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SALE AND SERVICING AGREEMENT
among
WFS FINANCIAL 2002-1 OWNER TRUST,
as Issuer,
WFS RECEIVABLES CORPORATION,
as Seller,
and
WFS FINANCIAL INC,
as Master Servicer
Dated as of March 1, 2002
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TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions............................................................................ 2
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.......................................................... 35
Section 3.03. Custody of Contract Files.............................................................. 35
Section 3.04. Duties of Master Servicer as Custodian................................................. 36
Section 3.05. Instructions; Authority to Act......................................................... 37
Section 3.06. Indemnification........................................................................ 37
Section 3.07. Effective Period and Termination....................................................... 38
Section 3.08. Nonpetition Covenant................................................................... 38
Section 3.09. Collecting Title Documents Not Delivered at the Closing Date........................... 39
Section 3.10. Optional Repurchase of Contracts by the Certificateholders............................. 39
ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer.............................................................. 40
Section 4.02. Collection of Contract Payments........................................................ 44
Section 4.03. Realization upon Defaulted Contracts and Liquidated Contracts.......................... 44
Section 4.04. Insurance.............................................................................. 45
Section 4.05. Maintenance of Security Interests in Financed Vehicles................................. 45
Section 4.06. Covenants, Representations and Warranties of the Master Servicer....................... 45
Section 4.07. Repurchase of Contracts upon Breach of Covenant........................................ 47
Section 4.08. Servicing Compensation................................................................. 47
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Section 4.09. Reporting by the Master Servicer....................................................... 48
Section 4.10. Annual Statement as to Compliance...................................................... 51
Section 4.11. Annual Independent Certified Public Accountants' Report................................ 51
Section 4.12. Access to Certain Documentation and Information Regarding Contracts.................... 51
Section 4.13. Fidelity Bond.......................................................................... 52
Section 4.14. Indemnification; Third Party Claims.................................................... 52
Section 4.15. Maintenance of Interest Rate Swap Agreements........................................... 52
ARTICLE FIVE
XXX DISTRIBUTIONS; SPREAD ACCOUNT; STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts........................................................ 53
Section 5.02. Collections; Realization Upon Note Policy; Net Deposits................................ 55
Section 5.03. Application of Collections............................................................. 56
Section 5.04. Advances and Nonrecoverable Advances; Repurchase Amounts............................... 57
Section 5.05. Distributions.......................................................................... 58
Section 5.06. Spread Account......................................................................... 59
Section 5.07. Statements to Securityholders.......................................................... 59
Section 5.08. Calculation of the Class A-3B Rate and Class A-4B Rate................................. 61
ARTICLE SIX
THE SELLER
Section 6.01. Corporate Existence.................................................................... 62
Section 6.02. Liability of Seller; Indemnities....................................................... 62
Section 6.03. Merger or Consolidation of, or Assumption of the Obligations of, the
Seller; Certain Limitations............................................................ 63
Section 6.04. Limitation on Liability of Seller and Others........................................... 64
Section 6.05. Seller Not to Resign................................................................... 65
Section 6.06. Seller May Own Securities.............................................................. 65
ARTICLE SEVEN
THE MASTER SERVICER
Section 7.01. Liability of Master Servicer; Indemnities.............................................. 66
Section 7.02. Corporate Existence; Status as Master Servicer; Merger................................. 67
Section 7.03. Performance of Obligations............................................................. 67
Section 7.04. Master Servicer Not to Resign; Assignment.............................................. 67
Section 7.05. Limitation on Liability of Master Servicer and Others.................................. 68
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ARTICLE EIGHT
DEFAULT
Section 8.01. Servicer Default....................................................................... 70
Section 8.02. Indenture Trustee to Act; Appointment of Successor..................................... 71
Section 8.03. Repayment of Advances.................................................................. 72
Section 8.04. Notification to Noteholders and Certificateholders..................................... 72
Section 8.05. Waiver of Past Defaults................................................................ 72
Section 8.06. Insurer Direction of Insolvency Proceedings............................................ 72
ARTICLE NINE
TERMINATION
Section 9.01. Optional Purchase of All Contracts..................................................... 74
Section 9.02. Transfer to the Insurer................................................................ 75
ARTICLE TEN
MISCELLANEOUS
Section 10.01. Amendment............................................................................. 77
Section 10.02. Protection of Title to Trust.......................................................... 78
Section 10.03. Governing Law......................................................................... 80
Section 10.04. Notices............................................................................... 80
Section 10.05. Severability of Provisions............................................................ 80
Section 10.06. Assignment............................................................................ 80
Section 10.07. Third Party Beneficiaries............................................................. 80
Section 10.08. Insurer Default or Insolvency......................................................... 81
Section 10.09. Counterparts.......................................................................... 81
Section 10.10. Headings.............................................................................. 81
Section 10.11. Assignment by Issuer.................................................................. 81
Section 10.12. Limitation of Liability of Owner Trustee.............................................. 81
Section 10.13. Effect of Policy Expiration Date...................................................... 81
Section 1.1. Limitation on Recourse Against WFSRC.................................................. 82
Section 10.14. Replacement Interest Rate Swap Agreement.............................................. 82
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SCHEDULES
Schedule A Schedule of Contracts............................................................. SA-1
Schedule B Location of Contract Files........................................................ SB-1
Schedule C Charge-Off Percentage Triggers.................................................... SC-1
EXHIBITS
Exhibit A Form of Insurance Agreement....................................................... A-1
Exhibit B Form of Note Policy............................................................... B-1
Exhibit C Form of RIC....................................................................... C-1
Exhibit D Form of Subservicing Agreement.................................................... D-1
Exhibit E Form of Distribution Date Statement............................................... E-1
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This SALE AND SERVICING AGREEMENT, dated as of March 1, 2002, is among
WFS Financial 2002-1 Owner Trust, as issuer (the "Issuer"), WFS Receivables
Corporation, as seller (the "Seller"), and WFS Financial Inc ("WFS"), 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 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.
(a) 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 0% of the Aggregate Principal 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. The
Accelerated Principal Distributable Amount shall be allocated and distributed on
each Distribution Date to the Note 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).
"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 Principal Balance" means, with respect to any Distribution
Date and the Outstanding Contracts, the aggregate of the Principal Balances of
such Contracts as of the end of the Due Period immediately preceding such
Distribution Date.
"Aggregate Principal Balance Decline" means, with respect to any
Distribution Date, the amount by which the Aggregate Principal Balance as of the
beginning of the related Due Period (or the Cut-Off Date Aggregate Principal
Balance in the case of the first Distribution Date) exceeds the Aggregate
Principal Balance at the end of such Due Period.
"Aggregate Repurchase Amount" means, with respect to the purchase of
Contracts pursuant to Section 9.01(a), an amount equal to the outstanding
principal amount of the Notes and all unpaid interest (including any overdue
interest) thereon that has accrued through the related Interest Period.
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"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 Issuer (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 Issuer), and (ii) the original instrument granting a security interest in
such Contract and other documents made by the Issuer 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 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 related Seller to the Issuer
and the Insurer.
