EXHIBIT 10.2
EXECUTION COPY
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SALE AND SERVICING AGREEMENT
among
WFS FINANCIAL 2004-2 OWNER TRUST,
as Issuer,
WFS RECEIVABLES CORPORATION 3,
as Seller,
and
WFS FINANCIAL INC,
as Master Servicer
Dated as of May 1, 2004
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TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS
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Section 1.01. Definitions......................................................... 2
Section 1.02. Usage of Terms...................................................... 23
Section 1.03. Calculations........................................................ 23
ARTICLE TWO
CONVEYANCE OF CONTRACTS
Section 2.01. Conveyance of Contracts............................................. 24
ARTICLE THREE
THE CONTRACTS
Section 3.01. Representations and Warranties of the Seller........................ 26
Section 3.02. Purchase of Certain Contracts....................................... 32
Section 3.03. Custody of Contract Files........................................... 33
Section 3.04. Duties of Master Servicer as Custodian.............................. 33
Section 3.05. Instructions; Authority to Act...................................... 34
Section 3.06. Indemnification..................................................... 34
Section 3.07. Effective Period and Termination.................................... 35
Section 3.08. Nonpetition Covenant................................................ 35
Section 3.09. Collecting Title Documents Not Delivered at the Closing Date........ 36
ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer........................................... 37
Section 4.02. Collection of Contract Payments..................................... 41
Section 4.03. Realization upon Defaulted Contracts and Liquidated Contracts....... 41
Section 4.04. Insurance........................................................... 42
Section 4.05. Maintenance of Security Interests in Financed Vehicles.............. 42
Section 4.06. Covenants, Representations and Warranties of the Master Servicer.... 42
Section 4.07. Repurchase of Contracts upon Breach of Covenant..................... 44
Section 4.08. Servicing Compensation.............................................. 45
Section 4.09. Reporting by the Master Servicer.................................... 45
Section 4.10. Annual Statement as to Compliance................................... 47
Section 4.11. Annual Independent Certified Public Accountants' Report............. 48
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Section 4.12. Access to Certain Documentation and Information Regarding Contracts.... 48
Section 4.13. Fidelity Bond.......................................................... 48
Section 4.14. Indemnification; Third Party Claims.................................... 48
ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT; STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts........................................ 50
Section 5.02. Collections; Net Deposits.............................................. 52
Section 5.03. Application of Collections............................................. 52
Section 5.04. Advances and Nonrecoverable Advances; Repurchase Amounts............... 53
Section 5.05. Distributions.......................................................... 54
Section 5.06. Spread Account......................................................... 56
Section 5.07. Statements to Securityholders.......................................... 56
ARTICLE SIX
THE SELLER
Section 6.01. Corporate Existence.................................................... 59
Section 6.02. Liability of Seller; Indemnities....................................... 59
Section 6.03. Merger or Consolidation of, or Assumption of the Obligations of, the
Seller; Certain Limitations........................................................... 60
Section 6.04. Limitation on Liability of Seller and Others........................... 61
Section 6.05. Seller Not to Resign................................................... 62
Section 6.06. Seller May Own Securities.............................................. 62
ARTICLE SEVEN
THE MASTER SERVICER
Section 7.01. Liability of Master Servicer; Indemnities.............................. 63
Section 7.02. Corporate Existence; Status of Master Servicer; Merger................. 64
Section 7.03. Performance of Obligations............................................. 64
Section 7.04. Master Servicer Not to Resign; Assignment.............................. 64
Section 7.05. Limitation on Liability of Master Servicer and Others.................. 65
ARTICLE EIGHT
DEFAULT
Section 8.01. Servicer Default....................................................... 67
Section 8.02. Indenture Trustee to Act; Appointment of Successor..................... 68
Section 8.03. Repayment of Advances.................................................. 69
Section 8.04. Notification to Noteholders and Certificateholders..................... 69
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Section 8.05. Waiver of Past Defaults............................................. 69
Section 8.06. Backup Servicer..................................................... 70
ARTICLE NINE
TERMINATION
Section 9.01. Optional Purchase of All Contracts.................................. 71
ARTICLE TEN
MISCELLANEOUS
