<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1998
REGISTRATION NO. 333-59293
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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-C 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. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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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*
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Auto Receivable Backed Notes, Class A-1..... $130,000,000 100% $130,000,000 $36,143
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Auto Receivable Backed Notes, Class A-2..... $145,000,000 100% $145,000,000 $40,314
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Auto Receivable Backed Notes, Class A-3..... $168,000,000 100% $168,000,000 $46,708
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Auto Receivable Backed Notes, Class A-4..... $ 80,000,000 100% $ 80,000,000 $22,242
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Auto Receivable Backed Notes, Class A-5..... $100,000,000 100% $100,000,000 $27,802
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Auto Receivable Backed Certificates......... $ 77,000,000 100% $ 77,000,000 $21,408
================================================================================================================================
</TABLE>
* 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. This amount 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.
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<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 NOVEMBER 16, 1998
$700,000,000
WFS FINANCIAL 1998-C OWNER TRUST
$130,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-1
$145,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-2
$168,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-3
$ 80,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-4
$100,000,000 % AUTO RECEIVABLE BACKED NOTES, CLASS A-5
$77,000,000 % AUTO RECEIVABLE BACKED CERTIFICATES
WFS FINANCIAL AUTO LOANS, INC. (SELLER)
WFS FINANCIAL INC (MASTER SERVICER)
The WFS Financial 1998-C Owner Trust Auto Receivable Backed Securities will
consist of five Classes of notes (respectively, the "Class A-1 Notes", the
"Class A-2 Notes", the "Class A-3 Notes", the "Class A-4 Notes" and the "Class
A-5 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 February 20, May 20,
August 20 and November 20 of each year (or, if any such day is not a Business
Day, on the immediately succeeding Business Day), beginning February 20, 1999.
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-C 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. At least 70.00% 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,
Class A-5 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, the Class A-4 Notes and the Class A-5 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.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO THE DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) THE SELLER(1)(3)
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<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 Class A-5 Note.......................................... % % %
Per Certificate............................................. % % %
Total....................................................... $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from November 1, 1998.
(2) See "Underwriting" for indemnification arrangements with the Underwriters.
(3) Before deducting expenses payable by the Seller estimated at $470,000.00.
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
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES LLC
<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, and the financial statements of
Financial Security Assurance, Inc. and Subsidiaries included in, or as exhibits
to, documents filed by Financial Security Assurance Holdings Ltd. (including
specifically the Annual Report on Form 10-K for the year ended December 31, 1997
and the Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1998), as filed in each case pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
those filed 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 , 1999, 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-C 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-C 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-C 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 five Classes of Notes pursuant
to an indenture to be dated as of November 1, 1998
(the "Indenture"), between the Trust and Bankers
Trust Company, as trustee (the "Indenture
Trustee"), as follows: (i) $130,000,000 aggregate
principal amount of % Auto Receivable Backed
Notes, Class A-1 (the "Class A-1 Notes"), (ii)
$145,000,000 aggregate principal amount of %
Auto Receivable Backed Notes, Class A-2 (the "Class
A-2 Notes"), (iii) $168,000,000 aggregate principal
amount of % Auto Receivable Backed Notes,
Class A-3 (the "Class A-3 Notes"), (iv) $80,000,000
aggregate principal amount of % Auto
Receivable Backed Notes, Class A-4 (the "Class A-4
Notes") and (v) $100,000,000 aggregate principal
amount of % Auto Receivable Backed Notes, Class
A-5 (the "Class A-5 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 $77,000,000 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"),
3
<PAGE> 5
WII and Chase Manhattan Bank Delaware, as trustee
(the "Owner 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 February 20, May 20,
August 20 and November 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 February 20, 1999. 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 November 20,
1999 (the "Class A-1 Final Distribution Date"),
(ii) the Class A-2 Notes will be payable on August
20, 2001 (the "Class A-2 Final Distribution Date"),
(iii) the Class A-3 Notes will be payable on
November 20, 2002 (the "Class A-3 Final
Distribution Date"), (iv) the Class A-4 Notes will
be payable on August 20, 2003 (the "Class A-4 Final
Distribution Date") and (v) the Class A-5 Notes
will be payable on August 20, 2003 (the "Class A-5
Final Distribution Date" and, together with the
Class A-1 Final Distribution Date, the Class A-2
Final Distribution Date, the Class A-3 Final
Distribution Date and the Class A-4 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 February 20,
2006 (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.
4
<PAGE> 6
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 at the rate of % per annum
(the "Class A-3 Rate"), (iv) the Class A-4 Notes at
the rate of % per annum (the "Class A-4 Rate")
and (v) the Class A-5 Notes at the rate of % per
annum (the "Class A-5 Rate" and, together with the
Class A-1 Rate, the Class A-2 Rate, the Class A-3
Rate and the Class A-4 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, Class A-4 Notes and Class A-5 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 and second, after the principal amount of
the Class A-1 Notes has been reduced to zero, (i)
the Class A2-4 Percentage of any remainder to the
Class A-2 Notes, Class A-3 Notes and Class A-4
Notes, sequentially, and (ii) the Class A-5
Percentage of such remainder to the Class A-5
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
5
<PAGE> 7
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 representing 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 $77,000,000
(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 all Classes of 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."
6
<PAGE> 8
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
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 40 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
$700,000,000 (the "Cut-Off Date Aggregate Scheduled
Balance") and the Contracts will have an expected
weighted average annual percentage rate of
approximately 14.68% and an expected weighted
average remaining maturity of approximately 58
months. See "The Contracts Pool."
Approximately 26.36% of the aggregate principal
amount of the Contracts will be "Rule of 78's
Contracts" and approximately 73.64% 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
7
<PAGE> 9
account in the name of the Indenture Trustee for
the benefit of the Securityholders (the "Spread
Account"). The Spread Account will be 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 $21,000,000 (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
$70,000,000 or be reduced below $12,600,000;
provided, however, it shall not be greater than the
outstanding principal amount of the Securities if
that amount is less than $12,600,000. 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 November 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
8
<PAGE> 10
Scheduled Balance (an "Optional Purchase"). See
"Certain Information Regarding the
Securities -- Termination."
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, Class A-4
Notes and Class A-5 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.
9
<PAGE> 11
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 include any
assessment as to the prepayment of the Securities.
Approximately 50.06% 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,
Class A-5 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, the Class A-4 Notes and the Class A-5 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, the Class A-4 Notes and the Class A-5 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 50.06% of the Contracts will have been originated in the State of
California, and not more than 5.91% 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 November 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 November 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............................................. $130,000,000
Class A-2 Notes............................................. 145,000,000
Class A-3 Notes............................................. 168,000,000
Class A-4 Notes............................................. 80,000,000
Class A-5 Notes............................................. 100,000,000
Certificates................................................ 77,000,000
------------
Total............................................. $700,000,000
============
</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 40 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 70.00% of the Contracts will have been originally underwritten as
prime contracts. Approximately 50.06% of the aggregate principal amount of the
Contracts will have been originated in California and approximately 49.94% 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.
For purposes of the Trust, all Rule of 78's Contracts are amortized on an
actuarial basis to prevent shortfalls of principal payments on the Securities.
As amortization on an actuarial basis produces a faster amortization than does
application of the Rule of 78's, there will not be a shortfall of principal in
any event, including as a result of prepayments or timely payment to maturity of
a Rule of 78's Contract.
The aggregate outstanding principal amount of the Contracts will be
$700,000,000. Based on the anticipated Cut-Off Date Aggregate Scheduled Balance,
approximately 26.36% of the Contracts will be Rule of 78's Contracts and
approximately 73.64% 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 October 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, not more than 5% of the
Contracts that will be sold to the Trust will have characteristics that vary
from the information concerning the Contracts presented.
13
<PAGE> 15
For Contracts originated through October 31, 1998, approximately 21.53% of
the aggregate principal amount of the Contracts relate to the purchase of new
vehicles and approximately 78.47% of the Contracts relate to the purchase of
used vehicles. Approximately 55.16% of the aggregate principal amount of these
Contracts consists of contracts secured by automobiles and approximately 44.84%
of the aggregate principal amount consists of contracts secured by light-duty
trucks. These Contracts have an annual percentage rate ("APR") of at least 6.90%
and not more than 30.0%, and the weighted average APR of these Contracts is
approximately 14.68%. These Contracts have remaining maturities of at least 4
months but not more than 84 months and original maturities of at least 12 months
but not more than 84 months. The weighted average original maturity of these
Contracts was 60 months and the weighted average remaining maturity of these
Contracts as of October 31, 1998 was 58 months. It is currently anticipated that
not more than 30.05% 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
October 31, 1998 was $12,434.06 and the outstanding principal balance of these
Contracts as of October 31, 1998 ranged from $1,001.04 to $62,194.22.
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%.................................... 5 $ 81,434.10 0.01%
7.00% to 7.99%.................................... 263 4,437,396.28 0.63
8.00% to 8.99%.................................... 1,435 22,506,062.81 3.22
9.00% to 9.99%.................................... 2,879 44,970,672.37 6.42
10.00% to 10.99%................................... 3,873 60,158,590.87 8.59
11.00% to 11.99%................................... 3,882 58,331,383.95 8.33
12.00% to 12.99%................................... 5,347 76,050,843.24 10.86
13.00% to 13.99%................................... 4,465 62,521,517.89 8.93
14.00% to 14.99%................................... 4,877 64,908,474.31 9.27
15.00% to 15.99%................................... 4,866 61,769,721.70 8.82
16.00% to 16.99%................................... 4,282 53,233,188.76 7.60
17.00% to 17.99%................................... 3,764 43,877,180.39 6.27
18.00% to 18.99%................................... 3,810 41,061,700.67 5.87
19.00% to 19.99%................................... 2,404 24,522,547.40 3.50
20.00% to 20.99%................................... 5,264 49,530,987.68 7.08
21.00% to 21.99%................................... 3,179 21,203,941.38 3.03
22.00% to 22.99%................................... 322 2,719,361.04 0.39
23.00% to 23.99%................................... 250 1,939,369.82 0.28
24.00% to 24.99%................................... 433 2,667,355.35 0.38
25.00% to 25.99%................................... 262 1,516,304.01 0.22
26.00% to 26.99%................................... 106 597,251.88 0.09
27.00% to 27.99%................................... 50 232,853.98 0.03
28.00% to 28.99%................................... 23 122,984.17 0.02
29.00% to 29.99%................................... 251 1,017,802.74 0.15
30.00% and over.................................... 5 21,083.39 0.00
------ --------------- ------
Total......................................... 56,297 $700,000,010.18 100.00%
====== =============== ======
</TABLE>
- ---------------
(1) Information as of October 31, 1998 for Contracts originated through October
31, 1998. Contracts having Cut-Off Date Aggregate Scheduled Balances of
$700,000,000 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......................................... 28,917 $350,396,232.24 50.06%
Arizona............................................ 3,195 41,403,592.77 5.91
Washington......................................... 2,977 33,120,876.92 4.73
Texas.............................................. 2,535 32,280,339.48 4.61
Oregon............................................. 2,300 23,994,752.75 3.43
Colorado........................................... 1,706 22,887,718.90 3.27
Nevada............................................. 1,361 19,857,625.23 2.84
Florida............................................ 1,112 14,787,437.03 2.11
Ohio............................................... 1,251 14,776,514.60 2.11
North Carolina..................................... 989 14,352,755.76 2.05
Illinois........................................... 869 11,487,592.63 1.64
Virginia........................................... 725 10,600,913.09 1.51
Tennessee.......................................... 650 9,858,167.08 1.41
Idaho.............................................. 795 9,332,395.42 1.33
South Carolina..................................... 583 8,023,758.02 1.15
Pennsylvania....................................... 591 7,155,905.30 1.02
Alabama............................................ 485 7,138,053.12 1.02
Missouri........................................... 419 6,272,999.78 0.90
Utah............................................... 473 6,239,435.80 0.89
Georgia............................................ 425 6,058,042.50 0.87
Wisconsin.......................................... 531 5,897,848.29 0.84
Maryland........................................... 388 5,176,776.20 0.74
Kentucky........................................... 367 4,654,198.06 0.66
Iowa............................................... 341 4,584,799.19 0.65
Indiana............................................ 331 4,340,505.53 0.62
Kansas............................................. 243 3,799,920.66 0.54
Massachusetts...................................... 304 3,470,073.41 0.50
New Mexico......................................... 238 2,784,551.99 0.40
Oklahoma........................................... 193 2,559,183.01 0.37
West Virginia...................................... 145 2,261,633.65 0.32
Michigan........................................... 165 2,099,385.16 0.30
Mississippi........................................ 127 1,868,948.24 0.27
Hawaii............................................. 153 1,627,365.84 0.23
New Hampshire...................................... 152 1,560,117.54 0.22
New Jersey......................................... 100 1,226,317.32 0.18
Rhode Island....................................... 67 791,888.53 0.11
Wyoming............................................ 57 791,699.27 0.11
Nebraska........................................... 21 248,821.96 0.04
Delaware........................................... 11 169,676.35 0.02
New York........................................... 3 32,487.27 0.00
Connecticut........................................ 2 28,704.29 0.00
------ --------------- ------
Total......................................... 56,297 $700,000,010.18 100.00%
====== =============== ======
</TABLE>
- ---------------
(1) Information as of October 31, 1998 for Contracts originated through October
31, 1998. Contracts having Cut-Off Date Aggregate Scheduled Balances of
$700,000,000.00 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
nine months ended September 30, 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
nine months ended September 30, 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 SEPTEMBER 30, 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............................. 456,353 $4,246,814 408,958 $3,680,817 341,486 $3,046,585
======= ========== ======= ========== ======= ==========
Period of delinquency(3)
31-59 days........................... 12,916 $ 106,810 6,605 $ 54,450 4,511 $ 38,173
60-89 days........................... 4,069 33,986 2,161 18,652 1,305 11,470
90 days or more...................... 1,775 15,233 918 7,762 567 5,144
------- ---------- ------- ---------- ------- ----------
Total contracts delinquent............ 18,760 $ 156,029 9,684 $ 80,864 6,383 $ 54,787
======= ========== ======= ========== ======= ==========
Delinquencies as a percentage of
number and amount of contracts
outstanding.......................... 4.11% 3.67% 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,
SEPTEMBER 30, ------------------------------------------------------------------
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).............................. $4,246,814 $3,680,817 $3,046,585 $2,209,594 $1,633,177 $1,233,732
========== ========== ========== ========== ========== ==========
Average during period (net of unearned
add-on interest)....................... $3,935,742 $3,383,570 $2,627,622 $1,886,359 $1,438,582 $1,132,538
========== ========== ========== ========== ========== ==========
Gross chargeoffs of contracts during
period................................. $ 124,901 $ 136,773 $ 86,464 $ 48,999 $ 27,620 $ 24,612
Recoveries during period of contracts
charged off............................ 26,196 34,634 25,946 18,715 11,927 7,308
---------- ---------- ---------- ---------- ---------- ----------
Net chargeoffs........................... $ 98,705 $ 102,139 $ 60,518 $ 30,284 $ 15,693 $ 17,304
========== ========== ========== ========== ========== ==========
Net chargeoffs as a percentage of
contracts outstanding during period.... 3.34% 3.02% 2.30% 1.61% 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.
Net charge-offs as a percentage of contracts outstanding for contracts
originated and serviced by WFS increased in 1997 to 3.02%, a 31.3% increase over
the 2.30% experienced in 1996 following a 42.9% increase over the 1.61% net
charge-off level experienced in 1995. Delinquencies increased during the same
periods as a percentage of contracts outstanding from 1.24% at year end 1995 to
1.80% and 2.20% at year end 1996 and 1997, respectively, an increase of 45.16%
and 22.22%, respectively. Net chargeoffs and delinquencies increased from year
end 1997 to September 30, 1998 to 3.34% and 3.67%, respectively, increases of
10.60% and 66.82%, respectively. Loss and delinquency for contracts 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 third quarter of 1998 were also impacted by a disruption of
collection efforts arising from WFS' restructuring of its offices. 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.
17
<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, Class A-4 Notes and Class
A-5 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
18
<PAGE> 20
and Expenses") 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 as follows: (i) principal will be
paid on the Class A-1 Notes before any other Class of Notes, (ii) principal will
be paid on the Class A-2, A-3 and A-4 Notes sequentially and (iii) the Class A-5
Notes will receive distributions of principal simultaneously with principal
payments on the Class A-2, A-3 and A-4 Notes. 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 Principal Distributable Amount on deposit in 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 second (i)
the Class A2-4 Percentage of any remaining Note Principal Distributable Amount
sequentially to the holders of (a) the Class A-2 Notes until the principal
amount of the Class A-2 Notes has been reduced to zero, (b) the Class A-3 Notes
until the principal amount of the Class A-3 Notes has been reduced to zero and
(c) the Class A-4 Notes until the principal amount of the Class A-4 Notes has
been reduced to zero and (ii) the Class A-5 Percentage of any remaining Note
Principal Distributable Amount to the holders of the Class A-5 Notes until the
principal amount of the Class A-5 Notes has been reduced to zero.
Notwithstanding the foregoing, in the event that a Class of Notes has not been
paid in full prior to such date, the unpaid principal amount of such Class of
Notes will be paid on the related Note Final Distribution Date and in no event
may the principal paid in respect of a Class of Notes exceed the unpaid
principal balance of such Class of Notes. 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 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
19
<PAGE> 21
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 (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
20
<PAGE> 22
(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 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 all Classes of 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."
21
<PAGE> 23
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 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
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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.
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.
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information of the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires
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<PAGE> 25
services to: (i) impress upon them the importance of such services being Year
2000 compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In additional, DTC
is in the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
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 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
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<PAGE> 26
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 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-
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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 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, 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 second (i) the Class A2-4 Percentage of
any remaining Note Principal Distributable Amount sequentially to the
holders of (a) the Class A-2 Notes until the principal amount of the Class
A-2 Notes has been reduced to zero, (b) the Class A-3 Notes until the
principal amount of the Class A-3 Notes has been reduced to zero and (c)
the Class A-4 Notes until the principal amount of the Class A-4 Notes has
been reduced to zero and (ii) the Class A-5 Percentage of any remaining
Note
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Principal Distributable Amount to the holders of the Class A-5 Notes until
the principal amount of the Class A-5 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."
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.
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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 and the Class A-5 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 and the Class A-5 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.
The "Class A2-4 Percentage" will mean (i) for each Distribution Date to and
including the Distribution Date on which the principal amount of the Class A-1
Notes is reduced to zero, 0% and (ii) for each Distribution Date thereafter, to
and including the Distribution Date on which the principal amount of the Class
A-4 Notes is reduced to zero, the percentage equivalent of a fraction, the
numerator of which is the aggregate outstanding principal amount of the Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes and the denominator of which is
the Note Balance, in each case as of the immediately preceding Distribution Date
(after giving effect to any distributions of principal made on such preceding
Distribution Date).
The "Class A-5 Percentage" will mean (i) for each Distribution Date to and
including the Distribution Date on which the principal amount of the Class A-1
Notes is reduced to zero, 0% and (ii) for each Distribution Date thereafter,
100% minus the Class A2-4 Percentage.
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.
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
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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 Balance" will mean, with respect to any Distribution Date, the
aggregate outstanding principal amount of the Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes and Class A-5 Notes, in each case as of the immediately
preceding Distribution Date (after giving effect to any distributions of
principal made on such preceding Distribution Date).
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 and the Class A-5 Notes is reduced to zero, 100%; (ii) on the Distribution
Date on which the principal amount of the Class A-4 Notes and the Class A-5
Notes is reduced to zero, (a) 100% until the principal amount of the Class A-4
Notes and the Class A-5 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 and
Class A-5 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).
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.
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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)
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
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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 $70,000,000
(10% of the Cut-off Date Aggregate Scheduled Balance) or less than $12,600,000
(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 $12,600,000. 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."
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
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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;
(vi) the Note Pool Factor for each Class of Notes and the Certificate
Pool Factor, in each case as of such Distribution Date; and
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(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 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)
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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 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)
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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 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
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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 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)
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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)
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
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<PAGE> 39
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 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
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<PAGE> 40
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 and not from the
proceeds of the Contracts or other assets of the Trust.
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 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."
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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 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
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<PAGE> 42
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
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
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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 Policy for
the benefit of the Noteholders, or a claim is made on the Certificate Policy 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
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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 MediaOne Capital Corporation, Fund
American Enterprises Holdings, Inc., The Tokio Marine and Fire Insurance Co.,
Ltd. and EXEL Limited. 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
Financial Security's insurance financial strength is rated "Aaa" by
Moody's. Financial Security's insurer financial strength is rated "AAA" by S&P
and Standard & Poor's (Australia) Pty. Ltd. Financial Security's claims-paying
ability is rated "AAA" by Fitch IBCA, Inc. and Japan Rating and Investment
Information, Inc. 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 September 30, 1998, as well as such capitalization as adjusted
to give effect to certain transactions entered into during November 1998 (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------------
ACTUAL AS ADJUSTED(1)
---------- ----------------
(UNAUDITED)
<S> <C> <C>
Deferred Premium Revenue (net of prepaid reinsurance
premiums)................................................. $ 480,089 $ 480,089
---------- ----------
Surplus Notes............................................... 50,000 130,000
---------- ----------
Minority Interest........................................... -- 20,000
---------- ----------
Shareholder's Equity:
Common Stock.............................................. 15,000 15,000
Additional Paid-In Capital................................ 614,787 684,787
Accumulated Other Comprehensive Income (net of deferred
income taxes)........................................... 41,923 41,923
Accumulated Earnings...................................... 326,145 326,145
---------- ----------
Total Shareholder's Equity.................................. 997,855 1,067,855
---------- ----------
Total Deferred Premium Revenue, Surplus Notes, Minority
Interest and Shareholder's Equity......................... $1,527,944 $1,697,944
========== ==========
</TABLE>
- ---------------
(1) Adjusted to give effect to (a) the purchase by Holdings of $80 million of
surplus notes from Financial Security, in connection with the formation of a
new indirect Bermuda subsidiary of Financial Security, initially capitalized
with $100 million, including a $20 million minority interest owned by EXEL
Limited, and (b) the contribution by Holdings to Financial Security of
approximately $70 million, representing a portion of the proceeds from the
sale by Holdings of $100 million of 6.95% Senior Quarterly Income Debt
Securities due 2098 and callable without premium or penalty commencing
November 1, 2003 or at any time following certain tax events.
For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security and Subsidiaries, and the notes
thereto, incorporated by reference into 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.
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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 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
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determined to be a Nonrecoverable Advance, out of unrelated installments of
Monthly P&I or prepayment proceeds.
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 actual cash 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 or there are six or fewer months remaining to its Maturity Date. 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 obtain 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 if the Obligor fails to maintain the required insurance;
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 or there are six or
fewer months remaining to its Maturity Date. (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 or there are six or
fewer months remaining to its Maturity Date, 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
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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 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)
YEAR 2000 COMPLIANCE
Many computer systems process transactions involving dates by using only
two digits to represent the year of the transaction (i.e., "98" for 1998),
rather than the full four digits of the year involved. These computer systems
could fail or produce erroneous results during the transition from 1999 to 2000.
This problem could affect a wide variety of automated information management
systems, the most critical of these functions from the perspective of the Trust
are the billing and collection systems used by the Master Servicer.
The Master Servicer has advised the Seller that the Master Servicer
initiated the process of preparing its computer systems and applications to be
year 2000 compliant in 1997, including in particular those systems used in
connection with the billing and collection of Obligors as to the Contracts to be
sold to the Trust. This process involves modifying or replacing certain hardware
and software maintained by the Master Servicer, as well as communicating with
external service providers to ensure that they are taking the necessary actions
to remedy their year 2000 compliance issues. The Master Servicer has advised the
Seller that it expects to have substantially modified all of its information
management systems and applications, both hardware and software, by the end of
1998 and to have completed testing during the third quarter of 1999. The Seller
believes, based upon its discussions with the Master Servicer, that the Master
Servicer and the Master Servicer's external service providers will be year 2000
compliant with respect to the systems and applications relevant to the Master
Servicer's activities for the Trust in advance of January 1, 2000. The Master
Servicer, as an operating subsidiary of Western Financial Bank, is subject to
regulation by the Office of Thrift Supervision (the "OTS"). The OTS is providing
vigorous oversight to the year 2000 compliance activities of the thrift
institutions and their subsidiaries for which the OTS is the primary federal
supervisory agency.
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Based upon the information currently available to the Seller, the Seller
does not anticipate that there will be any cost to the Trust to address year
2000 issues or that such issues will have a material adverse effect upon the
cash flows due the Trust from which payments to its Securityholders will be
made. If the Master Servicer, Financial Security, the Indenture Trustee or the
Owner Trustee do not have computerized systems that are year 2000 compliant by
the year 2000, the ability to service the Contracts (in the case of the Master
Servicer), to respond to a claim (in the case of Financial Security), to make
distributions to the Noteholders (in the case of the Indenture Trustee) and to
make distributions to the Certificateholders (in the case of the Owner Trustee)
may be materially and adversely affected.
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 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
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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 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
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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.
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.
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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 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
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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 OTS and the Federal Deposit
Insurance Corporation ("FDIC"). At September 30, 1998, WFS had total assets of
$1,505.6 million, total liabilities of $1,341.3 million and stockholders' equity
of $164.2 million. As of September 30, 1998, WFS' net portfolio of contracts
totalled approximately $998.2 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 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
47 production offices serving 41 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.
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THE BANK
GENERAL
The Bank is a federally chartered savings association the principal office
of which is located in Irvine, California. As of September 30, 1998, the Bank
had total assets of $4.1 billion, total deposits of $2.1 billion and
stockholder's equity of $333 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
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.
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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 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.
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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 the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders and the
Seller, 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.
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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 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.
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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 Certificateholder 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
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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.
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.
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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.
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.
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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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UNDERWRITING
Subject to certain conditions contained in an underwriting agreement (the
"Underwriting Agreement"), Donaldson, Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated and NationsBanc Montgomery Securities LLC (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................ $ $ $
Morgan Stanley & Co. Incorporated.........
NationsBanc Montgomery Securities LLC ....
------------ ------------ ------------
Total........................... $ $ $
============ ============ ============
</TABLE>
CLASS A-4 AND A-5 NOTES AND CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF CLASS A-4 NOTES OF CLASS A-5 NOTES OF CERTIFICATES
----------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation................ $ $ $
Morgan Stanley & Co. Incorporated.........
NationsBanc Montgomery Securities LLC ....
------------ ------------ ------------
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, % of the principal amount of the
Class A-4 Notes and % of the principal amount of the Class A-5 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, % of the principal amount of the Class A-4 Notes and
% of the principal amount of the Class A-5 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
61
<PAGE> 63
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.
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 LLP, 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 incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, 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.
62
<PAGE> 64
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.................................... 39
Administration Fee.......................................... 39
Administrator............................................... 39
Advance..................................................... 45
Aggregate Scheduled Balance................................. 27
Aggregate Scheduled Balance Decline......................... 27
APR......................................................... 14
Backup Withholding.......................................... 58
Bank........................................................ 3
Business Day................................................ 4
Calculation Day............................................. 8
Cede........................................................ 22
Certificate Balance......................................... 6
Certificate Distributable Amount............................ 27
Certificate Distribution Account............................ 26
Certificate Final Distribution Date......................... 4
Certificateholders.......................................... 22
Certificate Interest Carryover Shortfall.................... 27
Certificate Interest Distributable Amount................... 28
Certificate Percentage...................................... 28
Certificate Policy.......................................... 1,12
Certificate Pool Factor..................................... 18
Certificate Principal Carryover Shortfall................... 28
Certificate Principal Distributable Amount.................. 28
Certificate Quarterly Interest Distributable Amount......... 28
Certificate Quarterly Principal Distributable Amount........ 28
Certificates................................................ 1,3
Charge-Off Percentage....................................... 31
Class A-1 Final Distribution Date........................... 4
Class A-1 Notes............................................. 1,3
Class A-1 Rate.............................................. 5
Class A-2 Final Distribution Date........................... 4
Class A-2 Notes............................................. 1,3
Class A-2 Rate.............................................. 5
Class A2-4 Percentage....................................... 28
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
Class A-5 Final Distribution Date........................... 4
Class A-5 Notes............................................. 1,3
Class A-5 Percentage........................................ 28
Class A-5 Rate.............................................. 5
Closing Date................................................ 3
Code........................................................ 53
Collection Account.......................................... 25
Commission.................................................. 2
Contracts................................................... 1,4
Cut-Off Date................................................ 12
Cut-Off Date Aggregate Scheduled Balance.................... 7
</TABLE>
A-1
<PAGE> 65
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Defaulted Contract.......................................... 28
Delinquency Percentage...................................... 31
Determination Date.......................................... 26
Distribution Accounts....................................... 26
Distribution Date........................................... 4
Distribution Date Statement................................. 26
DTC......................................................... 1
DTC Services................................................ 23
Due Date.................................................... 30
Due Period.................................................. 28
Eligible Investments........................................ 25
ERISA....................................................... 9,59
Events of Default........................................... 19
Excess Amounts................................................ 8,27
Exchange Act................................................ 22
FDIC........................................................ 52
Final Distribution Dates.................................... 4
Financed Vehicles........................................... 1,4
Financial Security.......................................... 1,3
Guaranteed Distributions.................................... 41
Holdings.................................................... 43
Holding Account............................................. 26
Indenture................................................... 3
Indenture Trustee........................................... 3
Indirect Participants....................................... 22
Industry.................................................... 23
Insolvency Event............................................ 34
Insurance Agreement......................................... 8
Insurer Default............................................. 20
Interest Period............................................. 5
Interest Rates.............................................. 5
Issuer...................................................... 3
IRS......................................................... 53
Liquidated Contract......................................... 28
Liquidation Expenses........................................ 25
Master Servicer............................................. 3
Monthly P&I................................................. 30
Moody's..................................................... 1,9
Net Collections............................................. 24
Net Insurance Proceeds...................................... 25
Net Liquidation Proceeds.................................... 25
New Partnership............................................. 56
Nonrecoverable Advance...................................... 45
Note Distributable Amount................................... 29
Note Distribution Account................................... 26
Note Final Distribution Dates............................... 4
Note Interest Carryover Shortfall........................... 29
Note Interest Distributable Amount.......................... 29
Note Percentage............................................. 29
Note Policy................................................. 1,12
Note Pool Factor............................................ 18
Note Principal Carryover Shortfall.......................... 29
Note Principal Distributable Amount......................... 29
Note Quarterly Interest Distributable Amount................ 29
Note Quarterly Principal Distributable Amount............... 29
Noteholders................................................. 22
Notes....................................................... 1,3
</TABLE>
A-2
<PAGE> 66
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Note Balance................................................ 29
Obligors.................................................... 12
OID......................................................... 54
Old Partnership............................................. 56
Omnibus Proxy............................................... 23
Optional Purchase........................................... 9
Order....................................................... 41
Original Certificate Balance................................ 6
OTS......................................................... 47
Owner Trustee............................................... 4
Participants................................................ 22
Pass-Through Rate........................................... 6
Paying Agent................................................ 6
Plans....................................................... 59
Policies.................................................... 1,12
Principal Distributable Amount.............................. 30
PTCE........................................................ 60
Rating Agencies............................................. 1,9
Record Date................................................. 4
Rees-Levering Act........................................... 50
Receipt..................................................... 42
Received.................................................... 42
Reinvestment Contract....................................... 25
Repurchase Amount........................................... 46
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
</TABLE>
A-3
<PAGE> 67
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Scheduled Balance........................................... 30
Scheduled Payments.......................................... 40
Securities.................................................. 1,3
Seller...................................................... 1,3
Servicer Defaults........................................... 34
Servicing Fee............................................... 46
Servicing Fee Percent....................................... 47
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.............................................. 8
Spread Account Initial Deposit.............................. 8
Statement to Securityholders................................ 32
Subservicer................................................. 44
Systems..................................................... 23
Trust....................................................... 1,3
Trust Agreement............................................. 3
Trust Fees and Expenses..................................... 18
Trustees.................................................... 4
Trust Insolvency............................................ 20
UCC......................................................... 48
Underwriters................................................ 61
Underwriting Agreement...................................... 61
Unreimbursed Insurer Amounts................................ 27
voting interests............................................ 35
WFS......................................................... 1,3
WII......................................................... 3
</TABLE>
A-4
<PAGE> 68
- ------------------------------------------------------
- ------------------------------------------------------
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........................... 40
Financial Security Assurance Inc. ..... 43
The Master Servicer.................... 44
Certain Legal Aspects of the
Contracts............................ 48
The Seller............................. 51
WFS.................................... 52
WII.................................... 52
The Bank............................... 53
Federal Income Tax Consequences........ 53
California Income Tax Consequences..... 59
ERISA Considerations................... 59
Underwriting........................... 61
Legal Matters.......................... 62
Experts................................ 62
Forward-Looking Statements............. 62
Index of Definitions................... A-1
- ----------------------------------------------
- ----------------------------------------------
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
$700,000,000
WFS FINANCIAL
1998-C OWNER TRUST
$130,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-1
$145,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-2
$168,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-3
$80,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-4
$100,000,000
% AUTO RECEIVABLE
BACKED NOTES, CLASS A-5
$77,000,000
% AUTO RECEIVABLE
BACKED CERTIFICATES
--------------------
PROSPECTUS
--------------------
DONALDSON, LUFKIN & JENRETTE
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY
SECURITIES LLC
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 69
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............................................ $194,617.00
Printing and Engraving...................................... 52,500.00
Trustees' Fees.............................................. 13,100.00
Accounting Fees............................................. 36,800.00
Legal Fees and Expenses..................................... 84,000.00
Blue Sky Fees and Expenses.................................. 21,000.00
Rating Agency Fees.......................................... 63,000.00
Miscellaneous Fees.......................................... 4,983.00
-----------
Total............................................. $470,000.00
===========
</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> 70
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, 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-C 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> 71
<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-C
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. and Subsidiaries for the nine month
period ended September 30, 1998 (Incorporated by reference
from the Quarterly Report on Form 10-Q of Financial Security
Assurance Holdings Inc. for the quarter ended September 30,
1998 (file #1-12644) as filed on or about November 10, 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 PricewaterhouseCoopers LLP*
24.1 Power of Attorney*
25.1 Statement of Eligibility and Qualification of Indenture
Trustee*
</TABLE>
- ---------------
* Previously filed.
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> 72
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 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 13th day of
November, 1998.
WFS FINANCIAL AUTO LOANS, INC.,
as originator of
WFS FINANCIAL 1998-C 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 November 13, 1998
- ----------------------------------------------------- Executive Officer,
James R. Dowlan Director (Principal
Executive Officer)
* Chief Financial Officer, November 13, 1998
- ----------------------------------------------------- Director
Lee A. Whatcott (Principal Financial and
Accounting Officer)
* Director November 13, 1998
- -----------------------------------------------------
Joy Schaefer
Director November , 1998
- -----------------------------------------------------
James R. May
* Director November 13, 1998
- -----------------------------------------------------
Jeffrey B. Davis
*By: /s/ JAMES R. DOWLAN
------------------------------------------------
James R. Dowlan
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 73
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-C 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-C
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. and Subsidiaries 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 PricewaterhouseCoopers LLP*......................
24.1 Power of Attorney*..........................................
25.1 Statement of Eligibility and Qualification of Indenture
Trustee*....................................................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
WFS FINANCIAL 1998-C OWNER TRUST
$---,---,---
_.___% AUTO RECEIVABLE BACKED NOTES, CLASS A-1
$---,---,---
_.___% AUTO RECEIVABLE BACKED NOTES, CLASS A-2
$---,---,---
_.___% AUTO RECEIVABLE BACKED NOTES, CLASS A-3
$---,---,---
_.___% AUTO RECEIVABLE BACKED NOTES, CLASS A-4
$---,---,---
_.___% AUTO RECEIVABLE BACKED NOTES, CLASS A-5
$---,---,---
_.___% AUTO RECEIVABLE BACKED CERTIFICATES
WFS FINANCIAL AUTO LOANS, INC., SELLER
WFS FINANCIAL INC, MASTER SERVICER
UNDERWRITING AGREEMENT
__________, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Representative of the several Underwriters
277 Park Avenue
New York, New York 10172
Dear Sirs:
WFS Financial Auto Loans, Inc., a California corporation (the
"Company"), proposes to sell to the several underwriters listed on Schedule I
hereto (the "Underwriters") for whom Donaldson, Lufkin & Jenrette Securities
Corporation will be acting as representative (the "Representative"), as provided
in Section 2 hereof $___,___,___ aggregate principal amount of _.___% Auto
Receivable Backed Notes, Class A-1 (the "Class A-1 Notes"), $___,___,___
aggregate principal amount of _.___% Auto Receivable Backed Notes, Class A-2
(the "Class A-2 Notes"), $___,___,___ aggregate principal amount of _.___% Auto
Receivable Backed Notes, Class A-3 (the "Class A-3 Notes"), $___,___,___
aggregate principal amount of _.___% Auto Receivable Backed Notes, Class A-4
(the "Class A-4 Notes"), $______ aggregate principal amount of __% Auto
Receivable Backed Notes, Class A-5 (the "Class A-5 Notes") and, together with
the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes, the "Notes") and $__,___,___ aggregate principal amount of _.___% Auto
Receivable Backed Certificates (the "Certificates"
<PAGE> 2
and, together with the Notes, the "Securities"). The Notes will be issued
pursuant to an indenture dated as of November 1, 1998 (the "Indenture"), among
the WFS Financial 1998-C Owner Trust (the "Trust") and Bankers Trust Company, as
trustee (the "Indenture Trustee"). Each Note will represent an obligation of the
Trust. The Trust will be created and the Certificates will be issued pursuant to
a trust agreement, dated as of November __, 1998 as amended and restated as of
November __, 1998 (the "Trust Agreement"), among the Company, WFS Investments,
Inc. ("WII"), Financial Security Assurance Inc. ("Financial Security") and Chase
Manhattan Bank Delaware, as Owner Trustee. Each Certificate will evidence a
fractional undivided interest in 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 assets of the Trust will include, among other things, (i) a pool of
retail installment sales contracts and installment loans (the "Contracts")
secured by new and used automobiles and light-duty trucks financed thereby (the
"Financed Vehicles"), (ii) certain monies due under the Contracts on and after
November 1, 1998, (iii) security interests in the Financed Vehicles, (iv) the
Policies, (v) amounts on deposit in certain accounts and (vi) certain rights
under the sale and servicing agreement dated as of November 1, 1998 (the "Sale
and Servicing Agreement"), among the Trust, the Company and WFS Financial Inc
("WFS"), as Master Servicer. Pursuant to the Indenture, the Trust property will
be held by the Indenture Trustee on behalf of the holders of the Notes. Pursuant
to the administration agreement dated as of November 1, 1998 (the
"Administration Agreement"), among the Company, WII, WFS, as administrator (in
such capacity, the "Administrator"), the Trust and the Indenture Trustee, the
Administrator will perform certain administrative obligations under the
Indenture. Capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed thereto in the Indenture or the Sale and Servicing
Agreement, as the case may be. The Securities are more fully described in a
Registration Statement (as such term is defined in Section 1 hereof) which the
Company has furnished to the Underwriters.
1. Registration Statement and Prospectuses. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended (the
"Act"), a registration statement on Form S-3 (File No. 333-_____), including a
form of prospectus, relating to the Securities. Such registration statement has
been declared effective by the Commission. If any post-effective amendment has
been filed with respect thereto, prior to the execution and delivery of this
Agreement, the most recent such amendment has been declared effective by the
Commission. Such registration statement, as amended and the prospectus
constituting a part thereof (including in each case the information deemed to be
a part thereof pursuant to Rule 430A under the Act and all documents, if any,
incorporated or deemed to be incorporated by reference therein pursuant to the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as
from time to time amended or supplemented pursuant to the Act or otherwise, are
hereinafter referred to as the "Registration Statement" and the "Prospectus",
respectively, except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the offering of the
Securities which differs from the Prospectus on file at the Commission at the
time the Registration Statement became effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) under
the Act ("Rule 424(b)") of
2
<PAGE> 3
the rules and regulations of the Commission promulgated under the Act (the
"Rules and Regulations"), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters for
such use. All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which are or are deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any documents under the Exchange Act after the date of this Agreement
which are or are deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be.
2. Agreements to Sell and Purchase. The Company agrees to sell to the
Underwriters, severally and not jointly, and upon the basis of the
representations, warranties and agreements of the Company and WFS herein
contained and subject to all the terms and conditions of this Agreement, the
Underwriters agree to purchase from the Company, on the Closing Date referred to
in Section 4 hereof, the Securities at a purchase price of, in the case of (i)
the Class A-1 Notes, __._____% of the principal amount thereof; (ii) the Class
A-2 Notes, __.______% of the principal amount thereof; (iii) the Class A-3
Notes, __.______% of the principal amount thereof; (iv) the Class A-4 Notes,
__.______% of the principal amount thereof; (v) the Class A-5 Notes ___% of the
principal amount thereof and (vi) the Certificates, __.______% of the principal
amount thereof, in each case plus accrued interest at the related Interest Rate
or the Pass-Through Rate, as the case may be, from November 1, 1998, to but not
including the Closing Date.
3. Terms of Public Offering. The Company is advised by the
Representative that the Underwriters propose (i) to make a public offering of
the Securities as soon after the execution of this Agreement as in the judgment
of the Representative is advisable and (ii) initially to offer each Class of
Notes and the Certificates upon the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery of the Securities shall be made at
the office of the Representative at 277 Park Avenue, New York, New York 10172 at
10:00 A.M., New York City time, on November __ , 1998 (such time and date are
referred to herein as the "Closing Date"). Payment for the Securities shall be
made at the offices of WFS Financial Inc, 23 Pasteur Road, Irvine, California
92718. The Closing Date and the location of the delivery of and payment for the
Securities may be varied by agreement between the Representative and the
Company.
Each Class of Notes and the Certificates will be initially represented by
one or more certificates in definitive form registered in the name of Cede &
Co., the nominee of The Depository Trust Company ("DTC") (the "DTC
Certificates"). The certificates evidencing the DTC Certificates shall be made
available to the Representative for inspection not later than 10:00 A.M., New
York City time, on the business day immediately preceding the Closing Date. The
Securities shall be delivered to the Underwriters on the Closing Date for their
respective accounts against payment of the purchase price therefor by either (i)
certified or official bank check or checks payable in New York Clearing House
(next day) funds to the order of the
3
<PAGE> 4
Company or (ii) wire transfer (same day funds), as the Representative and the
Company shall agree.
Pursuant to Rule 15c6-1(d) under the Exchange Act, the parties hereto have
agreed that the Closing Date will be not later than November __, 1998.
5. Agreements of the Company. The Company agrees with the Underwriters:
(a) To transmit the Prospectus to the Commission pursuant to Rule 424(b)
by a means reasonably calculated to result in the timely filing of such
Prospectus with the Commission pursuant to Rule 424(b).
(b) To advise the Representative promptly and, if requested by the
Representative, to confirm such advice in writing, (i) when the Registration
Statement has become effective and when any post-effective amendment to it
becomes effective, (ii) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of any of the Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for either such purpose, and
(iv) of the happening of any event during the period referred to in paragraph
(e) below which, in the judgment of the Company, makes the Registration
Statement or the Prospectus contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, the
Company will make every reasonable effort to obtain the withdrawal or lifting of
such order at the earliest possible time.
(c) To furnish to the Representative two signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits, and to furnish to the Underwriters such number of
conformed copies of the Registration Statement as so filed and of each amendment
to it, without exhibits, as the Underwriters may reasonably request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or to
make any amendment or supplement to the Prospectus of which the Representative
shall not previously have been advised or to which the Representative shall
reasonably object and to prepare and file with the Commission promptly upon the
request of the Representative, any amendment to the Registration Statement or
supplement to the Prospectus which may be necessary or advisable in connection
with the distribution of any of the Securities by the Underwriters, and to use
our best efforts to cause the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel to the
Underwriters a prospectus is required by law to be delivered in connection with
sales by the Underwriters or such dealers as the Representative shall specify,
to furnish to the Underwriters and each such dealer as many copies of the
Prospectus (and of each amendment or supplement to the Prospectus) as the
Underwriters or such dealer may reasonably request.
4
<PAGE> 5
(f) If during the period specified in Section 5(e) hereof any event
shall occur as a result of which, in the opinion of the Company or counsel to
the Underwriters it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with any law, forthwith to prepare
and file with the Commission an appropriate amendment or supplement to the
Prospectus so that the statements in the Prospectus, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law, and to
furnish to the Underwriters and to such dealers as the Representative shall
specify, such number of copies thereof as the Underwriters or such dealers may
reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with
the Underwriters and counsel to the Underwriters in connection with the
registration or qualification of the Securities for offer and sale by the
Underwriters and by dealers under the securities or Blue Sky laws of such
jurisdictions as the Underwriters may reasonably request, to continue such
qualification in effect so long as reasonably required for distribution of the
Securities and to file such consents to service of process or other documents as
may be necessary in order to effect such registration or qualification; provided
that the Company shall not be required to register or qualify as a foreign
corporation or to take any action which would subject it to service of process
in suits, other than as to matters and transactions relating to the offer and
sale of the Securities, in any jurisdiction where it is not now so subject.
(h) As soon as practicable, but not later than 16 months after the
"effective date" of the Registration Statement, to cause the Trust to make
generally available to holders of the Securities an earnings statement of the
Trust covering a 12 month period beginning not later than the first day of the
Trust's fiscal quarter next following the "effective date" of the Registration
Statement. Such statement shall satisfy the provisions of Section 11(a) of the
Act.
(i) So long as any of the Securities remain outstanding, promptly to
furnish to the Underwriters (i) the annual statements of compliance, annual
independent certified public accountants' reports and annual opinions of counsel
furnished to the Indenture Trustee or the Owner Trustee pursuant to the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as soon as such
statements, reports and opinions are furnished to the Indenture Trustee or the
Owner Trustee, (ii) all documents of the Company or the Trust required to be
distributed to Securityholders or filed with the Commission pursuant to the
Exchange Act or any order of the Commission thereunder and (iii) such other
information concerning the Company, the Trust or WFS as the Underwriters may
reasonably request.