"Bank" means Western Financial Bank, and its successors.
"Base Price" means, with respect to any Repurchase Distribution Date,
the lesser of (i) the sum of the Principal Balances of the Contracts purchased
pursuant to Section 3.10 on such Repurchase Distribution Date or (ii) the sum of
the outstanding principal amount on the Notes and all unpaid interest thereon
that has accrued through the related Interest Period on such Repurchase
Distribution Date.
"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, Newark, Delaware,
London, England 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 Distributable Amount" means the aggregate amount of the
Excess Spread Amount distributed to Certificateholders pursuant to Section
5.06(b).
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"Certificate Distribution Account" shall have the meaning specified in
the Trust Agreement.
"Certificate Final Principal Distribution Date" means the September
2009 Distribution Date.
"Certificateholders" shall have the meaning specified in the Trust
Agreement.
"Certificate Percentage Interest" means, with respect to a Certificate,
the percentage specified on such Certificate as the Certificate Percentage
Interest, which percentage represents the beneficial interest of such
Certificate in the Issuer. The initial Certificate Percentage Interest held by
the Seller shall be 100%.
"Certificate Register" 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 Calculation Day, a
fraction, expressed as a percentage, the numerator of which is equal to (A) the
sum of (i) the Principal Balance of each Contract which is 120 days or more
delinquent, excluding Contracts which are subject to a Chapter 13 bankruptcy
proceeding, (ii) the difference between the Principal Balance of each Contract
which is less than 120 days delinquent but as to which the Financed Vehicle has
been repossessed and the estimated fair value of the Financed Vehicle as
determined in good faith by the Master Servicer and (iii) the difference between
the Principal Balance of each Contract which is subject to a bankruptcy court
approved Chapter 13 plan and the principal amount due under that approved plan,
less (B) all Net Liquidation Proceeds received with respect to the Financed
Vehicle and any other proceeds or other payments received from or for the
benefit of the Obligor as to any Contract subject to part (A), provided,
however, if the Net Liquidation Proceeds received with respect to the Financed
Vehicle is less than the estimated fair value of the Financed Vehicle used in
clause (ii), that difference shall be deducted from the amount otherwise
calculated pursuant to this part (B) and if the Net Liquidation Proceeds
received with respect to the Financed Vehicle is greater than the estimated fair
value of the Financed Vehicle used in clause (ii), that difference shall be
added to the amount otherwise calculated pursuant to this part (B), and the
denominator of which is the Cut-Off Date Aggregate Principal Balance.
"Charge-Off Percentage Trigger" means, with respect to any Calculation
Day, the percentage set forth in Schedule C.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class A-1 Final Scheduled Distribution Date" means the March 2003
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.
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"Class A-1 Rate" means 2.04% per annum.
"Class A-2 Final Scheduled Distribution Date" means the March 2005
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 3.04% per annum.
"Class A-3 Final Scheduled Distribution Date" means the December 2006
Distribution Date.
"Class A-3A Noteholder" means the Person in whose name a Class A-3A
Note is registered in the Note Register.
"Class A-3A Rate" means 4.15% per annum.
"Class A-3B Noteholder" means the Person in whose name a Class A-3B
Note is registered in the Note Register.
"Class A-3B Rate" means the sum of (i) the LIBOR Rate and (ii) 0.13%
per annum.
"Class A-4 Final Scheduled Distribution Date" means the September 2009
Distribution Date.
"Class A-4A Noteholder" means the Person in whose name a Class A-4A
Note is registered in the Note Register.
"Class A-4A Rate" means 4.87% per annum.
"Class A-4B Noteholder" means the Person in whose name a Class A-4B
Note is registered in the Note Register.
"Class A-4B Rate" means the sum of (i) the LIBOR Rate and (ii) 0.17%
per annum.
"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 March 20, 2002.
"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.
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"Commercial Paper" means 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
"Aaa" from Moody's and "AAA" from Standard & Poor's or have a short-term
unsecured debt rating of at least "Prime-1" from Moody's and "A-1+" from
Standard & Poor's.
"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 Issuer 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 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 lienholder 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, the interest rate
borne by such Contract.
"Contracts" means the Contracts sold to the Issuer by the Seller.
"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 March 15, 2002.
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"Cut-Off Date Aggregate Principal Balance" means $1,800,000,000, the
aggregate of the Principal Balances 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.
"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 Principal Balance of all Outstanding Contracts 60 days
or more delinquent (after taking into account permitted extensions), plus (ii)
the aggregate Principal 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 Principal Balance of all outstanding
Contracts, in each case, on the last day of such calendar month.
"Delinquent Contract" means any Contract that is 60 days or more
delinquent.
"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 registerable
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
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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 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 March 20, June 20, September 20 and
December 20, or, if any such date shall not be a Business Day, the next
succeeding Business Day, commencing June 20, 2002.
"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.
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"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 period
commencing on the first day of the third month preceding the month in which such
Distribution Date occurs (or from 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.
"Eligible Account" means (i) a segregated trust account in the
corporate trust department that is maintained with a depository institution or
trust company, 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 "Prime-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 "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 "Prime-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 (without giving effect to the guaranty under the Note Policy of payments
owing to the Noteholders). 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 "Prime-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
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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 (without giving effect to the guaranty under the Note
Policy of payments owing to the Noteholders); 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 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 "Prime-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 "Prime-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 Issuer to exceed 10% of the sum of the Aggregate 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 "A-1" from Moody's and "AAA" 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.
10
"Excess Amounts" shall have the meaning specified in Section 5.05(b).
"Excess Spread Amount" means, with respect to a Distribution Date or
Calculation Day, the excess of the Spread Account Balance over the Specified
Spread Account Balance (after giving effect to all deposits to, and withdrawals
(other than withdrawals pursuant to Section 5.06(b)) from, the Spread Account on
such Distribution Date or Calculation Day).
"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.
"Final Scheduled Distribution Date" means the Class A-1 Final Scheduled
Distribution Date, the Class A-2 Final Scheduled Distribution Date, the Class
A-3 Final Scheduled Distribution Date or the Class A-4 Final Scheduled
Distribution Date, as the case may be.
"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 Note Policy.
"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 or the Certificateholder, as the case may be, of the purchase price
of a Contract in connection with the purchase of all Contracts pursuant to
Section 9.01 or 3.10.
"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 March 1, 2002, between the
Issuer and the Indenture Trustee.
11
"Indenture Trustee" means the Person acting as trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture and, initially, will be Bankers Trust Company.
"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 the
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.
"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 and the Indenture Trustee, the form of which is
attached hereto as Exhibit A.
"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 Note Policy 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.
12
"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 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 and (i)
the Class A-1 Notes, the Class A-3B Notes and Class A-4B 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 March 20,
2002) to but excluding such Distribution Date and (ii) the Class A-2 Notes, the
Class A-3A Notes and the Class A-4A Notes, the period from and including the
20th day of the month in which the Distribution Date immediately preceding such
Distribution Date occurs (or in the case of the first Distribution Date from and
including March 20, 2002) to but excluding the 20th day of the month of such
Distribution Date.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2
Interest Rate, the Class A-3A Interest Rate, the Class A-3B Interest Rate, the
Class A-4A Interest Rate or the Class A-4B Interest Rate, as applicable.