Section 10.01. Amendment.......................................................... 73
Section 10.02. Protection of Title to Trust....................................... 74
Section 10.03. Governing Law...................................................... 76
Section 10.04. Notices............................................................ 76
Section 10.05. Severability of Provisions......................................... 77
Section 10.06. Assignment......................................................... 77
Section 10.07. Third Party Beneficiaries.......................................... 77
Section 10.08. Counterparts....................................................... 77
Section 10.09. Headings........................................................... 78
Section 10.10. Assignment by Issuer............................................... 78
Section 10.11. Limitation of Liability of Owner Trustee........................... 78
Section 10.12. Limitation on Recourse Against WFSRC3.............................. 78
SCHEDULES
Schedule A Schedule of Contracts.............................................. SA-1
Schedule B Location of Contract Files......................................... SB-1
Schedule C Sequential Payment Triggers........................................ SC-1
Schedule D Spread Account Triggers............................................ SD-1
EXHIBITS
Exhibit A Form of RIC........................................................ A-1
Exhibit B Form of Distribution Date Statement................................ B-1
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This SALE AND SERVICING AGREEMENT, dated as of May 1, 2004, is among WFS
Financial 2004-2 Owner Trust, as issuer (the "Issuer"), WFS Receivables
Corporation 3, 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. Except as otherwise specified herein or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Agreement. Capitalized terms used
herein that are not otherwise defined herein shall have the meanings ascribed
thereto in the Indenture.
"Administrator" shall have the meaning specified in the administration
agreement, dated as of May 27, 2004, among the Trust, the Depositor, the
Indenture Trustee and the Administrator.
"Advance" means the aggregate amount that the Master Servicer is required
to advance in respect of the Contracts in respect of a Collection Period
pursuant to Section 5.04(a).
"Advanced Insurance Premiums" mean any amounts due to the Master Servicer
for amounts advanced by the Master Servicer to acquire an LDI Policy as to a
Financed Vehicle. Advanced Insurance Premiums shall not be a part of Monthly P&I
and shall be retained by or reimbursed to the Master Servicer as set forth in
Sections 4.01 and 5.03.
"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 Collection
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 Collection Period
plus accrued and unpaid interest thereon (adjusted to the Net Contract Rate) to
the last Due Date in such Collection Period exceeds (ii) the Net Liquidation
Proceeds for such Contract.
"Aggregate Principal Balance" means, with respect to any date and the
Outstanding Contracts, the aggregate of the Principal Balances of such Contracts
as of such date.
"Aggregate Principal Distributable Amount" means the sum of the Class A
Undercollateralization Amount, the Class B Undercollateralization Amount, the
Class C Undercollateralization Amount, the Class D Undercollateralization Amount
and the Overcollateralization Distributable Amount.
"Aggregate Repurchase Amount" means, with respect to the purchase of
Contracts pursuant to Section 9.01(a), an amount equal to the sum of the amounts
described in clauses (i) through (iii) of Section 9.01(e).
"Agreement" means this Sale and Servicing Agreement.
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"APR" of a Contract means annual percentage rate and is the annual rate of
finance charges specified in such Contract.
"Assignments" means, collectively, 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) which 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 which 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.
"Available Funds" means, with respect to a Distribution Date, the sum of
Net Collections and the Spread Account Balance.
"Backup Servicer" means Deutsche Bank Trust Company Americas.
"Backup Servicer Event" means the occurrence of any of the following
events: (i) the Bank's long term senior debt rating is downgraded to "B3" or
less by ▇▇▇▇▇'▇, (ii) an Event of Default or (iii) a Servicer Default.
"Bank" means Western Financial Bank.
"Bankruptcy Code" has the meaning specified in the Trust Agreement.
"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 or
New York, New York are authorized or obligated by law, executive order or
government decree to remain closed.
"Certificate Distributable Amount" means the aggregate amount of the
Excess Spread Amount distributed to Certificateholders pursuant to Section
5.06(c).
"Certificate Distribution Account" 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.
"Certificate Registrar" shall have the meaning specified in the Trust
Agreement.
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"Certificateholders" shall have the meaning specified in the Trust
Agreement.
"Certificates" means the Trust Certificates (as such term is defined in
the Trust Agreement).
"Chapter 13 Bankruptcy Proceeding" means a bankruptcy proceeding under
Chapter 13 of Title 11 of the United States Code.
