have
been originally underwritten as non-prime Contracts. WFS will act as Master
Servicer of the Contracts. The Notes will be secured by the assets of the Trust
pursuant to the Indenture.
It is a condition of issuance that the Class A-1 Notes be rated A-1+ by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and P-1
by Moody's Investors Service, Inc. ("Moody's" and, together with S&P, the
"Rating Agencies"), and the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes
and the Certificates each be rated AAA by S&P and Aaa by Moody's. The ratings by
S&P of the Notes will be issued without regard to the benefit afforded by the
Note Policy. The rating by Moody's of the Class A-1 Notes will be substantially
based upon the issuance of the Note Policy by Financial Security, and the rating
by Moody's of the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes
will be based on the issuance of the Note Policy by Financial Security. The
ratings by each Rating Agency of the Certificates will be based on the issuance
of the Certificate Policy by Financial Security.
Each Class of Notes and the Certificates will be represented by one or more
certificates registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of the Securities will
be represented by book entries on the records of participating members of DTC.
Definitive Securities will be available only under the limited circumstances
described herein.
THE FINANCIAL GUARANTY INSURANCE POLICIES ARE NOT COVERED BY THE PROPERTY/
CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK
INSURANCE LAW.
Securityholders will not have recourse against that fund. See "The
Policies -- Other Terms of the Policies".
SEE "RISK FACTORS" COMMENCING ON PAGE 11 FOR A DISCUSSION OF THE MATERIAL
RISK FACTORS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
THE NOTES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES WILL REPRESENT
BENEFICIAL INTERESTS IN, THE TRUST AND WILL NOT REPRESENT OBLIGATIONS OF OR
INTERESTS IN WFS FINANCIAL AUTO LOANS, INC., WESTERN FINANCIAL BANK, WFS
FINANCIAL INC OR ANY OF THEIR RESPECTIVE AFFILIATES, THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL ENTITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO THE DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) THE SELLER(1)(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note.......................................... % % %
Per Class A-2 Note.......................................... % % %
Per Class A-3 Note.......................................... % % %
Per Class A-4 Note.......................................... % % %
Per Certificate............................................. % % %
Total....................................................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from June 1, 1998.
(2) See "Underwriting" for indemnification arrangements with the Underwriters.
(3) Before deducting expenses payable by the Seller estimated at $457,000.00.
The Securities are offered by the Underwriters subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to various
prior conditions, including their right to reject orders in whole or in part. It
is expected that the Securities will be delivered in book-entry form on or about
, 1998.
DONALDSON, LUFKIN & JENRETTE BANCAMERICA ROBERTSON STEPHENS
SECURITIES CORPORATION
<PAGE> 3
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of any Class of
Securities. Specifically, the Underwriters may overallot in connection with the
offering and may bid for and purchase the Securities in the open market. For a
description of these activities, see "Underwriting."
AVAILABLE INFORMATION
The Seller, as originator of the Trust, has filed a registration statement
on Form S-3 (together with all amendments and exhibits thereto and documents
incorporated by reference herein, the "Registration Statement") under the
Securities Act of 1933, as amended, with the Securities and Exchange Commission
(the "Commission") with respect to the Securities offered hereby. This
Prospectus, which forms a part of the Registration Statement, does not contain
all of the information included in the Registration Statement and the exhibits
thereto. The Registration Statement, including exhibits thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission in Washington, D.C. at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 or at the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission at http://www.sec.gov. Statements made in this Prospectus as
to the contents of any agreement or other document referred to herein are not
necessarily complete and reference is made to the copy of such agreement or
other document filed as an exhibit or schedule to the Registration Statement and
to the exhibits and schedules filed therewith, each such statement being
qualified in all respects by such reference.
REPORTS TO SECURITYHOLDERS
The Master Servicer, on behalf of the Trust, will prepare and the Indenture
Trustee and the Owner Trustee will provide to Securityholders of record (which
shall be Cede & Co. as the nominee of DTC unless Definitive Securities are
issued under the limited circumstances described herein) unaudited quarterly and
annual reports concerning the Contracts. See "Certain Information Regarding the
Securities -- Statements to Securityholders" and "-- Evidence as to Compliance."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by WFS, as Master Servicer, on behalf
of the Seller, or on behalf of the Trust, pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), subsequent to the date of this Prospectus and prior to the termination of
the offering of the Securities offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained herein or in a
document all or a portion of which is incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
WFS, as Master Servicer, will provide without charge to each person,
including any beneficial owner of Securities, to whom a copy of this Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated herein by reference, except the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Requests for such copies should be directed to Secretary,
WFS Financial Inc, 23 Pasteur Road, Irvine, California 92618 or by calling (949)
727-1000.
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES
OR THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE> 4
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. See the Index of
Definitions commencing on A-1 for the location herein of capitalized terms.
Issuer..................... WFS Financial 1998-B Owner Trust (the "Trust").
Seller..................... WFS Financial Auto Loans, Inc. (the "Seller"), a
wholly owned, limited-purpose operating subsidiary
of WFS Financial Inc. The principal executive
offices of the Seller are located at 23 Pasteur
Road, Irvine, California 92618 and its telephone
number is (949) 727-1000. Prior to May 29, 1996,
the Seller was known as Western Financial Auto
Loans, Inc. See "The Seller."
WFS........................ WFS Financial Inc ("WFS" or, in its capacity as
Master Servicer, the "Master Servicer"), a majority
owned, operating subsidiary of Western Financial
Bank (the "Bank"), a federally chartered savings
association. The principal offices of WFS are
located at 23 Pasteur Road, Irvine, California
92618 and its telephone number is (949) 727-1000.
See "WFS."
WII........................ WFS Investments, Inc. ("WII"), a California
corporation and a wholly owned operating subsidiary
of WFS. The principal office of WII is 23 Pasteur
Road, Irvine, California 92618 and its telephone
number is (949) 727-1000. See "WII."
Securities Offered......... The securities offered are as follows:
A. General................. The WFS Financial 1998-B Owner Trust Auto
Receivable Backed Notes (the "Notes") will
represent obligations of the Trust secured by the
assets of the Trust (other than the Certificate
Distribution Account and the Certificate Policy).
The WFS Financial 1998-B Owner Trust Auto
Receivable Backed Certificates (the "Certificates"
and, together with the Notes, the "Securities")
will represent fractional undivided interests in
the Trust.
The Trust will issue four Classes of Notes pursuant
to an indenture to be dated as of June 1, 1998 (the
"Indenture"), between the Trust and Bankers Trust
Company, as trustee (the "Indenture Trustee"), as
follows: (i) $125,000,000 aggregate principal
amount of % Auto Receivable Backed Notes, Class
A-1 (the "Class A-1 Notes"), (ii) $160,000,000
aggregate principal amount of % Auto
Receivable Backed Notes, Class A-2 (the "Class A-2
Notes"), (iii) $200,000,000 aggregate principal
amount of % Auto Receivable Backed Notes,
Class A-3 (the "Class A-3 Notes") and (iv)
$102,400,000 aggregate principal amount of %
Auto Receivable Backed Notes, Class A-4 (the "Class
A-4 Notes"). Payments of principal and interest on
the Notes will be made in accordance with the
priorities set forth under "Certain Information
Regarding the Securities -- Distributions on the
Securities."
The Trust will issue $72,600,000 aggregate
principal amount of % Auto Receivable Backed
Certificates pursuant to an amended and restated
trust agreement (the "Trust Agreement") to be dated
as of the date of initial issuance of the
Securities (the "Closing Date"), among the Seller,
Financial Security Assurance Inc. ("Financial
Security"), WII and Chase Manhattan Bank Delaware,
as trustee (the "Owner
3
<PAGE> 5
Trustee" and, together with the Indenture Trustee,
the "Trustees"). Payments in respect of the
Certificates will be subordinated to payments on
the Notes to the extent described herein.
Each Class of Notes and the Certificates will be
issued in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof.
Definitive Securities will be issued only under the
limited circumstances described herein. See
"Certain Information Regarding the
Securities -- Book-Entry Registration" and
"-- Definitive Securities."
B. Property of the Trust... Each Note will represent an obligation of, and each
Certificate will represent a fractional undivided
interest in, the Trust. The material property of
the Trust will include (i) a pool of retail
installment sales contracts and a limited number,
not to exceed 2% of the Cut-Off Date Aggregate
Scheduled Balance, of installment loans originated
by branch offices of WFS (collectively, the
"Contracts") secured in both instances by new or
used automobiles and light duty trucks (the
"Financed Vehicles"), (ii) the Policies and (iii)
the funds in a segregated trust account in the name
of the Indenture Trustee (the "Spread Account").
See "Formation of the Trust -- General."
C. Distribution Dates...... Distributions of interest and principal on the
Securities will be made on January 20, April 20,
July 20 and October 20 of each year (or, if any
such day is not a Business Day, on the next
succeeding Business Day) (each, a "Distribution
Date"), commencing October 20, 1998. Payments on
the Securities on each Distribution Date will be
paid to the holders of record of the related
Securities on the Business Day immediately
preceding such Distribution Date or, in the event
that Definitive Securities are issued, as of the
15th day of the month immediately preceding the
month in which such Distribution Date occurs (each,
a "Record Date").
A "Business Day" will be any day other than a
Saturday, a Sunday or a day on which banking
institutions in New York, New York, Wilmington,
Delaware, or Los Angeles, California are authorized
or obligated by law, executive order or government
decree to be closed.
To the extent not previously paid prior to such
dates, the outstanding principal amount of (i) the
Class A-1 Notes will be payable on July 20, 1999
(the "Class A-1 Final Distribution Date"), (ii) the
Class A-2 Notes will be payable on January 20, 2001
(the "Class A-2 Final Distribution Date"), (iii)
the Class A-3 Notes will be payable on July 20,
2001 (the "Class A-3 Final Distribution Date") and
(iv) the Class A-4 Notes will be payable on April
20, 2003 (the "Class A-4 Final Distribution Date"
and, together with the Class A-1 Final Distribution
Date, the Class A-2 Final Distribution Date and the
Class A-3 Final Distribution Date, the "Note Final
Distribution Dates"). To the extent not previously
paid in full prior to such date, the unpaid
principal balance of the Certificates will be
payable on October 20, 2005 (the "Certificate Final
Distribution Date" and, together with the Note
Final Distribution Dates, the "Final Distribution
Dates"). The Final Distribution Dates represent the
last day on which the outstanding principal amount
for the respective Note or Certificate will be
paid.
Terms of the Notes......... The principal terms of the Notes will be as
described below:
A. Interest Rates.......... Interest will be borne on (i) the Class A-1 Notes
at the rate of % per annum (the "Class A-1
Rate"), (ii) the Class A-2 Notes at the rate of
% per annum (the "Class A-2 Rate"), (iii) the
Class A-3 Notes
4
<PAGE> 6
at the rate of % per annum (the "Class A-3
Rate") and (iv) the Class A-4 Notes at the rate of
% per annum (the "Class A-4 Rate" and,
together with the Class A-1 Rate, the Class A-2
Rate and the Class A-3 Rate, the "Interest Rates").
B. Interest................ Interest on the outstanding principal amount of
each Class of Notes will accrue at the related
Interest Rate from and including the most recent
Distribution Date on which interest has been paid
(or from and including the Cut-Off Date with
respect to the first Distribution Date) to but
excluding the current Distribution Date (each, an
"Interest Period"). Interest on the Class A-1 and
the Class A-2 Notes will be calculated on the basis
of the actual number of days elapsed in an Interest
Period and a 360-day year. Interest on the Class
A-3 and Class A-4 Notes will be calculated on the
basis of a 360-day year consisting of twelve 30-day
months. Interest on the Notes for any Distribution
Date due but not paid on such Distribution Date
will be due on the next Distribution Date, together
with, to the extent permitted by applicable law,
interest on such shortfall at the related Interest
Rate. See "The Notes -- Payments of Interest" and
"Certain Information Regarding the
Securities -- Distributions on the Securities."
C. Principal............... Principal of the Notes will be payable on each
Distribution Date in an amount generally equal to
the Note Principal Distributable Amount for such
Distribution Date, calculated as described under
"Certain Information Regarding the
Securities -- Distributions on the
Securities -- Deposits to the Distribution
Accounts; Priority of Payments." On each
Distribution Date, the Note Principal Distributable
Amount will be applied in the following priority:
first to reduce the principal amount of the Class
A-1 Notes; second, after the principal amount of
the Class A-1 Notes has been reduced to zero, to
reduce the principal amount of the Class A-2 Notes;
third, after the principal amount of the Class A-2
Notes has been reduced to zero, to reduce the
principal amount of the Class A-3 Notes; and
fourth, after the principal amount of the Class A-3
Notes has been reduced to zero, to reduce the
principal amount of the Class A-4 Notes.
Notwithstanding the foregoing, if the principal
amount of a Class of Notes has not been paid in
full prior to its Note Final Distribution Date, the
Note Principal Distributable Amount for such Note
Final Distribution Date will include an amount
sufficient to reduce the unpaid principal amount of
such Class of Notes to zero on such Note Final
Distribution Date. See "The Notes -- Payments of
Principal" and "Certain Information Regarding the
Securities -- Distributions on the
Securities -- Deposits to the Distribution
Accounts; Priority of Payments."
D. Optional Redemption..... In the event of an Optional Purchase, each Class of
outstanding Notes will be redeemed in whole, but
not in part, at a redemption price equal to the
unpaid principal amount of such Class of Notes plus
accrued interest thereon at the related Interest
Rate. See "The Notes -- Optional Redemption."
E. Mandatory Redemption.... The Notes may be accelerated if an Event of Default
has occurred and is continuing under the Indenture
so long as no Insurer Default has occurred and is
continuing. If an Insurer Default has occurred and
is continuing and an Event of Default has occurred
and is continuing, the Trustee may, or if so
requested in writing by Holders of Notes represent-
5
<PAGE> 7
ing at least 66 2/3% of the aggregate Outstanding
Amount, upon prior written notice to each Rating
Agency, accelerate the Notes. So long as no Insurer
Default shall have occurred and be continuing,
under certain circumstances Financial Security will
have the right (in addition to its obligation to
make Scheduled Payments on the Notes in accordance
with the terms of the Note Policy), but not the
obligation, to elect to accelerate the principal of
the Notes and to cause the Master Servicer or the
Trustee to sell or otherwise liquidate the property
of the Trust and to deliver the proceeds to the
Indenture Trustee for distribution in accordance
with the terms of the Indenture. See "The
Notes -- Events of Default."
Terms of the
Certificates............... The principal terms of the Certificates will be as
described below:
A. Interest................ On each Distribution Date, the Owner Trustee or any
paying agent as the Owner Trustee may designate
from time to time (the "Paying Agent") will
distribute pro rata to Certificateholders of record
as of the related Record Date accrued interest at
the rate of % per annum (the "Pass-Through
Rate") on the Certificate Balance, as defined
below, as of the immediately preceding Distribution
Date (after giving effect to distributions of
principal to be made on such immediately preceding
Distribution Date) or, in the case of the first
Distribution Date, on the Original Certificate
Balance. Interest in respect of a Distribution Date
will accrue from and including the Cut-Off Date (in
the case of the first Distribution Date), or from
and including the most recent Distribution Date on
which interest has been paid, to but excluding the
current Distribution Date. Interest on the
Certificates for any Distribution Date due but not
paid on such Distribution Date will be due on the
next Distribution Date, together with, to the
extent permitted by applicable law, interest on
such shortfall at the Pass-Through Rate. See "The
Certificates -- Distributions of Interest" and
"Certain Information Regarding the
Securities -- Distributions on the Securities."
The "Certificate Balance" will equal $72,600,000
(the "Original Certificate Balance") on the Closing
Date and on any date thereafter will equal the
Original Certificate Balance reduced by all
distributions of principal previously made in
respect of the Certificates. Distributions on the
Certificates will be subordinated to payments of
interest and principal on the Notes as described
under "The Certificates" and "Certain Information
Regarding the Securities -- Distributions on the
Securities."
B. Principal............... No principal will be paid on the Certificates until
the Distribution Date on which the principal amount
of the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes has been reduced to zero. On such
Distribution Date and each Distribution Date
thereafter, principal of the Certificates will be
payable in an amount equal to the Certificate
Principal Distributable Amount for such
Distribution Date, calculated as described under
"Certain Information Regarding the
Securities -- Distributions on the
Securities -- Deposits to the Distribution
Accounts; Priority of Payments." If not paid in
full prior to the Certificate Final Distribution
Date, the remaining Certificate Balance, if any,
will be payable on that date. See "The
Certificates -- Distributions of Principal."
C. Optional Prepayment..... In the event of an Optional Purchase, the
Certificates will be repaid in whole, but not in
part, at a repayment price equal to the Certificate
6
<PAGE> 8
Balance plus accrued interest thereon at the
Pass-Through Rate. See "The
Certificates -- Optional Prepayment."
Security for the
Securities................. The principal security for the Securities will be
as described below:
A. The Contracts........... The Contracts will consist of retail installment
sales contracts and installment loans, secured by
liens on the Financed Vehicles, purchased from WFS
by the Seller and from the Seller by the Trust,
including the right to receive the payments
thereunder on and after the Cut-Off Date. The
Seller will be required to repurchase Contracts if
(a) (i) any defect in the documentation as to a
Contract exists or the documentation has not been
received by the Owner Trustee, (ii) the Contract
has not been executed by its Obligor or (iii) any
representation or warranty of the Seller was
incorrect when made and that defect, omission or
incorrectness is not cured within 90 days and (b)
that defect, omission or incorrectness materially
and adversely affects the Securityholders, the
Indenture Trustee, the Owner Trustee or Financial
Security. The Contracts were purchased from new and
used car dealers or originated directly from
consumers by WFS. The Contracts were originated in
California and 39 other states by new and used car
dealers not affiliated with WFS, except for a
limited number of Contracts originated directly
from consumers by WFS. The Contracts will be
selected by WFS from its portfolio of retail
installment sales contracts and installment loans
based upon the criteria to be specified in the Sale
and Servicing Agreement. As of the Cut-Off Date,
the Aggregate Scheduled Balance will be
$660,000,000 (the "Cut-Off Date Aggregate Scheduled
Balance") and the Contracts will have an expected
weighted average annual percentage rate of
approximately 14.72% and an expected weighted
average remaining maturity of approximately 58
months. See "The Contracts Pool."
Approximately 22.44% of the aggregate principal
amount of the Contracts will be "Rule of 78's
Contracts" and approximately 77.56% will be "Simple
Interest Contracts", based upon the anticipated
Scheduled Balances of the Contracts as of the
Cut-Off Date. See "Index of Definitions" for the
definition of "Rule of 78's Contract" and "Simple
Interest Contract."
All net collections received by the Master Servicer
on or in respect of the Contracts and any Advances
made by the Master Servicer will be deposited in or
credited to the Collection Account or, in certain
limited instances, the Holding Account. All amounts
paid under the Policies will be solely deposited in
or credited to the Collection Account. On each
Distribution Date, the Indenture Trustee will
distribute the amounts on deposit in the Collection
Account with respect to such Distribution Date to
the Note Distribution Account and, to the extent
applicable, the Certificate Distribution Account.
All payments to Noteholders will be made from the
Note Distribution Account and to Certificateholders
from the Certificate Distribution Account. See
"Certain Information Regarding the
Securities -- The Accounts and Eligible
Investments" and "-- Distributions on the
Securities."
B. The Spread Account...... The Securityholders will be afforded limited
protection against losses in respect of the
Contracts by the establishment of a segregated
trust account in the name of the Indenture Trustee
for the benefit of the Securityholders (the "Spread
Account"). The Spread Account will be
7
<PAGE> 9
part of the Trust. On each Distribution Date, funds
will be withdrawn from the Spread Account for
distribution to Securityholders to cover any
shortfalls in interest and principal required to be
paid on the Securities, to the extent of the funds
therein, before giving effect to any claim under
the Policies.
The Spread Account will be created with an initial
deposit by the Seller of $19,800,000 (the "Spread
Account Initial Deposit"). The funds in the Spread
Account will thereafter be supplemented on each
Distribution Date by the deposit of any Excess
Amounts (as defined below), until the cash on
deposit in the Spread Account is at least equal to
the Specified Spread Account Balance. "Excess
Amounts" in respect of a Distribution Date will be
calculated as described under "Certain Information
Regarding the Securities -- Distributions on the
Securities -- Deposits to the Distribution
Accounts; Priority of Payments" and will equal the
funds on deposit in the Collection Account in
respect of such Distribution Date, after giving
effect to all distributions required to be made on
such Distribution Date. The Specified Spread
Account Balance will be either 7% or 10% of the
Aggregate Scheduled Balance of the Contracts, based
upon fluctuations in the Charge-Off Percentage and
the Delinquency Percentage of the Contracts. The
Specified Spread Account Balance will not exceed
$66,000,000 or be reduced below $11,880,000;
provided, however, it shall not be greater than the
outstanding principal amount of the Securities if
that amount is less than $11,880,000. See "Certain
Information Regarding the Securities -- Payment
Priorities of the Notes and the Certificates; The
Spread Account -- Calculation of Specified Spread
Account Balance."
If on the last day of any month (each, a
"Calculation Day") or on any Distribution Date the
amount on deposit in the Spread Account is greater
than the Specified Spread Account Balance, any
excess cash on deposit therein will be released
therefrom and upon such distribution
Securityholders will have no further rights in, or
claims to, such amounts. See "Certain Information
Regarding the Securities -- Withdrawals from the
Spread Account."
C. The Policies............ On the Closing Date, Financial Security will issue
the Note Policy to the Indenture Trustee and the
Certificate Policy to the Owner Trustee pursuant to
the insurance, indemnity and pledge agreement to be
dated as of June 1, 1998 (the "Insurance
Agreement"), among Financial Security, the Trust,
the Seller, Bankers Trust Company as Collateral
Agent for Financial Security, WII and WFS. Pursuant
to the Note Policy, Financial Security will fully,
unconditionally and irrevocably guarantee to the
Noteholders payment of the Scheduled Payments for
each Distribution Date. Pursuant to the Certificate
Policy, Financial Security will unconditionally and
irrevocably guarantee to the Certificateholders
payment of the Guaranteed Distributions for each
Distribution Date. See "The Policies" and
"Financial Security Assurance Inc."
Optional Purchase.......... The Seller may, but will not be obligated to,
purchase all of the Contracts in the Trust, and
thereby cause early retirement of all outstanding
Securities, on any Distribution Date as of which
the Aggregate Scheduled Balance is 5% or less of
the Cut-Off Date Aggregate Scheduled Balance (an
"Optional Purchase"). See "Certain Information
Regarding the Securities -- Termination."
8
<PAGE> 10
The Master Servicer........ WFS, as Master Servicer, will be obligated pursuant
to the Sale and Servicing Agreement, subject to the
limitations set forth therein, to service the
Contracts and to repurchase Contracts if any
representations and warranties made by WFS are
incorrect or if (i) WFS, as Master Servicer,
breaches its obligations under the Sale and
Servicing Agreement regarding collection of
payments on the Contracts or the maintenance of a
first priority perfected security interest in each
Contract, (ii) such incorrectness or breach is not
cured within 30 days and (iii) that incorrectness
or breach materially and adversely affects such
Contracts. See "The Master Servicer."
Ratings.................... It is a condition of issuance that the Class A-1
Notes be rated A-1+ by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P")
and P-1 by Moody's Investors Service, Inc.
("Moody's" and, together with S&P, the "Rating
Agencies"), and the Class A-2, Class A-3 and Class
A-4 Notes and the Certificates each be rated AAA by
S&P and Aaa by Moody's. The ratings to be received
from a Rating Agency will be an assessment by that
Rating Agency of the likelihood of full repayment
of principal and interest on the related Securities
by the Final Payment Date and does not reflect an
assessment of whether or to what extent the related
Securities will be subject to prepayment. In
addition, a rating is not a recommendation to buy,
sell or hold the Securities and any rating assigned
may be revised or withdrawn by the assigning Rating
Agency. See "Risk Factors -- Ratings of the
Securities."
Tax Status................. In the opinion of Mitchell Silberberg & Knupp LLP,
special tax counsel to the Seller, for both federal
and California income tax purposes, the Notes will
be characterized as debt, and the Trust will not be
characterized as an association (or a publicly
traded partnership) taxable as a corporation. Each
Noteholder, by the acceptance of a Note, will agree
to treat the Notes as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are
partners for federal income tax purposes. See
"Certain Federal Income Tax Consequences" and
"Certain California Income Tax Consequences."
ERISA Considerations....... Subject to the considerations discussed under
"ERISA Considerations," the Notes will be eligible
for purchase by employee benefit plans that are
subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
Since the Certificates will be subordinated to the
Notes to the extent described herein, employee
benefit plans subject to ERISA will not be eligible
to purchase the Certificates. Any benefit plan
fiduciary considering purchase of the Securities
should, among other things, consult with its
counsel in determining whether all required
conditions have been satisfied. See "ERISA
Considerations."
Legal Investment........... The Class A-1 Notes have been structured to be
eligible securities for purchase by money market
funds under Rule 2a-7 under the Investment Company
Act of 1940, as amended. A money market fund should
consult its legal advisors regarding the
eligibility of the Class A-1 Notes under Rule 2a-7,
the fund's investment policies and objectives and
an investment in the Class A-1 Notes.
Risk Factors............... The Securities offered hereby are subject to
several risk factors. The ratings of the Securities
may be changed or withdrawn and do not
9
<PAGE> 11
include any assessment as to the prepayment of the
Securities. Approximately 43.85% of the Contracts,
based upon the Cut-Off Date Aggregate Balance will
have been originated in California. Accordingly,
adverse economic conditions in California may have
a disproportionate effect on the losses on the
Contracts. There is no secondary market for the
Securities, and none may develop or be maintained,
thereby making the Securities illiquid. See "Risk
Factors" for a more detailed discussion of such
risks.
10
<PAGE> 12
RISK FACTORS
Prospective investors should consider the following risk factors in
considering the purchase of the Securities.
RATINGS OF THE SECURITIES ARE SUBJECT TO REVISION OR WITHDRAWAL
It is a condition of issuance that the Class A-1 Notes be rated A-1+ by S&P
and P-1 by Moody's, and the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes
and the Certificates each be rated AAA by S&P and Aaa by Moody's. The ratings by
S&P of the Notes will be issued without regard to the benefit afforded by the
Note Policy. The rating by Moody's of the Class A-1 Notes will be substantially
based on the issuance of the Note Policy by Financial Security, and the rating
by Moody's of the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes
will be based on the issuance of the Note Policy by Financial Security. The
ratings by each Rating Agency of the Certificates will be based on the issuance
of the Certificate Policy by Financial Security. Although the ratings of the
Notes by S&P do not take into account the benefit of the Note Policy, the Notes
will have the benefit of the Note Policy.
There is no assurance that any such rating will continue for any period of
time or that it will not be revised or withdrawn entirely by the assigning
rating agency if, in its judgment, circumstances (including, in the case of the
Certificates and, with respect to Moody's in the case of the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes, as a result of any change in the
claims-paying ability of Financial Security) so warrant. A revision or
withdrawal of such rating may have an adverse effect on the market price of the
Notes and the Certificates. A security rating is not a recommendation to buy,
sell or hold the Securities. The ratings to be received from a Rating Agency
will be an assessment by that Rating Agency of the likelihood of full repayment
of principal and interest on the related Securities by the Fixed Payment Date
and does not reflect an assessment of whether or to what extent the related
Securities will be subject to prepayment.
GEOGRAPHIC CONCENTRATION OF CONTRACTS IN CALIFORNIA INCREASES POTENTIAL ADVERSE
EFFECT OF CHANGES IN CALIFORNIA ECONOMY
Based upon the Cut-Off Date Aggregate Scheduled Balance of the Contracts,
approximately 43.85% of the Contracts will have been originated in the State of
California, and not more than 5.63% of the Contracts will have been originated
in any other individual state. See "The Contracts Pool." Because of this
geographic concentration, losses on the Contracts may be affected
disproportionately by reason of general economic conditions in California, to
the extent those conditions differ significantly and adversely to those in the
other states in which Contracts have been originated.
LIMITED LIQUIDITY MAY RESTRICT RESALE OF SECURITIES
There is currently no secondary market for the Securities offered hereby.
The Underwriters currently intend to make a market in the Securities offered
hereby, but neither of them is under any obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the Securityholders with liquidity of investment
or that any such secondary market will continue for the life of the Securities
offered hereby.
FORMATION OF THE TRUST
GENERAL
The Trust will be a business trust formed under the laws of the State of
Delaware pursuant to the Trust Agreement for the transactions described herein.
After its formation, the Trust will not engage in any activity other than (i)
acquiring, holding and managing the Contracts and the other assets of the Trust
and proceeds therefrom; (ii) issuing the Notes and the Certificates; (iii)
making payments on the Notes and the Certificates; and (iv) engaging in other
activities that are necessary, suitable or convenient to accomplish the
foregoing purposes or are incidental thereto or connected therewith.
11
<PAGE> 13
On the Closing Date, the Seller will establish the Trust by selling and
assigning the Contracts to the Trust. WFS will act as Master Servicer of the
Contracts and will receive compensation and fees for such services. See "The
Master Servicer -- Servicing Compensation." WFS, as Master Servicer, may retain
physical possession of the original executed Contracts, and certain other
documents or instruments relating to the Contracts, as custodian for the Owner
Trustee pursuant to the Sale and Servicing Agreement, or may employ one or more
Subservicers as custodians. In order to protect the Trust's ownership interest
in the Contracts, the Trust's interest in the Contracts will be perfected by the
Seller, filing UCC-1 financing statements in the State of California to give
notice of the Trust's ownership of the Contracts. Under the Sale and Servicing
Agreement and the Indenture, WFS will be obligated to take all necessary steps
to preserve and protect the interests of the Trustees in the Contracts. Neither
the Indenture Trustee nor the Owner Trustee will be responsible for the
legality, validity or enforceability of any security interest in respect of any
Contract. WFS will not physically segregate the Contracts from the other retail
installment sales contracts and installment loans owned or serviced by it and
will not stamp the Contracts with notice of the sale to the Seller or the Trust.
See "Certain Legal Aspects of the Contracts."
Simultaneously with the issuance of the Securities, Financial Security will
issue the Note Policy to the Indenture Trustee and the Certificate Policy to the
Owner Trustee for the benefit of the related Securityholders. Under the Note
Policy and the Certificate Policy, Financial Security will unconditionally and
irrevocably guarantee to the related Securityholders full and complete payment
of the Scheduled Payments and the Guaranteed Distributions, respectively, for
each Distribution Date. Financial Security will have a lien on the Contracts and
other documents relating to the Contracts subordinate to the interest of the
Securityholders, which lien cannot be executed upon until all required payments
under the Policies have been made. See "The Policies."
On and after the Closing Date, the property of the Trust will consist of
(i) Contracts secured by the Financed Vehicles; (ii) principal and interest due
under the Contracts on and after June 1, 1998 (the "Cut-Off Date"); (iii)
security interests in the Financed Vehicles; (iv) a financial guaranty insurance
policy (the "Note Policy") to be issued by Financial Security for the exclusive
benefit of Noteholders, which will unconditionally and irrevocably guarantee
payment of the Scheduled Payments on each Distribution Date; (v) a financial
guaranty insurance policy (the "Certificate Policy" and, together with the Note
Policy, the "Policies") to be issued by Financial Security for the exclusive
benefit of Certificateholders, which will fully, unconditionally and irrevocably
guarantee payment of the Guaranteed Distributions on each Distribution Date;
(vi) amounts on deposit in the Collection Account, the Note Distribution
Account, the Certificate Distribution Account, the Spread Account and the
Holding Account, including all Eligible Investments therein and all income from
the investment of funds therein and all proceeds therefrom; (vii) proceeds from
claims under certain insurance policies in respect of individual Financed
Vehicles or obligors under the Contracts (the "Obligors"); and (viii) rights as
a third party beneficiary under the sale and servicing agreement to be dated as
of June 1, 1998 (the "Sale and Servicing Agreement"), among the Trust, the
Seller and the Master Servicer. Pursuant to the Indenture, the property of the
Trust (other than the Certificate Distribution Account and the Certificate
Policy) will be held by the Master Servicer for the benefit of the Indenture
Trustee and Financial Security on behalf of the holders of the Notes.
After the sale and assignment of the Contracts to the Trust, so long as WFS
acts as Master Servicer, WFS's obligations to the Trust with respect to the
Contracts will be limited to repurchasing Contracts if(a)(i) any representations
and warranties made by WFS are incorrect, (ii) WFS, as Master Servicer, breaches
its obligations under the Sale and Servicing Agreement regarding collection of
payments on the Contracts or (iii) WFS, as Master Servicer fails to maintain a
first priority perfected security interest in each Contract and (b) such
incorrectness or breach is not cured within 30 days and (c) that incorrectness
or breach materially and adversely affects such Contracts. See "The Master
Servicer."
The Trust's principal offices will be in Wilmington, Delaware, in care of
Chase Manhattan Bank Delaware, as Owner Trustee, at the address listed below
under "The Owner Trustee."
12
<PAGE> 14
CAPITALIZATION
The Trust will initially be capitalized with equity equal to the Original
Certificate Balance. WII will purchase Certificates with an original Certificate
Balance of approximately 1% of the Original Certificate Balance and the
remaining equity interests will be sold to third party investors that are
expected to be unaffiliated with the Seller, the Master Servicer or the Trust.
The following table illustrates the capitalization of the Trust as of the
Cut-Off Date, as if the issuance and sale of the Securities had taken place on
such date:
<TABLE>
<S> <C>
Class A-1 Notes............................................. $125,000,000
Class A-2 Notes............................................. 160,000,000
Class A-3 Notes............................................. 200,000,000
Class A-4 Notes............................................. 102,400,000
Certificates................................................ 72,600,000
------------
Total............................................. $660,000,000
============
</TABLE>
THE OWNER TRUSTEE
Chase Manhattan Bank Delaware will be the Owner Trustee under the Trust
Agreement. Chase Manhattan Bank Delaware is a Delaware corporation and its
Corporate Trust Office is located at 1201 Market Street, Wilmington, Delaware
19801.
The Owner Trustee will have the rights and duties set forth herein under
"Certain Information Regarding the Securities -- The Trustees" and "-- Duties of
the Trustees."
THE CONTRACTS POOL
Each Contract is a retail installment sales contract originated by a new or
used car dealer located in California or one of the other 39 states listed below
and purchased by WFS (except for a limited number of Contracts, not to exceed 2%
of the Cut-Off Date Aggregate Scheduled Balance, in the form of installment
loans originated by branch offices of WFS directly to consumers). Each Contract
is secured by a Financed Vehicle. Except as otherwise noted, all references to
contracts include installment loans.
WFS will select the Contracts from its portfolio of fixed-interest rate
retail installment sales contracts which are secured by new and used automobiles
or light-duty trucks. The Contracts were underwritten and purchased by WFS in
the ordinary course of its business operations. It is currently anticipated,
based on the Cut-Off Date Aggregate Scheduled Balance, that not less than
approximately 67.03% of the Contracts will have been originally underwritten as
prime contracts. Approximately 43.85% of the aggregate principal amount of the
Contracts will have been originated in California and approximately 56.15% of
the aggregate principal amount of the Contracts will have been originated in
states other than California. Each of the Contracts is fully amortizing and
provides for level payments over its term, with the portions of principal and
interest of each such level payment being determined on the basis of the Rule of
78's or the simple interest (actual number of days) method. The amortization of
the Rule of 78's Contracts will result in the outstanding principal balance on
each such Contract being in excess of the Scheduled Balance of that Contract.
The aggregate outstanding principal amount of the Contracts will be
$660,000,000. Based on the anticipated Cut-Off Date Aggregate Scheduled Balance,
approximately 22.44% of the Contracts will be Rule of 78's Contracts and
approximately 77.56% will be Simple Interest Contracts.
The information concerning the Contracts presented in this Prospectus is
based upon a pool of retail installment sales contracts and installment loans
originated through May 31, 1998. While information as of the Cut-Off Date for
the Contracts that will be actually sold to the Trust may differ somewhat from
the Contract information presented herein, WFS expects that not more than 5% of
the Contracts that will be sold to the Trust will have characteristics that vary
materially from the information concerning the Contracts presented.
13
<PAGE> 15
For Contracts originated through May 31, 1998, approximately 17.83% of the
aggregate principal amount of the Contracts relate to the purchase of new
vehicles and approximately 82.17% of the Contracts relate to the purchase of
used vehicles. Approximately 59% of the aggregate principal amount of these
Contracts consists of contracts secured by automobiles and approximately 41% of
the aggregate principal amount consists of contracts secured by light-duty
trucks. These Contracts have an annual percentage rate ("APR") of at least 6.50%
and not more than 30.00%, and the weighted average APR of these Contracts is
approximately 14.72%. These Contracts have remaining maturities of at least 3
months but not more than 84 months and original maturities of at least 6 months
but not more than 84 months. The weighted average original maturity of these
Contracts was 59 months and the weighted average remaining maturity of these
Contracts as of May 31, 1998 was 58 months. It is currently anticipated that not
more than 26.9% of the aggregate principal amount of the Contracts (by Cut-Off
Date Aggregate Scheduled Balance) will have had original maturities of more than
60 months. The average principal amount outstanding per Contract as of May 31,
1998 was $11,850.47 and the outstanding principal balance of these Contracts as
of May 31, 1998 ranged from $1,001.05 to $54,344.76.
DISTRIBUTION OF CONTRACTS BY APR(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE CONTRACTS BALANCE BALANCE(2)
--------- ---------- --------------- --------------
<S> <C> <C> <C>
6.00% to 6.99%.................................... 42 $ 190,681.69 0.03%
7.00% to 7.99%.................................... 823 10,728,280.25 1.63
8.00% to 8.99%.................................... 2,443 36,989,279.16 5.60
9.00% to 9.99%.................................... 3,430 51,017,331.55 7.73
10.00% to 10.99%................................... 3,581 52,127,823.20 7.90
11.00% to 11.99%................................... 3,263 46,409,878.22 7.03
12.00% to 12.99%................................... 4,314 59,254,660.63 8.98
13.00% to 13.99%................................... 3,774 49,586,355.13 7.51
14.00% to 14.99%................................... 4,141 52,033,372.23 7.88
15.00% to 15.99%................................... 4,200 50,147,344.60 7.60
16.00% to 16.99%................................... 3,804 45,906,679.83 6.96
17.00% to 17.99%................................... 3,304 37,973,041.17 5.75
18.00% to 18.99%................................... 4,507 49,000,338.96 7.42
19.00% to 19.99%................................... 2,793 28,825,667.67 4.37
20.00% to 20.99%................................... 4,433 42,646,162.02 6.46
21.00% to 21.99%................................... 3,722 27,055,153.02 4.10
22.00% to 22.99%................................... 771 6,502,867.21 0.99
23.00% to 23.99%................................... 379 2,969,096.84 0.45
24.00% to 24.99%................................... 789 4,755,243.90 0.72
25.00% to 25.99%................................... 497 2,839,991.56 0.43
26.00% to 26.99%................................... 170 981,548.84 0.15
27.00% to 27.99%................................... 45 226,050.83 0.03
28.00% to 28.99%................................... 43 210,202.60 0.03
29.00% to 29.99%................................... 419 1,594,488.75 0.24
30.00% and over.................................... 7 28,473.04 0.00
------ --------------- ------
Total......................................... 55,694 $660,000,012.90 100.00%
====== =============== ======
</TABLE>
- ---------------
(1) Information as of May 31, 1998 for Contracts originated through May 31,
1998. Contracts having Cut-Off Date Aggregate Scheduled Balances of
$660,000,000.00 will be included in the Trust.
(2) Percentages may not add to 100.00% due to rounding.