"Interest Rate Swap Agreements" means the interest rate swap
agreements, dated as of March 1, 2002, between the Issuer and the Swap
Counterparty.
"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 2002-1 Owner Trust.
"LDI Policy" means the limited dual interest policy providing coverage
for physical damage to, or loss of, a Financed Vehicle.
13
"LIBOR Determination Date" means the second London Business Day prior
to the Closing Date with respect to the first Distribution Date and, as to each
subsequent Distribution Date, the second London Business Day prior to the
immediately preceding Distribution Date.
"LIBOR Rate" means, with respect to any Interest Period, the London
interbank offered rate for deposits in U.S. dollars having a maturity of three
months commencing on the related LIBOR Determination Date which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Determination
Date; provided, however, that if such rate does not appear on the Telerate Page
3750, the LIBOR Rate will equal the Reference Bank Rate.
"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.
"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.
"London Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in London, England are authorized or obligated
by law or government decree to be closed.
"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
14
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 Xxxxx'x 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; (v) Net Swap Receipts excluding any Swap Termination Payments paid
by the Swap Counterparty to the extent such amounts are used to enter into a
replacement interest rate swap agreement; and (vi) 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 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.
"Net Swap Payment" means any net amount owed by the Issuer to the Swap
Counterparty pursuant to an Interest Rate Swap Agreement including Swap
Termination Payments.
"Net Swap Receipt" means any amount paid by the Swap Counterparty to
the Issuer pursuant to an Interest Rate Swap Agreement including any Swap
Termination Payments.
"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
15
recoverable by the Master Servicer from late payments, Insurance Proceeds or
Liquidation Proceeds.
"Note" has the meaning set forth in the Indenture.
"Note Balance" means with respect to any Distribution Date, the
aggregate outstanding principal amount of the Class A-1 Notes, Class A-2 Notes,
Class A-3A Notes, Class A-3B, Class A-4A and Class A-4B 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).
Notwithstanding the foregoing, any payments of the Repurchase Premium shall not
reduce the Note Balance.
"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 Scheduled Distribution Date" means the Class A-1 Final
Scheduled Distribution Date, the Class A-2 Final Scheduled Distribution Date,
the Class A-3 Final Scheduled Distribution Date and the Class A-4 Final
Scheduled 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 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 Notes, Class A-3B Notes and Class A-4B 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 March 20, 2002) and (ii) Class A-2 Notes,
Class A-3A Notes and Class A-4A Notes shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
16
"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 B 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
for such Distribution Date 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 the related Distribution Date.
"Note Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Note Quarterly Principal Distributable Amount,
the Accelerated Principal Distributable Amount, if any, for such Distribution
Date and the 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 Scheduled 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, the sum of all 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).
"Note Quarterly Principal Distributable Amount" means, with respect to
any Distribution Date, the Aggregate Principal Balance Decline 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.
17
"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.
"Optional Repurchase" means the repurchase of Contracts by the
Certificateholders pursuant to Section 3.10.
"Optional Repurchase Payment" means, with respect to the repurchase by
the Seller of Contracts pursuant to Section 3.10, an amount equal to the sum of
accrued but unpaid interest on such Contracts, the Base Price and the Repurchase
Premium; provided, however, on any Repurchase Distribution Date on which the
Aggregate Principal Balance is less than $360,000,000, the Optional Repurchase
Payment will equal the greater of (i) an amount equal to the sum of accrued but
unpaid interest on such Contracts, the Base Price and the Repurchase Premium and
(ii) an amount equal to the sum of the outstanding principal on the Notes and
all unpaid interest thereon that has accrued through the related Interest
Period.
"Original Class A-1 Note Balance" means $330,000,000.
"Original Class A-2 Note Balance" means $440,000,000.
"Original Class A-3A Note Balance" means $380,000,000.
"Original Class A-3B Note Balance" means $230,000,000.
"Original Class A-4A Note Balance" means $260,000,000.
"Original Class A-4B Note Balance" means $160,000,000.
"Original Pool Balance" means $1,800,000,000.
"Outstanding" means, with respect
(i) 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, 3.10, 4.07 or 9.01; and
18
(ii) to the 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 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
prior to the Policy Expiration Date, 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, as the case may be, Outstanding at the date of
determination.
"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 and, initially, will be Chase Manhattan Bank USA,
National Association.
"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
19
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.
"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".
"Policy Expiration Date" means the date on which the Notes have been
paid in full and all outstanding Reimbursement Obligations and other amounts due
to the Insurer have been paid in full and the Term Of this Policy (as defined in
the Note Policy) has expired.
"Pool Balance" as of the time of determination means the Aggregate
Principal Balance, exclusive of the Principal 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 Balance" means, with respect to a Contract that is a (i)
Rule of 78's Contract, the amount set forth as the Principal Balance of such
Contract on the Schedule of Contracts, such amount being the total of all
Monthly P&I due on or after March 15, 2002 less any unearned interest as of the
Due Date for such Contract immediately preceding March 15, 2002, computed in
accordance with the Rule of 78's, less all amounts received on or in respect of
such Contract on or after March 15, 2002 that are allocable to principal and
(ii) Simple Interest Contract, the actual principal balance under the terms
thereof.
"Proprietary Fund" means money market 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.
"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, in the case of the Notes, in the event that
Definitive Notes are issued, the 15th day of the month preceding the month in
which such Distribution Date occurs.
"Reference Bank Rate" means with respect to any Interest Period, the
arithmetic mean to the nearest 1/100,000 of 1% (0.0000001), with five
one-millionths of a percentage point rounded
20
upward, of the rates, as of 11:00 A.M., London time, on the related LIBOR
Determination Date, at which deposits in United States dollars, having a
maturity of three months and a principal amount of not less than $1,000,000,
offered by the Reference Banks from which the Indenture Trustee has received
quotations; provided however, in the event that the Indenture Trustee has not
received quotations from at least two Reference Banks, the Reference Bank Rate
will be the arithmetic mean to the nearest 1/100,000 of 1% (0.0000001), with
five one-millionths of a percentage point rounded upward, of the rates quoted by
two or more major banks in New York City, selected by the Indenture Trustee, as
of 11:00 A.M., New York City time, on the LIBOR Determination Date for loans in
United States dollars to leading European Banks having a maturity of three
months and a principal in amounts not less than $1,000,000; provided, further,
if less than two such quotations can be obtained, the Reference Bank Rate shall
be the Reference Bank Rate for the preceding Interest Period.
"Reference Banks" means four major banks that are engaged in the London
interbank market that are selected by the Indenture Trustee.
"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.
"Related Contracts" means, with respect to a particular Seller, the
Contracts sold to the Issuer by such Seller.
"Replacement Interest Rate Swap Agreement" has the meaning set forth in
Section 3.13 of the Insurance Agreement.
"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.