"Chapter 13 Contract" means a Contract with respect to which the related
Obligor is subject to a Chapter 13 Bankruptcy Proceeding and is in compliance
with a Chapter 13 Plan of Reorganization.
"Chapter 13 Plan of Reorganization" means a plan of reorganization that
has been approved by a court with jurisdiction over an Obligor under a Contract
in a Chapter 13 Bankruptcy Proceeding.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class A Notes" means, collectively, the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, the amount distributable in respect of principal on the Class
A Notes on such Distribution Date which amount shall equal the greater of (i)
the outstanding principal amount of the Class A-1 Notes on that Distribution
Date (before giving effect to any payments made to Holders of the Class A Notes
on that Distribution Date) or (ii) the excess of the principal amount of the
Class A Notes immediately prior to that Distribution Date over the lesser of (a)
the Class A Principal Percentage of the Aggregate Principal Balance as of the
last day of the related Collection Period or (b) the excess of such Aggregate
Principal Balance over the Overcollateralization Floor Amount; provided,
however, that on any Distribution Date that the Net Chargeoff Percentage exceeds
the Sequential Payment Trigger, the Class A Principal Distributable Amount shall
equal the lesser of (i) the Aggregate Principal Distributable Amount or (ii) the
outstanding principal amount of the Class A Notes; provided, further, that on
any Distribution Date on and after the Final Scheduled Distribution Date of any
class of Class A Notes, the Class A Principal Distributable Amount will not be
less than the amount that is necessary to pay the outstanding principal amount
of that class of Class A Notes.
"Class A Principal Percentage" means, with respect to any Distribution
Date, 80.93%; provided, however, that if, on any Distribution Date the related
Net Chargeoff Percentage is greater than the Sequential Payment Trigger, the
Class A Principal Percentage for each subsequent Distribution Date will equal
80.07%.
"Class A Undercollateralization Amount" means, with respect to a
Distribution Date, the excess, if any, of the outstanding principal amount of
the Class A Notes on that Distribution Date (before giving effect to any
payments made to Holders of the Notes on such Distribution Date) over the
Aggregate Principal Balance as of the last day of the related Collection Period.
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"Class A-1 Final Scheduled Distribution Date" means the May 20, 2005
Distribution Date.
"Class A-1 Note" shall have the meaning specified in the Indenture.
"Class A-1 Rate" means 1.1668% per annum.
"Class A-2 Final Scheduled Distribution Date" means the October 22, 2007
Distribution Date.
"Class A-2 Note" shall have the meaning specified in the Indenture.
"Class A-2 Rate" means 2.03% per annum.
"Class A-3 Final Scheduled Distribution Date" means the September 22, 2008
Distribution Date.
"Class A-3 Note" shall have the meaning specified in the Indenture.
"Class A-3 Rate" means 2.85% per annum.
"Class A-4 Final Scheduled Distribution Date" means the November 21, 2011
Distribution Date.
"Class A-4 Note" shall have the meaning specified in the Indenture.
"Class A-4 Rate" means 3.54% per annum.
"Class B Final Scheduled Distribution Date" means the November 21, 2011
Distribution Date.
"Class B Note" shall have the meaning specified in the Indenture.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, the amount distributable in respect of principal on the Class
B Notes on such Distribution Date which amount shall equal the excess of (i) the
sum of the outstanding principal amount of (a) the Class A Notes (after taking
into account payment of the Class A Principal Distributable Amount for that
Distribution Date) and (b) the Class B Notes immediately prior to such
Distribution Date over (ii) the lesser of (a) the Class B Principal Percentage
of the Aggregate Principal Balance as of the last day of the related Collection
Period or (b) the excess of such Aggregate Principal Balance over the
Overcollateralization Floor Amount; provided, however, that on any Distribution
Date that the Net Chargeoff Percentage exceeds the Sequential Payment Trigger,
the Class B Principal Distributable Amount shall equal the lesser of (i) the
excess of the Aggregate Principal Distributable Amount over the Class A
Principal Distributable Amount or (ii) the outstanding principal amount of the
Class B Notes; provided, further, that on any Distribution Date on and after the
Class B Final Scheduled Distribution Date, the Class B Principal Distributable
Amount will not be less than the amount that is necessary to pay the outstanding
principal amount of the Class B Notes.