14
<PAGE> 16
GEOGRAPHIC CONCENTRATION OF THE CONTRACTS(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
STATE(2) CONTRACTS BALANCE BALANCE(3)
-------- ---------- --------------- --------------
<S> <C> <C> <C>
California......................................... 24,476 289,417,645.65 43.85%
Arizona............................................ 2,983 37,130,127.64 5.63%
Washington......................................... 3,025 33,735,741.49 5.11%
Texas.............................................. 2,974 32,685,861.56 4.95%
Oregon............................................. 2,493 23,847,157.57 3.61%
Nevada............................................. 1,439 20,380,849.52 3.09%
Florida............................................ 1,675 20,369,310.03 3.09%
Ohio............................................... 1,610 17,313,067.88 2.62%
Illinois........................................... 1,274 15,611,593.60 2.37%
Colorado........................................... 1,163 15,538,488.69 2.35%
North Carolina..................................... 1,093 14,602,465.92 2.21%
Pennsylvania....................................... 1,049 11,392,804.25 1.73%
Virginia........................................... 750 10,333,060.97 1.57%
Alabama............................................ 772 9,779,211.52 1.48%
Wisconsin.......................................... 837 9,345,563.67 1.42%
Idaho.............................................. 835 8,949,466.60 1.36%
Tennessee.......................................... 685 8,782,427.13 1.33%
South Carolina..................................... 646 8,130,336.79 1.23%
Missouri........................................... 623 7,797,099.43 1.18%
Georgia............................................ 523 7,019,217.94 1.06%
Iowa............................................... 521 6,795,681.13 1.03%
Michigan........................................... 500 5,674,536.33 0.86%
Maryland........................................... 426 5,275,517.37 0.80%
Utah............................................... 419 5,272,420.19 0.80%
Indiana............................................ 424 5,245,046.07 0.79%
Mississippi........................................ 318 4,274,081.69 0.65%
Kentucky........................................... 333 3,878,300.23 0.59%
Kansas............................................. 234 3,474,862.91 0.53%
New Mexico......................................... 296 3,199,552.74 0.48%
West Virginia...................................... 232 2,966,607.56 0.45%
Oklahoma........................................... 255 2,550,661.42 0.39%
Massachusetts...................................... 225 2,445,816.37 0.37%
New Jersey......................................... 193 2,141,627.05 0.32%
Hawaii............................................. 171 1,945,507.58 0.29%
Wyoming............................................ 72 1,055,554.93 0.16%
New Hampshire...................................... 70 657,114.72 0.10%
Rhode Island....................................... 37 463,035.93 0.07%
Nebraska........................................... 29 379,917.72 0.06%
New York........................................... 7 90,614.60 0.01%
Connecticut........................................ 7 52,058.51 0.01%
------ --------------- ------
Total......................................... 55,694 $660,000,012.90 100.00%
====== =============== ======
</TABLE>
- ---------------
(1) Information as of May 31, 1998 for Contracts originated through May 31,
1998. Contracts having Cut-Off Date Aggregate Scheduled Balances of
$660,000,000.00 will be included in the Trust.
(2) Based upon the state in which the new or used car dealer which originated a
Contract is located, or in the case of an installment loan made by WFS, the
state in which the office of WFS which originated the loan is located.
(3) Percentages may not add to 100.00% due to rounding.
UNDERWRITING PROCEDURES RELATING TO THE CONTRACTS
WFS and its predecessors and affiliates have underwritten and purchased
motor vehicle installment sales contracts and installment loans (collectively,
"contracts") since 1973. The discussion herein regarding contracts is applicable
to the Contracts and none of the Contracts included in the Contracts Pool will
have been underwritten under special financing programs. WFS purchases contracts
across the full spectrum of the prime and non-prime credit quality market. It
offers competitive rates commensurate with the risks inherent in its obligors'
ability to make payments under their contracts.
15
<PAGE> 17
Substantially all contracts are nonrecourse to the originating dealer. In
the case of new vehicle contracts, the original amount financed does not exceed
the sum of the dealer's cost, taxes, license fees, service warranty cost and, if
applicable, premium for credit life or credit disability insurance, and in some
cases, miscellaneous costs. Over-advances (i.e., advances in excess of the
amount specified in the previous sentence) may be made under certain
circumstances to assist a dealer in selling an automobile or light duty truck by
permitting a lower down payment, and in some cases no down payment, based on the
creditworthiness of the applicant. For used vehicles, the amount financed does
not exceed the wholesale "blue book" value for the vehicle plus the related
expenses and the over-advances just described. WFS does not have a fixed maximum
amount financed as a percentage of the wholesale or retail value of the financed
vehicle. Any amount financed in excess of the wholesale value of the financed
vehicle is dependent upon the creditworthiness of the applicant. WFS believes
that, with respect to substantially all contracts, the total amount financed,
including any over-advance, does not exceed the retail value of the financed
vehicle.
Each contract is fully amortizing and provides for level payments over its
term with the portion of principal and interest of each level payment determined
generally on the basis of the sum of the digits (also known as the Rule of
78's), or on a simple interest basis otherwise. WFS does not have minimum
maturity requirements; however, contracts of less than three years maturity are
seldom purchased or made due to low customer demand.
WFS relies primarily on the judgment of its trained credit analysts who
evaluate the applicant's credit and stability, including income, employment and
housing, within the context of WFS' underwriting guidelines. WFS' credit
analysts are closely monitored by management and internal quality control
professionals to insure adherence to WFS' underwriting guidelines. The goal in
underwriting contracts is to correctly determine whether an applicant has the
ability and intention to perform on his or her obligations under the contract.
The formal underwriting process for either prime or non-prime contracts
begins when an application is received. Applications are faxed to one of two
processing centers where the system will collect credit data on applicants and
other information used in the underwriting process. The front-end application
processing system will arrange that information for review and analysis by
either a prime or non-prime credit analyst to whom the information will be
automatically queued.
Due to the credit history of some applicants, the credit analyst may
request that the data verification department verify information or seek
clarification of information learned during the review of the applicant's credit
history. Often, items in a credit history which may seem significant to another
financing source will not, upon investigation, preclude the applicant from
possessing the requisite ability and intent to perform on his or her
obligations. The application, credit history, and other relevant information are
then reviewed by the credit analyst for approval or denial. If the contract
amount or terms exceeds the credit analysts's approval authority, a senior
official with the requisite credit approval authority then reviews the
application. In order to maintain its competitive position in the marketplace,
WFS emphasizes a fast approval process and, under normal circumstances, an
approval or declination is given on the same day that the application is
received. When an application is approved, the submitting Dealer is notified.
Upon the Dealer's acceptance of WFS' approval, the contract is purchased.
Approximately one-third of all contracts purchased are reviewed by a senior
credit analyst, the quality control department of WFS or the reunderwriting
department of WFS to insure adherence to established lending guidelines and
compliance with proper documentation requirements.
16
<PAGE> 18
DELINQUENCY AND CONTRACT LOSS INFORMATION
The following tables set forth (i) the delinquency experience in regard to
contracts originated and serviced by WFS and its affiliates, including contracts
subsequently sold to WFS Financial Auto Loans, Inc. and WFS Financial Auto Loans
2, Inc. as of and for the years ended December 31, 1993 through 1997 and for the
three months ended March 31, 1998 and (ii) the loss experience for such
contracts originated and serviced by WFS and its affiliates, including contracts
subsequently sold to WFS Financial Auto Loans, Inc. and WFS Financial Auto Loans
2, Inc. as of and for the years ended December 31, 1993 through 1997 and for the
three months ended March 31, 1998. There is no assurance that the future
delinquency and loss experience of the Contracts will be similar to that set
forth below. WFS defines delinquency as being past due based on the contractual
due date of the underlying contract.
CONTRACT DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31, AT DECEMBER 31,
1998 1997 1996
------------------------ ------------------------ ------------------------
NUMBER NUMBER NUMBER
OF AMOUNT OF AMOUNT OF AMOUNT
CONTRACTS (2) CONTRACTS (2) CONTRACTS (2)
----------- ---------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio............................. 424,507 $3,824,193 408,958 $3,680,817 341,486 $3,046,585
======= ========== ======= ========== ======= ==========
Period of delinquency(3)
31-59 days........................... 8,352 $ 67,391 6,605 $ 54,450 4,511 $ 38,173
60-89 days........................... 2,582 21,408 2,161 18,652 1,305 11,470
90 days or more...................... 1,179 10,155 918 7,762 567 5,144
------- ---------- ------- ---------- ------- ----------
Total contracts delinquent............ 12,113 $ 98,954 9,684 $ 80,864 6,383 $ 54,787
======= ========== ======= ========== ======= ==========
Delinquencies as a percentage of
number and amount of contracts
outstanding.......................... 2.85% 2.59% 2.37% 2.20% 1.87% 1.80%
======= ========== ======= ========== ======= ==========
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1995 1994 1993
------------------------ ------------------------ ------------------------
NUMBER NUMBER NUMBER
OF AMOUNT OF AMOUNT OF AMOUNT
CONTRACTS (2) CONTRACTS (2) CONTRACTS (2)
----------- ---------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio............................. 258,665 $2,209,594 201,957 $1,633,177 164,516 $1,233,732
======= ========== ======= ========== ======= ==========
Period of delinquency(3)
31-59 days........................... 2,180 $ 18,557 1,136 $ 8,510 818 $ 5,239
60-89 days........................... 690 6,143 336 2,616 254 1,849
90 days or more...................... 308 2,701 145 998 138 983
------- ---------- ------- ---------- ------- ----------
Total contracts delinquent............ 3,178 $ 27,401 1,617 $ 12,124 1,210 $ 8,071
======= ========== ======= ========== ======= ==========
Delinquencies as a percentage of
number and amount of contracts
outstanding.......................... 1.23% 1.24% 0.80% 0.74% 0.74% 0.65%
======= ========== ======= ========== ======= ==========
</TABLE>
- ---------------
(1) Includes delinquency information relating to those contracts that are owned
by WFS and contracts that were sold to a grantor or owner trust but which
are serviced by WFS.
(2) This amount is net of unearned add-on interest.
(3) The period of delinquency is based on the number of days payments are
contractually past due.
CONTRACT LOSS EXPERIENCE(1)
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio
At end of period (net of unearned add-on
interest)................................. $3,824,193 $3,680,817 $3,046,585 $2,209,594 $1,633,177 $1,233,732
========== ========== ========== ========== ========== ==========
Average during period (net of unearned
add-on interest).......................... $3,739,041 $3,383,570 $2,627,622 $1,886,359 $1,438,582 $1,132,538
========== ========== ========== ========== ========== ==========
Gross chargeoffs of contracts during
period.................................... $ 41,772 $ 136,773 $ 86,464 $ 48,999 $ 27,620 $ 24,612
Recoveries during period of contracts
charged off............................... $ 7,137 34,634 25,946 18,715 11,927 7,308
---------- ---------- ---------- ---------- ---------- ----------
Net chargeoffs.............................. $ 34,635 $ 102,139 $ 60,518 $ 30,284 $ 15,693 $ 17,304
========== ========== ========== ========== ========== ==========
Net chargeoffs as a percentage of contracts
outstanding during period................. 3.71% 3.02%(2) 2.30%(2) 1.61%(2) 1.09% 1.53%
</TABLE>
- ---------------
(1) Includes loss information for contracts that are owned by WFS and contracts
that were sold to a grantor or owner trust but which are serviced by WFS. It
is the policy of WFS to charge-off all contracts when they become 120 days
delinquent, whether such contract is owned by WFS or serviced by WFS for
others. WFS believes that its charge-off policy is consistent with that
customarily used in the automobile finance industry.
(2) The loss experience in the first quarter of 1998, 1997, 1996 and 1995 was
impacted by a variety of factors, including, in particular, an increase in
the percentage of the outstanding contracts which were originally
underwritten as non-prime contracts and by general economic conditions.
Loss and delinquency experience during 1998, 1997, and 1996 for loans
originated and serviced by WFS was impacted by a variety of factors including an
increase in the percentage of the outstanding contracts which were originally
underwritten as non-prime contracts, an increase in the number of personal
bankruptcy filings and general economic conditions. Loss and delinquency
experience in the first quarter of 1998 was also impacted by a disruption of
collection efforts arising from WFS' restructuring of its offices located in the
western United States and the continued transitory effect of moving
post-repossession collection efforts to recently created centralized asset
recovery and vehicle recovery centers. As the characteristics of the Contracts
may be different than that of the entire portfolio of contracts originated and
serviced by WFS, no assurances can be given that the performance of the
Contracts will be similar.
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<PAGE> 19
POOL FACTORS AND TRADING INFORMATION
The "Note Pool Factor" for each Class of Notes will be a six-digit decimal
which the Master Servicer will compute prior to each Distribution Date with
respect to the Notes indicating the unpaid principal amount of such Class of
Notes, after giving effect to payments to be made on such Distribution Date, as
a fraction of the initial outstanding principal amount of such Class of Notes.
The "Certificate Pool Factor" for the Certificates will be a six-digit decimal
which the Master Servicer will compute prior to each Distribution Date
indicating the remaining Certificate Balance, after giving effect to
distributions to be made on such Distribution Date, as a fraction of the
Original Certificate Balance. Each Note Pool Factor and the Certificate Pool
Factor will be 1.000000 as of the Closing Date, and thereafter will decline to
reflect reductions in the outstanding principal amount of the applicable Class
of Notes, or the reduction of the Certificate Balance, as the case may be. A
Noteholder's portion of the aggregate outstanding principal amount of the
related Class of Notes will be the product of (i) the original denomination of
such Noteholder's Note and (ii) the applicable Note Pool Factor at the time of
determination. A Certificateholder's portion of the aggregate outstanding
Certificate Balance will be the product of (i) the original denomination of such
Certificateholder's Certificate and (ii) the Certificate Pool Factor at the time
of determination.
The Noteholders will receive reports on or about each Distribution Date
concerning payments received on the Contracts, the Pool Balance, each Note Pool
Factor and various other items of information, and the Certificateholders will
receive reports on or about each Distribution Date concerning payments received
on the Contracts, the Pool Balance, the Certificate Pool Factor and various
other items of information. In addition, Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law. See "Certain Information Regarding the
Securities -- Statements to Securityholders."
USE OF PROCEEDS
The net proceeds from the sale of the Securities (i.e., the proceeds of the
public offering of the Securities minus expenses relating thereto) will be
applied by the Seller to the purchase of the Contracts from WFS.
THE NOTES
GENERAL
The Notes will be issued pursuant to the Indenture, a form of which has
been filed as an exhibit to the Registration Statement. Copies of the Indenture
(without exhibits) may be obtained by Noteholders upon request in writing to the
Indenture Trustee at its Corporate Trust Office. Citations to the relevant
Sections of the Indenture appear below and under "Certain Information Regarding
the Securities" in parentheses. The following summary does not purport to be
complete and is subject to the provisions of the Notes and the Indenture;
provided, however, the following summary, together with the information
contained herein under the caption "Certain Information Regarding the
Securities," describes the material terms of the Indenture and the Notes. Where
particular provisions or terms used in the Notes or the Indenture are referred
to, the actual provisions of such documents (including definitions of terms and
Section references) are incorporated by reference as part of such summaries.
PAYMENTS OF INTEREST
Interest on the outstanding principal amount of each Class of Notes will
accrue at the applicable Interest Rate and will be payable to the Noteholders of
such Class on each Distribution Date. Interest on the Class A-1 and Class A-2
Notes will be calculated on the basis of the actual days elapsed in an Interest
Period and a 360-day year. Interest on the Class A-3 and Class A-4 Notes will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest accrued but not paid on any Distribution Date will be due on the
immediately succeeding Distribution Date, together with, to the extent permitted
by applicable law, interest on such shortfall at the related Interest Rate.
Interest payments on the Notes will be made from Net Collections after all
accrued and unpaid Trustees' fees and other administrative fees of the Trust and
payment of all applicable servicing compensation to the Master Servicer
(collectively, "Trust Fees and Expenses")
18
<PAGE> 20
have been paid. See "Certain Information Regarding the
Securities -- Distributions on the Securities -- Deposits to the Distribution
Accounts; Priority of Payments."
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders, to the extent described
below, on each Distribution Date in an amount equal to the Note Percentage of
the related Principal Distributable Amount, in each case calculated as described
under "Certain Information Regarding the Securities -- Distributions on the
Securities -- Deposits to the Distribution Accounts; Priority of Payments."
Principal payments on the Notes will be made from Net Collections after all
Trust Fees and Expenses have been paid, and after the Note Interest
Distributable Amount has been distributed. See "Certain Information Regarding
the Securities -- Distributions on the Securities -- Deposits to the
Distribution Accounts; Priority of Payments."
Principal payments on the Notes will be applied on each Distribution Date
from the Note Distribution Account as follows: first to the holders of the Class
A-1 Notes until the principal amount of the Class A-1 Notes has been reduced to
zero and in no event later than the Class A-1 Final Distribution Date, second to
the holders of the Class A-2 Notes until the principal amount of the Class A-2
Notes has been reduced to zero, third to the holders of the Class A-3 Notes
until the principal amount of the Class A-3 Notes has been reduced to zero, and
fourth to the holders of the Class A-4 Notes until the principal amount of the
Class A-4 Notes has been reduced to zero. No amount of principal will be paid on
the Certificates until the principal amount of each Class of Notes has been
reduced to zero. See "Certain Information Regarding the Securities -- Deposits
to the Distribution Accounts; Priority of Payments."
The principal amount of each Class of Notes, to the extent not previously
paid, will be due on the related Note Final Distribution Date for that Class of
Notes.
The actual date on which the outstanding principal amount of any Class of
Notes is paid may be earlier than its Note Final Distribution Date based on a
variety of factors, including the factors described under "Certain Information
Regarding the Securities -- Prepayment Considerations."
OPTIONAL REDEMPTION
Each Class of outstanding Notes will be subject to redemption in whole, but
not in part, on any Distribution Date relating to an Optional Purchase. The
redemption price will equal the unpaid principal amount of such Class of Notes
plus accrued interest thereon at the applicable Interest Rate.
THE INDENTURE TRUSTEE
Bankers Trust Company will be the Indenture Trustee. The Indenture Trustee
is a New York corporation and its Corporate Trust Office is located at Four
Albany Street, New York, New York 10006.
The Indenture Trustee will have the rights and duties set forth under
"Certain Information Regarding the Securities -- The Trustees" and "-- Duties of
the Trustees."
EVENTS OF DEFAULT
"Events of Default" under the Indenture will consist of: (i) a default by
the Trust for five days or more in the payment of any interest on the Notes of
any Class when the same becomes due and payable; (ii) a default by the Trust in
the payment of the principal of or any installment of the principal of the Notes
of any Class when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the Trust made in the
Indenture or any representation or warranty made by the Trust in the Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect in a material respect as of the time made, and the
continuation of any such default for a period of 30 days after notice thereof is
given to the Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the holders of Notes evidencing at least 25% of the voting interest
thereof, voting together as a single class; and
19
<PAGE> 21
(iv) certain events of bankruptcy, insolvency, receivership or liquidation
relating to the Trust (each, a "Trust Insolvency"). (Indenture, Section 5.01)
Upon the occurrence of an Event of Default, so long as an Insurer Default
(as defined below) shall not have occurred and be continuing, Financial Security
will have the right (in addition to its obligation to make Scheduled Payments on
the Notes in accordance with the terms of the Note Policy), but not the
obligation, to elect (i) to accelerate the principal of the Notes and to cause
the Master Servicer or the Trustee to sell or otherwise liquidate the property
of the Trust, in whole or in part on any date or dates following such
acceleration as Financial Security, in its sole discretion, shall elect, and to
deliver the proceeds thereof to the Indenture Trustee for distribution in
accordance with the terms of the Indenture or (ii) to make Scheduled Payments on
the Notes in accordance with the terms of the Note Policy. If an Insurer Default
has occurred and is continuing, upon the occurrence of an Event of Default, the
Trustee may, or if so requested in writing by holders of Notes evidencing at
least 66 2/3% of the voting interests thereof, voting together as a single
class, shall, declare the Notes due and payable at par, together with accrued
interest thereon. Notwithstanding the foregoing, upon the occurrence of a Trust
Insolvency, if an Insurer Default shall have occurred and be continuing, the
Notes will become immediately due and payable at par, together with accrued
interest thereon. (Indenture, Section 5.02) An "Insurer Default" will consist of
(i) a default by Financial Security of its obligations under either Policy or
(ii) certain events of bankruptcy, insolvency, receivership or liquidation
relating to Financial Security.
No sale or liquidation of the property of the Trust described in the
immediately preceding paragraph may be made if the proceeds thereof are not
sufficient to pay all outstanding principal of and accrued interest on the
Notes, unless (i) no Insurer Default has occurred and is continuing and the
related Event of Default arose as described in clauses (i), (ii) or (iv) of the
second preceding paragraph or (ii) an Insurer Default shall have occurred and be
continuing and (a) holders of Notes evidencing 100% of the voting interests
thereof, voting together as a single class, consent to such sale or liquidation,
or (b) (1) the Trustee determines that the property of the Trust will not
continue to provide sufficient funds for the payment of principal of and
interest on the Notes, (2) the Trustee provides prior written notice of such
sale or liquidation to each Rating Agency, and (3) holders of Notes evidencing
66 2/3% of the voting interests thereof, voting together as a single class,
consent to such sale or liquidation. (Indenture, Section 5.04)
Further, in the event that no Insurer Default has occurred and is
continuing, following the occurrence of an Event of Default, if Financial
Security has not elected to accelerate the principal of the Notes and such Event
of Default is subsequently cured, Financial Security shall not thereafter have
the right to elect to accelerate the principal of the Notes or to cause the
property of the Trust to be sold or liquidated by reason of that Event of
Default and the rights of all parties shall thereupon be restored as though such
Event of Default had not occurred.
Following the occurrence of an Event of Default and provided that (i) no
Insurer Default has occurred and is continuing and (ii) Financial Security has
not elected to accelerate the principal of the Notes, the Indenture Trustee and
the Owner Trustee will continue to submit claims under the Policies for any
shortfalls in Scheduled Payments on the Notes and Guaranteed Distributions on
the Certificates, respectively. (Indenture, Section 5.02 and 5.04) See "The
Policies."
THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Copies of the Trust Agreement (without exhibits) may be
obtained by holders of Certificates upon request in writing to the Owner Trustee
at its Corporate Trust Office. Citations to the relevant Sections of the Trust
Agreement appear below and under "Certain Information Regarding the Securities"
in parentheses. The following summary describes the material
20
<PAGE> 22
terms of the Certificates and the Trust Agreement and does not purport to be
complete and is subject to, and qualified in its entirety by, reference to all
of the provisions of the Certificates and the Trust Agreement. Where particular
provisions or terms used in the Trust Agreement are referred to, the actual
provisions (including definitions of terms and Section references) are
incorporated by reference as part of such summaries.
DISTRIBUTIONS OF INTEREST
Interest on the Certificate Balance will accrue at the Pass-Through Rate
and will be payable to Certificateholders on each Distribution Date. Interest
accrued but not paid on any Distribution Date will be due on the immediately
succeeding Distribution Date, together with, to the extent permitted by
applicable law, interest on such amount at the Pass-Through Rate. Interest
distributions with respect to the Certificates will be made from Net Collections
after all Trust Fees and Expenses have been paid and after the Note
Distributable Amount has been distributed. See "Certain Information Regarding
the Securities -- Distributions on the Securities -- Deposits to the
Distribution Accounts; Priority of Payments."
DISTRIBUTIONS OF PRINCIPAL
No principal will be paid on the Certificates until the Distribution Date
on which the principal amount of the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes has been reduced to zero. On such Distribution Date and each
Distribution Date thereafter, the Certificateholders will be entitled to
distributions in an amount equal to the Certificate Percentage of the Principal
Distributable Amount, in each case calculated as described under "Certain
Information Regarding the Securities -- Distributions on the
Securities -- Deposits to the Distribution Accounts; Priority of Payments."
Distributions with respect to principal payments will be made from Net
Collections after all Trust Fees and Expenses have been paid and after the Note
Distributable Amount and the Certificate Interest Distributable Amount have been
distributed. See "Certain Information Regarding the Securities -- Distributions
on the Securities -- Deposits to the Distribution Accounts; Priority of
Payments."
If not paid in full prior to the Certificate Final Distribution Date, the
remaining Certificate Balance, if any, will be payable on such Distribution
Date.
The actual date on which the Certificate Balance is reduced to zero may be
earlier than the Certificate Final Distribution Date based on a variety of
factors, including (i) the Seller's right or obligation to repurchase the
Contracts (a) on any Distribution Date as of which the Aggregate Scheduled
Balance is less than 5% of the Cut-Off Date Aggregate Scheduled Balance, or (b)
because of certain material defects in Contract documentation or due to breaches
of its respective representations and warranties in respect thereof, in either
case that materially and adversely affect the interests of Securityholders, the
Indenture Trustee, the Owner Trustee or Financial Security, or (ii) purchases by
the Master Servicer of Contracts due to certain breaches in representations and
warranties made by the Master Servicer or due to certain breaches by the Master
Servicer in servicing procedures, in either case that materially and adversely
affect such Contracts. Any such repurchase or purchase may reduce the average
life of the Contracts. See "Certain Information Regarding the
Securities -- Prepayment Considerations."
OPTIONAL PREPAYMENT
The Certificates will be subject to prepayment in whole, but not in part,
on any Distribution Date relating to an Optional Purchase. Certificateholders
will receive an amount in respect of the Certificates equal to the Certificate
Balance, together with accrued interest at the Pass-Through Rate. Any such
distribution will effect early retirement of the Certificates. See "Certain
Information Regarding the Securities -- Termination."
MANDATORY PREPAYMENT
As more fully described under "The Notes -- Events of Default," upon the
occurrence of an Event of Default (so long as an Insurer Default shall not have
occurred and be continuing), Financial Security will have the right, but not the
obligation, to cause the property of the Trust to be sold or liquidated in whole
or in
21
<PAGE> 23
part, on any date or dates as Financial Security, in its sole discretion, shall
elect prior to the date on which such Event of Default is cured. Any such sale
or liquidation may cause a full or partial prepayment of the Certificates.
PAYING AGENTS
Distributions of principal of and interest on the Certificates will be made
by the Owner Trustee or any Paying Agent or Paying Agents as the Owner Trustee
may designate from time to time. The Chase Manhattan Bank, N.A. will be
designated as the initial Paying Agent with respect to the Certificates. (Trust
Agreement, Section 3.10)
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
DTC, New York, New York, will act as securities depository for the
Securities. Each Class of Notes and the Certificates will be issued as fully
registered securities registered in the name of Cede & Co. ("Cede"), the nominee
of DTC. As such, it is anticipated that the only Noteholders or
Certificateholders, as the case may be, will be Cede, as nominee of DTC. Note
Owners will not be recognized by the Indenture Trustee as "Noteholders," as such
term will be used in the Indenture. Certificate Owners will not be recognized by
the Owner Trustee as "Certificateholders," as such term will be used in the
Trust Agreement. Security Owners will only be permitted to exercise the rights
of Securityholders indirectly through DTC and its Participants, as further
described below.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code in effect in the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC
was created to hold securities for its participating members ("Participants")
and to facilitate the clearance and settlement of securities transactions
between Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Security Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
Securities may do so only through Participants and Indirect Participants.
Participants will receive a credit for the related Securities on DTC's records.
The ownership interest of each Security Owner will in turn be recorded on the
respective records of Participants and Indirect Participants. Security Owners
will not receive written confirmation from DTC of their purchase, but Security
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Participant or Indirect Participant through which the Security Owner entered
into the transaction. Transfers of ownership interests in the Securities will be
accomplished by entries made on the books of Participants acting on behalf of
Security Owners.
To facilitate subsequent transfers, all Securities deposited by
Participants with DTC will be registered in the name of Cede, as nominee of DTC.
The deposit of Securities with DTC and their registration in the name of Cede
will effect no change in beneficial ownership. DTC will have no knowledge of the
actual Security Owners and its records will reflect only the identity of the
Participants to whose accounts such Securities are credited, which may or may
not be the Security Owners. Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
22
<PAGE> 24
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Security Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
DTC's practice is to credit Participants' accounts on each Distribution
Date in accordance with their respective holdings of Securities shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such Distribution Date. Payments by Participants and Indirect Participants to
Security Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant or Indirect Participant and not of DTC, the Indenture Trustee,
the Owner Trustee, Financial Security or the Seller, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal of and interest on the Securities to DTC will be the responsibility of
the related Trustee, disbursement of such payments to Participants will be the
responsibility of DTC and disbursement of such payments to Security Owners will
be the responsibility of Participants and Indirect Participants. As a result,
under the book-entry format, Security Owners may experience some delay in their
receipt of payments. DTC will forward such payments to its Participants which
thereafter will forward them to Indirect Participants or Security Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge Securities to persons or entities that do not participate in the
DTC system, or otherwise take actions with respect to such Securities, may be
limited due to the lack of a physical certificate for such Securities.
Neither DTC nor Cede will consent or vote with respect to the Securities.
Under its usual procedures, DTC will mail an "Omnibus Proxy" to the Indenture
Trustee or the Owner Trustee, as the case may be, as soon as possible after each
applicable record date for such a consent or vote. The Omnibus Proxy will assign
Cede's consenting or voting rights to those Participants to whose accounts the
related Securities will be credited on that record date (identified in a listing
attached to the Omnibus Proxy).
None of the Master Servicer, the Seller, Financial Security, the Indenture
Trustee or the Owner Trustee will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Securities held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DEFINITIVE SECURITIES
Definitive Securities representing any Class of Notes or the Certificates
will be issued to the related Security Owners rather than to DTC, only if (i)
DTC is no longer willing or able to discharge its responsibilities as depository
with respect to the Securities, and neither the Indenture Trustee nor the Owner
Trustee, as the case may be, nor the Administrator is able to locate a qualified
successor, (ii) the Administrator, at its option, elects to terminate the
book-entry system with respect to the related Securities through DTC or (iii)
after an Event of Default or Servicer Default, Security Owners evidencing not
less than 51% of the voting interests of the related Securities advise the
related Trustee through DTC and its Participants in writing that the
continuation of a book-entry system through DTC or its successor is no longer in
the best interests of the related Security Owners. (Indenture, Section 2.11;
Trust Agreement, Section 3.14)
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Owner Trustee or Indenture Trustee, as the case may be,
will be required to notify the related Security Owners, through Participants, of
the availability through DTC of Definitive Securities. Upon surrender by DTC of
the certificates representing all Securities of any affected Class and the
receipt of instructions for re-registration, such Trustee will issue Definitive
Securities to the related Security Owners, who thereupon will become Noteholders
or Certificateholders, as the case may be, for all purposes of the Indenture or
the Trust Agreement, respectively. (Indenture, Section 2.11; Trust Agreement,
Section 3.14)
Distributions on the Definitive Securities will thereafter be made by the
related Trustee directly to holders of such Definitive Securities in accordance
with the procedures described herein and to be set forth in
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the Indenture and the Trust Agreement. Interest payments and any principal
payments on the Securities on each Distribution Date will be made to holders in
whose names the Definitive Securities were registered at the close of business
on the Record Date with respect to such Distribution Date. Distributions will be
made by check mailed to the address of such holders as they appear on the
register specified in the Trust Agreement or the Indenture, as the case may be.
The final payment on any Securities (whether Definitive Securities or Securities
registered in the name of Cede), however, will be made only upon presentation
and surrender of such Securities at the office or agency specified in the notice
of final distribution to Securityholders. The Owner Trustee or the Indenture
Trustee will mail such notice to registered Securityholders within five Business
Days of receipt from the Master Servicer of notice of termination of the Trust.
(Indenture, Section 2.07; Trust Agreement, Section 9.01)
Definitive Securities will be transferable and exchangeable at the offices
of the Owner Trustee or the Indenture Trustee (or any security registrar
appointed thereby), as will be set forth in the Trust Agreement or the
Indenture, as the case may be. No service charge will be imposed for any
registration of transfer or exchange, but such Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. (Indenture, Section 2.04; Trust Agreement, Section 3.04)
PAYMENTS ON THE CONTRACTS
All Net Collections on or in respect of the Contracts will be deposited in
or credited to the Collection Account or, in limited instances, the Holding
Account described under "The Accounts and Eligible Investments." Such "Net
Collections" will include all payments received by the Master Servicer on or in
respect of the Contracts due on or after the Cut-Off Date, net of late payments
in respect of which the Master Servicer has previously made an Advance or
reimbursement to the Master Servicer for Nonrecoverable Advances, and will
include (i) prepayments, Net Liquidation Proceeds and Net Insurance Proceeds;
(ii) any amounts deposited in the Collection Account (a) by the Seller to
purchase Contracts because of certain material defects in the related Contract
Documents or certain breaches in representations or warranties regarding the
Contracts to be made by the Seller in the Sale and Servicing Agreement, in
either case that materially and adversely affect the interests of the
Securityholders, the Indenture Trustee, the Owner Trustee or Financial Security,
or (b) by the Master Servicer to purchase Contracts because of certain breaches
in representations and warranties to be made by the Master Servicer in the Sale
and Servicing Agreement or certain breaches by the Master Servicer in servicing
procedures relating to the Contracts, in each case that materially and adversely
affect such Contracts; (iii) any amounts deposited by the Seller in the
Collection Account as a result of exercising its right under certain
circumstances to purchase all of the outstanding Contracts; and (iv) any
Advances that may be made by the Master Servicer in respect of delinquent
Contracts. "Net Liquidation Proceeds" will be proceeds received by the Master
Servicer (net of Liquidation Expenses) upon liquidation of any Defaulted
Contract. "Liquidation Expenses" will be the reasonable out-of-pocket expenses
(exclusive of overhead expenses) incurred by the Master Servicer in realizing
upon a defaulted Contract. "Net Insurance Proceeds" will be proceeds paid by any
insurer under a comprehensive and collision or limited dual interest insurance
related to a Contract (other than funds used for the repair of the related
Financed Vehicle or otherwise released to the related Obligor in accordance with
normal servicing procedures), after reimbursement to the Master Servicer of
expenses recoverable under such insurance policy. (Sale and Servicing Agreement,
Section 5.02)
Subject to the remainder of this paragraph, distributions on the Securities
will be made on each Distribution Date out of Net Collections (exclusive of
amounts representing payments due in the Due Period in which such Distribution
Date occurs and any future Due Periods) for the related Due Period plus certain
reinvestment earnings on Eligible Investments and any Advance made by the Master
Servicer as described under "The Master Servicer -- Advances." The amount of
such Net Collections, reinvestment earnings and Advances on each Distribution
Date will be applied as described under "Distributions on the Securities."
Amounts, to the extent available, will be withdrawn from the Spread Account to
cover any shortfalls in distributions to Securityholders. Under the Policies,
Financial Security will be obligated to provide for distribution on the
Securities on each Distribution Date the amount, if any, by which the amount of
such Net Collections and funds available in the Spread Account is less than the
sum of the interest and principal due on
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<PAGE> 26
the Securities for such Distribution Date and will be obligated to provide for
the payment of Guaranteed Distributions on the Certificates on the Certificate
Final Distribution Date.
THE ACCOUNTS AND ELIGIBLE INVESTMENTS
The Collection Account. The Master Servicer will cause all collections made
on or in respect of the Contracts during a Due Period (other than amounts to be
deposited in the Holding Account as described below), net of late payments in
respect of which the Master Servicer has previously made an Advance and
reimbursements to it for Nonrecoverable Advances, to be deposited in or credited
to an account (the "Collection Account") to be established by the Master
Servicer under the Sale and Servicing Agreement. The Collection Account may,
upon prior written approval of Financial Security, be an uninsured general
ledger account or a deposit account at the Bank. Funds in the Collection Account
will be invested in a reinvestment contract (the "Reinvestment Contract") under
which the Bank will be the obligor, so long as the Reinvestment Contract is an
Eligible Investment as described below. The reinvestment earnings on the
Reinvestment Contract for each Distribution Date will be equal to the amount, if
any, by which the related payment of interest for such Distribution Date exceeds
the aggregate amount of interest (adjusted to the Pass-Through Rate) accrued on
the Contracts during the related Due Period. If the Reinvestment Contract does
not qualify as an Eligible Investment, the Indenture Trustee shall invest the
funds on deposit in the Collection Account in one or more other Eligible
Investment or Investments. Payments under the Reinvestment Contract will be
deposited in the Collection Account no later than the fifth Business Day
immediately preceding each Distribution Date. (Sale and Servicing Agreement,
Section 5.01)
If an Event of Default under the Sale and Servicing Agreement has occurred
and is continuing, funds in the Collection Account eligible to be invested in
Eligible Investments will be invested at the direction of the Indenture Trustee.
"Eligible Investments" will be specified in the Sale and Servicing Agreement and
will be limited to investments which meet the criteria of each Rating Agency as
being consistent with their then-current ratings of the Securities. All income
or other gain from such investments will be promptly deposited in, and any loss
resulting from such investments shall be charged to, the Collection Account.
(Sale and Servicing Agreement, Section 5.01)
The Distribution Accounts. The Master Servicer will establish and maintain
with the Indenture Trustee (i) an account, in the name of the Indenture Trustee
on behalf of the Noteholders, in which amounts released from the Collection
Account for distribution to Noteholders will be deposited and from which all
distributions to Noteholders will be made (the "Note Distribution Account") and
(ii) an account, in the name of the Owner Trustee on behalf of the
Certificateholders, in which amounts released from the Collection Account for
distribution to Certificateholders will be deposited and from which all
distributions to Certificateholders will be made (the "Certificate Distribution
Account" and, together with the Note Distribution Account, the "Distribution
Accounts"). (Sale and Servicing Agreement, Section 5.01; Trust Agreement,
Section 5.01)
The Holding Account. The Master Servicer will establish an account (the
"Holding Account") into which it will deposit during each Due Period payments on
Rule of 78's Contracts that are due in one or more Due Periods subsequent to
such Due Period. Funds in the Holding Account due in the next Due Period will be
transferred to the Collection Account immediately after the next succeeding
Distribution Date. (Sale and Servicing Agreement, Sections 5.01 and 5.02)
DISTRIBUTIONS ON THE SECURITIES
General. On or before the fifth Business Day prior to each Distribution
Date (each such date, a "Determination Date"), the Master Servicer will deliver
to the Indenture Trustee, the Owner Trustee, Financial Security and each Rating
Agency a statement (the "Distribution Date Statement") setting forth, among
other things, the following amounts with respect to the related Due Period and
such Distribution Date: (i) the amount of funds in the Collection Account
allocable to collections on the Contracts in the preceding Due Period (excluding
any Advances and Repurchase Amounts); (ii) the Repurchase Amount of all
Contracts repurchased by the Seller or the Master Servicer during the related
Due Period; (iii) the Advances made by the Master Servicer and the amounts for
which the Master Servicer is entitled to be reimbursed for
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unreimbursed Advances; (iv) the amount of Net Collections; (v) the Note Interest
Distributable Amount; (vi) the Note Principal Distributable Amount; (vii) the
Certificate Interest Distributable Amount; (viii) the Certificate Principal
Distributable Amount; and (ix) the Servicing Fee.
Deposits to the Distribution Accounts; Priority of Payments. On each
Distribution Date, the Master Servicer will allocate amounts on deposit in the
Collection Account with respect to the related Due Period and such Distribution
Date as described below and will instruct the Indenture Trustee to make the
following deposits and distributions in the following amounts and order of
priority:
(i) to the Master Servicer, the Servicing Fee, including any unpaid
Servicing Fees with respect to one or more prior Due Periods;
(ii) to the Indenture Trustee and the Owner Trustee, any accrued and
unpaid Trustees' fees, in each case to the extent such fees have not been
previously paid by the Master Servicer;
(iii) to the Note Distribution Account, from Net Collections (after
giving effect to the reduction in Net Collections described in clauses (i)
and (ii) above), the Note Interest Distributable Amount to be distributed
to the holders of the Notes at their respective Interest Rates;
(iv) to the Note Distribution Account, from Net Collections (after
giving effect to the reduction in Net Collections described in clauses (i)
through (iii) above), the Note Principal Distributable Amount to the
holders of the Class A-1 Notes until the principal amount of the Class A-1
Notes has been reduced to zero, second to the holders of the Class A-2
Notes until the principal amount of the Class A-2 Notes has been reduced to
zero, third to the holders of the Class A-3 Notes until the principal
amount of the Class A-3 Notes has been reduced to zero, and fourth to the
holders of the Class A-4 Notes until the principal amount of the Class A-4
Notes has been reduced to zero;
(v) to the Note Distribution Account, if such Distribution Date is a
Note Final Distribution Date, the remaining principal amount of the related
Class of Notes (after giving effect to the reduction in Net Collections
described in clauses (i) through (iv) above) to be distributed to the
holders of such Class of Notes;
(vi) to the Certificate Distribution Account, from Net Collections
(after giving effect to the reduction in Net Collections described in
clauses (i) through (v) above), the Certificate Interest Distributable
Amount to be distributed to the holders of the Certificates;
(vii) to the Certificate Distribution Account, from Net Collections
(after giving effect to the reduction in Net Collections described in
clauses (i) through (vi) above), the Certificate Principal Distributable
Amount to be distributed to the holders of the Certificates;
(viii) to the Certificate Distribution Account, if such Distribution
Date is the Certificate Final Distribution Date, from Net Collections
(after giving effect to the reduction in Net Collections described in
clauses (i) through (vii) above), the Certificate Balance, as such balance
has been reduced by payments thereon in respect of such Distribution Date
to be distributed to the holders of the Certificates;
(ix) to Financial Security, from Net Collections (after giving effect
to the reduction in Net Collections described in clauses (i) through (viii)
above), any amounts owing to Financial Security in respect of all payments,
if any, made under the Policies for which reimbursement has not yet been
made to Financial Security and any unreimbursed fees, expenses or other
amounts owing to Financial Security under the Insurance Agreement
(collectively, "Unreimbursed Insurer Amounts"); and
(x) in the event that the distributions described in clauses (i)
through (ix) above have been funded exclusively from Net Collections, any
Net Collections remaining ("Excess Amounts"), will be deposited into the
Spread Account, until the amount on deposit therein equals the Specified
Spread Account Balance, with any remaining Excess Amounts being distributed
as described under "-- Withdrawals from the Spread Account."