(j) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Act of the Registration
Statement as first filed (including all financial statements and exhibits), each
preliminary prospectus and all amendments and supplements to any of them prior
to or during the period specified in Section 5(e) hereof, (ii) the printing and
delivery of the Prospectus and all amendments or supplements to it during the
period specified in paragraph (e), (iii) the reproducing and delivery of this
Agreement, any dealer agreement, Preliminary and Supplemental Blue Sky
Memoranda, legal investment memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with the
offering of the Securities (including in each case the
5
<PAGE> 6
disbursements of counsel to the Underwriters relating to such reproducing and
delivery), (iv) the registration or qualification of the Securities for offer
and sale under the securities or Blue Sky laws of the jurisdictions referenced
in Section 5(g) hereof (including in each case the fees and disbursements of
counsel to the Underwriters relating to such registration or qualification and
memoranda relating thereto), (v) any filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the public offering
of any of the Securities, (vi) any fees paid to rating agencies in connection
with the rating of the Securities and (vii) the performance by the Company of
its other obligations under this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date and to satisfy all conditions precedent to the delivery of the
Securities. To the extent, if any, that the ratings provided with respect to the
Securities by any Rating Agency (as such term is defined in Section 8(m) hereof)
that initially rates the Securities is conditional upon the furnishing of
documents or the taking of any other actions by the Company, the Company shall
furnish such documents and take such other actions.
(l) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than by notice given by the Representative pursuant
to Section 9 hereof) or if for any reason the Company shall be unable to perform
its obligations hereunder, to reimburse the Underwriters for all of their
out-of-pocket expenses (including the fees and expenses of counsel to the
Underwriters) reasonably incurred by the Underwriters in connection herewith.
(m) To apply the net proceeds from the offering in the manner set forth
under the caption "Use of Proceeds" in the Prospectus.
(n) The Company, during the period when the Prospectus is required to be
delivered under the Act or the Exchange Act (including the Rules and Regulations
and the rules and regulations of the Commission under the Exchange Act (the
"Exchange Act Regulations")), will file all documents required to be filed with
the Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the
time periods required by the Exchange Act and the Exchange Act Regulations.
6. Representations and Warranties of the Company and WFS.
(a) The Company represents and warrants to the Underwriters that:
(i) The conditions to the use of a registration statement on Form
S-3 under the Act, as set forth in the General Instructions to Form S-3,
have been satisfied with respect to the Company and the Registration
Statement and the Prospectus fully comply, and any supplements or
amendments thereto will fully comply, in all material respects with the
provisions of the Act.
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or, to the knowledge of the Company, threatened by the
Commission. At the effective date, respectively, of the Registration
Statement and any
6
<PAGE> 7
post-effective amendments thereto, at the date of this Agreement and the
Closing Date, the Registration Statement and any post-effective amendments
or supplements thereto complied or will comply in all respects with the
requirements of the Act and the Rules and Regulations, and did not and
will not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and on the date of filing the Prospectus
pursuant to Rule 424(b), the date of this Agreement and the Closing Date,
neither the Prospectus nor any amendments or supplements thereto contained
or will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, except that the representations and
warranties in this subparagraph shall not apply to statements or omissions
in the Registration Statement or the Prospectus or any preliminary
prospectus made in reliance upon information furnished to the Company in
writing by the Underwriters through the Representative expressly for use
therein or to that part of the Registration Statement which shall
constitute the Statement of Eligibility and Qualification of the Indenture
Trustee on Form T-1 (the "Form T-1") under the Trust Indenture Act of
1939, as amended (the "1939 Act").
(iii) Each preliminary prospectus, the Prospectus and any amendment
or supplement thereto, complied or will comply when so filed with the
requirements of the Act and the Rules and Regulations, and the Prospectus
delivered to the Underwriters for use in connection with the offering of
the Securities was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system, except to the extent permitted
by Regulation S-T.
(iv) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement and the Prospectus, at the time
they were or hereafter are filed with the Commission, complied and will
comply in all material respects with the requirements of the Exchange Act
and Exchange Act Regulations, and, when read together with the other
information in the Prospectus, at the date of this Agreement and at the
Closing Date, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(v) The Securities conform to the description thereof contained in
the Prospectus and are duly and validly authorized and (i) when the
Certificates have been executed, authenticated and delivered in accordance
with the Trust Agreement and delivered to and paid for by the Underwriters
as provided herein, will be entitled to the benefits and security afforded
by the Trust Agreement and will constitute legal, valid and binding
obligations of the Trust enforceable in accordance with their terms and
the terms of the Trust Agreement, and (ii) when the Notes have been
executed, authenticated and delivered in accordance with the Indenture and
delivered to and paid for by the Underwriters as provided herein, will be
entitled to the benefits and security afforded by the Indenture and will
constitute legal, valid and binding obligations of the Trust enforceable
in accordance with their terms and the terms of the Indenture, in each
case subject to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar
7
<PAGE> 8
laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(vi) The execution and delivery by the Company of the
Administration Agreement, the Indenture, the Sale and Servicing Agreement,
the Trust Agreement, the indemnification agreement dated as of November
1, 1998 (the "Indemnification Agreement"), among the Company, WFS,
Financial Security and the Representative, the insurance, indemnity and
pledge agreement dated as of November 1, 1998 (the "Insurance Agreement"
and, together with the Administration Agreement, the Indemnification
Agreement, the Indenture, the Sale and Servicing Agreement and the Trust
Agreement, the "Basic Documents"), among the Trust, the Company, WFS, WII,
Financial Security and the Indenture Trustee, and this Agreement are
within the corporate power of the Company and have been duly authorized by
all necessary corporate action on the part of the Company; and neither the
issuance and sale of the Securities to the Underwriters, nor the execution
and delivery by the Company of this Agreement and the Basic Documents to
which it is a party, nor the consummation by the Company of the
transactions herein and therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or bylaws of the Company or
any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is now a party or by which it is bound, or any order of
any court or government agency or authority entered in any proceeding to
which the Company was or is now a party or by which it is bound.
(vii) The Company has been duly incorporated and is validly existing
in good standing under the laws of the State of California and is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction where the character of its properties
or the nature of its activities makes such qualification necessary, except
such jurisdictions, if any, in which the failure to be so qualified will
not have a material adverse effect on either the business or properties of
the Company; the Company holds all material licenses, certificates and
permits from all governmental authorities necessary for the conduct of its
business as described in the Prospectus; and the Company has the corporate
power and authority to own its properties and conduct its business as
described in the Prospectus.
(viii) Each of this Agreement and the Basic Documents to which the
Company is a party, when executed and delivered as contemplated thereby,
will have been duly authorized, executed and delivered by the Company and
will constitute, when so executed and delivered, a legal, valid and
binding instrument enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors' rights generally,
subject to general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law) and, in the case of this
Agreement and the Indemnification Agreement, except as rights to indemnity
and contribution hereunder and thereunder may be limited by applicable
law; each of the Basic Documents conforms to the description
8
<PAGE> 9
thereof contained in the Prospectus; and the Indenture has been duly
qualified under the 1939 Act.
(ix) At the Closing Date, the Company will have good and marketable
title to the Contracts listed in Schedule A to the Sale and Servicing
Agreement, free and clear of any lien, mortgage, pledge, charge, security
interest or other encumbrance (subject to the security interest afforded
to Financial Security under the Insurance Agreement); and the Company's
assignment and delivery of the Contract Documents to the Trust will vest
in the Trust the full legal title purported to be conveyed thereby
(subject to the security interest afforded to Financial Security under the
Insurance Agreement).
(x) The Trust's assignment of the Trust Estate to the Indenture
Trustee pursuant to the Indenture will vest in the Indenture Trustee, for
the benefit of the Noteholders, a first priority perfected security
interest therein, subject to no prior lien, mortgage, pledge, charge,
security interest or other encumbrance, except that such security interest
will be subject to the security interest afforded to Financial Security
under the Insurance Agreement.
(xi) The representations and warranties made by the Company in the
Sale and Servicing Agreement and in the Officers' Certificates of the
Company delivered pursuant to the Basic Documents to which the Company is
a party will be true and correct at the Closing Date.
(xii) Since June 30, 1998, there has been no material adverse change
or development involving a prospective material adverse change in or
affecting particularly the condition, financial or otherwise, of the
Company, or the earnings, affairs or business prospects of the Company,
whether or not arising in the ordinary course of business, except as set
forth in or contemplated in the Prospectus.
(b) WFS represents and warrants to the Underwriters that the
representations and warranties of the Company set forth in paragraph (a) above
are true and correct, and to the further effect that:
(i) WFS has been duly incorporated and is validly existing in good
standing under the laws of the State of California and is duly qualified
to do business as a foreign corporation and is in good standing under the
laws of each jurisdiction where the character of its properties or the
nature of its activities makes such qualification necessary, except such
jurisdictions, if any, in which the failure to be so qualified will not
have a material adverse effect on either the business or properties of
WFS; WFS holds all material licenses, certificates and permits from all
governmental authorities necessary for the conduct of its business as
described in the Prospectus; and WFS has the corporate power and authority
to own its properties and conduct its business as described in the
Prospectus.
(ii) The execution and delivery by WFS of this Agreement and the
Basic Documents to which it is a party are within the corporate power of
WFS and have been duly authorized by all necessary action on the part of
WFS; and neither the execution and
9
<PAGE> 10
delivery by WFS of this Agreement and the Basic Documents to which it is a
party, nor the consummation by WFS of the transactions herein and therein
contemplated, nor compliance by WFS with the provisions hereof and
thereof, will conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the articles of
incorporation or bylaws of WFS or any indenture, mortgage, deed of trust
or other agreement or instrument to which WFS is now a party or by which
it is bound, or any order of any court or government agency or authority
entered in any proceeding to which WFS was or is now a party or by which
it is bound.
(iii) Each of this Agreement and each Basic Document to which WFS is
a party has been duly authorized, executed and delivered by WFS and
constitutes a valid and binding agreement of WFS, enforceable against WFS
in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally, subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law) and, in the case of this Agreement and the Indemnification
Agreement, except as rights to indemnity and contribution hereunder and
thereunder may be limited by applicable law.
(iv) The Contracts transferred to the Company from WFS on the
Closing Date were free and clear of all liens (including tax liens),
mortgages, pledges, charges, security interests and other encumbrances at
the time of such transfer (subject to the security interest afforded to
Financial Security under the Insurance Agreement).
(v) WFS has the power and authority to own its properties, to
conduct its business as described in the Prospectus and to enter into and
perform its obligations under each of the Basic Documents to which it is a
party.
(vi) Since June 30, 1998, there has been no material adverse change
or development involving a prospective material adverse change in or
affecting particularly the condition, financial or otherwise, of WFS, or
the earnings, affairs or business prospects of WFS, whether or not arising
in the ordinary course of business, except as set forth in or contemplated
in the Prospectus.
7. Indemnification.
(a) The Company and WFS jointly and severally agree to indemnify and
hold harmless each Underwriter and each person, if any, who controls each
Underwriter within the meaning of Section 15 of the Act, or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (if used
within the period set forth in Section 5(e) hereof and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information furnished
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in writing to the Company by the Underwriters through the Representative
expressly for use therein.
(b) In case any action shall be brought against any Underwriter or any
person controlling any Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Company or WFS,
such Underwriter shall promptly notify the Company or WFS in writing and the
Company and WFS shall assume the defense thereof, including the employment of
counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company and WFS, (ii) the Company and WFS have failed to assume
the defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company or WFS, as the case may be, and such
Underwriter or such controlling person shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Company or WFS, as the case may be
(in which case the Company and WFS shall not have the right to assume the
defense of such action on behalf of such Underwriter or such controlling person;
it being understood, however, that the Company and WFS shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for such
Underwriter and controlling persons, which firm shall be designated in writing
by such Underwriter and that all such fees and expenses shall be reimbursed as
they are incurred). The Company and WFS shall not be liable for any settlement
of any such action effected without the written consent of the Company and WFS
but, if settled with the written consent of the Company and WFS, the Company and
WFS agree that each person so consenting agrees to indemnify and hold harmless
each such Underwriter and any such controlling person from and against any loss
or liability by reason of such settlement. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(c) The Underwriters, severally but not jointly, agree to indemnify and
hold harmless the Company, WFS, their respective directors, their respective
officers who signed the Registration Statement and any person controlling the
Company and WFS to the same extent as the foregoing indemnity from the Company
and WFS to the Underwriters but only with reference to information relating to
the Underwriters furnished in writing by the Underwriters through the
Representative expressly for use in the Registration Statement, the Prospectus
or any preliminary prospectus. In case any action shall be brought against the
Company, any of its directors, any such officer or any such controlling person
based on the Registration Statement, the Prospectus or any preliminary
prospectus and in respect of which indemnity may be sought against any
Underwriter, such Underwriter shall have the rights and duties given to the
Company
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<PAGE> 12
or WFS (except that if the Company or WFS shall have assumed the defense thereof
such Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such Underwriter), and the Company, its
directors, any such officers, any such controlling person and WFS shall have the
rights and duties given to the Underwriters by Section 7(b) hereof.
(d) If the indemnification provided for in this Section is unavailable
to an indemnified party in respect of any losses, claims, damages, liabilities
or judgments referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company and WFS on the one hand and the
Underwriters on the other hand from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, WFS
and the Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, WFS and the Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities (before
deducting expenses) received by the Company and WFS and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Securities, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company, WFS and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, WFS or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, WFS and the Underwriters agree that it would not be just and
equitable if contribution pursuant to Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by such Underwriter and distributed to the
public was offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Conditions. The obligations of the Underwriters to purchase the
Securities under this Agreement are subject to the satisfaction of each of the
following conditions:
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<PAGE> 13
(a) All the representations and warranties of the Company and WFS
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 6:30 P.M., New York City time, on the date of this Agreement or at such
later date and time as the Representative may approve in writing, and at the
Closing Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been commenced or shall be pending before or contemplated by the Commission.
(c) Since June 30, 1998, there shall not have been any material adverse
change, or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, affairs or business
prospects, whether or not arising in the ordinary course of business, of the
Company or WFS. On the Closing Date, the Representative shall have received (i)
a certificate dated the Closing Date, signed by the President or a Vice
President of the Company, confirming the matters set forth in paragraphs (a) (as
to the Company's representations and warranties only), (b) and (c) of this
Section (as to the Company only), and (ii) a certificate dated the Closing Date,
signed by the President or a Vice President of WFS, confirming the matters set
forth in paragraphs (a) and (c) of this Section. Such officers may in each
certificate rely upon the best of their information and belief as to proceedings
contemplated.
(d) The Representative shall have received the opinion of Mitchell,
Silberberg & Knupp LLP, counsel for the Company, dated the Closing Date and
satisfactory to counsel to the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of California, with
corporate power and authority to own its properties, to conduct its
business as described in the Prospectus and to enter into and perform its
obligations under this Agreement and each of the Basic Documents to which
it is a party, and is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the location of its properties
or the character of its operations makes such qualification necessary,
except such jurisdictions, if any, in which the failure to be so qualified
will not have a material adverse effect on either the business or
properties of the Company.
(ii) The statements in the Prospectus set forth under the captions
"Summary of Prospectus", "The Notes", "The Certificates", "The Contracts
Pool" and "Certain Information Regarding the Securities", insofar as such
statements purport to summarize certain provisions of the Notes, the
Certificates or the Basic Documents, provide a fair summary of such
provisions, and the statements in the Prospectus under the captions
"Summary of Prospectus--Tax Status", "--ERISA Considerations", "Certain
Legal Aspects of the Contracts", "Certain Federal Income Tax
Consequences", "Certain California Income Tax Consequences" and "ERISA
Considerations", to the extent such statements constitute matters of law
or legal conclusions with respect thereto, have been prepared or reviewed
by such counsel and are correct in all material respects.
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<PAGE> 14
(iii) For federal income tax purposes, the Notes will be considered
debt, the Trust will not be an association taxable as a corporation and
the Trust will not be a publicly traded partnership taxable as a
corporation. The trust fund created by the Trust Agreement will not, for
California income tax purposes, be classified as an association taxable as
a corporation, and 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 any Class of Notes or the
Certificates, be subject to California income, franchise, excise or
similar taxes with respect to interest on any Class of Notes or the
Certificates or with respect to any of the other Trust property.
(iv) Each of this Agreement and the Indemnification Agreement has
been duly authorized, executed and delivered by the Company.
(v) Each Basic Document (other than the Indemnification Agreement)
to which the Company is a party has been duly authorized, executed and
delivered by the Company and, assuming the due authorization, execution
and delivery by the other parties thereto, constitutes the valid, legal
and binding obligation of the Company, enforceable against the Company, in
accordance with its terms, except as enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or other laws 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 proceeding
therefor may be brought.
(vi) Assuming the due authorization, execution and delivery of each
Basic Document to which the Trust is a party by the Owner Trustee, on
behalf of the Trust, and by each other party thereto (other than the
Company) each such Basic Document constitutes the valid, legal and binding
obligation of the Trust enforceable against the Trust in accordance with
its terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other laws 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 proceeding therefor may
be brought.
(vii) The Certificates, when executed and authenticated in
accordance with the Trust Agreement and delivered and paid for pursuant to
this Agreement, will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement.
(viii) The Notes, when executed and authenticated in accordance with
the Indenture and delivered and paid for pursuant to this Agreement, will
be entitled to the benefits of the Indenture and will constitute legal,
valid and binding obligations of the Trust, entitled to the benefits of
the Indenture, and enforceable in accordance with their terms and the
terms of the Indenture (subject to the security interest afforded to
Financial Security under the Insurance Agreement), subject, with respect
to each of the Indenture
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<PAGE> 15
and the Notes, to applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting 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
proceeding therefor may be brought.
(ix) As to each security interest in a Financed Vehicle created by
a Contract, no filing or other action is necessary to perfect or continue
the perfected status of such security interest as against creditors of or
transferees from the obligor under such Contract, so long as such Financed
Vehicle is not removed from the State of California for a period longer
than four months, or before the end of such four-month period, WFS
perfects such security interest under applicable law; provided that (A) no
opinion is rendered as to a security interest in a Financed Vehicle as to
which neither a properly endorsed certificate of title naming WFS or an
affiliate or predecessor of WFS as legal owner nor an application for an
original registration together with an application for registration of WFS
or an affiliate or predecessor of WFS as legal owner, has been deposited
with the California Department of Motor Vehicles, and (B) no opinion is
given as to the enforceability of the security interest in a Financed
Vehicle as against a subsequent owner of a Financed Vehicle or a holder or
assignee of a certificate of title relating to such Financed Vehicle
through fraudulent or negligent transfer of such certificate of title.
(x) The Sale and Servicing Agreement, together with the filing
referred to in this subsection, creates and perfects the ownership
interest of the Trust in the Contracts which is a valid first priority
ownership interest (subject to the security interest afforded to Financial
Security under the Insurance Agreement); a financing statement with
respect to the Contracts has been filed with the Secretary of State of the
State of California pursuant to the California Uniform Commercial Code, as
amended, and with the Secretary of State of the State of Delaware,
pursuant to the Delaware Uniform Commercial Code, as amended; and no other
filings in any jurisdiction or any other actions are necessary to perfect
the ownership interest of the Trustee in the Contracts against any third
parties.
(xi) The Indenture constitutes a grant by the Trust to the
Indenture Trustee of a valid security interest in the Contracts, the
security interests in the Financed Vehicles securing the Contracts and the
proceeds of each of the foregoing (subject to the security interest
afforded to Financial Security under the Insurance Agreement), which
security interest has been perfected by the filing of financing statements
with the Secretary of State of the State of California and the Secretary
of State of the State of Delaware, each as pursuant to the Uniform
Commercial Code as in effect in such state. No filing or other action,
other than the filing of the financing statements referred to above, is
necessary to perfect and maintain the interest or the security interest of
the Indenture Trustee in the Contracts, the security interests in the
Financed Vehicles securing the Contracts and the proceeds of each of the
foregoing against third parties (subject to the security interest afforded
to Financial Security under the Insurance Agreement).
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<PAGE> 16
(xii) The Company's assignment and delivery of the Contracts to the
Trust will vest in the Trust all of the Company's right, title and
interest therein, subject to no prior lien, mortgage, security interest,
pledge, adverse claim, charge or other encumbrance, except that such
security interest will be subject to the security interest afforded to
Financial Security under the Insurance Agreement.
(xiii) The Trust's assignment of the Contracts to the Indenture
Trustee pursuant to the Indenture will vest in the Indenture Trustee, for
the benefit of the Noteholders, a first priority perfected security
interest therein, subject to no prior lien, mortgage, security interest,
pledge, adverse claim, charge or other encumbrance.
(xiv) The Registration Statement has become effective under the Act
and the Prospectus has been filed with the Commission, pursuant to Rule
424(b) and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated.
(xv) No order, consent or other authorization or approval of any
court, public board or governmental body is legally required for the
performance by the Company of its obligations under this Agreement or any
of the Basic Documents to which the Company is a party, except such as
have been obtained under the Act, such as may be required under the Blue
Sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters, such as have been
obtained from the Office of Thrift Supervision and such other approvals
(specified in such opinion) as have been obtained.
(xvi) Neither the consummation of the transactions contemplated in
this Agreement or any Basic Document to which the Company is a party, nor
the fulfillment of the terms hereof or thereof will conflict with, result
in a breach of, or constitute a default under the articles of
incorporation or bylaws of the Company or the terms of (A) any indenture
or other agreement or instrument known to such counsel and to which the
Company or any of its subsidiaries is a party or is bound, or (B) any
judgment, order or decree known to such counsel to be applicable to the
Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries, except, in the case of
clauses (A) and (B), for defaults, breaches or violations that do not, in
the aggregate, have a material adverse affect on the Company.
(xvii) To the best knowledge of such counsel, there is no legal or
governmental proceeding pending or threatened to which the Trust or the
Company is, or is threatened to be, a party or of which the business or
property of the Trust or the Company is, or is threatened to be, the
subject that is material to the business or financial condition of the
Trust or the Company and is not disclosed in the Prospectus.
(xviii) There is no contract or other document known to such counsel
of a character required to be described in the Prospectus or to be filed
as an exhibit to the Registration Statement that is not described or filed
as required.
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(xix) Neither the Trust nor the Company is an "investment company"
and neither is "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
(xx) The Company has obtained all material licenses, permits and
other governmental authorizations which are necessary to the conduct of
its business; such licenses, permits and other governmental authorizations
are in full force and effect, and the Company is in all material respects
complying therewith; and the Company is otherwise in compliance with all
laws, rules, regulations and statutes of any jurisdiction to which it is
subject, except where non-compliance would not have a material adverse
effect on the Company.
(xxi) Except as to the financial statements and other financial and
statistical data included therein, as to which such counsel need not
express any opinion, such counsel (A) is of the opinion the Registration
Statement and the Prospectus and any supplements or amendments thereto
(except for the financial statements and other financial or statistical
data included therein and the Form T-1) comply as to form in all material
respects with the Act and the 1939 Act and (B) believes that the
Registration Statement (except for the financial statements and other
financial or statistical data included therein, the information regarding
Financial Security included therein and the Form T-1), at the time the
Registration Statement became effective, did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and the Prospectus (except for the financial statements and
other financial or statistical data included therein and the information
regarding Financial Security included therein) at the date hereof and at
the Closing Date did not and does not contain any untrue statement of a
material fact and did not and does not omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(xxii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus (other than the financial statements,
supporting schedules and other financial data therein, as to which no
opinion need be rendered), when they were filed with the Commission,
complied as to form in all material respects with the applicable
requirements of the Exchange Act and the Exchange Act Regulations.
(xxiii) The Indenture has been duly qualified under the 1939 Act and
the Trust Agreement is not required to be qualified under the 1939 Act.
(e) The Representative shall have received the opinion of Harriet Burns
Feller, Esq., General Counsel of WFS, General Counsel of Western Financial Bank
(the "Bank") and General Counsel of WII, dated the Closing Date and satisfactory
to counsel to the Underwriters, to the effect that:
(i) Each of WFS and WII has been duly incorporated and is validly
existing and in good standing under the laws of the State of California,
with corporate power and authority to own its properties, to conduct its
business as described in the Prospectus and to enter into and perform its
obligations under this Agreement and each of the Basic
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<PAGE> 18
Documents to which it is a party, and is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the
location of its properties or the character of its operations makes such
qualification necessary, except such jurisdictions, if any, in which the
failure to be so qualified will not have a material adverse effect on
either the business or properties of WFS or WII, as the case may be.
(ii) This Agreement has been duly authorized, executed and
delivered by WFS.
(iii) Each Basic Document to which each of WFS or WII is a party has
been duly authorized, executed and delivered by WFS or WII, as the case
may be, and each Basic Document other than the Indemnification Agreement
constitutes a legal, valid and binding agreement of WFS or WII, as the
case may be, enforceable against WFS or WII, as the case may be, in
accordance with its terms, except as enforceability thereof may be subject
to or limited by bankruptcy, insolvency, reorganization or other laws,
provisions or principles now or hereafter in effect affecting the
enforcement of creditors' rights generally 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 proceeding therefor may be
brought.
(iv) No consent, approval, authorization or order of any court or
governmental agency or body is required for the performance by each of WFS
or WII of its respective obligations under this Agreement and any of the
Basic Documents to which it is a party, except such as have been obtained.
(v) Neither the consummation of any of the transactions
contemplated by this Agreement and each of the Basic Documents to which
WFS or WII is a party nor the fulfillment of the terms hereof or thereof
will conflict with, result in a breach of, or constitute a default under,
the respective articles of incorporation or bylaws of WFS or WII, as the
case may be, or the terms of (A) any indenture or other agreement or
instrument known to such counsel and to which WFS or WII, as the case may
be, or any of its subsidiaries is a party or is bound or (B) any judgment,
order or decree known to such counsel to be applicable to WFS or any of
its subsidiaries or WII, as the case may be, of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over WFS or any of its subsidiaries or WII, as the case may
be, except, in the case of clauses (A) and (B), for defaults, breaches or
violations that do not, in the aggregate, have an adverse material effect
on WFS or WII, as the case may be.
(vi) To the best knowledge of such counsel, there is no legal or
governmental proceeding pending or threatened to which WFS or WII, as the
case may be, is, or is threatened to be, a party or of which its business
or property is, or is threatened to be, the subject that would have a
material adverse effect on the ability of WFS or WII, as the case may be,
to perform its obligations under any of the Basic Documents to which it is
a party.
(vii) Each of WFS and WII has obtained all material licenses,
permits and other governmental authorizations which are necessary to the
conduct of its business; such
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<PAGE> 19
licenses, permits and other governmental authorizations are in full force
and effect, and each of WFS and WII is in all material respects complying
therewith; and each of WFS and WII is otherwise in compliance with all
laws, rules, regulations and statutes of any jurisdiction to which it is
subject, except where non-compliance would not have a material adverse
effect on WFS or WII, as the case may be, or, in the case of the
Contracts, would not cause the Contracts to be unenforceable.
(viii) The Bank has been duly organized and is validly existing and
in good standing as a Federal association pursuant to the laws of the
United States of America, with the authority within its charter to own its
properties, to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Reinvestment Contract
dated as of November 1, 1998, between the Bank and the Indenture Trustee,
and the Sale and Assignment dated as of November 1, 1998, from the Bank
to WFS of the Contracts (collectively, the "Bank Agreements").
(ix) Each of the Bank Agreements has been duly authorized, executed
and delivered by the Bank and constitutes a legal, valid and binding
instrument enforceable against the Bank in accordance with its 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 or the
rights of creditors of savings banks the accounts of which are insured by
the Federal Deposit Insurance Corporation 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 proceeding therefor may be
brought.
(x) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by the Bank Agreements except such as have been
obtained under the Act and such as have been obtained from the Office of
Thrift Supervision.
(xi) Neither the consummation of any of the transactions
contemplated by the Bank Agreements, nor the fulfillment of the terms
thereof, will conflict with, result in a breach of, or constitute a
default under the Charter or bylaws of the Bank or (i) the terms of any
indenture or other agreement or instrument known to such counsel to be
applicable to the Bank or any of its subsidiaries or (ii) any judgment,
order or decree known to such counsel to be applicable to the Bank or any
of its subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Bank or any
of its subsidiaries, except in the case of clauses (i) and (ii), for
defaults, breaches or violations that do not in the aggregate, have a
material adverse effect on the Bank.
(xii) The Bank is in compliance with all applicable state and
federal laws regarding its continued operation, including those pertaining
to the origination of the Contracts, other than those laws the Bank's
non-compliance with which would not materially affect its ability to
perform its obligations under the Bank Agreements or, in
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<PAGE> 20
the case of the origination of the Contracts, would not cause the
Contracts to be unenforceable.
(f) The Representative shall have received from Mitchell, Silberberg &
Knupp LLP, counsel for the Company, a letter dated the Closing Date to the
effect that the Underwriters may rely upon each opinion rendered by such counsel
to either Standard & Poor's or Moody's Investors Service, Inc. in connection
with the rating of any of the Securities, as if each such opinion were addressed
to the Underwriters.
(g) The Representative shall have received the opinion of Bruce E.
Stern, Esq., General Counsel for Financial Security, dated the Closing Date and
satisfactory to counsel to the Underwriters.
(h) The Representative shall have received the opinion addressed to the
Underwriters and to WFS from Richards, Layton & Finger, counsel to the Owner
Trustee, dated the Closing Date and satisfactory in form and substance to
counsel to the Underwriters and to counsel to the Company, to the effect that:
(i) The Owner Trustee has been duly incorporated and is validly
existing as a banking corporation in good standing under the laws of the
State of Delaware.
(ii) The Owner Trustee has full corporate trustee power and
authority to enter into and perform its obligations under the Trust
Agreement and, on behalf of the Trust, under the Indenture, the Sale and
Servicing Agreement and the Administration Agreement.
(iii) The execution and delivery of the Trust Agreement and, on
behalf of the Trust, of the Indenture, the Sale and Servicing Agreement,
the Administration Agreement, the Certificates and the Notes and the
performance by the Owner Trustee of its obligations under the Trust
Agreement, the Indenture, the Sale and Servicing Agreement and the
Administration Agreement have been duly authorized by all necessary
corporate action of the Owner Trustee and each has been duly executed and
delivered by the Owner Trustee.
(iv) The Trust Agreement, the Sale and Servicing Agreement, the
Indenture and the Administration Agreement constitute valid and binding
agreements of the Owner Trustee, enforceable against the Owner Trustee in
accordance with their terms, subject, as to enforcement of remedies, (A)
to applicable bankruptcy, insolvency and reorganization, generally, and
(B) to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(v) The execution and delivery by the Owner Trustee of the Trust
Agreement and, on behalf of the Trustee, of the Indenture, the Sale and
Servicing Agreement and the Administration Agreement do not require any
consent, approval or authorization of, or any registration or filing with,
any Delaware or United States Federal governmental authority having
jurisdiction over the trust power of the Owner Trustee, other than those
consents, approvals or authorizations as have been obtained and the filing
of the Certificate of Trust with the Secretary of State of the State of
Delaware.
20
<PAGE> 21
(vi) The Notes have been duly authorized, executed and issued by
the Trust.
(vii) The Certificates have been duly authorized, executed and
issued by the Trust.
(viii) The execution and delivery by the Owner Trustee of the Trust
Agreement and, on behalf of the Trust, the Sale and Servicing Agreement,
the Indenture and the Administration Agreement, and the performance by the
Owner Trustee of its obligations thereunder do not conflict with, result
in a breach or violation of or constitute a default under, the Articles of
Association or By-laws of the Owner Trustee.
(i) The Representative shall have received an opinion addressed to the
Underwriters and to WFS, dated as of the Closing Date, of Richards, Layton &
Finger, special Delaware counsel to the Trust, in form and substance
satisfactory to counsel to the Underwriters and counsel to WFS, to the effect
that:
(i) The Trust has been duly formed and is validly existing as a
business trust pursuant to the laws of the State of Delaware, 12 Del. C.
Section 3801, et seq.
(ii) The Trust Agreement authorizes the Trust to execute and
deliver the Indenture, the Sale and Servicing Agreement and the
Administration Agreement, to issue the Certificates and Notes and to grant
the trust estate to the Indenture Trustee as security for the Notes.
(iii) Assuming that the Certificates have been duly authorized,
executed and issued by the Trust, when delivered to the Underwriter and
paid for by the Underwriter pursuant to this Agreement, the Certificates
have been validly issued and are entitled to the benefits of the Trust
Agreement.
(iv) Except for the timely filing in the future of continuation
statements with respect to the financing statements, no other filing is
required in the State of Delaware in order to make effective the lien of
the Indenture. Insofar as the Delaware Uniform Commercial Code, 6 Del. C.
Section 9-101 et seq. (the "UCC"), applies (without regard to conflict of
laws principles) and, assuming that the security interests in that portion
of the trust estate that consists of general intangibles, accounts or
chattel paper, as defined under the UCC, have been duly created and have
attached, the Indenture Trustee has a perfected security interest in such
general intangibles, accounts or chattel paper and, assuming that the UCC
search accurately lists all the financing statements filed naming the
Trust as debtor and describing any portion of the trust estate consisting
of such general intangibles, accounts or chattel paper, the security
interest of the Indenture Trustee will be prior to the security interest
of all other creditors, except that such security interest will be subject
to the security interest afforded to Financial Security under the
Insurance Agreement, and excluding purchase money security interests under
Section 9-312(4) of the UCC, and temporarily perfected security interests
pursuant to Section 9-306(3) of the UCC (as to the priority of temporarily
unrecorded security interests in proceeds), subject to customary and usual
exceptions.
21
<PAGE> 22
(v) No creditor of the Seller or any Certificateholder shall have
any right to obtain possession or, or otherwise legal or equitable
remedies with respect to, the property of the Trust.
(vi) Assuming that the Sale and Servicing Agreement conveys good
title to the Trust Property referred to therein to the Trust as a true
sale and not as a security arrangement, the Trust rather than the Seller
is the owner of the Trust Property.
(j) The Representative shall have received an opinion addressed to the
Underwriters and to WFS from White & Case, counsel to the Indenture Trustee,
dated the Closing Date and satisfactory in form and substance to counsel to the
Underwriters and to special counsel to WFS to the effect that:
(i) The Indenture Trustee has been duly incorporated and is
validly existing as a banking corporation under the laws of the State of
New York.
(ii) The Indenture Trustee, at the time of its execution and
delivery of the Indenture, had full power and authority to execute and
deliver the Indenture and has full power and authority to perform its
obligations thereunder.
(iii) The Indenture has been duly and validly authorized, executed
and delivered by the Indenture Trustee and, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes the valid and
binding obligation of the Indenture Trustee enforceable against the
Indenture Trustee in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other laws relating to
or affecting creditors' rights or by general principles of equity.
(iv) To the best of such counsel's knowledge, there are no actions,
proceedings or investigations pending or threatened against or affecting
the Indenture Trustee before or by any court, arbitrator, administrative
agency or other governmental authority which, if adversely decided, would
materially and adversely affect the ability of the Indenture Trustee to
carry out the transactions contemplated in the Indenture.
(v) No consent, approval or authorization of, or registration,
declaration or filing with, any court or governmental agency or body of
the United States of America or any state thereof was or is required for
the execution, delivery or performance by the Indenture Trustee of the
Indenture.
(k) The Representative shall have received the opinion of Brown & Wood
LLP, counsel to the Underwriters, dated the Closing Date, with respect to the
issuance and sale of the Notes, the Registration Statement, the Prospectus and
other related matters as the Representative may reasonably require, and the
Company and WFS shall have furnished to counsel to the Underwriters such
documents as they may reasonably request for the purpose of enabling them to
pass upon such matters.
(l) The Representative shall have received letters in form and substance
satisfactory to the Representative, addressed to the Underwriters and dated the
date hereof and the Closing
22
<PAGE> 23
Date, from Ernst & Young LLP, independent public accountants for the Company,
substantially in the forms heretofore approved by the Representative.
(m) At the Closing Date each Class of Notes and the Certificates shall
have been rated in the highest category by at least one nationally recognized
rating agency without regard to the benefit afforded the Notes under the Note
Policy and such ratings shall be in full force and effect and subsequent to the
execution and delivery of this Agreement and prior to the Closing Date, there
shall not have been any downgrading, nor any notice given by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) under the Act (a "Rating Agency"), to the public or
the Company of any intended or potential downgrading or of a possible change
that does not indicate the direction of the possible change, in the rating
accorded any of the Company's securities by any Rating Agency.
(n) The Representative shall have received the Indemnification Agreement
executed by all parties thereto.
9. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the later of (i) execution of this Agreement and (ii)
receipt of notification of the effectiveness of the Registration Statement by
the Company or the Representative.
This Agreement may be terminated at any time prior to the Closing Date by
the Representative by written notice to the Company if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any adverse change or development
involving a prospective adverse change in or affecting particularly the
condition, financial or otherwise, of the Company or WFS or the earnings,
affairs or business prospects of the Company or WFS, whether or not arising in
the ordinary course of business, which would, in the reasonable judgment of the
Representative, make the offering or delivery of any Class of Notes or the
Certificates impracticable, (ii) any outbreak of hostilities or other national
or international calamity or crisis or material change in economic conditions,
if the effect of such outbreak, calamity, crisis or change on the financial
markets of the United States or elsewhere would, in the reasonable judgment of
the Representative, make the offering or delivery of any Class of Notes or the
Certificates impracticable, (iii) suspension of trading in securities on the New
York Stock Exchange or the American Stock Exchange or limitation on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in the reasonable opinion of the
Representative materially and adversely affects, or will materially and
adversely affect, the business or operations of the Company, (v) declaration of
a banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in the reasonable opinion the
Representative has a material adverse effect on the financial markets in the
United States.
10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to Harriet Burns
Feller, Esq. at her office at 23 Pasteur Road, Irvine, California 92618, (ii) if
to WFS, to Harriet Burns Feller, Esq. at her office at 23 Pasteur Road, Irvine,
California 92618 or (iii) if to any Underwriter, through the
23
<PAGE> 24
Representative at Donaldson, Lufkin & Jenrette Securities Corporation at 277
Park Avenue - 14th Floor, New York, New York 10172, Attention: Investment
Banking Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of WFS, the Company, their respective officers
and directors and of the Underwriters set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Securities, regardless of (i) any investigation,
or statement as to the results thereof, made by or on behalf of the Underwriters
or by or on behalf of the Company, its officers or directors or any controlling
person of the Company or WFS, (ii) acceptance of the Securities and payment for
them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Representative because of any
failure or refusal on the part of the Company or WFS to comply with the terms or
to fulfill any of the conditions of this Agreement, or pursuant to any other
provision hereof (other than by notice given to the Company with respect to
clauses (ii) through (vi) of the second paragraph of Section 9 hereof), the
Company and WFS agree to reimburse the Underwriters for all of their
out-of-pocket expenses (including the fees and disbursements of counsel to the
Underwriters) reasonably incurred by the Underwriters.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, WFS and the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Securities from the Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
The Representative will act for the several Underwriters in connection
with the transactions described in this Agreement and any action taken by the
Representative under this Agreement will be binding upon all of the
Underwriters.
24
<PAGE> 25
11. Please confirm that the foregoing correctly sets forth the agreement
among the Company, WFS and the Underwriters.
Very truly yours,
WFS FINANCIAL AUTO LOANS, INC.
By: _____________________________________
Name:
Title:
WFS FINANCIAL INC
By: _____________________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Representative of the several
Underwriters named on Schedule I hereto
By: ________________________________
Alan H. Mentle
Senior Vice President
25
<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
Amount of Amount of Amount of
Class A-1 Class A-2 Class A-3
Underwriter Notes Notes Notes
- ----------- ----------- ----------- -----------
<S> <C> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation............ $__________ $__________ $__________
.......................................
__________ __________ __________
Total $__________ $__________ $__________
</TABLE>
<TABLE>
<CAPTION>
Amount of Amount of
Class A-4 Class A-5 Amount of
Underwriter Notes Notes Certificates
- ----------- ---------- ---------- ------------
<S> <C> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation............ $__________ $__________ $__________
__________ __________ __________
Total $__________ $__________ $__________
</TABLE>
S-1
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
TRUST AGREEMENT
among
WFS FINANCIAL AUTO LOANS, INC.,
WFS INVESTMENTS, INC.,
FINANCIAL SECURITY ASSURANCE INC.
and
CHASE MANHATTAN BANK DELAWARE,
as Owner Trustee
Dated as of November __, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS
<S> <C> <C>
Section 1.01. Capitalized Terms....................................................... 1
Section 1.02. Other Definitional Provisions........................................... 5
Section 1.03. Usage of Terms.......................................................... 5
Section 1.04. Section References...................................................... 5
Section 1.05. Accounting Terms........................................................ 5
ARTICLE TWO
ORGANIZATION
Section 2.01. Name 6
Section 2.02. Office.................................................................. 6
Section 2.03. Purposes and Powers..................................................... 6
Section 2.04. Appointment of Owner Trustee............................................ 7
Section 2.05. Initial Capital Contribution of Owner Trust Estate...................... 7
Section 2.06. Declaration of Trust.................................................... 7
Section 2.07. Title to Trust Property................................................. 7
Section 2.08. Situs of Trust.......................................................... 7
Section 2.09. Representations and Warranties of the Depositor and the Company......... 8
Section 2.10. Federal Income Tax Allocations.......................................... 10
ARTICLE THREE
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.01. Initial Ownership....................................................... 12
Section 3.02. The Trust Certificates.................................................. 12
Section 3.03. Authentication and Delivery of Trust Certificates....................... 12
Section 3.04. Registration of Transfer and Exchange of Trust Certificates............. 13
Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates................. 14
Section 3.06. Persons Deemed Owners................................................... 14
Section 3.07. Access to List of Certificateholders' Names and Addresses............... 14
Section 3.08. Maintenance of Office or Agency......................................... 15
Section 3.09. Temporary Trust Certificates............................................ 15
Section 3.10. Appointment of Paying Agent............................................. 15
Section 3.11. Ownership by the Company of Trust Certificates.......................... 16
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 3.12. Book-Entry Certificates................................................. 16
Section 3.13. Notices to Clearing Agency.............................................. 17
Section 3.14. Definitive Trust Certificates........................................... 17
ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
Section 4.01. Prior Notice to Owners with Respect to Certain Matters.................. 19
Section 4.02. Action by Owners with Respect to Certain Matters........................ 19
Section 4.03. Action by Owners with Respect to Bankruptcy............................. 20
Section 4.04. Restrictions on Owners' Power........................................... 20
Section 4.05. Majority Control........................................................ 20
ARTICLE FIVE
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES
Section 5.01. Establishment of Trust Account.......................................... 21
Section 5.02. Application of Trust Funds.............................................. 21
Section 5.03. Method of Payment....................................................... 22
Section 5.04. No Segregation of Monies; No Interest................................... 22
Section 5.05. Accounting and Reports to the Noteholders, Owners, the Internal
Revenue Service and Others............................................. 22
Section 5.06. Signature on Returns; Tax Matters Partner............................... 22
ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.01. General Authority....................................................... 23
Section 6.02. General Duties.......................................................... 23
Section 6.03. Action Upon Instruction................................................. 23
Section 6.04. No Duties Except as Specified in this Agreement or in Instructions...... 24
Section 6.05. No Action Except Under Specified Documents or Instructions.............. 25
Section 6.06. Restrictions............................................................ 25
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
<S> <C> <C>
Section 7.01. Acceptance of Trusts and Duties......................................... 26
Section 7.02. Furnishing of Documents................................................. 27
Section 7.03. Representations and Warranties.......................................... 27
Section 7.04. Reliance; Advice of Counsel............................................. 28
Section 7.05. Not Acting in Individual Capacity....................................... 28
Section 7.06. Owner Trustee Not Liable for Trust Certificates, Notes or Contracts..... 28
Section 7.07. Owner Trustee May Own Trust Certificates and Notes...................... 29
Section 7.08. Pennsylvania Motor Vehicle Sales Finance Act Licenses................... 29
ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
Section 8.01. Owner Trustee's Fees and Expenses....................................... 30
Section 8.02. Indemnification......................................................... 30
Section 8.03. Payments to the Owner Trustee........................................... 30
ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
Section 9.01. Termination of Trust Agreement.......................................... 31
ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.01. Eligibility Requirements for Owner Trustee............................. 33
Section 10.02. Resignation or Removal of Owner Trustee................................ 33
Section 10.03. Successor Owner Trustee................................................ 34
Section 10.04. Merger or Consolidation of Owner Trustee............................... 34
Section 10.05. Appointment of Co-Trustee or Separate Trustee.......................... 34
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
ARTICLE ELEVEN
MISCELLANEOUS
<S> <C> <C>
Section 11.01. Supplements and Amendments............................................. 37
Section 11.02. No Legal Title to Trust Estate in Owners............................... 38
Section 11.03. Limitations on Rights of Others........................................ 38
Section 11.04. Notices................................................................ 38
Section 11.05. Severability of Provisions............................................. 39
Section 11.06. Counterparts........................................................... 39
Section 11.07. Successors and Assigns................................................. 39
Section 11.08. No Petition............................................................ 39
Section 11.09. No Recourse............................................................ 40
Section 11.10. Certificates Nonassessable and Fully Paid.............................. 40
Section 11.11. Headings............................................................... 40
Section 11.12. Governing Law.......................................................... 40
Section 11.13. Depositor Payment Obligation........................................... 40
Section 11.14. Insurer Default or Insolvency.......................................... 40
EXHIBITS
Exhibit A - Form of Certificate Depository Agreement................................... A-1
Exhibit B - Form of Certificate of Trust............................................... B-1
Exhibit C - Form of Trust Certificate.................................................. C-1
</TABLE>
(iv)
<PAGE> 6
This AMENDED AND RESTATED TRUST AGREEMENT, dated as of November __,
1998, is among WFS FINANCIAL AUTO LOANS, INC., a California corporation (the
"Depositor"), WFS INVESTMENTS, INC., a California corporation (the "Company"),
FINANCIAL SECURITY ASSURANCE INC., a New York corporation ("Financial
Security"), and CHASE MANHATTAN BANK DELAWARE, a Delaware corporation, as owner
trustee (the "Owner Trustee").
WHEREAS, in connection herewith, the Depositor is willing to assume
certain obligations pursuant hereto;
WHEREAS, in connection herewith, the Company is willing to purchase the
Company Trust Certificate (as defined herein) to be issued pursuant hereto and
to assume certain obligations pursuant hereto; and
WHEREAS, Financial Security is willing to issue a financial guaranty
insurance policy in respect of certain payments made on the Trust Certificates
to be issued pursuant hereto;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Capitalized Terms. Except as otherwise provided in this
Agreement, whenever used in this Agreement the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
"Administration Agreement" means the administration agreement, dated as
of November 1, 1998, among the Trust, the Company, the Depositor, the Indenture
Trustee and WFS, as administrator.