"Repurchase Distribution Date" means any Distribution Date on which
Contracts are purchased pursuant to Section 3.10.
"Repurchase Premium" means an amount equal to:
(i) on any Distribution Date on or prior to the March 2003
Distribution Date, the product of the Base Price and 15%;
(ii) on a Distribution Date from, but excluding, the March
2003 Distribution Date to, and including, the March 2004 Distribution
Date, the product of the Base Price and 10%;
(iii) on a Distribution Date from, but excluding, the
March 2004 Distribution Date to, and including, the March 2005
Distribution Date Distribution Date, the product of the Base Price and
7%; and
21
(iv) on a Distribution Date from, but excluding, the March
2005 Distribution Date to, and including, the September 2009
Distribution Date, the product of the Base Price and 4%.
Notwithstanding the foregoing, the Repurchase Premium shall equal zero
if the Aggregate Principal Balance of the Contracts is less than or equal to
$180,000,000.
"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 Principal 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
Principal 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 Class A-4A Rate.
"RIC" means the reinvestment contract provided by the Bank and WFAL2
or, with the prior written consent of the Insurer, a subsidiary thereof,
substantially in the form of Exhibit C hereto, in consideration of the right to
direct the investment of the funds on deposit in all Trust Accounts other than
the Holding Account.
"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 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 [Class A-4A 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).
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"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:
Information Column Number
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
Principal Balance ("PRIN BAL")........................................ 16 Bottom
Discount Rate ("APR")................................................. 7
"Securities" means the Notes and the Certificates.
"Securityholders" means the Holders of the Notes and the Certificates.
"Seller" means WFSRC, in its capacity as the Seller of 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 an amount equal to, for each month in such Due Period, the product
of the Servicing Fee Percent and the Principal 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.
"Servicing Fee Percent" means one-twelfth of 1.25% 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, 4.0% of the Aggregate Principal Balance on
such Calculation Day, except that if on any Calculation Day (i) the Charge-Off
Percentage for the related Calculation Day exceeds the Charge-Off Percentage
Trigger or (ii) the Delinquency Percentage for the three calendar
23
month period ending on such Calculation Day exceeds 2.5%, then the Specified
Spread Account Balance shall equal 9.0% of the Aggregate Principal 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 shall the Specified
Spread Account Balance be greater than $162,000,000 or less than $32,400,000;
provided, however, the Specified Spread Account Balance shall not be greater
than the Outstanding Amount of the Securities if such amount is less
$32,400,000.
"Spread Account" means the account established and maintained as such
pursuant to Section 5.01.
"Spread Account Balance" means the amount on deposit in the Spread
Account.
"Spread Account Initial Deposit" means $36,000,000, 100% of which will
be cash.
"Standard & Poor's" means Standard & Poor's, a Division of The
XxXxxx-Xxxx 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.
"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 D hereto.
"Swap Counterparty" means Bank of America, N.A., as the swap
counterparty under the Interest Rate Swap Agreements.
"Swap Termination Payments" means payment due to the Swap Counterparty
by the Issuer or to the Issuer by the Swap Counterparty due to the termination
of an Interest Rate Swap Agreement pursuant to the occurrence of an event of
default or termination event under such Interest Rate Swap Agreement or as
otherwise agreed between the parties to the Interest Rate Swap Agreement and
consented to by the Insurer.
"Telerate Page 3750" is the display page named that on the Dow Xxxxx
Telerate Services (or any other page that replaces that page on that service for
the purpose of displaying comparable name or rates).
"Third Party Lender" means an independent finance company which has
originated or acquired one or more Contracts and assigned such Contract(s) to
WFS.
"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.
24
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise) and all proceeds of the foregoing.
"Trust Accounts" shall have the meaning specified in Section 5.01(a).
"Trust Agreement" means the Trust Agreement, dated March 11, 2002, as
amended and restated as of March 20, 2002, among the Depositor, 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 Note Policy 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.
"WFAL2" means WFS Financial Auto Loans 2, Inc., a wholly owned
subsidiary of WFS, and its successors and assigns.
"WFS" means WFS Financial Inc, a majority-owned operating subsidiary of
the Bank, and its successors and assigns.
"WFSRC" means WFS Receivables Corporation, a wholly-owned subsidiary of
WFS, and its successors and assigns.
(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 Indenture.
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
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
25
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 the actual number of days elapsed since the immediately
preceding Distribution Date or the Closing Date, in the case of the first
Distribution Date (or, in the case of the Class A-2 Notes, Class A-3A and Class
A-4A Notes, on the basis of a 360-day year and twelve 30-day months) 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 Principal 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 defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
26
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 the Certificates and $1,800,000,000 aggregate principal balance of
Notes, the Seller hereby grants, transfers, assigns and otherwise conveys to the
Issuer, without recourse (subject to the obligations herein), all of its right,
title and interest (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 the Cut-Off Date (excluding the amount allocable to principal and interest
due prior to the Cut-Off Date); all Net Liquidation Proceeds and Net Insurance
Proceeds with respect to any Financed Vehicle to which a Contract relates
received on or after the Cut-Off Date and all other proceeds received on or in
respect of such Contracts (other than payments of Monthly P&I due prior to the
Cut-Off Date) 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
March 1, 2002 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 $2,431.85 of the principal amount of
Contract 815029320 is retained by the Seller.
(b) The Bank has caused the filing of UCC-1 financing statements,
naming the Bank as debtor and 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 caused the filing of UCC-1 financing statements naming WFS as debtor and
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
caused the filing of UCC-1 financing statements, naming the Seller as debtor and
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 caused the filing of UCC-1 financing statements, naming the
Seller as debtor and the Trust as secured party and describing the Contracts
being sold by it to the Trust as collateral, with the Office of the Secretary of
State of the State of California. The Trust has caused the filing of UCC-1
financing statements, naming the Trust as debtor and the Indenture Trustee, on
behalf of the Noteholders, as secured party and describing the Contracts as
collateral, with the office of the Secretary of State of the State of Delaware.
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
27
necessary to continue the perfection of the respective interests of the
Indenture Trustee, the 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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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 Note Policy. 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
29
any Lien upon any of its 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 Principal
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,
the Seller has taken all steps necessary to perfect its
security interest against the Obligors in the Financed
Vehicles securing the Contracts and such Contract granted a
valid and enforceable first priority security interest in
favor of WFS (or to the Bank, a Dealer or a Third Party
Lender, 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). The Seller has caused
the filing of all appropriate financing statements in the
proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the security interest in
the Contracts granted to the Issuer hereunder. All financing
statements filed against the Seller in favor of the Issuer in
connection herewith describing the Contracts contain a
statement to the following effect: "A purchase of or security
interest in any collateral described in this financing
statement will violate the rights of the Issuer unless the
Issuer authorizes it."
30
(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
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 any
Person 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, claims, encumbrances and rights of any
Person, 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 unenforceable
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
31
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 Securityholders, will not involve
the violation of any applicable state or federal law.