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If the Notes are accelerated following an Event of Default, amounts
collected following the sale or liquidation of the property of the Trust will be
distributed in the priority described above. See "The Notes -- Events of
Default."
For the purposes hereof, the following terms will have the following
meanings:
The "Aggregate Scheduled Balance" will equal the sum of the Scheduled
Balances of each outstanding Contract. At the time of initial issuance of the
Securities, the initial aggregate principal amount of the Securities will equal
the Aggregate Scheduled Balance.
The "Aggregate Scheduled Balance Decline" will mean, with respect to any
Distribution Date, the amount by which the Aggregate Scheduled Balance as of the
Distribution Date immediately preceding such Distribution Date (or as of the
Cut-Off Date in the case of the first Distribution Date) exceeds the Aggregate
Scheduled Balance as of such Distribution Date.
The "Certificate Distributable Amount" will mean, with respect to any
Distribution Date, the sum of the Certificate Principal Distributable Amount and
the Certificate Interest Distributable Amount for such Distribution Date.
The "Certificate Interest Carryover Shortfall" will mean, with respect to
any Distribution Date, the excess of the sum of the Certificate Quarterly
Interest Distributable Amount for the immediately preceding Distribution Date
and any outstanding Certificate Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest on the Certificates
that is actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Pass-Through Rate for the related Interest Period.
The "Certificate Interest Distributable Amount" will mean, with respect to
any Distribution Date, the sum of the Certificate Quarterly Interest
Distributable Amount for such Distribution Date and the Certificate Interest
Carryover Shortfall for such Distribution Date.
The "Certificate Percentage" will mean (i) for each Distribution Date to
and including the Distribution Date on which the principal amount of the Class
A-4 Notes is reduced to zero, 0% and (ii) for each Distribution Date on and
after the Distribution Date on which the principal amount of the Class A-4 Notes
is reduced to zero, a percentage equal to 100% minus the Note Percentage for
such Distribution Date.
The "Certificate Principal Carryover Shortfall" will mean, as of the close
of any Distribution Date, the excess of the sum of the Certificate Quarterly
Principal Distributable Amount and any outstanding Certificate Principal
Carryover Shortfall for the immediately preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such Distribution Date.
The "Certificate Principal Distributable Amount" will mean, with respect to
any Distribution Date, the sum of the Certificate Quarterly Principal
Distributable Amount for such Distribution Date and any outstanding Certificate
Principal Carryover Shortfall for the immediately preceding Distribution Date;
provided, however, that the Certificate Principal Distributable Amount shall not
exceed the Certificate Balance. In addition, on the Certificate Final
Distribution Date, the principal required to be deposited into the Certificate
Distribution Account will include the amount necessary to reduce the Certificate
Balance to zero.
The "Certificate Quarterly Interest Distributable Amount" will mean, with
respect to any Distribution Date, 90 days of interest (or, in the case of the
first Distribution Date, interest accrued from and including the Cut-Off Date to
but excluding such Distribution Date) at the Pass-Through Rate on the
Certificate Balance on the immediately preceding Distribution Date, after giving
effect to all payments of principal on such preceding Distribution Date (or, in
the case of the first Distribution Date, the Original Certificate Balance).
The "Certificate Quarterly Principal Distributable Amount" will mean, with
respect to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date.
A "Defaulted Contract" will mean, with respect to any Due Period, a
Contract (i) which is, at the end of such Due Period, delinquent in the amount
of at least two monthly payments or (ii) with respect to which the related
Financed Vehicle has been repossessed or repossession efforts have been
commenced.
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A "Due Period" will mean, with respect to any Distribution Date, the
three-month period commencing on the first day of the third month preceding the
month in which such Distribution Date occurs (or commencing on the Cut-Off Date
in the case of the first Distribution Date) to the last day of the month
immediately preceding the month in which such Distribution Date occurs.
A "Liquidated Contract" will be a Contract that (i) is the subject of a
Full Prepayment; (ii) is a Defaulted Contract with respect to which the related
Financed Vehicle was repossessed and, after any cure period required by law has
expired, the Master Servicer has charged-off any losses prior to the four-month
period referenced in clause (iv) below; (iii) has been paid in full on or after
its Maturity Date; or (iv) is delinquent as to all or part of four or more
payments of Monthly P&I. Contracts that become Liquidated Contracts pursuant to
clause (ii) or (iv) above and any collections thereon will thereupon no longer
be part of the Trust, although collections thereon will be deposited in the
Collection Account.
The "Note Distributable Amount" will mean, with respect to any Distribution
Date, the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
The "Note Interest Carryover Shortfall" will mean, with respect to any
Distribution Date and a Class of Notes, the excess, if any, of the sum of the
Note Interest Distributable Amount for such Class for the immediately preceding
Distribution Date plus any outstanding Note Interest Carryover Shortfall for
such Class on such preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account with
respect to such Class on such preceding Distribution Date, plus, to the extent
permitted by applicable law, interest on the amount of interest due but not paid
to Noteholders of such Class on such preceding Distribution Date at the related
Interest Rate for the related Interest Period.
The "Note Interest Distributable Amount" will mean, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Quarterly Interest
Distributable Amount and the Note Interest Carryover Shortfall for such Class of
Notes for such Distribution Date.
The "Note Percentage" will mean (i) for each Distribution Date to and
including the Distribution Date on which the principal amount of the Class A-4
Notes is reduced to zero, 100%; (ii) on the Distribution Date on which the
principal amount of the Class A-4 Notes is reduced to zero, (a) 100% until the
principal amount of the Class A-4 Notes has been reduced to zero and (b) with
respect to any remaining portion of the Principal Distributable Amount, 0%; and
(iii) for each Distribution Date after the principal amount of the Class A-4
Notes is reduced to zero, 0%.
The "Note Principal Carryover Shortfall" will mean, as of the close of any
Distribution Date, the excess of the sum of the Note Quarterly Principal
Distributable Amount and any outstanding Note Principal Carryover Shortfall for
the immediately preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account on such
Distribution Date.
The "Note Principal Distributable Amount" will mean, with respect to any
Distribution Date, the sum of the Note Quarterly Principal Distributable Amount
for such Distribution Date and any outstanding Note Principal Carryover
Shortfall for the immediately preceding Distribution Date; provided, however,
that the Note Principal Distributable Amount with respect to a Class of Notes
shall not exceed the outstanding principal amount of such Class of Notes.
Notwithstanding the foregoing, the Note Principal Distributable Amount on each
Note Final Distribution Date shall not be less than the amount that is necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding principal amount of the related Class of Notes to zero.
The "Note Quarterly Interest Distributable Amount" will mean, with respect
to any Distribution Date, 90 days of interest (or in the case of the first
Distribution Date, interest accrued from and including the Cut-Off Date to but
excluding such Distribution Date, or in the case of the Class A-1 Notes and the
Class A-2 Notes, interest for the actual number of days in the applicable
Interest Period, based on a 360-day year) at the related Interest Rate for each
Class of Notes on the outstanding principal amount of the Notes of such Class on
the immediately preceding Distribution Date, after giving effect to all payments
of principal to Noteholders of such Class on or prior to such Distribution Date
(or, in the case of the first Distribution Date, on the original principal
amount of such Class of Notes).
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The "Note Quarterly Principal Distributable Amount" will mean, with respect
to any Distribution Date, the Note Percentage of the Principal Distributable
Amount for such Distribution Date.
The "Principal Distributable Amount" will mean, with respect to any
Distribution Date, the sum of (i) the Aggregate Scheduled Balance Decline for
such Distribution Date, plus (ii) the aggregate Scheduled Balances as of such
Distribution Date of all Rule of 78's Contracts that became Liquidated Contracts
pursuant to clause (i), (ii) or (iv) of the definition of the term "Liquidated
Contract" during the related Due Period.
The "Scheduled Balance" of a Rule of 78's Contract will represent the
present value of the remaining scheduled payments of Monthly P&I due on such
Contract discounted on a monthly basis as described below, while the Scheduled
Balance of a Simple Interest Contract will be its actual principal balance. The
"Monthly P&I" for a Contract will be the installment of principal and interest
due thereunder each month (each such date, a "Due Date") and will be
substantially equal for the term of the Contract. The Scheduled Balance of a
Rule of 78's Contract for the Cut-Off Date and each Due Date will be set forth
in a schedule to the Sale and Servicing Agreement and will be equal to the
present value (determined as discussed below) at each such date of all payments
of Monthly P&I on the Contract that are due after such Due Date. Such present
value will be determined by discounting (on a monthly basis) each payment of
Monthly P&I from the last day of the month in which such payment of Monthly P&I
is due to the first day of the month in which such Due Date occurs using a
discount rate that will produce a present value at the Cut-Off Date equal to
the outstanding principal balance of the Contract as of the Cut-Off Date. The
interest rate borne by each Contract will at least equal the sum of the
weighted average of the Interest Rates and the Pass-Through Rate on the Closing
Date plus the Servicing Fee Percent.
PAYMENT PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE SPREAD ACCOUNT
General. The rights of the Securityholders to receive distributions with
respect to the Contracts will be subordinated to the rights of the Master
Servicer (to the extent that the Master Servicer has not been reimbursed for any
outstanding Advances and has not been paid all Servicing Fees), the Trustees and
certain other entities (to the extent the Trustees and such other entities have
not received all Trust Fees and Expenses payable to them). In addition, the
rights of the Noteholders to receive distributions with respect to the Contracts
will be subject to the priorities set forth under "-- Distributions on the
Securities -- Deposits to the Distribution Accounts; Priority of Payments," and
the rights of the Certificateholders to receive distributions with respect to
the Contracts will be subordinated to the rights of the Noteholders, in each
case to the extent described above. Such priorities and subordination are
intended to enhance the likelihood of timely receipt by senior Securityholders
of the full amount of interest and principal required to be paid to them, and to
afford such senior Securityholders limited protection against losses in respect
of the Contracts.
In the event of delinquencies or losses on the Contracts, the foregoing
protection will be effected both by the preferential right of the Noteholders to
receive, to the extent described herein, current distributions with respect to
the Contracts and by the establishment of the Spread Account. The Spread Account
will be a part of the Trust and will be a segregated trust account in the name
of the Indenture Trustee and the Indenture Trustee will have a perfected
security interest therein and in all amounts deposited in or credited to the
Spread Account as well as all Eligible Investments made with such deposits and
earnings. The Spread Account will be created with an initial deposit by the
Seller on the Closing Date of an amount equal to the Spread Account Initial
Deposit. The Spread Account will thereafter be funded by the deposit therein of
all Excess Amounts, if any, in respect of each Distribution Date.
Amounts held from time to time in the Spread Account will continue to be
held for the benefit of holders of the Securities and Financial Security and may
be invested in Eligible Investments. Investment income on monies on deposit in
the Spread Account will be credited to the Spread Account. Any loss on such
investment will be charged to the Spread Account. (Sale and Servicing Agreement,
Section 5.03)
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Calculation of Specified Spread Account Balance. The "Specified Spread
Account Balance" will be calculated as of each Calculation Day and will equal 7%
of the Aggregate Scheduled Balance on such Calculation Day, except that if on
any Calculation Day (i) the Charge-Off Percentage for the three calendar month
period ending on such Calculation Day exceeds 4% or (ii) the Delinquency
Percentage for the three calendar month period ending on such Calculation Day
exceeds 2%, then the Specified Spread Account Balance shall equal 10% of the
Aggregate Scheduled Balance on such Calculation Day (but only for so long as
such Charge-Off Percentage or Delinquency Percentage thresholds continue to be
exceeded on any subsequent Calculation Day). Notwithstanding the foregoing, in
no event can the Specified Spread Account Balance be greater than $66,000,000
(10% times the Cut-off Date Aggregate Scheduled Balance) or less than
$11,880,000 (the amount required by the Rating Agencies and Financial Security);
provided, however, it shall not be greater than the outstanding aggregate
principal amount of the Securities if such amount is less than $11,880,000. At
no time after the Closing Date will the Seller, WII, the Master Servicer,
Financial Security or any other entity be required to deposit funds into the
Spread Account.
The "Charge-Off Percentage" will mean, with respect to any three calendar
month period, the annualized percentage equivalent of the average of the
percentages of charged-off Contracts for each month in such period. For each
month, the percentage of charged-off Contracts shall be the percentage
equivalent of a fraction, the numerator of which is the aggregate Scheduled
Balance for such month of all Contracts that have become Liquidated Contracts
(as specified in clause (ii) or (iv) of the definition of Liquidated Contracts)
during such month, less any Net Liquidation Proceeds received during such month
(and not reflected in prior periods) with respect to such Contracts or from any
Contracts charged-off in prior periods, and the denominator of which is the
aggregate Scheduled Balance of all outstanding Contracts as of the end of the
immediately preceding month. The "Delinquency Percentage" will mean, with
respect to any three calendar month period, the average of the percentages of
delinquent Contracts for each month in such period. For each month the
percentage of delinquent Contracts shall be the percentage equivalent of a
fraction, the numerator of which is the sum of (i) the aggregate Scheduled
Balance of all outstanding Contracts 61 days or more delinquent (after taking
into account permitted extensions), plus (ii) the aggregate Scheduled Balance of
all Contracts in respect of which the related Financed Vehicles have been
repossessed but have not been liquidated (to the extent the related Contract is
not otherwise reflected in clause (i) above), and the denominator of which is
the aggregate Scheduled Balance of all outstanding Contracts, in each case on
the last day of such calendar month.
The Master Servicer may, from time to time after the date of this
Prospectus, and with the approval of Financial Security, request each Rating
Agency to approve a formula for determining the Specified Spread Account Balance
that is different from that described above and would result in a decrease in
the amount of the Specified Spread Account Balance or the manner by which the
Spread Account is funded. If each Rating Agency delivers a letter to the
Indenture Trustee, the Owner Trustee and Financial Security to the effect that
the use of any such new formulation will not in and of itself result in a
qualification, reduction or withdrawal of its then-current rating of any Class
of Securities (without giving effect to the guaranty under either Policy of
payments owing to the Securityholders), then the Specified Spread Account
Balance will be determined in accordance with such new formula. The Sale and
Servicing Agreement will accordingly be amended to reflect such new calculation
without the consent of any Securityholder.
WITHDRAWALS FROM THE SPREAD ACCOUNT
Amounts held from time to time in the Spread Account will continue to be
held for the benefit of the Noteholders, the Certificateholders and Financial
Security. On each Distribution Date funds will be withdrawn from the Spread
Account to the extent that the amount on deposit in the Note Distribution
Account with respect to any Distribution Date is less than the Note
Distributable Amount and will be deposited in the Note Distribution Account. In
addition, after giving effect to such withdrawal, funds will be withdrawn from
the Spread Account to the extent that the amount on deposit in the Certificate
Distribution Account is less than the Certificate Distributable Amount and will
be deposited in the Certificate Distribution Account. See "Payments from the
Spread Account and Under the Policies."
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If the amount on deposit in the Spread Account on any Calculation Day or
any Distribution Date (after giving effect to all deposits thereto or
withdrawals therefrom on such Distribution Date) is greater than the Specified
Spread Account Balance, the Indenture Trustee will distribute any excess first,
to Financial Security, to the extent of any Unreimbursed Insurer Amounts, then
to the Seller until the Seller has received from the Spread Account an aggregate
amount equal to the Spread Account Initial Deposit and to the Seller and WII in
the proportions of 99% and 1%, respectively. Upon any such distributions to
Financial Security, the Seller or WII, the Securityholders will have no further
rights in, or claims to, such amounts. (Sale and Servicing Agreement, Section
5.06)
None of the Securityholders, the Indenture Trustee, the Owner Trustee, the
Seller, WII or Financial Security will be required to refund any amounts
properly distributed or paid to them, whether or not there are sufficient funds
on any subsequent Distribution Date to make full distributions to the
Securityholders. The obligations of Financial Security under the Policies will
not be diminished or otherwise affected by any amounts distributed to Financial
Security.
PAYMENTS FROM THE SPREAD ACCOUNT AND UNDER THE POLICIES
On each Distribution Date on which the Note Distributable Amount exceeds
the amount then on deposit in the Note Distribution Account, the Noteholders
will be entitled to receive such deficiency (including amounts necessary to
reduce the outstanding principal balance of a given Class of Notes to zero on
the related Note Final Distribution Date), first, from amounts on deposit in the
Spread Account, second, if such amounts are insufficient, from amounts otherwise
payable to Certificateholders in respect of the Certificate Distributable Amount
and third, if such amounts are still insufficient, then from the payment of a
claim under the Note Policy. (Sale and Servicing Agreement, Section 5.05)
On each Distribution Date on which the Certificate Distributable Amount
exceeds the amount then on deposit in the Certificate Distribution Account, the
Certificateholders will be entitled to receive such deficiency (including
amounts necessary to reduce the Certificate Balance to zero on the Certificate
Final Distribution Date), first, from amounts on deposit in the Spread Account,
and second, if such amounts are insufficient, from the payment of a claim under
the Certificate Policy. (Sale and Servicing Agreement, Section 5.05)
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Master Servicer will prepare and
provide to the Indenture Trustee a statement to be delivered to each Noteholder
and to the Owner Trustee a statement to be delivered to each Certificateholder
on such Distribution Date (the "Statement to Securityholders"), setting forth
with respect to the related Distribution Date or Due Period, as applicable,
among other things, the following information:
(i) the amount of the Noteholder's or Certificateholder's distribution
allocable to principal (stated separately for each Class of Notes and the
Certificates);
(ii) the amount of the Noteholder's or Certificateholder's
distribution allocable to interest (stated separately for each Class of
Notes and the Certificates);
(iii) the Aggregate Scheduled Balance as of the close of business on
the last day of such Due Period;
(iv) the amount of the Servicing Fee paid to the Master Servicer with
respect to the related Due Period;
(v) the amount of any Note Interest Carryover Shortfall, Note
Principal Carryover Shortfall, Certificate Interest Carryover Shortfall and
Certificate Principal Carryover Shortfall on such Distribution Date and the
change in such amounts from those with respect to the immediately preceding
Distribution Date;
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(vi) the Note Pool Factor for each Class of Notes and the Certificate
Pool Factor, in each case as of such Distribution Date; and
(vii) the balance on deposit in the Spread Account on such
Distribution Date, after giving effect to distributions made on such
Distribution Date, and the change in such balance from the immediately
preceding Distribution Date.
Each amount set forth pursuant to subclauses (i), (ii), (iv) and (v) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
principal amount of a Note or the original Certificate Balance of a Certificate,
as the case may be. Copies of such statements may be obtained by Security Owners
by a request in writing addressed to the related Trustee at its Corporate Trust
Office. In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of the Sale and
Servicing Agreement, the Indenture Trustee and the Owner Trustee will mail to
each person who at any time during such calendar year shall have been a
Noteholder or a Certificateholder, as the case may be, a statement containing
the sum of the amounts described in clauses (i), (ii), (iv) and (v) above for
the purposes of such holder's preparation of federal income tax returns. See
"Certain Federal Income Tax Consequences." (Sale and Servicing Agreement,
Section 5.07)
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement. The Sale and Servicing Agreement will
provide that a firm of independent public accountants will furnish to the
Indenture Trustee and the Owner Trustee and Financial Security, on or before 90
days after the end of each fiscal year of the Master Servicer, beginning with
the fiscal year ended December 31, 1998, a statement as to compliance by the
Master Servicer during the preceding fiscal year (or since the Closing Date in
the case of the first such statement) with certain standards relating to the
servicing of the Contracts. (Sale and Servicing Agreement, Section 4.11)
The Sale and Servicing Agreement will also provide for delivery to the
Indenture Trustee and the Owner Trustee and Financial Security, on or before 90
days after the end of each fiscal year of the Master Servicer, commencing with
the fiscal year ended December 31, 1998, of a certificate signed by two officers
of the Master Servicer stating that the Master Servicer has fulfilled its
obligations under the Sale and Servicing Agreement throughout the preceding
fiscal year (or since the Closing Date in the case of the first such
certificate) or, if there has been a default in the fulfillment of any such
obligation, describing each such default. (Sale and Servicing Agreement, Section
4.10)
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the related Trustee at its
Corporate Trust Office.
The Indenture. The Trust will be required to file annually with the
Indenture Trustee and Financial Security a written statement as to the
fulfillment of its obligations under the Indenture. (Indenture, Section 3.09)
The Indenture Trustee will be required to mail each year to all related
Noteholders a brief report relating to, among other things, its eligibility and
qualification to continue as Indenture Trustee under the Indenture, any amounts
advanced by it under the Indenture, the amount, interest rate and maturity date
of certain indebtedness owing by the Trust to the Indenture Trustee in its
individual capacity, the property and funds physically held by such Indenture
Trustee as such and any action taken by it that materially affects the Notes and
that has not been previously reported. (Indenture, Section 7.04)
CERTAIN MATTERS REGARDING THE MASTER SERVICER
The Sale and Servicing Agreement will provide that the Master Servicer may
not resign from its obligations and duties as Master Servicer thereunder except
upon determination that the Master Servicer's performance of such duties is no
longer permissible under applicable law. No such resignation will become
effective until (i) the Indenture Trustee or a successor servicer has assumed
the Master Servicer's servicing obligations and duties under the Sale and
Servicing Agreement and (ii) each Rating Agency confirms that the
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selection of such successor master servicer will not result in the
qualification, reduction or withdrawal of its then-current rating of any Class
of Securities. (Sale and Servicing Agreement, Section 7.04)
The Sale and Servicing Agreement will further provide that neither the
Master Servicer nor any of its directors, officers, employees and agents shall
be under any liability to the Trust or the Securityholders for taking any action
or for refraining from taking any action pursuant to the Sale and Servicing
Agreement, or for errors in judgment; provided, however, that neither the Master
Servicer nor any such person will be protected against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties thereunder. In addition, the Sale and Servicing Agreement will
provide that the Master Servicer will be under no obligation to appear in,
prosecute or defend any legal action that is not incidental to its servicing
responsibilities under the Sale and Servicing Agreement and that, in its
opinion, may cause it to incur any expense or liability. The Master Servicer
may, however, undertake any reasonable action that it may deem necessary or
desirable in respect of the Sale and Servicing Agreement and the rights and
duties of the parties thereto and the interests of the Securityholders
thereunder. In any event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs and liabilities of the
Trust, and the Master Servicer will be entitled to be reimbursed therefor out of
funds on deposit in the Collection Account. Any such indemnification or
reimbursement could reduce the amount otherwise available for distribution to
Securityholders. (Sale and Servicing Agreement, Section 7.05)
Any corporation into which the Master Servicer may be merged or
consolidated, any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer is a party or any corporation
succeeding to the business of the Master Servicer or the Master Servicer's
obligations as the Master Servicer, will be the successor of the Master Servicer
under the Sale and Servicing Agreement. (Sale and Servicing Agreement, Sections
7.02 and 7.04)
SERVICER DEFAULT
"Servicer Defaults" under the Sale and Servicing Agreement will consist of
(i) a claim being made under either the Note Policy or the Certificate Policy,
(ii) any failure by the Master Servicer to deposit in or credit to the
Collection Account, either Distribution Account, the Spread Account or the
Holding Account any amount required to be so deposited or credited or to make
the required distributions therefrom, which failure continues unremedied for
three Business Days after written notice from the Indenture Trustee, the Owner
Trustee or Financial Security is received by the Master Servicer or discovery by
the Master Servicer; (iii) any failure by the Master Servicer to deliver to
Financial Security, the Indenture Trustee or the Owner Trustee certain reports
required by the Sale and Servicing Agreement by the fourth Business Day prior to
the related Distribution Date or to perform certain other covenants under the
Sale and Servicing Agreement; (iv) any failure by the Master Servicer or the
Seller duly to observe or perform in any material respect any other covenant or
agreement in the Sale and Servicing Agreement, which failure materially and
adversely affects the rights of Securityholders, Financial Security, the
Indenture Trustee or the Owner Trustee and which continues unremedied for 30
days after the giving of written notice of such failure (A) to the Master
Servicer or the Seller, as the case may be, by the Owner Trustee, the Indenture
Trustee or Financial Security or (B) to the Master Servicer or the Seller, as
the case may be, and to the Indenture Trustee or the Owner Trustee by holders of
Notes evidencing not less than 25% of the voting interests thereof, voting
together as a single class, or, if the Notes have been paid in full, by the
holders of Certificates evidencing not less than 25% of the voting interests
thereof or, so long as no default under either Policy has occurred and is
continuing and no insolvency of Financial Security has occurred, by Financial
Security; (v) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings and certain actions by the Seller
or the Master Servicer indicating its insolvency, reorganization pursuant to
bankruptcy or similar proceedings or inability to pay its obligations (each, an
"Insolvency Event"); and (vi) any material breach of any of the representations
and warranties of the Master Servicer or the Seller (except for any breaches
relating to Contracts repurchased by the Seller or the Master Servicer) that has
a material adverse effect on the Noteholders or the Certificateholders and,
within 30 days after written notice thereof shall have been given to the Master
Servicer or the Seller by the Indenture Trustee or the Owner Trustee or by
holders of Notes (voting together as a single
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class) or Certificates evidencing not less than 25% of the respective voting
interests thereof or, so long as no default under either Policy has occurred and
is continuing and no insolvency of Financial Security has occurred, by Financial
Security. (Sale and Servicing Agreement, Section 8.01)
RIGHTS UPON SERVICER DEFAULT
As long as a Servicer Default remains unremedied, the Indenture Trustee,
Financial Security or holders of Notes representing not less than 25% of the
voting interests thereof (or, if the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, by holders of
Certificates evidencing not less than 25% of the voting interests thereof),
voting together as a single class, may terminate all the rights and obligations
of the Master Servicer under the Sale and Servicing Agreement, whereupon the
Indenture Trustee will succeed, without further action, to all the
responsibilities, duties and liabilities of the Master Servicer in its capacity
as such under such agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Master Servicer, and no Servicer Default other than such
appointment has occurred, such trustee or official may have the power to prevent
the Indenture Trustee, Financial Security or the Noteholders (or
Certificateholders) from effecting a transfer of servicing. In the event that
the Indenture Trustee is unwilling or unable so to act, it may appoint or
petition a court of competent jurisdiction to appoint a successor with a net
worth of at least $50,000,000 and whose regular business includes the servicing
of motor vehicle receivables. The Indenture Trustee may make such arrangements
for compensation to be paid, which in no event may be greater than the servicing
compensation paid to the Master Servicer under the Sale and Servicing Agreement.
Notwithstanding such termination, the Master Servicer shall be entitled to
payment of certain amounts payable to it prior to such termination, for services
rendered prior to such termination. (Sale and Servicing Agreement, Sections 8.01
and 8.02)
So long as Financial Security is not in default under either Policy it may
direct the actions of the Indenture Trustee upon an Event of Default. (Sale and
Servicing Agreement, Section 8.06)
WAIVER OF PAST DEFAULTS
The holders of Notes evidencing at least 51% of the voting interests
thereof, voting together as a single class (or, if all of the Notes have been
paid in full and the Indenture has been discharged in accordance with its terms,
the holders of Certificates evidencing not less than 51% of the voting interests
thereof), may, on behalf of all Securityholders, with the consent of Financial
Security, waive any default by the Master Servicer in the performance of its
obligations under the Sale and Servicing Agreement and its consequences, except
a default in making any required deposits to or payments from the Collection
Account, the Holding Account, the Spread Account, the Certificate Distribution
Account or the Note Distribution Account in accordance with that agreement or in
respect of a covenant or provision of that agreement that cannot be modified or
amended without the consent of each Securityholder (in which event the related
waiver will require the approval of holders of all of the Securities). No such
waiver will impair the Securityholders' rights with respect to subsequent
Servicer Defaults. (Sale and Servicing Agreement, Section 8.05)
VOTING INTERESTS
The "voting interests" of the (i) Notes of a Class or Classes will be
allocated among the Noteholders or related Note Owners, as the case may be, in
accordance with the unpaid principal amount of the Notes of such Class or
Classes represented thereby and (ii) Certificates will be allocated among the
Certificateholders or related Certificate Owners, as the case may be, in
accordance with the Certificate Balance represented thereby; except that in
certain circumstances any Securities held by the Seller, WFS or any of their
respective affiliates shall be excluded from such determination.
AMENDMENT
Amendment of the Sale and Servicing Agreement. The Sale and Servicing
Agreement may be amended, with the consent of Financial Security but without the
consent of the Noteholders or the Certificateholders, to cure any ambiguity,
correct or supplement any provision therein which may be inconsistent with any
other provision therein, to add any other provisions with respect to matters or
questions arising under such
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agreement which are not inconsistent with the provisions thereof, to add or
provide for any credit enhancement for any Class of Securities or to permit
certain changes with respect to the Specified Spread Account Balance; provided,
that any such action will not, in the opinion of counsel satisfactory to the
related Trustee, materially and adversely affect the interests of any such
Securityholder; and provided further, that in the case of a change with respect
to the Specified Spread Account Balance, the Trustee receives a letter from S&P
to the effect that its then-current rating on each Class of Securities will not
be qualified, reduced or withdrawn due to such amendment and the Master Servicer
shall provide Moody's notice of such amendment. (Sale and Servicing Agreement,
Section 10.01)
The Sale and Servicing Agreement may also be amended from time to time with
the consent of the holders of Notes and Certificates evidencing not less than
51% of the respective voting interests thereof, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such agreement or of modifying in any manner the rights of the related
Securityholders of each Class; provided, that no such amendment may (i) except
as described above, increase or reduce in any manner the amount of or accelerate
or delay the timing of collections of payments on or in respect of the
Contracts, required distributions on the Notes or the Certificates, or the
Specified Spread Account Balance or the manner in which the Spread Account is
funded, or (ii) reduce the aforesaid percentage of the voting interests of which
the holders of any Class of Securities are required to consent to any such
amendment, without the consent of Financial Security and the holders of all of
the relevant Class of Securities. (Sale and Servicing Agreement, Section 10.01)
Amendment of the Trust Agreement. The Trust Agreement may be amended, with
the consent of Financial Security but without the consent of the
Securityholders, to cure any ambiguity, to correct or supplement any provision
therein which may be inconsistent with any other provision therein, or to add
any other provisions with respect to matters or questions arising thereunder
which are not inconsistent with the provisions thereof. (Trust Agreement,
Section 11.01)
The Trust Agreement may also be amended from time to time with the consent
of Securityholders evidencing not less than 51% of the respective voting
interests thereof, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, that no such amendment may increase or reduce in any manner the amount
of or accelerate or delay the timing of (i) collections of payments on or in
respect of the Contracts or required distributions on the Notes or the
Certificates or any Interest Rate or the Pass-Through Rate or (ii) reduce the
aforesaid percentage of the voting interests of which the holders of any Class
of Securities are required to consent to any such amendment, without the consent
of Financial Security and the holders of all of the relevant Class of
Securities. (Trust Agreement, Section 11.01)
Amendment of the Indenture. The Trust and the Indenture Trustee (on behalf
of such Trust) may, without the consent of the Noteholders but with the consent
of Financial Security, enter into one or more supplemental indentures for any of
the following purposes: (i) to correct or amplify the description of the
property subject to the lien of the Indenture or to subject additional property
to the lien of the Indenture; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders or to
surrender any rights or powers conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to the Indenture Trustee; (v)
to cure any ambiguity or correct or supplement any provision in the Indenture or
in any supplemental indenture which may be inconsistent with any other provision
in the Indenture, any supplemental indenture, the Sale and Servicing Agreement
or certain other agreements; provided, that any action specified in clause (v)
shall not adversely affect the interests of any Noteholder; (vi) to provide for
the acceptance of the appointment of a successor Indenture Trustee or to add to
or change any of the provisions of the Indenture as shall be necessary and
permitted to facilitate the administration by more than one trustee; (vii) to
modify, eliminate or add to the provisions of the Indenture in order to comply
with the Trust Indenture Act of 1939, as amended; and (viii) to add any
provisions to, change in any manner, or eliminate any of the provisions of, the
Indenture or modify in any manner the rights of Noteholders under the Indenture
provided, that any such action will not, in the opinion of counsel satisfactory
to the related Trustee, materially and adversely affect the interests of any
Noteholder or result in the creation of a new security; and further
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provided that any action specified in clause (viii) shall not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests of
any Noteholder unless such Noteholder's consent is otherwise obtained as
described below. (Indenture, Section 9.01)
Without the consent of the holder of each outstanding Note affected
thereby, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate thereon (or the method by which such interest
or principal is calculated) or the redemption price with respect thereto or
change any place of payment where or the coin or currency in which any such Note
or any interest thereon is payable; (ii) impair the right to institute suit for
the enforcement of provisions of the Indenture regarding payment; (iii) reduce
the percentage of the voting interests of the Notes, the consent of the holders
of which is required for any such supplemental indenture or the consent of the
holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the Trust, any
other obligor on the Notes, the Seller, or any of their respective affiliates;
(v) reduce the percentage of the voting interests of the Notes, the consent of
the holders of which is required to direct the Indenture Trustee to sell or
liquidate the property of the Trust if the proceeds of such sale or liquidation
would be insufficient to pay the principal amount of and accrued but unpaid
interest on the outstanding Notes; (vi) decrease the percentage of the voting
interests of such Notes required to amend the provisions of the Indenture which
specify the applicable percentage of voting interests of the Notes necessary to
amend such Indenture or certain other related agreements; or (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such Note of the
security afforded by the lien of such Indenture; and further provided, that any
such action will not, in the opinion of counsel satisfactory to the related
Trustee, result in the creation of a new security. (Indenture, Section 9.02)
LIST OF SECURITYHOLDERS
Upon the written request of the Master Servicer, the Owner Trustee will
provide to the Master Servicer within 15 days after receipt of such request, a
list of the names and addresses of all Certificateholders. In addition, three or
more holders of Certificates or holders of Certificates evidencing not less than
25% of the voting interests of the Certificates, upon compliance by such
Certificateholders with certain provisions of the Trust Agreement, may request
that the Owner Trustee afford such Certificateholders access during business
hours to the current list of Certificateholders for purposes of communicating
with other Certificateholders with respect to their rights under the Trust
Agreement. (Trust Agreement, Section 3.07)
Three or more holders of Notes may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders maintained by such
Indenture Trustee for the purpose of communicating with the other Noteholders
with respect to their rights under the Indenture or under the Notes. The
Indenture Trustee may elect not to afford the requesting Noteholders access to
the list of Noteholders if it agrees to mail the desired communication or proxy,
on behalf of and at the expense of the requesting Noteholders, to all
Noteholders. (Indenture, Section 7.02)
Neither the Trust Agreement nor the Indenture will provide for the holding
of any annual or other meetings of Securityholders.
TRUST; INSOLVENCY EVENT
The Trust Agreement will provide that the Owner Trustee, each
Certificateholder, the Indenture Trustee and each Noteholder shall agree that
they will not at any time institute, or join in any institution against, the
Trust, the Seller or WII, any bankruptcy proceedings relating to the
Certificates, the Notes, the Trust Agreement, the Indenture or certain other
agreements. (Trust Agreement, Section 11.08)
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TERMINATION
The obligations of the Master Servicer, the Seller, the Owner Trustee and
Indenture Trustee with respect to the related Securityholders pursuant to the
Trust Agreement, Sale and Servicing Agreement or Indenture will terminate upon
the earliest to occur of (i) the maturity or other liquidation of the last
Contract and the disposition of any amounts received upon liquidation of any
property remaining in the Trust, (ii) the payment to such Securityholders of all
amounts required to be paid to them pursuant to such agreement and (iii) the
occurrence of the event described below.
In order to avoid excessive administrative expenses, the Seller will be
permitted to purchase the remaining Contracts from the Trust on any Distribution
Date as of which the Aggregate Scheduled Balance is less than 5% of the Cut-Off
Date Aggregate Scheduled Balance at a price equal to the aggregate unpaid
principal balances of the related Contracts, together with accrued interest
thereon to the last Due Date in the Due Period in which such repurchase occurs.
(Sale and Servicing Agreement, Section 9.01)
The Owner Trustee and Indenture Trustee will give written notice of
termination to each Securityholder of record at least 20 days prior to such
termination. The final distribution to each Securityholder will be made only
upon surrender and cancellation of such holder's Securities at the office or
agency of the related Trustee specified in the notice of termination. Any funds
remaining in the Trust at least 18 months after the date of termination and
after such Trustee has attempted to locate a Securityholder and such measures
have failed, will be distributed to a charity designated by the Master Servicer.
Any outstanding Notes will be redeemed concurrently with any Optional
Purchase described above, and the subsequent distribution to the related
Certificateholders of all amounts required to be distributed to them pursuant to
the Trust Agreement will effect early retirement of the Certificates.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding Notes and the satisfaction and
discharge of the Indenture, the Owner Trustee will succeed to all the rights of
the Indenture Trustee, and the Certificateholders will succeed to all the rights
of the Noteholders, under the Sale and Servicing Agreement, except as otherwise
provided therein. (Sale and Servicing Agreement, Section 9.01)
THE TRUSTEES
A Trustee may resign at any time, in which event the Administrator, or its
successor, will be obligated to appoint a successor trustee. The Administrator
may also remove the Owner Trustee or the Indenture Trustee, in each case if such
Trustee becomes insolvent or ceases to be eligible to continue as such under the
Trust Agreement or Indenture, as the case may be. In such event, the
Administrator will be obligated to appoint a successor Trustee. Any resignation
or removal of a Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by the successor Trustee. (Trust
Agreement, Section 10.02; Indenture, Section 6.08)
Each Trustee and any of its affiliates may hold Securities in their own
names or as pledgees. For the purpose of meeting the legal requirements of
certain jurisdictions, the Administrator and the Owner Trustee or Indenture
Trustee acting jointly (or in some instances, the Owner Trustee and Indenture
Trustee acting without the Administrator) will have the power to appoint
co-trustees or separate trustees of all or any part of the Trust. In the event
of such an appointment, all rights, powers, duties and obligations conferred or
imposed upon such Trustee by the Indenture, Sale and Servicing Agreement or
Trust Agreement will be conferred or imposed upon such Trustee and such separate
trustee or co-trustee jointly, or, in any jurisdiction in which such Trustee
will be incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee who will exercise and perform such rights,
powers, duties and obligations solely at the direction of such Trustee. (Trust
Agreement, Section 10.05; Indenture, Section 6.10)
The Trust Agreement will further provide that WII will pay the fees of the
Owner Trustee and the Trust will, or will cause the Administrator to, pay the
fees of the Indenture Trustee. The Trust Agreement will further provide that the
Owner Trustee will be entitled to indemnification by the Master Servicer for,
and will
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be held harmless against, any loss, liability or expense incurred by such
Trustee not resulting from its own willful misconduct, bad faith or negligence
(other than by reason of a breach of any of its representations or warranties
set forth in such agreement). The Indenture will further provide that the
Indenture Trustee will be entitled to indemnification by the Trust or the
Administrator for any loss, liability or expense incurred by such Trustee not
resulting from its own willful misconduct, negligence or bad faith. (Trust
Agreement, Section 8.02; Indenture, Section 6.07)
DUTIES OF THE TRUSTEES
Neither Trustee will make any representations as to the validity or
sufficiency of the Trust Agreement or Indenture, the Securities issued pursuant
thereto (other than the execution and authentication thereof), or of any
Contracts or related documents, and will not be accountable for the use or
application by the Seller, WII or the Master Servicer of any funds paid to the
Seller, WII or the Master Servicer in respect of such Securities or the related
Contracts, or the investment of any monies by the Master Servicer before such
monies are deposited into the Collection Account. The Trustees will not
independently verify the existence or characteristics of the Contracts. If no
Event of Default or Servicer Default has occurred and is continuing, each
Trustee will be required to perform only those duties specifically required of
it under the Indenture, Trust Agreement or Sale and Servicing Agreement, as the
case may be. Generally those duties will be limited to the receipt of the
various certificates and reports or other instruments required to be furnished
to such Trustee under such agreements, in which case it will only be required to
examine them to determine whether they conform to the requirements of such
agreements. No Trustee will be charged with knowledge of a failure by the Master
Servicer to perform its duties under the relevant agreements which failure
constitutes an Event of Default or a Servicer Default unless such Trustee
obtains actual knowledge of such failure as specified in such agreements.
No Trustee will be under any obligation to exercise any of the rights or
powers vested in it by the Indenture, Trust Agreement or Sale and Servicing
Agreement, as the case may be, or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request order or direction of any of the
Securityholders, unless such Securityholders have offered to such Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Securityholder will have any right
under any such agreement to institute any proceeding with respect to such
agreement, unless such holder previously has given to such Trustee written
notice of default and (i) the default arises from the Master Servicer's failure
to remit payments when due or (ii) the holders of Securities evidencing not less
than 25% of the voting interests of all of the related Securities, voting
together as a single class, have made written request upon such Trustee to
institute such proceeding in its own name as Trustee thereunder and have offered
to such Trustee reasonable indemnity and such Trustee for 60 days has neglected
or refused to institute any such proceedings.