"Agreement" means this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Applicants" shall have the meaning assigned to such term in Section
3.07.
"Benefit Plan" means (i) an employee benefit plan (as such term is
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 or (iii) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity.
"Book-Entry Trust Certificate" means a beneficial interest in the Trust
Certificates, the ownership of which shall be evidenced, and transfers of which
shall be made, through book entries by a Clearing Agency as described in Section
3.12.
<PAGE> 7
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time to
time.
"Certificate Depository Agreement" means the agreement dated November
__, 1998, among the Trust, the Owner Trustee and DTC, as the initial Clearing
Agency, substantially in the form attached as Exhibit A hereto, relating to all
Trust Certificates other than the Company Trust Certificate, as the same may be
amended and supplemented from time to time.
"Certificate Distribution Account" means the account established and
maintained as such pursuant to Section 5.01.
"Certificate of Trust" means the Certificate of Trust filed for the
Trust pursuant to Section 3810(a) of the Business Trust Statute, substantially
in the form of Exhibit B hereto.
"Certificate Owner" means, with respect to a Book-Entry Trust
Certificate, the Person who is the owner of such Book-Entry Trust Certificate,
as reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in either case in accordance with the rules of such Clearing
Agency) and shall mean, with respect to a Definitive Trust Certificate, the
related Certificateholder.
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar (or any successor thereto) appointed pursuant to
Section 3.04.
"Certificateholder" or "Holder" means the Person in whose name a Trust
Certificate is registered in the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement or the other Basic Documents, the interest evidenced by any Trust
Certificate registered in the name of the Depositor, the Company, WFS or any of
their respective Affiliates shall not be taken into account in determining
whether the requisite percentage necessary to effect such consent, waiver,
request or demand in respect of the Trust Certificates shall have been obtained.
"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 November __, 1998.
"Code" means the Internal Revenue Code of 1986, as amended, and Treasury
Regulations promulgated thereunder.
"Company" means WFS Investments, Inc., a California corporation, in its
capacity as Owner of the Company Trust Certificate hereunder, and its
successors.
2
<PAGE> 8
"Company Trust Certificate" means the Trust Certificate purchased by the
Company on the Closing Date pursuant to Section 3.11, having an initial
principal balance equal to $__________.
"Definitive Trust Certificates" shall have the meaning assigned to such
term in Section 3.12.
"Depositor" means WFS Financial Auto Loans, Inc. in its capacity as
depositor hereunder, and its successors.
"DTC" means The Depository Trust Company, and its successors.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.02.
"Indenture" means the indenture dated as of November 1, 1998, among the
Trust and Bankers Trust Company, as Indenture Trustee.
"Instructing Party" shall have the meaning assigned to such term in
Section 6.03(a).
"Insurer" means Financial Security Assurance, Inc., and its successors.
"Note Depository Agreement" means the agreement dated November __, 1998,
among the Trust, the Indenture Trustee and DTC, as the initial Clearing Agency,
relating to the Notes, as the same may be amended and supplemented from time to
time.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes, in each case issued pursuant to the Indenture.
"Original Certificate Balance" means $__________.
"Owner" means each Holder of a Trust Certificate.
"Owner Trustee" means Chase Manhattan Bank Delaware, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Owner Trustee Corporate Trust Office" means the office of the Owner
Trustee at which its corporate trust business shall be administered, which
initially shall be Chase Manhattan Bank Delaware, 1201 Market Street,
Wilmington, Delaware 19801, Attention:
3
<PAGE> 9
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 such other office at such other address as
the Owner Trustee may designate from time to time by notice to the
Certificateholders, the Master Servicer, the Depositor, the Company and the
Insurer. The foregoing address of The Chase Manhattan Bank shall be its address
for purposes of its acting as Certificate Registrar and as agent of the Owner
Trustee pursuant to Sections 3.04 and 3.08, or such other office at such other
address as the Owner Trustee may designate from time to time by notice to the
Certificateholders, the Master Servicer, the Depositor, the Company and the
Insurer.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 3.10.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Record Date" means, with respect to any Distribution Date, the day
immediately preceding such Distribution Date or, if Definitive Trust
Certificates are issued, the 15th day of the month preceding the month in which
such Distribution Date occurs.
"Sale and Servicing Agreement" means the sale and servicing agreement,
dated as of November 1, 1998, among the Trust, as Issuer, the Depositor, as
Seller and WFS, as Master Servicer, as the same may be amended or supplemented
from time to time.
"Secretary of State" means the Secretary of State of the State of
Delaware.
"Seller" means WFS Financial Auto Loans, Inc., in its capacity as seller
under the Sale and Servicing Agreement, and its successors.
"Treasury Regulations" means regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" means the trust established by this Agreement.
"Trust Certificates" means the trust certificates evidencing the
beneficial interest of an Owner in the Trust, substantially in the form of
Exhibit C hereto.
"Trust Estate" means all right, title and interest of the Trust in and
to the property and rights assigned to the Trust pursuant to Article Two of the
Sale and Servicing Agreement, all funds on deposit from time to time in the
Trust Accounts and all other property of the Trust from time to time, including
any rights of the Owner Trustee and the Trust pursuant to the Sale and Servicing
Agreement and the Administration Agreement.
4
<PAGE> 10
"Underwriters" means Donaldson, Lufkin & Jenrette Securities Corporation
and BancAmerica Robertson Stephens.
"WFS" means WFS Financial Inc, and its successors.
Section 1.02. Other Definitional Provisions. Capitalized terms used that
are not otherwise defined herein shall have the meanings ascribed thereto in the
Sale and Servicing Agreement or, if not defined therein, in the Indenture.
Section 1.03. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation".
Section 1.04. Section References. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
Section 1.05. Accounting Terms. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
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ARTICLE TWO
ORGANIZATION
Section 2.01. Name. The Trust created hereby shall be known as "WFS
Financial 1998-C Owner Trust", in which name the Owner Trustee may conduct the
activities of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
Section 2.02. Office. The office of the Trust shall be in care of the
Owner Trustee at the Owner Trustee Corporate Trust Office or at such other
address in Delaware as the Owner Trustee may designate by written notice to the
Owners, the Depositor and the Insurer.
Section 2.03. Purposes and Powers.
(a) The sole purpose of the Trust is to conserve the Trust Estate and
collect and disburse the periodic income therefrom for the use and benefit of
the Owners, and in furtherance of such purpose to engage in the following
ministerial activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the
Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Contracts, to fund the Spread Account and
to pay the organizational, start-up and transactional expenses of the
Trust and to pay the balance to the Depositor pursuant to the Sale and
Servicing Agreement;
(iii) to Grant the Trust Estate pursuant to the Indenture and to
hold, manage and distribute to the Owners pursuant to the Sale and
Servicing Agreement any portion of the Trust Estate released from the
Lien of, and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary to accomplish the foregoing or are
incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Trust Estate and the making of distributions to the
Owners and the Noteholders.
The Trust shall not engage in any activities other than in connection with the
foregoing. Nothing contained herein shall be deemed to authorize the Owner
Trustee, on behalf of the Trust, to engage in any business operations or any
activities other than those set forth in the
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introductory sentence of this Section. Specifically, the Owner Trustee, on
behalf of the Trust, shall have no authority to engage in any business
operations, acquire any assets other than those specifically included in the
Trust Estate under Section 1.01 or otherwise vary the assets held by the Trust.
Similarly, the Owner Trustee shall have no discretionary duties other than
performing those ministerial acts set forth above necessary to accomplish the
purpose of the Trust as set forth in the introductory sentence of this Section.
Section 2.04. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein, and the
Owner Trustee hereby accepts such appointment.
Section 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1.00. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Trust Estate and
shall be deposited in the Certificate Distribution Account. The Depositor shall
pay organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
Section 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Trust Estate in trust upon and subject to the conditions
set forth herein for the sole purpose of conserving the Trust Estate and
collecting and disbursing the periodic income therefrom for the use and benefit
of the Owners, subject to the obligations of the Trust under the Basic
Documents. It is the intention of the parties hereto that the Trust constitute a
business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. It is the intention
of the parties hereto that, solely for income and franchise tax purposes, the
Trust shall be treated as a partnership, with the assets of the partnership
being the Contracts and other assets held by the Trust and with the partners of
the partnership being the Certificateholders (including the Company and the
Seller) and the Notes being debt of the partnership. The parties agree that,
unless otherwise required by appropriate tax authorities, the Trust will file or
cause to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Business Trust Statute for
the sole purpose and to the extent necessary to accomplish the purpose of the
Trust as set forth in the introductory sentence of Section 2.03.
Section 2.07. Title to Trust Property. Legal title to the Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee and/or a separate
trustee, as the case may be.
Section 2.08. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall
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be located in the State of California, the State of Delaware or the State of New
York. The Trust shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee from having employees within or without the State of Delaware. Payments
will be received by the Trust only in Delaware or New York and payments will be
made by the Trust only from Delaware or New York. The only office of the Trust
will be at the Owner Trustee Corporate Trust Office.
Section 2.09. Representations and Warranties of the Depositor and the
Company.
(a) The Depositor hereby represents and warrants to the Owner Trustee
and the Insurer that:
(i) The Depositor is duly organized and validly existing as a
corporation organized and existing and in good standing under the laws
of the State of California, with power and authority to own its
properties and to conduct its business and had at all relevant times,
and has, power, authority and legal right to acquire and own the
Contracts.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualifications.
(iii) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Owner Trustee on behalf of the Trust
as part of the Trust Estate and has duly authorized such sale and
assignment and deposit with the Owner Trustee on behalf of the Trust by
all necessary corporate action; and the execution, delivery and
performance of this Agreement have been duly authorized by the Depositor
by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in the breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of the properties of the Depositor pursuant to the
terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or any order, rule
or regulation applicable to the Depositor of any court or of any federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties.
(v) There are no proceedings or investigations pending, or to
the Depositor's best knowledge threatened, before any court,
regulatory body, administrative
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agency or other governmental instrumentality having jurisdiction over
the Depositor or its properties: (A) asserting the invalidity of this
Agreement, any of the other Basic Documents or the Trust Certificates,
(B) seeking to prevent the issuance of the Trust Certificates or the
consummation of any of the transactions contemplated by this Agreement
or any of the other Basic Documents, (C) seeking any determination or
ruling that might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability
of, this Agreement, any of the other Basic Documents or the Trust
Certificates or (D) involving the Depositor and which might adversely
affect the federal income tax or other federal, state or local tax
attributes of the Trust Certificates.
(b) The Company hereby represents and warrants to the Owner Trustee and
the Insurer that:
(i) The Company is duly organized and validly existing as a
corporation organized and existing and in good standing under the laws
of the State of California, with power and authority to own its
properties and to conduct its business and had at all relevant times,
and has, power, authority and legal right to acquire and own the
Contracts.
(ii) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualifications.
(iii) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; and the execution,
delivery and performance of this Agreement have been duly authorized by
the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Company, or any
indenture, agreement or other instrument to which the Company is a party
or by which it is bound; nor result in the creation or imposition of any
Lien upon any of the properties of the Company pursuant to the terms of
any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents); nor violate any law or any order, rule or
regulation applicable to the Company of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending, or to
the Company's best knowledge threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties: (A) asserting the
invalidity of this Agreement, any of the other Basic
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Documents or the Trust Certificates, (B) seeking to prevent the issuance
of the Trust Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the other Basic Documents, (C)
seeking any determination or ruling that might materially and adversely
affect the performance by the Company of its obligations under, or the
validity or enforceability of, this Agreement, any of the other Basic
Documents or the Trust Certificates or (D) involving the Company and
which might adversely affect the federal income tax or other federal,
state or local tax attributes of the Trust Certificates.
Section 2.10. Federal Income Tax Allocations.
(a) Net income of the Trust for any calendar quarter as determined for
federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated:
(i) among the Certificate Owners as of the first day following
the end of such quarter, in proportion to their ownership of the
principal amount of Trust Certificates on such date, net income in an
amount up to the sum of (A) the Certificate Interest Distributable
Amount for such quarter, (B) interest on the excess, if any, of the
Certificate Interest Distributable Amount for the preceding Distribution
Date over the amount in respect of interest that is actually deposited
in the Certificate Distribution Account on such preceding Distribution
Date, to the extent permitted by law, at the Pass-Through Rate from such
preceding Distribution Date through the current Distribution Date, (C)
the portion of the market discount on the Contracts accrued during such
quarter that is allocable to the excess, if any, of the initial
aggregate principal amount of the Trust Certificates over their initial
aggregate issue price and (D) any other amounts of income payable to the
Certificateholders for such quarter; such sum to be reduced by any
amortization by the Trust of premium on Contracts that corresponds to
any excess of the issue price of Trust Certificates over their principal
amount; and
(ii) to the Depositor and the Company in the proportion of 99%
and 1%, respectively, to the extent of any remaining net income.
(b) If the net income of the Trust for any calendar quarter is
insufficient for the allocations described in Section 2.10(a)(i), subsequent net
income shall first be allocated to make up such shortfall before being allocated
as provided in Section 2.11(a)(ii). Net losses of the Trust, if any, for any
calendar quarter as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall be
allocated to the Depositor and the Company in the proportion of 99% and 1%,
respectively, to the extent the Depositor and the Company are reasonably
expected to bear the economic burden of such net losses, and any remaining net
losses shall be allocated among the Certificate Owners as of the first day
following the end of such quarter in proportion to their ownership of the
principal amount of Trust Certificates on such day. The Depositor and the
Company are authorized to modify the allocations in this paragraph if necessary
or appropriate, in its sole discretion, for the allocations to fairly reflect
the income, gain, loss and
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deduction to the Depositor and the Company or to the Certificate Owners, or as
otherwise required by the Code.
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ARTICLE THREE
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
Section 3.02. The Trust Certificates. The Trust Certificates shall be
substantially in the form of Exhibit C hereto. The Trust Certificates shall be
issuable in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof; provided, however, that the Trust Certificates issued to the
Company pursuant to Section 3.11 may be issued in such denomination as required
to include any residual amount. The Trust Certificates shall be executed by the
Owner Trustee on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee and attested on behalf of the Owner
Trustee by the manual or facsimile signature of an authorized officer of the
Owner Trustee and shall be deemed to have been validly issued when so executed.
Trust Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures were affixed, authorized to sign on
behalf of the Owner Trustee shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the authentication and delivery of such Trust Certificates
or did not hold such offices at the date of such Trust Certificates. All Trust
Certificates shall be dated the date of their authentication.
Section 3.03. Authentication and Delivery of Trust Certificates. The
Owner Trustee shall cause to be authenticated and delivered upon the order of
the Depositor, in exchange for the Contracts and the other assets of the Trust,
simultaneously with the sale, assignment and transfer to the Trust of the
Contracts, and the constructive delivery to the Owner Trustee of the Contract
Files and the other assets of the Trust, Trust Certificates duly authenticated
by the Owner Trustee, in authorized denominations equaling in the aggregate the
Original Certificate Balance evidencing the entire ownership of the Trust and
Notes issued by the Owner Trustee and authenticated by the Indenture Trustee in
aggregate principal amount of, in the case of the (i) Class A-1 Notes,
$___________, (ii) Class A-2 Notes, $___________, (iii) Class A-3 Notes,
$___________, (iv) Class A-4 Notes, $__________ and (v) Class A-5 Notes,
$___________. No Trust Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such Trust
Certificate a certificate of authentication substantially in the form set forth
in the form of Trust Certificate attached hereto as Exhibit C, executed by the
Owner Trustee or its authenticating agent, by manual signature, and such
certificate upon any Trust Certificate shall be conclusive evidence, and the
only evidence, that such Trust Certificate has been duly authenticated and
delivered hereunder. Upon issuance, authentication and delivery pursuant to the
terms hereof, the Trust Certificates will be entitled to the benefits of this
Agreement.
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Section 3.04. Registration of Transfer and Exchange of Trust
Certificates.
(a) The Certificate Registrar shall keep or cause to be kept, a
Certificate Register, subject to such reasonable regulations as it may
prescribe. The Certificate Register shall provide for the registration of Trust
Certificates and transfers and exchanges of Trust Certificates as provided
herein. The Chase Manhattan Bank, 450 West 33rd Street, 15th Floor, New York,
New York 10001, Attention: Structured Finance Services (ABS) as agent for the
Owner Trustee, is hereby initially appointed Certificate Registrar for the
purpose of registering Trust Certificates and transfers and exchanges of Trust
Certificates as herein provided. In the event that, subsequent to the Closing
Date, the Owner Trustee notifies the Master Servicer that The Chase Manhattan
Bank is unable to act as Certificate Registrar, the Master Servicer shall
appoint another bank or trust company, having an office or agency located in The
City of New York, agreeing to act in accordance with the provisions of this
Agreement applicable to it, and otherwise acceptable to the Owner Trustee, to
act as successor Certificate Registrar hereunder.
(b) Upon surrender for registration of transfer of any Trust Certificate
at the office of the Certificate Registrar, the Owner Trustee shall execute,
authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Trust Certificates in authorized denominations of a
like aggregate principal amount.
(c) At the option of a Certificateholder, Trust Certificates may be
exchanged for other Trust Certificates in authorized denominations of a like
aggregate principal amount, upon surrender of the Trust Certificates to be
exchanged at the office of the Certificate Registrar. Whenever any Trust
Certificates are so surrendered for exchange, the Owner Trustee on behalf of the
Trust shall execute, authenticate and deliver (or shall cause its authenticating
agent to authenticate and deliver) the Trust Certificates that the
Certificate-holder making the exchange is entitled to receive. Every Trust
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in form satisfactory to
the Owner Trustee and the Certificate Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Trust Certificates.
(e) The Trust Certificates may not be acquired by or for the account of
a Benefit Plan. By accepting and holding a Trust Certificate, the Holder thereof
shall be deemed to have represented and warranted that it is not a Benefit Plan
nor will it hold such Trust Certificate for the account of a Benefit Plan.
(f) All Trust Certificates surrendered for registration of transfer or
exchange, if surrendered to the Company or any agent of the Owner Trustee or the
Company under this Agreement, shall be delivered to the Owner Trustee and
promptly cancelled by it, or, if
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surrendered to the Owner Trustee, shall be promptly cancelled by it, and no
Trust Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Agreement. The Owner Trustee shall dispose of
cancelled Trust Certificates in accordance with the normal industry practice.
Section 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (i) any mutilated Trust Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Trust Certificate, and (ii) there is
delivered to the Certificate Registrar and the Owner Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice that such Trust Certificate has been acquired by a bona fide
purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner
Trustee or its authenticating agent shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Certificate, a new Trust Certificate of like tenor and fractional undivided
interest. In connection with the issuance of any new Trust Certificate under
this Section, the Owner Trustee may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto. Any duplicate Trust Certificate issued pursuant to this
Section shall constitute complete and indefeasible evidence of ownership in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Trust Certificate shall be found at any time.
Section 3.06. Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar, any Paying Agent and any of their respective agents may
treat the Person in whose name any Trust Certificate is registered as the owner
of such Trust Certificate for the purpose of receiving distributions pursuant to
Section 5.02 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar, any Paying Agent or any of their respective
agents shall be affected by any notice to the contrary.
Section 3.07. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Master Servicer,
the Insurer and the Depositor, within 15 days after receipt by the Certificate
Registrar of a written request therefor from the Master Servicer, the Insurer or
the Depositor, a list, in such form as the Master Servicer or the Depositor may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date. If three or more Certificateholders, or one or more
Holders of Trust Certificates evidencing not less than 51% of the percentage
interests of the Trust Certificates (hereinafter referred to as "Applicants"),
apply in writing to the Owner Trustee, and such application states that the
Applicants desire to communicate with other Certificateholders with respect to
their rights hereunder or under the Trust Certificates and such application is
accompanied by a copy of the communication that such Applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such Applicants access, during normal
business hours, to the current list of Certificateholders. Every
Certificateholder, by receiving and holding a Trust Certificate, agrees with the
Master Servicer, the Depositor and the Owner Trustee that none of the Master
Servicer, the Depositor or the Owner Trustee shall be held accountable by reason
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of the disclosure of any such information as to the names and addresses of the
Certificate-holders hereunder, regardless of the source from which such
information was derived.
Section 3.08. Maintenance of Office or Agency. The Chase Manhattan Bank,
as agent for the Owner Trustee, shall maintain in the Borough of Manhattan, The
City of New York, an office or offices or agency or agencies where Trust
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the Trust
Certificates and the Basic Documents may be served. The Owner Trustee hereby
designates the office of The Chase Manhattan Bank at the address provided under
the definition of the term "Owner Trustee Corporate Trust Office" as its office
for such purposes. The Owner Trustee shall give prompt written notice to the
Depositor, the Master Servicer and to Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
Section 3.09. Temporary Trust Certificates. Pending the preparation of
definitive Trust Certificates, the Owner Trustee, on behalf of the Trust, may
execute, authenticate and deliver, temporary Trust Certificates that are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Trust
Certificates in lieu of which they are issued. If temporary Trust Certificates
are issued, the Depositor will cause definitive Trust Certificates to be
prepared without unreasonable delay. After the preparation of definitive Trust
Certificates, the temporary Trust Certificates shall be exchangeable for
definitive Trust Certificates upon surrender of the temporary Trust Certificates
at the office or agency to be maintained as provided in Section 3.08, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Trust Certificates, the Owner Trustee shall execute and authenticate
and deliver in exchange therefor a like principal amount of definitive Trust
Certificates in authorized denominations. Until so exchanged, the temporary
Trust Certificates shall in all respects be entitled to the same benefits
hereunder as definitive Trust Certificates.
Section 3.10. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02(a) and shall report the amounts of such distributions
to the Owner Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. The Owner Trustee may revoke such
power and remove the Paying Agent if the Owner Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its obligations
under this Agreement in any material respect. The Paying Agent initially shall
be The Chase Manhattan Bank and any co-paying agent chosen by the Paying Agent
that is acceptable to the Owner Trustee. Each Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Owner Trustee. In the
event that The Chase Manhattan Bank shall no longer be the Paying Agent, the
Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a
bank or trust company). The Owner Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Owner Trustee that, as
Paying Agent, such successor Paying Agent or additional Paying Agent will hold
all sums,
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if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders. The Paying Agent shall return all unclaimed funds to
the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall
also return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its
role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise. If the long term debt rating of the
Paying Agent 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 3.11. Ownership by the Company of Trust Certificates. The
Company shall on the Closing Date purchase from the Underwriters Trust
Certificates representing at least 1% of the Original Certificate Balance and
shall thereafter retain beneficial and record ownership of Trust Certificates
representing at least 1% of the Certificate Balance. Any attempted transfer of
any Trust Certificate that would reduce such interest of the Company below 1% of
the Certificate Balance shall be void. The Owner Trustee shall cause any Trust
Certificate issued to the Company on the Closing Date (and any Trust Certificate
issued in exchange therefor) to contain a legend stating "THIS TRUST CERTIFICATE
IS NONTRANSFERABLE".
Section 3.12. Book-Entry Certificates. The Trust Certificates upon
original issuance will be issued in the form of one or more typewritten
certificates representing the Book-Entry Trust Certificates, to be delivered to
DTC, the initial Clearing Agency, by, or on behalf of, the Trust; provided,
however, that one Definitive Trust Certificate (as defined below) may be issued
to the Company pursuant to Section 3.11. The certificate or certificates
delivered to DTC evidencing such Trust Certificates shall initially be
registered on the Certificate Register in the name of CEDE & CO., the nominee of
the initial Clearing Agency, and no Certificate Owner (other than the Company)
will receive a definitive certificate representing such Certificate Owner's
interest in the Trust Certificates, except as provided in Section 3.14. Unless
and until definitive, fully registered Trust Certificates (the "Definitive Trust
Certificates") have been issued to Certificate Owners pursuant to Section 3.14:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Depositor, the Master Servicer, the Certificate
Registrar and the Owner Trustee, subject to the provisions and
limitations of Sections 2.03 and 2.06, may deal with the Clearing Agency
for all purposes (including the making of distributions on the Trust
Certificates) as the authorized representative of the Certificate
Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this
Section shall control;
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(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency (or through procedures established by the
Clearing Agency) and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants; pursuant to the Certificate
Depository Agreement, unless and until Definitive Trust Certificates are
issued pursuant to Section 3.14, the Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit distributions of principal and interest on the Trust
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Trust
Certificates evidencing a specified percentage of the percentage
interests thereof, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such
effect from Certificate Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in Trust Certificates and has delivered such
instructions to the Owner Trustee.
Section 3.13. Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required hereunder, unless and until
Definitive Trust Certificates shall have been issued to Certificate Owners
pursuant to Section 3.14, the Owner Trustee and the Master Servicer shall give
all such notices and communications specified herein to be given to Holders of
the Trust Certificates to the Clearing Agency.
Section 3.14. Definitive Trust Certificates. If (i)(A) the Administrator
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities as described in the
Certificate Depository Agreement and (B) the Trustee or the Administrator is
unable to locate a qualified successor, (ii) the Administrator, at its option,
advises the Owner 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 or a Servicer Default, Certificate Owners representing beneficial
interests aggregating not less than 51% of the Certificate Balance advise the
Owner 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 Certificate Owners, then the
Clearing Agency shall notify all Certificate Owners and the Owner Trustee of the
occurrence of any such event and of the availability of Definitive Trust
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee by the Clearing Agency of the certificates evidencing the
Book-Entry Trust Certificates, accompanied by registration instructions from the
Clearing Agency for registration, the Owner Trustee shall issue the Definitive
Trust Certificates and deliver such Definitive Trust Certificates in accordance
with the instructions of the Clearing Agency. Neither the Depositor, the
Certificate Registrar nor the Owner 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
Trust Certificates, the Owner Trustee shall recognize the Holders of the
Definitive Trust Certificates as Certificateholders hereunder. The Owner Trustee
shall not be liable if the Owner Trustee or the Administrator is unable to
locate a qualified successor Clearing Agency. The Definitive Trust Certificates
shall be printed, lithographed or engraved
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or may be produced in any manner as is reasonably acceptable to the Owner
Trustee, as evidenced by its execution thereof.
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ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
Section 4.01. Prior Notice to Owners with Respect to Certain Matters.
Subject to the provisions and limitations of Section 4.04, with respect to the
following matters, the Owner Trustee shall not take action unless at least 30
days before the taking of such action, the Owner Trustee shall have notified the
Certificateholders in writing of the proposed action and the Owners shall not
have notified the Owner Trustee in writing prior to the 30th day after such
notice is given that such Owners have withheld consent or provided alternative
direction:
(a) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the
Contracts) and the compromise of any action, claim or lawsuit brought by
or against the Trust (except with respect to the aforementioned claims
or lawsuits for collection of the Contracts);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and
such amendment materially adversely affects the interest of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially
adversely affect the interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, paying agent for the Notes or Indenture Trustee or pursuant
to this Agreement of a successor Certificate Registrar, or the consent
to the assignment by the Note Registrar, Paying Agent, Indenture Trustee
or Certificate Registrar of its obligations under the Indenture or this
Agreement, as applicable.
Section 4.02. Action by Owners with Respect to Certain Matters. Subject
to the provisions and limitations of Section 4.04, the Owner Trustee shall not
have the power, except upon the direction of the Owners and with the prior
written consent of the Insurer (so long as no Insurer Default shall have
occurred and be continuing), to (a) remove the Administrator pursuant to Section
8 of the Administration Agreement, (b) appoint a successor Administrator
pursuant to Section 8 of the Administration Agreement, (c) remove the Master
Servicer pursuant to Section 8.01 of the Sale and Servicing Agreement, (d)
except as expressly provided in the Basic Documents, sell the Contracts after
the termination of the Indenture, (e) initiate any claim, suit or proceeding by
the Trust or compromise any claim, suit or
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proceeding brought by or against the Trust, (f) authorize the merger or
consolidation of the Trust with or into any other business trust or entity
(other than in accordance with Section 3.10 of the Indenture) or (g) amend the
Certificate of Trust. The Owner Trustee shall take the actions referred to in
the preceding sentence only upon written instructions signed by the Owners.
Section 4.03. Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the prior written consent of the
Insurer and the unanimous prior approval of all Owners and the delivery to the
Owner Trustee by each such Owner of a certificate certifying that such Owner
reasonably believes that the Trust is insolvent.
Section 4.04. Restrictions on Owners' Power. The Owners shall not direct
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the other Basic Documents or would be contrary to
the purpose of this Trust as set forth in Section 2.03, nor shall the Owner
Trustee be obligated to follow any such direction, if given.
Section 4.05. Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Owners delivered pursuant to this Agreement shall be effective if signed by
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
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ARTICLE FIVE
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES
Section 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Account (the "Certificate Distribution Account"), bearing
a designation clearly indicating that the funds deposited therein are held for
the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in funds
on deposit from time to time in the Certificate Distribution Account and in the
proceeds thereof. Except as otherwise expressly provided herein, the Certificate
Distribution Account shall be under the sole dominion and control of the Owner
Trustee for the benefit of the Certificateholders. If, at any time, the
Certificate Distribution Account ceases to be an Eligible Account, the Owner
Trustee (or the Depositor on behalf of the Owner Trustee, if the Certificate
Distribution Account is not then held by the Owner Trustee or an Affiliate
thereof) shall within ten Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency or the Insurer must consent)
establish a new Certificate Distribution Account as an Eligible Account and
shall transfer any cash and/or any investments to such new Certificate
Distribution Account.
Section 5.02. Application of Trust Funds.
(a) On each Distribution Date, the Owner Trustee will distribute to
Certificate-holders, on a pro rata basis, amounts deposited in the Certificate
Distribution Account pursuant to Sections 5.02 and 5.05 of the Sale and
Servicing Agreement with respect to such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificate-holder the statement or statements provided to the Owner Trustee by
the Master Servicer pursuant to Section 5.07 of the Sale and Servicing Agreement
with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. If there is a
possibility that withholding tax is payable with respect to a distribution, the
Owner Trustee may in its sole discretion withhold such amounts in accordance
with this paragraph (c).
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Section 5.03. Method of Payment. Subject to Section 9.01(c) respecting
the final payment upon retirement of each Trust Certificate, distributions
required to be made to each Certificateholder of record on the related Record
Date shall be made by check mailed to such Certificateholder at the address of
such Holder appearing in the Certificate Register (or, if DTC, its nominee or a
Clearing Agency is the relevant Certificateholder, by wire transfer of
immediately available funds or pursuant to other arrangements), the amount to be
distributed to such Certificateholder pursuant to such Holder's Trust
Certificates.
Section 5.04. No Segregation of Monies; No Interest. Subject to Sections
5.01 and 5.02, monies received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
Section 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (c) file such tax returns relating to the Trust
(including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect or cause to be collected any withholding tax as described in and
in accordance with Section 5.02(c) with respect to income or distributions to
Owners. The Owner Trustee shall elect under Section 1278 of the Code to include
in income currently any market discount that accrues with respect to the
Contracts. The Owner Trustee shall not make the election provided under Section
754 of the Code.
Section 5.06. Signature on Returns; Tax Matters Partner.
(a) The Company shall sign on behalf of the Trust the tax returns of the
Trust.
(b) The Company shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.01. General Authority. Subject to the provisions and
limitations of Sections 2.03 and 2.06, the Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Owner Trustee is further authorized
from time to time to take such action as the Administrator recommends with
respect to the Basic Documents.
Section 6.02. General Duties. Subject to the provisions and limitations
of Sections 2.03 and 2.06, it shall be the duty of the Owner Trustee to
discharge (or cause to be discharged through the Administrator or such agents as
shall be appointed with the consent of the Insurer) all of its responsibilities
pursuant to the terms of this Agreement and the other Basic Documents to which
the Trust is a party and to administer the Trust in the interest of the Owners,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Without limiting the foregoing, the Owner Trustee shall on behalf of
the Trust file and prove any claim or claims that may exist against the Company
in connection with any claims paying procedure as part of an insolvency or
receivership proceeding involving the Company. Notwithstanding the foregoing,
the Owner Trustee shall be deemed to have discharged its duties and
responsibilities hereunder and under the other Basic Documents to the extent the
Administrator has agreed in the Administration Agreement to perform any act or
to discharge any duty of the Owner Trustee hereunder or under any Basic
Document, and the Owner Trustee shall not be held liable for the default or
failure of the Administrator to carry out its obligations under the
Administration Agreement.
Section 6.03. Action Upon Instruction.
(a) Subject to Article Four, in accordance with the terms of the Basic
Documents, the Insurer (so long as an Insurer Default shall not have occurred
and be continuing) or the Owners (if an Insurer Default shall have occurred and
be continuing) (the "Instructing Party") may by written instruction direct the
Owner Trustee in the management of the Trust. Such direction may be exercised at
any time by written instruction of the Instructing Party pursuant to Article
Four.
(b) The Owner Trustee shall not be required to take any action hereunder
or under any other Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any other Basic Document or is otherwise contrary to law.
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(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any other Basic Document, the Owner Trustee shall promptly give notice (in such
form as shall be appropriate under the circumstances) to the Instructing Party
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Instructing Party received, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this Agreement and
the other Basic Documents, as it shall deem to be in the best interests of the
Owners, and shall have no liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any other Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Instructing
Party requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Agreement or the other Basic
Documents, as it shall deem to be in the best interests of the Owners, and shall
have no liability to any Person for such action or inaction.
Section 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any other Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any other Basic Document. The Owner Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any liens (other than the lien of the
Indenture) on any part of the Trust Estate that result from actions by, or
claims against, the Owner Trustee that are not related to the ownership or the
administration of the Trust Estate.
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Section 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Trust Estate except in accordance with
(i) the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) the other Basic Documents and (iii) any
document or instruction delivered to the Owner Trustee pursuant to Section 6.03.
Section 6.06. Restrictions. The Owner Trustee shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal or state income tax
purposes. The Owners shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
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ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
Section 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Trust Estate upon the terms of this Agreement and the other Basic
Documents. The Owner Trustee shall not be answerable or accountable hereunder or
under any other Basic Document under any circumstances, except (i) for its own
willful misconduct or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Administrator or any Owner;
(c) no provision of this Agreement or any other Basic Document
shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights or
powers hereunder or under any other Basic Document if the Owner Trustee
shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes or the Trust
Certificates;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or the Insurer or for the form,
character, genuineness, sufficiency, value or validity of any of the
Trust Estate, or for or in respect of the validity or sufficiency of the
Basic Documents, other than the certificate of authentication on the
Trust Certificates, and the Owner Trustee shall in no event assume or
incur any liability, duty or obligation to any Noteholder or to any
Owner, other than as expressly provided for herein or expressly agreed
to in the other Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, WFS Financial Auto Loans, Inc., as
Seller or Depositor, the Insurer, the Indenture Trustee or the Master
Servicer under any of the Basic Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the obligations
of the Trust under this Agreement or the other Basic Documents that are
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required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Master
Servicer or WFS Financial Auto Loans, Inc. as Seller or Depositor under
the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any other Basic Document,
at the request, order or direction of the Instructing Party, unless such
Instructing Party has offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may
be incurred by the Owner Trustee therein or thereby; the right of the
Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any other Basic Document shall not be construed as a
duty, and the Owner Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act.
Section 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
Section 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, the Owners and the Insurer that:
(a) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will
be executed and delivered by one of its officers who is duly authorized
to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee or
any judgment or order binding on it, or constitute any default under its
charter documents or bylaws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound or result in the creation or imposition of any
lien, charge or encumbrance on the Trust Estate resulting from actions
by or claims against the Owner Trustee individually which are unrelated
to this Agreement or the other Basic Documents.
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Section 7.04. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the other
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any other Basic Document.
Section 7.05. Not Acting in Individual Capacity. Except as otherwise
provided in this Article Seven, in accepting the trusts hereby created, Chase
Manhattan Bank Delaware acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any other Basic
Document shall look only to the Trust Estate for payment or satisfaction
thereof.
Section 7.06. Owner Trustee Not Liable for Trust Certificates, Notes or
Contracts. The recitals contained herein and in the Trust Certificates (other
than the signature of the Owner Trustee and the certificate of authentication on
the Trust Certificates) shall be taken as the statements of the Depositor, and
the Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of this
Agreement, any other Basic Document or the Trust Certificates (other than the
signature of the Owner Trustee and the certificate of authentication on the
Trust Certificates and the representations and warranties in Section 7.03) or
the Notes, or of any Contract or related documents. The Owner Trustee shall at
no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Contract, or the perfection and
priority of any security interest created by any Contract in any Financed
Vehicle or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust Estate or its ability to generate the
payments to be distributed to Certificateholders
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under this Agreement or the Noteholders under the Indenture, including, without
limitation, the existence, condition and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence and
contents of any Contract on any computer or other record thereof; the validity
of the assignment of any Contract to the Trust or of any intervening assignment;
the completeness of any Contract; the performance or enforcement of any
Contract; the compliance by the Depositor, the Insurer or the Master Servicer
with any warranty or representation made under any Basic Document or in any
related document or the accuracy of any such warranty or representation; or any
action of the Administrator, the Indenture Trustee or the Master Servicer or any
subservicer taken in the name of the Owner Trustee.
Section 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Insurer, the Administrator, the Indenture Trustee and the Master Servicer in
banking transactions with the same rights as it would have if it were not Owner
Trustee.
Section 7.08. Pennsylvania Motor Vehicle Sales Finance Act Licenses. The
Owner Trustee, in its individual capacity, shall use its best efforts to
maintain, and the Owner Trustee, as Owner Trustee, shall cause the Trust to use
its best efforts to maintain, the effectiveness of all licenses required under
the Pennsylvania Motor Vehicle Sales Finance Act in connection with this
Agreement and the other Basic Documents and the transactions contemplated hereby
and thereby until such time as the Trust shall terminate in accordance with the
terms hereof.
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ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
Section 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Depositor for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.
Section 8.02. Indemnification. The Company shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the other Basic Documents, the Trust
Estate, the administration of the Trust Estate or the action or inaction of the
Owner Trustee hereunder, except only that the Company shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.01. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In the
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Depositor, which approval shall not be
unreasonably withheld.
Section 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article shall be deemed not to be a part of the
Trust Estate immediately after such payment.
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ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
Section 9.01. Termination of Trust Agreement.
(a) This Agreement (other than Article Eight) and the Trust shall
terminate and be of no further force or effect upon the earlier of (i) final
distribution by the Owner Trustee of all monies or other property or proceeds of
the Trust Estate in accordance with the terms of the Indenture, the Sale and
Servicing Agreement and Article Five, (ii) the expiration of 21 years from the
death of the survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James's, living on the date
hereof and (iii) the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner, other than the Company as
described in Section 9.02, shall not (i) operate to terminate this Agreement or
the Trust, (ii) entitle such Owner's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of all or any part of the Trust or Trust Estate or (iii) otherwise
affect the rights, obligations and liabilities of the parties hereto.
Notwithstanding the foregoing, the obligation of the Owner Trustee to make draws
upon the Certificate Policy shall survive the termination of the Trust until the
end of any preference period associated with the payments previously made with
respect to the Trust Certificates or termination of the Trust.
(b) Except as provided in Section 9.01(a), neither the Depositor, the
Company, the Insurer nor any Owner shall be entitled to revoke or terminate the
Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Master Servicer
given pursuant to Section 9.01(c) of the Sale and Servicing Agreement and no
later than 20 days prior to such termination, stating (i) the Distribution Date
upon or with respect to which final payment of the Trust Certificates shall be
made upon presentation and surrender of the Trust Certificates at the office of
the Paying Agent in the City of New York therein designated, (ii) the amount of
any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Trust Certificates at the office of the Paying
Agent therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at
the time such notice is given to Certificateholders. Upon presentation and
surrender of the Trust Certificates, the Paying Agent shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 5.02. In addition, the Owner Trustee shall notify the
Rating Agencies upon the final payment of the Trust Certificates.
(d) In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining
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<PAGE> 37
Certificateholders to surrender their Trust Certificates for cancellation and
receive the final distribution with respect thereto. If within one year after
the second notice all the Trust Certificates shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Trust Certificates, and the cost thereof shall be
paid out of the funds and other assets that shall remain subject to this
Agreement. Any funds remaining in the Trust after exhaustion of such remedies
at least 18 months after the date of termination shall be distributed by the
Owner Trustee to a charity designated by the Master Servicer.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
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<PAGE> 38
ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least Baa3 by Moody's and
A-1 by Standard & Poor's. If such corporation shall publish reports of condition
at least annually pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of this Section, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 10.02.
Section 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator and the Insurer. Upon
receiving such notice of resignation, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee; provided that the Depositor shall have received written
confirmation from each Rating Agency that the proposed appointment will not
result in an increased capital charge to the Insurer by either Rating Agency. If
no successor Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or the Insurer may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator, with the consent of the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) may remove the Owner Trustee. If the Administrator shall remove the
Owner Trustee under the authority of the immediately preceding sentence, the
Administrator shall promptly appoint a successor Owner Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee,
and shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03
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<PAGE> 39
and payment of all fees and expenses owed to the outgoing Owner Trustee. The
Administrator shall provide notice of such resignation or removal of the Owner
Trustee to each Rating Agency.
Section 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective,
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall, upon payment of its fees and
expenses, deliver to the successor Owner Trustee all documents and statements
and monies held by it under this Agreement; and the Administrator and the
predecessor Owner Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Insurer, the Indenture Trustee, the Noteholders and each
Rating Agency. If the Administrator shall fail to mail such notice within ten
days after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
Section 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to each Rating Agency.
Section 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any Financed Vehicle may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Trust Estate, and
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<PAGE> 40
to vest in such Person, in such capacity, such title to the Trust or any part
thereof and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Administrator and the Owner
Trustee 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 Owner Trustee alone shall have the power to make such appointment.
No co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor Owner Trustee pursuant to Section 10.01
except that such co-trustee or successor trustee shall have (or have a parent
that has) a rating of at least Baa3 by Moody's and A-1 by Standard & Poor's, and
no notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner 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 Owner 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 Owner
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 Estate 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 Owner
Trustee;
(b) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(c) the Administrator and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner 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 appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of or affording protection to, the Owner
Trustee. Each such instrument shall be filed with the Owner Trustee and a copy
thereof given to the Administrator and the Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as 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
Agreement 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
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<PAGE> 41
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
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<PAGE> 42
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Supplements and Amendments.
(a) This Agreement may be amended by the Depositor, the Company and the
Owner Trustee, with the prior written consent of the Insurer (so long an Insurer
Default shall not have occurred and be continuing), without the consent of any
of the Noteholders or the Certificateholders, to cure any ambiguity, to correct
or supplement any provisions in this Agreement or to add any other provisions
with respect to matters or questions arising under this Agreement that shall not
be inconsistent with the provisions of this Agreement; provided, however, that
any such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Noteholder or
Certificateholder or result in the creation of a new security.
(b) This Agreement may also be amended from time to time with the prior
written consent of the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) by the Depositor, the Company and the Owner Trustee,
with the consent of the Holders of Trust Certificates evidencing not less than
51% of the Certificate Balance (which consent of any Holder of a Note or Trust
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Note or Trust Certificate, as the case may be, issued upon the
transfer thereof or in exchange thereof or in lieu thereof whether or not
notation of such consent is made thereon) and, if such amendment materially and
adversely affects the interests of the Noteholders, with the consent of Holders
(as such term is defined in the Indenture) of Notes evidencing not less than 51%
of the Outstanding Amount of the Notes, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall increase or
reduce in any manner the amount of, or accelerate or delay the timing of, (i)
collections of payments on Contracts or distributions that shall be required to
be made for the benefit of the Noteholders or the Certificateholders or any
Interest Rate or the Pass-Through Rate or (ii) reduce the aforesaid percentage
of the Outstanding Amount of the Notes and the Certificate Balance required to
consent to any such amendment, without the consent of the Insurer and the
Holders of all outstanding Notes and Trust Certificates and further provided
that any such action will not, in an opinion of counsel satisfactory to the
Owner Trustee, result in the creation of a new security.
(c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent, together with a copy thereof, to the Indenture Trustee, the Insurer,
the Administrator and each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder. It shall not be necessary for
the consent of Certificateholders, Noteholders or the Indenture Trustee pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve
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<PAGE> 43
the substance thereof. The manner of obtaining such consents (and any other
consents of Certificateholders provided for in this Agreement or in any other
Basic Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
(e) Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
(f) In connection with the execution of any amendment to this Agreement
or any other Basic Document to which the Issuer is a party and for which
amendment the Owner Trustee's consent is sought, the Owner Trustee shall be
entitled to receive and conclusively rely upon an Opinion of Counsel to the
effect that such amendment is authorized or permitted by the Basic Documents and
that all conditions precedent in the Basic Documents for the execution and
delivery thereof by the Issuer or the Owner Trustee, as the case may be, have
been satisfied. The Owner Trustee may, but shall not be obligated to, enter into
any such amendment that affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 11.02. No Legal Title to Trust Estate in Owners. The Owners
shall not have legal title to any part of the Trust Estate. The Owners shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with Articles Five and Nine. No transfer, by
operation of law or otherwise, of any right, title or interest of the Owners to
and in their ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.
Section 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Company, the Owners, the Administrator and, to the
extent expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07), whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Trust Estate or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
Section 11.04. Notices. All demands, notices and communications under
this Agreement shall be in writing personally delivered or mailed by certified
mail, return receipt requested, and shall be deemed to have been duly given upon
receipt in the case of (a) the Owner Trustee, at the Owner Trustee Corporate
Trust Office; (b) the Depositor, at 23 Pasteur Road, Irvine, California 92618,
Attention: Legal Department; (c) the Company, at 23 Pasteur Road, Irvine,
California 92618, Attention: Legal Department; (d) the Insurer, at 350 Park
Avenue, New York, New York 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 Financial
Security refers to an Event of Default, a claim on the Certificate Policy or the
Note Policy or with respect to which failure on the part of Financial Security
to respond shall be deemed to constitute consent or acceptance, then a copy of
such other notice or other communication
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should also be sent to the attention of the General Counsel and the Head --
Financial Guaranty Group "URGENT MATERIAL ENCLOSED"); (e) the Certificate
Registrar or the agent for the Owner Trustee, at the address indicated under the
definition of "Owner Trustee Corporate Trust Office"; or (f) as to each party,
at such other address as shall be designated by such party in a written notice
to each other party. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
Section 11.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Trust
Certificates or the rights of the Holders thereof.