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"Class B Principal Percentage" means, with respect to any Distribution
Date, 85.12%; provided, however, that if, on any Distribution Date the related
Net Chargeoff Percentage is greater than the Sequential Payment Trigger, the
Class B Principal Percentage for each subsequent Distribution Date will equal
84.21%.
"Class B Rate" means 3.07% per annum.
"Class B Undercollateralization Amount" means, with respect to a
Distribution Date, the excess, if any, of the aggregate outstanding principal
amount of the Class A Notes and Class B Notes on that Distribution Date (before
giving effect to any payments made to Holders of the Notes on such Distribution
Date) over the sum of the Class A Undercollateralization Amount and the
Aggregate Principal Balance as of the last day of the related Collection Period.
"Class C Final Scheduled Distribution Date" means the November 21, 2011
Distribution Date.
"Class C Note" shall have the meaning specified in the Indenture.
"Class C Principal Distributable Amount" means, with respect to any
Distribution Date, the amount distributable in respect of principal on the Class
C Notes on such Distribution Date which amount shall equal the excess of (i) the
sum of the aggregate outstanding principal amount of (a) the Class A Notes and
the Class B Notes (after taking into account payment of the Class A Principal
Distributable Amount and the Class B Principal Distributable Amount for that
Distribution Date) and (b) the Class C Notes immediately prior to such
Distribution Date over (ii) the lesser of (a) the Class C Principal Percentage
of the Aggregate Principal Balance as of the last day of the related Collection
Period or (b) the excess of such Aggregate Principal Balance over the
Overcollateralization Floor Amount; provided, however, that on any Distribution
Date that the Net Chargeoff Percentage exceeds the Sequential Payment Trigger,
the Class C Principal Distributable Amount shall equal the lesser of (i) the
excess of the Aggregate Principal Distributable Amount over the sum of (a) the
Class A Principal Distributable Amount and (b) the Class B Principal
Distributable Amount or (ii) the outstanding principal amount of the Class C
Notes; provided, further, that on any Distribution Date on and after the Class C
Final Scheduled Distribution Date, the Class C Principal Distributable Amount
will not be less than the amount that is necessary to pay the outstanding
principal amount of the Class C Notes.
"Class C Principal Percentage" means, with respect to any Distribution
Date, 89.87%; provided, however, that if, on any Distribution Date the related
Net Chargeoff Percentage is greater than the Sequential Payment Trigger, the
Class C Principal Percentage for each subsequent Distribution Date will equal
88.91%.
"Class C Rate" means 3.20% per annum.
"Class C Undercollateralization Amount" means, with respect to a
Distribution Date, the excess, if any, of the aggregate outstanding principal
amount of the Class A Notes, Class B Notes and Class C Notes on such
Distribution Date (before giving effect to any payments made to Holders of the
Notes on that Distribution Date) over the sum of the Class A
Undercollateralization Amount, the Class B Undercollateralization Amount and the
Aggregate Principal Balance as of the last day of the related Collection Period.
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"Class D Final Scheduled Distribution Date" means the November 21, 2011
Distribution Date.
"Class D Note" shall have the meaning specified in the Indenture.
"Class D Principal Distributable Amount" means, with respect to any
Distribution Date, the excess of the Aggregate Principal Distributable Amount
over the sum of the Class A Principal Distributable Amount, the Class B
Principal Distributable Amount and the Class C Principal Distributable Amount;
provided, however, that, on any Distribution Date on and after the Class D Note
Final Scheduled Distribution Date the Class D Principal Distributable Amount
will not be less than the amount that is necessary to pay the outstanding
principal amount of the Class D Notes; provided, further, that the Class D
Principal Distributable Amount on any Distribution Date will not exceed the
outstanding principal amount of the Class D Notes.
"Class D Rate" means 3.77% annum.
"Class D Undercollateralization Amount" means, with respect to a
Distribution Date, the excess, if any, of the outstanding principal amount of
the Notes on such Distribution Date (before giving effect to any payment to
Holders of the Notes on such Distribution Date) over the sum of the Class A
Undercollateralization Amount, the Class B Undercollateralization Amount, the
Class C Undercollateralization Amount and the Aggregate Principal Balance as of
the last day of the related Collection Period.
"Closing Date" means May 27, 2004.
"Collection Account" means the account established and maintained as such
pursuant to Section 5.01.