(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, violation 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 (1) in an amount
at least equal to the lesser of (a) its actual cash value or
(b) the principal amount due from the Obligor under the
related Contract, (2) naming WFS as a loss payee and (3)
insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage or (B) a LDI Policy;
provided, however, that if such Financed Vehicle has an unpaid
principal balance of less than $4,000.00 or the related
32
Contract has six or fewer months remaining before its Maturity
Date, 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 or a Third Party Lender with which it ordinarily does
business or the Bank 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
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. The Seller has received a written
acknowledgement from the Master Servicer that the Master
Servicer is holding the Contract Documents that constitute or
evidence the Contracts solely on behalf and for the benefit of
the Issuer. None of the Contract Documents that constitute or
evidence each Contract has any marks or notations indicating
that it has been pledged, assigned or otherwise conveyed to
any Person other than the Issuer. 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. As of the Cut-Off Date
such Contract had (A) an Principal Balance of not less than
$509.04 nor more than $104,049.06, (B) an original term of not
less than 10 months nor greater than 84 months, (C) a
remaining maturity of not less than three months nor greater
than 84 months and (D) an APR of not less than 5.09%.
(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 Principal Distribution Date.
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(xx) Principal Balance. At the Cut-Off Date the
initial Principal 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. With respect to each
Contract, 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 5.50% for Rule of 78's Contracts and equal to or
greater than 5.09% for Simple Interest Contracts.
(xxiii) WFS, Bank and Third Party Lender
Originations. With respect to the Contracts, the aggregate
Principal Balance as of the Cut-Off Date of such Contracts
purchased by WFS from the Bank and Third Party Lenders or
originated directly by WFS is not more than approximately
1.68% of the Cut-Off Date Principal Balance.
(xxiv) Simple Interest Contracts. As of the
Cut-Off Date, approximately 94.85% of the aggregate Principal
Balances of the Contracts shall be Simple Interest Contracts
and approximately 5.13% of the aggregate Principal Balances of
the Contracts shall be Rule of 78's Contracts.
(xxv) New or Used Vehicles. At least 24.12% of
the Contracts by Cut-Off Date Aggregate Principal Balance
shall be new vehicles and not greater than 75.88% shall be
used vehicles.
(xxvi) States of Origination. Approximately
40.80% of the Contracts by Cut-Off Date Aggregate Principal
Balance were originated or purchased by WFS or the Bank in
California and approximately 59.20% of the Contracts by
Cut-Off Date Aggregate Principal 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.
(xxviii) Chattel Paper. Each Contract constitutes
"chattel paper" within the meaning of the applicable UCC.
(xxix) Priority of Interest. This Agreement
creates a valid and continuing security interest (as defined
in the UCC) in the Contracts in favor of the Issuer, which
security interest is prior to all other Liens, and is
enforceable as such as against creditors of and purchasers
from the Seller. Other than the security interest granted to
the Issuer pursuant to this Agreement and subject to the
Insurance Agreement, the Seller has not pledged, assigned,
sold, granted a security interest in, or otherwise conveyed
any of the Contracts. The Seller has not authorized the filing
of and is not aware of any financing statements against the
Seller that include a description of collateral covering the
Contracts other than
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any financing statement relating to the security interest
granted to the Issuer hereunder, the security interest granted
to the Indenture Trustee under the Indenture and the security
interest granted to the Insurer under the Insurance Agreement
or that has been terminated.
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 title to 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
enforce the Seller's obligation to repurchase Contracts pursuant to this
Section; 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.
(a) 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;
(iii) the original credit application fully executed by
the Obligor; and
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(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.
(b) 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 Issuer as the owner of, and the security interest of the
Indenture Trustee and the Insurer in, the Contract Documents and shall xxxx 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 Issuer 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
9-313 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 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.
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(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
Principal 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 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 Issuer, the Owner Trustee, the Indenture Trustee,
the Insurer and the Securityholders for
37
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
Issuer, 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 Issuer, 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 Issuer.
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 this Section, upon the
termination of the Issuer or the repurchase of all of the Contracts by the
Seller, whichever is first to occur. 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 aggregate Certificate
Percentage Interest, 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 obligations 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 or as designated by the Owner Trustee 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 case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
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(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.
Section 3.10. Optional Repurchase of Contracts by the
Certificateholders.
(a) On each Distribution Date, the Certificateholders shall have the
option to repurchase Contracts randomly selected by the Master Servicer from the
Issuer; provided, however, such option shall only be exercised once during the
term of this Agreement. The sum of the Principal Balances of the Contracts
purchased pursuant to this Section may not exceed $360,000,000. Notice of the
exercise of such option shall be given by the Certificateholders to the Owner
Trustee, the Indenture Trustee and the Insurer not later than 15 days prior to
such Distribution Date. To exercise such option, the Certificateholders shall,
on the Business Day immediately preceding the related Distribution Date, pay to
the Indenture Trustee for the benefit of the Securityholders, by deposit in the
Collection Account, the Optional Repurchase Payment. Upon such deposit of the
Optional Repurchase Payment, the Owner Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be requested by the Certificateholder to vest in such Certificateholder title to
any Contract purchased hereunder.
(b) The Optional Repurchase Payment other than the Repurchase Premium
shall constitute Net Collections and shall be distributed in accordance with
Section 5.05(a); provided, however, if, upon the exercise of its right to
repurchase pursuant to Section 3.10(a), the Certificateholders repurchase all
remaining Contracts, the Optional Repurchase Payment will be distributed
pursuant to Section 9.01(e).
(c) Upon instruction of the Master Servicer, the Indenture Trustee
shall deposit the Repurchase Premium into the Note Distribution Account for
distribution on the related Distribution Date to each Class of Notes, pro rata,
based on the outstanding principal balance of each Class of Notes after making
the distributions (other than the distribution of the Base Price) described in
Section 5.05(a); provided, however, if, upon the exercise of its right to
repurchase pursuant to Section 3.10(a), the Certificateholders repurchase all
remaining Contracts, the Repurchase Premium will be distributed pursuant to
Section 9.01(e).
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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 Class A-4A 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 Class A-4 Final Scheduled 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 Principal Balance greater
than one-tenth 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 Issuer on an annual
basis, based on a tax year for the Issuer 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, 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
40
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 D
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 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
41
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 the
Cut-Off Date 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 the Cut-Off Date) of any
such Contract received by the Master Servicer on or after the Cut-Off Date) 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 the
Cut-Off Date 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 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
42
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; provided,
however, that the Master Servicer must provide such certificate within three
months of such Nonrecoverable Advance or Advances. 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 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
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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, however, the Master Servicer shall
not defer payments more than three times over the life of such Contract;
provided, further, 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 Class A-4 Final Scheduled
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
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
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rights of the Issuer. 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. To the extent the Obligor fails to maintain a
comprehensive and collision insurance policy in an amount at least equal to the
lesser of (i) the actual cash value of the Financed Vehicle or (ii) the
principal amount due from the Obligor under the related Contract, the Master
Servicer shall obtain the LDI Policy in respect of such 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 or the related
Contract has six or fewer months remaining before its Maturity Date.
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 Issuer in the event of the relocation of a
Financed Vehicle or for any other reason.