Section 11.06. Counterparts. This Agreement 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 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor, the Company, the Insurer, the Owner Trustee and their respective
successors and permitted assigns and each Owner and its successors and permitted
assigns, all as herein provided. Any request, notice, direction, consent, waiver
or other instrument or action by an Owner shall bind the successors and assigns
of such Owner.
Section 11.08. No Petition.
(a) The Depositor will not at any time institute against the Trust or
the Company any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, this Agreement or any of the other Basic
Documents.
(b) The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee
and each Noteholder, by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Seller,
the Depositor, the Company or the Trust, or join in any institution against the
Seller, the Depositor, the Company or the Trust of, any bankruptcy proceedings
under any United States federal or state bankruptcy or similar law in connection
with any obligations relating to the Trust Certificates, the Notes, this
Agreement or any of the other Basic Documents.
(c) The Company will not at any time institute against the Trust, the
Seller or the Depositor any bankruptcy proceedings under any United States
federal or state bankruptcy or
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similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Agreement or any of the other Basic Documents.
Section 11.09. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Company, the Master Servicer, the
Seller, the Administrator, the Owner Trustee, the Indenture Trustee or any of
their respective Affiliates and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated in this
Agreement, the Trust Certificates or the other Basic Documents.
Section 11.10. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof pursuant to Section 3.03, the Certificates shall be
deemed fully paid.
Section 11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.12. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.13. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's compensation pursuant to Section
3 of the Administration Agreement and shall reimburse the Administrator for all
expenses and liabilities of the Administrator incurred thereunder.
Section 11.14. Insurer Default or Insolvency. If a default under the
Note Policy or the Certificate Policy has occurred and is continuing or a
Insurer Insolvency has occurred, any provision of this Agreement or any other
Basic Document giving the Insurer the right to direct, appoint or consent to,
approve of, or take any action under this Agreement, shall be inoperative during
the period of such default or the period from and after such Insurer Insolvency
and such consent or approval shall be deemed to have been given for the purpose
of such provisions.
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<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
WFS FINANCIAL AUTO LOANS, INC.,
as Depositor
By:
------------------------------------------
Name:
Title:
WFS INVESTMENTS, INC.
By:
------------------------------------------
Name:
Title:
FINANCIAL SECURITY ASSURANCE INC.
By:
------------------------------------------
Name:
Title:
CHASE MANHATTAN BANK DELAWARE,
as Owner Trustee
By:
------------------------------------------
Name:
Title:
41
<PAGE> 47
EXHIBIT A
FORM OF CERTIFICATE DEPOSITORY AGREEMENT
A-1
<PAGE> 48
EXHIBIT B
CERTIFICATE OF TRUST OF
WFS FINANCIAL 1998-C OWNER TRUST
This Certificate of Trust of WFS Financial 1998-C Owner Trust (the
"Trust"), dated as of November __, 1998, is being duly executed and filed by
Chase Manhattan Bank Delaware, a Delaware corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, Section 3801
et seq.).
1. Name. The name of the business trust formed hereby is WFS Financial
1998-B Owner Trust.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is Chase Manhattan Bank Delaware, 1201 Market
Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration
Department.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but solely as Owner
Trustee
By:
-----------------------------------------------
Name:
Title:
B-1
<PAGE> 49
EXHIBIT C
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES TO THE
EXTENT DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.
UNLESS THIS TRUST CERTIFICATE 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 TRUST
CERTIFICATE 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.
[TO BE INSERTED ON COMPANY CERTIFICATE--
THIS TRUST CERTIFICATE IS NON-TRANSFERABLE]
WFS FINANCIAL 1998-C OWNER TRUST
_____% AUTO RECEIVABLE BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes, among other things, (i) a pool of retail installment
sale contracts secured by new and used automobiles and light duty trucks sold to
the Trust by WFS Financial Auto Loans, Inc. and (ii) a Financial Guaranty
Insurance Policy issued by Financial Security Assurance Inc. (the "Certificate
Policy"). The Certificate Final Distribution Date is _____ 20, 20__.
(This Trust Certificate does not represent an interest in or obligation of WFS
Financial Auto Loans, Inc., WFS Financial Inc, WFS Investments, Inc. or any of
their respective affiliates, and is not a deposit and is not insured by the
Federal Deposit Insurance Corporation.)
Full and complete payment of the Certificate Distributable Amount on each
Distribution Date is unconditionally and irrevocably guaranteed pursuant to the
Certificate Policy.
NUMBER C-1 $__________
CUSIP NO. __________
THIS CERTIFIES THAT Cede & Co. is the registered owner of a
________________ ________________________________ Dollars ($__________)
nonassessable, fully-paid, fractional undivided interest in the WFS Financial
1998-C Owner Trust (the "Trust") formed by WFS Financial Auto Loans, Inc., a
California corporation (the "Depositor").
C-1
<PAGE> 50
The Trust was created pursuant to a Trust Agreement, dated as of
November __, 1998, as amended and restated as of November __, 1998 (as amended
and supplemented from time to time, the "Trust Agreement"), among WFS Financial
Auto Loans, Inc. (the "Depositor"), WFS Investments, Inc. (the "Company"),
Financial Security Assurance Inc. (the "Insurer") and Chase Manhattan Bank
Delaware, as owner trustee (the "Owner Trustee"), a summary of certain of the
pertinent provisions of which is set forth below. Capitalized terms used herein
that are not otherwise defined shall have the meanings ascribed thereto in the
Trust Agreement.
This Trust Certificate is one of the duly authorized Trust Certificates
designated as "_____% Auto Receivable Backed Certificates" (the "Trust
Certificates"). Issued under the Indenture, dated as of November 1, 1998 (the
"Indenture"), between the Trust and Bankers Trust Company as Indenture Trustee,
are four classes of Notes designated as "_____% Auto Receivable Backed Notes,
Class A-1", "_____% Auto Receivable Backed Notes, Class A-2", "_____% Auto
Receivable Backed Notes, Class A-3", "_____% Auto Receivable Backed Notes, Class
A-4," "____% Auto Receivable Backed Notes, Class A-5", (collectively, the
"Notes"). This Trust Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
Holder of this Trust Certificate by virtue of its acceptance hereof assents and
by which such Holder is bound. The property of the Trust includes, among other
things, (i) a pool of retail installment sale contracts (the "Contracts") for
new and used automobiles and light duty trucks (the "Financed Vehicles") and
(ii) the Certificate Policy.
Under the Trust Agreement, there will be distributed on each
________________ 20, ________________ 20, ________________ 20 and
________________ 20, of each year or, if any such day is not a Business Day, the
next succeeding Business Day (each, a "Distribution Date"), commencing on
________________ ___, 1998 and ending no later than ________________ ___, 20__
to the person in whose name this Trust Certificate is registered at the close of
business on the last calendar day immediately preceding the related Distribution
Date or, if Definitive Trust Certificates are issued, the 15th day of the
immediately preceding calendar month (each, a "Record Date"), such
Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Distribution Date.
The holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders to the extent described in the
Sale and Servicing Agreement and the Indenture.
It is the intent of the Seller, the Master Servicer, the Company and the
Certificate-holders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust will be treated as
a partnership and the Certificate-holders (including the Company) will be
treated as partners in that partnership. The Company and the other
Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to
take no action inconsistent with the treatment of, the Trust Certificates for
such tax purposes as partnership interests in the Trust.
C-2
<PAGE> 51
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial interest
in a Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Trust, the Seller, the Depositor or the Company, or join in any institution
against the Trust, the Seller, the Depositor or the Company 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 Trust Certificates, the
Notes, the Trust Agreement or any of the other Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon,
except that with respect to Trust Certificates registered on the Record Date in
the name of the nominee of the Clearing Agency (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. Except as otherwise provided in
the Trust Agreement and notwithstanding the above, the final distribution on
this Trust Certificate will be made after due notice by the Owner Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Trust Certificate at the office of the Paying Agent or the office or agency
maintained for that purpose by the Owner Trustee in The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or any other Basic Document or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
C-3
<PAGE> 52
[REVERSE OF CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an interest
in, the Seller, the Depositor, the Company, the Master Servicer, the Owner
Trustee or any of their respective Affiliates and no recourse may be had against
such parties or their assets, except as expressly set forth or contemplated
herein or in the Trust Agreement or the other Basic Documents. In addition, this
Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Contracts (and certain other amounts), and
amounts payable under the Certificate Policy, in each case as more specifically
set forth herein and in the Sale and Servicing Agreement. Copies of the Sale and
Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any, designated
by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
parties thereto and the rights of the Certificateholders under the Trust
Agreement at any time by the parties thereto with the consent of Holders of
Trust Certificates evidencing not less than 51% of the Certificate Balance and,
if such amendment materially and adversely affects the interests of the
Noteholders, with the consent of Holders of Notes evidencing not less than 51%
of the Outstanding Amount of the Notes. Any such consent by the Holder of this
Trust Certificate shall be conclusive and binding on such Holder and on all
future Holders of this Trust Certificate and of any Trust Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof, whether or
not notation of such consent is made upon this Trust Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Trust Certificates or the
Notes.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
in The City of New York, accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Trust Certificates of authorized denominations
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee. The initial Certificate Registrar appointed under the
Trust Agreement is The Chase Manhattan Bank.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $1,000 and in integral multiples of $1,000 in excess thereof. As provided in
the Trust Agreement and subject to certain limitations therein set forth, Trust
Certificates are exchangeable for new Trust Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may
C-4
<PAGE> 53
require payment of a sum sufficient to cover any tax or governmental charge
payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Paying Agent and any
of their respective agents may treat the Person in whose name this Trust
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar, the Paying Agent or any such agent
shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Trust Estate. The Seller may at its option purchase the Trust Estate
at a price specified in the Sale and Servicing Agreement, and such purchase of
the Contracts and other property of the Trust will effect early retirement of
the Trust Certificates; however, such right of purchase is exercisable only as
of 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.
The Trust Certificates may not be acquired by a Benefit Plan. By
accepting and holding this Trust Certificate, the Holder hereof or, in the case
of Book-Entry Trust Certificate, by accepting a beneficial interest in this
Trust Certificate, the related Certificate Owner, shall be deemed to have
represented and warranted that it is not a Benefit Plan and is not acquiring
this Trust Certificate or an interest therein for the account of a Benefit Plan.
C-5
<PAGE> 54
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
Dated: November ___, 1998 WFS FINANCIAL 1998-C OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE, not in its individual
capacity but solely as Owner Trustee
By:
----------------------------------------
Authorized Signatory
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the
within-mentioned Trust Agreement.
THE CHASE MANHATTAN BANK, CHASE MANHATTAN BANK DELAWARE,
as Certificate Registrar not in its individual capacity but
solely as Owner Trustee
OR
By: By:
------------------------------- -------------------------------
Authorized Signatory Authorized Signatory
C-6
<PAGE> 55
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 Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
Signature Guaranteed:
- ----------------------------------- ----------------------------------------
NOTICE: Signature(s) must be NOTICE: The signature to this assignment
guaranteed by an eligible guarantor must correspond with the name of the
institution. registered owner as it appears on the
face of the within Trust Certificate in
every particular, without alteration or
enlargement or any change whatever.
C-7
<PAGE> 1
EXHIBIT 4.2
================================================================================
WFS FINANCIAL 1998-C OWNER TRUST,
as Issuer,
and
BANKERS TRUST COMPANY,
as Trustee
------------------
INDENTURE
Dated as of November 1, 1998
------------------
$____________
Auto Receivable Backed Notes
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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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
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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
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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
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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
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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 Class A-5 Note.................................................. G-1
Exhibit H - Form of Note Assignment................................................. H-1
Exhibit I - Form of Note Policy..................................................... I-1
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<PAGE> 7
This Indenture, dated as of November 1, 1998, is among WFS Financial
1998-C 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"), _____% Auto
Receivable Backed Notes, Class A-4 (the "Class A-4 Notes") and ____% Auto
Receivable Backed Notes, Class A-5 (the "Class A-5 Notes" and, together with
the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
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 November 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 November 1, 1998 and all other
proceeds received on or in respect of such Contracts (other than payments of
Monthly P&I due prior to November 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. Capitalized terms used herein that are not
otherwise defined herein shall have the meaning ascribed thereto in the Sale and
Servicing Agreement.
"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.
"Class A-5 Final Distribution Date" means the November 20, 2003
Distribution Date.
"Class A-5 Interest Rate" means _____% per annum (computed on the basis
of a 360-day year of twelve 30-day months).
"Class A-5 Notes" means the Class A-5 Notes, substantially in the form
of Exhibit G.
"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 November __, 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
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(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
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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 November 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, the Class A-4 Interest Rate or the
Class A-5 Interest Rate, as applicable.
"Issuer" means WFS Financial 1998-C 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, a
Class A-4 Note, or a Class A-5 Note.
"Note Depository Agreement" means the agreement dated November __, 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.
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"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
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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
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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.
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"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 November __,
1998, as amended and restated as of November __, 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:
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"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, the Class A-4 Notes and the Class A-5 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, (iv) $__________ of Class A-4
Notes and (v) $___________ of Class A-5 Notes. The aggregate principal amount of
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes and Class A-5
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 51% 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, (iv) the Class A-4 Notes, to the Class A-4 Noteholders, (v) the
Class A-5 Notes, to the Class A-5 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-5
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) pro rata to Holders of the Class A-2 Notes and Class A-5
Notes for amounts due and unpaid on the Class A-2 Notes and Class A-5
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-2 Notes
and Class A-5 Notes for principal, until the Outstanding Amount of the
Class A-2 Notes is reduced to zero;
(v) pro rata to Holders of the Class A-3 Notes and Class A-5
Notes for amounts due and unpaid on the Class A-3 Notes and Class A-5
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-3 Notes
and Class A-5 Notes for principal, until the Outstanding Amount of the
Class A-3 Notes is reduced to zero;
(vi) pro rata to Holders of the Class A-4 Notes and Class A-5
Notes for amounts due and unpaid on the Class A-4 Notes and Class A-5
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-4 Notes
and Class A-5 Notes for principal, until the Outstanding Amount of the
Class A-4 Notes and Class A-5 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, the Note Principal
Distributable Amount until the Outstanding Amount of the Class A-1 Notes
is reduced to zero;
(iii) (A) to the Class A-2 Noteholders in reduction of the
Outstanding Amount of the Class A-2 Notes, the Class A2-4 Percentage of
the Note Principal Distributable Amount until the Outstanding Amount of
the Class A-2 Notes is reduced to zero and (B) to the Class A-5
Noteholders in reduction of the Outstanding Amount of the Class A-5
Notes, the Class A-5 Percentage of the Note Principal Distributable
Amount;
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(iv) (A) to the Class A-3 Noteholders in reduction of the
Outstanding Amount of the Class A-3 Notes the Class A2-4 Percentage of
the Note Principal Distributable Amount until the Outstanding Amount of
the Class A-3 Notes is reduced to zero and (B) to the A-5 Noteholders in
reduction of the Outstanding Amount of the Class A-5 Notes, the Class
A-5 Percentage of the Note Principal Distributable Amount;
(v) (A) to the Class A-4 Noteholders in reduction of the
Outstanding Amount of the Class A-4 Notes the Class A2-4 Percentage of
the Note Principal Distributable Amount until the Outstanding Amount of
the Class A-4 Notes is reduced to zero and (B) to the A-5 Noteholders in
reduction of the Outstanding Amount of the Class A-5 Notes, the Class
A-5 Percentage of the Note Principal Distributable Amount; and
(vi) to the Class A-5 Noteholders, in reduction of the
Outstanding Amount of the Class A-5 Notes, and Class A-5 Percentage of
the Principal Note Distributable Amount.
(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.
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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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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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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-C 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:
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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]
-----------------------------------------
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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]
-----------------------------------------
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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-C OWNER TRUST
____% AUTO RECEIVABLE BACKED NOTE, CLASS A-1
REGISTERED $___________
No. R-A1 CUSIP NO. __________
WFS Financial 1998-C Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ___________________ Dollars ($___________), 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 November 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: November __, 1998 WFS FINANCIAL 1998-C 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 November 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, the
Class A-4 Notes and the Class A-5 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-C OWNER TRUST
____% AUTO RECEIVABLE BACKED NOTE, CLASS A-2
REGISTERED $___________
No. R-A2 CUSIP NO. __________
WFS Financial 1998-C Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ________________________ Dollars ($___________), 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 November 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: November __, 1998 WFS FINANCIAL 1998-C 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 November 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 1 the
Class A-4 Notes and the Class A-5 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.
D-4
<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,
THE CLASS A-2 NOTES AND THE CLASS A-5 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-C OWNER TRUST
_____% AUTO RECEIVABLE BACKED NOTE, CLASS A-3
REGISTERED $___________
No. R-A3 CUSIP NO. __________
WFS Financial 1998-C Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ________________________ Dollars ($___________), 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 November 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: November __, 1998 WFS FINANCIAL 1998-C 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 November 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, the Class
A-4 Notes and the Class A-5 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.
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<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
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<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, THE CLASS A-3 NOTES AND THE CLASS A-5 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-C OWNER TRUST
____% AUTO RECEIVABLE BACKED NOTE, CLASS A-4
REGISTERED $__________
No. R-A4 CUSIP NO. __________
WFS Financial 1998-C Owner Trust, a business trust organized and
existing under the laws of the State of Delaware (the "Issuer"), for value
received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of _______________________________ Dollars ($__________), 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 November 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: November __, 1998 WFS FINANCIAL 1998-C 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 November 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, the
Class A-4 Notes and the Class A-5 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.
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<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 CLASS A-5 NOTE
THIS NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A-1 NOTES CLASS A-2
NOTES, CLASS A-3 NOTES AND CLASS A-4 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-C OWNER TRUST
_.___% AUTO RECEIVABLE BACKED NOTE, CLASS A-5
REGISTERED $______________
No. R-A5 CUSIP NO. 928951 ___
WFS Financial 1998-C Owner Trust, a business trust organized and existing under
the laws of the State of Delaware (the "Issuer"), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal sum of
_______ Million Dollars ($___________), 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, 200_ (the "Class A-5 Final Distribution Date")
and the Redemption
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<PAGE> 110
Date, if any, selected pursuant to the Indenture. No payments of principal of
the Class A-5 Notes shall be made until the principal amount of the Class A-1
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 November 1, 1998. The Issuer shall pay interest
on overdue installments of interest at the Class A-5 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.
G-2
<PAGE> 111
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: _____ __, 1998 WFS FINANCIAL 1998-C 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
G-3
<PAGE> 112
[REVERSE OF CLASS A-5 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer, designated
as its _.___% Auto Receivable Backed Notes, Class A-5" (the "Class A-5 Notes"),
all issued under an Indenture, dated as of November 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, the Class A-4
Notes and the Class A-5 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-5 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-5
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-5 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-5 Notes shall be made pro
rata to the Class A-5 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 Clearing Agency (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
G-4
<PAGE> 113
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.
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
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<PAGE> 114
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 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.
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<PAGE> 115
EXHIBIT H
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)
H-1
<PAGE> 116
EXHIBIT I
FORM OF NOTE POLICY
I-1
<PAGE> 1
EXHIBIT 10.2
================================================================================
SALE AND SERVICING AGREEMENT
among
WFS FINANCIAL 1998-C OWNER TRUST,
as Issuer,
WFS FINANCIAL AUTO LOANS, INC.,
as Seller,
and
WFS FINANCIAL INC,
as Master Servicer
Dated as of November 1, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions.............................................................. 1
Section 1.02. Usage of Terms........................................................... 25
Section 1.03. Section References....................................................... 26
Section 1.04. Calculations............................................................. 26
Section 1.05. Accounting Terms......................................................... 26
ARTICLE TWO
CONVEYANCE OF CONTRACTS
Section 2.01. Conveyance of Contracts.................................................. 27
ARTICLE THREE
THE CONTRACTS
Section 3.01. Representations and Warranties of the Seller............................. 29
Section 3.02. Purchase of Certain Contracts............................................ 34
Section 3.03. Custody of Contract Files................................................ 34
Section 3.04. Duties of Master Servicer ............................................... 35
Section 3.05. Instructions; Authority to Act........................................... 36
Section 3.06. Indemnification.......................................................... 37
Section 3.07. Effective Period and Termination......................................... 37
Section 3.08. Nonpetition Covenant..................................................... 37
Section 3.09. Collecting Title Documents Not Delivered at the Closing Date............. 38
ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer................................................ 39
Section 4.02. Collection of Contract Payments.......................................... 43
Section 4.03. Realization upon Defaulted Contracts and Liquidated Contracts............ 43
Section 4.04. Insurance................................................................ 44
Section 4.05. Maintenance of Security Interests in Financed Vehicles................... 44
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Section 4.06. Covenants, Representations and Warranties of Master Servicer............. 44
Section 4.07. Repurchase of Contracts upon Breach...................................... 46
Section 4.08. Servicing Compensation................................................... 46
Section 4.09. Reporting by the Master Servicer......................................... 47
Section 4.10. Annual Statement as to Compliance........................................ 50
Section 4.11. Annual Independent Certified Public Accountants' Report.................. 50
Section 4.12. Access to Certain Documentation and Information Regarding Contracts...... 51
Section 4.13. Fidelity Bond............................................................ 51
Section 4.14. Indemnification; Third Party Claims...................................... 51
ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT;
STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts.......................................... 52
Section 5.02. Collections; Realization Upon Policies; Net Deposits..................... 54
Section 5.03. Application of Collections............................................... 56
Section 5.04. Advances and Nonrecoverable Advances; Repurchase Amounts................. 56
Section 5.05. Distributions............................................................ 57
Section 5.06. Spread Account........................................................... 59
Section 5.07. Statements to Securityholders............................................ 59
ARTICLE SIX
THE SELLER
Section 6.01. Corporate Existence...................................................... 61
Section 6.02. Liability of Seller; Indemnities......................................... 61
Section 6.03. Merger or Consolidation of, or Assumption of the Obligations of, Seller;
Certain Limitations...................................................... 62
Section 6.04. Limitation on Liability of Seller and Others............................. 63
Section 6.05. Seller Not to Resign..................................................... 64
ARTICLE SEVEN
THE MASTER SERVICER
Section 7.01. Liability of Master Servicer; Indemnities................................ 65
Section 7.02. Corporate Existence; Status as Master Servicer; Merger................... 66
Section 7.03. Performance of Obligations............................................... 66
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Section 7.04. Master Servicer Not to Resign; Assignment................................ 66
Section 7.05. Limitation on Liability of Master Servicer and Others.................... 67
ARTICLE EIGHT
DEFAULT
Section 8.01. Servicer Default......................................................... 69
Section 8.02. Trustee to Act; Appointment of Successor................................. 70
Section 8.03. Repayment of Advances.................................................... 71
Section 8.04. Notification to Noteholders and Certificateholders....................... 71
Section 8.05. Waiver of Past Defaults.................................................. 71
Section 8.06. Insurer Direction of Insolvency Proceedings.............................. 72
ARTICLE NINE
TERMINATION
Section 9.01. Optional Purchase of All Contracts....................................... 73
Section 9.02. Transfer to the Insurer.................................................. 74
ARTICLE TEN
MISCELLANEOUS
Section 10.01. Amendment................................................................ 75
Section 10.02. Protection of Title to Trust............................................. 76
Section 10.03. Governing Law............................................................ 78
Section 10.04. Notices.................................................................. 78
Section 10.05. Severability............................................................. 78
Section 10.06. Assignment............................................................... 79
Section 10.07. Third Party Beneficiaries................................................ 79
Section 10.08. Insurer Default or Insolvency............................................ 79
Section 10.09. Counterparts............................................................. 79
Section 10.10. Headings................................................................. 79
Section 10.11. Assignment by Issuer..................................................... 79
Section 10.12. Limitation of Liability of Owner Trustee................................. 79
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SCHEDULES
Schedule A Schedule of Contracts..................................................... SA-1
Schedule B Location of Contract Files................................................ SB-1
EXHIBITS
Exhibit A Form of Certificate Policy................................................ A-1
Exhibit B Form of Insurance Agreement............................................... B-1
Exhibit C Form of Note Policy....................................................... C-1
Exhibit D Form of RIC............................................................... D-1
Exhibit E Form of Subservicing Agreement............................................ E-1
Exhibit F Form of Distribution Date Statement....................................... F-1
</TABLE>
iv
<PAGE> 6
This SALE AND SERVICING AGREEMENT, dated as of November 1, 1998, is
among WFS Financial 1998-C Owner Trust (the "Issuer"), WFS Financial Auto Loans,
Inc. (the "Seller") and WFS Financial Inc ("WFS" or, in its capacity as Master
Servicer, the "Master Servicer").
WHEREAS, the Issuer desires to purchase from the Seller a portfolio of
receivables arising in connection with automobile retail installment sales
contracts and installment loans (collectively, the "Contracts") primarily
originated by new or used motor vehicle dealers and purchased by WFS, which
Contracts were subsequently sold by WFS to the Seller;
WHEREAS, the Seller is willing to sell the Contracts to the Issuer
pursuant to the terms hereof; and
WHEREAS, the Master Servicer is willing to service the Contracts
pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Accelerated Principal Distributable Amount" means, with respect to any
Distribution Date, an amount equal to the lesser of (i) the sum of one-twelfth
of __% of the Aggregate Scheduled Balance as of the first day of each month of
the Due Period relating to such Distribution Date and (ii) amounts remaining on
deposit in the Collection Account for such Distribution Date after giving effect
to the distributions pursuant to Section 5.05(a) without regard to the inclusion
of such amount as part of the Note Principal Distributable Amount or the
Certificate Principal Distributable Amount, as the case may be. The Accelerated
Principal Distributable Amount shall be allocated and distributed as follows:
(i) on each Distribution Date to but excluding the Distribution Date on which
the principal amount of the Class A-4 Notes and Class A-5 Notes has been reduced
to zero, to the Note Distribution Account; (ii) on the Distribution Date on
which the principal amount of the Class A-4 Notes and Class A-5 Notes is reduced
to zero, (A) to the Note Distribution Account in the amount necessary to reduce
the principal amount of the Class A-4 Notes and Class A-5 Notes to zero and (B)
to the Certificate Distribution Account, any remaining portion; and (ii) on each
Distribution Date thereafter, to and including the Distribution Date on which
the principal amount of the Certificates is reduced to zero, to the Certificate
Distribution Account.
"Advance" means the aggregate amount, as of a Master Servicer Report
Date, that the Master Servicer is required to advance in respect of the
Contracts pursuant to Section 5.04(a).
<PAGE> 7
"Affiliate" of any specified Person means 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 specified
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" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Net Liquidation Losses" means, with respect to any Due
Period, the aggregate of the amounts by which (i) the principal amount of each
Contract that became a Liquidated Contract pursuant to clause (ii) or (iv) of
the definition of the term "Liquidated Contract" during such Due Period plus
accrued and unpaid interest thereon (adjusted to the Net Contract Rate) to the
last Due Date in such Due Period exceeds (ii) the Net Liquidation Proceeds for
such Contract.
"Aggregate Scheduled Balance" means, with respect to any Distribution
Date and the Outstanding Contracts, the aggregate of the Scheduled Balances of
such Contracts as of the end of the Due Period immediately preceding such
Distribution Date.
"Aggregate Scheduled Balance Decline" means, with respect to any
Distribution Date, the amount by which the Aggregate Scheduled Balance as of the
immediately preceding Distribution Date (or the Cut-Off Date Aggregate Scheduled
Balance in the case of the first Distribution Date) exceeds the Aggregate
Scheduled Balance as of such Distribution Date.
"Amount Financed" means, with respect to a Contract, the amount advanced
under the Contract toward the purchase price of the related Financed Vehicle and
any related costs, exclusive of any amount allocable to the premium of
force-placed physical damage insurance covering such Financed Vehicle.
"APR" of a Contract means annual percentage rate and is the annual rate
of finance charges specified in such Contract.
"Assignments" means, collectively, (i) the original instrument of
assignment of a Contract and all other documents securing such Contract made by
the Seller to the Owner Trustee (or in the case of any Contract acquired by the
Seller from another Person, from such other Person to the Seller and from the
Seller to the Owner Trustee), and (ii) the original instrument granting a
security interest in such Contract and other documents made by the Owner Trustee
to the Insurer, which, in the case of clause (i) above, is in a form sufficient
under the laws of the jurisdiction under which the security interest in the
related Financed Vehicle arises to permit the assignee to exercise all rights
granted by the Obligor under such Contract and such other documents and all
rights available under applicable law to the Obligee under such Contract and
such other documents and, in the case of clause (ii) above, is in a form
sufficient under the laws of the jurisdiction under which the security interest
in the related Financed Vehicle arises to permit the Insurer, as a secured
party, to exercise, upon default, all rights granted by the Obligor under such
Contract and such other documents and all rights available under applicable law
to the Obligee under such Contract and which, in the case of either clause (i)
or (ii) above, may, to the extent permitted by the laws of such
2
<PAGE> 8
jurisdiction, be a blanket instrument of assignment covering other Contracts as
well and which may also, to the extent permitted by the laws of the jurisdiction
governing such Contract, be an instrument of assignment running directly from
the Seller to the Owner Trustee and the Insurer.
"Bank" means Western Financial Bank, and its successors.
"Basic Documents" shall have the meaning specified in the Indenture.
"Business Day" means any day that is not 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
government decree to remain closed.
"Calculation Day" means the last day of each calendar month.
"Certificate Balance" equals $__________ on the Closing Date, and, on
any date thereafter, equals the Original Certificate Balance, reduced by all
amounts allocable to principal previously distributed to Certificateholders.
"Certificate Deficiency Claim Amount" means, with respect to each
Distribution Date, the amount, if any, by which the Certificate Distributable
Amount for such Distribution Date exceeds the amount of Net Collections actually
deposited in the Certificate Distribution Account on such Distribution Date in
accordance with Section 5.05.
"Certificate Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificate Principal Distributable Amount and
the Certificate Interest Distributable Amount for such Distribution Date.
"Certificate Distribution Account" shall have the meaning specified in
the Trust Agreement.
"Certificate Final Distribution Date" means the ______ 20, 20__
Distribution Date.
"Certificate Interest Carryover Shortfall" means, 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.
"Certificate Interest Distributable Amount" means, 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. Interest with
3
<PAGE> 9
respect to the Certificates shall be computed on the basis of a 360-day year
consisting of twelve 30-day months for all purposes of this Agreement and the
other Basic Documents.
"Certificate Percentage" means (i) for each Distribution Date to but
excluding the Distribution Date on which the principal amount of the Class A-4
Notes and Class A-5 Notes is reduced to zero, zero; (ii) for the Distribution
Date on which the principal amount of the Class A-4 Notes and the Class A-5
Notes is reduced to zero, (A) zero until the principal amount of the Class A-4
Notes and the Class A-5 Notes has been reduced to zero and (B) with respect to
any remaining portion of the Principal Distributable Amount, 100%; and (iii) for
any Distribution Date thereafter, 100%.
"Certificate Policy" means the financial guaranty insurance policy
issued by the Insurer to the Owner Trustee on behalf of the Certificateholders,
the form of which is attached as Exhibit A hereto.
"Certificate Policy Claim Amount" means, with respect to each
Distribution Date, the amount, if any, by which the Certificate Distributable
Amount for such Distribution Date exceeds the sum of (i) the amount of Net
Collections actually deposited in the Certificate Distribution Account on such
Distribution Date in accordance with Section 5.05 plus (ii) the amount of the
Certificate Deficiency Claim Amount, if any, paid to the Certificate
Distribution Account from the Spread Account pursuant to a Deficiency Notice
delivered for such Distribution Date.
"Certificate Pool Factor" means, as of any Distribution Date, a
six-digit decimal figure equal to the Certificate Balance (after giving effect
to any reductions therein to be made on such Distribution Date) divided by the
Original Certificate Balance.
"Certificate Principal Carryover Shortfall" means, as 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.
"Certificate Principal Distributable Amount" means, 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 Distribution Date on which the
principal amount of the Class A-4 Notes and the Class A-5 Notes has been reduced
to zero, any Accelerated Principal Distributable Amounts remaining after such
reduction shall be included in the Certificate Principal Distributable Amount,
and on each Distribution Date thereafter, to and including the Distribution Date
on which the Certificate Balance is reduced to zero, the Accelerated Principal
Distributable Amount, if any, will be included in the Certificate Principal
Distributable Amount. Further, on the Certificate Final Distribution Date, the
amount required to be deposited into the Certificate Distribution Account will
include the amount necessary to reduce the Certificate Balance to zero.
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<PAGE> 10
"Certificate Quarterly Interest Distributable Amount" means, with
respect to any Distribution Date, 90 days of interest (or, in the case of the
first Distribution Date, interest accrued from and including November 1, 1998 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).
"Certificate Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date.
"Certificate Register" shall have the meaning specified in the Trust
Agreement.
"Certificateholders" shall have the meaning specified in the Trust
Agreement.
"Certificates" means the Trust Certificates (as such term is defined in
the Trust Agreement).
"Charge-Off Percentage" means, 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 became Liquidated Contracts pursuant to clauses (ii)
or (iv) of the definition of the term "Liquidated Contract" 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 Balances of all Outstanding Contracts as of the end of the immediately
preceding month.
"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 ___________ 20, __________
Distribution Date.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note
is registered in the Note Register, as such term is defined in the Indenture.
"Class A-1 Rate" means _____% per annum.
"Class A-2 Final Distribution Date" means the ___________, 200_
Distribution Date.
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note
is registered in the Note Register.
"Class A-2 Rate" means _____% per annum.
"Class A2-4 Percentage" means (i) for each Distribution Date to and
including the Distribution Date on which the principal amount of the Class A-1
Notes is reduced to zero, 0% and (ii) for each Distribution Date thereafter, to
and including the Distribution Date on which the principal amount of the Class
A-4 Notes is reduced to zero, the percentage equivalent of a fraction, the
numerator of which is the aggregate outstanding principal amount of the Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes and the denominator of which is
the Note Balance, in each case as of the immediately preceding Distribution
Date (after giving effect to any distributions of principal made on such
preceding Distribution Date).
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<PAGE> 11
"Class A-3 Final Distribution Date" means the ______, 20__ Distribution
Date.
"Class A-3 Noteholder" means the Person in whose name a Class A-3 Note
is registered in the Note Register.
"Class A-3 Rate" means _____% per annum.
"Class A-4 Final Distribution Date" means the ___________, 20__
Distribution Date.
"Class A-4 Noteholder" means the Person in whose name a Class A-4 Note
is registered in the Note Register.
"Class A-4 Rate" means _____% per annum.
"Class A-5 Final Distribution Date" means the _______20, 200_
Distribution Date.
"Class A-5 Noteholder" means the Person in whose name a Class A-5 Note
is registered in the Note Register.
"Class A-5 Rate" means ____% per annum.
"Class A-5 Percentage" means (i) for each Distribution Date to
and including the Distribution Date on which the principal amount of the Class
A-1 Notes is reduced to zero, 0% and (ii) for each Distribution Date
thereafter, 100% minus the Class A2-4 Percentage.
"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 November __, 1998.
"Collateral Agent" means Bankers Trust Company, in its capacity as
collateral agent for the Insurer under the Insurance Agreement, and each
successor thereto.
"Collection Account" means the account established and maintained as
such pursuant to Section 5.01.
"Company" means WFS Investments, Inc., and its successors.
"Contract" means each retail installment sales contract and security
agreement or installment loan agreement and security agreement which has been
executed by an Obligor and pursuant to which such Obligor purchased, financed or
pledged the Financed Vehicle described therein, agreed to pay the deferred
purchase price (i.e., the purchase price net of any down payment) or amount
borrowed, together with interest, as therein provided in connection with such
purchase or loan, granted a security interest in such Financed Vehicle, and
undertook to perform certain other obligations as specified in such Contract and
which has been conveyed to the Trust pursuant to this Agreement.
"Contract Documents" means, with respect to each Contract, (i) the
Contract; (ii) either the original Title Document for the related Financed
Vehicle or a duplicate copy thereof issued or certified by the Registrar of
Titles which issued the original thereof, together with evidence of perfection
of the security interest in the related Financed Vehicle granted by such
Contract, as determined by the Master Servicer to be permitted or required to
perfect such security interest under the laws of the applicable jurisdiction
(or, in the case of a Contract
6
<PAGE> 12
listed on the Schedule of Contracts, written evidence from the Dealer selling
such Financed Vehicle that the Title Document for such Financed Vehicle showing
the Seller as first lien-holder has been applied for); (iii) the related
Assignments; (iv) any agreement(s) modifying the Contract (including, without
limitation, any extension agreement(s)); and (v) documents evidencing the
existence of physical damage insurance covering such Financed Vehicle.
"Contract Files" means the Contract Documents and all other papers and
computerized records customarily kept by the Master Servicer and all
Subservicers, as the case may be, in servicing contracts and loans comparable to
the Contracts.
"Contract Number" means, with respect to any Contract included in the
Trust, the number assigned to such Contract by the Master Servicer, which number
is set forth in the related Schedule of Contracts.
"Contract Rate" means, with respect to a Contract that is a (i) Simple
Interest Contract, the interest rate borne by such Contract as determined by the
terms thereof, and (ii) Rule of 78's Contract, the discount rate used in
accordance with the definition of the term "Scheduled Balance" to derive the
Scheduled Balance of such Contract.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the 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
Indenture Trustee may designate from time to time by notice to the
Certificateholders, the Insurer, the Master Servicer and the Seller.
"Cut-Off Date" means November 1, 1998.
"Cut-Off Date Aggregate Scheduled Balance" means $___________, the
aggregate Scheduled Balance of the Contracts as of the Cut-Off Date.
"Dealer" means the seller of a Financed Vehicle, which seller originated
and assigned the related Contract, including the Bank.
"Defaulted Contract" means, 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.
"Deficiency Claim Date" means, with respect to any Distribution Date,
the fourth Business Day immediately preceding such Distribution Date.
"Deficiency Notice" means, with respect to any Distribution Date, the
notice delivered pursuant to Section 5.02(c) by the Master Servicer to the
Indenture Trustee, with a copy to the Insurer and the Owner Trustee.
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"Delinquency Percentage" means, 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.
"Delivery" means, when used with respect to Trust Account Property:
(i) with respect to certificated securities, bankers'
acceptances, commercial paper, negotiable certificates of deposit and
any other obligations which evidence a right to the payment of money and
is not itself a security agreement or lease and is of a type which is in
ordinary course of business transferred by delivery with necessary
endorsement or assignment (collectively, "Physical Property"): (A) the
Indenture Trustee or the Owner Trustee, as the case may be, or its
Financial Intermediary acquires possession of the Physical Property, and
evidence that any such Physical Property that is in registrable form has
been registered in the name of the Trustee, its Financial Intermediary,
its custodian or its nominee; (B) the Financial Intermediary, not a
clearing corporation, sends the Indenture Trustee or the Owner Trustee,
as the case may be, confirmation of the transfer and also by book entry
or otherwise identifies as belonging to the Indenture Trustee or the
Owner Trustee, as the case may be, the Physical Property in the
Financial Intermediary's possession; or (C) with respect to a clearing
corporation, appropriate entries to the account of the Indenture Trustee
or the Owner Trustee, as the case may be, or a Person designated by him
or her and, if certificated, it is both, in the custody of the clearing
corporation or another clearing corporation, a custodian bank or a
nominee of any of them and, in bearer form or endorsed in blank by the
appropriate person or registered in the name of the clearing
corporation, custodian bank, or a nominee of any of them;
(ii) with respect to any Trust Account Property that is a
book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations, the following procedures, all in
accordance with applicable law, including applicable Federal regulations
and Articles 8 and 9 of the UCC: (A) book-entry registration of such
property to an appropriate book-entry account maintained with a Federal
Reserve Bank by the Indenture Trustee or the Owner Trustee, as the case
may be, of a deposit advice or other written confirmation of such
book-entry registration, (B) the making by any such custodian of entries
in its books and records identifying such book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations as belonging to the Indenture Trustee or the Owner Trustee,
as the case may be, and indicating that such custodian holds such Trust
Account Property solely as agent for the Indenture Trustee or the Owner
Trustee, as the case may be, and the making by the Indenture Trustee or
the Owner Trustee, as the case may be, of entries
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in its books and records establishing that it holds such Trust Account
Property solely as trustee pursuant to Section 5.01, and (C) such
additional or alternative procedures as may hereafter become necessary
to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or the Owner Trustee, as the case may
be, consistent with changes in applicable law or regulations or the
interpretation thereof; and
(iii) with respect to any Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (ii) above, registration of the transfer to, and
ownership of such Trust Account Property by, the Indenture Trustee or
the Owner Trustee, as the case may be, its custodian or its nominee by
the issuer of such Trust Account Property.
"Depositor" means the Seller in its capacity as Depositor under the
Trust Agreement, and its successors.
"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 ________ 20, 199_.
"Distribution Date Outstanding Principal Balance" means, with respect to
any Contract which has been the subject of a Partial Prepayment and under which
payments are applied on the basis of the Rule of 78's, the amount equal to the
total of all Monthly P&I due after the Distribution Date next succeeding the Due
Period during which such Partial Prepayment was received, less any unearned
finance charge as of the Due Date next preceding such Distribution Date computed
in accordance with the Rule of 78's.
"Distribution Date Statement" shall have the meaning specified in
Section 4.09(a).
"DTC" means The Depository Trust Company, and its successors.
"Due Date" means, as to any Contract, the date upon which an installment
of Monthly P&I is due.
"Due Period" means, 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 from November 1, 1998 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.
"Eligible Account" means (i) a segregated trust account in the corporate
trust department that is maintained with a depository institution or trust
company the commercial paper or other short-term debt obligations of which have
credit ratings from Standard & Poor's at least equal to "A-1" and from Moody's
equal to "P-1", which account is fully insured up to applicable limits by the
FDIC or (ii) a general ledger account or deposit account that is (a) guaranteed
by an entity the long-term unsecured debt obligations of which are rated
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"Aa2" by Moody's and "AAA" by Standard & Poor's or the commercial paper or other
short-term debt obligations of which have credit ratings from Standard & Poor's
at least equal to "A-1+" and from Moody's equal to "P-1" or (b) that otherwise
will not result in the qualification, reduction or withdrawal by any Rating
Agency of its then-applicable rating on any Class of Notes or the Certificates
(without giving effect to the guaranty under either Policy of payments owing to
Securityholders). If any Eligible Account falls below the ratings specified in
(i) or (ii) above, all monies in such Eligible Account will be moved within 15
days to an account meeting the requirements of an Eligible Account.
"Eligible Investments" means any one or more of the following
obligations or securities, all of which shall be denominated in United States
dollars:
(i) direct obligations of, and obligations fully guaranteed as
to timely payment of principal and interest by, the United States or any
agency or instrumentality of the United States the obligations of which
are backed by the full faith and credit of the United States;
(ii) general obligations of or obligations guaranteed as to
timely payment of principal and interest by FNMA, FHLMC or any state of
the United States, the District of Columbia or the Commonwealth of
Puerto Rico then rated the highest available credit rating of each
Rating Agency for such obligations;
(iii) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or the
Owner Trustee) incorporated under the laws of the United States or any
state and subject to supervision and examination by federal and/or state
banking authorities, so long as at the time of such investment or
contractual commitment providing for such investment either (a) the
long-term, unsecured debt obligations of such depository institution or
trust company have credit ratings from Moody's at least equal to "Aa2"
and shall have commercial paper or other short-term debt obligations
rated at least "A-1+" by Standard & Poor's and "P-1" by Moody's or (b)
the investment is guaranteed by an entity the long-term, unsecured debt
obligations of which have been rated "AAA" by Standard & Poor's and at
least "Aa2" by Moody's or otherwise will not result in the
qualification, reduction or withdrawal by Moody's or Standard & Poor's
of its then-applicable rating on any Class of Notes or the Certificates
(without giving effect to the guaranty under either Policy of payments
owing to Securityholders); if the investments in this paragraph (iii)
fall below the specified ratings, the invested monies shall be moved to
Eligible Investments as soon as the investment matures; however, no new
monies may be invested in any instrument that is not currently an
Eligible Investment;
(iv) repurchase obligations with respect to (a) any security
described in clause (i) above or (b) any other security issued or
guaranteed as to timely payment of principal and interest by an agency
or instrumentality of the United States, in either case entered into
with a depository institution or trust company (including the Indenture
Trustee or the Owner Trustee), acting as principal and the counterparty,
the
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long-term unsecured debt obligations of which are rated "AAA" by
Standard & Poor's and at least "Aa2" by Moody's and commercial paper or
other short-term debt obligations are rated at least "A-1+" by Standard
& Poor's and "P-1" by Moody's;
(v) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any
state thereof which at the time of such investment or contractual
commitment providing for such investment have long-term, unsecured debt
obligations rated "AAA" by Standard & Poor's and at least "Aa2" by
Moody's or better and shall have commercial paper or other short-term
debt obligations rated at least "A-1+" by Standard & Poor's and "P-1" by
Moody's; provided, however, that securities issued by any corporation
will not be Eligible Investments to the extent that investment therein
will cause the then outstanding principal amount of securities issued by
such corporation and held as part of the Trust to exceed 10% of the sum
of the aggregate Outstanding Principal Balances of the Contracts and all
Eligible Investments held as part of the Trust;
(vi) commercial paper given the highest rating by each Rating
Agency at the time of such investment; provided that the issuer of such
commercial paper must have a long-term unsecured debt rating of at least
A1 from Moody's and A+ from Standard & Poor's;
(vii) the RIC, if guaranteed by an entity which has long-term,
unsecured debt obligations rated "AAA" by Standard & Poor's and at least
"Aa2" by Moody's or otherwise will not result in a qualification,
reduction or withdrawal by Moody's or Standard & Poor's of its
then-applicable rating on any Class of Notes or the Certificates
(without giving effect to the guaranty under either Policy of payments
owing to Securityholders); if the investments in this paragraph (vii)
fall below the specified ratings, the invested monies shall be moved to
Eligible Investments on the fifth Business Day preceding the next
succeeding Distribution Date; however, no new monies may be invested in
the RIC until the RIC once again becomes an Eligible Investment; and
(viii) any other investments which meet the criteria of each
Rating Agency as being consistent with their then-current rating of each
Class of Notes and the Certificates.