"Collection Period" means, with respect to any Distribution Date, the
period commencing on the first day of the month preceding the month in which
such Distribution Date occurs (or from, but excluding, the Cut-Off Date in the
case of the first Distribution Date) through the last day of such month.
"Contract" means each retail installment sales contract and security
agreement or installment loan agreement and security agreement, in each case
transferred by the Seller to the Issuer hereunder, 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
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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 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 each
Subservicer, as the case may be, in servicing contracts and loans comparable to
the Contracts.
"Contract Number" means, with respect to any Contract, 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.
"Controlling Class" shall have the meaning specified in the Indenture.
"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 ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust & Agency Services - Structured Finance Services; or
at such other address as the Indenture Trustee may designate from time to time
by notice to the Certificateholders, the Master Servicer and the Seller.
"Cut-Off Date" means May 26, 2004.
"Cut-Off Date Aggregate Principal Balance" means $1,500,000,000, the
Aggregate Principal Balance 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 Collection Period, a
Contract (i) which is, at the end of such Collection Period, all or a part of at
least two monthly payments is delinquent or (ii) with respect to which the
related Financed Vehicle has been repossessed or repossession efforts have
commenced.
"Definitive Notes" shall have the meaning specified in the Indenture.
"Delinquent Contract" means a Contract for which the Monthly P&I payment
for a Due Date was not received by the Master Servicer on or before that Due
Date. A Delinquent Contract for which the Monthly P&I payment was not received
on or before the last Business Day of the calendar month next following the
month in which that Due Date occurs is referred to as a "30 to 59 day Delinquent
Contract". A Delinquent Contract for which the Monthly P&I payment was
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not received on or before the last Business Day of the second calendar month
next following the month in which that Due Date occurs is referred to as a "60
to 89 day Delinquent Contract". A Delinquent Contract for which the Monthly P&I
payment was not received on or before the last Business Day of the third
calendar month next following the month in which that Due Date occurs is
referred to as a "90 to 119 day Delinquent Contract". A Delinquent Contract for
which the Monthly P&I payment was not received on or before the last Business
Day of the fourth calendar month next following the month in which that Due Date
occurs is referred to as a "120 day and over Delinquent Contract".
"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 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
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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.
"Distribution Date" means the 20th day of each calendar month or, if any
such date shall not be a Business Day, the next succeeding Business Day,
commencing July 20, 2004.
"Distribution Date Statement" shall have the meaning specified in Section
4.09(a).
"Due Date" means, as to any Contract, the date upon which an installment
of Monthly P&I is due.
"Eligible Account" means (i) a segregated trust account in the corporate
trust department that is maintained with a federal 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+," from
Moody's equal to "Prime-1" and from Fitch equal to "F1+," which account is fully
insured up to applicable limits by the FDIC or (ii) a general ledger account or
deposit account (A) with an entity whose long-term unsecured debt obligations
are rated "Aa2" by Moody's and "AAA" by each of Standard & Poor's and Fitch 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+," from Moody's equal to
"Prime-1" and from Fitch equal to "F1+" 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. If any Person with whom the
Eligible Account is maintained falls below the ratings specified in clause (i)
or (ii) above, all monies in such Eligible Account will be moved within 10 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, and general
obligations of or obligations guaranteed as to timely payment of principal
and interest by FNMA or FHLMC;
(ii) 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 or State banking
authorities, so long as at the time of such investment or
10
contractual commitment providing for such investment either 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+" (without an "r" suffix and with a fixed dollar amount of principal
due at maturity that cannot vary) by Standard & Poor's, "Prime-1" by
Moody's and "F1+" by Fitch;
(iii) commercial paper given the highest rating, at the time of such
investment, by each Rating Agency that rates such commercial paper;
provided that if a Rating Agency rates such commercial paper, the issuer
of such commercial paper must have a long-term unsecured debt rating of at
least "Aaa" from Moody's, "AAA" from Fitch and "AAA" from Standard &
Poor's or have a short-term unsecured debt rating of at least "Prime-1"
from Moody's, "F1+" from Fitch and "A-1+" (without an "r" suffix and with
a fixed dollar amount of principal due at maturity that cannot vary) from
Standard & Poor's, to the extent such Rating Agency has rated this issuer;
(iv) money market funds having a rating of at least "AAAm" or
"AAAm-G", as applicable, from Standard & Poor's and a rating from each
remaining Rating Agency in the highest investment category granted by such
Rating Agency, including funds for which the Indenture Trustee or any of
its affiliates is investment manager or advisor;
(v) the RIC, provided that (a)(1) it is guaranteed by an entity
which has long-term, unsecured debt obligations rated "AAA" by each of
Standard & Poor's and Fitch and at least "Aa2" by Moody's or (2) such
investment will not result in a qualification, reduction or withdrawal by
any Rating Agency of its then-applicable rating on any Class of Notes and
(b) it has not ceased to be an Eligible Investment in accordance with
Section 2 thereof; if the rating of any Person, with whom the investments
in this paragraph are made, falls below the specified ratings, the
invested monies shall be moved to Eligible Investments within two Business
Days such investments fall below the specified ratings and no additional
funds may be invested in the RIC until the RIC once again becomes an
Eligible Investment; and
(vi) any other investments which satisfy the Rating Agency
Condition.