ADMINISTRATION AGREEMENT
WFS, in its capacity as administrator (the "Administrator"), will enter
into an agreement (the "Administration Agreement") with the Trust, the Seller,
WII and the Indenture Trustee pursuant to which the Administrator will agree, to
the extent provided in the Administration Agreement, to provide the notices and
to perform other administrative obligations required to be provided or performed
by the Trust or the Owner Trustee under the Indenture. As compensation for the
performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee (the
"Administration Fee"), which fee will be paid by the Seller.
PREPAYMENT CONSIDERATIONS
Because the rate of distribution of principal on the Securities will depend
on the rate of payment on the Contracts (including prepayments, liquidations and
repurchases of Contracts by the Seller or the Master Servicer under certain
conditions and the sale or liquidation of the property of the Trust under
certain conditions following the occurrence of an Event of Default), the final
distribution on each Class of Notes or the Certificates may occur earlier than
the related Final Distribution Date. The right of the Seller to
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repurchase all of the Contracts upon certain events prior to the Certificate
Final Distribution Date is described under "-- Termination" and "The Master
Servicer -- Repurchases of Certain Contracts by the Master Servicer and the
Seller."
The law of California and most other states generally requires that retail
installment sales contracts such as the Contracts permit full and partial
prepayment without penalty, although a minimum finance charge may be applicable
in some circumstances. Any prepayments (including certain partial prepayments
not designated as advance payments by the Obligor on the related Contract) can
reduce the average life of the Contracts. The Master Servicer will permit the
sale or other transfer of a Financed Vehicle without accelerating the maturity
of the related Contract if such Contract is assumed by a person satisfying WFS'
then-current underwriting standards. See "The Master Servicer." Partial
prepayments not designated as advance payments by the Obligor on a Contract and
all partial prepayments as to Simple Interest Contracts will affect the average
life of the Contracts because those partial prepayments will be passed through
to Securityholders on the Distribution Date following the Due Period in which
they are received, while those partial prepayments designated as advance
payments for Rule of 78's Contracts only will be held until passed through in
accordance with the original schedule of payments for the related Contract or
until the amount of such partial prepayment equals the remaining principal
amount plus accrued interest due on the related Contract. Any reinvestment risk
resulting from the rate of prepayments of the Contracts and the distribution of
such prepayments to Securityholders will be borne entirely by the
Securityholders.
Purchases by the Seller of Contracts because of certain material defects in
Contract documentation or due to breaches of its respective representations and
warranties in respect thereof, in either case that materially and adversely
affect the interests of Securityholders, the Indenture Trustee, the Owner
Trustee or Financial Security, and purchases by the Master Servicer of Contracts
due to certain breaches in representations and warranties made by the Master
Servicer or due to certain breaches by the Master Servicer in servicing
procedures, in either case that materially and adversely affect such Contracts
can reduce the average life of the Contracts. Any reduction in the average life
of the Securities will reduce the aggregate amount of interest received by the
Securityholders over the life of the Securities. See "The Master Servicer."
While WFS does not maintain specific records for this purpose, it estimates
that, based on its experience over the past five years, the monthly prepayment
rate on the outstanding principal amount of the retail installment sales
contracts and installment loans secured by automobiles and light duty trucks it
has originated and serviced, for itself or others, has been approximately 1.5%.
However, no assurance can be given that the Contracts will experience this rate
of prepayment or any greater or lesser rate. WFS does not maintain specific
records which would suggest any difference in prepayment rate for Rule of 78's
Contracts as compared with Simple Interest Contracts.
THE POLICIES
The following summary of the terms of the Policies does not purport to be
complete and is qualified by reference to the Note Policy and the Certificate
Policy included as exhibits to the Registration Statement; provided, however,
the following summary describes the material terms of the Policies.
THE NOTE POLICY
Simultaneously with the issuance of the Notes, Financial Security will
deliver the Note Policy to the Indenture Trustee for the benefit of each
Noteholder. Under the Note Policy, Financial Security will unconditionally and
irrevocably guarantee to the Indenture Trustee for the benefit of each
Noteholder the full and complete payment of (i) Scheduled Payments (as defined
below) on the Notes and (ii) the amount of any Scheduled Payment which
subsequently is avoided in whole or in part as a preference payment under
applicable law.
"Scheduled Payments" will mean, with respect to any Distribution Date,
payments which are scheduled to be made on the Notes during the term of the Note
Policy in accordance with the original terms of the Notes when issued and
without regard to any subsequent amendment or modification of the Notes or of
the
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<PAGE> 41
Indenture except amendments or modifications to which Financial Security has
given its prior written consent in an amount equal to (i) the Note Interest
Distributable Amount and (ii) the Note Principal Distributable Amount. Scheduled
Payments will not include payments which become due on an accelerated basis as a
result of (a) a default by the Trust, (b) any election to pay principal on an
accelerated basis, (c) the occurrence of an Event of Default under the Indenture
or (d) any other cause, unless Financial Security elects, in its sole
discretion, to pay in whole or in part such principal due upon acceleration,
together with any accrued interest to the date of acceleration. In the event
Financial Security does not so elect, the Note Policy will continue to guarantee
Scheduled Payments on the Notes in accordance with their original terms.
Scheduled Payments shall not include any portion of a Note Interest
Distributable Amount due to Noteholders because a notice and certificate in
proper form was not timely Received (as defined below) by Financial Security
unless, in each case, Financial Security elects, in its sole discretion, to pay
such amount in whole or in part. Scheduled Payments shall not include any
amounts due in respect of the Notes attributable to any increase in interest
rate, penalty or other sum payable by the Trust by reason of any default or any
event of default in respect of the Notes, or by reason of any deterioration of
the creditworthiness of the Trust, nor shall Scheduled Payments include, nor
shall coverage be provided under the Note Policy in respect of, any taxes,
withholding or other charge with respect to any Noteholder imposed by any
governmental authority due in connection with the payment of any Scheduled
Payment to a Noteholder.
Payment of claims on the Note Policy made in respect of Scheduled Payments
will be made by Financial Security following Receipt (as defined below) by
Financial Security of the appropriate notice for payment on the later to occur
of (a) 12:00 noon, New York City time, on the fourth Business Day following
Receipt of such notice for payment, and (b) 12:00 noon, New York City time, on
the date on which such payment was due on the Notes.
THE CERTIFICATE POLICY
Simultaneously with the issuance of the Certificates, Financial Security
will deliver the Certificate Policy to the Owner Trustee for the benefit of each
Certificateholder. Under the Certificate Policy, Financial Security will
unconditionally and irrevocably guarantee to the Owner Trustee for the benefit
of each Certificateholder the full and complete payment of (i) Guaranteed
Distributions (as defined below) with respect to the Certificates and (ii) the
amount of any Guaranteed Distribution which subsequently is avoided in whole or
in part as a preference payment under applicable law.
"Guaranteed Distributions" will mean, with respect to each Distribution
Date, the distributions to be made to Certificateholders (other than to WII) in
an aggregate amount equal to the Certificate Distributable Amount due and
payable on such Distribution Date in accordance with the original terms of the
Certificates when issued and without regard to any amendment or modification of
the Certificates, the Sale and Servicing Agreement or the Trust Agreement to
which Financial Security has not given its prior written consent. Guaranteed
Distributions shall not include, nor shall coverage be provided under the
Certificate Policy in respect of, any taxes, withholding or other charge imposed
with respect to any Certificateholder by any governmental authority.
Payment of claims on the Certificate Policy made in respect of Guaranteed
Distributions will be made by Financial Security following Receipt (as defined
below) by Financial Security of the appropriate notice for payment on the later
to occur of (a) 12:00 noon, New York City time, on the fourth Business Day
following Receipt of such notice for payment, and (b) 12:00 noon, New York City
time, on the date on which such payment was due on the Certificates.
OTHER TERMS OF THE POLICIES
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
either Policy, Financial Security shall cause such payment to be made on the
later of (a) the date when due to be paid pursuant to the Order referred to
below or (b) the first to occur of (i) the fourth Business Day following Receipt
by Financial Security from the Indenture Trustee or the Owner Trustee, as the
case may be, of (A) a certified copy of the order (the "Order") of the court or
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other governmental body which exercised jurisdiction to the effect that the
Noteholder is required to return principal or interest paid on the Notes during
the term of the Note Policy or the Certificateholder is required to return
principal or interest distributed with respect to the Certificates during the
term of the Certificate Policy, in either case because such distributions were
avoidable as preference payments under applicable bankruptcy law, (B) a
certificate of the Noteholder or Certificateholder, as the case may be, that the
Order has been entered and is not subject to any stay and (C) an assignment duly
executed and delivered by such Noteholder or Certificateholder, as the case may
be, in such form as is reasonably required by Financial Security and provided to
such Securityholder by Financial Security, irrevocably assigning to Financial
Security all rights and claims of such Securityholder relating to or arising
under the related Class of Notes or the Certificates, as the case may be,
against the debtor which made such preference payments or otherwise with respect
to such preference payment, or (ii) the date of Receipt by Financial Security
from the Indenture Trustee or the Owner Trustee, as the case may be, of the
items referred to in clauses (A), (B) and (C) above if, at least four Business
Days prior to such date of Receipt, Financial Security shall have Received
written notice from the related Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the related Trustee or any
Securityholder directly (unless a Securityholder has previously paid such amount
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Order in which case such payment shall be disbursed to the related
Trustee for distribution to such Securityholder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, and as will be provided in the Indenture and Sale and Servicing
Agreement, Financial Security will have certain rights to direct proceedings
regarding the seeking to avoid payments made on or in respect of the Contracts,
the Notes or the Certificates as preferential.
The terms "Receipt" and "Received," with respect to either Policy, shall
mean actual delivery to Financial Security and to its fiscal agent, if any,
prior to 12:00 noon, New York City time, on a Business Day and delivery either
on a day that is not a Business Day or after 12:00 noon, New York City time,
shall be deemed to be Receipt on the next succeeding Business Day. If any notice
or certificate given under a Policy by the Indenture Trustee or the Owner
Trustee, as the case may be, is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its fiscal agent shall promptly so advise the Indenture
Trustee or the Owner Trustee, as the case may be, and such Trustee may submit an
amended notice.
Under the Policies, "Business Day" will mean any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in The City of
New York, New York are authorized or obligated by law or executive order to be
closed.
Financial Security's obligations under the Note Policy in respect of
Scheduled Payments and under the Certificate Policy in respect of Guaranteed
Distributions shall in each case be discharged to the extent funds are
transferred to the Indenture Trustee or the Owner Trustee, as the case may be,
as provided in the related Policy whether or not such funds are properly applied
by the Indenture Trustee or the Owner Trustee.
Financial Security shall be subrogated to the rights of each Noteholder or
Certificateholder, as the case may be, to receive payments of principal and
interest to the extent of any payment by Financial Security under the related
Policy.
Claims under the Policies will constitute direct, unsecured and
unsubordinated obligations of Financial Security ranking not less than pari
passu with other unsecured and unsubordinated indebtedness of Financial Security
for borrowed money. Claims against Financial Security under each other financial
guaranty insurance policy issued thereby constitute pari passu claims against
the general assets of Financial Security. The terms of the Policies cannot be
modified or altered by any other agreement or instrument, or by the merger,
consolidation or dissolution of the Trust. The Note Policy may not be cancelled
or revoked prior to distribution in full of all Scheduled Payments and the
Certificate Policy may not be cancelled or revoked prior to distribution in full
of all Guaranteed Distributions with respect to the Certificates. The Policies
are not covered by the Property/Casualty Insurance Security Fund specified in
Article 76 of the New York Insurance Law. The Policies are governed by the laws
of the State of New York. As a result, if a claim is made on the Note
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Policy for the benefit of the Noteholders, or a claim is made on the Certificate
for the benefit of the Certificateholders and Financial Security is insolvent
and unable to pay the amount then due under that policy, the Noteholders or
Certificateholders would not be permitted to file a claim against the Property/
Casualty Insurance Fund specified in Article 76 of the New York Insurance Law.
In that circumstance, the Noteholders or Certificateholders would have recourse
against the estate of Financial Security only, as any other general creditor of
Financial Security.
FINANCIAL SECURITY ASSURANCE INC.
GENERAL
Financial Security is a monoline insurance company incorporated in 1984
under the laws of the State of New York. Financial Security is licensed to
engage in financial guaranty insurance business in all 50 states, the District
of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities -- thereby enhancing the credit rating of those
securities -- in consideration for the payment of a premium to the insurer.
Financial Security and its subsidiaries principally insure asset-backed,
collateralized and municipal securities. Asset-backed securities are generally
supported by residential mortgage loans, consumer or trade receivables,
securities or other assets having an ascertainable cash flow or market value.
Collateralized securities include public utility first mortgage bonds and
sale/leaseback obligation bonds. Municipal securities consist largely of general
obligation bonds, special revenue bonds and other special obligations of state
and local governments. Financial Security insures both newly issued securities
sold in the primary market and outstanding securities sold in the secondary
market that satisfy Financial Security's underwriting criteria.
Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.
The principal executive offices of Financial Security are located at 350
Park Avenue, New York, New York 10022, and its telephone number at that location
is (212) 826-0100.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries are reinsured among
such companies on an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable statutory risk
limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty insurance policies with
other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
RATINGS OF CLAIMS-PAYING ABILITY
Financial Security's claims-paying ability is rated "Aaa" by Moody's and
"AAA" by S&P, Fitch IBCA, Inc., Japan Rating and Investment, Inc. and Standard &
Poor's (Australia) Pty. Ltd. Such ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by such rating
agencies. See "Risk Factors -- Ratings of the Securities."
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CAPITALIZATION
The following table sets forth the capitalization of Financial Security and
its wholly owned subsidiaries on the basis of generally accepted accounting
principles as of March 31, 1998 (in thousands):
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------
(UNAUDITED)
<S> <C>
Deferred Premium Revenue (net of prepaid reinsurance
premiums)................................................... $ 428,157
----------
Shareholder's Equity:
Common Stock.............................................. 15,000
Additional Paid-In Capital................................ 618,317
Unrealized Gain on Investments
(net of deferred income taxes)......................... 24,700
Accumulated Earnings...................................... 265,030
----------
Total Shareholder's Equity.................................. 923,047
----------
Total Deferred Premium Revenue and Shareholder's Equity..... $1,351,204
==========
</TABLE>
For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security and Subsidiaries, and the notes
thereto, included at page A-2 et seq. of this Prospectus. Copies of the
statutory quarterly and annual statements filed with the State of New York
Insurance Department by Financial Security are available upon request to the
State of New York Insurance Department.
INSURANCE REGULATION
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York Insurance Law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such insurer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such insurer. Other
provisions of the New York Insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liability for
borrowings.
THE MASTER SERVICER
The Contracts will be serviced by WFS in its capacity as Master Servicer.
While WFS may or may not use a Subservicer in servicing the Contracts, WFS is
referred to as the Master Servicer herein.
WFS, as Master Servicer, will be obligated pursuant to the Sale and
Servicing Agreement, subject to the limitations set forth therein, to service
the Contracts and to repurchase certain of the Contracts under certain
circumstances if certain representations and warranties made by WFS are
incorrect or if WFS, as Master Servicer, breaches certain of its servicing
obligations under the Sale and Servicing Agreement, in either case in a manner
that materially and adversely affects the Securityholders. WFS, as Master
Servicer, may perform its servicing duties through one or more subservicers
(each, a "Subservicer"), provided that the employment of a Subservicer shall not
relieve the Master Servicer from any liability of the Master Servicer under the
Sale and Servicing Agreement.
If WFS uses a Subservicer, WFS, as Master Servicer, will enter into a
subservicing agreement with that Subservicer. Such subservicing agreements must
not be inconsistent with the terms of the Sale and Servicing Agreement. The
Master Servicer may terminate a subservicing agreement and either service the
related
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Contracts directly or enter into a new subservicing agreement for such Contracts
with a Subservicer that need not be an affiliate of the Master Servicer.
Notwithstanding any subservicing agreement, the Master Servicer will remain
obligated and liable to the Indenture Trustee, the Owner Trustee and the
Securityholders for servicing and administering the Contracts in accordance with
the Sale and Servicing Agreement as if the Master Servicer alone were servicing
the Contracts. References herein to actions required or permitted to be taken by
the Master Servicer include such actions by a Subservicer. (Sale and Servicing
Agreement, Section 4.01)
COLLECTION OF PAYMENTS
The Master Servicer will service the Contracts and will provide certain
accounting and reporting services with respect to the Contracts and the
Securities. The Master Servicer must take all actions necessary to maintain
continuous perfection of the security interests granted by the Obligors in the
Financed Vehicles. The Master Servicer will be obligated to service the
Contracts in accordance with the customary and usual servicing procedures
employed by financial institutions that service retail installment sales
contracts and/or installment loan agreements secured by motor vehicles and, to
the extent more exacting, the procedures used for such contracts owned by the
Master Servicer. In its judgment, the Master Servicer may reduce the APR of a
delinquent Contract (but not below the sum of the Pass-Through Rate and the
Servicing Fee Percent), may reduce the principal balance and may extend the
scheduled maturity of a delinquent Contract for up to 90 days in the aggregate
past the originally scheduled date of the last payment on such Contract, so long
as the Master Servicer makes an appropriate Advance as will be required in the
Sale and Servicing Agreement. (Sale and Servicing Agreement, Sections 4.01 and
4.02)
The Master Servicer shall deposit in or credit to the Collection Account or
the Holding Account, within two Business Days of receipt, all Net Collections
received on or in respect of the Contracts (except that as to Contracts serviced
by a Subservicer, such proceeds shall be deposited within three Business Days of
receipt by the Subservicer). The Master Servicer will also deposit in or credit
to the Collection Account or the Holding Account, within two Business Days of
receipt, all Net Liquidation Proceeds and Net Insurance Proceeds, after
deducting therefrom the amount of any outstanding and unreimbursed Advances.
(Sale and Servicing Agreement, Section 4.01) See "Certain Information Regarding
the Securities -- The Accounts and Eligible Investments."
ADVANCES
The Master Servicer will be obligated to advance delinquent payments of
Monthly P&I on individual Rule of 78's Contracts and to advance 30 days of
interest at the sum of the Pass-Through Rate and the Servicing Fee Percent for
each month of delinquency in that Due Period on individual Simple Interest
Contracts (each, an "Advance") to the extent that any such Advance, if made,
would not, in the good faith judgment of the Master Servicer, constitute a
Nonrecoverable Advance. A "Nonrecoverable Advance" will be an Advance previously
made or to be made by the Master Servicer which, in the good faith judgment of
the Master Servicer, may not be ultimately recoverable by the Master Servicer
from Liquidation Proceeds, Insurance Proceeds or otherwise. Concurrently with
the furnishing of the related Distribution Date Statement to the Indenture
Trustee and the Owner Trustee, the Master Servicer will deposit in the
Collection Account all Advances, if any, in respect of the related Due Period.
The Master Servicer will not be entitled to any interest on Advances when it is
reimbursed for Advances. The amount of Advances deposited in the Collection
Account for any Distribution Date may be net of amounts otherwise payable to the
Master Servicer on such Distribution Date. (Sale and Servicing Agreement,
Section 5.04)
In making Advances, the Master Servicer will be endeavoring to maintain a
regular flow of interest and principal payments to the Securityholders rather
than to guarantee or insure against losses. Advances will be reimbursed to the
Master Servicer out of recoveries on the related Contracts (e.g., late payments
by the Obligor, Net Liquidation Proceeds and Net Insurance Proceeds) or, to the
extent any portion of an Advance is determined to be a Nonrecoverable Advance,
out of unrelated installments of Monthly P&I or prepayment proceeds.
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INSURANCE ON FINANCED VEHICLES
Each Obligor on a Contract is required to maintain insurance covering
physical damage to the Financed Vehicle of such Obligor in an amount not less
than the lesser of its maximum insurable value or the unpaid principal balance
under such Contract; provided, however, that the Master Servicer will not be
obligated to enforce this requirement when the principal balance of a Contract
is less than $4,000. The Master Servicer or a Subservicer is required to be
named as a loss payee under the policy of insurance obtained by the Obligor. In
addition, to the extent required by applicable law, the policy of insurance will
be delivered to the Master Servicer or Subservicer, as appropriate. The Financed
Vehicle is required to be insured against loss and damage due to fire, theft,
transportation, collision and other risks covered by comprehensive coverage. The
Master Servicer shall maintain a limited dual interest insurance policy in
respect of each Financed Vehicle that provides coverage for physical damage to,
or loss of, a Financed Vehicle; provided, however, that the Master Servicer
shall not be required to maintain such insurance in respect of any Financed
Vehicle as to which the related Contract has an unpaid principal balance of less
than $4,000. (Sale and Servicing Agreement, Section 4.04) Since Obligors may
choose their own insurers to provide the required coverage, the specific terms
and conditions of their policies vary. If the Obligor fails to obtain or
maintain the required insurance, the Master Servicer will be obligated, except
when the Contract relating to such Financed Vehicle has an unpaid principal
balance of less than $4,000, to obtain such insurance and may add the premium
for such insurance to the balance due on the Contract to the extent permitted by
applicable law. The Scheduled Balance of a Contract will not include any amount
for such premium, and payments by an Obligor in respect of such financed premium
will not be applied to distributions on the Securities.
SERVICER DETERMINATION AND REPORTS TO TRUSTEES
The Master Servicer will perform monitoring and reporting functions for the
Owner Trustee, the Indenture Trustee and Financial Security, including the
preparation and delivery to the Owner Trustee, the Indenture Trustee and
Financial Security of each Statement to Securityholders and an additional report
covering the aggregate amount, if any, paid by or due from it or the Seller for
the purchase of Contracts which it or the Seller has become obligated to
purchase and the net amount of funds which have been deposited in or credited to
the Collection Account or Holding Account. (Sale and Servicing Agreement,
Section 4.09)
REPURCHASES OF CERTAIN CONTRACTS BY THE MASTER SERVICER AND THE SELLER
The Seller will have the option to purchase the remaining Contracts, and
thereby cause early retirement of the Securities, on any Distribution Date as of
which the Aggregate Scheduled Balance is less than 5% of the Cut-Off Date
Aggregate Scheduled Balance. See "Certain Information Regarding the
Securities -- Termination." In addition, the Seller will be required to
repurchase certain Contracts under certain circumstances if certain
representations and warranties made by the Seller are incorrect and materially
and adversely affect the interests of the Securityholders, the Indenture
Trustee, the Owner Trustee or Financial Security. The Master Servicer will be
required to purchase a Contract if it breaches certain of its servicing
obligations with respect to such Contract such that the Contract is materially
and adversely affected. Any such repurchase must be effected at a price (the
"Repurchase Amount") equal to the outstanding principal balance of such Contract
plus accrued interest thereon to the last Due Date in the Due Period in which
such repurchase occurs. (Sale and Servicing Agreement, Sections 3.02, 4.07 and
9.01)
SERVICING COMPENSATION
The Master Servicer will be entitled to compensation for the performance of
its obligations under the Sale and Servicing Agreement. The Master Servicer
shall be entitled to receive for each Contract from the Monthly P&I paid on or
in respect of such Contract an amount (the "Servicing Fee") equal to one-twelfth
of 1.25% per annum (the "Servicing Fee Percent") of the Scheduled Balance of
such Contract for the related month in respect of which the Monthly P&I for such
month has been collected or advanced. As additional compensation, the Master
Servicer or its designee shall be entitled to retain all late payment charges,
extension fees (the Master Servicer will determine when an extension is to be
granted, subject to the limitations described under "Collection of Payments")
and similar items paid in respect of the Contracts. The
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Master Servicer or its designee will receive as additional servicing
compensation the amount, if any, by which the outstanding principal balance of a
Contract that is prepaid in full prior to its maturity exceeds the Scheduled
Balance of such Contract. The Master Servicer shall pay all expenses incurred by
it in connection with its servicing activities under the Sale and Servicing
Agreement and shall not be entitled to reimbursement of such expenses except to
the extent they constitute Liquidation Expenses or expenses recoverable under an
applicable insurance policy. (Sale and Servicing Agreement, Section 4.08)
The Servicing Fee will compensate the Master Servicer for performing the
functions of a third party servicer of the Contracts as an agent for the
Indenture Trustee and the Owner Trustee, including collecting and posting all
payments, responding to inquiries of Obligors, investigating delinquencies,
sending payment statements and reporting tax information to Obligors, paying
costs of collections and policing the collateral. The Servicing Fee will also
compensate the Master Servicer for administering the Contracts, including making
Advances, accounting for collections, furnishing quarterly and annual statements
to the Indenture Trustee and the Owner Trustee with respect to distributions and
generating federal income tax information and certain taxes, accounting fees,
outside auditor fees, data processing costs and other costs incurred in
connection with administering the Contracts.
REALIZATION UPON DEFAULTED CONTRACTS
The Master Servicer will liquidate any Contract that comes into and
continues in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments. Such liquidation may be through
repossession or sale of the Financed Vehicle securing such Contract or
otherwise. In connection with such repossession or other conversion, the Master
Servicer will follow such procedures as are normal and usual for holders of
motor vehicle retail installment sales contracts and installment loans. In this
regard, the Master Servicer may sell the Financed Vehicle at a repossession or
other sale. (Sale and Servicing Agreement, Section 4.03)
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The Contracts are "chattel paper" as defined in the Uniform Commercial Code
as in effect in California and the other states in which the Contracts are
originated (the "UCC"). Pursuant to the UCC, an ownership interest in chattel
paper may be perfected by possession of the chattel paper or filing a UCC-1
financing statement with the Secretary of State or other central filing office
in the appropriate state as required by the applicable UCC.
WFS and the Seller will take or cause to be taken such action as is
required to perfect the Trust's rights in the Contracts and will represent and
warrant that the Trust, subject to the interest of Financial Security under the
Insurance Agreement pursuant to which the Policies will be issued, has good
title, free and clear of liens and encumbrances, to each Contract on the Closing
Date. Under the Sale and Servicing Agreement, WFS, as Master Servicer (or one or
more Subservicers), will have custody of the Contracts following the sale of the
Contracts to the Trust and will hold the Contracts as bailee for the benefit of
the Trust. However, the Contracts will not be physically marked to indicate the
ownership interest thereof by the Trust. UCC-1 financing statements will be
filed with the California Secretary of State to perfect by filing and give
notice of the Trust's ownership interest in the Contracts. If, through
inadvertence or otherwise, any of the Contracts were sold to another party who
purchased such Contracts in the ordinary course of its business and took
possession of such Contracts, the purchaser would acquire an interest in the
Contracts superior to the interests of the Trust if the purchaser acquired the
Contracts in good faith, for value and without actual knowledge of the Trust's
ownership interest in the Contracts. The Master Servicer will agree in the Sale
and Servicing Agreement to take all necessary action to preserve and protect the
Trust's ownership interest in the Contracts. The Seller will represent and
warrant that each Contract is secured by a Financed Vehicle. Notwithstanding the
failure of the Trust to have obtained a valid, first priority ownership interest
in a Contract, Financial Security will remain unconditionally and irrevocably
obligated on its guarantee of Scheduled Payments
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payable to Noteholders and Guaranteed Distributions payable to
Certificateholders on each Distribution Date. See "The Policies."
SECURITY INTERESTS IN THE FINANCED VEHICLES
All of the Financed Vehicles were registered in the State of California or
another of the states listed above under "The Contracts Pool" at the time of
origination of the related Contracts. Perfection of security interests in motor
vehicles is generally governed by state certificate of title statutes or by the
motor vehicle registration laws of the state in which each vehicle is located.
Security interests in vehicles registered in the State of California (the state
in which the largest number of Financed Vehicles is located) may be perfected by
depositing with the California Department of Motor Vehicles a properly endorsed
certificate of title showing the secured party as legal owner or an application
for an original registration together with an application for registration of
the secured party as legal owner. Security interests in vehicles registered in
most other states are perfected, generally, in a similar manner. California and
some other states permit the required documents to perfect a security interest
to be filed electronically as well as physically. The Seller will represent and
warrant to the Trust in the Sale and Servicing Agreement that all steps
necessary to obtain a perfected first priority security interest with respect to
the Financed Vehicles securing the Contracts have been taken. If the Master
Servicer fails, because of clerical error or otherwise, to effect or maintain
such notation for a Financed Vehicle, the Trust may not have a first priority
security interest in such Financed Vehicle.
All retail installment sales contracts purchased by WFS name WFS as obligee
or assignee and as the secured party. WFS also takes all actions necessary under
the laws of the state in which the related vehicles are located to perfect its
security interest in such vehicles, including, where applicable, having a
notation of its lien recorded on the related certificate of title and obtaining
possession of the certificates of title.
The Seller will sell the Contracts and assign its security interests in the
Financed Vehicles to the Trust and Financial Security. However, because of the
administrative burden and expense, neither the Trust nor Financial Security will
amend any certificate of title to identify the Trust or Financial Security as
the new secured party nor will the certificates of title be delivered to the
Trustee. Accordingly, WFS will continue to be named as the secured party on the
certificates of title for the Financed Vehicles relating to Contracts originated
by it. Under the law of California and most other states, the assignment of the
Contracts is an effective conveyance of a security interest without amendment of
any lien noted on a vehicle's certificate of title, and the new secured party
succeeds thereby to the assignor's rights as secured party. However, there
exists a risk in not identifying the Trust as the new secured party on the
certificates of title that, through fraud or negligence, the security interest
of the Trust in one or more Financed Vehicles could be released.
In the absence of fraud or forgery by the Financed Vehicle owner or
administrative error by state recording officials, notation of the lien of WFS
on the certificates of title or in the electronic records of the state officials
where electronic titles are permitted, should be sufficient to protect the Trust
against the rights of subsequent purchasers of a Financed Vehicle or subsequent
lenders who take a security interest in such Financed Vehicle. If there are any
Financed Vehicles as to which WFS has failed to perfect the security interest
assigned to the Trust, such security interest would be subordinate to, among
others, subsequent purchasers of the Financed Vehicles and holders of perfected
security interests.
In the event that the owner of a Financed Vehicle relocates to a state
other than the state in which the Financed Vehicle is registered, under the laws
of most states the perfected security interest in the Financed Vehicle would
continue for four months after such relocation and thereafter, in most
instances, until the owner registers the Financed Vehicle in such state. A
majority of states, including California, generally require surrender of a
certificate of title to initially register in that state a vehicle originally
registered in another state. Therefore, the Master Servicer on behalf of the
Trust must surrender possession, if it holds the certificate of title to such
Financed Vehicle, for the Financed Vehicle owner to effect the registration. If
the Financed Vehicle owner moves to a state that provides for notation of lien
on the certificate of title to perfect the security interests in the Financed
Vehicle, WFS, absent clerical errors or fraud, would receive notice of surrender
of the certificate of title if WFS' lien is noted thereon. Accordingly, WFS will
have notice and the opportunity to reperfect the security interest in the
Financed Vehicle in the state of relocation. If the Financed
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Vehicle owner moves to a state which does not require surrender of a certificate
of title for registration of a motor vehicle, registration in that state could
defeat perfection. In the ordinary course of servicing its portfolio of motor
vehicle loans, WFS takes steps to effect such reperfection upon receipt of
notice of reregistration or information from the obligor as to relocation.
Similarly, when an Obligor under a Contract sells a Financed Vehicle, the Master
Servicer must surrender possession of the certificate of title or will receive
notice as a result of its lien noted thereon and accordingly will have an
opportunity to require satisfaction of the related Contract before release of
the lien. Under the Sale and Servicing Agreement, the Master Servicer, at its
cost, will be obligated to maintain the continuous perfection of security
interests in the Financed Vehicles.
Under the law of California and most other states, liens for unpaid taxes
and possessory liens for storage of and repairs performed on a motor vehicle
take priority even over a perfected security interest in such vehicle. The
Internal Revenue Code of 1986, as amended, also grants priority to certain
federal tax liens over the lien of a secured party. The laws of certain states
and federal law permit the confiscation of motor vehicles by governmental
authorities under certain circumstances if used in unlawful activities, which
may result in the loss of a secured party's perfected security interest in a
confiscated vehicle. The Seller will represent in the Sale and Servicing
Agreement that, as of the Closing Date, the security interest in each Financed
Vehicle is prior to all other present liens upon and security interests in such
Financed Vehicle. However, liens for repairs or taxes could arise at any time
during the term of a Contract. No notice will be given to the Trustees, the
Master Servicer or Securityholders in the event such a lien or confiscation
arises and any such lien or confiscation arising after the Closing Date would
not give rise to the Seller's repurchase obligations under the Sale and
Servicing Agreement.
ENFORCEMENT OF SECURITY INTERESTS IN FINANCED VEHICLES
The Master Servicer, on behalf of the Trust, may take action itself or
through one or more Subservicers to enforce its security interest with respect
to defaulted Contracts by repossession and resale of the Financed Vehicles
securing such defaulted Contracts. In addition to the provisions of the UCC,
under California law the Contracts originated in California are subject to the
provisions of its Rees-Levering Motor Vehicle Sales and Finance Act (the
"Rees-Levering Act"). Contracts originated in other states are subject to retail
installment sales laws and similar laws of those states including in many of
those states their version of the Uniform Consumer Credit Code. The provisions
of the Rees-Levering Act and similar laws of other states control in the event
of a conflict with the provisions of the UCC. Under the UCC and laws applicable
in most states, a creditor can, without prior notice to the debtor, repossess a
motor vehicle securing a loan by voluntary surrender, by "self-help"
repossession without breach of peace, and by judicial process. The Rees-Levering
Act and similar laws of other states place restrictions on repossession sales,
including notice to the debtor of the intent to sell and of the debtor's right
to redeem the vehicle. In addition, the UCC requires commercial reasonableness
in the conduct of the sale.
In the event of repossession and resale of a Financed Vehicle, the Master
Servicer for the benefit of the Trust would be entitled to be paid out of the
sale proceeds before such proceeds could be applied to the payment of the claims
of unsecured creditors or the holders of subsequently perfected security
interests or, thereafter, to the debtor.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the motor vehicle securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments. Under
California law the proceeds from the resale of the motor vehicle securing the
debtor's loan are required to be applied first to the expenses of resale and
repossession, and if the remaining proceeds are not sufficient to repay the
indebtedness, the creditor may seek a deficiency judgment for the balance. The
priority of application of proceeds of sale as to repossessed vehicles under the
Contracts originated in most other states is similar.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, may limit or delay the ability of a creditor to repossess
and resell collateral or enforce a deficiency judgment.
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In the event that deficiency judgments are not satisfied or are satisfied
at a discount or are discharged in whole or in part in bankruptcy proceedings,
including proceedings under Chapter 13 of the Bankruptcy Reform Act of 1978, as
amended, the loss will be borne by the Trust.
OTHER MATTERS
The so-called "holder-in-due-course" rule of the Federal Trade Commission
is intended to defeat the ability of the transferor of a consumer credit
contract which is the seller of goods which give rise to the transaction (and
certain related lenders and assignees) to transfer such contract free of notice
of claims by the debtor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the debtor could
assert against the seller of goods. Liability under this rule, which would be
applicable to the Trust and Financial Security, is limited to amounts paid under
a Contract; however, the Obligor may also assert the rule to set off remaining
amounts due as a defense against a claim brought by the Trustee against such
Obligor.
The courts have imposed general equitable principles on repossession and
litigation involving deficiency balances. These equitable principles may have an
effect of relieving an Obligor from some or all of the legal consequences of a
default.
Numerous other federal and state consumer protection laws, regulations and
rules impose requirements applicable to the origination and servicing of the
Contracts, including the Truth-in-Lending Act (and Federal Reserve Board
Regulation Z), the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Equal Credit Opportunity Act (and Federal
Reserve Board Regulation B), the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, state adaptations of the National Consumer Act and
of the Uniform Consumer Credit Code and the California Rees-Levering Act and
motor vehicle retail installment sale acts in other states, and similar laws and
rules. Also, the laws of certain states impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect the ability of an assignee such as
the Trustee to enforce consumer finance contracts such as the Contracts. The
Seller will represent and warrant in the Sale and Servicing Agreement that each
of the Contracts, and the sale of the Financed Vehicles sold thereunder,
complied with all material requirements of such laws.
REPURCHASE OBLIGATION
Under the Sale and Servicing Agreement, the Seller will make
representations and warranties relating to validity, subsistence, perfection and
priority of the security interest in each Financed Vehicle as of the Closing
Date. Accordingly, if any defect exists in the perfection of the security
interest in any Financed Vehicle as of the Closing Date, including any defect
arising from the violation of laws or rules, and such defect materially and
adversely affects the interests of the Securityholders, the Indenture Trustee,
the Owner Trustee or Financial Security, such defect would constitute a breach
of a representation and warranty under the Sale and Servicing Agreement and, if
uncured, would create an obligation of the Seller to repurchase such Contract
unless the breach is cured. Additionally, in the Sale and Servicing Agreement
the Master Servicer will make certain representations, warranties and
affirmative covenants regarding, among other things, the maintenance of the
security interest in each Financed Vehicle, the breach of which would create an
obligation of the Master Servicer to repurchase any affected Contract unless the
breach is cured.
THE SELLER
The Seller is a wholly owned, limited-purpose operating subsidiary of WFS
which was incorporated under the laws of the State of California on October 24,
1985. The principal office of the Seller is 23 Pasteur Road, Irvine, California
92618.
The Seller was organized principally for the purpose of purchasing retail
installment sales contracts and installment loans from the Bank in connection
with its activities as a finance subsidiary of the Bank. Effective
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May 1, 1995, ownership of the Seller was transferred to WFS and it is now a
limited purpose operating subsidiary of WFS. The Seller has not and will not
engage in any activity other than (i) acquiring, owning, holding, selling,
transferring, assigning, pledging or otherwise dealing in installment sales
contracts and installment loans secured by automobiles and light-duty trucks or
(ii) authorizing, issuing, selling and delivering one or more series of
obligations consisting of one or more classes of bonds or pass-through
certificates collateralized by installment sales contracts and installment loans
secured by automobiles and light-duty trucks, which bonds or pass-through
certificates are rated in the highest available category by at least one
nationally recognized statistical rating agency.
The Seller's Articles of Incorporation limit the activities of the Seller
to the above purposes and to any activities incidental to and necessary for such
purposes.
BREACH OF REPRESENTATIONS AND WARRANTIES; DEFECTIVE CONTRACT DOCUMENTATION
In the Sale and Servicing Agreement, the Seller will make certain
representations and warranties with respect to each Contract as of the Closing
Date, including but not limited to, perfection, validity, enforceability of and
the absence of liens prior to the security interest granted pursuant to each
Contract, title of the Trust in and to such Contracts, validity and
enforceability of the Contracts as against the related Obligor, and collision
and comprehensive insurance coverage related to each Financed Vehicle. (Sale and
Servicing Agreement, Section 3.01) If (i) any of such representations and
warranties is found to have been incorrect as of the time it was made or any
document evidencing or securing a Contract is found to be defective or not to be
contained in the Contract files, and (ii) the same materially and adversely
affects the interest of the Certificateholders, the Indenture Trustee, the Owner
Trustee or Financial Security in and to such Contract, the Seller must cure the
defect or eliminate or otherwise cure the circumstances or condition in respect
of which such representation or warranty is incorrect within 90 days of the
discovery thereof. If the defect is not cured within such 90-day period, the
Seller must purchase the Contract affected by the defect at a price equal to the
outstanding principal amount of such Contract plus accrued interest thereon to
the last Due Date in the Due Period in which such repurchase occurs. (Sale and
Servicing Agreement, Section 3.02)
WFS
GENERAL
WFS is an auto finance company incorporated in California in 1988. WFS was
formerly known as Westcorp Financial Services, Inc. ("Westcorp Financial"), a
wholly owned subsidiary of the Bank and a licensed consumer finance company.
Prior to May 1, 1995, the auto finance activities described in this Prospectus
were conducted separately by the Bank, through its auto finance division, and by
Westcorp Financial. Effective May 1, 1995, the Bank's auto finance division was
combined with the consumer auto finance activities of Westcorp Financial, with
Westcorp Financial then changing its corporate name to WFS Financial Inc. In
August 1995, WFS completed an initial public offering of 19.7% of its common
stock. WFS is now a majority owned operating subsidiary of the Bank.
WFS purchases contracts in both the prime and non-prime credit quality
segments of the auto finance market. During 1997, WFS purchased approximately
55% of its contracts from the prime credit quality segment and 45% from the
non-prime segment. WFS purchases the majority of its contracts from franchised
dealers and to a lesser extent from independent dealers. During that same
period, contracts for new and used vehicles represented 18% and 82%,
respectively, of WFS' volume of contracts purchased.
WFS is an operating subsidiary of the Bank. As an operating subsidiary, WFS
is subject to regulation and supervision by the Office of Thrift Supervision
("OTS") and the Federal Deposit Insurance Corporation ("FDIC"). At March 31,
1998, WFS had total assets of $903 million, total liabilities of $737 million
and stockholders' equity of $167 million. As of March 31, 1998, WFS' net
portfolio of contracts totalled approximately $284 million.
WFS' revenues are derived principally from contractual servicing fees, the
retained interest on contracts sold for which servicing is retained, interest on
contracts not sold and fee income including late fees, deferment
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fees, documentation fees and other fees, interest charged on its portfolio of
contracts and, to a lesser extent, gain on other investments. Interest on
borrowings and general and administrative costs are WFS' major expense items.