"Excess Amounts" shall have the meaning specified in Section 5.05(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIC" means the Federal Deposit Insurance Corporation, and its
successors.
"FHLMC" means the Federal Home Loan Mortgage Corporation, and its
successors.
"FNMA" means the Federal National Mortgage Association, and its
successors.
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"Final Distribution Date" means with respect to (i) the Notes, the Class
A-1 Final Distribution Date, the Class A-2 Final Distribution Date, the Class
A-3 Final Distribution Date, the Class A-4 Final Distribution Date or the Class
A-5 Final Distribution Date, as the case may be, and (ii) the Certificates, the
Certificate Final Distribution Date.
"Financed Vehicle" means, as to any Contract, an automobile or
light-duty truck, together with all accessions thereto, securing the related
Obligor's indebtedness under such Contract.
"Financial Intermediary" means a bank, broker, clearing corporation or
the Person (or the nominee of any of them) that in the ordinary course of its
business maintains security accounts for its customers and is acting in that
capacity.
"Fiscal Agent" shall have the meaning set forth in the Policies.
"Full Prepayment" means any of the following: (i) payment to the Master
Servicer of 100% of the outstanding principal balance of a Contract, exclusive
of any Contract referred to in clause (ii), (iii) or (iv) of the definition of
the term "Liquidated Contract," together with all accrued and unpaid interest
thereon to the date of such payment, or (ii) payment by the Seller or the Master
Servicer, as the case may be, of the purchase price of a Contract in connection
with the purchase of a Contract pursuant to Section 3.02 or 4.07 or payment by
the Seller of the purchase price of a Contract in connection with the purchase
of all Contracts pursuant to Section 9.01.
"Holder" means, with respect to a (i) Certificate, the Person in whose
name such Certificate is registered in the Certificate Register and (ii) Note,
the Person in whose name such Note is registered in the Note Register.
"Holding Account" means the account established and maintained as such
pursuant to Section 5.01.
"Indenture" means the Indenture, dated as of the date hereof, among the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Independent", when used with respect to any specified Person, means
such a Person who (i) is in fact independent of the Issuer, the Seller or WFS,
(ii) is not a director, officer or employee of any Affiliate of the Issuer, the
Seller or WFS, (iii) is not a person related to any officer or director of the
Issuer, the Seller, WFS or any of their respective Affiliates, (iv) is not a
holder (directly or indirectly) of more than 10% of any voting securities of
Issuer, the Seller, WFS or any of their respective Affiliates, and (v) is not
connected with the Issuer, the Seller or WFS as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
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"Insolvency Event" means, with respect to a specified Person, (i) the
entry of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of such Person in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; (ii) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or any other present
or future federal or state bankruptcy, insolvency or similar law and such case
is not dismissed within 60 days; or (iii) the commencement by such Person of a
voluntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future federal or state, bankruptcy, insolvency
or similar law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or other similar official for such Person or for any substantial part of its
property, or the making by such Person of an assignment for the benefit of
creditors or the failure by such Person generally to pay its debts as such debts
become due or the taking of corporate action by such Person in furtherance of
any the foregoing.
"Insolvency Proceeding" shall have the meaning specified in Section
8.06.
"Insolvency Proceeds" shall have the meaning specified in Section
9.01(b).
"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 Indenture Trustee, the form of
which is attached hereto as Exhibit B.
"Insurance Agreement Obligations" means, as of any date, the aggregate
of 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.
"Insurance Policy" means, with respect to a Financed Vehicle, the
policies of comprehensive and collision insurance and the LDI Policy.
"Insurance Proceeds" means proceeds paid pursuant to any Insurance
Policy and amounts (exclusive of rebated premiums) paid by any insurer under any
other insurance policy related to a Financed Vehicle, a Contract or an Obligor.
"Insurer" means Financial Security Assurance Inc., and its successors.
"Insurer Insolvency" means (i) the entry of a decree or order for relief
by a court or regulatory authority having jurisdiction in respect of the Insurer
in an involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bankruptcy, insolvency,
rehabilitation or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Insurer or
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<PAGE> 19
of any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Insurer and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days, or (ii) the
commencement by the Insurer of a voluntary case under the federal bankruptcy
laws, as now or hereafter in effect, or any other present or future federal or
state bankruptcy, insolvency, rehabilitation or similar law, or the consent by
the Insurer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Insurer or of any substantial part of its property or the making by the
Insurer of an assignment for the benefit of creditors or the failure by the
Insurer generally to pay its debts as such debts become due or the taking of
corporate action by the Insurer in furtherance of any of the foregoing.
"Interest Period" means, with respect to any Distribution Date, 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 November 1, 1998) to but excluding such Distribution Date.
"Interest Rate" means the Class A-1 Rate, the Class A-2 Rate, the Class
A-3 Rate, the Class A-4 Rate or the Class A-5 Rate, as the case may be.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts, other than the Holding Account, to be deposited
into the Collection Account on such Distribution Date pursuant to Section
5.01(b).
"Issuer" means the WFS Financial 1998-C Owner Trust.
"LDI Policy" means the limited dual interest policy providing coverage
for physical damage to, or loss of, a Financed Vehicle.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Contract by operation of law.
"Liquidated Contract" means a Contract which (i) has been the subject of
a Full Prepayment; (ii) was a Defaulted Contract and 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 end
of the four-month period referred to in clause (iv); (iii) has been paid in full
on or after its Maturity Date; or (iv) has become delinquent as to all or part
of four or more payments of Monthly P&I.
"Liquidation Expenses" means reasonable out-of-pocket expenses (not to
exceed Liquidation Proceeds), other than any overhead expenses, incurred by the
Master Servicer in connection with the realization of the full amounts due under
any Contract (including the attempted liquidation of a Contract which is brought
current and is no longer in default during such attempted liquidation) and the
sale of any property acquired in respect thereof which are not recoverable under
any Insurance Policy.
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"Liquidation Proceeds" means amounts received by the Master Servicer
(before reimbursement for Liquidation Expenses) in connection with the
realization of the amounts due and to become due under any Defaulted Contract
and the sale of any property acquired in respect thereof.
"Master Servicer" means WFS in its capacity as the master servicer of
the Contracts under Section 4.01, and, in each case upon succession in
accordance herewith, each successor servicer in the same capacity pursuant to
Section 4.01 and each successor master servicer pursuant to Section 8.02.
"Master Servicer Report Date" means, with respect to any Distribution
Date, the fifth Business Day prior to such Distribution Date.
"Maturity Date" means, with respect to any Contract, the date on which
the last scheduled payment of such Contract shall be due and payable (after
giving effect to all Prepayments received prior to the date of determination) as
such date may be extended pursuant to Section 4.02.
"Monthly P&I" means, with respect to any Contract, the amount of each
monthly installment of principal and interest payable to the Obligee of such
Contract in accordance with the terms thereof, exclusive of any charges
allocable to the financing of any insurance premium and charges which represent
late payment charges or extension fees.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Collections" means, with respect to any Distribution Date and the
related Due Period, the sum of (i) all amounts of principal and interest
collected on or in respect of the Contracts during such Due Period (in the case
of principal and interest that are part of any Liquidation Proceeds or Insurance
Proceeds, only to the extent of the related Net Liquidation Proceeds or Net
Insurance Proceeds), less (a) the Retained Yield, if any, (b) any late payments
of interest retained by the Master Servicer as reimbursement for Advances
pursuant to Section 5.04 and (c) any installments of Monthly P&I or Prepayments
retained by the Master Servicer as reimbursement for Nonrecoverable Advances
pursuant to Section 5.04; (ii) the Advance for such Due Period to the extent
actually made; (iii) the investment earnings on funds in the Collection Account
for such Distribution Date (which, except as otherwise provided in Section 5.01,
shall be the RIC Reinvestment Earnings); (iv) amounts withdrawn from the Holding
Account and deposited in the Collection Account in such Due Period pursuant to
Section 5.02; and (v) the aggregate Repurchase Amount for Repurchased Contracts
deposited in or credited to the Collection Account pursuant to Section 5.04(c)
on the related Master Servicer Report Date.
"Net Contract Rate" means, with respect to any Contract, its Contract
Rate less the sum of the Servicing Fee Percent and the Retained Yield Percent.
"Net Insurance Proceeds" means, with respect to any Contract, Insurance
Proceeds net of any such amount applied to the repair of the related Financed
Vehicle, released to the
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<PAGE> 21
related Obligor in accordance with the normal servicing procedures of the Master
Servicer or representing expenses incurred by the Master Servicer and
recoverable hereunder.
"Net Liquidation Proceeds" means the amount derived by subtracting from
the Liquidation Proceeds of a Contract the related Liquidation Expenses.
"Nonrecoverable Advance" means any Advance proposed to be made or
previously made by the Master Servicer which, in its good faith judgment, would
not be or will not be ultimately recoverable by the Master Servicer from late
payments, Insurance Proceeds or Liquidation Proceeds.
"Note Balance" means with respect to any Distribution Date, the
aggregate outstanding principal amount of the Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes and Class A-5 Notes, in each case as of the immediately
preceding Distribution Date (after giving effect to any distributions of
principal made on such preceding Distribution Date).
"Note Deficiency Claim Amount" means, with respect to each Distribution
Date, the amount, if any, by which the Note Distributable Amount for such
Distribution Date exceeds the amount of Net Collections actually deposited in
the Note Distribution Account on such Distribution Date in accordance with
Section 5.05.
"Note Distributable Amount" means, with respect to any Distribution
Date, the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"Note Distribution Account" means the account established and maintained
as such pursuant to Section 5.01.
"Note Final Distribution Date" means the Class A-1 Final Distribution
Date, the Class A-2 Final Distribution Date, the Class A-3 Final Distribution
Date, the Class A-4 Final Distribution Date or the Class A-5 Note Distribution
Date, as the case may be.
"Note Interest Carryover Shortfall" means, 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 the preceding Distribution Date at the related
Interest Rate for the related Interest Period.
"Note Interest Distributable Amount" means, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Quarterly Interest
Distributable Amount for such Class of Notes for such Distribution Date and the
Note Interest Carryover Shortfall for such Class of Notes for such Distribution
Date. For all purposes of this Agreement and the other Basic Documents, interest
with respect to the (i) Class A-1 and Class A-2 Notes shall be computed on the
basis of a 360-day year and the actual number of days elapsed since the
immediately preceding Distribution Date (or, with respect to the first
Distribution Date, since November 1, 1998) and (ii) Class A-3, Class A-4 Notes
and Class A-5 Notes shall be computed on the basis of a 360-day year consisting
of twelve 30-day months.
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<PAGE> 22
"Note Percentage" means, (i) for each Distribution Date to but excluding
the Distribution Date on which the principal amount of the Class A-4 Notes and
Class A-5 Notes is reduced to zero, 100%; (ii) for the Distribution Date on
which the principal amount of the Class A-4 Notes and Class A-5 Notes is reduced
to zero, (A) 100% until the principal amount of the Class A-4 Notes and Class
A-5 Notes has been reduced to zero and (B) with respect to any remaining portion
of the Principal Distributable Amount, zero; and (iii) for any Distribution Date
thereafter, zero.
"Note Policy" means the financial guaranty insurance policy issued by
the Insurer to the Indenture Trustee on behalf of the Noteholders, the form of
which is attached as Exhibit C hereto.
"Note Policy Claim Amount" means, with respect to each Distribution
Date, the amount, if any, by which the Note Distributable Amount for such
Distribution Date exceeds the sum of (i) the amount of Net Collections actually
deposited in the Note Distribution Account on such Distribution Date in
accordance with Section 5.05 and (ii) the amount of the Note Deficiency Claim
Amount, if any, paid to the Note Distribution Account from the Spread Account
pursuant to a Deficiency Notice delivered for such Distribution Date.
"Note Pool Factor" means, with respect to any Class of Notes as of any
Distribution Date, a six-digit decimal figure equal to the outstanding principal
amount of such Class of Notes (after giving effect to any reductions thereof to
be made on such Distribution Date) divided by the original outstanding principal
amount of such Class of Notes.
"Note Principal Carryover Shortfall" means, as 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.
"Note Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Note Quarterly Principal Distributable Amount
and the Accelerated Principal Distributable Amount, if any, 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; and provided, further,
that 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.
"Note Quarterly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued for the related Interest Period on each
Class of Notes at the related Interest Rate for such Class 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 the
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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"Note Quarterly Principal Distributable Amount" means, with respect to
any Distribution Date, the Note Percentage of the Principal Distributable Amount
for such Distribution Date.
"Note Register" shall have the meaning specified in the Indenture.
"Obligee" means the Person to whom an Obligor is indebted under a
Contract.
"Obligor" on a Contract means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Contract.
"Offered Securities" shall have the meaning specified in Section
6.03(b)(ii).
"Officers' Certificate" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
any Person delivering such certificate and delivered to the Person to whom such
certificate is required to be delivered. In the case of an Officers' Certificate
of the Master Servicer, at least one of the signing officers must be a Servicing
Officer. Unless otherwise specified, any reference herein to an Officers'
Certificate shall be to an Officers' Certificate of the Master Servicer.
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel to the Seller or the Master Servicer) acceptable to the Indenture
Trustee or the Owner Trustee, as the case may be, and the Insurer.
"Original Certificate Balance" means $__________.
"Original Class A-1 Note Balance" means $___________.
"Original Class A-2 Note Balance" means $___________.
"Original Class A-3 Note Balance" means $___________.
"Original Class A-4 Note Balance" means $__________.
"Original Class A-5 Note Balance" means $__________.
"Original Pool Balance" means $___________.
"Outstanding" means,
(i) with respect to a Contract and as of time of reference
thereto, a Contract that has not reached its Maturity Date, has not been
fully prepaid, has not become a Liquidated Contract and has not been
repurchased pursuant to Section 3.02, 4.07 or 9.01; and
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<PAGE> 24
(ii) with respect to Securities, as of the date of
determination, all Notes of one Class or of all Classes, all
Certificates or all Notes and Certificates, as the case may be,
theretofore authenticated and delivered except:
(a) Securities theretofore cancelled by the applicable Registrar
or delivered to the applicable Registrar for cancellation;
(b) Securities or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the applicable
Trustee or any Paying Agent, as the case may be, in trust for the
Holders of such Securities (provided, however, that if such Securities
are to be redeemed or repurchased, notice of such redemption or
repurchase has been duly given or provision for such notice has been
made, satisfactory to the applicable Trustee); and
(c) Securities in exchange for or in lieu of other Securities
which have been authenticated and delivered unless proof satisfactory to
the applicable Trustee is presented that any such Securities are held by
a bona fide purchaser;
provided, however, that Securities which have been paid with proceeds of the
Note Policy or the Certificate Policy, as the case may be, shall continue to
remain Outstanding 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 applicable 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 a
specified Outstanding Amount of Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any other
Basic Document, Securities owned by the Issuer, any other obligor upon the
Securities, the Seller, WFS or any of their respective Affiliates shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the applicable Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities that the applicable Trustee knows to be so owned shall be so
disregarded. Securities so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
applicable Trustee the pledgee's right so to act with respect to such Securities
and that the pledgee is not the Issuer, any other obligor upon the Securities,
the Seller, WFS or any of their respective Affiliates.
"Outstanding Amount" means the aggregate principal amount of all Notes
of one Class or of all Classes, of all Certificates or of all Securities, as the
case may be, Outstanding at the date of determination.
"Outstanding Principal Balance" means, with respect to a Contract that
is a (i) Rule of 78's Contract, the amount set forth as the Outstanding
Principal Balance of such Contract on the Schedule of Contracts, such amount
being the total of all Monthly P&I due on or after November 1, 1998, less any
unearned interest as of the Due Date for such Contract next preceding November
1, 1998 computed in accordance with the Rule of 78's, less all amounts received
on or
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<PAGE> 25
in respect of such Contract on or after November 1, 1998 that are allocable to
principal and (ii) Simple Interest Contract, the actual principal balance under
the terms thereof.
"Owner Trustee" means the Person acting as Owner Trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
"Owner Trustee Corporate Trust Office" shall have the meaning specified
in the Trust Agreement.
"Partial Prepayment" means, as to any Rule of 78's Contract, any partial
prepayment received by the Master Servicer that (i) is not accompanied by an
amount specified by the related Obligor to be interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month
of such prepayment and (ii) is required by the terms of such Contract to be
applied to the payment of principal thereunder on or prior to the Due Date next
succeeding the date of receipt.
"Pass-Through Rate" means _____% per annum.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Property" shall have the meaning specified in the definition
of the term "Delivery".
"Policies" means the Note Policy and the Certificate Policy.
"Pool Balance" as of the time of determination means the Aggregate
Scheduled Balance, exclusive of the Scheduled Balances of all Contracts that are
not Outstanding at the end of the Due Period ending immediately prior to such
time of determination.
"Preference Claim" shall have the meaning specified in Section 8.06.
"Preferential Transfer" shall have the meaning specified for the term
"Preference" in the Insurance Agreement.
"Prepayment" means a Full Prepayment or a Partial Prepayment.
"Principal Distributable Amount" means, with respect to any Distribution
Date, the Aggregate Scheduled Balance Decline for such Distribution Date.
"Proprietary Fund" means money market mutual funds having a rating from
each Rating Agency in the highest investment category granted by each Rating
Agency, including funds for which the Indenture Trustee or the Owner Trustee or
any of their respective Affiliates is investment manager or advisor.
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<PAGE> 26
"Rating Agency" means Moody's and Standard & Poor's.
"Record Date" means, with respect to a Class of Notes or the
Certificates and any Distribution Date, the Business Day immediately preceding
such Distribution Date or, if Definitive Securities are issued, the 15th day of
the month preceding the month in which such Distribution Date occurs.
"Registrar of Titles" means the agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and issuing
documents evidencing such titles in the jurisdiction in which a particular
Financed Vehicle is registered.
"Repurchase Amount" means, with respect to any Contract, the amount, as
of the date of repurchase, required to prepay in full the principal of and
accrued interest on such Contract to the last Due Date in the Due Period in
which such repurchase occurs.
"Repurchased Contract" means a Contract repurchased as of the related
Master Servicer Report Date by the Master Servicer pursuant to Section 4.07 or
by the Seller pursuant to Section 3.02.
"Responsible Officer" means any officer within the Corporate Trust and
Agency Group (or any successor group of the Indenture Trustee) including any
Vice President, assistant secretary or any other officer or assistant officer of
the Indenture Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred at the Indenture Trustee's
Corporate Trust Office because of his knowledge of and familiarity with the
particular subject.
"Retained Yield" shall mean the amount, if any, stripped off from the
interest portion of Monthly P&I by the Servicer and paid to the Seller on a
monthly basis. Such monthly payment shall be equal to (i) with respect to each
Rule of 78's Contract, an amount equal to the product of the Retained Yield
Percent and the Scheduled Balance of such Contract (as specified in the Schedule
of Contracts) for such month, but only to the extent that the Monthly P&I for
such Contract for such month has been collected and (ii) with respect to each
Simple Interest Contract, out of each payment of Monthly P&I collected on such
Contract, an amount equal to interest at the Retained Yield Percent of the
Scheduled Balance of such Contract on which, and for the period for which, the
interest portion of such payment of Monthly P&I was calculated.
"Retained Yield Percent" means, with respect to any Contract, the lesser
of (i) 0% per annum or (ii) a percent per annum equal to the APR of such
Contract less the sum of (A) 1% and (B) the Pass-Through Rate.
"RIC" means the reinvestment contract provided by the Bank or, with the
prior written consent of the Insurer, a subsidiary thereof, substantially in the
form of Exhibit D hereto, in consideration of the right to direct the investment
of the funds on deposit in all Trust Accounts other than the Holding Account.
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"RIC Reinvestment Earnings" means, with respect to any Distribution
Date, the related Due Period and the Contracts that were Outstanding at the
beginning of such Due Period, the amount by which the sum of the Note Quarterly
Interest Distributable Amount and the Certificate Quarterly Interest
Distributable Amount for such Distribution Date exceeds the sum of (i) the
aggregate amount of interest on the Contracts (adjusted with respect to each
Contract to the Pass-Through Rate and exclusive of such collections that have
been paid to the Master Servicer in reimbursement of a previous Advance) that is
part of Net Collections for such Distribution Date and (ii) the amount of the
Advance as to interest for such Distribution Date (assuming for this purpose
that an Advance was made in respect of each delinquent Contract).
"Rule of 78's Contract" means a Contract as to which payments thereunder
are applied on the basis of the Rule of 78's.
"Schedule of Contracts" means the list or lists of Contracts attached as
Schedule A to this Agreement, which Contracts are being transferred to the Owner
Trustee as part of the Trust Estate, which list or lists shall set forth the
following information with respect to each such Contract in numbered columns:
<TABLE>
<CAPTION>
Information Column Number
----------- -------------
<S> <C>
Contract Number ("ACCT NBR")................................ 2
Date of Origination ("ORG DT").............................. 9
Maturity Date ("MAT DT").................................... 15
Monthly P&I ("P&I")......................................... 10
Original Principal Balance ("ORIG AMT")..................... 16 Top
Outstanding Principal Balance ("PRIN BAL").................. 16 Bottom
Discount Rate ("APR")....................................... 7
</TABLE>
In addition, the Scheduled Balance of each Rule of 78's Contract for each Due
Date on or after November 1, 1998, computed in accordance with the definition of
the term "Scheduled Balance," shall be contained on a computer disk or tape (the
"Disk") that shall be delivered by the Company to the Master Servicer not later
than the fifth Business Day following the Closing Date. The Disk shall be a part
of the Schedule of Contracts and shall be made available by the Master Servicer
to the Indenture Trustee and the Owner Trustee upon reasonable request. In
calculating the outstanding principal balance of each Rule of 78's Contract to
be set forth in Column 16 Bottom, it shall be assumed that all payments of
principal and interest due on or before the Cut-Off Date were received and
applied. The Schedule of Contracts or the Disk shall also set forth the Original
Pool Balance and the Retained Yield Percent (if the Retained Yield Percent is
not the same for all the Contracts).
"Scheduled Balance" means, with respect to any Rule of 78's Contract for
each month and as of the Cut-Off Date, the amount set forth as the "Scheduled
Balance" of such Contract for such month or as of the Cut-Off Date on the
Schedule of Contracts. Each such amount shall be the present value (determined
as provided below) for the applicable month of all payments of Monthly P&I on
the Contract due after such month (due during or after the first
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<PAGE> 28
Due Period in the case of a Scheduled Balance at the Cut-Off Date). Such present
value as of a Distribution Date shall be determined by discounting, on a monthly
basis, each such payment of Monthly P&I from the last day of the month in which
such payment of Monthly P&I is due back to the first day of the month during
which such Distribution Date occurs, using the applicable discount rate
specified below. Such present value as of the Cut-Off Date shall be determined
by discounting, on a monthly basis, each such payment of Monthly P&I back from
the last day of the month in which such payment of Monthly P&I is due to the
Cut-Off Date, using the applicable discount rate specified below. The applicable
discount rate (the "Discount Rate") shall be the discount rate that will produce
a present value at the Cut-Off Date equal to the Outstanding Principal Balance
of the Contract. The Scheduled Balance of a Rule of 78's Contract that becomes a
Liquidated Contract or a Repurchased Contract shall be reduced to zero as of the
end of the Due Period in which such Contract became a Liquidated Contract. In
the case of a Simple Interest Contract, the Scheduled Balance thereof is its
actual principal balance. The principal balance of a Simple Interest Contract
that becomes a Repurchased Contract shall be deemed to be reduced to zero upon
the related repurchase thereof and the principal balance of a Simple Interest
Contract that becomes a Liquidated Contract shall be deemed to be reduced to
zero as of the date on which such Contract becomes a Liquidated Contract. If a
Partial Prepayment is received on any Rule of 78's Contract at any time after
the Cut-Off Date, the Schedule of Contracts shall be revised to reflect the new
Scheduled Balance of such Contract for each Due Date after the date of such
Partial Prepayment, any such recalculations being made in the manner described
above, except that "Outstanding Principal Balance" shall be read to mean
"Distribution Date Outstanding Principal Balance" and "Cut-Off Date" shall be
read to mean the Due Date next succeeding the Due Date after which such Partial
Prepayment was received. As used herein, reference to the Scheduled Balance of a
Contract for a Distribution Date shall mean (i) in the case of a Rule of 78's
Contract, the Scheduled Balance of such Contract on the last day for such
Contract in the Due Period ending immediately prior to such Distribution Date,
and (ii) in the case of a Simple Interest Contract, the Scheduled Balance of
such Contract at the close of business of the last day in such Due Period, and
reference to the Scheduled Balance of a Contract in a month shall mean (i) in
the case of a Rule of 78's Contract, the Scheduled Balance of such Contract for
the last day of such month and (ii) in the case of a Simple Interest Contract,
the Scheduled Balance of such Contract at the close of business on the last day
of such month.
"Securities" means the Notes and the Certificates.
"Securityholders" means the Holders of the Notes and the Certificates.
"Seller" means WFS Financial Auto Loans, Inc., in its capacity as the
Seller of the Contracts under this Agreement, and each successor thereto (in the
same capacity) pursuant to Section 6.03.
"Servicer Default" means an event specified in Section 8.01.
"Servicing Fee" means, as to any Distribution Date, the fee payable to
the Master Servicer for services rendered during the related Due Period, which
shall equal with respect to
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<PAGE> 29
each Contract that is a (i) Rule of 78's Contract, the amount equal to, for each
month in such Due Period, the product of the Servicing Fee Percent and the
Scheduled Balance of such Contract (as specified in the Schedule of Contracts)
for such month in the related Due Period, but only to the extent that the
Monthly P&I for such Contract for such month has been collected or advanced by
the Master Servicer pursuant to Section 5.04 and (ii) Simple Interest Contract,
out of each payment of Monthly P&I collected or advanced on such Contract an
amount equal to interest at the Servicing Fee Percent on the Scheduled Balance
of such Contract on which, and for the period for which, the interest portion of
such payment of Monthly P&I was calculated.
"Servicing Fee Percent" means one-twelfth of ____% per annum.
"Servicing Officer" means any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of the Contracts whose
name appears on a list of servicing officers furnished to the Indenture Trustee
and the Owner Trustee by the Master Servicer pursuant to Section 4.01.
"Simple Interest Contract" means 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" means, with respect to any
Calculation Day or Distribution Date, ____% of the Aggregate Scheduled Balance
on such date of calculation, except that if on any date of calculation (i) the
Charge-Off Percentage for the three calendar month period ending on such date of
calculation exceeds ____% or (ii) the Delinquency Percentage for the three
calendar month period ending on such date of calculation exceeds ____%, then the
Specified Spread Account Balance shall equal _____% of the Aggregate Scheduled
Balance on such date of calculation (but only for so long as such Charge-Off
Percentage or Delinquency Percentage thresholds continue to be exceeded on any
subsequent date of calculation). Notwithstanding the foregoing, in no event
shall the Specified Spread Account Balance be greater than $__________ or less
than $_________; provided, however, the Specified Spread Account Balance shall
not be greater than the Outstanding Amount of the Securities if such amount is
less than $_________.
"Spread Account" means the account established and maintained as such
pursuant to Section 5.01.
"Spread Account Initial Deposit" means $__________, 100% of which will
be cash.
"Standard & Poor's" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., and its successors in interest.
"Subservicer" means any subservicer engaged by the Master Servicer to
subservice a Contract pursuant to Section 4.01.
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<PAGE> 30
"Subservicing Agreement" means an agreement between the Master Servicer
and a Subservicer relating to the servicing of one or more Contracts,
substantially in the form of Exhibit E hereto.
"Title Document" means, with respect to any Financed Vehicle, the
certificate of title for, or other evidence of ownership of, such Financed
Vehicle issued by the Registrar of Titles in the jurisdiction in which such
Financed Vehicle is registered.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise), including the Spread Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" shall have the meaning specified in Section 5.01(a).
"Trust Agreement" means the Trust Agreement, dated as of November __,
1998, as amended and restated as of November __, 1998, among the Depositor, the
Company, the Insurer and the Owner Trustee.
"Trust Estate" shall have the meaning specified in the Trust Agreement.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"United States" means the United States of America.
"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.
"Vehicle Receivables" shall have the meaning specified in Section
6.03(b)(ii).
"Vice President" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "Vice
President," who is a duly elected officer of such Person.
"WFS" means WFS Financial Inc, a majority-owned operating subsidiary of
the Bank, and its successors and assigns.
Section 1.02. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
25
<PAGE> 31
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
Section 1.03. Section References. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
Section 1.04. Calculations. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder will be made on the basis
of a 360-day year and twelve 30-day months (or, in the case of the Class A-1 and
Class A-2 Notes, on the basis of a 360-day year and the actual number of days
elapsed since the immediately preceding Distribution Date or November 1, 1998,
in the case of the first Distribution Date) and will be carried out to at least
six decimal places. Collections of interest on Rule of 78's Contracts shall be
calculated as if such Contracts were actuarial contracts the scheduled principal
balances of which are the Scheduled Balances thereof, and collections of
interest on Simple Interest Contracts will be calculated in accordance with the
terms thereof.
Section 1.05. Accounting Terms. All accounting terms used but not
specifically Iefined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
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<PAGE> 32
ARTICLE TWO
CONVEYANCE OF CONTRACTS
Section 2.01. Conveyance of Contracts.
(a) In consideration of the Issuer's delivery to or upon the order of
the Seller of $______________ less the Spread Account Initial Deposit, effective
upon the Closing Date, the Seller hereby sells, grants, transfers, assigns and
otherwise conveys to the Issuer, without recourse (subject to the obligations
herein), all of the right, title and interest of the Seller (exclusive of (i)
the Retained Yield in respect of the Contracts, and (ii) the amount, if any,
allocable to any rebatable insurance premium financed by any Contract) in, to
and under the Contracts (which Contracts shall be listed in the Schedule of
Contracts), including, without limitation, all payments of Monthly P&I
(exclusive of the Retained Yield, which shall be paid directly to the Seller as
provided in Section 5.02(b)) due on or after November 1, 1998 (excluding the
amount allocable to principal and interest due prior to November 1, 1998); all
Net Liquidation Proceeds and Net Insurance Proceeds with respect to any Financed
Vehicle to which a Contract relates received on or after November 1, 1998 and
all other proceeds received on or in respect of such Contracts (other than
payments of Monthly P&I due prior to November 1, 1998), and any and all security
interests in the Financed Vehicles; the Contract Documents relating to the
Contracts (except the Contract Documents for Contracts which have been the
subject of a Full Prepayment received on or after November 1, 1998 but no later
than one Business Day prior to the Closing Date, in lieu of which the Seller
shall have deposited in or credited to the Collection Account on or prior to the
Closing Date an amount equal to such Full Prepayment); and all proceeds in any
way delivered with respect to the foregoing, all rights to payments with respect
to the foregoing and all rights to enforce the foregoing, provided that
$_____________ of the principal amount of Contract number _________ is retained
by the Seller.
(b) The Bank has filed or caused to be filed UCC-1 financing statements,
executed by the Bank as debtor, naming WFS as secured party and describing the
Contracts originated by the Bank and transferred to WFS on or prior to the
Closing Date as collateral with the Office of the Secretary of State of the
State of California. WFS has filed or caused to be filed UCC-1 financing
statements executed by WFS as debtor, naming the Seller as secured party and
describing the Contracts as collateral with the office of the Secretary of State
of the State of California. The Seller has filed or caused to be filed UCC-1
financing statements, executed by the Seller as debtor, naming the Collateral
Agent, on behalf of the Insurer, as secured party and describing the Contracts
as collateral, with the Office of the Secretary of State of the State of
California. The grant of a security interest to the Collateral Agent on behalf
of the Insurer and the rights of the Collateral Agent and the Insurer in respect
of such security interest shall be governed by the Insurance Agreement. The
Seller has filed or caused to be filed UCC-1 financing statements, executed by
the Seller as debtor, naming the Owner Trust as secured party and describing the
Contracts being sold by it to the Owner Trust as collateral, with the Office of
the Secretary of State of the State of California. The Owner Trust has filed or
caused to be filed UCC-1 financing statements, executed by the Owner Trust as
debtor, naming the Indenture Trustee, on behalf of the Noteholders, as
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<PAGE> 33
secured party and describing the Contracts as collateral, with the office of the
Secretary of State of the States of Delaware and California. The grant of a
security interest to the Indenture Trustee and the rights of the Indenture
Trustee in the Contracts shall be governed by the Indenture. From time to time,
the Master Servicer shall cause to be taken such actions as are necessary to
continue the perfection of the respective interests of the Indenture Trustee,
the Owner Trust and the Collateral Agent on behalf of the Insurer in the
Contracts and to continue the first priority security interest of the Indenture
Trustee (subject to the security interest of the Insurer pursuant to the
Insurance Agreement) in the Financed Vehicles and their proceeds (other than, as
to such priority, any statutory lien arising by operation of law after the
Closing Date which is prior to such interest), including, without limitation,
the filing of financing statements, amendments thereto or continuation
statements and the making of notations on records or documents of title.
If any change in the name, identity or corporate structure of the Seller
or WFS or the relocation of the chief executive office of any of them would make
any financing or continuation statement or notice of lien filed under this
Agreement or the other Basic Documents seriously misleading within the meaning
of applicable provisions of the UCC or any title statute, the Master Servicer,
within the time period required by applicable law, shall file such financing
statements or amendments as may be required to preserve and protect the
interests of the Indenture Trustee, the Owner Trustee, the Securityholders and
the Insurer in the Contracts, Financed Vehicles and the proceeds thereof.
Promptly thereafter, the Master Servicer shall deliver to the Indenture Trustee,
the Owner Trustee and the Insurer an Opinion of Counsel stating that, in the
opinion of such counsel, all financing statements or amendments necessary fully
to preserve and protect the interests of the Indenture Trustee, the Owner
Trustee, Securityholders and the Insurer in the Contracts, Financed Vehicles and
the proceeds thereof have been filed, and reciting the details of such filings.
During the term of this Agreement, the Seller and WFS shall each
maintain its chief executive office in one of the states of the United States,
other than Louisiana or Tennessee.
The Master Servicer shall pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Indenture Trustee's right, title and interest in and to
the Contracts and in connection with maintaining the first priority security
interest (subject to the security interest of the Insurer pursuant to the
Insurance Agreement) in the Financed Vehicles and the proceeds thereof.
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<PAGE> 34
ARTICLE THREE
THE CONTRACTS
Section 3.01. Representations and Warranties of the Seller. The Seller
hereby makes the following representations and warranties on which (i) the
Issuer is deemed to have relied in acquiring the Contracts and (ii) the Insurer
is deemed to have relied in issuing the Policies. Such representations and
warranties speak as of the execution and delivery of this Agreement and as of
the Closing Date, but shall survive the sale, transfer and assignment of the
Contracts to the Issuer and the pledge thereof to the Indenture Trustee pursuant
to the Indenture.
(a) As to the Seller:
(i) Organization and Good Standing. The Seller is duly
organized and validly existing as a corporation in good standing under
the laws of the State of California, with power and authority to own its
properties and to conduct its business, and has the corporate power,
authority and legal right to acquire and own the Contracts.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and shall have
obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of property or the conduct of its business
shall require such qualifications.
(iii) Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property to be sold and assigned to and deposited with the Issuer, and
has duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance
of this Agreement has been duly authorized by the Seller by all
necessary corporate action.
(iv) Binding Obligation. This Agreement constitutes (A) a valid
sale, transfer and assignment of the Contracts, enforceable against
creditors of and purchasers from the Seller and (B) a legal, valid and
binding obligation of the Seller enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights in general and by general principles of
equity, regardless of whether such enforceability shall be considered in
a proceeding in equity or at law.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the articles of incorporation or bylaws of the Seller, or
any indenture, agreement or other instrument to which the Seller is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of its
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<PAGE> 35
properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents to which
the Seller is a party); nor violate any law or, to the best of the
Seller's knowledge, any order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(vi) No Proceedings. There are no proceedings or investigations
pending, or to the Seller's best knowledge, threatened, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties:
(A) asserting the invalidity of this Agreement or any of the other Basic
Documents, the Notes or the Certificates, (B) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of
the transactions contemplated by this Agreement or any of the other
Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement,
any of the other Basic Documents, the Notes or the Certificates or (D)
which might adversely affect the federal or state income tax attributes
of the Notes or the Certificates.
(b) As to each Contract or all of the Contracts, as the case may be:
(i) Schedule of Contracts. The information pertaining to such
Contract set forth in the related Schedule of Contracts was true and
correct in all material respects at the Closing Date and the
calculations of the Scheduled Balances appearing in such Schedule of
Contracts for each such Contract at the Closing Date and at each
Distribution Date thereafter prior to the related Maturity Date have
been performed in accordance with this Agreement and are accurate.
(ii) Security Interests. As of the Closing Date, such Contract
granted a valid and enforceable first priority security interest in
favor of WFS (or to the Bank, which security interest has been assigned
to WFS) in the related Financed Vehicle, and such security interest has
been duly perfected and is prior to all other liens upon and security
interests in such Financed Vehicle which now exist or may hereafter
arise or be created (except, as to priority, for any lien for unpaid
taxes or unpaid storage or repair charges which may arise after the
Closing Date).
(iii) Title Documents. (A) If the related Financed Vehicle was
originated in a state in which notation of a security interest on the
Title Document is required or permitted to perfect such security
interest, the Title Document for such Financed Vehicle shows, or if a
new or replacement Title Document is being applied for with respect to
such Financed Vehicle the Title Document will be received within 180
days of the Closing Date and will show WFS named as the original secured
party under the related Contract as the holder of a first priority
security interest in such Financed Vehicle, and (B) if the related
Financed Vehicle was originated in a state in which the filing of a
financing statement under the UCC is required to perfect a security
interest in motor vehicles, such filings or recordings have been duly
made and show WFS named as the original secured party under the related
Contract, and in either case, the
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Indenture Trustee and the Owner Trustee have the same rights as such
secured party has or would have (if such secured party were still the
owner of the Contract) against all parties claiming an interest in such
Financed Vehicle. With respect to each Contract for which the Title
Document has not yet been returned from the Registrar of Titles, WFS has
received written evidence from the related Dealer that such Title
Document showing WFS as first lienholder has been applied for.
(iv) Title to the Contracts. Immediately prior to the issuance
of the Notes and the Certificates, the Seller had good and indefeasible
title to and was the sole owner of each Contract to be transferred to
the Issuer pursuant to Section 2.01 free of liens, claims, encumbrances
and rights of others and, upon transfer of such Contract to the Issuer
pursuant to Section 2.01, the Issuer will have good and indefeasible
title to and will be the sole owner of such Contract free of liens,
encumbrances and rights of others, except for the Lien of the Indenture
Trustee under the Indenture and the security interest granted to the
Insurer under the Insurance Agreement.
(v) Current in Payment. As of the Cut-Off Date, such Contract
is no more than 30 days delinquent in payment as to all or any portion
of any installment of Monthly P&I.
(vi) Tax Liens. As of the Closing Date, there is no lien against
the related Financed Vehicle for delinquent taxes.
(vii) Rescission, Offset, Etc. As of the Closing Date, there is
no right of rescission, offset, defense or counterclaim to the
obligation of the Obligor to pay the unpaid principal or interest due
under such Contract; the operation of the terms of such Contract or the
exercise of any right thereunder will not render such Contract unen-
forceable in whole or in part or subject to any right of rescission,
offset, defense or counterclaim, and no such right of rescission,
offset, defense or counterclaim has been asserted.
(viii) Mechanics' Liens. As of the Closing Date, there are no
liens or claims for work, labor, material or storage affecting the
related Financed Vehicle which are or may become a lien prior to or
equal with the security interest granted by such Contract.
(ix) Compliance with Laws. Such Contract, and the sale of the
Financed Vehicle sold thereunder, complied, at the time it was made, in
all material respects with all applicable state and federal laws (and
regulations thereunder), including without limitation usury, equal
credit opportunity, fair credit reporting, truth-in-lending or other
similar laws, the Federal Trade Commission Act, and applicable state
laws regulating retail installment sales contracts and loans in general
and motor vehicle retail installment contracts and loans in particular;
and the consummation of the transactions herein contemplated, including,
without limitation, the transfer of ownership of the Contracts to the
Issuer and the receipt of interest by the Security-holders, will not
involve the violation of any applicable state or federal law.
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(x) Valid and Binding. Such Contract is the legal, valid and
binding obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally; all parties to such Contract had full legal
capacity to execute and deliver such Contract and all other documents
related thereto and to grant the security interest purported to be
granted thereby; and the terms of such Contract have not been waived or
modified in any respect, except by instruments that are part of the
Contract Documents.
(xi) Enforceability. Such Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder or assignee thereof adequate for the realization against the
collateral of the benefits of the security, subject, as to
enforceability, to bankruptcy, insolvency, reorganization or similar
laws affecting the enforcement of creditors' rights generally.
(xii) No Default. As of the Cut-Off Date, there was no default,
breach, viol tion or event permitting acceleration existing under such
Contract (except payment delinquencies permitted by subparagraph (v)
above) and no event which, with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or
event permitting acceleration under such Contract, and the Seller has
not waived any such default, breach, violation or event permitting
acceleration except payment delinquencies permitted by subparagraph (v)
above.
(xiii) Insurance. At the Closing Date, the related Financed
Vehicle will be covered by (A) a comprehensive and collision insurance
policy (i) in an amount at least equal to the lesser of (a) its maximum
insurable value or (b) the principal amount due from the Obligor under
the related Contract, (ii) naming WFS as a loss payee and (iii) insuring
against loss and damage due to fire, theft, transportation, collision
and other risks generally covered by comprehensive and collision
coverage and (B) an LDI Policy; provided, however, that if such Financed
Vehicle has an unpaid principal balance of less than $______________ it
will not be required to be covered by the insurance described in this
subparagraph. Each of the Seller, WFS and the Master Servicer shall at
all times comply with all of the provisions of such insurance policies
and the LDI Policy applicable to such Financed Vehicle.
(xiv) Acquisition of Contract. Such Contract was either acquired
by WFS (or its predecessor in interest) from a Dealer with which it
ordinarily does business or originated directly by WFS in the ordinary
course of its business, and no adverse selection procedures have been
utilized in selecting such Contract from all other similar contracts
purchased by the Seller.
(xv) Scheduled Payments. As of the Cut-Off Date, scheduled
payments under such Contract are applied in accordance with the Rule of
78's method or the simple interest method and are due monthly in level
payments through its Maturity Date sufficient to fully amortize the
principal balance of such Contract by its Maturity Date, assuming timely
payment by Obligors on Simple Interest Contracts, except that
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the payment in the first or last month in the life of the Contract may
be minimally different from the level payment.
(xvi) One Original. There is only one original of such Contract
and such original, together with all other Contract Documents, is being
held by the Master Servicer pursuant to Section 3.04. Each original
Contract has been segregated and marked to show the Issuer as owner
thereof, unless the Insurer has waived the requirement for such
segregation and marking by notice in writing to the Owner Trustee, the
Indenture Trustee and the Master Servicer.
(xvii) Characteristics. At the Cut-Off Date such Contract had (i)
an Outstanding Principal Balance of not less than $________ nor more
than $_________, (ii) an original term not less than __ months nor
greater than __ months, (iii) a remaining maturity of not less than __
months nor greater than __ months, (iv) a Contract Rate at least equal
to the Pass-Through Rate plus the sum of the Servicing Fee Percent and
the Retained Yield Percent and (v) an APR of not less than ____%.
(xviii) Identification. The Master Servicer and WFS have clearly
marked their electronic records to indicate that such Contract is owned
by the Issuer.
(xix) Maturity. At the Cut-Off Date such Contract did not have a
Maturity Date later than the 90th day prior to the end of the Due Period
immediately preceding the Certificate Final Distribution Date.
(xx) Scheduled Balance. At the Cut-Off Date the initial
Scheduled Balance of such Contract was not greater than the purchase
price of the related vehicle.
(xxi) Location of Contract Files. The Contract Files are kept at
one or more of the locations listed in Schedule B hereto.
(xxii) Finance Charge. Such Contract provides for the payment of a
finance charge calculated at its APR based on the Rule of 78's or the
simple interest method and such APR shall be equal to or greater than
____% for Rule of 78's Contracts and equal to or greater than ____% for
Simple Interest Contracts.
(xxiii) Bank Originations. The aggregate Scheduled Balance as of
the Cut-Off Date of Contracts purchased or originated by the Bank is not
more than approximately 1.00% of the aggregate Scheduled Balance of all
Contracts as of such date.
(xxiv) Simple Interest Contracts. As of the Cut-Off Date,
approximately _____% of the aggregate Scheduled Balances of the
Contracts shall be Simple Interest Contracts and approximately _____% of
the aggregate Scheduled Balances of the Contracts shall be Rule of 78's
Contracts.
(xxv) New or Used Vehicles. Approximately _____% of the Contracts
by Cut-Off Date Aggregate Scheduled Balance shall be new vehicles and
approximately _____% shall be used vehicles.
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(xxvi) States of Origination. Approximately _____% of the
Contracts by CutOff Date Aggregate Scheduled Balance were originated by
WFS or the Bank in California and approximately _____% of the Contracts
by Cut-Off Date Aggregate Scheduled Balance were originated in states
other than California.
(xxvii) No Government Entity Obligors. Each Contract shall have an
Obligor that is not a local, state or federal governmental entity.
Section 3.02. Purchase of Certain Contracts. The representations and
warranties of the Seller set forth in Section 3.01 shall survive delivery of the
Contract Documents to the Owner Trustee and shall continue until the termination
of this Agreement. Upon discovery by the Seller, the Master Servicer or the
Owner Trustee, as the case may be, that any of such representations and
warranties was incorrect as of the time made or that any of the Contract
Documents relating to any such Contract has not been properly executed by the
Obligor or contains a material defect or has not been received by the Owner
Trustee, such Person making such discovery shall give prompt notice to the other
such Persons. If any such defect, incorrectness or omission materially and
adversely affects the interest of the Noteholders, the Certificateholders, the
Indenture Trustee, the Owner Trustee, the Issuer or the Insurer, the Seller
shall, within 90 days after discovery thereof or receipt of notice thereof, cure
the defect or eliminate or otherwise cure the circumstances or condition in
respect of which such representation or warranty was incorrect as of the time
made. If the Seller is unable to do so, it shall purchase such Contract on the
Master Servicer Report Date next succeeding the end of such 90-day period from
the Issuer for an amount equal to the related Repurchase Amount in the manner
set forth in Section 5.04. Upon any such purchase, the Owner Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest in the Seller any Contract
purchased hereunder. The sole remedy of the Issuer, the Owner Trustee, the
Indenture Trustee or the Securityholders with respect to a breach of the
Seller's representations and warranties pursuant to Section 3.01 shall be to
require the Seller to enforce the Master Servicer's obligation to repurchase
Contracts pursuant to Section 4.07; provided, however, that the Seller shall
indemnify the Owner Trustee, the Indenture Trustee, the Insurer, the Issuer and
the Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third-party claims
arising out of the events or facts giving rise to such breach.