Section 4.06. Covenants, Representations and Warranties of the 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 Note Policy. 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:
(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.
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(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.
(v) Security Interest. The Master Servicer shall
maintain the perfection and priority of the Issuer's and the
Indenture Trustee's security interests in the Contracts.
(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.
(iv) Binding Obligation. This Agreement has been
duly executed and delivered by the Master Servicer and,
assuming the due authorization, execution
46
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 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
47
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 Principal 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, the
Swap Counterparty and the Insurer a statement, substantially in the form of
Exhibit E hereto (the "Distribution Date Statement"), setting forth with respect
to the next succeeding Distribution Date:
(i) the Note Interest Distributable Amount for such
Distribution Date;
(ii) the Note Principal Distributable Amount for such
Distribution Date and the portion thereof constituting the Accelerated
Principal Distributable Amount;
(iii) the Net Collections for such Distribution Date;
(iv) the amount otherwise distributable to each Class of
Noteholders 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
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;
(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 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;
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(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 Principal Balance of
Contracts so modified as a percentage of the Pool Balance for the most
recent Distribution Date;
(xv) 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;
(xvi) 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;
(xvii) the Certificate Distributable Amount;
(xviii) with respect to Contracts repurchased pursuant to
Section 3.10, the Base Price, the accrued but unpaid interest on such
Contracts, the Repurchase Spread Account Amount and the Repurchase
Premium;
(xix) the amount otherwise distributable to the
Certificateholders;
(xx) if the data becomes available, the principal amount
of Contracts originated by WFS in respect of clauses (viii) and (xii)
above; and
(xxi) the Net Swap Receipts and Net Swap Payments, if any.
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.
(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, the
Seller has elected to purchase pursuant to Section 9.01 or the
Certificateholder has elected to purchase pursuant to Section 3.10;
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(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 Principal 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 Principal Balance as of the prior
Distribution Date (or as of the Cut-Off Date in the case of
the first Distribution Date) and its Principal Balance for
each Distribution Date having a Due Period prior to the Due
Period of its Maturity Date, computed on the basis set forth
under the definition of the term "Principal Balance";
(v) the Contract Numbers, Monthly P&I, Principal 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
50
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,
the Swap Counterparty 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, 2002, 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 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 Securityholders 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
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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 Certificateholders 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.
Section 4.15. Maintenance of Interest Rate Swap Agreements. As long as
the Class A-3B Notes and the Class A-4B Notes are Outstanding, the Master
Servicer shall cause the Trust to maintain in effect an interest rate swap
agreement acceptable to the Insurer with respect to each of the Class A-3B Notes
and the Class A-4B Notes; provided, that, the issuance of the Note Policy on the
Closing Date shall demonstrate the Insurer's approval of the Interest Rate Swap
Agreements.
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ARTICLE FIVEXXX
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.
(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, Commercial Paper 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 in Proprietary Funds or Commercial Paper, shall be
53
invested in the RIC, Commercial Paper 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, Commercial Paper 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 Commercial Paper or
Proprietary Funds that mature on the Distribution Date 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 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
54
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 Note Policy; Net Deposits.
(a) Subject to Section 5.03 and subsections (b) 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 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
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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 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 Note Deficiency Claim
Amount, if any, for such Distribution Date, separately identifying the amount of
the applicable Note Deficiency Claim Amount payable in respect of each Class of
Notes. Such Deficiency Notice shall direct the Indenture Trustee to remit such
Note Deficiency Claim Amount (to the extent of funds then on deposit in the
Spread Account are insufficient) 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, the Indenture Trustee shall make a
claim under the Note Policy for any Note Policy Claim Amount for such
Distribution Date 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 Note Policy Claim Amount, as the case may
be. In making any such claim, the Owner Trustee or the Indenture Trustee shall
comply with all the terms and conditions of the related Policy. The notice of
such claim shall direct the Insurer to remit such Note Policy Claim Amount to
the Owner Trustee or the Indenture Trustee for deposit in the Note Distribution
Account.
(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 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
56
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 Principal Balance of such Contract at a
rate equal to the sum of (A) the Class A-4A 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; provided,
however, that the Master Servicer must provide such certificate within three
months of such Nonrecoverable Advance or Advances.
(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.
(d) The Certificateholders shall remit or credit to the Collection
Account the Optional Repurchase Payment for the Seller Contracts repurchased
pursuant to Section 3.10 and the Master Servicer and the Seller shall deposit or
caused to be deposited into the Collection Account the Aggregate Repurchase
Amount of Contracts purchased pursuant to Section 9.01(a).
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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) from Net Collections (after giving effect to the
reduction in Net Collections described in clause (i) above), to the
Swap Counterparty, the Net Swap Payment;
(iii) from Net Collections (after giving effect to the
reduction in Net Collections described in clause (i) and (ii) above),
to the Indenture Trustee, any accrued and unpaid fees and expenses
payable to the Indenture Trustee and to the Owner Trustee, any accrued
and unpaid fees and expenses payable to the Owner Trustee, in each case
to the extent such fees and expenses have not been previously paid by
the Master Servicer;
(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 Interest
Distributable Amount;
(v) to the Note Distribution Account, from Net Collections
(after giving effect to the reduction in Net Collections described in
clauses (i) through (iv) above), the Note Principal Distributable
Amount, (which amount includes, if such Distribution Date is a Note
Final Scheduled Distribution Date, the remaining principal amount of
the related Class of Notes) 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, second to the holders of the Class A-2 Notes until the principal
amount of the Class A-2 Notes has been reduced to zero, third to the
holders of the Class A-3A Notes and the Class A-3B Notes, pro rata
based on their respective principal amounts, until the principal amount
of the Class A-3A Notes and the Class A-3B Notes has been reduced to
zero; and fourth to the holders of the Class A-4A Notes and the Class
A-4B Notes, pro rata based on their respective principal amounts, until
the principal amount of the Class A-4A Notes and the Class A-4B Notes
has been reduced to zero; and
(vi) from Net Collections (after giving effect to the
reduction in Net Collections described in clauses (i) through (v)
above), to the Insurer, 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)
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("Excess Amounts") to the Spread Account. On each Distribution Date, the Master
Servicer shall instruct the Indenture Trustee to distribute the Excess Spread
Amount pursuant to Section 5.06(b).
(c) To the extent that on any Distribution Date 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;
and second, 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).
Section 5.06. Spread Account.
(a) On or prior to the Closing Date, WFSRC shall deposit the Spread
Account Initial Amount into the Spread Account. 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 and Distribution Date, the Master Servicer
shall instruct the Indenture Trustee to distribute the Excess Spread Amount, (i)
first, to the Insurer, to the extent of any Unreimbursed Insurer Amounts, (ii)
second, to WFSRC until WFSRC has received full payment of the Spread Account
Initial Deposit and (iii) third, on a Calculation Day that is not a Distribution
Date, all remaining funds to the Certificateholders in accordance with their
Certificate Percentage Interests and in the case of a Distribution Date, to the
Certificate Distribution Account for distribution to Certificateholders in
accordance with Section 5.02 of the Trust Agreement. Upon any such distribution
to the Insurer, neither the Seller nor the Securityholders will have 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 Issuer pursuant to Section 3.10 or 9.01,
any amounts on deposit in the Spread Account, after payments of amounts due to
the Securityholders and the Insurer (if there exists any Unreimbursed Insurer
Amounts), will be distributed first, to WFSRC until WFSRC has received full
repayment of the Spread Account Initial Deposit and second, to the Certificate
Distribution Account for distribution to Certificateholders in accordance with
the Section 5.02 of the Trust Agreement.