The principal executive offices of WFS are located at 23 Pasteur Road,
Irvine, California 92618.
BUSINESS ACTIVITIES
WFS is engaged principally in the business of originating contracts secured
by automobiles and light duty trucks from new and used car dealers and the
public. WFS currently conducts its operations through its principal office and
109 production offices serving 40 states.
WII
WII is a wholly owned limited-purpose, operating subsidiary of WFS. WII was
incorporated in California on June 11, 1996, for the purpose of purchasing an
ownership interest in the Trust and similar trusts. WII is limited by its
Articles of Incorporation from engaging in any business activities not
incidental or necessary to its stated purpose.
The principal executive office of WII is located at 23 Pasteur Road,
Irvine, California 92618 and its telephone number is (949) 727-1000.
THE BANK
GENERAL
The Bank is a federally chartered savings association the principal office
of which is located in Irvine, California. As of March 31, 1998, the Bank had
total assets of $3.8 billion, total deposits of $2.2 billion and stockholder's
equity of $328 million on a generally accepted accounting principles basis. The
Bank is a wholly owned subsidiary of Westcorp. Westcorp is a broadly based
financial services holding company which operates principally through the Bank,
its wholly owned subsidiary, and through WFS.
As a federally chartered savings association, the Bank is subject to
regulation and supervision by the OTS and the FDIC. The Bank is a member of the
Federal Home Loan Bank of San Francisco.
The principal executive office of the Bank is located at 16485 Laguna
Canyon Road, Irvine, California 92618 and its telephone number is (949)
727-1100.
BUSINESS ACTIVITIES
The Bank is engaged principally in the business of attracting deposits
from, and making real estate secured loans to the public. The Bank has offices
in 10 states, including 26 retail banking offices in California. Funds for
lending are obtained from deposits, borrowings, payments on existing loans and
contracts and sales of loans and contracts.
FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the purchase, ownership and disposition of the Securities. This
summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules contained within the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder.
Investors should consult their own tax advisors to determine the federal,
state, local and other tax consequences of the purchase, ownership and
disposition of the Securities. Prospective investors should note that no rulings
have been or will be sought from the Internal Revenue Service (the "IRS") with
respect to any of the federal income tax consequences discussed below, and no
assurance can be given that the IRS will not take contrary positions. Moreover,
there are no cases or IRS rulings on transactions similar to those described
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herein with respect to the Trust, involving both debt and equity interests
issued by a trust with terms similar to those of the Notes and the Certificates.
Prospective investors are urged to consult their own tax advisors in determining
the federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Securities.
This summary does not purport to deal with all aspects of federal income
taxation that may be relevant to investors in light of their individual
investment circumstances (e.g., financial institutions, broker-dealers, life
insurance companies and tax-exempt organizations).
TAX CHARACTERIZATION OF TRUSTS
In the opinion of Mitchell, Silberberg & Knupp LLP, special tax counsel to
the Seller, the Trust will not be an association (or a publicly traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion is based on the assumption that the terms of the Trust Agreement and
related documents will be complied with, and on such counsel's conclusions that
the nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
it would be subject to corporate income tax on its taxable income. The Trust's
taxable income would include all its income on the related Contracts, which may
be reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Mitchell, Silberberg & Knupp LLP, special tax
counsel to the Seller, has rendered an opinion that the Notes will be classified
as debt for federal income tax purposes. All of the discussion below assumes
this characterization of the Notes is correct.
OID. The discussion below assumes that all payments on the Notes are
denominated in U.S. dollars. Moreover, the discussion assumes that the interest
formula for the Notes meets the requirements for "qualified stated interest"
under Treasury regulations relating to original issue discount ("OID"), and that
any OID on the Notes (i.e., any excess of the principal amount of the Notes over
their issue price) does not exceed a de minimis amount (i.e., 1/4% of their
principal amount multiplied by the number of full years included in their term),
all within the meaning of such OID regulations.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. A purchaser who
buys a Note for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
However, because a failure to pay interest currently on the Notes is not a
default and does not give rise to a penalty, under the OID regulations the Notes
might be viewed as having been issued with OID. This interpretation would not
significantly affect accrual basis holders of Notes, although it would somewhat
accelerate taxable income to cash basis holders by in effect requiring them to
report interest income on the accrual basis.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium (if any) previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to
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such Note. Any such gain or loss will be capital gain or loss if the Note was
held as a capital asset, except for gain representing accrued interest and
accrued market discount not previously included in income. Capital losses
generally may be used only to offset capital gains.
Foreign holders. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest," and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust or the Seller (including a holder of 10% of outstanding Notes or
Certificates) or a "controlled foreign corporation" with respect to which the
Trust or the Seller is a "related person" within the meaning of the Code and
(ii) provides the Trustee or other person who is otherwise required to withhold
U.S. tax with respect to the Notes with an appropriate statement (on Form W-8 or
a similar form), signed under penalty of perjury, certifying that the beneficial
owner of the Note is a foreign person and providing the foreign person's name
and address. If a Note is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide the relevant signed statement to the withholding agent; in that case,
however, the signed statement must be accompanied by a Form W-8 or substitute
form provided by the foreign person that owns the Note. If such interest is not
portfolio interest, then it will be subject to United States federal income and
withholding tax at a rate of 30%, unless reduced or eliminated pursuant to an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder such
as a corporation, tax exempt organization, qualified pension and profit sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalty of perjury, a certificate containing the holder's name, address, correct
federal taxpayer identification number and a statement that the holder is not
subject to backup withholding. Should a nonexempt Noteholder fail to provide the
required certification, the Trust will be required to withhold 31% of the amount
otherwise payable to the holder, and remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of special tax counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust. If so treated, the Trust might be
treated as a publicly traded partnership taxable as a corporation with the
adverse consequences described above (and the resulting taxable corporation
would not be able to reduce its taxable income by deductions for interest
expense on Notes recharacterized as equity). Alternatively, and most likely in
the view of special tax counsel, the Trust might be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
certain qualifying income tests. Nonetheless, treatment of the Notes as equity
interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "unrelated business taxable income",
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of Trust as a Partnership. The Seller and the Master Servicer
will agree, and the related Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with
53
<PAGE> 55
the assets of the partnership being the assets held by the Trust, the partners
of the partnership being the Certificateholders, and the Notes being debt of the
partnership. However, the proper characterization of the arrangement involving
the Trust, the Certificates, the Notes, the Seller and the Master Servicer is
not certain because there is no authority on transactions closely comparable to
that contemplated herein.
A variety of alternative characterizations are possible. For example, the
Trust may be treated as a trust rather than a partnership for federal tax
purposes. Or, because the Certificates have certain features characteristic of
debt, the Certificates might be considered debt of the Seller or the Trust. Any
such characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership and that all payments on the Certificates are denominated in U.S.
dollars.
Partnership Taxation. As a partnership, the Trust will not be subject to
federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the related Contracts
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of such Contracts. The Trust's
deductions will consist primarily of interest accruing with respect to the
Notes, servicing and other fees, and losses or deductions upon collection or
disposition of Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (i.e., the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of (i) the interest that accrues on the
Certificates in accordance with their terms for such month, including interest
accruing at the Pass-Through Rate for such month and interest on amounts
previously due on the Certificates but not yet distributed; (ii) any Trust
income attributable to discount on the related Contracts that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
of premium on Contracts that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust will be allocated to the Seller and WII, in the proportion of 99% and 1%,
respectively. Based on the economic arrangement of the parties, this approach
for allocating Trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, even
under the foregoing method of allocation, Certificateholders may be allocated
income equal to the entire Pass-Through Rate plus the other items described
above, even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Master Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Contract, the
54
<PAGE> 56
Trust might be required to incur additional expense but it is believed that
there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Contracts will not be issued
with OID, and, therefore, the Trust should not have OID income. However, the
purchase price paid by the Trust for the related Contracts may be greater or
less than the remaining principal balance of the Contracts at the time of
purchase. If so, the Contracts will have been acquired at a premium or discount,
as the case may be. As indicated above, the Trust will make this calculation on
an aggregate basis, but might be required to recompute it on a Contract-by-
Contract basis.
If the Trust acquires the Contracts at a market discount or premium, it
will elect to include any such discount in income currently as it accrues over
the life of such Contracts or to offset any such premium against interest income
on such Contracts. As indicated above, a portion of such market discount income
or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Pursuant to final Treasury regulations issued May
9, 1997, under Section 708 of the Code, a sale or exchange of 50 percent or more
of the capital and profits in the Trust would cause a deemed contribution of the
assets of the Trust (the "Old Partnership") to a new partnership (the "New
Partnership") in exchange for interests in the New Partnership. Such interests
would be deemed distributed to the partners of the Old Partnership in
liquidation thereof.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the related Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Seller will
be authorized to revise the Trust's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificate-
55
<PAGE> 57
holder had. The tax basis of the Trust's assets will not be adjusted to reflect
that higher (or lower) basis unless the Trust were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust will not make such
election. As a result, Certificateholders might be allocated a greater or lesser
amount of Trust income than would be appropriate based on their own purchase
price for Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-l information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (a) the name, address and identification number of such person, (b)
whether such person is a United States person, a tax-exempt entity, a foreign
government or an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (c) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
WII will be designated as the tax matters partner for the Trust in the
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. These rates may be increased by future tax legislation.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the Trust to change its withholding
procedures. In determining a holder's withholding status, the Trust may rely on
IRS Form W-8, IRS Form W-9 or the holder's certification of nonforeign status
signed under penalty of perjury.
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<PAGE> 58
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must obtain
a taxpayer identification number from the IRS and submit that number to the
Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust. If these interest payments are properly characterized
as guaranteed payments, then the interest will not be considered "portfolio
interest". As a result, Certificateholders will be subject to United States
federal income tax and withholding tax at a rate of 30%, unless reduced or
eliminated pursuant to an applicable treaty. In such case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in excess
of the taxes that should be withheld with respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
SECURITYHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
CALIFORNIA INCOME TAX CONSEQUENCES
In the opinion of Mitchell, Silberberg & Knupp LLP, special tax counsel to
the Seller, the Trust will not be an association taxable as a corporation for
California income tax purposes. This opinion will be based on the assumption
that the terms of the Trust Agreement and related documents will be complied
with. Mitchell, Silberberg & Knupp LLP has rendered an opinion that
Certificateholders and Noteholders who are not residents of or otherwise subject
to tax in California will not, solely by reason of their acquisition of an
interest in the Certificates or any Class of Notes, respectively, be subject to
California income, franchise, excise or similar taxes with respect to interest
on the Certificates or any Class of Notes, respectively, or with respect to any
of the other Trust Property.
Investors should consult their own tax advisors to determine the state,
local and other tax consequences to them of the purchase, ownership and
disposition of the Securities.
ERISA CONSIDERATIONS
OVERVIEW
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans subject to ERISA
("Plans") and on persons who are parties in interest or disqualified persons
("parties in interest") with respect to such Plans which would affect purchases
of Securities by or on behalf of Plans. Certain employee benefit plans, such as
governmental plans and church plans (if no election has been made under Section
410(d) of the Code), are not subject to the requirements of ERISA and assets of
such plans may be invested in Certificates without regard to the ERISA
considerations described below, subject to the provisions of other applicable
federal and state law, including, for any such government or church plan
qualified under Section 401(a) of the Code and exempt from taxation under
Section 501(a) of the Code, the prohibited transaction rules set forth in
Section 503 of the Code.
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<PAGE> 59
Investments by Plans are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification,
requirements respecting delegation of investment authority and the requirement
that a Plan's investment be made in accordance with the documents governing the
Plan.
PROHIBITED TRANSACTIONS
Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in certain transactions involving a Plan and its assets unless a
statutory or administrative exemption applies to the transaction. Section 4975
of the Code and Section 502(i) of ERISA impose certain excise taxes on such
prohibited transactions. Securities purchased by a Plan would be assets of the
Plan. Under regulations issued by the U.S. Department of Labor, the Contracts in
certain circumstances may also be deemed to be assets of each Plan that
purchases Securities. If this were so, persons that cause a Plan to acquire
Securities or that sponsor or insure the related Contracts or manage, control or
service the Contracts may be subject to the fiduciary responsibility provisions
of ERISA and the prohibited transaction provisions of Section 4975 of the Code
in the absence of a statutory or administrative exemption.
THE NOTES
The Notes may be purchased by a Plan subject to ERISA or Section 4975 of
the Code. A fiduciary of a Plan must determine that the purchase of a Note is
consistent with its fiduciary duties under ERISA and does not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code.
The Notes may not be purchased with the assets of a Plan if the Seller, the
Master Servicer, the Indenture Trustee, the Owner Trustee or any of their
affiliates (i) has investment or administrative discretion with respect to such
Plan assets; (ii) has authority or responsibility to give, or regularly gives,
investment advice with respect to such Plan assets, for a fee and pursuant to an
agreement or understanding that such advice (a) will serve as a primary basis
for investment decisions with respect to such Plan assets and (b) will be based
on the particular investment needs for such Plan; or (iii) is an employer
maintaining or contributing to such Plan.
THE CERTIFICATES
The Certificates may not be acquired by (i) an employee benefit plan (as
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code (other than a
governmental plan described in Section 4975(g)(2) of the Code) or (iii) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity or which uses plan assets to acquire Certificates. By
its acceptance of a Certificate or a beneficial interest therein, each
Certificateholder or Certificate Owner will be deemed to have represented and
warranted that it is not subject to the foregoing limitation.
Due to the complexities of the foregoing rules and the penalties imposed
upon persons involved in prohibited transactions, it is important that the
fiduciary of an employee benefit plan considering the purchase of Certificates
consult with its counsel regarding the applicability of the prohibited
transaction provisions of ERISA and the Code to such investment.
Prohibited Transaction Class Exemption ("PTCE") 95-60 was issued by the
Department of Labor on July 12, 1995 in response to the United States Supreme
Court decision John Hancock Mutual Life Insurance Co. v. Harris Trust and
Savings Bank, 510 U.S. 86 (1993), in which the Court held that assets held in an
insurance company's general account may be deemed to be "plan assets" for ERISA
purposes under certain circumstances. Subject to certain conditions, PTCE 95-60
provides general relief from the prohibited transaction rules that would
otherwise be applicable to assets held in an insurance company's general
account. Prospective insurance company purchasers should consult with their
counsel to determine whether the decision in John Hancock, as modified by PTCE
95-60, affects their ability to make purchases of the Certificates.
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<PAGE> 60
UNDERWRITING
Subject to certain conditions contained in an underwriting agreement (the
"Underwriting Agreement"), Donaldson, Lufkin & Jenrette Securities Corporation
and BancAmerica Robertson Stephens (the "Underwriters") have agreed to severally
purchase from the Trust, and the Trust has agreed to sell to the Underwriters,
the respective principal amounts of each Class of Notes and the Certificates as
set forth opposite their names below:
CLASS A-1, A-2 AND A-3 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF CLASS A-1 NOTES OF CLASS A-2 NOTES OF CLASS A-3 NOTES
----------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation................ $ $ $
BancAmerica Robertson Stephens............ $ $ $
------------ ------------ ------------
Total........................... $ $ $
============ ============ ============
</TABLE>
CLASS A-4 NOTES AND CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF CLASS A-4 NOTES OF CERTIFICATES
----------- ------------------ ----------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation.................................. $ $
BancAmerica Robertson Stephens.............................. $ $
----------- -----------
Total............................................. $ $
=========== ===========
</TABLE>
The Seller has been advised by the Underwriters that they propose initially
to offer the Notes to the public at the respective public offering prices set
forth on the cover page of this Prospectus and to certain dealers at such prices
less a concession not in excess of % of the principal amount of the Class
A-1 Notes, % of the principal amount of the Class A-2 Notes, % of the
principal amount of the Class A-3 Notes and % of the principal amount of
the Class A-4 Notes. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of % of the principal amount of the Class A-1 Notes,
% of the principal amount of the Class A-2 Notes, % of the principal
amount of the Class A-3 Notes and % of the principal amount of the Class
A-4 Notes on sales to certain other dealers. After the initial public offering,
the public offering prices of the Notes and such concessions and discounts may
be changed.
The Seller has been advised by the Underwriters that they propose initially
to offer the Certificates to the public at the public offering price set forth
on the cover page of this Prospectus and to certain dealers at such prices less
a concession not in excess of % of the principal amount thereof. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Certificates. After the initial public
offering, the public offering price of the Certificates and such concessions and
discounts may be changed.
The Underwriting Agreement provides that the Underwriters' obligations
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions.
The Seller and WFS have agreed to jointly and severally indemnify the
Underwriters against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the Underwriters may be required to
make in respect thereof.
In connection with the offering of the Securities, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
any Class of Securities. Specifically, the Underwriters may overallot the
offering, creating a syndicate short position. The Underwriters may bid for and
purchase the Securities in the open market to cover syndicate short positions.
In addition, the Underwriters may bid for and purchase the Securities in the
open market to stabilize the price of the Securities. These activities may
stabilize or maintain the market price of the Securities above independent
market levels. The Underwriters are not required to engage in these activities,
and may end these activities at any time.
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<PAGE> 61
LEGAL MATTERS
Certain legal matters with respect to the Securities, including certain
federal and California income tax matters, will be passed upon for the Seller by
Mitchell, Silberberg & Knupp LLP, Los Angeles, California. Brown & Wood LLP, San
Francisco, California will act as counsel for the Underwriters. Certain legal
matters relating to the Policies will be passed upon for Financial Security by
Bruce E. Stern, Esq., General Counsel, Financial Security or an Associate
General Counsel of Financial Security and by Rogers & Wells, New York, New York.
EXPERTS
The consolidated balance sheets of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the period ended December 31, 1997, incorporated by reference
in this Prospectus, have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995 which provides a
new "safe harbor" for these types of statements. This Prospectus contains
forward-looking statements which reflect the Seller's current views with respect
to future events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties, including those identified below,
which could cause actual results to differ materially from historical results or
those anticipated. The forward-looking terminology such as "believe," "expect,"
"may," "will," "should," "continue," and/or the negative thereof or other
comparable expressions which indicate future events and trends identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. The Seller
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The level of demand for contracts, which is affected by such external factors as
the level of interest rates, the strength of the various segments of the
economy, debt burden held by the consumer and demographics of WFS' lending
markets could cause actual results to differ materially from historical results
or those anticipated.
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<PAGE> 62
INDEX OF DEFINITIONS
Set forth below is a list of the defined capitalized terms used in this
Prospectus and the pages on which the definitions of such terms may be found.
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Administration Agreement.................................... 38
Administration Fee.......................................... 38
Administrator............................................... 38
Advance..................................................... 44
Aggregate Scheduled Balance................................. 27
Aggregate Scheduled Balance Decline......................... 27
APR......................................................... 14
Backup Withholding.......................................... 57
Bank........................................................ 3
Business Day................................................ 4
Calculation Day............................................. 8
Cede........................................................ 22
Certificate Balance......................................... 6
Certificate Distributable Amount............................ 27
Certificate Distribution Account............................ 25
Certificate Final Distribution Date......................... 4
Certificateholders.......................................... 22
Certificate Interest Carryover Shortfall.................... 27
Certificate Interest Distributable Amount................... 27
Certificate Percentage...................................... 27
Certificate Policy.......................................... 1,12
Certificate Pool Factor..................................... 18
Certificate Principal Carryover Shortfall................... 27
Certificate Principal Distributable Amount.................. 27
Certificate Quarterly Interest Distributable Amount......... 27
Certificate Quarterly Principal Distributable Amount........ 27
Certificates................................................ 1,3
Charge-Off Percentage....................................... 30
Class A-1 Final Distribution Date........................... 4
Class A-1 Notes............................................. 1,3
Class A-1 Rate.............................................. 4
Class A-2 Final Distribution Date........................... 4
Class A-2 Notes............................................. 1,3
Class A-2 Rate.............................................. 4
Class A-3 Final Distribution Date........................... 4
Class A-3 Notes............................................. 1,3
Class A-3 Rate.............................................. 5
Class A-4 Final Distribution Date........................... 4
Class A-4 Notes............................................. 1,3
Class A-4 Rate.............................................. 5
Closing Date................................................ 3
Code........................................................ 51
Collection Account.......................................... 25
Commission.................................................. 2
Contracts................................................... 1,4
Cut-Off Date................................................ 12
Cut-Off Date Aggregate Scheduled Balance.................... 7
</TABLE>
A-1
<PAGE> 63
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Defaulted Contract.......................................... 27
Delinquency Percentage...................................... 30
Determination Date.......................................... 25
Distribution Accounts....................................... 25
Distribution Date........................................... 4
Distribution Date Statement................................. 25
DTC......................................................... 1
Due Date.................................................... 29
Due Period.................................................. 28
Eligible Investments........................................ 25
ERISA....................................................... 9,57
Events of Default........................................... 19
Excess Amounts................................................ 8,26
Exchange Act................................................ 22
FDIC........................................................ 50
Final Distribution Dates.................................... 4
Financed Vehicles........................................... 1,4
Financial Security.......................................... 1,3
Guaranteed Distributions.................................... 40
Holdings.................................................... 42
Holding Account............................................. 25
Indenture................................................... 3
Indenture Trustee........................................... 3
Indirect Participants....................................... 22
Insolvency Event............................................ 33
Insurance Agreement......................................... 8
Insurer Default............................................. 20
Interest Period............................................. 5
Interest Rates.............................................. 5
Issuer...................................................... 3
IRS......................................................... 51
Liquidated Contract......................................... 28
Liquidation Expenses........................................ 24
Master Servicer............................................. 3
Monthly P&I................................................. 29
Moody's..................................................... 1,9
Net Collections............................................. 24
Net Insurance Proceeds...................................... 24
Net Liquidation Proceeds.................................... 24
New Partnership............................................. 55
Nonrecoverable Advance...................................... 44
Note Distributable Amount................................... 28
Note Distribution Account................................... 25
Note Final Distribution Dates............................... 4
Note Interest Carryover Shortfall........................... 28
Note Interest Distributable Amount.......................... 28
Note Percentage............................................. 28
Note Policy................................................. 1,12
Note Pool Factor............................................ 18
Note Principal Carryover Shortfall.......................... 28
Note Principal Distributable Amount......................... 28
Note Quarterly Interest Distributable Amount................ 28
Note Quarterly Principal Distributable Amount............... 29
</TABLE>
A-2
<PAGE> 64
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Noteholders................................................. 22
Notes....................................................... 1,3
Obligors.................................................... 12
OID......................................................... 52
Old Partnerships............................................ 55
Omnibus Proxy............................................... 23
Optional Purchase........................................... 8
Order....................................................... 40
Original Certificate Balance................................ 6
OTS......................................................... 50
Owner Trustee............................................... 3,4
Participants................................................ 22
Pass-Through Rate........................................... 6
Paying Agent................................................ 6
Plans....................................................... 57
Policies.................................................... 1,12
Principal Distributable Amount.............................. 29
PTCE........................................................ 58
Rating Agencies............................................. 1,9
Record Date................................................. 4
Rees-Levering Act........................................... 48
Receipt..................................................... 41
Received.................................................... 41
Reinvestment Contract....................................... 25
Repurchase Amount........................................... 45
</TABLE>
A-3
<PAGE> 65
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Rule of 78's Contract..............A Contract that provides
for the payment by the
Obligor of a specified
total number of payments,
payable in equal monthly
installments, which total
represents the principal
amount financed plus
add-on interest in an
amount calculated by
using the Rule of 78's.
Under the Rule of 78's,
the amount of a monthly
payment allocable to
interest on a Contract is
determined by multiplying
the total amount of
add-on interest payable
over the term of the
Contract by a fraction
the denominator of which
is a number equal to the
sum of a series of
numbers representing the
number of each monthly
payment due under the
Contract and the
numerator of which for a
given month is the number
of payments remaining
before the maturity of
the Contract. For
example, with a Contract
providing for 12
payments, the denominator
of each month's fraction
will be 78, the sum of a
series of numbers from 1
to 12. Accordingly, in
the example of a twelve
payment Contract, the
fraction for the first
payment is 12/78, for the
second payment 11/78, for
the third payment 10/78,
and so on through the
final payment, for which
the fraction is 1/78. The
applicable fraction is
then multiplied by the
total add-on interest
payment over the entire
term of the Contract, and
the resulting amount is
the amount of add-on
interest earned that
month. The difference
between the amount of the
monthly payment by the
Obligor and the amount of
earned add-on interest
calculated for the month
is applied to principal
reduction. Under the law
of Texas, a similar
procedure is permitted
for calculating the
amount of add-on interest
earned, except the
fraction is derived by
using the sum of the
monthly payments rather
than the sum of the
number of months (the
"sum of the balances").
As a Contract using
either the Rule of 78's
or the sum of the
balances method to
compute interest earned
is payable in equal
monthly payments, the
mathematical result is
substantially identical
under either system.
Accordingly, for purposes
of convenience, the term
"Rule of 78's" is used
herein in referring to
Contracts with add-on
interest regardless of
which system is used to
calculated interest
earned.
S&P......................................................... 1,9
Sale and Servicing Agreement................................ 12
Scheduled Balance........................................... 29
Scheduled Payments.......................................... 39
Securities.................................................. 1,3
Seller...................................................... 1,3
Servicer Defaults........................................... 33
Servicing Fee............................................... 45
Servicing Fee Percent....................................... 45
Simple Interest Contract .. A Contract as to which interest
is calculated each day on the
basis of the actual principal
balance of such Contract on
such day.
Specified Spread Account Balance............................ 30
Spread Account.............................................. 7
Spread Account Initial Deposit.............................. 8
Statement to Securityholders................................ 31
Subservicer................................................. 43
Trust....................................................... 1,3
Trust Agreement............................................. 3
Trust Fees and Expenses..................................... 18
Trustees.................................................... 4
Trust Insolvency............................................ 20
UCC......................................................... 46
Underwriters................................................ 59
</TABLE>
A-4
<PAGE> 66
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Underwriting Agreement...................................... 59
Unreimbursed Insurer Amounts................................ 26
voting interests............................................ 34
WFS......................................................... 1,3
WII......................................................... 3
</TABLE>
A-5
<PAGE> 67
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE SELLER, THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO OR SOLICITATION
OF ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.................. 2
Reports to Securityholders............. 2
Incorporation of Certain Documents by
Reference............................ 2
Summary of Prospectus.................. 3
Risk Factors........................... 11
Formation of the Trust................. 11
The Contracts Pool..................... 13
Delinquency and Contract Loss
Information.......................... 17
Pool Factors and Trading Information... 18
Use of Proceeds........................ 18
The Notes.............................. 18
The Certificates....................... 20
Certain Information Regarding the
Securities........................... 22
The Policies........................... 39
Financial Security Assurance Inc. ..... 42
The Master Servicer.................... 43
Certain Legal Aspects of the
Contracts............................ 46
The Seller............................. 49
WFS.................................... 50
WII.................................... 51
The Bank............................... 51
Federal Income Tax Consequences........ 51
California Income Tax Consequences..... 57
ERISA Considerations................... 57
Underwriting........................... 59
Legal Matters.......................... 60
Experts................................ 60
Forward-Looking Statements............. 60
Index of Definitions................... A-1
==============================================
</TABLE>
======================================================
$660,000,000
WFS FINANCIAL
1998-B OWNER TRUST
$125,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-1
$160,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-2
$200,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-3
$102,400,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-4
$72,600,000
% AUTO RECEIVABLE
BACKED CERTIFICATES
--------------------
PROSPECTUS
--------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
, 1998
======================================================
<PAGE> 68
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Securities being registered
hereby are estimated as follows:
<TABLE>
<S> <C>
Registration Fee............................................ $194,700.00
Printing and Engraving...................................... 50,000.00
Trustees' Fees.............................................. 12,500.00
Accounting Fees............................................. 35,000.00
Legal Fees and Expenses..................................... 80,000.00
Blue Sky Fees and Expenses.................................. 20,000.00
Rating Agency Fees.......................................... 60,000.00
Miscellaneous Fees.......................................... 4,800.00
-----------
Total............................................. $457,000.00
===========
</TABLE>
- ---------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317(b) of the California Corporations Code (the "Corporations
Code") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any "proceeding" (as defined in
Section 317(a) of the Corporations Code), other than an action by or in the
right of the corporation to procure a judgment in its favor, by reason of the
fact that such person is or was a director, officer, employee or other agent of
the corporation (collectively, an "Agent"), against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if the Agent acted in good faith and in a manner the Agent
reasonably believed to be in the best interest of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct
was unlawful.
Section 317(c) of the Corporations Code provides that a corporation shall
have power to indemnify any Agent who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was an Agent, against expenses actually and reasonably
incurred by the Agent in connection with the defense or settlement of such
action if the Agent acted in good faith and in a manner such Agent believed to
be in the best interest of the corporation and its shareholders.
Section 317(c) further provides that no indemnification may be made
thereunder for any of the following: (i) in respect of any matter as to which an
Agent shall have been adjudged to be liable to the corporation, unless the court
in which such proceeding is or was pending shall determine that such Agent is
fairly and reasonably entitled to indemnity for expenses, (ii) of amounts paid
in settling or otherwise disposing of a pending action without court approval
and (iii) of expenses incurred in defending a pending action which is settled or
otherwise disposed of without court approval.
Section 317(d) of the Corporations Code requires that an Agent be
indemnified against expenses actually and reasonably incurred to the extent the
Agent has been successful on the merits in the defense of proceedings referred
to in subdivisions (b) or (c) of Section 317.
Except as provided in Section 317(d), and pursuant to Section 317(e),
indemnification under Section 317 shall be made by the corporation only if
specifically authorized and upon a determination that indemnification is proper
in the circumstances because the Agent has met the applicable standard of
conduct, by any of the following: (i) a majority vote of a quorum consisting of
directors who are not parties to the proceeding, (ii) if such a quorum of
directors is not obtainable, by independent legal counsel in a written
II-1
<PAGE> 69
opinion, (iii) approval of the shareholders, provided that any shares owned by
the Agent may not vote thereon, or (iv) the court in which such proceeding is or
was pending.
Pursuant to Section 317(f) of the Corporations Code, the corporation may
advance expenses incurred in defending any proceeding upon receipt of an
undertaking by the Agent to repay such amount if it is ultimately determined
that the Agent is not entitled to be indemnified.
Section 317(h) provides, with certain exceptions, that no indemnification
shall be made under Section 317 where it appears that it would be inconsistent
with a provision of the corporation's articles, bylaws, a shareholder resolution
or an agreement which prohibits or otherwise limits indemnification, or where it
would be inconsistent with any condition expressly imposed by a court in
approving a settlement.
Section 317(i) authorizes a corporation to purchase and maintain insurance
on behalf of an Agent for liabilities arising by reason of the Agent's status,
whether or not the corporation would have the power to indemnify the Agent
against such liability under the provisions of Section 317.
Registrant's Bylaws (the "Bylaws") provide for the indemnification of
officers and directors of the Registrant, to the maximum extent permitted by the
Corporations Code, against expenses, judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding
arising by reason of the fact that such person is or was an officer or director
of the Registrant, and further provides for the advance to such officer or
director of expenses incurred by such officer or director in any such proceeding
to the maximum extent permitted by law. The Bylaws also provide that
Registrant's Board of Directors may provide for the indemnification of, or
advancement of expenses to, other Agents. Registrant's Articles of Incorporation
provide that the liability of directors of the Registrant shall be eliminated to
the fullest extent permissible under California law, but contain no specific
provisions with respect to the indemnification of, or advancement of expenses
to, Agents.
Reference is also made to Section 7 of the Underwriting Agreement among
Donaldson, Lufkin & Jenrette Securities Corporation, BancAmerica Robertson
Stephens, the Registrant and WFS (see Exhibit 1.1), which provides for
indemnification of the Registrant under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Articles of Incorporation of WFS Financial Auto Loans, Inc.*
3.2 Bylaws of WFS Financial Auto Loans, Inc.*
4.1 Form of Trust Agreement among WFS Financial Auto Loans,
Inc., as Seller, WFS Investments, Inc., Financial Security
Assurance Inc. and Chase Manhattan Bank Delaware, as Owner
Trustee (including form of Certificates)*
4.2 Form of Indenture among WFS Financial 1998-B Owner Trust,
Financial Security Assurance Inc. and Bankers Trust Company,
as Indenture Trustee (including forms of Notes)
5.1 Opinion of Mitchell, Silberberg & Knupp LLP with respect to
legality
8.1 Opinion of Mitchell, Silberberg & Knupp LLP with respect to
tax matters
10.1 Form of Reinvestment Contract*
10.2 Form of Sale and Servicing Agreement*
10.3 Form of Insurance Agreement*
10.4 Form of Financial Guaranty Insurance Policy (Notes)*
</TABLE>
II-2
<PAGE> 70
<TABLE>
<C> <S>
10.5 Form of Financial Guaranty Insurance Policy (Certificates)*
10.6 Form of Indemnification Agreement*
10.7 Form of Administration Agreement among WFS Financial 1998-B
Owner Trust, WFS Financial Inc, and Bankers Trust Company,
as Indenture Trustee*
20.1 Consolidated financial statements of Financial Security
Assurance Inc. and Subsidiaries as of December 31, 1997 and
1996, and for each of the three years in the period ended
December 31, 1997 (Incorporated by reference from the Annual
Report on Form 10-K of Financial Security Assurance Holdings
Inc. for the year ended December 31, 1997 (file #1-12644) as
filed on or about March 24, 1998)
20.2 Condensed consolidated financial statements of Financial
Security Assurance Inc. for the three month period ended
March 31, 1998 (Incorporated by reference from the Quarterly
Report on Form 10-Q of Financial Security Assurance Holdings
Inc. for the quarter ended March 31, 1998 (file #1-12644) as
filed on or about May 13, 1998)
23.1 Consent of Mitchell, Silberberg & Knupp LLP (included as
part of Exhibit 5.1)
23.2 Consent of Mitchell, Silberberg & Knupp LLP (included as
part of Exhibit 8.1)
23.3 Consent of Coopers & Lybrand L.L.P.**
24.1 Power of Attorney*
25.1 Statement of Eligibility and Qualification of Indenture
Trustee
</TABLE>
- ---------------
* Previously filed.
** To be filed by Amendment.
B. FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing date specified in
the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to provide prompt
delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(c) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act will be deemed to be part of this registration
statement as of the time it was declared effective.
(d) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that (i) it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and (ii) it reasonably believes
that the securities offered under this Registration Statement will be
"investment grade securities", as such term is defined under Transaction
Requirements B.2 of the Instructions to Form S-3, at the time of sale of such
securities, and has duly caused this Amendment No. 2 to the Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Irvine, State of California, on the 15th day of
June, 1998.
WFS FINANCIAL AUTO LOANS, INC.,
as originator of
WFS FINANCIAL 1998-B OWNER TRUST
By: /s/ JAMES R. DOWLAN
-------------------------------------
James R. Dowlan
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement on Form S-3 has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES R. DOWLAN President and Chief Executive June 15, 1998
- ----------------------------------------------------- Officer, Director (Principal
James R. Dowlan Executive Officer)
* Chief Financial Officer, June 15, 1998
- ----------------------------------------------------- Director
Lee A. Whatcott (Principal Financial and
Accounting Officer)
* Director June 15, 1998
- -----------------------------------------------------
Joy Schaefer
* Director June 15, 1998
- -----------------------------------------------------
James R. May
* Director June 15, 1998
- -----------------------------------------------------
Jeffrey B. Davis
*By: /s/ JAMES R. DOWLAN
- -----------------------------------------------------
James R. Dowlan
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 72
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*.............................
3.1 Articles of Incorporation of WFS Financial Auto Loans,
Inc.*.......................................................
3.2 Bylaws of WFS Financial Auto Loans, Inc.*...................
4.1 Form of Trust Agreement among WFS Financial Auto Loans,
Inc., as Seller, WFS Investments, Inc., Financial Security
Assurance Inc. and Chase Manhattan Bank Delaware, as Owner
Trustee (including form of Certificates)*...................
4.2 Form of Indenture among WFS Financial 1998-B Owner Trust,
Financial Security Assurance Inc. and Bankers Trust Company,
as Indenture Trustee (including forms of Notes).............
5.1 Opinion of Mitchell, Silberberg & Knupp LLP with respect to
legality....................................................
8.1 Opinion of Mitchell, Silberberg & Knupp LLP with respect to
tax matters.................................................
10.1 Form of Reinvestment Contract*..............................
10.2 Form of Sale and Servicing Agreement*.......................
10.3 Form of Insurance Agreement*................................
10.4 Form of Financial Guaranty Insurance Policy (Notes)*........
10.5 Form of Financial Guaranty Insurance Policy
(Certificates)*.............................................
10.6 Form of Indemnification Agreement*..........................
10.7 Form of Administration Agreement among WFS Financial 1998-B
Owner Trust, WFS Financial Inc, and Bankers Trust Company,
as Indenture Trustee*.......................................
20.1 Consolidated financial statements of Financial Security
Assurance Inc. and Subsidiaries as of December 31, 1997 and
1996, and for each of the three years in the period ended
December 31, 1997 (Incorporated by reference from the Annual
Report on Form 10-K of Financial Security Assurance Holdings
Inc. for the year ended December 31, 1997 (file #1-12644) as
filed on or about March 24, 1998)
20.2 Condensed consolidated financial statements of Financial
Security Assurance Inc. for the three month period ended
March 31, 1998 (Incorporated by reference from the Quarterly
Report on Form 10-Q of Financial Security Assurance Holdings
Inc. for the quarter ended March 31, 1998 (file #1-12644) as
filed on or about May 13, 1998)
23.1 Consent of Mitchell, Silberberg & Knupp LLP (included as
part of Exhibit 5.1)........................................
23.2 Consent of Mitchell, Silberberg & Knupp LLP (included as
part of Exhibit 8.1)........................................
23.3 Consent of Coopers & Lybrand L.L.P.**.......................
24.1 Power of Attorney*..........................................
25.1 Statement of Eligibility and Qualification of Indenture
Trustee.....................................................
</TABLE>
- ---------------
* Previously filed.