Section 3.03. Custody of Contract Files. Subject to Sections 3.07, 7.04
and 8.01, the Owner Trustee hereby irrevocably appoints the Master Servicer, and
the Master Servicer hereby accepts such appointment, to act as the agent of the
Owner Trustee as custodian of the Contract Documents and any and all other
documents that the Master Servicer shall keep on file, in accordance with its
customary procedures, relating to a Contract, Obligor or Financed Vehicle, which
are hereby constructively delivered to the Owner Trustee with respect to each
Contract:
(i) the original of the Contract;
(ii) documents evidencing the existence of physical damage
insurance covering the Financed Vehicles;
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(iii) the original credit application fully executed by the
Obligor; and
(iv) the original certificate of title or such documents that
the Master Servicer shall keep on file, in accordance with its customary
procedures, evidencing the security interest of the Master Servicer in
the Financed Vehicle.
The Master Servicer shall maintain the Contract Documents held by it (by
itself or through one or more Subservicers) in a file area physically separate
from the other installment sales contracts and installment loans owned or
serviced by it or any of its Affiliates, which area shall be clearly marked to
indicate the Trust as the owner of, and the security interest of the Indenture
Trustee and the Insurer in, the Contract Documents and shall mark the Contracts
in the same manner; except that if the Indenture Trustee and the Insurer have
waived the requirement for such segregation and marking by notice in writing to
the Owner Trustee, the Indenture Trustee and the Master Servicer, such file area
may contain contract documents for other motor vehicle retail installment sales
contracts and installment loans owned or serviced by the Master Servicer.
The Master Servicer shall cause the electronic record of the Contracts
maintained by it to be clearly marked to indicate that the Contracts have been
sold to the Trust and shall not in any way assert or claim an ownership interest
in the Contracts. It is intended by the Master Servicer's and the Seller's
agreement pursuant to this Section that the Owner Trustee shall be deemed to
have possession of the Contract Documents for purposes of Section 9-305 of the
UCC of the state in which the Contract Documents are located.
Section 3.04. Duties of Master Servicer as Custodian.
(a) Safekeeping. The Master Servicer shall hold the Contract Files on
behalf of the Owner Trustee, the Indenture Trustee and the Insurer for the use
and benefit of all present and future Securityholders, and maintain such
accurate and complete accounts, records and computer systems pertaining to each
Contract File as shall enable the Issuer to comply with this Agreement. In
performing its duties as custodian the Master Servicer shall act with reasonable
care, using that degree of skill and attention that the Master Servicer
exercises with respect to the files relating to all comparable automobile
contracts that the Master Servicer owns or services for itself or others. The
Master Servicer shall conduct, or cause to be conducted, periodic physical
inspections of the Contract Files held by it under this Agreement and of the
related accounts, records and computer systems, and shall maintain them in such
a manner as shall enable the Owner Trustee, the Indenture Trustee and the
Insurer to verify the accuracy of the Master Servicer's record keeping. The
Master Servicer shall promptly report to the Owner Trustee, the Indenture
Trustee and the Insurer any failure on its part to hold the Contract Files and
maintain its accounts, records and computer systems as herein provided and shall
promptly take appropriate action to remedy any such failure.
(b) Maintenance of and Access to Records. The Master Servicer shall
maintain each Contract File at one of its offices specified in Schedule B hereto
or at such other location as shall be specified to the Owner Trustee, the
Indenture Trustee and the Insurer by 30 days' prior written notice. The Master
Servicer shall permit the Owner Trustee, the Indenture Trustee and the Insurer
or their respective duly authorized representatives, attorneys
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or auditors to inspect the Contract Files and the related accounts, records and
computer systems maintained by the Master Servicer at such times as such Persons
may request.
(c) Release of Documents. Upon instruction from the Indenture Trustee (a
copy of which shall be furnished to the Owner Trustee and the Insurer), the
Master Servicer shall release any Contract File to the Indenture Trustee, the
Indenture Trustee's agent, or the Indenture Trustee's designee, as the case may
be, at such place or places as the Indenture Trustee may designate, as soon as
practicable.
(d) Monthly Reports. On the tenth Business Day of each month, other than
a month in which a Distribution Date occurs, commencing with the month next
succeeding the month of the Closing Date, the Master Servicer shall mail to the
Indenture Trustee and the Owner Trustee, by first class mail, a certificate of a
Servicing Officer stating (i) the Contract Number and outstanding principal
balance of each Contract that has become a Liquidated Contract since the
Business Day next preceding the date of the last certificate delivered pursuant
to this subsection (or since the Closing Date in the case of the first such
certificate); (ii) that all proceeds received in respect of such Contract have
been deposited in or credited to the Collection Account or Holding Account as
required by Section 5.02; (iii) that, if such Contract has been the subject of a
Full Prepayment pursuant to clause (i) of the definition of the term "Full
Prepayment" or is a Liquidated Contract pursuant to clause (iii) of the
definition of the term "Liquidated Contract," all proceeds received in respect
thereof have been deposited in or credited to the Collection Account or Holding
Account in accordance with Section 5.02; (iv) that, if such Contract has been
the subject of a Full Prepayment pursuant to clause (ii) of the definition of
the term "Full Prepayment," the correct Repurchase Amount has been deposited in
or credited to the Collection Account in accordance with Section 4.07 or 5.04;
(v) that, if such Contract is a Liquidated Contract pursuant to clause (ii) of
the definition of the term "Liquidated Contract," there have been deposited in
or credited to the Collection Account or Holding Account the related Net
Liquidation Proceeds in accordance with Section 5.02; (vi) the current Aggregate
Scheduled Balance; (vii) the total dollar amount of charged-off Contracts;
(viii) the total dollar amount of delinquent Contracts; (ix) the total dollar
amount of all Contracts in respect of which the related Financed Vehicles have
been repossessed but have not been liquidated; (x) the current Charge-off
Percentage; and (xi) the current Delinquency Percentage. The information called
for in clauses (vi) through (xi) above shall be presented as of the Business Day
next preceding the date of the last certificate so delivered.
(e) Title Documents. The Master Servicer shall deliver to the Indenture
Trustee, the Owner Trustee and the Insurer (i) within 120 days of the Closing
Date, a schedule of Title Documents for Financed Vehicles which, as of the
Closing Date did not show the Master Servicer as first lienholder and (ii)
within 180 days of the Closing Date, a schedule of Title Documents for Financed
Vehicles which as of the date prior to such delivery do not show the Master
Servicer as first lienholder and as to which the Seller is obligated to
repurchase pursuant to the provisions hereof.
Section 3.05. Instructions; Authority to Act. The Master Servicer shall
be deemed to have received proper instructions (a copy of which shall be
furnished to the Owner Trustee
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and the Insurer) with respect to the Contract Files upon its receipt of written
instructions signed by a Responsible Officer of the Indenture Trustee.
Section 3.06. Indemnification. Subject to Section 8.02, the Master
Servicer shall indemnify the Trust, the Owner Trustee, the Indenture Trustee,
the Insurer and the Security- holders for any and all liabilities, obligations,
losses, compensatory damages, payments, costs or expenses of any kind whatsoever
(including the reasonable fees and expenses of counsel) that may be imposed on,
incurred by or asserted against the Trust, the Owner Trustee, the Indenture
Trustee, the Insurer, the Noteholders or the Certificateholders as the result of
any improper act or omission in any way relating to the maintenance and custody
by the Master Servicer of the Contract Files, or the failure of the Master
Servicer to perform its duties and service the Contracts in compliance with the
terms of this Agreement; provided, however, that the Master Servicer shall not
be liable to the Owner Trustee for any portion of any such amount resulting from
the willful misfeasance, bad faith or negligence of the Owner Trustee and the
Master Servicer shall not be liable to the Indenture Trustee for any portion of
any such amount resulting from the willful misfeasance, bad faith or negligence
of the Indenture Trustee. The Master Servicer shall also indemnify and hold
harmless the Trust, the Trust Estate and the Securityholders against any taxes
that may be asserted at any time against any of them with respect to the
Contracts, including any sales, gross receipts, general corporation, personal
property, privilege or license taxes (but exclusive of federal or other income
taxes arising out of payments on the Contracts) and the costs and expenses in
defending against such taxes. The Master Servicer shall immediately notify the
Owner Trustee and the Indenture Trustee if a claim is made by a third party with
respect to the Contracts, shall assume, with the consent of the Owner Trustee
and the Indenture Trustee, the defense of any such claim, pay all expenses in
connection therewith, including counsel fees, and shall promptly pay, discharge
and satisfy any judgment or decree which may be entered against it or the Trust.
Section 3.07. Effective Period and Termination. The Master Servicer's
appointment as custodian shall become effective as of the Cut-Off Date and shall
continue in full force and effect until terminated under to this Section or
until the Certificate Final Distribution Date. If the Master Servicer shall
resign in accordance with the provisions of this Agreement or if all of the
rights and obligations of the Master Servicer shall have been terminated
pursuant to Section 8.01, the appointment of the Master Servicer as custodian
shall be terminated by the Indenture Trustee, by the Holders of Notes evidencing
not less than 51% of the Outstanding Amount of the Notes, by the Owner Trustee,
by Certificateholders evidencing not less than 51% of the Certificate Balance,
or by the Insurer, in the same manner as the Indenture Trustee, the Owner
Trustee, the Insurer or such Holders may terminate the rights and obliga- tions
of the Master Servicer pursuant to Section 8.01. As soon as practicable after
any termination of such appointment, the Master Servicer shall, at its own
expense, deliver the Contract Files to the Owner Trustee or its agent at such
place or places as the Owner Trustee may reasonably designate and shall
cooperate in good faith to effect such delivery.
Section 3.08. Nonpetition Covenant.
(a) Neither the Seller nor the Master Servicer shall petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a
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case against the Trust under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Trust.
(b) The Master Servicer shall not, nor cause the Seller to, petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Seller under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Seller or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Seller.
Section 3.09. Collecting Title Documents Not Delivered at the Closing
Date. In the case of any Contract in respect of which written evidence from the
Dealer selling or transferring the related Financed Vehicle that the Title
Document for such Financed Vehicle showing the Master Servicer as first
lienholder has been applied for from the Registrar of Titles was delivered to
the Owner Trustee on the Closing Date in lieu of a Title Document, the Master
Servicer shall use its best efforts to collect such Title Document from the
Registrar of Titles as promptly as possible. If such Title Document showing the
Master Servicer as first lienholder is not received by the Master Servicer or
the related Subservicer within 180 days after the Closing Date, then the
representation and warranty in Section 3.01(b)(iii) in respect of such Contract
shall be deemed to have been incorrect in a manner that materially and adversely
affects the Certificateholders.
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ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer. The Master Servicer, acting
alone and/or through one or more Subservicers as provided in this Section,
shall, as agent for the Indenture Trustee, the Owner Trustee and the Insurer,
manage, service, administer and make collections on the Contracts. The Master
Servicer agrees that its servicing of the Contracts shall be carried out in
accordance with customary and usual procedures of financial institutions which
service motor vehicle retail installment sales contracts and installment loans
and, to the extent more exacting, the procedures used by the Master Servicer in
respect of such contracts serviced by it for its own account. In accordance with
the foregoing, the Master Servicer may, whenever an Obligor has become
delinquent or the Master Servicer believes an Obligor may become delinquent, in
order to preserve the ultimate collectability of amounts due on a Contract,
modify the payment schedule on any Contract by reducing the APR on such Contract
without the consent of the Insurer or any Rating Agency; provided, however, that
the new APR shall not be less than the sum of (i) the Pass-Through Rate, (ii)
the Servicing Fee Percent and (iii) the Retained Yield Percent. In addition, in
order to preserve the Trust Estate, the Master Servicer may, without the consent
of any Rating Agency or the Insurer, reduce the principal amount of a Contract
(i.e., write-down a portion of the principal amount due on such Contract and,
accordingly, lower the Monthly P&I on such Contract) to the extent funds are
available in the Spread Account to cover such reduction; provided however, the
total amount of such modifications pursuant to the immediately preceding
sentence and this sentence and reductions (i) may not affect more than 1% of the
Original Pool Balance through the Certificate Final Distribution Date and (ii)
during each three-month period between Distribution Dates (or in the case of the
first Distribution Date, from the Cut-Off Date to such Distribution Date) shall
not affect Contracts having an aggregate Scheduled Balance greater than 10/100
of one percent of the Pool Balance at the beginning of such period. Any such
modifications or reductions exceeding such limits may be made only with the
consent of the Insurer and each Rating Agency. The Master Servicer may also
extend the Maturity Date on a Contract in accordance with Section 4.02. The
Master Servicer's duties shall include collection and posting of all payments,
responding to inquiries of Obligors on the Contracts, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information to
Obligors, accounting for collections, furnishing monthly and annual statements
to the Indenture Trustee, the Owner Trustee and the Insurer with respect to
distributions and filing applicable U.S. tax returns for the Trust on an annual
basis, based on a tax year for the Trust that is the calendar year. The Master
Servicer shall have, subject to the terms hereof, full power and authority,
acting alone, and subject only to the specific requirements and prohibitions of
this Agreement, to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable; provided, however, that the Master Servicer shall commence
repossession efforts in respect of any Financed Vehicle respecting which the
related Contract is four or more months delinquent. Without limiting the
generality of the foregoing, but subject to the provisions of this Agreement,
the Master Servicer is authorized and empowered by the Indenture Trustee and the
Owner Trustee to execute and deliver, on behalf of itself, the Trust, the
Insurer, the Noteholders, the Certificateholders, the Indenture Trustee, the
Owner Trustee or any of them,
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any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Contracts or to the Financed Vehicles. The Owner Trustee shall furnish the
Master Servicer all documents necessary or appropriate to enable the Master
Servicer to carry out its servicing and administrative duties hereunder.
On the Closing Date, the Master Servicer shall deliver to the Insurer,
the Indenture Trustee and the Owner Trustee a list of Servicing Officers
involved in, or responsible for, the administration and servicing of the
Contracts, which list shall from time to time be updated by the Master Servicer
on request of the Owner Trustee, the Indenture Trustee or the Insurer.
The Master Servicer may enter into Subservicing Agreements with one or
more Subservicers approved by the Insurer for the servicing and administration
of certain of the Contracts (including holding the related Contract Files as
custodian). The Master Servicer shall notify each Rating Agency promptly if a
Subservicer is hired. References herein to actions taken or to be taken by the
Master Servicer in servicing the Contracts include actions taken or to be taken
by a Subservicer on behalf of the Master Servicer and the Insurer. Each
Subservicing Agreement will be upon such terms and conditions as are not
inconsistent with this Agreement and as the Master Servicer and the Subservicer
have agreed. With the approval of the Master Servicer and the Insurer, a
Subservicer may delegate its servicing obligations to third-party servicers, but
such Subservicer will remain obligated under the related Subservicing Agreement.
The Master Servicer and a Subservicer may enter into amendments thereto or
different forms of Subservicing Agreements and the form attached as Exhibit E
hereto is merely provided for information and shall not be deemed to limit in
any respect the discretion of the Master Servicer to modify or enter into
different Subservicing Agreements; provided, however, that any such amendments
or different forms shall be consistent with and not violate the provisions of
this Agreement or materially adversely affect the rights of Noteholders,
Certificateholders or the Insurer hereunder.
The Master Servicer shall be entitled to terminate any Subservicing
Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this Agreement;
provided, however, that in the event of termination of any Subservicing
Agreement by the Master Servicer or the related Subservicer, the Master Servicer
shall either act directly as servicer of the related Contract or enter into a
Subservicing Agreement with a successor Subservicer approved by the Insurer
which will be bound by the terms of the related Subservicing Agreement.
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or a Subservicer or reference to actions taken through such Persons or
otherwise, the Master Servicer shall remain obligated and liable to the
Indenture Trustee, the Owner Trustee and the Securityholders for the servicing
and administering of the Contracts in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from a
Subservicer and to the same extent and under the same terms and conditions as if
the Master Servicer alone were servicing and administering the Contracts. The
Master Servicer shall be entitled to enter into
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an agreement with a Subservicer for indemnification of the Master Servicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
Any Subservicing Agreement that may be entered into and any other
transactions or servicing arrangements relating to the Contracts involving a
Subservicer or other Affiliate of the Master Servicer in its capacity as such
and not as an originator shall be deemed to be between the Subservicer or such
other Affiliate, as the case may be, and the Master Servicer alone, and none of
the Indenture Trustee, the Owner Trustee, the Noteholders nor the
Certificateholders shall be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in the immediately succeeding paragraph; provided that the
Insurer may rely upon the representations and warranties of the Subservicer
contained therein.
In the event the Master Servicer shall for any reason no longer be a
servicer (including, but not limited to, by reason of an Event of Default), the
Indenture Trustee or its designee may, at the sole discretion of the Indenture
Trustee, thereupon assume all of the rights and obligations of such Master
Servicer under each Subservicing Agreement selected by the Indenture Trustee in
its sole discretion. In such event, the Indenture Trustee, its designee or the
successor servicer for the Indenture Trustee shall be deemed to have assumed all
of the Master Servicer's interest therein and to have replaced the Master
Servicer as a party to each such Subservicing Agreement to the same extent as if
such Subservicing Agreement had been assigned to the assuming party except that
the Master Servicer shall not thereby be relieved of any liability or
obligations under the Subservicing Agreement. The Master Servicer shall, upon
request of the Indenture Trustee but at the expense of the Master Servicer,
deliver to the assuming party all documents and records relating to each such
Subservicing Agreement and the Contracts then being serviced and an accounting
of amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of the Subservicing Agreement to the assuming
party.
On the Closing Date, the Master Servicer shall deposit in the Collection
Account (i) all installments of Monthly P&I due on or after November 1, 1998 and
received by the Master Servicer at least two Business Days prior to the Closing
Date; (ii) the proceeds of each Prepayment (excluding any portion allocable to
principal and interest due before November 1, 1998) of any such Contract
received by the Master Servicer on or after November 1, 1998 but no later than
two Business Days prior to the Closing Date; and (iii) all Net Liquidation
Proceeds and Net Insurance Proceeds realized in respect of a Financed Vehicle at
least two Business Days prior to the Closing Date.
Subject to Section 5.02 respecting deposits in the Holding Account, the
Master Servicer shall deposit in or credit to the Collection Account within two
Business Days of receipt all collections of Monthly P&I due on or after June 1,
1998 received by it on or in respect of the Contracts together with the proceeds
of all Prepayments and any accompanying interest; provided, however, that, to
the extent any such installment of Monthly P&I or any such Prepayment proceeds
are received in respect of a Contract as to which there is an outstanding and
unreimbursed Advance or Advances, such installment or proceeds shall, to the
extent of any such unreimbursed Advance or Advances, be retained by the Master
Servicer in
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reimbursement of itself. The Master Servicer shall likewise deposit in the
Collection 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 made by it in respect of such Contract.
The foregoing notwithstanding, the Master Servicer may, in the event it
determines that it has made a Nonrecoverable Advance or Advances, reimburse
itself from unrelated installments of Monthly P&I or Prepayment proceeds to the
extent it shall, concurrently with the withholding of any such installment or
proceeds from deposit in or credit to the Collection Account as required above,
furnish to the Indenture Trustee, the Owner Trustee and the Insurer a
certificate of a Servicing Officer setting forth the basis for the Master
Servicer's determination, the amount of and Contract with respect to which such
Nonrecoverable Advance was made and the installment or installments or other
proceeds respecting which reimbursement has been taken. The foregoing
requirements for deposit in the Collection Account are exclusive, it being
understood that collections in the nature of late payment charges or extension
fees or collections allocable to payments to be made by the Master Servicer on
behalf of Obligors for payment of insurance premiums or similar items need not
be deposited in the Collection Account and may be retained by the Master
Servicer as additional servicing compensation or for application on behalf of
Obligors, as the case may be.
Amounts otherwise required to be deposited in the Collection Account
pursuant to the immediately preceding paragraph shall instead be deposited by
the Master Servicer in the Holding Account to the extent such amounts are
payments of Monthly P&I due in one or more months subsequent to the end of the
Due Period during which such payments are received.
With respect to payments of Monthly P&I made by Obligors to the Master
Servicer's lock box, the Master Servicer shall direct the Person maintaining the
lock box to deposit the amount collected on or in respect of the Contracts to
the Collection Account.
In those cases where a Subservicer is servicing a Contract pursuant to a
Subservicing Agreement, the Master Servicer shall cause the Subservicer to remit
to the Master Servicer for deposit in the Collection Account, on a daily basis,
within two Business Days after receipt by the Subservicer, all proceeds of
Contracts and all Net Liquidation Proceeds and Net Insurance Proceeds received
by the Subservicer.
In order to facilitate the servicing of the Contracts by the Master
Servicer, the Master Servicer shall retain, subject to and only to the extent
permitted by the provisions of this Agreement, all collections on or in respect
of the Contracts prior to the time they are remitted or credited, in accordance
with such provisions, to the Collection Account or the Holding Account, as the
case may be. The Master Servicer acknowledges that the unremitted collections on
the Contracts are part of the Trust Estate and the Master Servicer agrees to act
as custodian and bailee of the Indenture Trustee, the Owner Trustee and the
Insurer in holding such monies and collections. The Master Servicer agrees, for
the benefit of the Indenture Trustee, the Owner Trustee, the Securityholders and
the Insurer, to act as such custodian and bailee, and to hold and deal with such
monies and such collections, as custodian and bailee
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for the Indenture Trustee, the Owner Trustee and the Insurer, in accordance with
the provisions of this Agreement.
The Master Servicer shall retain all data (including, without
limitation, computerized records) relating directly to or maintained in
connection with the servicing of the Contracts at the address of the Master
Servicer set forth as Schedule B to this Agreement, at the office of any
Subservicer or, upon 15 days' notice to the Insurer, the Indenture Trustee and
the Owner Trustee, at such other place where the servicing offices of the Master
Servicer are located, and shall give the Indenture Trustee, the Owner Trustee
and the Insurer access to all data at all reasonable times. While a Servicer
Default shall be continuing, the Master Servicer shall, on demand of the
Indenture Trustee, the Owner Trustee or the Insurer, deliver or cause to be
delivered to the Indenture Trustee, the Owner Trustee or the Insurer, as the
case may be, all data (including, without limitation, computerized records and,
to the extent transferable, related operating software) necessary for the
servicing of the Contracts and all monies collected by it and required to be
deposited in or credited to the Collection Account or the Holding Account, as
the case may be.
Section 4.02. Collection of Contract Payments. The Master Servicer shall
use its best efforts to collect all payments called for under the terms and
provisions of the Contracts as and when the same shall become due and shall use
its best efforts to cause each Obligor to make all payments in respect of his or
her Contract to the Master Servicer. Consistent with the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charges in connection
with delinquent payments on a Contract or prepayment charges and (ii) in order
to work out a default or an impending default due to the financial condition of
the Obligor, modify the payment schedule of a delinquent Contract (subject to
the next sentence) or extend the Maturity Date of a delinquent Contract by up to
90 days in the aggregate past the originally scheduled date of the last payment
on such Contract; provided that in the case of any extension granted pursuant to
clause (ii) the Master Servicer makes an Advance in respect of such extension
and in no event can the last payment on such Contract be extended beyond the
last day of the Due Period ending immediately prior to the Certificate Final
Distribution Date. The Master Servicer shall not extend the Maturity Date of a
Contract except as provided in clause (ii) of the preceding sentence and shall
not modify any Contracts except in accordance with the criteria and limitations
specified in Section 4.01.
Section 4.03. Realization upon Defaulted Contracts and Liquidated
Contracts. The Master Servicer shall use its best efforts, consistent with the
servicing standard specified in Section 4.01, to repossess or otherwise convert
the ownership of the Financed Vehicle securing any Contract as to which no
satisfactory arrangements can be made for collection of delinquent payments.
Such servicing procedures may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
In connection with such repossession or other conversion, the Master Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual for prudent holders of motor vehicle
retail installment sales contracts and installment loans and as shall be in
compliance with all applicable laws, and, in connection with the repossession of
any Financed Vehicle or any Contract in default, may commence and prosecute any
proceedings in respect of such Contract in its own name or, if the Master
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Servicer deems it necessary, in the name of the Owner Trustee or on behalf of
the Owner Trustee. The Master Servicer's obligations under this Section are
subject to the provision that, in the case of damage to a Financed Vehicle from
an uninsured cause, the Master Servicer shall not be required to expend its own
funds in repairing such Financed Vehicle unless it shall determine (i) that such
restoration will increase the proceeds of liquidation of the related Contract,
after reimbursement to itself for such expenses, and (ii) that such expenses
will be recoverable by it either as Liquidation Expenses or as expenses
recoverable under an applicable Insurance Policy. In the event that the Master
Servicer determines that, in its best judgment, further collection efforts by it
as to a Liquidated Contract will not result in the realization of additional Net
Liquidation Proceeds to the Trust, the Master Servicer may, in the name of the
Owner Trustee, and for the benefit of the Trust, sell the Liquidated Contract to
any party not affiliated with the Master Servicer free and clear of the rights
of the Trust. The Master Servicer shall be responsible for all other costs and
expenses incurred by it in connection with any action taken in respect of a
defaulted Contract; provided, however, that it shall be entitled to
reimbursement of such costs and expenses to the extent they constitute
Liquidation Expenses or expenses recoverable under an applicable Insurance
Policy. All Net Liquidation Proceeds, Net Insurance Proceeds and proceeds of the
sale of Contracts hereunder shall be deposited directly in or credited to the
Collection Account (without deposit in any intervening account) to the extent
required by Section 5.02.
Section 4.04. Insurance. The Master Servicer shall cause the LDI Policy
to be maintained in respect of each 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.
Section 4.05. Maintenance of Security Interests in Financed Vehicles.
The Master Servicer shall take such steps as are necessary to maintain
continuous perfection and priority of the security interest created by each
Contract in the related Financed Vehicle, including but not limited to,
obtaining the execution by the Obligors and the recording, registering, filing,
re-recording, re-registering and refiling of all security agreements, financing
statements, continuation statements or other instruments as are necessary to
maintain the security interest granted by Obligors under the respective
Contracts. The Owner Trustee and the Indenture Trustee each hereby authorizes
the Master Servicer to take such steps as are necessary to re-perfect such
security interest on behalf of the Trust in the event of the relocation of a
Financed Vehicle or for any other reason.
Section 4.06. Covenants, Representations and Warranties of Master
Servicer. The Master Servicer hereby makes the following covenants,
representations and warranties on which (i) the Issuer is deemed to have relied
in acquiring the Contracts and (ii) the Insurer is deemed to have relied in
issuing the Policies. Such covenants, representations and warranties speak as of
the execution and delivery of this Agreement and as of the Closing Date, but
shall survive the sale, transfer and assignment of the Contracts to the Issuer
and the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) The Master Servicer covenants as to the Contracts:
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(i) Lien in Force. The Financed Vehicle securing each Contract
shall not be released from the lien granted by the Contract in whole or
in part, except as contemplated herein.
(ii) Impairment. The Master Servicer shall not impair the rights
of the Noteholders and Certificateholders in the Contracts.
(iii) Amendments. The Master Servicer shall not amend the terms
of any Contract, except that extensions or modifications may be granted
in accordance with Section 4.02.
(iv) Transfers. The Master Servicer may consent to the sale or
transfer by an Obligor of any Financed Vehicle if the original Obligor
under the related Contract remains liable under such Contract and the
transferee assumes all of the Obligor's obligations thereunder.
(b) The Master Servicer represents, warrants, and covenants:
(i) Organization and Good Standing. The Master Servicer (A) has
been duly organized and is validly existing as a corporation in good
standing under the laws of the State of California, (B) has qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, and (C) has full power,
authority and legal right to own its property, to carry on its business
as presently conducted and to enter into and perform its obligations
under this Agreement
(ii) Power and Authority. The execution and delivery by the
Master Servicer of this Agreement are within the corporate power of the
Master Servicer and have been duly authorized by all necessary corporate
action on the part of the Master Servicer. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
herein contemplated, nor compliance with the provisions hereof, will
conflict with or result in a breach of, or constitute a default under,
any of the provisions of any law, governmental rule, regulation,
judgment, decree or order binding on the Master Servicer or its
properties or the articles of incorporation or bylaws of the Master
Servicer, or any of the provisions of any indenture, mortgage, contract
or other instrument to which the Master Servicer is a party or by which
it is bound or result in the creation or imposition of any lien, charge
or encumbrance upon any of its property pursuant to the terms of any
such indenture, mortgage, contract or other instrument.
(iii) Governmental Consents. The Master Servicer is not required
to obtain the consent of any other party or consent, license, approval
or authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except (in
each case) such as have been obtained and are in full force and effect.
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(iv) Binding Obligation. This Agreement has been duly executed
and delivered by the Master Servicer and, assuming the due
authorization, execution and delivery thereof by the Owner Trustee and
the Indenture Trustee, constitutes a legal, valid and binding instrument
enforceable against the Master Servicer in accordance with its terms
(subject to applicable bankruptcy and insolvency laws and other similar
laws affecting the enforcement of creditors' rights generally).
(v) No Proceedings. There are no actions, suits or proceedings
pending or, to the knowledge of the Master Servicer, threatened against
or affecting the Master Servicer, before or by any court, administrative
agency, arbitrator or governmental body with respect to any of the
transactions contemplated by this Agreement, or which will, if
determined adversely to the Master Servicer, materially and adversely
affect it or its business, assets, operations or condition, financial or
otherwise, or adversely affect the Master Servicer's ability to perform
its obligations hereunder. The Master Servicer is not in default with
respect to any order of any court, administrative agency, arbitrator or
governmental body so as to materially and adversely affect the
transactions contemplated by the above-mentioned documents.
(vi) Other Consents. The Master Servicer has obtained or made
all necessary consents, approvals, waivers and notifications of
creditors, lessors and other nongovernmental persons, in each case in
connection with the execution and delivery of, and the consummation of
the transactions contemplated by, this Agreement.
Section 4.07. Repurchase of Contracts upon Breach of Covenant. The
Master Servicer or the Owner Trustee shall inform the other party and the
Indenture Trustee and the Insurer promptly, in writing, upon the discovery of
any breach pursuant to Section 4.02, 4.05 or 4.06. Unless the breach shall have
been cured within 30 days following such discovery, the Master Servicer shall
purchase any Contract materially and adversely affected by such breach. In
consideration of the purchase of such Contract, the Master Servicer shall remit
the Repurchase Amount in the manner specified in Section 5.04. The sole remedy
of the Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders
or the Noteholders with respect to a breach pursuant to Section 4.02, 4.05 or
4.06 shall be to require the Master Servicer to purchase Contracts pursuant to
this Section; provided, however, that the Master Servicer shall indemnify the
Owner Trustee, the Indenture Trustee, the Insurer, the Issuer and the
Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third-party claims
arising out of the events or facts giving rise to such breach. The Owner Trustee
shall have no duty to conduct any affirmative investigation as to the occurrence
of any condition requiring the repurchase of any Contract pursuant to this
Section.
Section 4.08. Servicing Compensation. As compensation for the
performance of its obligations under this Agreement and subject to the terms of
this Section, the Master Servicer shall be entitled to receive on each
Distribution Date the Servicing Fee in respect of each Contract that was
Outstanding at the beginning of the Due Period ending immediately prior to such
Distribution Date, to the extent the related payment of Monthly P&I has been
collected
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or advanced pursuant to Section 5.04. As servicing compensation in addition to
the Servicing Fee, the Master Servicer shall be entitled (i) to retain all late
payment charges, extension fees and similar items paid in respect of Contracts,
and (ii) to receive, in respect of each Rule of 78's Contract that is prepaid in
full prior to its Maturity Date, the amount by which the outstanding principal
balance of such Contract exceeds the Scheduled Balance of such Contract at the
time of such prepayment; provided, however, that the Master Servicer agrees that
each amount payable to it pursuant to clause (ii) above shall be deposited in
the Spread Account and applied in accordance with Article Five and the Insurance
Agreement. The Master Servicer shall pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement of such expenses except to the extent provided in Section 4.03.
Section 4.09. Reporting by the Master Servicer.
(a) On each Master Servicer Report Date, the Master Servicer shall
transmit to the Owner Trustee, the Indenture Trustee, each Rating Agency and the
Insurer a statement, substantially in the form of Exhibit F hereto (the
"Distribution Date Statement"), setting forth with respect to the next
succeeding Distribution Date:
(i) the Certificate Interest Distributable Amount and the Note
Interest Distributable Amount for such Distribution Date;
(ii) the Certificate Principal Distributable Amount and the Note
Principal Distributable Amount for such Distribution Date and the
portion thereof constituting the Accelerated Principal Distributable
Amount;
(iii) the Net Collections, the Note Percentage and the
Certificate Percentage for such Distribution Date;
(iv) the amount otherwise distributable to each Class of
Noteholders and the Certificateholders that will be distributed to a
different Class of Noteholders on such Distribution Date;
(v) the amount to be on deposit in the Spread Account on such
Distribution Date, before and after giving effect to deposits thereto
and withdrawals therefrom to be made in respect of such Distribution
Date;
(vi) the Servicing Fee with respect to the related Due Period;
(vii) 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;
(viii) the aggregate amount of Monthly P&I which was due on the
Contracts during the related Due Period and was delinquent as of the end
of the related Due
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Period (any such payment of Monthly P&I being presumed to be delinquent
to the extent that it was not deposited in or credited to the Collection
Account during such Due Period);
(ix) the amount set forth in clause (viii) above which is being
advanced concurrently with such Distribution Date Statement by the
Master Servicer pursuant to Section 5.04, the amount of any such Advance
being deposited in or credited to the Collection Account on such Master
Servicer Report Date;
(x) the aggregate amount of any Nonrecoverable Advances
deducted by the Master Servicer from amounts otherwise required to be
deposited by the Master Servicer in the Collection Account during the
related Due Period;
(xi) the aggregate amount of Retained Yield for the related Due
Period;
(xii) the Aggregate Net Liquidation Losses for the related Due
Period;
(xiii) the Delinquency Percentage and the Charge-Off Percentage
for the most recent Calculation Day;
(xiv) the amount of Contracts which have had their APR or
principal amount modified pursuant to Section 4.01 and the percentage
that amount constitutes of the Original Principal Balance on a
cumulative basis; in addition the aggregate Scheduled Balance of
Contracts so modified as a percentage of the Pool Balance for the most
recent Distribution Date;
(xv) the Certificate Deficiency Claim Amount, if any, for such
Distribution Date;
(xvi) the Certificate Policy Claim Amount, if any, for such
Distribution Date;
(xvii) the Note Deficiency Claim Amount, if any, for such
Distribution Date, separately setting forth the amount thereof payable
in respect of each Class of Notes;
(xviii) the Note Policy Claim Amount, if any, for such Distribution
Date, separately setting forth the amount thereof payable in respect of
each Class of Notes; and
(xix) if the data becomes available, the principal amount of
Contracts originated by WFS in respect of clauses (viii) and (xii)
above.
Each such Distribution Date Statement shall be accompanied by an Officers'
Certificate of the Master Servicer stating that the computations reflected in
such statement were made in conformity with the requirements of this Agreement.
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(b) On each Master Servicer Report Date, the Master Servicer shall
deliver to the Owner Trustee, the Indenture Trustee, each Rating Agency and the
Insurer a report, in respect of the immediately preceding Due Period, setting
forth the following:
(i) the aggregate amount, if any, paid by or due from it for
the purchase of Contracts which the Seller or the Master Servicer has
become obligated to purchase pursuant to Section 3.02 or 4.07 or the
Seller has elected to purchase pursuant to Section 9.01;
(ii) the net amount of funds which have been deposited in or
credited to the Collection Account or the Holding Account in respect of
such Due Period (including amounts, if any, collected during the
immediately preceding Due Period and deposited in the Holding Account
pursuant to Section 5.02) after giving effect to all permitted
deductions therefrom pursuant to Section 5.02;
(iii) with respect to each Contract that became a Liquidated
Contract during such Due Period, the following information:
(A) its Contract Number;
(B) the effective date as of which such Contract became a
Liquidated Contract;
(C) its Monthly P&I and Scheduled Balance as of the
immediately preceding Distribution Date (or as of the Cut-Off
Date in the case of the first Distribution Date); and
(D) if less than 100% of the outstanding principal balance
of and accrued and unpaid interest was recovered on such
Liquidated Contract, the amount of the Net Liquidation Proceeds
or Net Insurance Proceeds;
(iv) with respect to each Contract which was the subject of a
Partial Prepayment during such Due Period, the following information:
(A) its Contract Number;
(B) the date of such Partial Prepayment;
(C) its new Maturity Date;
(D) the total amount received with respect to such Partial
Prepayment; and
(E) its Scheduled Balance as of the prior Distribution
Date (or as of the Cut-Off Date in the case of the first
Distribution Date) and its Scheduled Balance for each
Distribution Date having a Due Period prior to the Due Period
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of its Maturity Date, computed on the basis set forth under the
definition of the term "Scheduled Balance";
(v) the Contract Numbers, Monthly P&I, Scheduled Balances and
Maturity Dates of all Contracts which became Defaulted Contracts during
such Due Period;
(vi) any other information relating to the Contracts reasonably
requested by the Owner Trustee, the Indenture Trustee, each Rating
Agency or the Insurer; and
(vii) the amount of Net Liquidation Proceeds and Net Insurance
Proceeds which have been deposited in or credited to the Collection
Account or the Holding Account in respect of the Due Period ending
immediately prior to such Master Servicer Report Date and the cumulative
amount of Net Liquidation Proceeds and Net Insurance Proceeds deposited
in or credited to the Collection Account or the Holding Account during
the preceding Due Periods.
Section 4.10. Annual Statement as to Compliance. The Master Servicer
shall deliver to the Owner Trustee, the Indenture Trustee, each Rating Agency
and the Insurer, 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, an
Officers' Certificate of the Master Servicer stating that (i) a review of the
activities of the Master Servicer during the preceding fiscal year (or since the
Closing Date in the case of the first such Officers' Certificate) and of its
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Master Servicer has fulfilled all its obligations under this Agreement
throughout such year and that no default under this Agreement has occurred and
is continuing, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. A copy of such certificate and the report referred to in
Section 4.11 may be obtained by any Certificateholder, Certificate Owner,
Noteholder or Note Owner by a request in writing to the Owner Trustee addressed
to the Owner Trustee Corporate Trust Office. Upon the telephone request of the
Owner Trustee, the Indenture Trustee will promptly furnish the Owner Trustee a
list of Noteholders as of the date specified by the Owner Trustee.
Section 4.11. Annual Independent Certified Public Accountants' Report.
On or before 90 days after the end of the first fiscal year of the Master
Servicer which ends more than three months after the Closing Date and each
fiscal year thereafter, the Master Servicer at its expense shall cause a firm of
nationally-recognized independent certified public accountants (who may also
render other services to the Master Servicer) to furnish a report to the
Indenture Trustee, the Owner Trustee, each Rating Agency and the Insurer to the
effect that (i) they have audited the balance sheet of the Master Servicer as of
the last day of said fiscal year and the related statements of operations,
retained earnings and cash flows for such fiscal year and have issued an opinion
thereon, specifying the date thereof, (ii) they have also audited certain
documents and the records relating to the servicing of the Contracts and the
distributions on the Notes and the Certificates hereunder, (iii) their audit as
described under clauses (i) and (ii) above was made in accordance with generally
accepted auditing standards and accordingly included such tests of the
accounting records and such other auditing
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procedures as they considered necessary in the circumstances, and (iv) their
audits described under clauses (i) and (ii) above disclosed no exceptions which,
in their opinion, were material, relating to the servicing of such Contracts in
accordance with this Agreement and the making of distributions on the Notes and
Certificates in accordance with this Agreement, or, if any such exceptions were
disclosed thereby, setting forth such exceptions which, in their opinion, were
material.
Section 4.12. Access to Certain Documentation and Information Regarding
Contracts. The Master Servicer shall provide to the Insurer, the Indenture
Trustee and the Security-holders access to the Contract Files in such cases
where the Certificateholders or Noteholders shall be required by applicable
statutes or regulations to review such documentation. Access shall be afforded
without charge, but only upon reasonable request and during the normal business
hours at the designated offices of the Master Servicer and each related
Subservicer, if any. Nothing in this Section shall affect the obligation of the
Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors and the failure of the Master Servicer to
provide access to information as a result of such obligation shall not
constitute a breach of this Section.
Section 4.13. Fidelity Bond. The Master Servicer shall maintain a
fidelity bond in such form and amount as is customary for banks acting as
custodian of funds and documents in respect of mortgage loans or consumer
contracts on behalf of institutional investors.
Section 4.14. Indemnification; Third Party Claims. Subject to Section
8.02, the Master Servicer agrees to indemnify and hold the Indenture Trustee,
the Owner Trustee and the Securityholders harmless against any and all claims,
losses, penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and any reasonable other costs, fees and expenses that the Indenture
Trustee, the Owner Trustee, the Noteholders or the Certificate-holders may
sustain because of the failure of the Master Servicer to perform its duties and
service the Contracts in compliance with the terms of this Agreement. The Master
Servicer shall immediately notify the Indenture Trustee and the Owner Trustee if
a claim is made by a third party with respect to the Contracts, assume, with the
consent of the Indenture Trustee and the Owner Trustee, the defense of any such
claim and pay all expenses in connection therewith, including counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against it or Indenture Trustee, the Owner Trustee, the Noteholders or the
Certificateholders.
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ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT;
STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts.
(a) Prior to the Closing Date, the Master Servicer shall open, at a
depository institution (which may be the Indenture Trustee, the Bank or the
Master Servicer), the following accounts (the "Trust Accounts"):
(i) an account in the name of the Indenture Trustee (the
"Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Securityholders;
(ii) an account in the name of the Indenture Trustee (the
"Holding Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Securityholders;
(iii) an account in the name of the Indenture Trustee (the
"Spread Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Securityholders;
(iv) an account in the name of the Indenture Trustee (the "Note
Distribution Account") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders; and
(v) an account in the name of the Owner Trustee (the
"Certificate Distribution Account") bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Certificateholders.
The Trust Accounts shall be Eligible Accounts and relate solely to the
Securities and to the Contracts and Eligible Investments. The Master Servicer
shall give the Indenture Trustee, the Owner Trustee and the Insurer at least
five Business Days' written notice of any change in the location of any Trust
Account and any related account identification information. All monies
(exclusive of the Retained Yield) deposited in or credited to, from time to
time, the Trust Accounts shall be part of the Trust Estate and all monies
deposited in or credited to, from time to time, the Collection Account, the
Spread Account, the Certificate Distribution Account and the Note Distribution
Account shall be invested by the Indenture Trustee in Eligible Investments
pursuant to Section 5.01(b). On the Business Day following each Distribution
Date, all amounts, if any, on deposit in or credited to the Holding Account
(excluding any installments of Monthly P&I that are due in one or more Due
Periods ending subsequent to the Distribution Date immediately succeeding such
Distribution Date) shall be transferred to the Collection Account.
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(b) All funds in the Collection Account, the Spread Account, the Note
Distribution Account and the Certificate Distribution Account shall be invested
by the Indenture Trustee in Eligible Investments and/or Proprietary Funds.
Unless and until the RIC is no longer an Eligible Investment, all funds in such
Trust Accounts, in each case that are available for investment in Eligible
Investments or in Proprietary Funds, shall be invested in the RIC or in
Proprietary Funds. If the RIC is no longer an Eligible Investment then, subject
to the limitations set forth herein, the Master Servicer may direct the
Indenture Trustee in writing to invest funds in the foregoing Trust Accounts in
Eligible Investments or Proprietary Funds other than the RIC; provided that in
the absence of such directions from the Master Servicer, the Insurer may so
direct the Indenture Trustee. All such investments shall be in the name of the
Indenture Trustee for the benefit of the Noteholders and the Certificateholders,
as applicable. All income or other gain from investment of monies deposited in
or credited to the Collection Account (including without limitation the RIC
Reinvestment Earnings) shall be deposited in or credited to the Collection
Account immediately upon receipt, and any loss resulting from such investment
shall be charged to the Collection Account. All income or other gain from
investment of monies deposited in or credited to the Spread Account (including
without limitation the RIC Reinvestment Earnings) shall be deposited in or
credited to the Spread Account immediately upon receipt, and any loss resulting
from such investment shall be charged to the Spread Account. All income or other
gain from investment of monies deposited in or credited to the Note Distribution
Account (including without limitation the RIC Reinvestment Earnings) shall be
deposited in or credited to the Note Distribution Account immediately upon
receipt, and any loss resulting from such investment shall be charged to the
Note Distribution Account. All income or other gain from investment of monies
deposited in or credited to the Certificate Distribution Account (including
without limitation the RIC Reinvestment Earnings) shall be deposited in or
credited to the Certificate Distribution Account immediately upon receipt, and
any loss resulting from such investment shall be charged to the Certificate
Distribution Account. The maximum permissible maturities of any investments of
funds in the Collection Account, the Spread Account, the Note Distribution
Account and the Certificate Distribution Account on any date shall not be later
than the fifth Business Day immediately preceding the Distribution Date next
succeeding the date of such investment; provided, however, that such funds may
be invested by the Indenture Trustee in Eligible Investments (other than the
RIC) that mature on the Business Day before the Distribution Date or in
Proprietary Funds for a period not to exceed one Business Day. No investment in
Eligible Investments may be sold prior to its maturity and all investments in
Proprietary Funds shall be for a period not to exceed one Business Day.
(c) Funds in the Holding Account shall not be invested.