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
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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:
(i) the amount of such distribution allocable to principal
(stated separately for each Class of Notes);
(ii) the amount of such distribution allocable to interest
(stated separately for each Class of Notes);
(iii) the Aggregate Principal 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
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;
(vi) the Note Pool Factor for each Class of Notes as of
such Distribution Date, after giving effect to payments allocated to
principal reported under clause (i) above;
(vii) the Certificate Distributable Amount;
(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; and
(ix) the amount of the Optional Repurchase Payment payable
on such 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 original principal amount of a
Note.
(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 Indenture Trustee
shall mail to each Person who at any time during such calendar year shall have
been a Holder of a Note 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 during a portion of such calendar
year, for the applicable portion of such year, for the purposes of such
Noteholder's preparation of federal income tax returns. In addition, the Master
Servicer shall furnish to 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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Section 5.08. Calculation of the Class A-3B Rate and Class A-4B Rate.
With respect to the Class A-3B Notes and Class A-4B Notes, on each LIBOR
Determination Date, the Indenture Trustee shall determine the LIBOR Rate for the
Interest Period commencing on such Distribution Date and inform the Master
Servicer (at the facsimile number given to the Indenture Trustee in writing) of
such rates. If necessary to calculate the LIBOR Rate, the Indenture Trustee
will, in a timely manner, request the principal London office of each Reference
Bank to provide a quotation of its rates. On or prior to each Determination
Date, the Indenture Trustee shall determine the Interest Rate for the Class A-3B
Notes and Class A-4B Notes for the related Distribution Date.
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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 such 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 such 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 indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are
62
made thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to such Seller, without interest.
Section 6.03. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller; Certain Limitations.
(a) The Seller shall not consolidate with nor 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 such 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. The Seller and WFS each 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 laws of California Revised
Statutes.
(ii) Notwithstanding paragraph (b)(i) above, the actual
business activities of the Seller shall be limited to those 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 an investment grade 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, such Seller shall not issue notes or
otherwise incur debt unless (1) 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
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the related nationally recognized statistical rating organization the
same as or higher than the rating afforded such debt or securities or
(2) such notes or borrowings (a) 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, (b) do not constitute a claim against
the Seller in the event such assets are insufficient to pay such notes
or borrowings and (c) where such notes or borrowings are secured by the
rated debt or Offered Securities, 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, 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
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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 such 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 an Affiliate
thereof shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority or distinction as among all of the
Notes.
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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 or the Trust
Agreement 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
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.
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(e) The Master Servicer shall pay the Owner Trustee
compensation, reimbursement or other payments owed to it by the Seller
pursuant to Sections 8.01 and 8.02 of the Trust Agreement if the Seller
fails to remit such compensation, reimbursement or payment in a timely
manner.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement of the Trust 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
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effect. No such resignation shall become effective unless and until (i) a new
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 Issuer 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 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 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
Issuer 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 performance of such Trustee's
duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
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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 the Note 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 aggregate
Certificate Percentage Interest, or so long as no default under the
Note 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 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
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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
aggregate Certificate Percentage Interest or, so long as no default has
occurred under the Note 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 aggregate Certificate Percentage Interest),
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. Indenture 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
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,
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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 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 aggregate
Certificate Percentage Interest (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 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
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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, 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 Note
Policy 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 sum of the Principal
Balances of the Contracts is less than or equal to $180,000,000, the Seller
shall have the option to purchase the remaining Contracts from the Issuer.
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 the related 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, and shall succeed to all interests in and to the Issuer. Such
purchase shall be deemed to have occurred on the last day of such Due Period. In
addition, if the Master Servicer or the Seller has outstanding senior debt and
such debt is not rated "investment grade" by Xxxxx'x at the time of exercising
the option pursuant to this Section, then the Master Servicer or such Seller
shall deliver to the Owner Trustee, the Indenture Trustee and Xxxxx'x, 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 Issuer pursuant to Section
5.02(b) of the Indenture, 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 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 Insurer, to the extent of any Unreimbursed
Insurer Amounts;
(iv) to WFSRC until WFSRC has received full repayment of
the Spread Account Initial Deposit; and
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(v) to the Certificate Distribution Account, for
distribution to Certificateholders in accordance with Section 5.02 of
the Trust Agreement as determined by the Master Servicer.
(c) As described in Article Nine of the Trust Agreement, notice of any
termination of the Issuer shall be given by the Master Servicer to the Owner
Trustee, the Insurer, the Swap Counterparty 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.
(e) On a Distribution Date on which an optional purchase pursuant to
Section 9.01(a) or an Optional Repurchase of all remaining Contracts in the
Issuer occur, the Master Servicer shall instruct the Indenture Trustee to make
the following distributions of the Optional Repurchase Payment or the Aggregate
Repurchase Amount, as the case may be, and any Net Collections on deposit in the
Collection Account in the following priorities:
(i) to the Master Servicer, any accrued and unpaid
Servicing Fees with respect to one or more prior Due Periods;
(ii) to the Owner Trustee and Indenture Trustee, any
accrued and unpaid fees and expenses;
(iii) to the Note Distribution Account, the Redemption
Price for full payment of outstanding principal and accrued interest on
the Notes;
(iv) in the case of an Optional Repurchase, to the Note
Distribution Account, the Repurchase Premium for pro rata distribution
to the Noteholders based on the principal balance of each Noteholder
reduced by the Note Principal Distributable Amount calculated for the
Due Period preceding the date of the Optional Repurchase;
(v) to the Insurer, to the extent of any Unreimbursed
Insurer Amounts;
(vi) to WFSRC until WFSRC has received full repayment of
the Spread Account Initial Deposit; and
(vii) to the Certificate Distribution Account, for
distribution to Certificateholders in accordance with Section 5.02 of
the Trust Agreement as determined by the Master Servicer.