** To be filed by Amendment.
<PAGE> 1
EXHIBIT 4.2
================================================================================
WFS FINANCIAL 1998-B OWNER TRUST,
as Issuer,
and
BANKERS TRUST COMPANY,
as Trustee
------------------
INDENTURE
Dated as of June 1, 1998
------------------
$____________
Auto Receivable Backed Notes
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions............................................................. 2
Section 1.02. Incorporation by Reference of Trust Indenture Act....................... 11
Section 1.03. Rules of Construction................................................... 12
ARTICLE TWO
THE NOTES
Section 2.01. Form.................................................................... 13
Section 2.02. Execution, Authentication and Delivery.................................. 13
Section 2.03. Temporary Notes......................................................... 13
Section 2.04. Registration; Registration of Transfer and Exchange..................... 14
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes.............................. 15
Section 2.06. Persons Deemed Owner.................................................... 16
Section 2.07. Payment of Principal and Interest; Defaulted Interest................... 16
Section 2.08. Cancellation............................................................ 17
Section 2.09. Book-Entry Notes........................................................ 18
Section 2.10. Notices to Clearing Agency.............................................. 18
Section 2.11. Definitive Notes........................................................ 19
Section 2.12. Release of Collateral................................................... 19
Section 2.13. Tax Treatment........................................................... 19
ARTICLE THREE
COVENANTS
Section 3.01. Payment of Principal and Interest....................................... 20
Section 3.02. Maintenance of Office or Agency......................................... 20
Section 3.03. Money for Payments to be Held in Trust.................................. 20
Section 3.04. Existence............................................................... 22
Section 3.05. Protection of Trust Estate.............................................. 22
Section 3.06. Opinions as to Trust Estate............................................. 23
Section 3.07. Performance of Obligations; Servicing of Contracts...................... 23
Section 3.08. Negative Covenants...................................................... 25
Section 3.09. Annual Statement as to Compliance....................................... 26
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3.10. Issuer May Consolidate, etc. Only on Certain Terms...................... 26
Section 3.11. Successor or Transferee................................................. 28
Section 3.12. No Other Business....................................................... 28
Section 3.13. No Borrowing............................................................ 28
Section 3.14. Master Servicer's Obligations........................................... 29
Section 3.15. Guarantees, Loans, Advances and Other Liabilities....................... 29
Section 3.16. Capital Expenditures.................................................... 29
Section 3.17. Restricted Payments..................................................... 29
Section 3.18. Notice of Events of Default............................................. 29
Section 3.19. Further Instruments and Acts............................................ 29
Section 3.20. Compliance with Laws.................................................... 30
Section 3.21. Amendments of Sale and Servicing Agreement and Trust Agreement.......... 30
Section 3.22. Removal of Administrator................................................ 30
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture................................. 31
Section 4.02. Application of Trust Money.............................................. 32
Section 4.03. Repayment of Monies Held by Paying Agent................................ 32
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default....................................................... 33
Section 5.02. Rights upon Event of Default............................................ 34
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee;
Authority of Controlling Party...................................... 35
Section 5.04. Remedies................................................................ 37
Section 5.05. Optional Preservation of the Contracts.................................. 38
Section 5.06. Priorities.............................................................. 38
Section 5.07. Limitation of Suits..................................................... 40
Section 5.08. Unconditional Rights of Noteholders to Receive Principal and Interest... 40
Section 5.09. Restoration of Rights and Remedies...................................... 41
Section 5.10. Rights and Remedies Cumulative.......................................... 41
Section 5.11. Delay or Omission Not a Waiver.......................................... 41
Section 5.12. Control by Noteholders.................................................. 41
Section 5.13. Waiver of Past Defaults................................................. 42
Section 5.14. Undertaking for Costs................................................... 42
Section 5.15. Waiver of Stay or Extension Laws........................................ 42
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.16. Action on Notes......................................................... 43
Section 5.17. Performance and Enforcement of Certain Obligations...................... 43
Section 5.18. Claims Under Note Policy................................................ 43
Section 5.19. Preference Claims....................................................... 45
ARTICLE SIX
THE TRUSTEE
Section 6.01. Duties of Trustee....................................................... 46
Section 6.02. Rights of Trustee....................................................... 47
Section 6.03. Individual Rights of Trustee............................................ 49
Section 6.04. Trustee's Disclaimer.................................................... 49
Section 6.05. Notice of Defaults...................................................... 49
Section 6.06. Reports by Trustee to Holders........................................... 49
Section 6.07. Compensation and Indemnity.............................................. 49
Section 6.08. Replacement of Trustee.................................................. 50
Section 6.09. Successor Trustee by Merger............................................. 51
Section 6.10. Appointment of Co-Trustee or Separate Trustee........................... 51
Section 6.11. Eligibility; Disqualification........................................... 53
Section 6.12. Preferential Collection of Claims Against Issuer........................ 53
Section 6.13. Representations and Warranties of Trustee............................... 53
Section 6.14. Pennsylvania Motor Vehicle Sales Finance Act Licenses................... 53
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Trustee Names and Addresses of Noteholders............ 54
Section 7.02. Preservation of Information; Communications to Noteholders.............. 54
Section 7.03. Reports by Issuer....................................................... 54
Section 7.04. Reports by Trustee...................................................... 55
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money..................................................... 56
Section 8.02. Trust Accounts.......................................................... 56
Section 8.03. General Provisions Regarding Accounts................................... 57
Section 8.04. Release of Trust Estate................................................. 58
Section 8.05. Opinion of Counsel...................................................... 58
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.................. 59
Section 9.02. Supplemental Indentures With Consent of Noteholders..................... 60
Section 9.03. Execution of Supplemental Indentures.................................... 61
Section 9.04. Effect of Supplemental Indenture........................................ 61
Section 9.05. Conformity With Trust Indenture Act..................................... 62
Section 9.06. Reference in Notes to Supplemental Indentures........................... 62
ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01. Redemption............................................................. 63
Section 10.02. Form of Redemption Notice.............................................. 63
Section 10.03. Notes Payable on Redemption Date....................................... 64
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.............................. 65
Section 11.02. Form of Documents Delivered to Trustee................................. 67
Section 11.03. Acts of Noteholders.................................................... 67
Section 11.04. Notices, etc., to Trustee, Issuer, Insurer and Rating Agencies......... 68
Section 11.05. Notices to Noteholders; Waiver......................................... 69
Section 11.06. Alternate Payment and Notice Provisions................................ 70
Section 11.07. Conflict With Trust Indenture Act...................................... 70
Section 11.08. Effect of Headings and Table of Contents............................... 70
Section 11.09. Successors and Assigns................................................. 70
Section 11.10. Separability........................................................... 70
Section 11.11. Benefits of Indenture.................................................. 70
Section 11.12. Legal Holidays......................................................... 71
Section 11.13. Governing Law.......................................................... 71
Section 11.14. Counterparts........................................................... 71
Section 11.15. Recording of Indenture................................................. 71
Section 11.16. Trust Obligation....................................................... 71
Section 11.17. No Petition............................................................ 71
Section 11.18. Inspection............................................................. 72
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 11.19. Limitation of Liability of Owner Trustee............................... 72
EXHIBITS
Schedule A - Schedule of Contracts................................................... SA-1
Exhibit A - Form of Sale and Servicing Agreement.................................... A-1
Exhibit B - Form of Depository Agreement............................................ B-1
Exhibit C - Form of Class A-1 Note.................................................. C-1
Exhibit D - Form of Class A-2 Note.................................................. D-1
Exhibit E - Form of Class A-3 Note.................................................. E-1
Exhibit F - Form of Class A-4 Note.................................................. F-1
Exhibit G - Form of Note Assignment................................................. G-1
Exhibit H - Form of Note Policy..................................................... H-1
</TABLE>
(v)
<PAGE> 7
This Indenture, dated as of June 1, 1998, is among WFS Financial 1998-B
Owner Trust, a Delaware business trust (the "Issuer"), and Bankers Trust
Company, a New York banking corporation, in its capacity as trustee (the
"Trustee") and not in its individual capacity.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the holders of the Issuer's _____% Auto
Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), _____% Auto
Receivable Backed Notes, Class A-2 (the "Class A-2 Notes"), _____% Auto
Receivable Backed Notes, Class A-3 (the "Class A-3 Notes") and _____% Auto
Receivable Backed Notes, Class A-4 (the "Class A-4 Notes" and, together with the
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee on behalf of the Trust on the
Closing Date, on behalf of and for the benefit of the Holders of the Notes,
without recourse, all of the Issuer's right, title and interest (exclusive of
the amount, if any, allocable to any rebatable insurance premium financed by any
Contract) in, to and under (i) the Contracts secured by the Financed Vehicles
(which Contracts shall be listed in the Schedule of Contracts); (ii) certain
monies due under the Contracts on and after June 1, 1998, including, without
limitation, all payments of Monthly P&I with respect to any Financed Vehicle to
which a Contract relates received on or after June 1, 1998 and all other
proceeds received on or in respect of such Contracts (other than payments of
Monthly P&I due prior to June 1, 1998; (iii) security interests in the Financed
Vehicles; (iv) a financial guaranty insurance policy to be issued by Financial
Security for the exclusive benefit of Noteholders, which will unconditionally
and irrevocably guarantee payment of the Scheduled Payments on each Distribution
Date; (v) amounts on deposit in the Collection Account, the Note Distribution
Account, the Spread Account and the Holding Account, including all Eligible
Investments therein and all income from the investment of funds therein and all
proceeds therefrom; (vi) proceeds from claims under certain insurance policies
in respect of individual Financed Vehicles or obligors under the Contracts;
(vii) certain rights under the Sale and Servicing Agreement; (viii) the
protective security interest in certain of the above-described property granted
by the Seller in favor of the Issuer; (ix) all present and future claims,
demands, causes and choses in action in respect of any or all of the foregoing;
and (x) 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 (as each such
defined term is defined in Section 1.01) (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without
<PAGE> 8
prejudice, priority or distinction, and to secure compliance with the provisions
of this Indenture, all as provided in this Indenture.
The Trustee, as Trustee on behalf of the Holders of the Notes,
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties required
in this Indenture to the best of its ability to the end that the interests of
the Holders of the Notes may be adequately and effectively protected.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
(a) Except as otherwise specified herein or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture.
"Act" shall have the meaning specified in Section 11.03(a).
"Administration Agreement" means the Administration Agreement, dated as
of the date hereof, among the Administrator, the Company, the Issuer, the Seller
and the Trustee.
"Administrator" means the Master Servicer, or any successor
Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Vice President or more senior
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the foregoing
list of Authorized Officers.
2
<PAGE> 9
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
the Sale and Servicing Agreement, the Administration Agreement, the Note
Depository Agreement, the Certificate Depository Agreement, the Insurance
Agreement, the Policies and this Indenture.
"Book-Entry Notes" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.09.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banking institutions in Los Angeles, California, Wilmington, Delaware
or New York, New York are authorized or obligated by law, executive order or
governmental decree to remain closed.
"Certificate Depository Agreement" shall have the meaning specified in
the Trust Agreement.
"Certificate Final Distribution Date" means the ________________ ___,
20___ Distribution Date.
"Certificate of Trust" means the Certificate of Trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Certificate Policy" means the Financial Guaranty Insurance Policy
issued by the Insurer with respect to the certificates issued under the Trust
Agreement.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class A-1 Final Distribution Date" means the _______________ ___, 199__
Distribution Date.
"Class A-1 Interest Rate" means _____% per annum (computed on the basis
of a 360-day year and actual number of days elapsed since the immediately
preceding Distribution Date).
"Class A-1 Notes" means the Class A-1 Notes, substantially in the form
of Exhibit C.
"Class A-2 Final Distribution Date" means the _______________ ___, 20__
Distribution Date.
"Class A-2 Interest Rate" means _____% per annum (computed on the basis
of a 360-day year and actual number of days elapsed since the immediately
preceding Distribution Date).
"Class A-2 Notes" means the Class A-2 Notes, substantially in the form
of Exhibit D.
3
<PAGE> 10
"Class A-3 Final Distribution Date" means the _______________ ___, 20__
Distribution Date.
"Class A-3 Interest Rate" means _____% per annum (computed on the basis
of a 360-day year of twelve 30-day months).
"Class A-3 Notes" means the Class A-3 Notes, substantially in the form
of Exhibit E.
"Class A-4 Final Distribution Date" means the _______________ ___, 20__
Distribution Date.
"Class A-4 Interest Rate" means _____% per annum (computed on the basis
of a 360-day year of twelve 30-day months).
"Class A-4 Notes" means the Class A-4 Notes, substantially in the form
of Exhibit F.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means June __, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning specified in the Granting Clause of
this Indenture.
"Company" means WFS Investments, Inc., and its successors.
"Controlling Party" means the Insurer, so long as no Insurer Default
shall have occurred and be continuing, and the Trustee, for so long as an
Insurer Default shall have occurred and be continuing.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at date of the execution of this Agreement is located at Four
Albany Street, 10th Floor, New York, New York 10006, Attention: Corporate Trust
Department - Asset Backed Group; or at such other address as the Trustee may
designate from time to time by notice to the Noteholders, the Insurer and the
Issuer, or the principal corporate trust office of any successor Trustee (the
address of which the successor Trustee will notify the Noteholders, the Insurer
and the Issuer).
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
4
<PAGE> 11
"Definitive Notes" shall have the meaning specified in Section 2.09.
"Distribution Date" means each ______________ 20, ______________ 20,
________________ 20, and _______________ 20 or, if any such date shall not be a
Business Day, the next succeeding Business Day, commencing _________________
___, 1998.
"DTC" means The Depository Trust Company, and its successors.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall have the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation or bank, the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary or the
Treasurer of such corporation or bank; and with respect to any partnership, any
general partner thereof.
"Financial Security" means Financial Security Assurance Inc.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (i)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (ii)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA; (iv)
obligations issued for or liabilities incurred on the account of such Person;
(v) obligations or liabilities of such Person arising under acceptance
facilities; (vi) obligations of such Person under any guaranties, endorsements
5
<PAGE> 12
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor against
loss; (vii) obligations of such Person secured by any lien on property or assets
of such Person, whether or not the obligations have been assumed by such Person;
or (viii) obligations of such Person under any interest rate or currency
exchange agreement.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent" means, when used with respect to any specified Person,
that the Person (i) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any of their respective Affiliates, (ii) does not have
any direct financial interest or any material indirect financial interest in the
Issuer, any such other obligor, the Seller or any of their respective
Affiliates, and (iii) is not connected with the Issuer, any such other obligor,
the Seller or any of their respective Affiliates as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions.
"Independent Certificate" means a certificate or opinion to be delivered
to the Trustee under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.01, made by an Independent
appraiser or other expert appointed by an Issuer Order and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in this
Indenture and that the signer is Independent within the meaning thereof.
"Insurance Agreement" means the Insurance, Indemnity and Pledge
Agreement, dated as of the date hereof, among the Insurer, the Issuer, the
Seller, the Master Servicer, the Company and the Trustee.
"Insurance Agreement Obligations" means, as of any date, the aggregate
amounts owing to the Insurer under the Insurance Agreement as of such date,
other than amounts representing payments made under the Policies for which the
Insurer has not yet been reimbursed.
"Insurer" means Financial Security.
"Insurer Default" means the occurrence and continuance of any of the
following:
(i) the Insurer shall have failed to make a payment required to
be made under the Certificate Policy or the Note Policy;
(ii) the Insurer shall have (a) filed a petition or commenced
any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other
similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (b) made a general
assignment for the benefit of its creditors or (c) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law or any
6
<PAGE> 13
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and
nonappealable; or
(iii) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority shall have entered
a final and nonappealable order, judgment or decree (a) appointing a
custodian, trustee, agent or receiver for the Insurer or for all or any
material portion of its property or (b) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Insurer (or
the taking of possession of all or any material portion of the property
of the Insurer).
"Interest Period" means, with respect to any Distribution Date and any
Class of Notes, the period from and including the Distribution Date immediately
preceding such Distribution Date (or, in the case of the first Distribution
Date, from and including June 1, 1998) to but excluding such Distribution Date.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2
Interest Rate, the Class A-3 Interest Rate or the Class A-4 Interest Rate, as
applicable.
"Issuer" means WFS Financial 1998-B Owner Trust until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by an Authorized Officer and delivered to the
Trustee.
"Master Servicer" means WFS, in its capacity as master servicer under
the Sale and Servicing Agreement, and any successor Master Servicer thereunder.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note or a
Class A-4 Note.
"Note Depository Agreement" means the agreement dated June __, 1998,
among the Issuer, the Trustee and DTC, as the initial Clearing Agency, relating
to the Notes, substantially in the form of Exhibit B hereto.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Policy" means the Financial Guaranty Insurance Policy issued by
the Insurer with respect to the Notes, including any endorsements thereto,
substantially in the form of Exhibit H hereto.
7
<PAGE> 14
"Note Policy Claim Amount" shall have the meaning specified in Section
5.18(a).
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Notice of Claim" shall have the meaning specified in Section 5.18(b).
"Officer's Certificate" means a certificate signed by an Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Trustee.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Trustee and, if
addressed to the Insurer, satisfactory to the Insurer, and which shall comply
with any applicable requirements of Section 11.01, and shall be in form and
substance satisfactory to the Trustee, and if addressed to the Insurer,
satisfactory to the Insurer.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
for such notice has been made, satisfactory to the Trustee, has been
made); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by
a protected purchaser (as defined in Article 8 of the UCC);
provided, however, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Trustee, and the Insurer shall be deemed to be the Holder thereof to the
extent of any payments thereon made by the Insurer; provided, further, that in
determining whether the Holders of the requisite Outstanding Amount have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder or under any other Basic Document, Notes owned by the Issuer, any
other obligor upon the Notes, the Seller, the Company, WFS or any of their
respective Affiliates shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be
8
<PAGE> 15
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that the Trustee knows to be so owned
shall be so disregarded. Notes so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes, the Seller, the
Company, WFS or any of their respective Affiliates.
"Outstanding Amount" means the aggregate principal amount of all Notes
of one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"Owner Trustee" means Chase Manhattan Bank Delaware, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, or
any successor trustee under the Trust Agreement.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and, so long as
no Insurer Default shall have occurred and be continuing, is consented to by the
Insurer and is authorized by the Issuer to make the distributions from the Note
Distribution Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Policies" means the Note Policy and the Certificate Policy.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preference Claim" shall have the meaning specified in Section 5.19(b).
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency" means each of Moody's and Standard & Poor's.
"Rating Agency Condition" means, with respect to any action, that (i)
Standard & Poor's shall have been given ten Business Days (or such shorter
period as is acceptable to Standard & Poor's) prior notice thereof and that
Standard & Poor's shall have notified the Seller, the Master Servicer, the
Insurer and the Issuer in writing that such action will not result in a
qualification, reduction or withdrawal of its then-current rating of any Class
of Notes and will not result in an increased capital charge to the Insurer and
(ii) Moody's shall have been given ten Business Days (or such shorter period as
is acceptable to Moody's) prior
9
<PAGE> 16
notice thereof and copies of all documentation relating to the event requiring
such Rating Agency Condition.
"Rating Event" means the qualification, reduction or withdrawal by
either Rating Agency of its then-current rating of any Class of Notes.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the Business Day immediately preceding such
Distribution Date or Redemption Date, or, in the event that Definitive Notes are
issued, the close of business on the 15th day of the month immediately preceding
the month in which such Distribution Date or Redemption Date occurs.
"Redemption Date" means in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Master Servicer or the Issuer
pursuant to Section 10.01(a) or 10.01(b), as the case may be.
"Redemption Price" means (i) in the case of a redemption of the Notes
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the weighted
average of the Interest Rate for each Class of Notes being so redeemed to but
excluding the Redemption Date, or (ii) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (i)
above.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust and Agency Group (or any successor group of the
Trustee), including any Vice President, assistant secretary or other officer or
assistant officer of the Trustee customarily performing function similar to
those performed by the people who at such time shall be officers, respectively,
or to whom any corporate trust matter is referred at the Corporate Trust Office
of the Trustee because of his knowledge of and familiarity with the particular
subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Issuer, the Seller and the Master
Servicer, substantially in the form of Exhibit A hereto.
"Schedule of Contracts" means the listing of the Contracts set forth in
Schedule A hereto.
"Scheduled Payments" shall have the meaning specified therefor in the
Note Policy.
"Seller" shall mean WFS Financial Auto Loans, Inc., in its capacity as
seller under the Sale and Servicing Agreement, and its successors.
10
<PAGE> 17
"State" means any one of the 50 states of the United States or the
District of Columbia.
"Successor Master Servicer" shall have the meaning specified in Section
3.07(e).
"Termination Date" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Insurer for cancellation, (ii)
the date on which the Insurer shall have received payment and performance of all
amounts and obligations which the Issuer may owe to or on behalf of the Insurer
under this Indenture and (iii) the date on which the Trustee shall have received
payment and performance of all amounts and obligations which the Issuer may owe
to or on behalf of the Trustee for the benefit of the Noteholders under this
Indenture or the Notes.
"Trust Agreement" means the Trust Agreement, dated as of June __, 1998,
as amended and restated as of June __, 1998, among the Seller, the Insurer, the
Company and the Owner Trustee.
"Trust Estate" means the Collateral Granted to the Trustee under this
Indenture, including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended, as in force on the date hereof, unless otherwise specifically provided.
"Trustee" means Bankers Trust Company, as Trustee under this Indenture,
or any successor Trustee under this Indenture.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"Unreimbursed Insurer Amounts" means, on any date, the amount that is
the sum of (i) all payments (if any) made under the Policies for which the
Insurer has not yet been reimbursed as of such date, plus (ii) all Insurance
Agreement Obligations as of such date.
"United States" means the United States of America.
"WFS" means WFS Financial Inc, and its successors.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used herein that are not otherwise defined shall have
the meanings ascribed thereto in the Sale and Servicing Agreement.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
11
<PAGE> 18
"Commission" means the Securities and Exchange Commission.
"Indenture Securities" means the Notes.
"Indenture Security Holder" means a Noteholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
"Obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular;
(vi) 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 from time to
time amended, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns; and
(vii) the words "hereof," "herein" and "hereunder" and words of
similar import when used in this Indenture shall refer to this Indenture
as a whole and not to any particular provision of this Indenture;
Section, subsection and Schedule references contained in this Indenture
are references to Sections, subsections and Schedules in or to this
Indenture unless otherwise specified.
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ARTICLE TWO
THE NOTES
Section 2.01. Form. The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes, in each case together with the Trustee's
certificate of authentication, shall be in substantially the forms set forth as
Exhibits to this Indenture with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits hereto are part of the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall, upon receipt of the Note Policy and an Issuer Order,
authenticate and deliver for original issue the following aggregate principal
amount of Notes: (i) $___________ of Class A-1 Notes, (ii) $___________ of Class
A-2 Notes, (iii) $___________ of Class A-3 Notes and (iv) $__________ of Class
A-4 Notes. The aggregate principal amount of Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes outstanding at any time may not exceed such
respective amounts, except as otherwise provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
Section 2.03. Temporary Notes. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes that are printed, lithographed,
typewritten, mimeographed or
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otherwise produced, of the tenor of the Definitive Notes in lieu of which they
are issued and with such variations not inconsistent with the terms of this
Indenture as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the related Holder.
Upon surrender for cancellation of any one or more temporary Notes, the Issuer
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like tenor and principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
Section 2.04. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, provided that
the requirements of Section 8-401 of the UCC are met, the Issuer shall execute,
and the Trustee shall authenticate and the Noteholder shall obtain from the
Trustee, in the name of the designated transferee or transferees, one or more
new Notes of the same Class in any authorized denominations, of a like aggregate
principal amount.
At the option of a Holder, Notes may be exchanged for other Notes of the
same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, provided that the
requirements of Section 8-401 of the UCC are met, the Issuer shall execute, and
the Trustee shall authenticate and the Noteholder shall obtain from the Trustee,
the Notes which the Noteholder making the exchange is entitled to receive.
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All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located, in The City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.03 or 9.06 not involving any
transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, (ii) there is
delivered to the Trustee and the Insurer (unless an Insurer Default shall have
occurred and be continuing) such security or indemnity as may be required by
them to hold the Issuer, the Trustee and the Insurer harmless and (iii) the
requirements of Section 8-405 of the UCC are met, then, in the absence of notice
to the Issuer, the Note Registrar or the Trustee that such Note has been
acquired by a protected purchaser (as defined in Article 8 of the UCC), the
Issuer shall execute and upon its request the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note of the same Class; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a protected purchaser (as defined in Article 8 of the UCC)
of the original Note in lieu of which such replacement Note was issued presents
for payment such original Note, the Issuer, the Insurer and the Trustee shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such
Person, except a protected purchaser (as defined in Article 8 of the UCC), and
shall be entitled to recover upon the security or indemnity provided therefor
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to the extent of any loss, damage, cost or expense incurred by the Issuer or the
Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
or the Trustee may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.06. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee, the Insurer and
any of their respective agents may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Insurer, the Trustee nor any of their respective agents
shall be affected by notice to the contrary.
Section 2.07. Payment of Principal and Interest; Defaulted Interest.
(a) Each Class of Notes shall accrue interest at the related Interest
Rate, and such interest shall be payable on each Distribution Date as specified
therein, subject to Section 3.01. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered on the Record
Date, by check mailed first-class, postage prepaid to such Person's address as
it appears on the Note Register on such Record Date, except that, unless
Definitive Notes have been issued pursuant to Section 2.11, with respect to
Notes registered on the Record Date in the name of the nominee of the Depository
(initially, such nominee to be Cede & Co.), payment will be made by wire
transfer in immediately available funds to the account designated by such
nominee and except for the final installment of principal payable with respect
to such Note on a Distribution Date, a Redemption Date or on the related Final
Distribution Date, as the case may be (and except for the Redemption Price for
any Note called for redemption pursuant to Section 10.01(a)), which shall be
payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.
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(b) The principal of each Note shall be payable on each Distribution
Date to the extent provided in the form of the related Note set forth as an
Exhibit hereto. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, so long
as an Insurer Default shall not have occurred and be continuing or, if an
Insurer Default shall have occurred and be continuing, on the date on which an
Event of Default shall have occurred and be continuing and the Trustee or the
Holders of Notes representing not less than a majority of the Outstanding Amount
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02. All principal payments on each Class of Notes shall be made pro
rata to the Noteholders of such Class entitled thereto. The Trustee shall notify
the Person in whose name a Note is registered at the close of business on the
Record Date preceding the Distribution Date on which the Issuer expects that the
final installment of principal of and interest on such Note will be paid. Such
notice shall be mailed within five Business Days of such Distribution Date (or,
in the case of Notes registered in the name of Cede & Co., as nominee of DTC,
such notice shall be provided within one Business Day of such Distribution Date)
or receipt of notice of termination of the Trust pursuant to Section 9.01(c) of
the Trust Agreement and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify the
place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.02. In addition, the Administrator shall
notify the Rating Agencies upon the final payment of interest and principal of
each Class of Notes, and upon the termination of the Trust, in each case
pursuant to Section 1(a)(i) of the Administration Agreement.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the related payment date. The Issuer shall fix or cause to be fixed any
such special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to the Trustee and each Noteholder a
notice that states the special record date, the payment date and the amount of
defaulted interest to be paid.
(d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, if the Insurer has paid any amount in respect of the
Notes under the Note Policy which has not been reimbursed to it, deliver such
surrendered Notes to the Insurer.
Section 2.08. Cancellation. Subject to Section 2.07(d), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by the Trustee. Subject to Section 2.07(d), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. Subject
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to Section 2.07(d), all cancelled Notes may be held or disposed of by the
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Order that they
be destroyed or returned to it; provided that such Issuer Order is timely and
the Notes have not been previously disposed of by the Trustee.
Section 2.09. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the
Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no Note
Owner will receive a Definitive Note representing such Note Owner's interest in
such Note, except as provided in Section 2.11. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of
the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.11,
the Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of
and interest on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount, the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Note Owners
and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Trustee.
Section 2.10. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.11, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Note Owners.
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Section 2.11. Definitive Notes. If (i)(A) the Administrator advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities as described in the Note Depository
Agreement, and (B) Trustee or the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Trustee in writing
that it elects to terminate the book-entry system through the Clearing Agency,
or (iii) after the occurrence of an Event of Default, the Note Owners
representing not less than ___% of the Outstanding Amount of a Class of Notes
advise the Trustee and the Clearing Agency through the Clearing Agency
Participants in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of the related Note Owners,
then the Trustee shall notify all Note Owners of the related Class of Notes,
through the Clearing Agency, of the occurrence of any such event and of the
availability of Definitive Notes of the related Class of Notes to Note Owners
requesting the same. Upon surrender to the Trustee of the Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes of a Class, the Trustee shall recognize the Holders of the
Definitive Notes as Noteholders hereunder.
The Trustee shall not be liable if the Trustee or the Administrator is
unable to locate a qualified successor Clearing Agency. The Definitive Notes
shall be typewritten, printed, lithographed or engraved or produced by any
combination of these methods (with or without steel engraved borders), all as
determined by the officers executing such Notes, as evidenced by their execution
of such Notes.
Section 2.12. Release of Collateral. Subject to Section 11.01 and the
terms of the other Basic Documents, the Trustee shall release property from the
lien of this Indenture only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(l) or an Opinion of Counsel
in lieu of such Independent Certificates to the effect that the TIA does not
require any such Independent Certificates.
Section 2.13. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Trust Estate. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of its Note
(and each Note Owner by its acceptance of an interest in the applicable
Book-Entry Note), agree to treat the Notes for federal, state and local income,
single business and franchise tax purposes as indebtedness of the Issuer.
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ARTICLE THREE
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed
all amounts on deposit in the Note Distribution Account on a Distribution Date
deposited therein pursuant to the Sale and Servicing Agreement for the benefit
of (i) the Class A-1 Notes, to the Class A-1 Noteholders, (ii) the Class A-2
Notes, to the Class A-2 Noteholders, (iii) the Class A-3 Notes, to the Class A-3
Noteholders and (iv) the Class A-4 Notes, to the Class A-4 Noteholders. Amounts
properly withheld under the Code by any Person from a payment to any Noteholder
of interest and/or principal shall be considered as having been paid by the
Issuer to such Noteholder for all purposes of this Indenture.
Section 3.02. Maintenance of Office or Agency. The Chase Manhattan Bank,
as agent for the Issuer, will maintain in The City of New York, an office or
agency where Notes may be surrendered for registration of transfer or exchange,
and where notices and demands to or upon the Issuer in respect of the Notes and
this Indenture may be served. The Issuer hereby initially appoints the Trustee
to serve as its agent for the foregoing purposes. The Issuer will give prompt
written notice to the Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such office or agency or shall fail to furnish the Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its
agent to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments to be Held in Trust. As provided in
Sections 5.06 and 8.02, all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Note Distribution Account pursuant to Section 8.02(b) shall be made on
behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On the Business Day immediately preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless the Paying Agent is the Trustee) shall promptly
notify the Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee and the Insurer an instrument in which such
Paying Agent shall agree with the Trustee (and if the Trustee acts as Paying
Agent, it hereby so agrees), subject to the provisions of this Section, that
such Paying Agent will:
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(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Trustee notice of any default by the Issuer (or
any other obligor upon the Notes) in the making of any payment required
to be made with respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Trustee all sums held in trust by
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which the sums were held by such Paying Agent; and upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust and upon
receipt of an Issuer Request with the consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) shall be deposited by the Trustee
in the Collection Account; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money
shall thereupon cease; provided, however, that if such money or any portion
thereof had been previously deposited by the Insurer with the Trustee for the
payment of principal or interest on the Notes, to the extent any amounts are
owing to the Insurer, such amounts shall be paid promptly to the Insurer upon
receipt of a written request by the Insurer to such effect, and provided,
further, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Issuer cause to be published once,
in a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such
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publication, any unclaimed balance of such money then remaining will be repaid
to or for the account of the Issuer. The Trustee may also adopt and employ, at
the expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in monies due and payable but not
claimed is determinable from the records of the Trustee or of any Paying Agent,
at the last address of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Trust Estate.
Section 3.05. Protection of Trust Estate. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the Trust
Estate, and the Issuer shall take all actions necessary to obtain and maintain,
for the benefit of the Trustee on behalf of the Noteholders, a first lien on and
a first priority, perfected security interest in the Trust Estate, subject to
the rights of the Insurer under the Insurance Agreement. The Issuer will from
time to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, all as prepared by the Master Servicer and
delivered to the Issuer, and will take such other action necessary or advisable
to:
(i) Grant more effectively all or any portion of the Trust
Estate;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Estate and the
rights of the Trustee and the Noteholders in such Trust Estate against
the claims of all persons and parties; or
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
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The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute all financing statements, continuation statements or other instruments
required to be executed pursuant to this Section.
Section 3.06. Opinions as to Trust Estate.
(a) Promptly after the execution and delivery of this Indenture, the
Issuer shall furnish to the Trustee and the Insurer an Opinion of Counsel to the
effect that, in the opinion of such counsel, either (i) all financing statements
and continuation statements have been executed and filed that are necessary to
create and continue the Trustee's first priority perfected security interest in
the collateral (subject to the rights of the Insurer under the Insurance
Agreement) for the benefit of the Noteholders, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) no such action shall be necessary to perfect such security
interest.
(b) Within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the Cut-Off
Date, the Issuer shall furnish to the Trustee and the Insurer an Opinion of
Counsel, dated as of a date during such 90-day period, to the effect that, in
the opinion of such counsel, either (i) all financing statements and
continuation statements have been executed and filed that are necessary to
create and continue the Trustee's first priority perfected security interest in
the collateral (subject to the rights of the Insurer under the Insurance
Agreement) for the benefit of the Noteholders, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (ii) no such action shall be necessary to perfect such security
interest.
Section 3.07. Performance of Obligations; Servicing of Contracts.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others, including the Servicer, that
would release any Person from any of such Person's material covenants or
obligations under any instrument or agreement included in the Trust Estate or
that would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any such instrument or
agreement, except as expressly provided in the Basic Documents or such other
instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the Insurer
(so long as no Insurer Default shall have occurred and be continuing) to assist
it in performing its duties and obligations under this Indenture, and any
performance of such duties by a Person identified to the Trustee and the Insurer
in an Officer's Certificate shall be deemed to be action taken by the Issuer.
The Trustee shall not be responsible for the action or inaction of the Master
Servicer or the Administrator. Initially, the Issuer has contracted with the
Master Servicer and the Administrator to assist the Issuer in performing its
duties under this Indenture.
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(c) The Issuer will, and will cause the Administrator to, punctually
perform and observe all of the obligations and agreements of the Issuer and the
Administrator contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the other Basic Documents in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Trustee or the
Holders of at least a majority of the Outstanding Amount or such greater
percentage as may be specified in the particular provision.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default, the Issuer shall promptly notify the Trustee, the Insurer and each
Rating Agency thereof, and shall specify in such notice the action, if any, the
Issuer is taking with respect of such default. If a Servicer Default shall arise
from the failure of the Master Servicer to perform any of its duties or
obligations under the Sale and Servicing Agreement with respect to the
Contracts, the Issuer shall take all reasonable steps available to it to remedy
such failure.
(e) If an Insurer Default shall have occurred and be continuing and if
the Issuer has given notice of termination to the Master Servicer of the Master
Servicer's rights and powers pursuant to Section 8.02 of the Sale and Servicing
Agreement, as promptly as possible thereafter, the Issuer shall appoint a
successor servicer (the "Successor Master Servicer"), and such Successor Master
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Trustee. In the event that a Successor Master Servicer has not
been appointed and accepted its appointment at the time when the Master Servicer
ceases to act as Master Servicer, the Trustee without further action shall
automatically be appointed the Successor Master Servicer. The Trustee may resign
as the Successor Master Servicer by giving written notice of such resignation to
the Issuer and in such event will be released from such duties and obligations,
such release not to be effective until the date a new servicer enters into a
servicing agreement with the Issuer as provided below. Upon delivery of any such
notice to the Issuer, the Issuer shall obtain a new servicer as the Successor
Master Servicer under the Sale and Servicing Agreement. Any Successor Master
Servicer other than the Trustee shall (i) be an established financial
institution having a net worth of not less than $50,000,000 and whose regular
business includes the servicing of motor vehicle receivables and (ii) enter into
a servicing agreement with the Issuer having substantially the same provisions
as the provisions of the Sale and Servicing Agreement applicable to the Master
Servicer. If within 30 days after the delivery of the notice referred to above,
the Issuer shall not have obtained such a new Master Servicer, the Trustee may
appoint, or may petition a court of competent jurisdiction to appoint, a
Successor Master Servicer. In connection with any such appointment, the Trustee
may make such arrangements for the compensation of such successor as it and such
successor shall agree, subject to the limitations set forth below and in the
Sale and Servicing Agreement, and in accordance with Section 8.02 of the Sale
and Servicing Agreement, the Issuer shall enter into an agreement with such
successor for the servicing of the Contracts (such agreement to be in form and
substance satisfactory to the Trustee). If the Trustee shall succeed to the
Master Servicer's duties as servicer of the Contracts as provided herein, it
shall do so in its individual capacity and not in its capacity as
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Trustee and, accordingly, the provisions of Article Six shall be inapplicable to
the Trustee in its duties as the successor to the Master Servicer and the
servicing of the Contracts. In case the Trustee shall become successor to the
Master Servicer under the Sale and Servicing Agreement, the Trustee shall be
entitled to appoint as Master Servicer one of its Affiliates, provided that it
shall be fully liable for the actions and omissions of such Affiliate in such
capacity as Successor Master Servicer.
(f) Upon any termination of the Master Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Trustee. As soon as a successor Master Servicer is appointed, the Issuer
shall notify the Trustee of such appointment, specifying in such notice the name
and address of such successor Master Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Master Servicer or the Seller of their respective duties under
the Basic Documents: (i) without the prior consent of the Insurer (unless an
Insurer Default shall have occurred and be continuing) or (ii) if the effect
thereof would adversely affect the Holders of the Notes.
Section 3.08. Negative Covenants. Until the Termination Date, the Issuer
shall not:
(i) except as expressly permitted by the Basic Documents, sell,
transfer, exchange or otherwise dispose of any of the properties or
assets of the Issuer, including those included in the Trust Estate,
unless directed to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed upon
any part of the Trust Estate;
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien created by this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit
any Person to be released from any covenants or obligations with respect
to the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture or
the lien in favor of the Insurer created by the Insurance Agreement) to
be created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on a Financed Vehicle and
arising solely as a result of an action or omission of the related
Obligor), (C) permit the lien created by this Indenture not to
constitute a valid first priority (other than with respect to any such
tax, mechanics' or other lien) security interest in the Trust Estate, or
(D) amend, modify or fail to comply with the provisions of the Basic
Documents without the prior written consent of the Controlling Party,
except where the Basic Documents allow for amendment or modification
without the consent or approval of the Controlling Party; or
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(iv) dissolve or liquidate in whole or in part.
Section 3.09. Annual Statement as to Compliance. The Issuer will deliver
to the Trustee and the Insurer, on or before 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year ended December 31,
1998) an Officer's Certificate stating, as to the Authorized Officer signing
such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.10. Issuer May Consolidate, etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form and substance satisfactory to the
Trustee and the Insurer (so long as no Insurer Default shall have
occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or observance
of every agreement and covenant of this Indenture and each other Basic
Document on the part of the Issuer to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such consolidation or
merger, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such consolidation or merger;
(iv) the Issuer shall have received an Opinion of Counsel which
shall be delivered to and shall be satisfactory to the Trustee and the
Insurer (so long as no Insurer Default shall have occurred and be
continuing) to the effect that such consolidation or merger will not
have any material adverse tax consequence to the Trust, the Insurer, any
Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
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(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel (which shall describe the actions
taken as required by clause (v) above or that no such actions will be
taken) each stating that such consolidation or merger and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction
have been compiled with (including any filings required by the Exchange
Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such consolidation or merger at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such consolidation or merger and the Issuer
or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (A) greater than zero and (B) not less
than the net worth of the Issuer immediately prior to giving effect to
such consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Trust Estate, to any
Person (except as expressly permitted by the Basic Documents), unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer shall (A) be a United States citizen
or a Person organized and existing under the laws of the United States
or any State, (B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form and substance
satisfactory to the Trustee and the Insurer (so long as no Insurer
Default shall have occurred and be continuing), the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture and each other Basic Document on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agree by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agree to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agree by means of such supplemental indenture that such Person
(or if a group of Persons, then one specified Person) shall make all
filings with the Commission (and any other appropriate Person) required
by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such conveyance or
transference, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such conveyance or transference;
(iv) the Issuer shall have received an Opinion of Counsel which
shall be delivered to and shall be satisfactory to the Trustee and the
Insurer (so long as no
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Insurer Default shall have occurred and be continuing) to the effect
that such conveyance or transference will not have any material adverse
tax consequence to the Trust, the Insurer, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel (which shall describe the actions
taken as required by clause (v) above or that no such actions will be
taken) each stating that such conveyance or transference and such
supplemental indenture comply with this Article Three and that all
conditions precedent herein provided for relating to such transaction
have been complied with (including any filings required by the Exchange
Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such conveyance or transfer of properties or assets at least 20 Business
Days prior to the consummation of such action and shall have received
the prior written approval of the Insurer of such conveyance or transfer
and the Person acquiring by conveyance or transference the properties or
assets of the Issuer has a net worth, immediately after such conveyance
or transfer, that is (A) greater than zero and (B) not less than the net
worth of the Issuer immediately prior to giving effect to such
conveyance or transfer.
Section 3.11. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the assets
or properties of the Issuer pursuant to Section 3.10(b), the Issuer will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice to the Trustee stating that the Issuer is to be
so released.
Section 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the other Basic
Documents and activities incidental thereto.
Section 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, (ii) obligations or Indebtedness owing
from time to time to the Insurer under the Insurance Agreement and (iii) any
other Indebtedness permitted by or arising under the other Basic
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Documents. The proceeds of the Notes and the Certificates shall be used
exclusively to fund the Issuer's purchase of the Contracts and the other assets
specified in the Sale and Servicing Agreement, to fund the Spread Account and to
pay the transactional expenses of the Issuer.
Section 3.14. Master Servicer's Obligations. The Issuer shall cause the
Master Servicer to comply with Sections 4.09, 4.10, 4.11 and 5.07 and Article
Nine of the Sale and Servicing Agreement.
Section 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as otherwise contemplated by the Basic Documents, the Issuer shall not make any
loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuming another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, any
other interest in, or make any capital contribution to, any other Person.
Section 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.17. Restricted Payments. Except as expressly permitted by the
Basic Documents, the Issuer shall not, directly or indirectly, (i) pay any
dividend or make any distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, to the Owner
Trustee or any owner of a beneficial interest in the Issuer or otherwise with
respect to any ownership or equity interest or security in or of the Issuer or
to the Master Servicer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided, however, that
the Issuer may make, or cause to be made, (A) distributions to the Master
Servicer, the Owner Trustee and the Certificateholders as contemplated by, and
to the extent funds are available for such purpose under, the Sale and Servicing
Agreement or the Trust Agreement and (B) payments to the Trustee and the Owner
Trustee pursuant to Section 1(a)(ii) of the Administration Agreement. The Issuer
will not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the other Basic
Documents.
Section 3.18. Notice of Events of Default. The Issuer agrees to give the
Trustee, the Insurer and each Rating Agency prompt written notice of each Event
of Default hereunder and each default on the part of the Master Servicer or the
Seller of their respective obligations under the Sale and Servicing Agreement.
Section 3.19. Further Instruments and Acts. Upon request of the Trustee
or the Insurer, the Issuer will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
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Section 3.20. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Basic Document.
Section 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 10.01 of the
Sale and Servicing Agreement or Section 11.01 of the Trust Agreement to
eliminate the requirements thereunder that the Trustee or the Holders of the
Notes consent to amendments thereto as provided therein.