(d) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts
(exclusive of Retained Yield, if any) and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and income shall be
part of the Trust Estate. The Trust Accounts, other than the Certificate
Distribution Account, shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the Certificateholders,
as the case may be. The Certificate Distribution Account shall be in the name of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
any of the Trust Accounts ceases to be an Eligible
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Account, the Indenture Trustee (or the Master Servicer on its behalf) shall
within ten Business Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency may consent) establish a new Trust Account as an
Eligible Account and shall transfer any cash and/or any investments to such new
Trust Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Accounts, subject
to the last sentence of Section 5.01(d)(i); and each such
Eligible Account shall be subject to the exclusive custody and
control of the Indenture Trustee, and the Indenture Trustee shall
have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in
accordance with paragraph (i) of the definition of the term
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a Financial Intermediary
acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
Federal book-entry regulations shall be delivered in accordance
with paragraph (ii) of the definition of the term "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article Eight of the UCC and that is not governed
by clause (C) above shall be delivered to the Indenture Trustee
in accordance with paragraph (iii) of the definition of the term
"Delivery" and shall be maintained by the Indenture Trustee,
pending maturity or disposition, through continued registration
of the Indenture Trustee's (or its nominee's) ownership of such
security.
(iii) The Master Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee to make withdrawals
and payments from the Trust Accounts for the purpose of permitting the
Master Servicer or the Owner Trustee to carry out its respective duties
hereunder or permitting the Indenture Trustee to carry out its duties
under the Indenture.
Section 5.02. Collections; Realization Upon Policies; Net Deposits.
(a) Subject to Section 5.03 and subsections (d) and (e) hereof, the
Master Servicer shall remit or credit all payments by the Obligors on the
Contracts, all payments on behalf of Obligors on the Contracts, and all Net
Liquidation Proceeds and Net Insurance Proceeds to
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the Collection Account (within two Business Days as specified in Section 4.01);
provided that the Master Servicer shall retain from collection of late payments
and Net Liquidation Proceeds or Net Insurance Proceeds in respect of a Contract
an amount equal to previously unreimbursed Advances in respect of such Contract
made pursuant to Section 5.04. Amounts otherwise required to be deposited in or
credited to the Collection Account pursuant to the immediately preceding
sentence shall instead be deposited in or credited to the Holding Account to the
extent that such amounts are installments of Monthly P&I which are due in a Due
Period for a Distribution Date subsequent to the Distribution Date immediately
succeeding the date of receipt.
(b) Notwithstanding anything in this Agreement to the contrary, the
Retained Yield will be collected by the Master Servicer and paid out on a
monthly basis to the Seller without ever becoming part of the Trust's assets.
(c) Not later than 12:00 p.m., New York City time, on the fifth Business
Day prior to each Distribution Date, based on the information set forth in the
related Distribution Date Statement to the extent that there are insufficient
funds to make the distributions required to be made to each Class of Notes and
the Certificates as described in Sections 5.05 and 5.06, the Master Servicer
shall deliver to the Indenture Trustee, with a copy to the Insurer, the Owner
Trustee and the Fiscal Agent, if any, by hand delivery, telex or facsimile
transmission, a written notice (a "Deficiency Notice") specifying the
Certificate Deficiency Claim Amount or the Note Deficiency Claim Amount, if any,
for such Distribution Date, separately identifying the amount of the applicable
Deficiency Claim Amount payable in respect of each Class of Notes and the
Certificates. Such Deficiency Notice shall direct the Indenture Trustee to remit
such Deficiency Claim Amount (to the extent of funds then on deposit in the
Spread Account) (i) with respect to any Certificate Deficiency Claim Amount, to
the Owner Trustee for deposit in the Certificate Distribution Account and (ii)
with respect to any Note Deficiency Claim Amount, to the Indenture Trustee for
deposit in the Note Distribution Account.
(d) Not later than 12:00 p.m., New York City time, on the fourth
Business Day prior to each Distribution Date, (i) the Owner Trustee shall make a
claim under the Certificate Policy for any Certificate Policy Claim Amount for
such Distribution Date and/or (ii) the Indenture Trustee shall make a claim
under the Note Policy for any Note Policy Claim Amount for such Distribution
Date, in each case by delivering to the Insurer and the Fiscal Agent, if any,
with a copy to the Master Servicer, by hand delivery, telex or facsimile
transmission, a claim for the related Certificate Policy Claim Amount or Note
Policy Claim Amount, as the case may be. In making any such claim, the Owner
Trustee or the Indenture Trustee, as the case may be, shall comply with all the
terms and conditions of the related Policy. The notice of such claim shall
direct the Insurer to remit such Certificate Policy Claim Amount or Note Policy
Claim Amount, as the case may be, to the Owner Trustee or the Indenture Trustee
for deposit in the Certificate Distribution Account or the Note Distribution
Account, as the case may be.
(e) So long as the Master Servicer is WFS, the Master Servicer shall
have the right, on a basis not more frequently than once per month (although
deposits shall be made
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into the Collection Account within two Business Days pursuant to Section 4.01),
to deduct from amounts received that are otherwise required to be deposited in
or credited to the Collection Account and, to the extent such amounts are
insufficient, to require that the Indenture Trustee withdraw and deliver to it
from the Collection Account, amounts due to be paid hereunder to the Master
Servicer or to the Seller after giving effect to application of the payment
priorities specified in this Article for the month (or other applicable period),
and to pay such amounts to itself as Master Servicer or to the Seller, as the
case may be. Notwithstanding the foregoing, the Master Servicer shall maintain
the records and accounts for such deposits and credits on a gross basis.
Section 5.03. Application of Collections. As of each Record Date, all
collections for the related Due Period shall be applied by the Master Servicer
as follows: with respect to each Contract (including a Defaulted Contract),
payments by or on behalf of an Obligor shall be applied first to late payment
and extension fees, second to interest accrued on the Contract, third to
principal due on the Contract and fourth to administrative charges, if any. Any
excess shall be applied to prepay the principal balance of the Contract.
Section 5.04. Advances and Nonrecoverable Advances; Repurchase Amounts.
(a) If, as of the end of any Due Period, one or more payments of Monthly
P&I due under any Contract (other than a Liquidated Contract) Outstanding at the
end of such Due Period shall not have been received by the Master Servicer and
deposited in or credited to the Collection Account pursuant to Section 5.02(a),
the Master Servicer shall make, concurrently with the furnishing of the related
Distribution Date Statement to the Indenture Trustee and the Owner Trustee, the
Advance for such Due Period by depositing in or crediting to the Collection
Account (i) with respect to a Rule of 78's Contract, the amount of delinquent
Monthly P&I and (ii) with respect to a Simple Interest Contract, 30 days of
interest on the Outstanding Principal Balance of such Contract at a rate equal
to the sum of (A) the Pass-Through Rate and (B) the Servicing Fee Percent for
each month that the related Monthly P&I is delinquent at the end of such Due
Period. The Master Servicer shall account for such deposit or credit in
accordance with Section 4.01. The foregoing notwithstanding, the Master Servicer
shall not make an Advance in respect of a Contract if the Master Servicer shall
have determined that any such Advance, if made, would constitute a
Nonrecoverable Advance. Any such determination shall be evidenced by an
Officers' Certificate furnished to the Indenture Trustee, the Owner Trustee and
the Insurer setting forth the basis for such determination.
(b) If the Master Servicer determines that it has made a Nonrecoverable
Advance or Advances, the Master Servicer shall reimburse itself, without
interest, from unrelated installments of Monthly P&I or Prepayment proceeds to
the extent it shall, concurrently with the withholding of any such installment
or proceeds from deposit in or credit to the Collection Account as required by
Section 5.02, furnish to the Indenture Trustee, the Owner Trustee and the
Insurer a certificate of a Servicing Officer setting forth the basis for the
Master Servicer's determination, the amount of, and Contract with respect to
which, such Nonrecoverable Advance was made and the installment or installments
or other proceeds respecting which reimbursement has been taken.
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(c) The Master Servicer or the Seller, as the case may be, shall remit
or credit to the Collection Account the aggregate Repurchase Amount with respect
to Repurchased Contracts on the Master Servicer Report Date next succeeding the
last day of the related cure period specified in Section 3.02 or 4.07, as the
case may be. In addition, the Master Servicer and the Seller shall deposit or
cause to be deposited in the Collection Account the aggregate Repurchase Amount
with respect to Repurchased Contracts and the Master Servicer shall deposit
therein all amounts to be paid under Section 9.01.
Section 5.05. Distributions.
(a) On each Distribution Date, the Master Servicer shall instruct the
Indenture Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Master Servicer Report Date pursuant to
Section 4.09) to make the following deposits and distributions for receipt by
the Master Servicer or deposit in the applicable account by 11:00 a.m. (New York
time), to the extent of the Net Collections for such Distribution Date, in the
following 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;
(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 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 second (i)
the Class A2-4 Percentage of any remaining Note Principal
Distribution Amount sequentially to the holders of (a) the Class A-2
Notes until the principal amount of the Class A-2 Notes has been reduced
to zero, (b) the Class A-3 Notes until the principal amount of the Class
A-3 Notes has been reduced to zero and (c) the Class A-4 Notes until the
principal amount of the Class A-4 Notes has been reduced to zero and
(ii) the Class A-5 Percentage of any remaining Note Principal
Distribution Amount to the holders of the Class A-5 Notes until the
principal amount of the Class A-5 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 from Net Collections (after giving effect to the
reduction in Net Collections described in clauses (i) through (iv)
above);
(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;
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(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;
(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; and
(ix) to the Insurer, from Net Collections (after giving effect
to the reduction in Net Collections described in clauses (i) through
(viii) above), any Unreimbursed Insurer Amounts.
(b) On each Distribution Date, the Master Servicer shall instruct the
Indenture Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Master Servicer Report Date pursuant to
Section 4.09), to distribute any excess amounts remaining from Net Collections
after making the distributions described in Section 5.05(a) ("Excess Amounts")
to the Spread Account. On any Distribution Date on which the amount on deposit
in the Spread Account (after giving effect to all deposits to, and withdrawals
from, the Spread Account on such Distribution Date) is greater than the
Specified Spread Account Balance, the Master Servicer shall instruct the
Indenture Trustee to distribute an amount in cash, 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
Deposit and third, to the Seller and the Company, in the proportions of 99% and
1%, respectively.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
(c) To the extent that on any Distribution Date:
(i) the amount on deposit in the Note Distribution Account
(after giving effect to any deposits thereto on such Distribution Date)
is less than the Note Distributable Amount, Noteholders shall be
entitled to receive distributions in respect of such deficiency first,
from amounts on deposit in the Spread Account pursuant to a Deficiency
Notice; 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,
from a claim made under the Note Policy for the Note Policy Claim Amount
pursuant to Section 5.02(d); and
(ii) the amount on deposit in the Certificate Distribution
Account (after giving effect to any deposits thereto on such
Distribution Date) is less than the Certificate Distributable Amount,
Certificateholders shall be entitled to receive distributions in respect
of such deficiency, first, from amounts on deposit in the Spread
Account, to the extent that such amounts remain available after giving
effect to the
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immediately preceding paragraph, pursuant to a Deficiency Notice and
second, if such amounts are insufficient, from a claim made under the
Certificate Policy for the Certificate Policy Claim Amount pursuant to
Section 5.02(d).
Section 5.06. Spread Account.
(a) On or prior to the Closing Date, the Owner Trustee, on behalf of the
Seller, shall deposit the Spread Account Initial Deposit into the Spread Account
from the net proceeds of the sale of the Notes and the Certificates. The Spread
Account will be held for the benefit of the Securityholders and the Insurer in
order to effectuate the subordination of the rights of the Securityholders to
the extent described above.
(b) On each Calculation Day or Distribution Date on which the amount on
deposit in the Spread Account (after giving effect to all deposits to, and
withdrawals from, the Spread Account on such Distribution Date) is greater than
the Specified Spread Account Balance, the Master Servicer shall instruct the
Indenture Trustee to distribute an amount in cash, first, to the Insurer, to the
extent of any Unreimbursed Insurer Amounts, second, to the Seller until the
Seller has received an amount equal to the Spread Account Initial Deposit and
third, to the Seller and the Company in the proportions of 99% and 1%,
respectively. Upon any such distribution to the Insurer, the Seller or the
Company, Securityholders will have no further rights in, or claims to, such
amounts.
(c) Amounts held in the Spread Account shall be invested in the manner
specified in Section 5.01(b), and such investments shall be made in accordance
with written instructions from the Master Servicer; provided that, if the
Indenture Trustee does not receive any such written instructions prior to any
date on which an investment decision must be made, the Indenture Trustee shall
invest such amounts held in the Spread Account in Eligible Investments
consisting of commercial paper given the highest rating by each Rating Agency at
the time of such investment. All such investments shall be made in the name of
the Indenture Trustee or its nominee and such investments shall not be sold or
disposed of prior to their maturity.
(d) Upon termination of the Trust pursuant to Section 9.01, any amounts
on deposit in the Spread Account, after payments of amounts due to the
Securityholders or the Insurer (if there exists any Unreimbursed Insurer
Amounts), will be paid to the Seller.
Section 5.07. Statements to Securityholders.
(a) On each Distribution Date, (i) the Indenture Trustee shall include
with each distribution to each Noteholder of record as of the related Record
Date, and (ii) the Owner Trustee shall include with each distribution to each
Certificateholder of record as of the related Record Date, a statement, prepared
by the Master Servicer, based on the information in the Distribution Date
Statement furnished pursuant to Section 4.09, setting forth for such
Distribution Date the following information as of the related Record Date or
such Distribution Date, as the case may be:
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(i) the amount of such distribution allocable to principal
(stated separately for each Class of Notes and the Certificates);
(ii) the amount of such distribution allocable to interest
(stated separately for each Class of Notes and the Certificates);
(iii) the Note Percentage and the Certificate Percentage as of
the close of business on the last day of such Due Period;
(iv) the Aggregate Scheduled Balance as of the close of business
on the last day of such Due Period;
(v) the amount of the Servicing Fee paid to the Master Servicer
with respect to the related Due Period;
(vi) the amount of any Certificate Interest Carryover Shortfall,
Certificate Principal Carryover Shortfall, Note Interest Carryover
Shortfall and Note Principal Carryover Shortfall on such Distribution
Date and the change in such amounts from those with respect to the
immediately preceding Distribution Date;
(vii) the Note Pool Factor for each Class of Notes and the
Certificate Pool Factor as of such Distribution Date, after giving
effect to payments allocated to principal reported under clause (i)
above; and
(viii) the amount 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) or (v) above shall
be expressed as a dollar amount per $1,000.00 of original principal amount of a
Note or original Certificate Balance, as the case may be.
(b) Within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Owner Trustee and
the Indenture Trustee, as the case may be, shall mail to each Person who at any
time during such calendar year shall have been a Holder of a Note or a
Certificate, respectively, a statement or statements, prepared by the Master
Servicer, which in the aggregate contain the sum of the amounts set forth in
clauses (i), (ii), (iv) and (v) above for such calendar year or, in the event
such Person shall have been a Holder of a Note or a Certificate during a portion
of such calendar year, for the applicable portion of such year, for the purposes
of such Noteholder's or Certificateholder's preparation of federal income tax
returns. In addition, the Master Servicer shall furnish to the Owner Trustee and
the Indenture Trustee for distribution to such Person at such time any other
information necessary under applicable law for the preparation of such income
tax returns.
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ARTICLE SIX
THE SELLER
Section 6.01. Corporate Existence. During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation 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 Agreement, the other Basic
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
Section 6.02. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Master Servicer from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated herein and in the other Basic Documents,
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to, and as of the date of, the sale of
the Contracts to the Issuer or the issuance and original sale of the Securities,
or asserted with respect to ownership of the Contracts, or federal or other
income taxes arising out of distributions on the Certificates or the Notes) and
costs and expenses in defending against the same.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Securityholders from and against
any loss, liability or expense incurred by reason of the Seller's willful
misfeasance, bad faith or negligence (other than errors in judgment) in the
performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against all costs, expenses,
losses, claims, damages and liabilities arising out of or incurred in connection
with the acceptance or performance of the trusts and duties herein and, in the
case of the Owner Trustee, in the Trust Agreement and, in the case of the
Indenture Trustee, in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability, in the case of (i) the Owner Trustee,
shall be due to the willful misfeasance, bad faith or negligence of the Owner
Trustee or shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in Section 7.03 of the Trust Agreement,
or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence of the Indenture Trustee.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Seller shall have made any
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indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Seller, without
interest.
Section 6.03. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Certain Limitations.
(a) The Seller shall not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets as an
entirety to any Person unless the corporation formed by such consolidation or
into which the Seller has merged or the Person which acquires by conveyance,
transfer or lease substantially all the assets of the Seller as an entirety, can
lawfully perform the obligations of the Seller hereunder and executes and
delivers to the Insurer, the Owner Trustee and the Indenture Trustee an
agreement in form and substance reasonably satisfactory to the Owner Trustee,
the Indenture Trustee and the Insurer, which contains an assumption by such
successor entity of the due and punctual performance and observance of each
covenant and condition to be performed or observed by the Seller under this
Agreement. The Seller shall provide notice of any merger, consolidation or
succession pursuant to this Section to each Rating Agency and will deliver to
the Insurer, the Owner Trustee and the Indenture Trustee a letter from each
Rating Agency to the effect that such merger, consolidation or succession will
not result in a qualification, downgrading or withdrawal of its then-current
ratings of each Class of Notes or the Certificates. The Seller and WFS shall
maintain separate corporate offices.
(b) (i) Subject to paragraph (ii) below, the purpose of the Seller shall
be to engage in any lawful activity for which a corporation may be organized
under the General Corporation Law of California and which is permitted for
operating subsidiaries of federally chartered savings associations other than
the banking business, the trust company business or the practice of a profession
permitted to be incorporated by the California Corporations Code.
(ii) Notwithstanding paragraph (b)(i) above, the actual business
activities of the Seller shall be limited to those activities permitted an
operating subsidiary of a federally chartered savings association pursuant to 12
CFR Section 545.81 including the following purposes, and activities incident to
and necessary or convenient to accomplish the following purposes: (A) to
acquire, own, hold, sell, transfer, assign, pledge, finance, refinance and
otherwise deal with, retail installment sales contracts and installment loans
secured by automobiles and light duty trucks (the "Vehicle Receivables"); (B) to
authorize, issue, sell and deliver one or more series of obligations, consisting
of one or more classes of notes, certificates or other securities (the "Offered
Securities") that are collateralized by or evidence an interest in Vehicle
Receivables and are rated in the highest available category by at least one
nationally recognized statistical rating agency; and (C) to negotiate,
authorize, execute, deliver and assume the obligations of any agreement relating
to the activities set forth in clauses (A) and (B) above, including but not
limited to any pooling and servicing agreement, indenture, reimbursement
agreement, credit support agreement, receivables purchase agreement or
underwriting agreement or to engage in any lawful activity which is incidental
to the activities contemplated by any such agreement. So long as any outstanding
debt of the Seller or Offered Securities are rated by any nationally recognized
statistical rating organization, the
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Seller shall not issue notes or otherwise incur debt unless (I) the Seller has
made a written request to the related nationally recognized statistical rating
organization to issue notes or incur borrowings which notes or borrowings are
rated by the related nationally recognized statistical rating organization the
same as or higher than the rating afforded such debt or securities, or (II) such
notes or borrowings (X) are fully subordinated (and which shall provide for
payment only after payment in respect of all outstanding rated debt and/or
Offered Securities) or are nonrecourse against any assets of the Seller other
than the assets pledged to secure such notes or borrowings, (Y) do not
constitute a claim against the Seller in the event such assets are insufficient
to pay such notes or borrowings, and (Z) where such notes or borrowings are
secured by the rated debt or Offered Certificates, are fully subordinated (and
which shall provide for payment only after payment in respect of all outstanding
rated debt and/or Offered Securities) to such rated debt or Offered Securities.
(c) Notwithstanding any other provision of this Section and any
provision of law, the Seller shall not do any of the following:
(i) engage in any business or activity other than as set forth
in clause (b) above;
(ii) without the affirmative vote of a majority of the members
of the Board of Directors of the Seller (which must include the
affirmative vote of at least two duly appointed Independent directors)
(A) dissolve or liquidate, in whole or in part, or institute proceedings
to be adjudicated bankrupt or insolvent, (B) consent to the institution
of bankruptcy or insolvency proceedings against it, (C) file a petition
seeking or consent to reorganization or relief under any applicable
federal or state law relating to bankruptcy, (D) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the corporation or a substantial part of
its property, (E) make a general assignment for the benefit of
creditors, (F) admit in writing its inability to pay its debts generally
as they become due, or (G) take any corporate action in furtherance of
the actions set forth in clauses (A) through (F) above; provided,
however, that no director may be required by any shareholder of the
Seller to consent to the institution of bankruptcy or insolvency
proceedings against the Seller so long as it is solvent; or
(iii) merge or consolidate with any other corporation, company or
entity or sell all or substantially all of its assets or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any other corporation, company or entity (except for the
acquisition of Vehicle Receivables and the sale of Vehicle Receivables
to one or more trusts in accordance with the terms of clause (b)(ii)
above, which shall not be otherwise restricted by this Section 6.03(c)).
Section 6.04. Limitation on Liability of Seller and Others. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on any document of any kind, prima facie properly executed and submitted
by any Person respecting any matters arising hereunder. The Seller and any
director or officer or employee or agent of the Seller shall be reimbursed by
the Owner Trustee or the Indenture Trustee, as the case may be,
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for any contractual damages, liability or expense incurred by reason of the
Owner Trustee's or the Indenture Trustee's willful misfeasance, bad faith or
negligence (except for errors in judgment) in the performance of their
respective duties hereunder, or by reason of reckless disregard of their
respective obligations and duties hereunder. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability. The indemnities contained in this
Section shall survive the resignation or termination of the Owner Trustee or the
termination of this Agreement.
Section 6.05. Seller Not to Resign. Subject to the provisions of Section
6.03, the Seller shall not resign from the obligations and duties hereby imposed
on it as Seller hereunder.
Section 6.06. Seller May Own Securities. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Securities with the same rights as it would have if it were not the Seller or
an Affiliate thereof, except as expressly provided herein or in any Basic
Document. Securities so owned by or pledged to the Seller or such Affiliate
shall have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority or distinction as among all of the Notes
or Certificates, as the case may be.
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ARTICLE SEVEN
THE MASTER SERVICER
Section 7.01. Liability of Master Servicer; Indemnities. Subject to
Section 8.02, the Master Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Master Servicer
under this Agreement. Such obligations shall include the following:
(a) The Master Servicer shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee, the Indenture Trustee, the
Securityholders and the Insurer from and against any and all costs,
expenses, losses, damages, claims and liabilities, arising out of or
resulting from the use, ownership or operation by the Master Servicer,
any Subservicer or any of their respective Affiliates of a Financed
Vehicle.
(b) The Master Servicer shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee, the Indenture Trustee and the Insurer
from and against any taxes that may at any time be asserted against the
Owner Trustee, the Indenture Trustee or the Issuer with respect to the
transactions contemplated herein, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale of the Contracts to the
Issuer or the issuance and original sale of the Securities, or asserted
with respect to ownership of the Contracts, or federal or other income
taxes arising out of distributions on the Securities) and costs and
expenses in defending against the same.
(c) The Master Servicer shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee, the Indenture Trustee, the Insurer and
the Securityholders from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost,
expense, loss, claim, damage or liability arose out of, or was imposed
upon any such Person through, the negligence, willful misfeasance or bad
faith of the Master Servicer in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and
duties under this Agreement.
(d) The Master Servicer shall indemnify, defend and hold harmless
the Owner Trustee, the Indenture Trustee and the Insurer from and
against any and all costs, expenses, losses, claims, damages and
liabilities arising out of or incurred in connection with the acceptance
or performance of the trusts and duties herein contained, except to the
extent that such cost, expense, loss, claim, damage or liability (i)
shall be due to the willful misfeasance, bad faith or negligence (except
for errors in judgment) of the Owner Trustee or the Indenture Trustee,
as the case may be; (ii) relates to any tax other than the taxes with
respect to which either the Seller or Master Servicer shall be required
to indemnify the Owner Trustee and the Indenture Trustee; (iii) shall
arise from the Owner Trustee's or the Indenture Trustee's breach of any
of their respective representations or warranties set forth herein, in
the Trust Agreement
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or in the Indenture; or (iv) shall be one as to which the Seller is
required to indemnify the Owner Trustee or the Indenture Trustee, as the
case may be.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If the Master Servicer shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter collects any of such amounts from others,
such Person shall promptly repay such amounts to the Master Servicer, without
interest.
Section 7.02. Corporate Existence; Status as Master Servicer; Merger.
The Master Servicer shall not consolidate with or merge into any other
corporation or convey, transfer or lease all or substantially all of its assets
as an entirety to any Person unless the corporation formed by such consolidation
or into which the Master Servicer has merged or the Person which acquires by
conveyance, transfer or lease substantially all the assets of the Master
Servicer as an entirety can lawfully perform the obligations of the Master
Servicer hereunder and executes and delivers to the Indenture Trustee and the
Owner Trustee an agreement in form and substance reasonably satisfactory to the
Indenture Trustee, the Owner Trustee and the Insurer, which contains an
assumption by such successor entity of the due and punctual performance or
observance of each covenant and condition to be performed or observed by the
Master Servicer under this Agreement. Notice shall be sent to each Rating Agency
by the Master Servicer of any consolidation, merger or succession pursuant to
this Section.
Section 7.03. Performance of Obligations.
(a) The Master Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(b) The Master Servicer shall not take any action, or permit any action
to be taken by others, which would excuse any person from any of its covenants
or obligations under any of the Contract Documents or under any other instrument
included in the Trust Estate, or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any of the Contract Documents or any such
instrument, except as expressly provided herein and therein.
Section 7.04. Master Servicer Not to Resign; Assignment.
(a) The Master Servicer shall not resign from the duties and obligations
hereby imposed on it except upon determination by its Board of Directors that by
reason of change in applicable legal requirements the continued performance by
the Master Servicer of its duties hereunder would cause it to be in violation of
such legal requirements in a manner which would result in a material adverse
effect on the Master Servicer or its financial condition, said determination to
be evidenced by a resolution of its Board of Directors to such effect
accompanied by an Opinion of Counsel, satisfactory to the Owner Trustee and the
Indenture Trustee, to such effect. No such resignation shall become effective
unless and until (i) a new
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servicer acceptable to the Owner Trustee, the Indenture Trustee and the Insurer
is willing to service the Contracts and enters into a servicing agreement with
the Trust and the Insurer in form and substance substantially similar to this
Agreement and satisfactory to the Owner Trustee, the Indenture Trustee and the
Insurer and (ii) each Rating Agency confirms that the selection of such new
servicer will not result in the qualification, reduction or withdrawal of its
then-current rating of each Class of Notes and the Certificates assigned by such
Rating Agency. No such resignation shall affect the obligation of the Master
Servicer to repurchase Contracts pursuant to Section 4.07.
(b) Except as specifically permitted in this Agreement, the Master
Servicer may not assign this Agreement or any of its rights, powers, duties or
obligations hereunder; provided that (i) the Master Servicer may assign this
Agreement in connection with a consolidation, merger, conveyance, transfer or
lease made in compliance with Section 7.02.
(c) Except as provided in Sections 7.04(a) and (b), the duties and
obligations of the Master Servicer under this Agreement shall continue until
this Agreement shall have been terminated as provided in Section 9.01 or the
Trust shall have been terminated as provided by the terms of the Trust
Agreement, and shall survive the exercise by the Owner Trustee, the Indenture
Trustee or the Insurer of any right or remedy under this Agreement, or the
enforcement by the Owner Trustee, the Indenture Trustee, any Certificateholder
or Noteholder, or the Insurer of any provision of the Notes, the Certificates,
the Insurance Agreement or this Agreement.
(d) The resignation of the Master Servicer in accordance with this
Section shall not affect the rights of the Seller hereunder. If the Master
Servicer resigns pursuant to this Section, its appointment as custodian can be
terminated pursuant to Section 3.07.
Section 7.05. Limitation on Liability of Master Servicer and Others.
(a) Neither the Master Servicer nor any of the directors, officers,
employees or agents of the Master Servicer shall be under any liability to the
Issuer, the Noteholders or the Certificateholders, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; provided, however, that
this provision shall not protect the Master Servicer or any such person against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence (except errors in judgment) in the performance of duties
or by reason of reckless disregard of obligations and duties under this
Agreement. The Master Servicer and any director, officer, employee or agent of
the Master Servicer may rely in good faith on any document of any kind prima
facie properly executed and submitted by any person respecting any matters
arising under this Agreement.
(b) The Master Servicer and any director or officer or employee or agent
of the Master Servicer shall be reimbursed by the Owner Trustee or the Indenture
Trustee, as the case may be, for any contractual damages, liability or expense
incurred by reason of such Trustee's willful misfeasance, bad faith or
negligence (except errors in judgment) in the
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performance of such Trustee's duties under this Agreement or by reason of
reckless disregard of its obligations and duties under this Agreement.
Except as provided in this Agreement, the Master Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Contracts in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Master Servicer may undertake any
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the other Basic Documents and the rights and duties of the parties
to this Agreement and the other Basic Documents and the interests of the
Securityholders under the Basic Documents.
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ARTICLE EIGHT
DEFAULT
Section 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) A claim being made under either the Note Policy or the
Certificate Policy;
(b) Any failure by the Master Servicer or the Issuer to deposit
or credit, or to deliver to the Indenture Trustee for deposit, in any of
the Trust Accounts any amount required hereunder to be as deposited,
credited or delivered or to direct the Indenture Trustee to make any
required distributions therefrom, that shall continue unremedied for a
period of three Business Days after written notice of such failure is
received from the Owner Trustee, the Indenture Trustee or the Insurer or
after discovery of such failure by an officer of the Master Servicer;
(c) Any failure by the Master Servicer to deliver to the Insurer,
the Indenture Trustee or the Owner Trustee a report in accordance with
Section 4.09 and/or Section 4.10 by the fourth Business Day prior to the
Distribution Date with respect to which such report is due, or the
Master Servicer shall have defaulted in the due observance of any
provision of Section 7.02 (other than failure to enter into an
assumption agreement under Section 7.02, which is a Servicer Default
only if such failure continues for ten Business Days);
(d) Failure on the part of the Seller, the Issuer or the Master
Servicer duly to observe or to perform in any material respect any other
covenants or agreements of the Master Servicer or the Seller set forth
in this Agreement or any other Basic Document, which failure shall (i)
materially and adversely affect the rights of the Insurer, the Owner
Trustee, the Indenture Trustee, the Certificateholders or Noteholders
and (ii) continue unremedied for a period of 30 days after the date on
which written notice of such failure, requiring the same to be remedied,
shall have been given (A) to the Master Servicer or the Seller (as the
case may be) by the Insurer, the Owner Trustee or the Indenture Trustee
or (B) to the Master Servicer or the Seller (as the case may be), and to
the Owner Trustee and the Indenture Trustee by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes or,
if the Notes have been paid in full, by Certificateholders evidencing
not less than 25% of the Certificate Balance, or, so long as no default
under either Policy has occurred and is continuing and no insolvency of
the Insurer has occurred, by the Insurer;
(e) The occurrence of an Insolvency Event with respect to the
Seller, the Issuer or the Master Servicer; or
(f) Any representation, warranty or statement of the Master
Servicer, the Issuer or the Seller made in this Agreement or any
certificate, report or other writing
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delivered pursuant hereto shall prove to be incorrect in any material
respect as of the time when the same shall have been made (excluding,
however, any representation or warranty to which Section 3.01 or 4.06
shall be applicable so long as the Master Servicer or the Seller shall
be in compliance with Section 3.02 or 4.07, as the case may be), and the
incorrectness of such representation, warranty or statement 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 the Holders of Notes evidencing not less than 25% of
the Outstanding Amount of the Notes, or Certificateholders evidencing
not less than 25% of the Certificate Balance or, so long as no default
has occurred under either Policy and is continuing and no Insurer
Insolvency has occurred, by the Insurer, the circumstance or condition
in respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured;
then, and in each and every case, so long as such Servicer Default shall not
have been remedied and subject to the limitations set forth in Section 6.07 of
the Insurance Agreement, either the Indenture Trustee, the Insurer, the Holders
of Notes evidencing not less than 25% of the Outstanding Amount of the Notes
(or, if the Notes have been paid in full and the Indenture has been discharged
in accordance with its terms, by the Owner Trustee or by Certificateholders
evidencing not less than 25% of the Certificate Balance), by notice then given
in writing to the Master Servicer (and to the Insurer, the Indenture Trustee and
the Owner Trustee if given by the Noteholders or the Certificateholders) may
terminate all the rights and obligations of the Master Servicer under this
Agreement. Upon such termination, termination of the Master Servicer as
custodian can be made pursuant to Section 3.07. On or after the receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer under this Agreement, whether with respect to the Notes, the
Certificates, the Contracts or otherwise, shall, without further action, pass to
and be vested in the Indenture Trustee or such successor Master Servicer as may
be appointed under Section 8.02; and, without limitation, the Indenture Trustee
and the Owner Trustee are hereby authorized and empowered to execute and
deliver, for the benefit of the predecessor Master Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Contracts and related documents, or otherwise. The Master
Servicer shall cooperate with the Indenture Trustee and the Owner Trustee in
effecting the termination of the responsibilities and rights of the predecessor
Master Servicer under this Agreement, including the transfer to the Indenture
Trustee for administration by it of all cash amounts that shall at the time be
held by the predecessor Master Servicer for deposit, or shall thereafter be
received by it with respect to any Contract.
Section 8.02. Trustee to Act; Appointment of Successor. Upon the Master
Servicer's receipt of notice of termination pursuant to Section 8.01 or
resignation pursuant to Section 7.04, the Indenture Trustee shall be the
successor to the Master Servicer in its capacity as servicer under this
Agreement, and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
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provisions of this Agreement, except that the Indenture Trustee shall not be
obligated to purchase Contracts pursuant to Section 4.07 unless the obligation
to repurchase arose after the date of the notice of termination given to the
Master Servicer pursuant to Section 8.01 or be subject to any obligation of the
Master Servicer to indemnify or hold harmless any Person as set forth in this
Agreement arising from the acts or omissions of the previous Master Servicer. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Master Servicer would have been entitled to under this Agreement if no such
notice of termination shall have been given. 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, Insurer or the Noteholders (or
Certificateholders) from effecting a transfer of servicing. Notwithstanding the
above, the Indenture Trustee may, if it shall be unwilling to act, or shall, if
it shall be legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established financial institution, having a net
worth of not less than $50,000,000 and whose regular business shall include the
servicing of motor vehicle retail installment sales contracts, as the successor
to the Master Servicer under this Agreement. Pending appointment of any such
successor Master Servicer, the Indenture Trustee shall act in such capacity as
provided above. In connection with such appointment, the Indenture Trustee may
make such arrangements for the compensation of such successor out of payments on
Contracts it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Master Servicer under this
Agreement without the consent of the Insurer. The Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
Section 8.03. Repayment of Advances. If the identity of the Master
Servicer shall change, the predecessor Master Servicer shall be entitled to
receive reimbursement for outstanding Advances pursuant to Section 5.04 with
respect to all Advances made by the predecessor Master Servicer.
Section 8.04. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to, the Master Servicer
pursuant to this Article, the Owner Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register, and the Indenture Trustee shall give prompt written notice
thereof to Noteholders at their respective addresses appearing in the Note
Register and to each Rating Agency.
Section 8.05. Waiver of Past Defaults. The Holders of Notes evidencing
not less than 51% of the Outstanding Amount of the Notes, or, if all the Notes
have been paid in full and the Indenture has been discharged in accordance with
its terms, Certificateholders evidencing not less than 51% of the Certificate
Balance (in the case of any default which does not adversely affect the
Indenture Trustee or the Noteholders) may, on behalf of all Securityholders,
with the consent of the Insurer, waive in writing any default by the Master
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to or payments from any of the
Trust Accounts in accordance with this Agreement or in respect of a covenant or
provisions hereof which cannot be
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modified without the consent of each Securityholder. Upon any such waiver of a
past default, such default shall cease to exist, and any Servicer Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereto.
Section 8.06. Insurer Direction of Insolvency Proceedings. Upon receipt
of actual knowledge thereof by a Responsible Officer, the Indenture Trustee
shall promptly notify the Insurer of (i) the commencement of any of the events
or proceedings (individually, an "Insolvency Proceeding") described in the
definition of the term "Insolvency Event" or any such event or proceeding
applicable to an Obligor under a Contract and (ii) the making of any claim in
connection with any Insolvency Proceeding seeking the avoidance as a
preferential transfer (a "Preference Claim") of any payment of principal of, or
interest on, a Contract or any Notes or Certificates. Each Noteholder and Note
Owner, by its purchase of Notes or a beneficial interest therein, each
Certificateholder and Certificate Owner, by its purchase of Certificates or a
beneficial interest therein, the Owner Trustee and the Indenture Trustee hereby
agree that, so long as neither a default under the Policies nor an Insurer
Insolvency has occurred and is continuing, the Insurer may at any time during
the continuation of an Insolvency Proceeding direct all matters relating to such
Insolvency Proceeding, including, without limitation, (i) all matters relating
to any Preference Claim, (ii) the direction of any appeal of any order relating
to any Preference Claim and (iii) the posting of any surety, supersedes or
performance bond pending any such appeal. The Insurer shall be subrogated to the
rights of the Indenture Trustee, the Owner Trustee and each Securityholder in
the conduct of any Insolvency Proceeding, 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 Insolvency Proceeding. 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 effected without the prior written consent of the Insurer.
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ARTICLE NINE
TERMINATION
Section 9.01. Optional Purchase of All Contracts.
(a) On each Distribution Date as of which the Aggregate Scheduled
Balance is less than 5% of the Cut-Off Date Aggregate Scheduled Balance, the
Seller shall have the option to purchase the remaining Contracts from the Trust.
Notice of the exercise of such option shall be given by the Seller to the Owner
Trustee, the Indenture Trustee and the Insurer not later than the 25th day of
the month immediately preceding the month of such Distribution Date. To exercise
such option, the Seller shall pay to the Indenture Trustee for the benefit of
the Securityholders, by deposit in the Collection Account on the Business Day
immediately preceding the related Distribution Date, the aggregate Repurchase
Amount of all Contracts that were Outstanding at the beginning of the Due Period
ending immediately prior to such Distribution Date, and shall succeed to all
interests in and to the Trust. Such purchase shall be deemed to have occurred on
the last day of such Due Period. Notwithstanding the foregoing, the Seller shall
not be permitted to exercise such option unless the amount to be deposited in
the Collection Account pursuant to the preceding sentence is greater than or
equal to the sum of the outstanding principal amount of the Notes and the
Certificate Balance and all accrued but unpaid interest (including any overdue
interest) thereon. In addition, if the Master Servicer or the Seller has
outstanding senior debt and such debt is not rated "investment grade" by Moody's
at the time of exercising the option pursuant to this Section, then the Master
Servicer or the Seller shall deliver to the Owner Trustee, the Indenture Trustee
and Moody's, an Opinion of Counsel to the effect that such optional purchase is
not a fraudulent conveyance.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Master Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Master
Servicer shall instruct the Indenture Trustee to make the following deposits
(after the application on such Distribution Date of Net Collections and funds on
deposit in the Spread Account pursuant to Sections 5.05 and 5.06) from the
Insolvency Proceeds and any funds remaining on deposit in the Spread Account
(including the proceeds of any sale of investments therein as described in the
following sentence):
(i) to the Note Distribution Account, any portion of the Note
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the outstanding principal
amount of the Notes (after giving effect to the reduction in the
outstanding principal amount of
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the Notes to result from the deposits made in the Note Distribution
Account on such Distribution Date and on prior Distribution Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificate Interest Distributable Amount not otherwise deposited into
the Certificate Distribution Account on such Distribution Date; and
(iv) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance
to result from the deposits made in the Certificate Distribution Account
on such Distribution Date).
(c) As described in Article Nine of the Trust Agreement, notice of any
termination of the Trust shall be given by the Master Servicer to the Owner
Trustee, the Insurer and the Indenture Trustee as soon as practicable after the
Master Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
Section 9.02. Transfer to the Insurer. If (i) there is one or more
Outstanding Contracts at the end of the Due Period ending immediately prior to
the Certificate Final Distribution Date and (ii) an amount sufficient to pay the
Certificate Distributable Amount on the Certificate Final Distribution Date has
been deposited with the Indenture Trustee by the Insurer for the benefit of the
Certificateholders, then on the Certificate Final Distribution Date the
Certificates shall be deemed to be transferred by the Certificateholders to the
Insurer or its designee as purchaser thereof at the opening of business on the
Certificate Final Distribution Date and the Owner Trustee, on behalf of the
Trust, shall execute, and the Owner Trustee shall authenticate and deliver to
the Insurer or its designee, in the name of the Insurer or its designee, as the
case may be, a new Certificate evidencing the entire Certificate Balance. Such
new Certificate shall have the same terms as the Certificates deemed transferred
by the Certificateholders. No service charge shall be made for the issuance of
such Certificate to the Insurer or its designee, but the Owner Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith. Such transfer shall not diminish or
restrict the Insurer's rights hereunder or under the Insurance Agreement.
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<PAGE> 80
ARTICLE TEN
MISCELLANEOUS
Section 10.01. Amendment.
(a) This Agreement may be amended by the Seller, the Master Servicer and
the Owner Trustee on behalf of the Issuer, collectively, without the consent of
any Security- holders, (i) to cure any ambiguity, to correct or supplement any
provisions in this Agreement which are inconsistent with the provisions herein,
or to add any other provisions with respect to matters or questions arising
under this Agreement that shall not be inconsistent with the provisions of this
Agreement, (ii) to add or provide any credit enhancement for any Class of Notes
or the Certificates and (iii) to change any provision applicable for determining
the Specified Spread Account Balance or the manner in which the Spread Account
is funded (in each case with the approval of the Insurer); provided, however,
that any such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Securityholder and provided,
further, that in connection with any amendment pursuant to clause (iii) above,
the Master Servicer shall deliver to the Owner Trustee, the Indenture Trustee
and the Insurer a letter from Standard & Poor's to the effect that such
amendment will not cause its then-current rating on any Class of Notes or the
Certificates to be qualified, reduced or withdrawn, without giving any
consideration to the effect of the guaranty under either Policy of payments
owing to Noteholders or to Certificateholders, and the Master Servicer shall
provide Moody's notice of such amendment; and provided, further, that this
Agreement may not be amended to alter the rights or obligations of the Indenture
Trustee without the prior consent of the Indenture Trustee.
(b) This Agreement may also be amended from time to time by the Seller,
the Master Servicer and the Owner Trustee on behalf of the Issuer, with the
consent of the Holders of Notes evidencing not less than 51% of the Outstanding
Amount of the Notes, and the consent of Certificateholders evidencing not less
than 51% of the Certificate Balance, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall increase or
reduce in any manner the amount of, or accelerate or delay the timing of (i)(a)
collections of payments on the Contracts or distributions that shall be required
to be made on any Note or Certificate or any Interest Rate or the Pass-Through
Rate, (b) except as otherwise provided in Section 10.01(a), the Specified Spread
Account Balance, or the manner in which the Spread Account is funded or (ii)
reduce the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance, the Holders of which are required to consent to any such
amendment, without the consent of the Insurer and the Holders of all Notes and
Certificates of the relevant Class then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent, as prepared by the Seller, the Master Servicer and the
Owner Trustee on behalf of the Issuer, at the
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expense of the such party, together with a copy thereof, to each Rating Agency
and the Insurer.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish the
written notification of the substance of the amendment or consent described in
paragraph (c) above, at the expense of the Seller, the Master Servicer or the
Owner Trustee on behalf of the Issuer, as the case may be, to each
Certificateholder and Noteholder, respectively. It shall not be necessary for
the consent of Noteholders and Certificateholders pursuant to Section 10.01(b)
to approve the particular form of any proposed amendment or consent, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization by
Noteholders and Certificateholders of the execution thereof shall be subject to
such reasonable requirements as the Owner Trustee or the Indenture Trustee may
prescribe.
(e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 10.02. Protection of Title to Trust.
(a) The Master Servicer shall execute and file such financing statements
and cause to be executed and filed such continuation statements, all in such
manner and in such places as may be required by law fully to preserve, maintain
and protect the interest of the Issuer, the Securityholders, the Indenture
Trustee, the Owner Trustee and the Insurer in the Contracts and in the proceeds
thereof. The Master Servicer shall deliver (or cause to be delivered) to the
Owner Trustee and the Indenture Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the WFS, the Seller nor the Master Servicer shall change its
name, identity or corporate structure in any manner that would, could or might
make any financing statement or continuation statement filed in accordance with
Section 10.02(a) seriously misleading within the meaning of Section 9-402(7) of
the UCC, unless it shall have given the Insurer, the Owner Trustee and the
Indenture Trustee at least 60 days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) WFS, the Seller and the Master Servicer shall give the Insurer, the
Owner Trustee and the Indenture Trustee at least 60 days' prior written notice
of any relocation of the principal executive office of WFS or the Seller and the
Master Servicer or the Subservicers (in the case of notice provided by the
Master Servicer) if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
promptly file any such amendment or new financing statement. The Master Servicer
76
<PAGE> 82
shall at all times maintain each office from which it shall service Contracts,
and its principal executive office, within the United States.
(d) The Master Servicer shall maintain or cause to be maintained
accounts and records as to each Contract accurately and in sufficient detail to
permit (i) the reader thereof to know at any time the status of such Contract,
including payments and recoveries made and payments owing (and the nature of
each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Contract and the amounts from time to time deposited in or credited to
the Collection Account and the Holding Account in respect of such Contract.
(e) The Master Servicer shall maintain or cause to be maintained its
computer systems and those of Subservicers so that, from and after the time of
sale under this Agreement of the Contracts, the Master Servicer's and
Subservicer's master computer records (including any backup archives) that shall
refer to a Contract indicate clearly the interest of the Issuer and the
Indenture Trustee in such Contract and that such Contract is owned by the Issuer
and has been pledged to the Indenture Trustee. Indication of the Issuer's
ownership of and the Indenture Trustee's interest in a Contract shall be deleted
from or modified on the Master Servicer's computer systems when, and only when,
the related Contract shall have been paid in full or repurchased or shall have
become a Liquidated Contract.
(f) If at any time the Seller, the Master Servicer or a Subservicer
shall propose to sell, grant a security interest in, or otherwise transfer any
interest in automotive retail installment sales contracts to any prospective
purchaser, lender or other transferee, the Master Servicer shall give or cause
to be given to such prospective purchaser, lender or other transferee computer
tapes, records or print-outs (including any restored from back-up archives)
that, if they shall refer in any manner whatsoever to any Contract, shall
indicate clearly that such Contract has been sold and is owned by the Issuer and
has been pledged to the Indenture Trustee.