Notwithstanding anything to the contrary contained in this definition, no
(a) Eligible Investment may be purchased at a premium and (b) obligation or
security is an "Eligible Investment" unless (i) the Indenture Trustee has
control over such obligation or security and (ii) at the time such obligation or
security was delivered to the Indenture Trustee or the Indenture Trustee became
the related Entitlement Holder, the Indenture Trustee did not have notice of any
adverse claim with respect thereto within the meaning of Section 8-105 of the
UCC.
"Entitlement Holder" shall have the meaning specified in Section 8-102 of
the UCC.
"Estimated Sale Value" means, with respect to a Repossessed Vehicle, the
estimated sale value determined in good faith (and in accordance with its credit
and collection policy) by the Master Servicer as of the related Repossessed
Vehicle Redemption Date.
11
"Excess Spread Amount" means, with respect to a Distribution Date, the
excess of the Spread Account Balance (after giving effect to all deposits to,
and withdrawals from the Spread Account on such Distribution Date, other than
withdrawals pursuant to Section 5.06(c)) over the Specified Spread Account
Balance.
"Exchange Act" means the Securities Exchange Act of 1934.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"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, the Class A-4 Final Scheduled
Distribution Date, the Class B Final Scheduled Distribution Date, the Class C
Final Scheduled Distribution Date or the Class D 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.
"Fitch" means Fitch Ratings.
"FNMA" means the Federal National Mortgage Association.
"Gross Chargeoff Amount" means, with respect to any Collection Period, the
sum of (i) the excess of the outstanding Principal Balances of all Repossessed
Vehicle Contracts as to which the related Repossessed Vehicle Redemption Dates
have occurred during such Collection Period over the aggregate Estimated Sale
Values of the related Repossessed Vehicles, (ii) the excess of the aggregate
Estimated Sale Values of Repossessed Vehicles sold during such Collection Period
over the net sales proceeds of such Repossessed Vehicles, (iii) the outstanding
Principal Balances of Contracts, other than Repossessed Vehicle Contracts and
Chapter 13 Contracts, that have become 120 days past due during such Collection
Period, (iv) the amount by which the outstanding Principal Balances of Contracts
that have become Chapter 13 Contracts during the related Collection Period have
been reduced by such Chapter 13 Plans of Reorganization and (v) the outstanding
Principal Balances, as such balances have been previously reduced by the related
Chapter 13 Plans of Reorganization, of Chapter 13 Contracts that are no longer
in compliance with their Chapter 13 Plans of Reorganization and are more than
120 days past due as of the last day of such Collection Period; provided that,
with respect to any Contract, in no event shall the aggregate amount included in
the Gross Chargeoff Amounts for all Collection Periods exceed the Principal
Balance of such Contract as of the date it becomes a Defaulted Contract.
12
"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.
"Indenture" means the Indenture, dated as of May 1, 2004, between the
Issuer and the Indenture Trustee.
"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 Deutsche Bank Trust Company Americas.
"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;
provided that a person who is an Independent director or Independent officer of
the Seller may be an Independent director or Independent officer of an Affiliate
of the Seller which is a special purpose bankruptcy remote entity.
"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 Proceeds" shall have the meaning specified in Section 9.01(b).
"Insurance Policy" means, with respect to a Financed Vehicle, any
comprehensive and collision insurance policy and the LDI Policy.