Section 3.22. Removal of Administrator. If an Insurer Default shall have
occurred and be continuing, so long as any Notes are issued and outstanding, the
Issuer shall not remove the Administrator without cause unless the Rating Agency
Condition shall have been satisfied in connection with such removal.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.07,
3.08, 3.10, 3.12, 3.13, 3.20 and 3.21, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the Trustee under
Section 6.07 and the obligations of the Trustee under Section 4.02), (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them and (vii) the
obligation of the Trustee to make claims under the Note Policy, which shall
survive the Class A-4 Final Distribution Date and extend through any preference
period applicable with respect to the Notes or any payments made in respect of
the Notes, and the Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.05
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Issuer
and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.03) have been delivered to the
Trustee for cancellation and the Note Policy has expired and been
returned to the Insurer for cancellation; or
(2) all Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at the Class A-4
Final Distribution Date within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Issuer,
and the Issuer, in the case of clauses (i), (ii) or (iii) above,
has irrevocably deposited or caused to be irrevocably deposited
with the Trustee cash or direct obligations of or obligations
guaranteed by the United States (which will mature prior to the
date such amounts are payable), in trust in an Eligible Account
for such purpose, in an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation when due to the final scheduled
Distribution Date or Redemption
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Date (if Notes shall have been called for redemption pursuant to
Section 10.01(a)), as the case may be;
(B) the Issuer has paid or performed or caused to be paid or
performed all amounts and obligations which the Issuer may owe to or on
behalf of (1) the Trustee for the benefit of the Noteholders under this
Indenture or the Notes and (2) the Insurer under this Indenture; and
(C) the Issuer has delivered to the Trustee and the Insurer an
Officer's Certificate, an Opinion of Counsel and (if required by the
TIA, the Trustee and the Insurer) an Independent Certificate from a firm
of certified public accountants, each meeting the applicable
requirements of Section 11.01(a) and, subject to Section 11.02, each
stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been complied with
(and, in the case of the foregoing Officer's Certificate, stating that
the Rating Agency Condition has been satisfied).
Section 4.02. Application of Trust Money. All monies deposited with the
Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent, as the Trustee may determine, to
the Holders of the particular Notes for the payment or redemption of which such
monies have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest; but such monies need not be segregated from
other funds except to the extent required herein or in the Sale and Servicing
Agreement or required by law.
Section 4.03. Repayment of Monies Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied according to Section
3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such monies.
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ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default by the Issuer in the payment of any interest on any
Note when the same becomes due and payable, and such default shall
continue for a period of five days, without taking into account the
effect of any payment under the Note Policy;
(ii) default by the Issuer in the payment of the principal of or
any installment of the principal of any Note when the same becomes due
and payable, without taking into account the effect of any payment under
the Note Policy;
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proves to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or condition
in respect of which such misrepresentation or warranty was incorrect
shall not have been eliminated or otherwise cured, for a period of 30
days after there shall have been given, by registered or certified mail,
to the Issuer and the Trustee by the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or, if an Insurer
Default shall have occurred and be continuing, to the Issuer by the
Trustee or to the Issuer and the Trustee by the Holders of at least 25%
of the Outstanding Amount of the Notes, taken together as a single
class, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder;
(iv) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(v) the commencement by the Issuer of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter
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in effect, or the consent by the Issuer to the entry of an order for
relief in an involuntary case under any such law, or the consent by the
Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Trust Estate,
or the making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as
such debts become due, or the taking of action by the Issuer in
furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee and the Insurer, within five
days after obtaining knowledge of the occurrence thereof, written notice in the
form of an Officer's Certificate of any event which with the giving of notice
and the lapse of time would become an Event of Default under clause (iii) above,
its status and what action the Issuer is taking or proposes to take with respect
thereto.
Section 5.02. Rights upon Event of Default.
(a) So long as no Insurer Default has occurred and is continuing, if an
Event of Default shall have occurred and be continuing, then with the consent of
the Insurer, the Notes shall become immediately due and payable at par, together
with accrued interest thereon. The Trustee will have no discretion with respect
to the acceleration of the Notes under the foregoing circumstances. In the event
of any such acceleration of the Notes, the Trustee shall continue to be entitled
to make claims under the Note Policy pursuant to Section 5.18 for Scheduled
Payments on the Notes. Payments under the Note Policy following acceleration of
the Notes shall be applied by the Trustee:
(i) to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for interest; and
(ii) to each Class of Noteholders for amounts due and unpaid on
such Class of Notes for principal, ratably, without preference or
priority of any kind, according to amounts due and payable on the Notes
for principal.
(b) So long as no Insurer Default has occurred and is continuing, in the
event the Notes are accelerated due to an Event of Default, the Insurer shall
have the right (in addition to its obligation to pay Scheduled Payments on the
Notes in accordance with the Note Policy), but not the obligation, to elect:
(i) to cause the Trustee or the Master Servicer, subject to
Section 5.04, to sell or liquidate the Trust Estate, in whole or in
part, on any date or dates following such acceleration as the Insurer,
in its sole discretion, shall elect; or
(ii) to pay Scheduled Payments on the Notes in accordance with
the Note Policy.
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(c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Trustee may, or if
so requested in writing by Holders of Notes representing at least 662/3% of the
aggregate Outstanding Amount, upon prior written notice to each Rating Agency,
shall declare by written notice to the Issuer that the Notes become, whereupon
they shall become, immediately due and payable at par, together with accrued
interest thereon. Notwithstanding anything to the contrary in this paragraph
(c), if an Event of Default specified in Section 5.01(iv) or (v) shall occur and
be continuing when an Insurer Default has occurred and is continuing, the Notes
shall become immediately due and payable at par, together with accrued interest
thereon.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee; Authority of Controlling Party.
(a) The Issuer covenants that if the Notes are accelerated following the
occurrence of an Event of Default, the Issuer will, upon demand of the Trustee,
pay to it, for the benefit of the Holders of the Notes, the whole amount then
due and payable on such Notes for principal and interest, with interest upon the
overdue principal, and, to the extent payment at such rate of interest shall be
legally enforceable, upon overdue installments of interest, at the applicable
Interest Rate and in addition thereto such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee and its agents
and counsel.
(b) Each of the Trustee and the Insurer hereby irrevocably and
unconditionally appoints the Controlling Party as the true and lawful
attorney-in-fact of such Person for so long as such Person is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Person such acts, things and deeds for or on behalf of and in the name
of such Person under this Indenture (including specifically under Section 5.04)
and under the other Basic Documents which such Person could or might do or which
may be necessary, desirable or convenient in such Controlling Party's sole
discretion to effect the purposes contemplated hereunder and under the other
Basic Documents and, without limitation, following the occurrence of an Event of
Default, exercise full right, power and authority to take, or defer from taking,
any and all acts with respect to the administration, maintenance or disposition
of the Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may in
its discretion but with the consent of the Controlling Party (except as provided
in Section 5.03(d)), proceed to protect and enforce the rights of the
Noteholders, by such appropriate Proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this Indenture
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer
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fails to perform its obligations under Section 10.01(b) when and as due, the
Trustee may in its discretion (and without the consent of the Controlling Party)
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate proceedings as the Trustee shall deem most effective to protect
and enforce any such rights, whether for specific performance of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other remedy or legal or equitable right vested in the
Trustee by this Indenture or by law; provided that the Trustee shall only be
entitled to take any such actions without the consent of the Controlling Party
to the extent such actions (i) are taken only to enforce the Issuer's
obligations to redeem the principal amount of Notes, and (ii) are taken only
against the portion of the Collateral, if any, consisting of the Spread Account,
any investments therein and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and
their respective agents, attorneys and counsel, and for reimbursement of
all expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee, except as a result of negligence
or bad faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any monies or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
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and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(f) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(g) All rights of action and of asserting claims under this Indenture or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes or the production thereof in any trial or other Proceedings
relative thereto, and any such action or Proceedings instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of the
Notes.
(h) In any Proceedings brought by the Trustee (including any Proceedings
involving the interpretation of any provision of this Indenture), the Trustee
shall be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
Section 5.04. Remedies. If an Event of Default shall have occurred and
be continuing the Controlling Party may (subject to Sections 5.02 and 5.05):
(i) institute Proceedings in its own name and as or on behalf
of a trustee of an express trust for the collection of all amounts then
payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, enforce any judgment obtained, and
collect from the Issuer and any other obligor upon such Notes monies
adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
any other remedy available to the Trustee and take any other appropriate
action to protect and enforce the rights and remedies of the Trustee on
behalf of the Noteholders under this Indenture or the Notes; and
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(iv) direct the Trustee or the Master Servicer to sell or
otherwise liquidate the Trust Estate or any portion thereof or rights or
interests therein, at one or more public or private sales called and
conducted in any manner permitted by law and deliver the proceeds of
such sale or liquidation to the Trustee for distribution in accordance
with the terms of this Indenture; provided, however, that, except as
otherwise provided in the immediately succeeding sentence, no such sale
or liquidation can be made if the proceeds of such sale or liquidation
distributable to the Noteholders are not sufficient to pay all
outstanding principal of and accrued interest on the Notes.
Notwithstanding the foregoing, the proceeds of such sale or liquidation
need not be sufficient to pay all outstanding principal of and accrued
interest on the Notes if (A) the Insurer is the Controlling Party and
the related Event of Default arose as described in clause (i), (ii),
(iv) or (v) of Section 5.01 or (B) the Trustee is the Controlling Party
and (1) the Holders of 100% of the Outstanding Amount of the Notes,
voting together as a single class, consent to such sale or liquidation
or (2) the Trustee determines that the Trust Estate will not continue to
provide sufficient funds for the payment of principal of and interest on
the Notes as they would have become due if the Notes had not been
declared due and payable, the Trustee provides prior written notice of
such sale or liquidation to each Rating Agency and Holders of 662/3% of
the Outstanding Amount of the Notes, voting together as a single class,
consent to such sale or liquidation. In determining such sufficiency or
insufficiency of (i) the proceeds of such sale or liquidation to pay all
outstanding principal of and accrued interest on the Notes or (ii) the
Trust Estate to provide sufficient funds for the payment of principal of
and interest on the Notes as they would have become due if the Notes had
not been declared due and payable, the Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such
purpose.
Section 5.05. Optional Preservation of the Contracts. If the Trustee is
the Controlling Party and if the Notes have been declared to be due and payable
under Section 5.02 following an Event of Default and such declaration and its
consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to maintain possession of the Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest on the Notes, and the Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession of
the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
Section 5.06. Priorities.
(a) If the Trustee collects any money or property pursuant to this
Article (excluding any payments made under the Note Policy), it shall pay out
the money or property in the following order and priority:
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(i) amounts due and owing and required to be distributed to the
Master Servicer, the Owner Trustee and the Trustee, respectively,
pursuant to clauses (i) and (ii) of Section 5.05(a) of the Sale and
Servicing Agreement and not previously distributed, in the order of such
priorities and without preference or priority of any kind within such
priorities;
(ii) to each Class of Noteholders, accrued and unpaid interest
on the outstanding principal amount of the related Class of Notes at the
related Interest Rate, together with, to the extent permitted by
applicable law, interest at the related Interest Rate on any interest
accrued but not timely paid;
(iii) to Holders of the Class A-1 Notes for amounts due and
unpaid on the Class A-1 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Class A-1 Notes for principal, until the Outstanding Amount of the Class
A-1 Notes is reduced to zero;
(iv) to Holders of the Class A-2 Notes for amounts due and
unpaid on the Class A-2 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Class A-2 Notes for principal, until the Outstanding Amount of the Class
A-2 Notes is reduced to zero;
(v) to Holders of the Class A-3 Notes for amounts due and
unpaid on the Class A-3 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Class A-3 Notes for principal, until the Outstanding Amount of the Class
A-3 Notes is reduced to zero;
(vi) to Holders of the Class A-4 Notes for amounts due and
unpaid on the Class A-4 Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Class A-4 Notes for principal, until the Outstanding Amount of the Class
A-4 Notes is reduced to zero;
(vii) amounts due and unpaid on the Certificates for interest and
principal, to the Owner Trustee for distribution to Certificateholders
in accordance with Section 5.02(a) of the Trust Agreement;
(viii) amounts due and owing and required to be distributed to the
Insurer pursuant to clause (ix) of Section 5.05(a) of the Sale and
Servicing Agreement and not previously distributed; and
(ix) any excess amounts remaining after making the distributions
described in clauses (i) through (viii) above shall be distributed in
the following order of priority: into the Spread Account until the
amounts deposited therein equal the Specified Spread Account Balance,
with any excess being distributed, first, to the Insurer, to the extent
of any Unreimbursed Insurer Amounts, second, to the Seller until the
Seller has received an aggregate amount equal to the Spread Account
Initial
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Deposit and third, to the Seller and the Company in the proportions of
99% and 1%, respectively.
(b) The Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section. At least 15 days before such record
date, the Issuer shall mail to each Noteholder and the Trustee a notice that
states the record date, the payment date and the amount to be paid.
Section 5.07. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount
of the Notes have made written request to the Trustee to institute such
Proceeding in respect of such Event of Default in its own name as
Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceedings;
(v) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes, voting together as a
single class; and
(vi) an Insurer Default shall have occurred and be continuing.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Trustee in its sole discretion may determine that action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
Section 5.08. Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest
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on such Note on or after the respective due dates thereof expressed in such Note
or in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder; provided,
however, that so long as an Insurer Default shall not have occurred and be
continuing, no such suit shall be instituted.
Section 5.09. Restoration of Rights and Remedies. If the Controlling
Party or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11. Delay or Omission Not a Waiver. No delay or omission of
the Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Trustee or to the Noteholders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the Noteholders, as
the case may be.
Section 5.12. Control by Noteholders. If the Trustee is the Controlling
Party, the Holders of a majority of the Outstanding Amount of the Notes shall
have the right to direct the time, method and place of conducting any Proceeding
for any remedy available to the Trustee with respect to the Notes or exercising
any trust or power conferred on the Trustee; provided that:
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the terms of Section 5.04, any direction to the
Trustee to sell or liquidate the Trust Estate shall be by the Holders of
Notes representing not less than 100% of the Outstanding Amount of the
Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Trustee elects to retain the Trust Estate pursuant to
such Section, then any direction to
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the Trustee by Holders of Notes representing less than 100% of the
Outstanding Amount of the Notes to sell or liquidate the Trust Estate
shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Trustee need not take any action that it determines, in its
sole discretion, might involve it in liability or might materially adversely
affect the rights of any Noteholders not consenting to such action.
Section 5.13. Waiver of Past Defaults. If an Insurer Default shall have
occurred and be continuing, the Holders of Notes of not less than a majority of
the Outstanding Amount of the Notes may waive any past Default or Event of
Default and its consequences except a Default (i) in payment of principal of or
interest on any of the Notes or (ii) in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the Holder of
each Note. In the case of any such waiver, the Issuer, the Trustee and the
Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
Section 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (i)
any suit instituted by the Trustee, (ii) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (iii) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
Section 5.15. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in and manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever
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enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantages of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 5.16. Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer. Any money or property collected by the Trustee shall be applied in
accordance with Section 5.06.
Section 5.17. Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Trustee to do so and at the
Administra- tor's expense, the Issuer shall take all such lawful action as the
Trustee may request to compel or secure the performance and observance by the
Seller and the Master Servicer as applicable, of each of their obligations to
the Issuer under or in connection with the Sale and Servicing Agreement in
accordance with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Sale and Servicing Agreement to the extent and in the manner directed
by the Trustee, including the transmission of notices of default on the part of
the Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Master Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If the Trustee is the Controlling Party and if an Event of Default
has occurred and is continuing, the Trustee may, and at the direction (which
direction shall be in writing and may include a facsimile) of the Holders of
___% of the Outstanding Amount of the Notes shall exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Seller or the Master
Servicer under or in connection with the Sale and Servicing Agreement, including
the right or power to take any action to compel or secure performance or
observance by the Seller or the Master Servicer of each of their obligations to
the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale and Servicing Agreement, and any
right of the Issuer to take such action shall be suspended.
Section 5.18. Claims Under Note Policy.
(a) In the event that the Trustee has received a Deficiency Notice with
respect to any Distribution Date pursuant to Section 5.02(c) of the Sale and
Servicing Agreement, the Trustee shall furnish to the Insurer no later than
12:00 p.m., New York City time, on the fourth Business Day prior to the related
Distribution Date a completed Notice of Claim in the amount of the shortfall in
amounts so available to pay the Note Interest Distributable Amount
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and the Note Principal Distributable Amount with respect to such Distribution
Date (the amount of any such shortfall being hereinafter referred to as the
"Note Policy Claim Amount"). Amounts paid by the Insurer pursuant to a claim
submitted under this Section shall be deposited by the Trustee into the Note
Distribution Account for payment to Noteholders on the related Distribution
Date.
(b) Any notice delivered by the Trustee to the Insurer pursuant to
Section 5.18(a) shall specify the Note Policy Claim Amount claimed under the
Note Policy and shall constitute a "Notice of Claim" under the Note Policy. In
accordance with the provisions of the Note Policy, the Insurer is required to
pay to the Trustee the Note Policy Claim Amount properly claimed thereunder by
12:00 p.m., New York City time, on the later of (i) the fourth Business Day
following receipt of the Notice of Claim, and (ii) the applicable Distribution
Date. Any payment made by the Insurer under the Note Policy shall be applied
solely to the payment of the Notes, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder
any Note Policy Claim Amount from the Insurer and (ii) deposit the same in the
Note Distribution Account for distribution to Noteholders as provided in
Sections 3.01 or 5.02. Any and all Note Policy Claim Amounts disbursed by the
Trustee from claims made under the Note Policy shall not be considered payment
by the Trust or from the Spread Account with respect to such Notes, and shall
not discharge the obligations of the Trust with respect thereto. The Insurer
shall, to the extent it makes any payment with respect to the Notes, become
subrogated to the rights of the recipients of such payments to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Notes by or on behalf of the Insurer, the Trustee shall assign to the Insurer
all rights to the payment of interest or principal with respect to the Notes
which are then due for payment to the extent of all payments made by the Insurer
and the Insurer may exercise any option, vote, right, power or the like with
respect to the Notes to the extent that it has made payment pursuant to the Note
Policy. To evidence such subrogation, the Note Registrar shall note the
Insurer's rights as subrogee upon the register of Noteholders upon receipt from
the Insurer of proof of payment by the Insurer of any Note Interest
Distributable Amount or Note Principal Distributable Amount. The foregoing
subrogation shall in all cases be subject to the rights of the Noteholders to
receive all Scheduled Payments in respect of the Notes.
(d) The Trustee shall keep a complete and accurate record of all funds
deposited by the Insurer into the Note Distribution Account and the allocation
of such funds to payment of interest on and principal paid in respect of any
Note. The Insurer shall have the right to inspect such records at reasonable
times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Insurer under the Note Policy.
Notwithstanding any other provision of this Indenture or any other Basic
Document, the Noteholders are not entitled to institute proceedings directly
against the Insurer.
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Section 5.19. Preference Claims.
(a) In the event that the Trustee has received a certified copy of an
order of the appropriate court that any Note Interest Distributable Amount or
Note Principal Distributable Amount paid on a Note has been avoided in whole or
in part as a preference payment under applicable bankruptcy law, the Trustee
shall so notify the Insurer, shall comply with the provisions of the Note Policy
to obtain payment by the Insurer of such avoided payment, and shall, at the time
it provides notice to the Insurer, notify Holders of the Notes by mail that, in
the event that any Noteholder's payment is so recoverable, such Noteholder will
be entitled to payment pursuant to the Note Policy. The Trustee shall furnish to
the Insurer its records evidencing the payments of principal of and interest on
Notes, if any, which have been made by the Trustee and subsequently recovered
from Noteholders, and the dates on which such payments were made. Pursuant to
the Note Policy, the Insurer will make such payment on behalf of the Noteholder
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Order (as such term is defined in the Note Policy) and not to the
Trustee or any Noteholder directly (unless a Noteholder has previously paid such
payment to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy, in which case the Insurer will make such payment to the Trustee for
distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer).
(b) To the extent that a Responsible Officer of the Trustee has actual
knowledge thereof, the Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (a "Preference Claim") of any distribution made
with respect to the Notes. Each Holder, by its purchase of Notes, and the
Trustee hereby agree that so long as an Insurer Default shall not have occurred
and be continuing, the Insurer may at any time during the continuation of any
proceeding relating to a Preference Claim direct all matters relating to such
Preference Claim including, without limitation, (i) the direction of any appeal
of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 5.18(c), the Insurer shall be subrogated to, and each Noteholder and the
Trustee hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Trustee and each Noteholder in the conduct of any proceeding with
respect to a Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim. In addition, for so long as the
Insurer guarantees amounts owing under the RIC and has not defaulted in the
making of any payment required to be made by it pursuant to such guaranty, the
Insurer shall have the right to initiate and control a proceeding against the
obligor under the RIC but only to the extent such proceeding relates to the
amounts so guaranteed and no settlement of any other proceeding or claim that
would adversely affect the Insurer's rights to recover such amounts shall be
affected without the prior written consent of the Insurer.
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ARTICLE SIX
THE TRUSTEE
Section 6.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and in the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs; provided, however, that if the Trustee shall assume the duties of the
Master Servicer pursuant to Section 3.07(e), the Trustee in performing such
duties shall use the degree of care and skill customarily exercised by a prudent
institutional servicer with respect to automobile retail installment sales
contracts that it services for itself or others.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture; however, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture and the other Basic Documents to which the Trustee is a
party.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) this paragraph does not limit the effect of Section
6.01(b);
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it.
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(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law or the terms of this Indenture or the
Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayments of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) The Trustee shall, upon one Business Day's prior notice to the
Trustee, so long as no Insurer Default shall have occurred and be continuing, at
the expense of the Trust, and if an Insurer Default shall have occurred and be
continuing, at the expense of the Insurer, permit any representative of the
Insurer, during the Trustee's normal business hours, to examine all books of
account, records, reports and other papers of the Trustee relating to the Notes,
to make copies and extracts therefrom and to discuss the Trustee's affairs and
actions, as such affairs and actions relate to the Trustee's duties with respect
to the Notes, with the Trustee's officers and employees responsible for carrying
out the Trustee's duties with respect to the Notes.
(j) The Trustee shall, and hereby agrees that it will (i) perform all of
the obligations and duties required of it under the Sale and Servicing Agreement
and (ii) hold the Note Policy in trust, and will hold any proceeds of any claim
on the Note Policy in trust solely for the use and benefit of the Noteholders.
(k) Except as otherwise required or permitted by the TIA, nothing
contained herein shall be deemed to authorize the Trustee to engage in any
business operations or any activities other than those set forth in this
Indenture. Specifically, the Trustee shall have no authority to engage in any
business operations, acquire any assets other than those specifically included
in the Trust Estate under this Indenture or otherwise vary the assets held by
the Trust. Similarly, the Trustee shall have no discretionary duties other than
performing those ministerial acts set forth above necessary to accomplish the
purpose of this Trust as set forth in this Indenture.
Section 6.02. Rights of Trustee.
(a) Except as otherwise provided in Section 6.02(g) and the second
succeeding sentence, the Trustee may conclusively rely and shall be protected in
acting upon or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, note,
direction, demand, election or other paper or document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document. Notwithstanding
the
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foregoing, the Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of this Indenture, shall examine them to determine whether they
comply as to form to the requirements of this Indenture.
(b) Other than with respect to actions required to be taken by the
Trustee pursuant to Section 5.18 and 5.19, before the Trustee acts or refrains
from acting, it may require an Officer's Certificate (with respect to factual
matters) or an Opinion of Counsel, as applicable. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Holders of Notes or the
Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders or the Controlling Party shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby; provided, however, that the Trustee shall, upon the
occurrence of an Event of Default (that has not been cured), exercise the rights
and powers vested in it by this Indenture with reasonable care and skill.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Insurer (so long as no
Insurer Default shall have occurred and be continuing) or (if an Insurer Default
shall have occurred and be continuing) by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount of the Notes; provided, however, that if
the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture or the Sale and Servicing
Agreement, the Trustee may require reasonable
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indemnity against such cost, expense or liability as a condition to so
proceeding. The reasonable expense of each such investigation shall be paid by
the Person making such request, or, if paid by the Trustee, shall be reimbursed
by the Person making such request upon demand.
Section 6.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee is required to comply with Sections 6.11 and 6.12.
Section 6.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this
Indenture, the Trust Estate or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in this Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
Section 6.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Trustee, the Trustee shall
mail to each Noteholder and the Insurer notice of the Default within 90 days
after it occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the redemption of Notes),
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.06. Reports by Trustee to Holders. The Trustee shall deliver
to each Noteholder such information as may be required to enable such holder to
prepare its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. The Issuer shall, or shall
cause the Administrator to, pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Issuer shall,
or shall cause the Administrator to, reimburse the Trustee for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Issuer shall, or shall
cause the Administrator to, indemnify the Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Issuer and the Administrator promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Issuer and the Administrator shall not relieve the Issuer or the
Administrator of its obligations hereunder. The Issuer shall, or shall cause the
Administrator to, defend any such claim, and the Trustee may have separate
counsel and the Issuer shall, or shall cause the Administrator to, pay the fees
and expenses of such counsel. Neither the Issuer nor the Administrator need
reimburse
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any expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Trustee pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 5.01(iv) or (v) with
respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
federal or state bankruptcy, insolvency or similar law.
Section 6.08. Replacement of Trustee. The Trustee may resign at any time
by so notifying the Issuer, the Master Servicer and the Insurer. The Issuer,
may, with the consent of the Insurer, and, at the request of the Insurer shall,
remove the Trustee, unless an Insurer Default shall have occurred and be
continuing) if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or state
banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trustee or for
any substantial part of the Trustee's property, or ordering the
winding-up or liquidation of the Trustee's affairs, provided any such
decree or order shall have continued unstayed and in effect for a period
of 30 consecutive days;
(iii) the Trustee commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator or other similar official for the Trustee or for any
substantial part of the Trustee's property, or makes any assignment for
the benefit of creditors or fails generally to pay its debts as such
debts become due or takes any corporate action in furtherance of any of
the foregoing; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly appoint a successor
Trustee reasonably acceptable to the Insurer (so long as an Insurer Default
shall not have occurred and be continuing). If the Issuer fails to appoint such
a successor Trustee, the Insurer may appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and
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duties of the Trustee under this Indenture. The Issuer or the successor Trustee
shall mail a notice of its succession to Noteholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Insurer
(provided that no Insurer Default shall have occurred and be continuing), the
Issuer or the Holders of a majority of the Outstanding Amount of the Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to the provisions of this Section shall not become effective
until acceptance of appointment by the successor Trustee pursuant to this
Section and payment of all fees and expenses owed to the outgoing Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section, the
retiring Trustee shall be entitled to payment or reimbursement of such amounts
as such Person is entitled pursuant to Section 6.07.
Section 6.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee; provided, that such corporation or
banking association shall be otherwise qualified and eligible under Section
6.11. The Trustee shall provide the Insurer and each Rating Agency prompt notice
of any such transaction.
In case at the time such successor by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Section 6.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provision of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Trustee and the
Administrator acting jointly shall have the power and may execute and deliver
all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust, and to vest in such Person or Persons, in such
capacity and for
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the benefit of the Noteholders and the Insurer, such title to the Trust Estate,
or any part hereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Trustee and the
Administrator may consider necessary or desirable. If the Administrator shall
not have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor Trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.08.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Trustee and the Administrator may at any time accept
the resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of co-appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Administrator.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor
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trustee. Notwithstanding anything to the contrary in this Indenture, the
appointment of any separate trustee or co-trustee shall not relieve the Trustee
of its obligations and duties under this Indenture.
Section 6.11. Eligibility; Disqualification.
(a) The Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall provide copies of such reports to the Insurer upon
request. The Trustee shall comply with TIA Section 310(b); provided, however,
that there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
(b) If the long term debt rating of the Trustee shall not be at least
Baa3 from Moody's and BBB- from Standard & Poor's, the Rating Agencies shall be
given notice of such lower long-term debt rating.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
Section 6.13. Representations and Warranties of Trustee. The Trustee
hereby makes the following representations and warranties on which the Issuer
and Noteholders shall rely:
(a) the Trustee is a corporation duly organized, validly existing
and in good standing under the laws of its place of incorporation; and
(b) the Trustee has full power, authority and legal right to
execute, deliver, and perform this Indenture and shall have taken all
necessary action to authorize the execution, delivery and performance by
it of this Indenture.
Section 6.14. Pennsylvania Motor Vehicle Sales Finance Act Licenses. The
Trustee shall take such action as, in its reasonable judgment, shall be
necessary to maintain the effectiveness of all licenses required under the
Pennsylvania Motor Vehicle Sales Finance Act in connection with this Indenture
and the transactions contemplated hereby until the lien and security interest of
this Indenture shall no longer be in effect in accordance with the terms hereof.
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ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer to Furnish Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Trustee (i)
not more than five days after the earlier of (a) each Record Date and (b) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Notes as of
such Record Date and (ii) at such other times as the Trustee may request in
writing, within 30 days after receipt by the Issuer of any such request, a list
of similar form and content as of a date not more than ten days prior to the
time such list is furnished; provided, however, that so long as the Trustee is
the Note Registrar, no such list shall be required to be furnished. The Trustee
or, if the Trustee is not the Note Registrar, the Issuer shall furnish to the
Insurer in writing at such times as the Insurer may reasonably request a copy of
the list.
Section 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and the
names and addresses of Holders of Notes received by the Trustee in its capacity
as Note Registrar. The Trustee may destroy any list furnished to it as provided
in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
Section 7.03. Reports by Issuer.
(a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from time
to time by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
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(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA Section 313(c)) such summaries
of any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as may
be required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Trustee. To the extent that any of the events
described in TIA Section 313(a) shall have occurred, the Trustee shall, within
60 days after each December 15 beginning with December 15, 1998, mail to the
Insurer and each Noteholder as required by TIA Section 313(c) a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Trustee with the Commission and with each stock exchange, if any,
on which the Notes are listed and of which listing the Trustee has been
informed. The Issuer shall notify the Trustee if and when the Notes are listed
on any stock exchange.
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ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trustee pursuant to this Indenture. The Trustee shall apply
all such money received by it as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Trust Estate, the Trustee may take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any right
to claim a Default or Event of Default under this Indenture and any right to
proceed thereafter as provided in Article Five.
Section 8.02. Trust Accounts.
(a) On or prior to the Closing Date, the Issuer shall cause the Master
Servicer to establish and maintain, in the name of the Trustee, for the benefit
of the Noteholders and the Certificateholders, the Trust Accounts as provided in
Section 5.01 of the Sale and Servicing Agreement.
(b) All Net Collections with respect to each Due Period will be
deposited in the Collection Account as provided in Section 5.02 of the Sale and
Servicing Agreement. On the Business Day immediately preceding each Distribution
Date, all amounts required to be deposited in the Note Distribution Account with
respect to the preceding Due Period pursuant to Section 5.05 of the Sale and
Servicing Agreement will be transferred from the Collection Account and/or the
Spread Account to the Note Distribution Account.
(c) On each Distribution Date, the Trustee shall distribute all amounts
on deposit in the Note Distribution Account in respect of such Distribution Date
to Noteholders in respect of the Notes to the extent of amounts due and unpaid
on the Notes for principal and interest as follows:
(i) to each Class of Noteholders, accrued and unpaid interest
on the outstanding principal amount of the related Class of Notes at the
related Interest Rate;
(ii) to the Class A-1 Noteholders in reduction of the
Outstanding Amount of the Class A-1 Notes until the Outstanding Amount
of the Class A-1 Notes is reduced to zero;
(iii) to the Class A-2 Noteholders in reduction of the
Outstanding Amount of the Class A-2 Notes until the Outstanding Amount
of the Class A-2 Notes is reduced to zero;
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(iv) to the Class A-3 Noteholders in reduction of the
Outstanding Amount of the Class A-3 Notes until the Outstanding Amount
of the Class A-3 Notes is reduced to zero; and
(v) to the Class A-4 Noteholders in reduction of the
Outstanding Amount of the Class A-4 Notes until the Outstanding Amount
of the Class A-4 Notes is reduced to zero.
(d) If on any Distribution Date there will be insufficient funds in the
Note Distribution Account to make any payment required to be made pursuant to
Section 8.02(c) or 8.02(d), the Trustee will make a claim under the Note Policy
as described in Section 5.18.
Section 8.03. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Trust Accounts other than the
Holding Account shall be invested in Eligible Investments and reinvested by the
Trustee upon receipt of an Issuer Order, subject to the provisions of Section
5.01(b) of the Sale and Servicing Agreement. Except as otherwise provided in
Section 5.01(b) of the Sale and Servicing Agreement, all income or other gain
from investments of monies deposited in such Trust Accounts shall be deposited
by the Trustee in the Collection Account, and any loss resulting from such
investments shall be charged to the related Trust Account. The Issuer will not
direct the Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest Granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Trustee to make any such
investment or sale, if requested by the Trustee, the Issuer shall deliver to the
Trustee an Opinion of Counsel, acceptable to the Trustee, to such effect.
(b) Subject to Section 6.01(c), the Trustee shall not in any way be held
liable by reason of any insufficiency in any of the Trust Accounts resulting
from any loss on any Eligible Investment included therein except for losses
attributable to the Trustee's failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as Trustee, in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Trustee by 11:00 a.m., New
York City time (or such other time as may be agreed by the Issuer and Trustee),
on any Business Day, (ii) a Default or Event of Default shall have occurred and
be continuing with respect to the Notes but the Notes have not been declared due
and payable pursuant to Section 5.02 or (iii) if such Notes have been declared
due and payable following an Event of Default but amounts collected or
receivable from the Trust Estate are being applied in accordance with Section
5.05 as if there had not been such a declaration, then the Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Trust Accounts in
one or more Eligible Investments.
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Section 8.04. Release of Trust Estate.
(a) Subject to the payment of its fees and expenses pursuant to Section
6.07, the Trustee may, and when required by the provisions of this Indenture
shall, execute instruments to release property from the lien of this Indenture,
or convey the Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this Indenture.
No party relying upon an instrument executed by the Trustee as provided in this
Article shall be bound to ascertain the Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
monies.
(b) The Trustee shall, at such time as there are no Notes Outstanding
and all sums due the Trustee pursuant to Section 6.07 have been paid, release
any remaining portion of the Trust Estate that secured the Notes from the lien
of this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts. The Trustee shall release
property from the lien of this Indenture pursuant to this Section 8.04(b) only
upon receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.01.
Section 8.05. Opinion of Counsel. The Trustee shall receive at least
seven days' notice when requested by the Issuer to take any action pursuant to
Section 8.04(a), accompanied by copies of any instruments involved, and the
Trustee shall also require, as a condition to such action, an Opinion of
Counsel, in form and substance satisfactory to the Trustee, stating the legal
effect of any such action, outlining the steps required to complete the same,
and concluding that all conditions precedent to the taking of such action have
been complied with and such action will not materially and adversely impair the
security for the Notes or the rights of the Noteholders in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the Trust
Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Trustee in connection with any such action.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with the consent
of the Insurer (unless an Insurer Default shall have occurred and be continuing)
and with prior notice to each Rating Agency, the Issuer and the Trustee, when
authorized by an Issuer Order, and the other parties hereto at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the TIA as in force at the date of the
execution thereof), in form satisfactory to the Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey or confirm unto the Trustee any property subject or required to
be subjected to the lien created by this Indenture, or to subject to the
lien created by this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or the Basic Documents or to make any other provisions with
respect to matters or questions arising under this Indenture or in any
supplemental indenture that shall not be inconsistent with the
provisions of this Indenture; provided that such action shall not
adversely affect the interests of the Holders of the Notes or result
in the creation of a new security;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article Six; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA
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or under any similar federal statute hereafter enacted and to add to
this Indenture such other provisions as may he expressly required by the
TIA.
The Trustee is hereby authorized to join in the exemption of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer Order, may,
also without the consent of any of the Holders of the Notes but with the consent
of the Insurer (unless an Insurer Default shall have occurred and be continuing)
and with prior notice to each Rating Agency, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder or result in the creation of a new security.
Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to each Rating Agency, with the consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) and with the consent of the
Holders of not less than a majority of the Outstanding Amount of the Notes, by
Act of such Holders delivered to the Issuer and the Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, subject to the express
rights of the Insurer under the Basic Documents, no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provisions of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place of
payment where, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article Five, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after
the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
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(iii) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to sell or liquidate the Trust
Estate pursuant to Section 5.04 or amend the provisions of this Article
which specify the percentage of the Outstanding Amount of the Notes
required to amend this Indenture or the other Basic Documents;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Basic Documents cannot be
modified or waived without the consent of the Holder of each Outstanding
Note affected thereby; or
(vi) permit the creation of any lien ranking prior to or on a
parity with the lien created by this Indenture with respect to any part
of the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien created by this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of the
security provided by the lien created by this Indenture, and further
provided that any such action will not, as evidenced by an Opinion of
Counsel satisfactory to the Trustee, result in the creation of a new
Security.
The Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Trustee shall not be liable for any
such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the parties hereto of any supplemental
indenture pursuant to this Section, the Trustee shall mail to the Holders of the
Notes to which such amendment or supplemental indenture relates a notice setting
forth in general terms the substance of such supplemental indenture. Any failure
of the Trustee to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to
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be modified and amended in accordance therewith with respect to the Notes
affected thereby, and the respective rights, limitations of rights, obligations,
duties, liabilities and immunities under this Indenture of the parties hereto
and the Holders of the Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 9.05. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act as then in
effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
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ARTICLE TEN
REDEMPTION OF NOTES
Section 10.01. Redemption.
(a) In the event that the Seller pursuant to Section 9.01(a) of the Sale
and Servicing Agreement purchases the corpus of the Trust, the Notes are subject
to redemption in whole, but not in part, on the Distribution Date on which such
repurchase occurs, for a purchase price equal to the Redemption Price; provided,
however, that the Issuer has available funds sufficient to pay the Redemption
Price. The Seller, the Master Servicer or the Issuer shall furnish the Insurer
and each Rating Agency notice of such redemption. If the Notes are to be
redeemed pursuant to this Section 10.01(a), the Master Servicer or the Issuer
shall furnish notice of such election to the Trustee not later than 20 days
prior to the Redemption Date and the Issuer shall deposit with the Trustee in
the Note Distribution Account the Redemption Price of the Notes to be redeemed
whereupon all such Notes shall be due and payable on the Redemption Date upon
the furnishing of a notice complying with Section 10.02 to each Holder of the
Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement or Section 5.02(b) of this Indenture, the
proceeds of such sale shall be distributed as provided in Section 5.06. If
amounts are to be paid to Noteholders pursuant to this Section 10.01(b), the
Master Servicer or the Issuer shall, to the extent practicable, furnish notice
of such event to the Trustee not later than 20 days prior to the Redemption Date
whereupon all such amounts shall be payable on the Redemption Date.
Section 10.02. Form of Redemption Notice.
(a) Notice of redemption under Section 10.01(a) shall be given by the
Trustee by first-class mail, postage prepaid, mailed not less than 20 days
prior to the applicable Redemption Date to each Holder of Notes, as of the close
of business on the Record Date preceding the applicable Redemption Date, at such
Holder's address appearing in the Note Register. In addition, the Administrator
shall notify the Rating Agencies upon the redemption of any Class of Notes,
pursuant to Section 1(a)(i) of the Administration Agreement.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.02); and
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(iv) that on the Redemption Date, the Redemption Price will
become due and payable upon each Note and that interest thereon shall
cease to accrue from and after the Redemption Date.
Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to
be given to Noteholders.
Section 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
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ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish to
the Trustee (i) an Officer's Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with and (iii)
(if required by the TIA) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of this Section.
Notwithstanding the foregoing, in the case of any such application or request as
to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition and
the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Trustee that is to be made the basis for the release
of any property subject to the lien created by this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a)
or elsewhere in this Indenture, furnish to the Trustee and the Insurer
(so long as no Insurer Default shall have occurred and be continuing) an
Officer's Certificate certifying or stating the opinion of the signer
thereof such certificate as to the fair value (within 90 days of such
deposit) to the Issuer of the Collateral or other property or securities
to be so deposited.
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(ii) Whenever the Issuer is required to furnish to the Trustee
and the Insurer an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Trustee and the Insurer an
Independent Certificate as to the named matters, if the fair value to
the Issuer of the property to be so deposited and of all other such
property made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth
in the Officer's Certificates delivered pursuant to clause (i) above and
this clause (ii), is 10% or more of the Outstanding Amount of the Notes,
but such Officer's Certificate need not be furnished with respect to any
property so deposited, if the fair value thereof to the Issuer as set
forth in the related Officer's Certificate is less than $25,000 or less
than one percent of the Outstanding Amount of the Notes.