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 Class A-4 Final Scheduled Distribution Date and (ii) an amount sufficient to
pay the Note Distributable Amount on the Class A-4 Final Scheduled Distribution
Date has been deposited with the Indenture Trustee by the Insurer for the
benefit of the Class A-4A Noteholders and Class A-4B Noteholders then on
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the Class A-4 Final Scheduled Distribution Date the Class A-4A Notes and Class
A-4B Notes shall be deemed to be transferred by the Class A-4A Noteholders and
Class A-4B Noteholders, respectively, to the Insurer or its designee as
purchaser thereof at the opening of business on the Class A-4 Final Scheduled
Distribution Date and the Owner Trustee, on behalf of the Trust, shall execute,
and the Indenture 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, new
Class A-4A Note and Class A-4B Note evidencing the entire Note Balance. Such new
Class A-4A Note and Class A-4B Note shall have the same terms as the Class A-4A
Notes and Class A-4B Notes, respectively, deemed transferred by the Class A-4A
Noteholders and Class A-4B Noteholders. No service charge shall be made for the
issuance of such Class A-4A Note and Class A-4B Note 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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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 Securityholders, (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
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 (ii) and (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 to be qualified,
reduced or withdrawn, without giving any consideration to the effect of the
guaranty under the Note Policy of payments owing to Noteholders, 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 Percentage Interest, 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, (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, the Holders of which are
required to consent to any such amendment, without the consent of the Insurer,
the Swap Counterparty 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 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
77
substance of the amendment or consent described in Section 10.01(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 perfection and priority of 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 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 9-507 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
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
78
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 Issuer.
(i) The Master Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, each Rating Agency and the Insurer:
(i) 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 Issuer holds
title to the Contracts subject to the security interest of the
Indenture Trustee and 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
(ii) 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
79
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 (i) WFSRC,
at 0000 Xxxx Xxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000, Attention: Xxxxx Xxxx, (ii)
the Master Servicer, 00 Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000, Attention: Legal
Department, (iii) the Issuer or the Owner Trustee, at the Corporate Trust Office
(with, in the case of the Issuer, a copy to the Seller), (iv) the Indenture
Trustee, at Four Albany Street - 10th Floor, New York, New York 10006,
Attention: Corporate Trust Department - Asset Backed Group, (v) Moody's, to
Xxxxx'x Investors Service, Inc., ABS Monitoring Department, 00 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, (vi) Standard & Poor's, to Standard & Poor's, 00 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention of Asset Backed Surveillance
Department and (vii) the Insurer, at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Transaction Oversight Department, with a copy to the Senior Vice
President -- Transaction Oversight; 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 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, 7.02 and 8.04, 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
662/3% of the Outstanding Amount of Notes of such Class and Certificateholders
evidencing not less than 662/3% of the aggregate Certificate Percentage
Interest.
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
80
and the Swap Counterparty 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 the
Note Policy has occurred and is continuing or an 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 USA, National Association not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Chase Manhattan Bank USA, National Association 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.
Section 10.13. Effect of Policy Expiration Date. Notwithstanding
anything to the contrary set forth herein, all references to any right of the
Insurer to direct, appoint, consent to, accept, approve of, take or omit to take
any action under this Sale and Servicing Agreement or any other Basic Document
shall be inapplicable at all times after the Policy Expiration Date, and (i) if
such reference provides for another party or parties to take or omit to take any
such action following an Insurer Default, such party or parties shall be
entitled to take or omit to take such action following the Policy Expiration
Date and (ii) if such reference does not provide for another party or parties to
take or omit to take any such action following an Insurer Default, then the
Trustee acting at the written direction of the Certificateholders holding in the
aggregate more than 51% of the outstanding Certificateholders Note Balance shall
have the right to take or omit to take any such action following the Policy
Expiration Date. In addition, any other provision of this Sale and Servicing
Agreement or any other Basic Document which is operative based in
81
whole or in part on whether an Insurer Default has or has not occurred shall, at
all times on or after the Policy Expiration Date, be deemed to refer to whether
or not the Policy Expiration Date has occurred.
Section 1.1. Limitation on Recourse Against WFSRC. Notwithstanding
anything to the contrary contained in this Agreement, the obligations of WFSRC
under the Basic Documents are solely the corporate obligations of WFSRC, and
shall be payable by WFSRC, solely as provided by the Basic Documents. WFSRC
shall only be required to pay (i) any fees, expenses, indemnities or other
liabilities that it may incur under the Basic Documents from funds available
pursuant to, and in accordance with, the payment priorities set forth in this
Agreement and (ii) to the extent WFSRC has additional funds available (other
than funds described in the preceding clause (i)) that would be in excess of
amounts that would be necessary to pay the debt and other obligations of WFSRC
incurred in accordance with WFSRC's certificate of incorporation and all
financing documents to which WFSRC is a party. The agreement set forth in the
preceding sentence shall constitute a subordination agreement for purposes of
Section 510(a) of the Bankruptcy Code. In addition, no amount owing by WFSRC
hereunder in excess of the liabilities that it is required to pay in accordance
with the preceding sentence shall constitute a "claim" (as defined in Section
101(5) of the Bankruptcy Code) against it.
Section 10.14. Replacement Interest Rate Swap Agreement. Upon a request
by the Insurer pursuant to Section 3.13 of the Insurance Agreement, the
Collateral Agent shall cause the Issuer to enter into a Replacement Interest
Rate Swap Agreement with a replacement swap provider(s) in form and substance
satisfactory to the Insurer. Any payment by a replacement swap provider(s) to
enter into a Replacement Interest Rate Swap Agreement shall be applied first to
pay all Net Swap Payments payable to the Swap Counterparty until such payment
obligations are satisfied.
82
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 2002-1 OWNER TRUST
By: CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Owner Trustee on behalf of the Trust
By:
---------------------------------------------
Name:
Title:
WFS RECEIVABLES CORPORATION,
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:
83
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
SCHEDULE B
LOCATION OF CONTRACT FILES
WFS Financial Inc WFS Financial Inc
23 Pasteur 0000 X. Xxxxx Xxxxxxx 000
Xxxxxx, XX 00000 Xxxxxx, XX 00000
000-000-0000 000-000-0000
SB-1
SCHEDULE C
CHARGE-OFF PERCENTAGE TRIGGERS
Charge-Off Percentage
Calculation Day Trigger
------------------------------------------- ---------------------
March 2002 0.00%
March 2002 -- May 2002 0.34%
June 2002 -- August 2002 1.03%
September 2002 -- November 2002 1.72%
December 2002 -- February 2003 2.32%
March 2003 -- May 2003 2.87%
June 2003 -- August 2003 3.35%
September 2003 -- November 2003 3.77%
December 2003 -- February 2004 4.12%
March 2004 -- May 2004 4.39%
June 2004 -- August 2004 4.61%
September 2004 -- November 2004 4.77%
December 2004 -- February 2005 4.90%
March 2005 -- May 2005 5.00%
June 2005 -- August 2005 5.07%
September 2005 -- November 2005 5.11%
December 2005 -- February 2006 5.15%
March 2006 -- May 2006 5.18%
June 2006 -- August 2006 5.21%
September 2006 -- November 2006 5.22%
December 2006 -- February 2007 5.24%
March 2007 -- May 2007 5.24%
June 2007 -- September 2009 5.25%
SC-1
EXHIBIT A
[FORM OF INSURANCE AGREEMENT]
A-1
EXHIBIT B
[FORM OF NOTE POLICY]
B-1
EXHIBIT C
[FORM OF RIC]
C-1
EXHIBIT D
[FORM OF SUBSERVICING AGREEMENT]
D-1
EXHIBIT E
[FORM OF DISTRIBUTION DATE STATEMENT]
E-1