13
"Insurance Proceeds" means proceeds paid pursuant to any Insurance Policy
and amounts (exclusive of any rebated insurance premiums) paid by any insurer
under any other insurance policy related to a Financed Vehicle, a Contract or an
Obligor.
"Interest Carryover Shortfall" means, with respect to any Distribution
Date and a Class of Notes, the excess, if any, of the sum of the Interest
Distributable Amount for such Class on the immediately preceding Distribution
Date over the amount in respect of interest that was 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 any interest due but not paid to Noteholders of such Class at the
related Interest Rate for the related Interest Period.
"Interest Distributable Amount" means, with respect to any Distribution
Date and a Class of Notes, the sum of the Monthly Interest Distributable Amount
and the Interest Carryover Shortfall, in each case for such Class of Notes on
such Distribution Date. For all purposes of this Agreement and the other Basic
Documents, interest shall be computed with respect to the (i) Class A-1 Notes 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, from, and including, May 27, 2004) and (ii) Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes and Class D Notes
on the basis of a 360-day year consisting of twelve 30-day months.
"Interest Period" means, with respect to any Distribution Date and (i) the
Class A-1 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, May 27, 2004) to, but excluding, such
Distribution Date and (ii) the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class B Notes, the Class C Notes and the Class D 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, May 27, 2004) to, but excluding,
the 20th day of the month of such Distribution Date.
"Interest Rate" means the Class A-1 Rate, the Class A-2 Rate, the Class
A-3 Rate, the Class A-4 Rate, the Class B Rate, the Class C Rate or the Class D
Rate, as applicable.
"Issuer" means the WFS Financial 2004-2 Owner Trust.
"LDI Policy" means the limited dual interest policy providing coverage for
physical damage to, or loss of, a Financed Vehicle.
"Letter Indemnity Agreement" means the letter indemnity agreement, dated
May 6, 2004, among WFS, WFSRC3 and the Representative on behalf of the
Underwriters.
"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
Prepayment, (ii) was a Defaulted Contract and with respect to which the related
Financed Vehicle was
14
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. The Principal Balance of a Liquidated Contract will be deemed to
be zero.
"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.
"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 master servicer in the same capacity pursuant to
Section 4.01 and each successor master servicer pursuant to Section 8.02.
"Master Servicer Report Date" means, with respect to any Distribution
Date, the fifth Business Day prior to such Distribution Date.
"Maturity Date" means, with respect to any Contract, the date on which the
last scheduled payment of such Contract shall be due and payable (after giving
effect to all Prepayments received prior to the date of determination) as such
date may be extended pursuant to Section 4.02.
"Monthly 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).
"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 ▇▇▇▇▇'▇ Investors Service, Inc.
"Net Chargeoff Percentage" means, with respect to any Distribution Date
and the related Collection Period, the percentage equivalent of a fraction, (i)
the numerator of which is equal to the excess of the sum of the Gross Chargeoff
Amounts for such Collection Period and all prior
15
Collection Periods over the sum of Recoveries for such Collection Period and all
prior Collection Periods and (ii) the denominator of which is equal to the
Cut-Off Date Aggregate Principal Balance.
"Net Collections" means, with respect to any Distribution Date and the
related Collection Period, the sum of (i) all amounts collected on or in respect
of the Contracts during such Collection Period, including Monthly P&I, the
Aggregate Repurchase Amount, if any, Liquidation Proceeds (only to the extent of
the related Net Liquidation Proceeds) and Insurance Proceeds (only to the extent
of the related Net Insurance Proceeds), less the sum of (a) any late payments of
interest retained by the Master Servicer as reimbursement for Advances pursuant
to Section 5.04, (b) any installments of Monthly P&I or Prepayments retained by
the Master Servicer as reimbursement for Nonrecoverable Advances pursuant to
Section 5.04 and (c) any Advanced Insurance Premiums that have been repaid by an
Obligor; (ii) the Advance for such Collection 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); and (iv) 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 Servicing Fee Percent.
"Net Insurance Proceeds" means, with respect to any Contract, Insurance
Proceeds net of amounts 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.
"Nonrecoverable Advance" means any Advance proposed to be made or
previously made by the Master Servicer which, in its good faith judgment, would
not be or will not be ultimately recoverable by the Master Servicer from late
payments, Insurance Proceeds or Liquidation Proceeds.