(iii) Other than with respect to any release described in clause
(A) or (B) of Section 11.01(b)(v), whenever any property or securities
are to be released from the lien created by this Indenture, the Issuer
shall also furnish to the Trustee and the Insurer (so long as no Insurer
Default shall have occurred and be continuing) an Officer's Certificate
certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the
opinion of such person the proposed release will not impair the security
created by this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
and the Insurer an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(iii) above, the Issuer shall also furnish to the Trustee and the
Insurer an Independent Certificate as to the same matters if the fair
value of the property or securities and of all other property or
securities (other than property described in clauses (A) or (B) of
Section 11.01(b)(v)) released from the lien created by this Indenture
since the commencement of the then current fiscal year, as set forth in
the Officer's Certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the Notes,
but such Officer's Certificate need not be furnished in the case of any
release of property or securities if the fair value thereof as set forth
in the related Officer's Certificate is less than $25,000 or less than
one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the
Issuer may, without compliance with the other provisions of this
Section, (A) collect, liquidate, sell or otherwise dispose of the
Contracts as and to the extent permitted or required by the Basic
Documents, (B) make cash payments out of the Trust Accounts as and to
the extent permitted or required by the Basic Documents, so long as the
Issuer shall deliver to the Trustee every six months, commencing
November 15, 1998, an Officer's Certificate stating that all the
dispositions of Collateral described in clauses (A) or (B) that occurred
during the preceding six calendar months were in the ordinary course of
the Issuer's business and that the proceeds thereof were applied in
accordance with the Basic Documents.
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Section 11.02. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Master
Servicer, the Seller or the Issuer, stating that the information with respect to
such factual matters is in the possession of the Master Servicer, the Seller or
the Issuer, unless such officer or counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute to or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
Six.
Section 11.03. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be
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sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Issuer, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 11.04. Notices, etc., to Trustee, Issuer, Insurer and Rating
Agencies.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture shall be in writing and if such request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders is to be made upon,
given or furnished to or filed with:
(i) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if in writing, personally
delivered, sent by facsimile transmission and confirmed or mailed by
overnight service, to or with the Trustee at its Corporate Trust Office;
(ii) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing, personally
delivered, sent by facsimile transmission and confirmed or mailed by
overnight service, to the Issuer addressed to: WFS Financial 1998-B
Owner Trust, in care of Chase Manhattan Bank Delaware, as Owner Trustee,
1201 Market Street, Wilmington, Delaware 19801, Attention: Corporate
Trust Administration Department, with a copy to: The Chase Manhattan
Bank, 450 West 33rd Street, 15th Floor, New York, New York 10001,
Attention: Structured Finance Services (ABS), or at any other address
furnished in writing to the Trustee by the Issuer; or
(iii) the Insurer by the Issuer or the Trustee shall be
sufficient for any purpose hereunder if in writing, personally
delivered, sent by facsimile transmission and confirmed or mailed by
overnight service, to the recipient as follows:
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Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(In each case in which notice or other communication to the Insurer refers to an
Event of Default, a claim on the Note Policy or with respect to which failure on
the part of the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the Head--Financial Guaranty
Group "URGENT MATERIAL ENCLOSED.")
(b) Notices required to be given to the Rating Agencies by the Issuer,
the Trustee or the Owner Trustee shall be in writing, personally delivered, sent
by facsimile transmission and confirmed or mailed by overnight service, to (i)
in the case of Moody's, at the following address: Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007 and
(ii) in the case of Standard & Poor's, at the following address: Standard &
Poor's, 26 Broadway (20th Floor), New York, New York 10004, Attention: Asset
Backed Surveillance Department; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed un the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee but
such filing shall not be a conclusion precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
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Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default
Section 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices. The Issuer will furnish to the Trustee a copy of each such agreement
and the Trustee will cause payments to be made and notices to be given in
accordance with such agreements.
Section 11.07. Conflict With Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.08. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Trustee in this
Indenture shall bind its successors, co-trustees and agents.
Section 11.10. Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.11. Benefits of Indenture. The Insurer and its successors and
assigns shall be a third-party beneficiary to the provisions of this Indenture,
and shall be entitled to rely upon and directly to enforce such provisions of
this Indenture so long as no Insurer Default shall have occurred and be
continuing. Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and any
other Person with an ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
The Insurer may disclaim any of its rights and powers under this Indenture, but
not its duties and obligations under the Note Policy, upon delivery of a written
notice to the Trustee.
70
<PAGE> 77
Section 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THIS INDENTURE SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS EXCEPT THAT THE DUTIES OF THE TRUSTEE SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 11.14. Counterparts. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee and the Insurer) to the effect that such recording is necessary
either for the protection of the Noteholders or any other Person secured
hereunder or for the enforcement of any right or remedy granted to the Trustee
under this Indenture.
Section 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Trustee on the Notes or under this Indenture or any certificate or other
writing delivered in connection herewith or therewith, against (i) the Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficiary
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Trustee or of any successor or assign of the Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Articles Six, Seven and Eight of
the Trust Agreement.
Section 11.17. No Petition. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that they will not at any time institute
against the Seller or the Issuer, or join in any
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<PAGE> 78
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, this Indenture or any of the other Basic
Documents.
Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee or of the Insurer,
during the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees and independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested, the
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Trustee may reasonably determine that such disclosure is
consistent with its obligations hereunder.
Section 11.19. Limitation of Liability of Owner Trustee. Notwithstanding
anything contained herein to the contrary, this instrument has been
countersigned by Chase Manhattan Bank Delaware not in its individual capacity
but solely in its capacity as Owner Trustee of the Issuer and in no event shall
Chase Manhattan Bank Delaware in its individual capacity or any beneficial owner
of the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles Six, Seven and Eight of the Trust
Agreement.
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<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
WFS FINANCIAL 1998-B OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE, not in its individual
capacity but solely on behalf of
the Issuer as Owner Trustee under
the Trust Agreement
By: ___________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Trustee
By: ___________________________________
Name:
Title:
73
<PAGE> 80
STATE OF ____________ )
) ss
COUNTY OF ___________ )
On before me,
--------------------- -------------------------------------,
[insert date] [Here insert name and title of notary]
personally appeared
-----------------------------------------------------------,
[ ] personally known to me, or
[ ] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
-----------------------------------------
74
<PAGE> 81
STATE OF ____________ )
) ss
COUNTY OF ___________ )
On before me,
--------------------- -------------------------------------,
[insert date] [Here insert name and title of notary]
personally appeared
-----------------------------------------------------------,
[ ] personally known to me, or
[ ] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
-----------------------------------------
75
<PAGE> 82
SCHEDULE A
SCHEDULE OF CONTRACTS
Omitted -- Schedules of Contracts on file at the offices of the Seller, the
Master Servicer and the Owner Trustee.
SA-1
<PAGE> 83
EXHIBIT A
FORM OF SALE AND SERVICING AGREEMENT
A-1
<PAGE> 84
EXHIBIT B
FORM OF NOTE DEPOSITORY AGREEMENT
B-1
<PAGE> 85
EXHIBIT C
FORM OF CLASS A-1 NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT
INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED
STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
WFS FINANCIAL 1998-B OWNER TRUST
____% AUTO RECEIVABLE BACKED NOTE, CLASS A-1
REGISTERED $___________
No. R-A1 CUSIP NO. __________
WFS Financial 1998-B Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ___________________ Dollars ($___________), payable to the
extent described in the Indenture referred to on the reverse hereof on each
Distribution Date; provided, however, that the entire unpaid principal amount of
this Note shall be payable on the earlier of _______________ ___, 199__ (the
"Class A-1 Final Distribution Date") and the Redemption Date, if any, selected
pursuant to the Indenture.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), or on the Closing Date in the case of
the first Distribution Date or if no interest has yet been paid,
C-1
<PAGE> 86
subject to certain limitations contained in the Indenture. Interest on this Note
will accrue for each Distribution Date from and including the most recent
Distribution Date on which interest has been paid to but excluding such
Distribution Date or, in the case of the first Distribution Date or if no
interest has yet been paid, from June 1, 1998. The Issuer shall pay interest on
overdue installments of interest at the Class A-1 Interest Rate to the extent
lawful. Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed since the immediately preceding Distribution Date. Such
principal of and interest on this Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed payment
of the Note Interest Distributable Amount and the Note Principal Distributable
Amount on each Distribution Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as set forth below.
Date: June __, 1998 WFS FINANCIAL 1998-B OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE,
not in its individual capacity
but solely on behalf of the
Issuer as Owner Trustee, under
the Trust Agreement
By: _______________________________
Name:
Title:
C-2
<PAGE> 87
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By: _______________________________
Authorized Signatory
C-3
<PAGE> 88
[REVERSE OF CLASS A-1 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its "____% Auto Receivable Backed Notes, Class A-1" (the "Class
A-1 Notes"), all issued under an Indenture, dated as of June 1, 1998 (the
"Indenture"), between the Issuer and Bankers Trust Company, as trustee (the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Insurer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal payable on the Class A-1 Notes will be paid on each
Distribution Date in the amount specified in the Indenture. As described above,
the entire unpaid principal amount of this Note will be payable on the earlier
of the Class A-1 Final Distribution Date and the Redemption Date, if any,
selected pursuant to the Indenture. Notwithstanding the foregoing, under certain
circumstances, the entire unpaid principal amount of the Class A-1 Notes shall
be due and payable following the occurrence and continuance of an Event of
Default, as described in the Indenture. All principal payments on the Class A-1
Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of principal and interest on this Note due and payable on each
Distribution Date or Redemption Date shall be made by check mailed to the Person
whose name appears as the registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on the
related Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depository (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) affected by any payments made
on any Distribution Date or Redemption Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the remaining unpaid principal amount of this Note on a Distribution
Date or Redemption Date, then the Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the registered Holder hereof as of the
Record Date preceding such Distribution Date or Redemption Date by notice mailed
within 20 days of such Distribution Date or Redemption Date and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the office of the
Trustee's agent appointed for such purposes located in The City of New York.
C-4
<PAGE> 89
As provided in the Indenture, the Notes may be redeemed pursuant to the
Indenture, in whole, but not in part, at the option of the Seller, on any
Distribution Date as of which the Aggregate Scheduled Balance is less than or
equal to 5% of the Cut-Off Date Aggregate Scheduled Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Trustee or the Owner Trustee in its individual capacity, (ii)
any owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Owner Trustee or the Trustee or of any successor or assign of the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the other Basic Documents.
The Issuer has entered into the Indenture, and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether
C-5
<PAGE> 90
or not this Note be overdue, and neither the Issuer, the Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of the Notes. The Indenture
also contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of the Notes, on behalf of the Holders of
all the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of California, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws, except that the duties of the Trustee under the Indenture shall be
governed by New York law.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
C-6
<PAGE> 91
EXHIBIT D
FORM OF CLASS A-2 NOTE
THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1 NOTES TO
THE EXTENT DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT
INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED
STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
WFS FINANCIAL 1998-B OWNER TRUST
____% AUTO RECEIVABLE BACKED NOTE, CLASS A-2
REGISTERED $___________
No. R-A2 CUSIP NO. __________
WFS Financial 1998-B Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ________________________ Dollars ($___________), payable to the
extent described in the Indenture referred to on the reverse hereof on each
Distribution Date; provided, however, that the entire unpaid principal amount of
this Note shall be payable on the earlier of _______________ ___, 20__ (the
"Class A-2 Final Distribution Date") and the Redemption Date, if any, selected
pursuant to the Indenture. No payments of principal of the Class A-2 Notes shall
be made until the principal amount of the Class A-1 Notes has been reduced to
zero.
D-1
<PAGE> 92
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), or on the Closing Date in the case of
the first Distribution Date or if no interest has yet been paid, subject to
certain limitations contained in the Indenture. Interest on this Note will
accrue for each Distribution Date from and including the most recent
Distribution Date on which interest has been paid to but excluding such
Distribution Date or, in the case of the first Distribution Date or if no
interest has yet been paid, from June 1, 1998. The Issuer shall pay interest on
overdue installments of interest at the Class A-2 Interest Rate to the extent
lawful. Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed since the immediately preceding Distribution Date. Such
principal of and interest on this Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed payment
of the Note Interest Distributable Amount and the Note Principal Distributable
Amount on each Distribution Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
D-2
<PAGE> 93
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as set forth below.
Date: June __, 1998 WFS FINANCIAL 1998-B OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE,
not in its individual capacity
but solely on behalf of the
Issuer as Owner Trustee, under
the Trust Agreement
By: ___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Trustee,
By: ___________________________________
Authorized Signatory
D-3
<PAGE> 94
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its "____% Auto Receivable Backed Notes, Class A-2" (the "Class
A-2 Notes"), all issued under an Indenture, dated as of June 1, 1998 (the
"Indenture"), between the Issuer and Bankers Trust Company, as trustee (the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Insurer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal payable on the Class A-2 Notes will be paid on each
Distribution Date in the amount specified in the Indenture. As described above,
the entire unpaid principal amount of this Note will be payable on the earlier
of the Class A-2 Final Distribution Date and the Redemption Date, if any,
selected pursuant to the Indenture. Notwithstanding the foregoing, under certain
circumstances, the entire unpaid principal amount of the Class A-2 Notes shall
be due and payable following the occurrence and continuance of an Event of
Default, as described in the Indenture. All principal payments on the Class A-2
Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of principal and interest on this Note due and payable on each
Distribution Date or Redemption Date shall be made by check mailed to the Person
whose name appears as the registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on the
related Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depository (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) affected by any payments made
on any Distribution Date or Redemption Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the remaining unpaid principal amount of this Note on a Distribution
Date or Redemption Date, then the Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the registered Holder hereof as of the
Record Date preceding such Distribution Date or Redemption Date by notice mailed
within 20 days of such Distribution Date or Redemption Date and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the office of the
Trustee's agent appointed for such purposes located in The City of New York.
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<PAGE> 95
As provided in the Indenture, the Notes may be redeemed pursuant to the
Indenture, in whole, but not in part, at the option of the Seller, on any
Distribution Date as of which the Aggregate Scheduled Balance is less than or
equal to 5% of the Cut-Off Date Aggregate Scheduled Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Trustee or the Owner Trustee in its individual capacity, (ii)
any owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Owner Trustee or the Trustee or of any successor or assign of the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the other Basic Documents.
The Issuer has entered into the Indenture, and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether
D-5
<PAGE> 96
or not this Note be overdue, and neither the Issuer, the Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of the Notes. The Indenture
also contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of the Notes, on behalf of the Holders of
all the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of California, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws, except that the duties of the Trustee under the Indenture shall be
governed by New York law.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
D-6
<PAGE> 97
EXHIBIT E
FORM OF CLASS A-3 NOTE
THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1
NOTES AND THE CLASS A-2 NOTES AS DESCRIBED IN THE INDENTURE
REFERRED TO HEREIN.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT
INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED
STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
WFS FINANCIAL 1998-B OWNER TRUST
_____% AUTO RECEIVABLE BACKED NOTE, CLASS A-3
REGISTERED $___________
No. R-A3 CUSIP NO. __________
WFS Financial 1998-B Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ________________________ Dollars ($___________), payable to the
extent described in the Indenture referred to on the reverse hereof on each
Distribution Date; provided, however, that the entire unpaid principal amount of
this Note shall be payable on the earlier of _______________ ___, 20__ (the
"Class A-3 Final Distribution Date") and the Redemption Date, if any, selected
pursuant to the Indenture. No payments of principal of the Class A-3 Notes shall
be made until the principal amount of the Class A-1 Notes and the Class A-2
Notes has been reduced to zero.
E-1
<PAGE> 98
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), or on the Closing Date in the case of
the first Distribution Date or if no interest has yet been paid, subject to
certain limitations contained in the Indenture. Interest on this Note will
accrue for each Distribution Date from and including the most recent
Distribution Date on which interest has been paid to but excluding such
Distribution Date or, in the case of the first Distribution Date or if no
interest has yet been paid, from June 1, 1998. The Issuer shall pay interest on
overdue installments of interest at the Class A-3 Interest Rate to the extent
lawful. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed payment
of the Note Interest Distributable Amount and the Note Principal Distributable
Amount on each Distribution Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
E-2
<PAGE> 99
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as set forth below.
Date: June __, 1998 WFS FINANCIAL 1998-B OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE,
not in its individual capacity
but solely on behalf of the
Issuer as Owner Trustee, under
the Trust Agreement
By: ___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By: ___________________________________
Authorized Signatory
E-3
<PAGE> 100
[REVERSE OF CLASS A-3 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its "____% Auto Receivable Backed Notes, Class A-3" (the "Class
A-3 Notes"), all issued under an Indenture, dated as of June 1, 1998 (the
"Indenture"), between the Issuer and Bankers Trust Company, as trustee (the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Insurer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal payable on the Class A-3 Notes will be paid on each
Distribution Date in the amount specified in the Indenture. As described above,
the entire unpaid principal amount of this Note will be payable on the earlier
of the Class A-3 Final Distribution Date and the Redemption Date, if any,
selected pursuant to the Indenture. Notwithstanding the foregoing, under certain
circumstances, the entire unpaid principal amount of the Class A-3 Notes shall
be due and payable following the occurrence and continuance of an Event of
Default, as described in the Indenture. All principal payments on the Class A-3
Notes shall be made pro rata to the Class A-3 Noteholders entitled thereto.
Payments of principal and interest on this Note due and payable on each
Distribution Date or Redemption Date shall be made by check mailed to the Person
whose name appears as the registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on the
related Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depository (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) affected by any payments made
on any Distribution Date or Redemption Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the remaining unpaid principal amount of this Note on a Distribution
Date or Redemption Date, then the Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the registered Holder hereof as of the
Record Date preceding such Distribution Date or Redemption Date by notice mailed
within 20 days of such Distribution Date or Redemption Date and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the office of the
Trustee's agent appointed for such purposes located in The City of New York.
E-4
<PAGE> 101
As provided in the Indenture, the Notes may be redeemed pursuant to the
Indenture, in whole, but not in part, at the option of the Seller, on any
Distribution Date as of which the Aggregate Scheduled Balance is less than or
equal to 5% of the Cut-Off Date Aggregate Scheduled Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Trustee or the Owner Trustee in its individual capacity, (ii)
any owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Owner Trustee or the Trustee or of any successor or assign of the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the other Basic Documents.
The Issuer has entered into the Indenture, and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether
E-5
<PAGE> 102
or not this Note be overdue, and neither the Issuer, the Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of the Notes. The Indenture
also contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of the Notes, on behalf of the Holders of
all the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of California, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws, except that the duties of the Trustee under the Indenture shall be
governed by New York law.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
E-6
<PAGE> 103
EXHIBIT F
FORM OF CLASS A-4 NOTE
THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1 NOTES,
THE CLASS A-2 NOTES AND THE CLASS A-3 NOTES AS DESCRIBED IN THE INDENTURE
REFERRED TO HEREIN.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT
INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED
STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
WFS FINANCIAL 1998-B OWNER TRUST
____% AUTO RECEIVABLE BACKED NOTE, CLASS A-4
REGISTERED $__________
No. R-A4 CUSIP NO. __________
WFS Financial 1998-B Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________ Dollars ($__________), payable
to the extent described in the Indenture referred to on the reverse hereof on
each Distribution Date; provided, however, that the entire unpaid principal
amount of this Note shall be payable on the earlier _______________ ___, 20___
(the "Class A-4 Final Distribution Date") and the Redemption Date, if any,
selected pursuant to the Indenture. No payments of principal of the Class A-4
Notes shall be made until the principal
F-1
<PAGE> 104
amount of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes has
been reduced to zero.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date) or on the Closing Date in the case of
the first Distribution Date or if no interest has yet been paid, subject to
certain limitations contained in the Indenture. Interest on this Note will
accrue for each Distribution Date from and including the most recent
Distribution Date on which interest has been paid to but excluding such
Distribution Date or, in the case of the first Distribution Date or if no
interest has yet been paid, from June 1, 1998. The Issuer shall pay interest on
overdue installments of interest at the Class A-4 Interest Rate to the extent
lawful. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed payment
of the Note Interest Distributable Amount and the Note Principal Distributable
Amount on each Distribution Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
F-2
<PAGE> 105
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as set forth below.
Date: June __, 1998 WFS FINANCIAL 1998-B OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE,
not in its individual capacity
but solely on behalf of the
Issuer as Owner Trustee, under
the Trust Agreement
By: ___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Trustee
By: ___________________________________
Authorized Signatory
F-3
<PAGE> 106
[REVERSE OF CLASS A-4 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its "____% Auto Receivable Backed Notes, Class A-4" (the "Class
A-4 Notes"), all issued under an Indenture, dated as of June 1, 1998 (the
"Indenture"), between the Issuer and Bankers Trust Company, as trustee (the
"Trustee") to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Insurer, the Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes (collectively, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal payable on the Class A-4 Notes will be paid on each
Distribution Date in the amount specified in the Indenture. As described above,
the entire unpaid principal amount of this Note will be payable on the earlier
of the Class A-4 Final Distribution Date and the Redemption Date, if any,
selected pursuant to the Indenture. Notwithstanding the foregoing, under certain
circumstances, the entire unpaid principal amount of the Class A-4 Notes shall
be due and payable following the occurrence and continuance of an Event of
Default, as described in the Indenture. All principal payments on the Class A-4
Notes shall be made pro rata to the Class A-4 Noteholders entitled thereto.
Payments of principal and interest on this Note due and payable on each
Distribution Date or Redemption Date shall be made by check mailed to the Person
whose name appears as the registered Holder of this Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on the
related Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depository (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) affected by any payments made
on any Distribution Date or Redemption Date shall be binding upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If
funds are expected to be available, as provided in the Indenture, for payment in
full of the remaining unpaid principal amount of this Note on a Distribution
Date or Redemption Date, then the Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the registered Holder hereof as of the
Record Date preceding such Distribution Date or Redemption Date by notice mailed
within 20 days of such Distribution Date or Redemption Date and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Corporate Trust Office of the Trustee or at the office of the
Trustee's agent appointed for such purposes located in The City of New York.
F-4
<PAGE> 107
As provided in the Indenture, the Notes may be redeemed pursuant to the
Indenture, in whole, but not in part, at the option of the Seller, on any
Distribution Date as of which the Aggregate Scheduled Balance is less than or
equal to 5% of the Cut-Off Date Aggregate Scheduled Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Trustee or the Owner Trustee in its individual capacity, (ii)
any owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Owner Trustee or the Trustee or of any successor or assign of the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder or
Note Owner will not at any time institute against the Seller or the Issuer or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the other Basic Documents.
The Issuer has entered into the Indenture, and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether
F-5
<PAGE> 108
or not this Note be overdue, and neither the Issuer, the Trustee nor any such
agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of the Notes. The Indenture
also contains provisions permitting the Holders of Notes representing specified
percentages of the Outstanding Amount of the Notes, on behalf of the Holders of
all the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of California, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws, except that the duties of the Trustee under the Indenture shall be
governed by New York law.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
F-6
<PAGE> 109
EXHIBIT G
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Note, and all rights thereunder, hereby irrevocably constituting and
appointing
________________________________________________________________________________
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:____________________
Signature Guaranteed By:
____________________________________ _______________________________________
Signature must be guaranteed by Notice: The signature(s) on this
an eligible guarantor assignment must correspond with
institution which is a the name(s) as it appears on the
participant in the Securities face of the within Note in every
Transfer Agent's Medallion particular, without alteration,
Program (STAMP) or similar enlargement, or any change
signature guarantee program. whatsoever.
____________________________________
(Authorized Officer)
G-1
<PAGE> 110
EXHIBIT H
FORM OF NOTE POLICY
H-1
<PAGE> 1
EXHIBIT 5.1
[MITCHELL, SILBERBERG & KNUPP LLP LETTERHEAD]
June 15, 1998
WFS Financial Auto Loans, Inc.
23 Pasteur Road
Irvine, California 92618
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: WFS Financial 1998-B Owner Trust
Registration Statement on Form S-3, File Number 333-51113
Ladies and Gentlemen:
We are counsel for WFS Financial Auto Loans, Inc. (the "Company")
in connection with the proposed offering of $660,000,000 principal amount of
Auto Receivable Backed Securities consisting of four classes of Notes and one
class of Certificates (the Notes and Certificates together, the "Securities") as
identified in the above referenced Registration Statement to be issued by the
WFS Financial 1998-B Owner Trust (the "Trust") originated by the Company. The
Notes are obligations of the Trust secured by the assets of the Trust and the
Certificates represent undivided interests in the assets of the Trust. The Notes
are to be issued pursuant to an indenture between the Trust and Bankers Trust
Company as the Trustee (the "Indenture"). The Certificates are to be issued
pursuant to a trust agreement (the "Agreement") among the Company, WFS
Investments, Inc., Financial Security Assurance Inc. and Chase Manhattan Bank
Delaware, as Owner Trustee. The Securities are to be registered for sale
pursuant to the accompanying Form S-3 Registration Statement.
In our capacity as counsel for the Company and for purposes of
this opinion, we have made those examinations and investigations of the legal
and factual matters we deemed advisable, and have examined the originals, or
copies identified to our satisfaction as being true copies of the originals, of
the certificates, documents, corporate records, and other instruments which we,
in our judgment, have considered necessary or appropriate to enable us to render
the opinion expressed below. We have relied, without independent investigation
or confirmation, upon certificates provided by public
<PAGE> 2
WFS Financial Auto Loans, Inc.
Securities and Exchange Commission
June 15, 1998
Page 2
officials and officers of the Company as to certain factual matters. In the
course of our examinations and investigations, we have assumed the genuineness
of all signatures on original documents, and the due execution and delivery of
all documents requiring due execution and delivery for the effectiveness
thereof.
Based upon and subject to the foregoing and in reliance thereon,
and subject to the assumptions, exceptions and qualifications set forth herein,
it is our opinion that:
The Notes, when executed and authenticated as specified in the
Indenture and delivered to and paid for by Donaldson, Lufkin & Jenrette
Securities Corporation and BancAmerica Robertson Stephens (the "Underwriters")
pursuant to the underwriting agreement among the Underwriters, the Company and
WFS Financial Inc (the "Underwriting Agreement"), will constitute legal, valid
and binding obligations of the Trust, entitled to the benefits of the Indenture,
and enforceable in accordance with their terms, except as enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or other laws,
provisions or principles now or hereafter in effect affecting the enforcement of
creditors' rights generally and except that no opinion is expressed as to the
availability of remedies of specific performance, injunction or other forms of
equitable relief, all of which may be subject to certain tests of equity
jurisdiction, equitable defenses and the discretion of the court before which
any such proceeding may be brought.
The Certificates have been duly authorized, and when executed and
authenticated as specified in the Agreement and delivered to and paid for by the
Underwriters pursuant to the Underwriting Agreement, will be legally issued,
fully paid and non-assessable, and will be binding obligations of the Trust and
entitled to the benefits of the Agreement.
We consent to the filing of this opinion with, and to the
reference to our firm under the caption "Legal Matters" in the Registration
Statement. In giving our consent, we do not hereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations thereunder. This opinion
is given as of the date hereof and we assume no obligation to advise you of
changes that may hereafter be brought to our attention.
Very truly yours,
/s/ MITCHELL, SILBERBERG & KNUPP LLP
MITCHELL, SILBERBERG & KNUPP LLP
<PAGE> 1
EXHIBIT 8.1
[MITCHELL, SILBERBERG & KNUPP LLP LETTERHEAD]
June 15, 1998
WFS Financial Auto Loans, Inc.
23 Pasteur Road
Irvine, California 92618
Re: WFS Financial 1998-B Owner Trust
Registration Statement on Form S-1
Dear Sirs and Madams:
We have acted as legal counsel for WFS Financial Auto Loans, Inc., a
California corporation (the "Company"), in connection with the preparation of
the Company's Registration Statement, as amended, on Form S-1 under the
Securities Act of 1933, as amended (the "Registration Statement"), filed with
the Securities and Exchange Commission relating to the issuance of certain
certificates (the "Certificates") representing undivided interests in the WFS
Financial 1998-B Owner Trust (the "Trust") and certain notes (the "Notes" and
together with the Certificates the "Securities") secured by the assets of the
Trust.
In rendering the opinion set forth below, we have examined the Registration
Statement dated as filed on June 16, 1998 (the "Form S-3") and such exhibits to
the Form S-3 as we have considered necessary or appropriate for the purposes of
this opinion. In rendering this opinion, we have assumed that a final version of
the Form S-3 will become the effective Registration Statement of the Company
without material change in the facts stated, and that the issuance of the
Securities will be duly authorized by all necessary action and duly executed
substantially in the manner described in the Form S-3. In rendering this
opinion, we have relied upon certain representations regarding the underlying
facts set forth in the Form S-3, including the existence, nature and sufficiency
of the installment contracts which shall be held as assets of the Trust, as set
forth in certain certificates provided by officers of the Company and by
officers of Western Financial Bank and WFS Financial Inc. The opinion set forth
herein is expressly based upon such assumptions and representations and upon the
accuracy of those facts so assumed or represented. With respect to the
underlying facts, we have made only such factual inquiries as we have deemed
appropriate and have not independently verified any facts.
Based upon and subject to the foregoing, and in reliance thereon and
subject to the assumptions, exceptions and qualifications set forth herein, it
is our opinion that the information contained in the Form S-3 under the caption
"Federal Income Tax Consequences" and the caption "California Income Tax
Consequences", and the opinions set forth under each such caption, to the extent
that such information constitutes matters of law or legal conclusions,
represents our opinions.
The opinions expressed in this letter are based upon relevant provisions of
the Internal Revenue Code of 1986, as amended, the California Revenue and
Taxation Code, federal and state income tax regulations, and current
interpretations thereof as expressed in court decisions and administrative
determinations in effect on this date. All of these provisions, regulations and
interpretations are subject to changes which might result in substantial
modifications of our opinions, and we do not undertake to advise you of any such
modification. We caution that although the opinions expressed in this letter
represents our best legal judgment as to such matter, our opinions have no
binding effect on the Internal Revenue Service, the California Franchise Tax
Board or the courts.
We have expressed no opinion as to other tax issues affecting the Company,
the purchasers of the Securities or any other participant to the transactions
described in the Form S-3. We expressly refrain from rendering any opinion as to
the tax laws of any state (or subdivision thereof) other than California or any
foreign country.
We consent to the filing of this opinion with, and to the reference to our
firm under the caption "Legal Matters" in the Registration Statement. In giving
our consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended,
<PAGE> 2
WFS Financial Auto Loans, Inc.
June 15, 1998
Page 2
or the rules and regulations thereunder. This opinion is given as of the date
hereof and we assume no obligation to advise you of changes that may hereafter
be brought to our attention.
Very truly yours,
/s/ MITCHELL, SILBERBERG & KNUPP LLP
MITCHELL, SILBERBERG & KNUPP LLP
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) -----------
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
WFS FINANCIAL 1998-B OWNER TRUST
(Exact name of obligor as specified in its charter)
CALIFORNIA 33-0149603
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
23 PASTEUR ROAD
IRVINE, CALIFORNIA 92618
(Address of principal executive offices)
WFS FINANCIAL 1998-B OWNER TRUST
AUTO RECEIVABLE BACKED SECURITIES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3. -15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment
of the Organization Certificate of Bankers Trust
Company dated June 21, 1995 - Incorporated herein by
reference to Exhibit 1 filed with Form T-1 Statement,
Registration No. 33-65171, Certificate of Amendment of
the Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporated by reference to
Exhibit 1 filed with Form T-1 Statement, Registration
No. 333-25843, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated
June 19, 1997, incorporated by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
333-45229 and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated
March 26, 1998, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to
Exhibit 2 filed with Form T-1 Statement, Registration
No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended
on November 18, 1997. Copy attached.
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1 Statement,
Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust Company
dated as of March 31, 1998. Copy attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-2-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 15th day
of June, 1998.
BANKERS TRUST COMPANY
By: /s/ JENNA KAUFMAN
-------------------------------------
Jenna Kaufman
Vice President
-3-
<PAGE> 5
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION
8005 OF THE BANKING LAW," dated March 18, 1998, providing for an increase in
authorized capital stock from $2,351,666,670 consisting of 135,166,667 shares
with a par value of $10 each designated as Common Stock and 1000 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,501,666,670 consisting of 150,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 26TH day of MARCH in the Year of our Lord one thousand nine
hundred and NINETY-EIGHT.
Manuel Kursky
Deputy Superintendent of Banks
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion, Three Hundred and Fifty One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($2,351,666,670),
divided into One Hundred Thirty Five Million, One Hundred Sixty-Six
Thousand, Six Hundred Sixty-Seven (135,166,667) shares with a par value
of $10 each designated as Common Stock and 1000 shares with a par value
of One Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion Five Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($2,501,666,670), divided into One
Hundred Fifty Million, One Hundred Sixty-Six Thousand, Six Hundred
Sixty-Seven (150,166,667) shares with a par value of $10 each designated
as Common Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 7
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
18th day of March, 1998.
James T. Byrne, Jr.
-----------------------------------------
James T. Byrne, Jr.
Managing Director and Secretary
Lea Lahtinen
-----------------------------------------
Lea Lahtinen
Vice President and Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.
Lea Lahtinen
-----------------------------------------
Lea Lahtinen
Sworn to before me this 18th day of March, 1998.
Sandra L. West
-------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE> 8
BY-LAWS
NOVEMBER 18, 1997
BANKERS TRUST COMPANY
NEW YORK
<PAGE> 9
BY-LAWS
OF
BANKERS TRUST COMPANY
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than ten nor more than twenty-five, as may from time to time be fixed
by resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board of
Directors or any Committee thereof may participate in a meeting of the Board of
Directors or Committee thereof by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
<PAGE> 10
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who shall have attained age 72 shall be eligible to be elected or
re-elected a director. Such director may, however, remain a director of the
Company until the next annual meeting of the stockholders of Bankers Trust New
York Corporation (the Company's parent) so that such director's retirement will
coincide with the retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board of
Directors may be filled by the affirmative vote of a majority of the directors
then in office, and the directors so elected shall hold office for the balance
of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time to
time on the third Tuesday of the month. If the day appointed for holding such
regular meetings shall be a legal holiday, the regular meeting to be held on
such day shall be held on the next business day thereafter. Special meetings of
the Board of Directors may be called upon at least two day's notice whenever it
may be deemed proper by the Chairman of the Board or, the Chief Executive
Officer or, in their absence, by such other director as the Board of Directors
may have designated pursuant to Section 3 of this Article, and shall be called
upon like notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE> 11
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall conduct
the annual directors' examinations of the Company as required by the New York
State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
<PAGE> 12
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a Chairman
of the Board and a Chief Executive Officer; and shall also elect a President,
and may also elect a Senior Vice Chairman, one or more Vice Chairmen, one or
more Executive Vice Presidents, one or more Senior Managing Directors, one or
more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of Directors
may require any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer of
the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records
<PAGE> 13
and premises of the Company and shall delegate such authority to his
subordinates. He shall have the duty to report to the Audit Committee on all
matters concerning the internal audit program and the adequacy of the system of
internal controls of the Company which he deems advisable or which the Audit
Committee may request. Additionally, the General Auditor shall have the duty of
reporting independently of all officers of the Company to the Audit Committee at
least quarterly on any matters concerning the internal audit program and the
adequacy of the system of internal controls of the Company that should be
brought to the attention of the directors except those matters responsibility
for which has been vested in the General Credit Auditor. Should the General
Auditor deem any matter to be of special immediate importance, he shall report
thereon forthwith to the Audit Committee. The General Auditor shall report to
the Chief Financial Officer only for administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
<PAGE> 14
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018 of
the New York Banking Law, indemnify any person who is or was made, or threatened
to be made, a party to an action or proceeding, whether civil or criminal,
whether involving any actual or alleged breach of duty, neglect or error, any
accountability, or any actual or alleged misstatement, misleading statement or
other act or omission and whether brought or threatened in any court or
administrative or legislative body or agency, including an action by or in the
right of the Company to procure a judgment in its favor and an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Company is servicing or served
in any capacity at the request of the Company by reason of the fact that he, his
testator or intestate, is or was a director or officer of the Company, or is
serving or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement, and costs, charges and expenses, including
attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company,
<PAGE> 15
evidenced by a written communication signed by the Chairman of the Board, the
Chief Executive Officer or the President, and (ii) only if and to the extent
that, after making such efforts as the Chairman of the Board, the Chief
Executive Officer or the President shall deem adequate in the circumstances,
such person shall be unable to obtain indemnification from such other enterprise
or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement of
expense pursuant to this Article V (i) is a contract right pursuant to which the
person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
<PAGE> 16
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE> 17
I, Peter Becker, Assistant Secretary of Bankers Trust Company, New York, New
York, hereby certify that the foregoing is a complete, true and correct copy of
the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.
Peter Becker
--------------------------
ASSISTANT SECRETARY
DATED: June 15, 1998
-------------------------
<PAGE> 18
<TABLE>
<CAPTION>
Legal Title of Bank: Bankers Trust Company Call Date: 03/31/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
-----------------
| C400 |
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin (1) .............................. | 0081 1,458,000 |1.a.
b. Interest-bearing balances (2) ....................................................... | 0071 2,253,000 |1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A) .......................... | 1754 0 |2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)......................... | 1773 6,444,000 |2.b.
3. Federal funds sold and securities purchased under agreements to resell.................. | 1350 30,836,000 |3.
4. Loans and lease financing receivables: | ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 19,993,000 | ////////////////// |4.a.
b. LESS: Allowance for loan and lease losses.......................RCFD 3123 647,000 | ////////////////// |4.b.
c. LESS: Allocated transfer risk reserve ..........................RCFD 3128 0 | ////////////////// |4.c.
d. Loans and leases, net of unearned income, | ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c) ................................. | 2125 19,346,000 |4.d.
5. Trading Assets (from schedule RC-D) ................................................... | 3545 45,690,000 |5.
6. Premises and fixed assets (including capitalized leases) ............................... | 2145 791,000 |6.
7. Other real estate owned (from Schedule RC-M) ........................................... | 2150 184,000 |7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 104,000 |8.
9. Customers' liability to this bank on acceptances outstanding ........................... | 2155 542,000 |9.
10. Intangible assets (from Schedule RC-M) ................................................. | 2143 81,000 |10.
11. Other assets (from Schedule RC-F) ...................................................... | 2160 5,339,000 |11.
12. Total assets (sum of items 1 through 11) ............................................... | 2170 113,068,000 |12.
---------------------------
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 19
<TABLE>
<CAPTION>
Legal Title of Bank: Bankers Trust Company Call Date: 03/31/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Dollar Amounts in Thousands | ////// Bil Mil Thou |
LIABILITIES | /////////////////////// |
13. Deposits: | /////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 26,465,000 |13.a.
(1) Noninterest-bearing(1) ...................................RCON 6631 3,005,000 | ////////////////////// |13.a.(1)
(2) Interest-bearing .........................................RCON 6636 23,460,000 | ////////////////////// |13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | ////////////////////// |
part II) | RCFN 2200 21,993,000 |13.b.
(1) Noninterest-bearing ......................................RCFN 6631 1,712,000 | ////////////////////// |13.b.(1)
(2) Interest-bearing .........................................RCFN 6636 20,281,000 | ////////////////////// |13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase | RCFD 2800 12,125,000 |14.
15. a. Demand notes issued to the U.S. Treasury ........................................... | RCON 2840 0 |15.a.
b. Trading liabilities (from Schedule RC-D)............................................ | RCFD 3548 25,701,000 |15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases): | ////////////////////// |
a. With a remaining maturity of one year or less ...................................... | RCFD 2332 6,773,000 |16.a.
b. With a remaining maturity of more than one year through three years................ | A547 3,754,000 |16.b.
c. With a remaining maturity of more than three years.................................. | A548 2,212,000 |16.c
17. Not Applicable. | ////////////////////// |17.
18. Bank's liability on acceptances executed and outstanding ............................... | RCFD 2920 542,000 |18.
19. Subordinated notes and debentures (2)................................................... | RCFD 3200 1,308,000 |19.
20. Other liabilities (from Schedule RC-G) ................................................. | RCFD 2930 6,135,000 |20.
21. Total liabilities (sum of items 13 through 20) ......................................... | RCFD 2948 107,008,000 |21.
22. Not Applicable | ////////////////////// |
| ////////////////////// |22.
EQUITY CAPITAL | ////////////////////// |
23. Perpetual preferred stock and related surplus .......................................... | RCFD 3838 1,000,000 |23.
24. Common stock ........................................................................... | RCFD 3230 1,352,000 |24.
25. Surplus (exclude all surplus related to preferred stock) ............................... | RCFD 3839 544,000 |25.
26. a. Undivided profits and capital reserves ............................................. | RCFD 3632 3,583,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ............. | RCFD 8434 (41,000) |26.b.
27. Cumulative foreign currency translation adjustments .................................... | RCFD 3284 (378,000) |27.
28. Total equity capital (sum of items 23 through 27) ...................................... | RCFD 3210 6,060,000 |28.
29. Total liabilities and equity capital (sum of items 21 and 28)........................... | RCFD 3300 113,068,000 |29
| |
--------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed
for the bank by independent external auditors as of any date during 1997 Number
....................................................................................| RCFD 6724 1 | M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards by a
certified public accounting firm (may be required by state
chartering authority)
</TABLE>
- ----------
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