(g) The Master Servicer shall permit the Owner Trustee, the Indenture
Trustee and the Insurer and its agents, at any time during normal business
hours, to inspect, audit and make copies of and abstracts from the Master
Servicer's records regarding any Contract.
(h) Upon request, the Master Servicer shall furnish to the Owner
Trustee, the Indenture Trustee and the Insurer, within five Business Days, a
list of all Contracts then held as part of the Trust Estate, together with a
reconciliation of such list to the Schedule of Contracts and to each of the
Distribution Date Statements furnished before such request indicating removal of
Contracts from the Trust.
(i) The Master Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, each Rating Agency and the Insurer:
(1) promptly after the execution and delivery of this Agreement
and of each amendment hereto, an Opinion of Counsel stating that, in the
opinion of such counsel, the Indenture Trustee holds a perfected
security interest in the Contracts, that the Trust holds title to the
Contracts subject to the security interest of the Indenture Trustee and
77
<PAGE> 83
the lien of the Insurer pursuant to the Insurance Agreement, and that
the Insurer holds a lien on the Contracts under the Insurance Agreement,
subject to applicable subordination; and
(2) 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, an Opinion of Counsel, dated as of a date during
such 90-day period, either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee in the
Contracts, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B)
stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest.
Section 10.03. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California and the obligations, rights,
and remedies of the parties under the Agreement shall be determined in
accordance with such laws, except that the duties of the Owner Trustee and the
Indenture Trustee shall be governed by the laws of the State of New York.
Section 10.04. Notices. All demands, notices and communications upon or
to the Seller, the Master Servicer, the Owner Trustee, the Indenture Trustee,
the Insurer or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt in the case of (a) the
Seller, at 23 Pasteur Road, Irvine, California 92618, (b) the Master Servicer,
23 Pasteur Road, Irvine, California 92618, Attention: Legal Department, (c) the
Issuer or the Owner Trustee, at the Corporate Trust Office (with, in the case of
the Issuer, a copy to the Seller), (d) the Indenture Trustee, at Four Albany
Street - 10th Floor, New York, New York 10006, Attention: Corporate Trust
Department - Asset Backed Group, (e) Moody's, to Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007, (f)
Standard & Poor's, to Standard & Poor's, 26 Broadway (15th Floor), New York, New
York 10004, Attention of Asset Backed Surveillance Department and (g) the
Insurer, at 350 Park Avenue, New York, New York 10022, Attention: Surveillance
Department, with a copy to the Senior Vice President -- Surveillance; or, as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties. Any notice required or permitted to be to be mailed
to a Securityholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Note Register or the Certificate
Register, as the case may be. Any notice so mailed within the time prescribed
herein shall be conclusively presumed to have been duly given, whether or not
such Securityholder shall receive such notice.
Section 10.05. Severability of Provisions. If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no
78
<PAGE> 84
way affect the validity or enforceability of the other provisions of this
Agreement or of the Notes or Certificates or the rights of the Holders thereof.
Section 10.06. Assignment. Notwithstanding anything to the contrary
contained herein, as provided in Sections 6.03 and 7.02, this Agreement may not
be assigned by the Seller or the Master Servicer without the prior written
consent of Holders of Notes of each Class evidencing not less than 66 2/3% of
the Outstanding Amount of Notes of such Class and Certificateholders evidencing
not less than 66 2/3% of the Certificate Balance.
Section 10.07. Third Party Beneficiaries. Except as otherwise
specifically provided herein, the parties hereto hereby manifest their intent
that no third party other than the Insurer shall be deemed a third party
beneficiary of this Agreement, and specifically that the Obligors are not third
party beneficiaries of this Agreement.
Section 10.08. Insurer Default or Insolvency. If a default under either
Policy has occurred and is continuing or a Insurer Insolvency has occurred, any
provision giving the Insurer the right to direct, appoint or consent to, approve
of, or take any action under this Agreement, shall be inoperative during the
period of such default or the period from and after such Insurer Insolvency and
such consent or approval shall be deemed to have been given for the purpose of
such provisions.
Section 10.09. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
Section 10.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 10.11. Assignment by Issuer. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Noteholders of all right, title and interest of the Issuer in, to and under
the Contracts and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Indenture Trustee.
Section 10.12. 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.
79
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
WFS FINANCIAL 1998-C OWNER
TRUST
By: CHASE MANHATTAN BANK
DELAWARE, not in its individual
capacity but solely as Owner
Trustee on behalf of the Trust
By:________________________________
Name:
Title:
WFS FINANCIAL AUTO LOANS, INC.,
as Seller
By:________________________________
Name:
Title:
WFS FINANCIAL INC,
as Master Servicer
By:________________________________
Name:
Title:
Acknowledged and accepted as of the day
and year first above written:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as Indenture
Trustee
By:__________________________
Name:
Title:
80
<PAGE> 86
SCHEDULE A
SCHEDULE OF CONTRACTS
[Omitted--Schedule of Contracts on file at the
offices of the Seller, the Master Servicer, the
Owner Trustee and the Indenture Trustee.]
SA-1
<PAGE> 87
SCHEDULE B
LOCATION OF CONTRACT FILES
Western Financial Bank WFS Financial Inc
23 Pasteur Rd. 8113 Ridgepoint, Suite 214
Irvine, CA 92618 Irving, TX 75063
949-727-1000 800-811-4334 or 214-409-3300
WFS Financial Inc WFS Financial Inc
2790 S.W. Cedar Hills Blvd. 1883 NE 7th Street, Suite H
Beaverton, OR 97005 Grants Pass, OR 97526
503-646-0953 503-955-1402
WFS Financial Inc WFS Financial Inc
1724 NE 122nd 3872 Center Street N.E.
Portland, OR 97230 Salem, OR 97301
503-251-7660 503-581-9977
WFS Financial Inc WFS Financial Inc
15913 Westminister Way, Suite B-7 E. 13817 Sprague, Suite 5
Seattle, WA 98133 Spokane, WA 99216
206-365-9910 509-922-9950
WFS Financial Inc
1901 S. 72nd Street
Tacoma, WA 98408
206-475-5585
SB-1
<PAGE> 88
EXHIBIT A
[FORM OF CERTIFICATE POLICY]
A-1
<PAGE> 89
EXHIBIT B
[FORM OF INSURANCE AGREEMENT]
B-1
<PAGE> 90
EXHIBIT C
[FORM OF NOTE POLICY]
C-1
<PAGE> 91
EXHIBIT D
[FORM OF RIC]
D-1
<PAGE> 92
EXHIBIT E
[FORM OF SUBSERVICING AGREEMENT]
E-1
<PAGE> 93
EXHIBIT F
[FORM OF DISTRIBUTION DATE STATEMENT]
F-1
<PAGE> 1
EXHIBIT 10.4
DRAFT:
11/13/98
[FORM OF FSA NOTE POLICY]
FINANCIAL
SECURITY FINANCIAL GUARANTY
ASSURANCE(R) INSURANCE POLICY
OBLIGOR: WFS Financial 1998-C Owner Trust Policy No.:
OBLIGATIONS: Date of Issuance: November 24, 1998
$ % Auto Receivable Backed Notes, Class A-1,
$ % Auto Receivable Backed Notes, Class A-2,
$ % Auto Receivable Backed Notes, Class A-3,
$ % Auto Receivable Backed Notes, Class A-4,
$ % Auto Receivable Backed Notes, Class A-5,
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such Holder
that is subsequently avoided in whole or in part as a preference payment under
applicable law (such payment to be made by Financial Security in accordance with
Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as described
in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal on an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall
<PAGE> 2
elect, in its sole discretion, to pay such principal due upon such acceleration
together with any accrued interest to the date of acceleration. "Term of this
Policy" shall have the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the merger,
consolidation or dissolution of the Obligor. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever, including payment, or provision
being made for payment, of the Obligations prior to maturity. This Policy may
not be cancelled or revoked during the Term of this Policy. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By______________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, NY 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE> 3
R&W DRAFT:
11/13/98
ENDORSEMENT NO. 1
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: WFS Financial 1998-C Owner Trust
OBLIGATIONS: $ % Auto Receivable Backed Notes, Class A-1,
$ % Auto Receivable Backed Notes, Class A-2,
$ % Auto Receivable Backed Notes, Class A-3,
$ % Auto Receivable Backed Notes, Class A-4, and
$ % Auto Receivable Backed Notes, Class A-5
Date of Issuance: November 24, 1998
Policy No.:
1. Definitions. For all purposes of this Policy, the terms
specified below shall have the meanings or constructions provided below.
Capitalized terms used and not defined herein shall have the respective meanings
ascribed to such terms in the Sale and Servicing Agreement, dated as of November
1, 1998, by and among the Trust, WFS Financial Auto Loans, Inc., as Seller, and
WFS Financial Inc, as Master Servicer (as amended from time to time in
accordance with its terms, the "Sale and Servicing Agreement") or, if not
defined therein, then in the Indenture, dated as of November 1, 1998, by and
between the Trust and Bankers Trust Company, unless the context shall otherwise
require.
"Business Day" means any day other than (i) a Saturday or
Sunday, or (ii) a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to be closed.
"Guaranteed Payments" means, as to each Distribution Date, the
amount equal to the sum of (i) the Guaranteed RIC Payments for such Distribution
Date and (ii) the Scheduled Payments for such Distribution Date less the amount
of any payment under this Policy of the Guaranteed RIC Payments for such
Distribution Date that is required to be applied pursuant to the Sale and
Servicing Agreement to pay such Scheduled Payments; provided, however, that the
aggregate amount of payments guaranteed to be paid under this Policy shall not
exceed the Outstanding Amount of the Notes plus all interest thereon.
"Guaranteed RIC Payments" means (i) with respect to the first
Distribution Date to occur during any period in which Financial Security's
claims-paying ability is not rated Aa2 or
<PAGE> 4
higher by Moody's and AAA by Standard & Poor's and amounts in the Collection
Account, Note Distribution Account, Certificate Distribution Account and the
Spread Account shall have been invested in the RIC pursuant to Section 2(a)
thereof, an amount equal to the RIC Payment Amount for such Distribution Date,
(ii) with respect to the second Distribution Date to occur during any period in
which Financial Security's claims-paying ability is not rated Aa2 or higher by
Moody's and AAA by Standard & Poor's and amounts in the Collection Account in
respect of such second Distribution Date shall have been invested in the RIC
pursuant to Section 2(a) thereof, an amount equal to the Supplemental RIC
Payment Amount for such second Distribution Date, and (iii) with respect to any
other date, zero; provided, however, that with respect to clauses (i) and (ii)
above, the amount payable in respect of the Guaranteed RIC Payments under this
Policy on any Distribution Date shall not exceed the Scheduled Payments for such
Distribution Date.
"Indenture Trustee" means Bankers Trust Company, as trustee
under the Indenture, and any successor in such capacity.
"Policy" means this Financial Guaranty Insurance Policy and
includes each endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial
Security and to the Fiscal Agent (as defined below), if any, prior to 12:00
noon, New York City time, on a Business Day; 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 hereunder by the Indenture Trustee 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 notify
the Indenture Trustee and the Indenture Trustee may submit an amended notice.
"RIC" means the Reinvestment Contract, dated as of November 1,
1998, between Western Financial Bank and the Indenture Trustee, as in effect on
the date of this Policy and without regard to any amendment or modification of
the RIC except amendments or modifications to which Financial Security has given
its prior written consent.
"RIC Payment Amount" means, as to any Distribution Date, certain
obligations due and owing under the RIC for such Distribution Date in an amount
equal to the sum of (A) the Spread Account Invested Funds (as defined in the
RIC) plus the Holding Account Deposited Funds (as defined in the RIC) and (B)
the amount that is equal to the lesser of (a) the Specified Account Invested
Funds (as defined in the RIC) and (b) the amount by which (i) the sum of (x) the
aggregate amount due and owing on such Distribution Date to the Holders of the
Notes and the Certificates, (y) the amount (if any) required to be deposited out
of Excess Amounts into the Spread Account on such Distribution Date (after
giving effect
2
<PAGE> 5
to distributions and other payments required to have been made on such date
prior to such required deposit and assuming that the Spread Account Invested
Funds were available in the Spread Account for such date), and (z) the amount of
Servicing Fee due and owing to the Master Servicer on such date exceeds (ii) the
Net Collections for such Distribution Date that are otherwise on deposit in the
Collection Account and available for payment of the amounts referred to in
clause (i) above pursuant to the Sale and Servicing Agreement.
"Scheduled Payments" means, as to each Distribution Date, the
payment to be made to Holders in accordance with the original terms of the
Obligations when issued and without regard to any subsequent amendment or
modification of the Obligations or of the 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 do not include payments
which become due on an accelerated basis as a result of (a) a default by the
Obligor, (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,
this Policy will continue to guarantee payment 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 as required by paragraph 2 hereof was not timely
Received 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 Obligations
attributable to any increase in Interest Rate, penalty or other sum payable by
the Obligor by reason of any default or event of default in respect of the
Obligations, or by reason of any deterioration of the credit worthiness of the
Obligor, nor shall Scheduled Payments include, nor shall coverage be provided
under this Policy in respect of, any taxes, withholding or other charge with
respect to any Holder imposed by any governmental authority due in connection
with the payment of any Scheduled Payment to a Holder. Notwithstanding the
foregoing, the term "Scheduled Payments" that appears on the face of the Policy
(and only on the face of the Policy) shall mean "Guaranteed Payments" as such
term is defined in this Endorsement No. 1 to the Policy.
"Supplemental RIC Payment Amount" means, as to the first
Distribution Date following the Distribution Date (if any) on which the
Guaranteed RIC Payment shall have been equal to the RIC Payment Amount, the
amount that is equal to the lesser of (A) the amount of remaining Specified
Account Invested Funds (if any) that is required to be a part of the Net
Collections for such Distribution Date and (B) the amount (if any) by which (i)
the sum of (x) the
3
<PAGE> 6
aggregate amount due and owing on such Distribution Date to Holders of the Notes
and the Certificates plus (y) the amount (if any) required to be deposited out
of Excess Amounts into the Spread Account on such Distribution Date (after
giving effect to distributions and other payments required to have been made on
such date prior to such required deposit) exceeds (ii) the Net Collections for
such Distribution Date that are otherwise on deposit in the Collection Account
and available for payment of the amounts referred to in clause (i) above
pursuant to the Sale and Servicing Agreement.
"Term of this Policy" means the period from and including the
Closing Date to and including the date on which (i) all Scheduled Payments have
been paid that are required to be paid by the Obligor within the meaning of
Section 4.01 of the Indenture, (ii) any period during which any Scheduled
Payment could have been voided in whole or in part as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law has expired, and
(iii) if any proceedings requisite to voidance as a preference payment have been
commenced prior to the occurrence of (i) and (ii), a final and nonappealable
order in resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of
Guaranteed Payments. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Payments out of the funds of Financial Security on the later to
occur of (a) 12:00 noon, New York City time, on the fourth Business Day
following Receipt of such notice and certificate and (b) 12:00 noon, New York
City time, on the Distribution Date to which such claim relates. Payments due
hereunder, in respect of Guaranteed Payments, will be disbursed by wire transfer
of immediately available funds to the Indenture Trustee.
Financial Security shall be entitled to pay any amount hereunder
in respect of Guaranteed Payments, including any acceleration payment, whether
or not any notice and certificate shall have been Received by Financial Security
as provided above; provided, however, that by acceptance of this Policy the
Indenture Trustee agrees to provide upon request to Financial Security a notice
and certificate in respect of any such payments made by Financial Security.
Financial Security's obligations hereunder in respect of Guaranteed Payments
shall be discharged to the extent funds are disbursed by Financial Security as
provided herein, whether or not such funds are properly applied by the Indenture
Trustee.
3. Notices and Conditions to Payment in Respect of
Guaranteed Payments Avoided as Preference Payments. If any Guaranteed Payments
is avoided as a preference payment under applicable bankruptcy, insolvency,
receivership or similar law, Financial Security will pay such amount out of the
funds of
4
<PAGE> 7
Financial Security 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 (A) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (a) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that (i) the Holder is required to return
payments of principal of or interest paid on the Obligations or (ii) the
Indenture Trustee is required to return payments of the RIC Payment Amount or
the Supplemental RIC Payment Amount paid under the RIC, during (in each case)
the Term of this Policy because such distributions or payments were avoidable as
preference payments under applicable bankruptcy law (the "Order"), (b) a
certificate of the Holder (or, in the case of the RIC, of the Indenture Trustee)
that the Order has been entered and is not subject to any stay and (c) an
assignment duly executed and delivered by the Holder (or, in the case of the
RIC, by the Indenture Trustee), in such form as is reasonably required by
Financial Security and provided by Financial Security (i) to the Holder
irrevocably assigning to Financial Security all rights and claims of the Holder
relating to or arising under the Obligations or (ii) to the Indenture Trustee
irrevocably assigning to Financial Security all rights and claims of the
Indenture Trustee relating to or arising under the RIC, to the extent of the RIC
Payment Amount and the Supplemental RIC Payment Amount, as the case may be, in
each case (as to clauses (i) and (ii)) against the debtor which made such
preference payment or otherwise with respect to such preference payment or (B)
the date of Receipt by Financial Security from the Indenture Trustee 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 Indenture 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 Indenture Trustee or any Holder
directly (unless a Holder (or, in the case of the RIC, the Indenture Trustee)
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 Indenture Trustee for distribution to
such Holder (or, in the case of the RIC, for application in accordance with the
Sale and Servicing Agreement) upon proof of such payment reasonably satisfactory
to Financial Security). In connection with the foregoing, Financial Security
shall have the rights provided pursuant to Section 5.19 of the Indenture.
4. Governing Law. This Policy shall be governed by, and
shall be construed in accordance with, the laws of the State of New York,
without giving effect to the conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this
Policy, Financial Security may appoint a fiscal agent (the "Fiscal Agent") for
purposes of this Policy by written notice to the
5
<PAGE> 8
Indenture Trustee at the notice address specified in the Sale and Servicing
Agreement specifying the name and notice address of the Fiscal Agent. From and
after the date of receipt of such notice by the Indenture Trustee, (i) copies of
all notices and documents required to be delivered to Financial Security
pursuant to this Policy shall be simultaneously delivered to the Fiscal Agent
and to Financial Security and shall not be deemed Received until Received by
both and (ii) all payments required to be made by Financial Security under this
Policy may be made directly by Financial Security or by the Fiscal Agent on
behalf of Financial Security. The Fiscal Agent is the agent of Financial
Security only and the Fiscal Agent shall in no event be liable to any Holder for
any acts of the Fiscal Agent or any failure of Financial Security to deposit, or
cause to be deposited, sufficient funds to make payments when due under this
Policy.
6. Waiver of Defenses. To the fullest extent permitted by
applicable law, Financial Security agrees not to assert, and hereby waives, for
the benefit of each Holder, all rights (whether by counterclaim, set-off or
otherwise) and defenses (including, without limitation, the defense of fraud),
whether acquired by subrogation, assignment or otherwise, to the extent that
such rights and defenses may be available to Financial Security to avoid payment
of its obligations under this Policy in accordance with the express provisions
of this Policy.
7. Notices. All notices to be given hereunder shall be in
writing (except as otherwise specifically provided herein) and shall be mailed
by registered mail or personally delivered or telecopied to Financial Security
as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses
by writing mailed or delivered to the Trustee.
8. Priorities. In the event that any term or provision of
the face of this Policy is inconsistent with the provisions of this Endorsement,
the provisions of this Endorsement shall take precedence and shall be binding.
9. Exclusions from Insurance Guaranty Funds. This Policy is
not covered by the Property/Casualty Insurance Security Fund specified in
Article 76 of the New York Insurance Law. This Policy is not covered by the
Florida Insurance Guaranty Association created under Part II of Chapter 631 of
the Florida Insurance Code. In the event that Financial Security were to become
insolvent, any claims arising under this Policy are excluded from coverage by
the California Insurance Guaranty Association, established pursuant to
6
<PAGE> 9
Article 14.2 of Chapter 1 of Part 2 of Division 1 of the California Insurance
Code.
10. Surrender of Policy. The Indenture Trustee shall, upon
request, surrender this Policy to Financial Security for cancellation upon
expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused
this Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By_______________________________________
Authorized Officer
7
<PAGE> 10
EXHIBIT A
CERTIFICATE OF CLAIM
(Letterhead of Trustee)
Dated: _________________________
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Senior Vice President
Re: WFS Financial 1998-C Owner Trust
The undersigned, a duly authorized officer of Bankers Trust
Company (the "Indenture Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. dated November 24, 1998 (the "Policy") issued by
Financial Security in respect of the $ % Auto Receivable Backed Notes, Class
A-1, $ % Auto Receivable Backed Notes, Class A-2, $ % Auto Receivable
Backed Notes, Class A-3, $ % Auto Receivable Backed Notes, Class A-4, and
$ % Auto Receivable Backed Notes, Class A-5 (collectively, the "Obligations")
that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Holders.
(ii) the sum of all amounts on deposit (or scheduled to be on
deposit) in the Collection Account and Spread Account and available for
application in accordance with the Sale and Servicing Agreement will be
$_________ (the "RIC Shortfall") less than the Guaranteed RIC Payment.
Of such RIC Shortfall, $__________ is attributable to the Guaranteed RIC
Payment amount to be paid to the Indenture Trustee for deposit into the
Collection Account and $__________ is attributable to Guaranteed RIC
Payment amount to be paid to the Indenture Trustee as collateral agent
for deposit into the Spread Account.
(iii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Note Distribution Account and available for distribution
to the Holders pursuant to the Indenture will be $__________ (the "Note
Shortfall") less than the aggregate amount of Scheduled Payments with
respect to [DISTRIBUTION DATE]. Of such Note Shortfall, $__________ is
attributable to Scheduled Payments to be made to Holders of the
Obligations.
<PAGE> 11
(iv) The Indenture Trustee is making a claim under the Policy
[(i) for the RIC Shortfall to be applied to payment of the Guaranteed
RIC Payment and (ii)] for the Note Shortfall to be applied to
distributions of principal or interest or both with respect to the
Obligations.
(v) The Indenture Trustee agrees that, following receipt of
funds from Financial Security, it shall (a) hold such amounts in trust
and apply the same directly to the payment of Guaranteed Payments; (b)
not apply such funds for any other purpose; (c) not commingle such funds
with other funds held by the Indenture Trustee; and (d) maintain an
accurate record of such payments with respect to each Obligation and
with respect to the RIC and the corresponding claim on the Policy and
proceeds thereof and, if the Obligation is required to be surrendered or
presented for such payment, shall stamp on each such Obligation the
legend $"[insert applicable amount] paid by Financial Security and the
balance hereof has been cancelled and reissued" and then shall deliver
such Obligation to Financial Security.
(vi) The Indenture Trustee, on behalf of the Holders, hereby
assigns to Financial Security the rights of the Holders with respect to
the Obligations to the extent of any payments under the Policy,
including, without limitation, any amounts due to the Holders in respect
of securities law violations arising from the offer and sale of the
Obligations and any amounts due and owing but unpaid under the RIC. The
foregoing assignment is in addition to, and not in limitation of, rights
of subrogation otherwise available to Financial Security in respect of
such payments. Payments to Financial Security in respect of the
foregoing assignment shall in all cases be subject to and subordinate to
the rights of the Holders to receive all Guaranteed Payments in respect
of the Obligations. The Indenture Trustee shall take such action and
deliver such instruments as may be reasonably requested or required by
Financial Security to effectuate the purpose or provisions of this
clause (vi).
(vii) The Indenture Trustee, on its behalf and on behalf of
the Holders, hereby appoints Financial Security as agent and
attorney-in-fact for the Indenture Trustee and each such Holder in any
legal proceeding with respect to the Obligations. The Indenture Trustee
hereby agrees that Financial Security may at any time during the
continuation of any proceeding by or against any debtor with respect to
which a preference claim (as defined below) or other claim with respect
to the Obligations or the RIC is being asserted under the United States
Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding")
direct all matters relating to such Insolvency Proceeding, including
without limitation, (A) all matters relating to any claim in connection
with an Insolvency Proceeding seeking the avoidance
2
<PAGE> 12
as a preferential transfer of any payment made with respect to the
Obligations or the RIC (a "Preference Claim"), (B) the direction of any
appeal of any order relating to any Preference Claim at the expense of
Financial Security but subject to reimbursement as provided in the
Insurance Agreement and (C) the posting of any surety, supersedeas or
performance bond pending any such appeal. In addition, the Indenture
Trustee hereby agrees that Financial Security shall be subrogated to,
and the Indenture Trustee on its behalf and on behalf of each Holder,
hereby delegates and assigns, to the fullest extent permitted by law,
the rights of the Indenture Trustee and each Holder in the conduct of
any Insolvency Proceeding, including, without limitation, all rights of
any party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(viii) Payment should be made by wire transfer directed to
[SPECIFY ACCOUNT].
Unless the context otherwise requires, any capitalized term used
in this Certificate of Claim shall have the meaning assigned thereto in the
Policy, including in the Endorsement thereto.
IN WITNESS WHEREOF, the Indenture Trustee has executed and
delivered this Certificate of Claim as of the __day of _______, 19__ .
_________________________________________
not in its individual capacity
but solely as Indenture Trustee
By:______________________________________
Name:
Title:
- --------------------------------------------------------------------------------
For Financial Security Assurance Inc. or Fiscal Agent use only.
Wire transfer sent on ___________________________________ by ___________________
__________________________ Confirmation Number ____________.
3
<PAGE> 1
EXHIBIT 10.7
================================================================================
ADMINISTRATION AGREEMENT
among
WFS FINANCIAL 1998-C OWNER TRUST,
as Issuer,
WFS FINANCIAL INC,
as Administrator,
WFS INVESTMENTS, INC.,
WFS FINANCIAL AUTO LOANS, INC.,
as Seller,
and
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated as of November 1, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Duties of the Administrator.................................................. 2
Section 2. Records...................................................................... 8
Section 3. Compensation................................................................. 8
Section 4. Additional Information to be Furnished to the Issuer......................... 8
Section 5. Independence of the Administrator............................................ 8
Section 6. No Joint Venture............................................................. 8
Section 7. Other Activities of Administrator............................................ 9
Section 8. Term of Agreement; Resignation and Removal of Administrator.................. 9
Section 9. Action upon Termination, Resignation or Removal.............................. 10
Section 10. Notices...................................................................... 10
Section 11. Amendments................................................................... 11
Section 12. Successors and Assigns....................................................... 12
Section 13. Governing Law................................................................ 12
Section 14. Headings..................................................................... 12
Section 15. Counterparts................................................................. 12
Section 16. Severability................................................................. 12
Section 17. Not Applicable to WFS in Other Capacities.................................... 12
Section 18. Limitation of Liability of Owner Trustee and Indenture Trustee............... 13
Section 19. Third-Party Beneficiary...................................................... 13
</TABLE>
(i)
<PAGE> 3
This ADMINISTRATION AGREEMENT, dated as of November 1, 1998, is among
WFS FINANCIAL 1998-C OWNER TRUST (the "Issuer"), WFS FINANCIAL INC ("WFS" or in
its capacity as administrator, the "Administrator"), WFS INVESTMENTS, INC. (the
"Company"), WFS FINANCIAL AUTO LOANS, INC. (the "Seller") and BANKERS TRUST
COMPANY, not in its individual capacity but solely as Indenture Trustee (the
"Indenture Trustee").
W I T N E S S E T H :
WHEREAS, the Issuer is issuing _____% Auto Receivable Backed Notes,
Class A-1, _____% Auto Receivable Backed Notes, Class A-2, _____% Auto
Receivable Backed Notes, Class A-3, _____% Auto Receivable Backed Notes, Class
A-4 and ___% Auto Receivable Backed Notes, Class A-5 (collectively, the "Notes")
pursuant to the Indenture, dated as of the date hereof (the "Indenture"),
between the Issuer and the Indenture Trustee (capitalized terms used herein that
are not otherwise defined shall have the meanings ascribed thereto in the
Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and of certain beneficial ownership interests of
the Issuer, including (i) a Sale and Servicing Agreement, dated as of the date
hereof (the "Sale and Servicing Agreement"), among the Issuer, the Seller and
WFS, as servicer (in such capacity, the "Master Servicer"), and (ii) a Letter of
Representations, dated November __, 1998 (the "Note Depository Agreement"),
among the Issuer, the Indenture Trustee and The Depository Trust Company ("DTC")
relating to the Notes, (iii) a Letter of Representations, dated November __,
1998 (the "Certificate Depository Agreement", and together with the Note
Depository Agreement, the "Depository Agreements"), among the Issuer, Chase
Manhattan Bank Delaware (the "Owner Trustee") and DTC and (iv) the Indenture
(the Sale and Servicing Agreement, the Depository Agreements and the Indenture
being referred to hereinafter collectively as the "Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (i) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "Collateral")
and (ii) the beneficial ownership interests in the Issuer (the registered
holders of such interests being referred to herein as the "Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner Trustee
referred to in the preceding clause and to provide such additional services
consistent with the terms of this Agreement and the Related Agreements as the
Issuer and the Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
<PAGE> 4
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Duties of the Administrator.
(a) Duties with Respect to the Depository Agreements and the Indenture.
(i) The Administrator agrees to perform all its duties as
Administrator and the duties of the Issuer and the Owner Trustee under
the Depository Agreements. In addition, the Administrator shall consult
with the Owner Trustee regarding the duties of the Issuer or the Owner
Trustee under the Indenture and the Depository Agreements. The
Administrator shall monitor the performance of the Issuer and shall
advise the Owner Trustee when action is necessary to comply with the
respective duties of the Issuer and the Owner Trustee under the
Indenture and the Depository Agreements. The Administrator shall prepare
for execution by the Issuer, or shall cause the preparation by other
appropriate persons of, all such documents, reports, filings,
instruments, certificates and opinions that it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to the
Indenture and the Depository Agreements. In furtherance of the
foregoing, the Administrator shall take all appropriate action that the
Issuer or the Owner Trustee is required to take pursuant to the
Indenture including, without limitation, such of the foregoing as are
required with respect to the following matters under the Indenture
(references are to Sections of the Indenture):
(A) the duty to cause the Note Register to be kept and to
give the Indenture Trustee notice of any appointment of a new
Note Registrar and the location, or change in location, of the
Note Register (Section 2.04);
(B) the notification of Noteholders and the Rating
Agencies of the final principal payment on the Notes (Section
2.07(b));
(C) the fixing or causing to be fixed of any special
record date and the notification of the Indenture Trustee and
Noteholders with respect to special payment dates, if any
(Section 2.07(c));
(D) the preparation of or obtaining of the documents and
instruments required for execution and authentication of the
Notes and delivery of the same to the Indenture Trustee (Section
2.02);
(E) the preparation, obtaining or filing of the
instruments, opinions and certificates and other documents
required for the release of Collateral (Section 2.12);
2
<PAGE> 5
(F) the maintenance of an office in the Borough of
Manhattan, The City of New York, for registration of transfer or
exchange of Notes (Section 3.02);
(G) the duty to cause newly appointed Paying Agents, if
any, to deliver to the Indenture Trustee the instrument specified
in the Indenture regarding funds held in trust (Section 3.03);
(H) the direction to the Indenture Trustee to deposit
monies with Paying Agents, if any, other than the Indenture
Trustee (Section 3.03);
(I) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity
and enforceability of the Indenture, the Notes, the Collateral
and each other instrument and agreement included in the Trust
Estate (Section 3.04);
(J) the preparation of all supplements and amendments to
the Indenture and all financing statements, continuation
statements, instruments of further assurance and other
instruments and the taking of such other action as is necessary
or advisable to protect the Trust Estate (Section 3.05);
(K) the delivery of the Opinion of Counsel on the Closing
Date and the annual delivery of Opinions of Counsel as to the
Trust Estate, and the annual delivery of the Officer's
Certificate and certain other statements as to compliance with
the Indenture (Sections 3.06 and 3.09);
(L) the identification to the Indenture Trustee and
Financial Security Assurance Inc. (the "Insurer") in an Officer's
Certificate of a Person with whom the Issuer has contracted to
perform its duties under the Indenture (Section 3.07(b));
(M) the notification of the Indenture Trustee, the Insurer
and each Rating Agency of a Servicer Default under the Sale and
Servicing Agreement and, if such Servicer Default arises 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 taking of all reasonable steps available to
remedy such failure (Section 3.07(d));
(N) the duty to 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 3.14);
(O) the preparation and obtaining of documents and
instruments required for the release of the Issuer from its
obligations under the Indenture (Section 3.10(b));
3
<PAGE> 6
(P) the delivery of written notice to the Indenture
Trustee, the Insurer and each Rating Agency of each Event of
Default under the Indenture and each default by the Master
Servicer or the Seller under the Sale and Servicing Agreement
(Section 3.18);
(Q) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation
of an Officer's Certificate and the obtaining of the Opinion of
Counsel and the Independent Certificate relating thereto (Section
4.01);
(R) the compliance with any written directive of the
Controlling Party with respect to the sale of the Trust Estate in
a commercially reasonable manner if an Event of Default shall
have occurred and be continuing (Section 5.04);
(S) the preparation and delivery of notice to Noteholders
of the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee (Section 6.08);
(T) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate
trustee and any written instruments necessary in connection with
the resignation or removal of the Indenture Trustee or any
co-trustee or separate trustee (Sections 6.08 and 6.10);
(U) the furnishing of the Indenture Trustee with the names
and addresses of Noteholders during any period when the Indenture
Trustee is not the Note Registrar (Section 7.01);
(V) the preparation and, after execution by the Issuer,
the filing with the Commission, any applicable state agencies and
the Indenture Trustee of documents required to be filed on a
periodic basis with, and summaries thereof as may be required by
rules and regulations prescribed by, the Commission and any
applicable state agencies and the transmission of such summaries,
as necessary, to the Noteholders (Section 7.03);
(W) the opening of one or more accounts in the Issuer's
name, the preparation and delivery of Issuer Orders, Officer's
Certificates and Opinions of Counsel and all other actions
necessary with respect to investment and reinvestment of funds in
the Trust Accounts (Sections 8.02 and 8.03);
(X) the preparation of an Issuer Request and Officer's
Certificate and the obtaining of an Opinion of Counsel and
Independent Certificates, if necessary, for the release of the
Trust Estate (Sections 8.04 and 8.05);
(Y) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the
4
<PAGE> 7
mailing to the Noteholders of notices with respect to such
supplemental indentures (Sections 9.01, 9.02 and 9.03);
(Z) the execution, authentication and delivery of new
Notes conforming to any supplemental indenture (Section 9.06);
(AA) the duty to notify Noteholders and the Rating
Agencies of redemption of the Notes or to cause the Indenture
Trustee to provide such notification (Section 10.02);
(BB) the preparation and delivery of all Officer's
Certificates, Opinions of Counsel and Independent Certificates
with respect to any requests by the Issuer to the Indenture
Trustee to take any action under the Indenture (Section
11.01(a));
(CC) the preparation and delivery of Officer's
Certificates and the obtaining of Independent Certificates, if
necessary, for the release of property from the lien of the
Indenture (Section 11.01(b));
(DD) the notification of the Rating Agencies, upon the
failure of the Issuer, the Owner Trustee or the Indenture Trustee
to give such notification, of the information required pursuant
to Section 11.04 of the Indenture (Section 11.04);
(EE) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate
payment and notice provisions (Section 11.06);
(FF) the recording of the Indenture, if applicable
(Section 11.15);
(GG) the preparation of Definitive Notes in accordance
with the instructions of the Clearing Agency (Section 2.11); and
(HH) maintaining the effectiveness of the licenses
required under the Pennsylvania Motor Vehicle Sales Finance Act
(Section 6.14).
(ii) The Administrator will:
(A) pay the Indenture Trustee from time to time reasonable
compensation for all services rendered by the Indenture Trustee
under the Indenture (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee
of an express trust);
(B) except as otherwise expressly provided in the
Indenture, reimburse the Indenture Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or
made by the Indenture Trustee in
5
<PAGE> 8
accordance with any provision of the Indenture (including the
reasonable compensation, expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or bad faith;
(C) indemnify the Indenture Trustee and its agents for,
and hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part, arising
out of or in connection with the acceptance or administration of
the transactions contemplated by the Indenture, including the
reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance
of any of their powers or duties under the Indenture; and
(D) indemnify the Owner Trustee and its agents for, and
hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part, arising
out of or in connection with the acceptance or administration of
the transactions contemplated by the Trust Agreement, including
the reasonable costs and expenses of defending themselves against
any claim or liability in connection with the exercise or
performance of any of their powers or duties under the Trust
Agreement.
(b) Additional Duties.
(i) In addition to the duties set forth in Section 1(a)(i), the
Administrator shall perform such calculations and shall prepare or shall
cause the preparation by other appropriate persons of, and shall execute
on behalf of the Issuer or the Owner Trustee, all such documents,
reports, filings, instruments, certificates and opinions that the Issuer
or the Owner Trustee are required to prepare, file or deliver pursuant
to the Related Agreements or Section 5.05 of the Trust Agreement, and at
the request of the Owner Trustee shall take all appropriate action that
the Issuer or the Owner Trustee are required to take pursuant to the
Related Agreements. In furtherance thereof, the Owner Trustee shall, on
behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to
the terms hereof, one or more powers of attorney substantially in the
form of Exhibit A hereto, appointing the Administrator the
attorney-in-fact of the Owner Trustee and the Issuer for the purpose of
executing on behalf of the Owner Trustee and the Issuer all such
documents, reports, filings, instruments, certificates and opinions.
Subject to Section 5, and in accordance with the directions of the Owner
Trustee, the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Related Agreements) as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner Trustee
and are reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding
tax is imposed on the Trust's
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payments (or allocations of income) to an Owner as contemplated in
Section 5.02(c) of the Trust Agreement. Any such notice shall specify
the amount of any withholding tax required to be withheld by the Owner
Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in Section
5.05(a), (b), (c) and (d), the penultimate sentence of Section 5.05 and
Section 5.06(a) of the Trust Agreement with respect to, among other
things, accounting and reports to Owners; provided, however, that the
Owner Trustee shall retain responsibility for the distribution of the
Schedule K-1s necessary to enable each Owner to prepare its federal and
state income tax returns.
(iv) The Administrator shall satisfy its obligations with
respect to clauses (ii) and (iii) above by retaining, at the expense of
the Trust payable by the Administrator, a firm of independent public
accountants (the "Accountants") acceptable to the Owner Trustee, which
shall perform the obligations of the Administrator thereunder. In
connection with paragraph (ii) above, the Accountants will provide prior
to December 31, 1998, a letter in form and substance satisfactory to the
Owner Trustee as to whether any tax withholding is then required and, if
required, the procedures to be followed with respect thereto to comply
with the requirements of the Code. The Accountants shall be required to
update the letter in each instance that any additional tax withholding
is subsequently required or any previously required tax withholding
shall no longer be required.
(v) The Administrator shall perform the duties of the
Administrator specified in Section 10.02 of the Trust Agreement required
to be performed in connection with the resignation or removal of the
Owner Trustee, and any other duties expressly required to be performed
by the Administrator under the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its Affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in
the Administrator's opinion, no less favorable to the Issuer than would
be available from unaffiliated parties.
(c) Non-Ministerial Matters.
(i) With respect to matters that in the reasonable judgment of
the Administrator are non-ministerial, the Administrator shall not take
any action unless within a reasonable time before the taking of such
action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
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(B) the initiation of any claim or lawsuit by the Issuer
and the compromise of any action, claim or lawsuit brought by or
against the Issuer (other than in connection with the collection
of the Contracts);
(C) the amendment, change or modification of the Related
Agreements;
(D) the appointment of successor Note Registrars,
successor Paying Agents and successor Indenture Trustees pursuant
to the Indenture or the appointment of successor Administrators
or a successor Master Servicer, or the consent to the assignment
by the Note Registrar, Paying Agent or Indenture Trustee of its
obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement,
the Administrator shall not be obligated to, and shall not, (A) make any
payments to the Noteholders under the Related Agreements, (B) sell the
Trust Estate pursuant to clause (iv) of Section 5.04 of the Indenture,
(C) take any other action that the Issuer directs the Administrator not
to take on its behalf or (D) take any other action which may be
construed as having the effect of varying the investment of the Holders.
Section 2. Records. The Administrator shall maintain appropriate books
of account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer and the
Company at any time during normal business hours.
Section 3. Compensation. As compensation for the performance of the
Administra- tor's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to an annual
payment of compensation which shall be solely an obligation of the Company.
Section 4. Additional Information to be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
Section 5. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in any
way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
Section 6. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity,
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(ii) shall be construed to impose any liability as such on any of them or (iii)
shall be deemed to confer on any of them any express, implied or apparent
authority to incur any obligation or liability on behalf of the others.
Section 7. Other Activities of Administrator. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other Person or entity even though such person or entity
may engage in business activities similar to those of the Issuer, the Owner
Trustee or the Indenture Trustee.
Section 8. Term of Agreement; Resignation and Removal of Administrator.
This Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(a) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days' prior written notice.
(b) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(c) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of termination from
the Issuer to the Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any
of its duties under this Agreement and, after notice of such default,
shall not cure such default within ten days (or, if such default cannot
be cured in such time, shall not give within ten days such assurance of
cure as shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a
decree or order for relief, and such decree or order shall not have been
vacated within 60 days, in respect of the Administrator in any
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect or appoint a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official for the Administrator or any substantial part of its property
or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment
of a receiver, liquidator, assignee, trustee, custodian, sequestrator or
similar official for the Administrator or any substantial part of its
property, shall consent to the taking of possession by any such official
of any substantial part of its property, shall make any general
assignment for the benefit of creditors or shall fail generally to pay
its debts as they become due.
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The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) above shall occur, it shall give written notice thereof to the
Issuer and the Indenture Trustee within seven days after the occurrence of such
event.
(d) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(e) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(f) Subject to Section 8(d) and 8(e), the Administrator acknowledges
that upon the appointment of a Successor Master Servicer pursuant to the Sale
and Servicing Agreement, the Administrator shall immediately resign and such
Successor Master Servicer shall automatically become the Administrator under
this Agreement; provided, however, that this subsection (f) shall not apply at
such times as the Trustee shall be the Successor Master Servicer.
Section 9. Action upon Termination, Resignation or Removal. Promptly
upon the effective date of termination of this Agreement pursuant to the first
sentence of Section 8 or the resignation or removal of the Administrator
pursuant to Section 8(a), (b) or (c), respectively, the Administrator shall be
entitled to be paid all fees and reimbursable expenses accruing to it to the
date of such termination, resignation or removal. The Administrator shall
forthwith upon such termination pursuant to the first sentence of Section 8
deliver to the Issuer all property and documents of or relating to the
Collateral then in the custody of the Administrator. In the event of the
resignation or removal of the Administrator pursuant to Section 8(a), (b) or
(c), respectively, the Administrator shall cooperate with the Issuer and take
all reasonable steps requested to assist the Issuer in making an orderly
transfer of the duties of the Administrator.
Section 10. Notices. Any notice, report or other communication given
hereunder shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to:
WFS Financial 1998-C Owner Trust
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trust - Administration Department
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(b) if to the Administrator, to:
WFS Financial Inc
23 Pasteur Road
Irvine, California 92618
Attention: Harriet Burns Feller, Esq.
(c) if to the Indenture Trustee, to:
Bankers Trust Company
Four Albany Street - 10th Floor
New York, New York 10006
Attention: Corporate Trust Department - Asset Backed Group
(d) if to the Insurer, to:
Financial Security Assurance, Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
Section 11. Amendments. This Agreement may be amended from time to time
by a written amendment duly executed and delivered by the parties hereto, with
the written consent of the Insurer and the Owner Trustee but without the consent
of the Noteholders and the Certificateholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
Certificateholders; provided that such amendment will not, in the Opinion of
Counsel satisfactory to the Indenture Trustee, materially and adversely affect
the interest of any Noteholder or Certificateholder. This Agreement may also be
amended by the parties hereto with the written consent of the Owner Trustee and
the holders of Notes evidencing at least a majority of the Outstanding Amount of
the Notes and the holders of Certificates evidencing at least a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of Noteholders or the Certificateholders;
provided, however, that no such amendment may (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on the Contracts or distributions that are required to be made for the
benefit of the Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the holders of Notes and Certificates which are required to
consent to any such amendment, without the consent of the Insurer and the
holders of all outstanding Notes and Certificates. Notwithstanding the
foregoing, the
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Administrator may not amend this Agreement without the permission of the Seller,
which permission shall not be unreasonably withheld.
Section 12. Successors and Assigns. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Issuer and the Owner Trustee and subject to the satisfaction of
the Rating Agency Condition in respect thereof. An assignment with such consent
and satisfaction, if accepted by the assignee, shall bind the assignee hereunder
in the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer, the Insurer or the Owner Trustee to a corporation or
other organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization executes
and delivers to the Issuer, the Insurer, the Owner Trustee and the Indenture
Trustee an agreement, in form and substance reasonably satisfactory to the Owner
Trustee, the Indenture Trustee and the Insurer, in which such corporation or
other organization agrees to be bound hereunder by the terms of said assignment
in the same manner as the Administrator is bound hereunder. Subject to the
foregoing, this Agreement shall bind any successors or assigns of the parties
hereto.
Section 13. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT THAT
THE DUTIES OF THE INDENTURE TRUSTEE SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK.
Section 14. Headings. The section and subsection headings hereof have
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement.
Section 15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
Section 16. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 17. Not Applicable to WFS in Other Capacities. Nothing in this
Agreement shall affect any obligation WFS may have in any other capacity.
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Section 18. Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) 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.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
Section 19. Third-Party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
WFS FINANCIAL 1998-C OWNER TRUST
By: CHASE MANHATTAN BANK
DELAWARE, not in its individual
capacity but solely as Owner
Trustee
By: _________________________________
Name:
Title:
WFS INVESTMENTS, INC.
By: _________________________________
Name:
Title:
WFS FINANCIAL AUTO LOANS, INC., as
Seller
By: _________________________________
Name:
Title:
BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee
By: _________________________________
Name:
Title:
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WFS FINANCIAL INC,
as Administrator
By: ______________________________
Name:
Title:
15