"Note" has the meaning set forth in the Indenture.
"Note Distribution Account" means the account established and maintained
as such pursuant to Section 5.01.
"Note Register" shall have the meaning specified in the Indenture.
"Note Registrar" shall have the meaning specified in the Indenture.
"Noteholder" means, with respect to a Note, the Holder of such Note.
"Obligee" means the Person to whom an Obligor is indebted under a
Contract.
16
"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.
"Original Pool Balance" means $1,500,000,000.
"Outstanding" means, with respect to:
(i) a Contract and as of time of reference thereto, a Contract that
has not reached its Maturity Date, has not been fully prepaid, has not
become a Liquidated Contract and has not been repurchased pursuant to
Section 3.02, 4.07 or 9.01; and
(ii) 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 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 date on which the Notes have been paid
in full, except
17
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.
"Overcollateralization Amount" means, with respect to a Distribution Date,
the greater of (i) 6.50% of the Aggregate Principal Balance as of the last day
of the related Collection Period; provided, however, that if, on any
Distribution Date, the related Net Chargeoff Percentage is greater than the
Sequential Payment Trigger, the Overcollateralization Amount for such
Distribution Date and each subsequent Distribution Date will equal 7.50% of the
Aggregate Principal Balance as of the last day of the related Collection Period
and (ii) the Overcollateralization Floor Amount.
"Overcollateralization Distributable Amount" means, with respect to any
Distribution Date, the lesser of (i) the Overcollateralization Amount or (ii)
the amount by which (a) the sum of the Overcollateralization Amount and the
outstanding principal amount of the Notes on that Distribution Date (before
giving effect to any payments made to the Holders of the Notes on that
Distribution Date) exceeds (b) the Aggregate Principal Balance as of the last
day of the related Collection Period.
"Overcollateralization Floor Amount" means 1.30% of the Cut-Off Date
Aggregate Principal Balance.
"Owner" shall have the meaning specified in the Trust Agreement.
"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.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, limited liability company,
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."
"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) or (iv) of the definition of the term
"Liquidated Contract", together with all accrued
18
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.
"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
received on or after May 27, 2004 less any unearned interest as of the Due Date
for such Contract immediately preceding May 27, 2004, computed in accordance
with the Rule of 78's, less all amounts received on or in respect of such
Contract on or after May 27, 2004 that are allocable to principal and (ii)
Simple Interest Contract, the actual principal balance under the terms thereof.
"Proposed Merger" means the merger between WFS and the Bank, announced by
Westcorp and WFS in a joint press release dated May 24, 2004, in which it was
announced that WFS will merge into the Bank, pending conversion of the Bank's
federal thrift charter to a California state bank charter.
"Rating Agency" means each of ▇▇▇▇▇'▇, Standard & Poor's and Fitch.
"Rating Agency Condition" shall have the meaning specified in the
Indenture.
"Record Date" means, with respect to a Class of Notes or the Certificates
and any Distribution Date or Redemption Date, the close of business on the
Business Day immediately preceding such Distribution Date or Redemption 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.
"Recoveries" means, with respect to any Collection Period, the sum of (i)
the excess of actual sales proceeds for Repossessed Vehicles sold during such
Collection Period over the sum of (a) the Estimated Sales Values of such
Repossessed Vehicles and (b) any amounts required by law to be remitted to the
related Obligor and (ii) any insurance proceeds and other amounts received in
that Collection Period from the related Obligors or otherwise in connection with
Repossessed Vehicle Contracts, Chapter 13 Contracts and Contracts that have
become 120 days past due.
"Redemption Date" shall have the meaning specified in the Indenture.
"Redemption Price" shall have the meaning specified in the Indenture.
"Registrar" means the Note Registrar or the Certificate Registrar, as the
case may be.
"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.
19
"Repossessed Vehicle" means the Financed Vehicle under a Repossessed
Vehicle Contract.
"Repossessed Vehicle Contract" means a Defaulted Contract for which the
related Financed Vehicle has been repossessed by the Master Servicer.
"Repossessed Vehicle Redemption Date" means, with respect to a Repossessed
Vehicle Contract, the date 10 days (or longer if required by applicable law)
from the date the related Repossessed Vehicle is repossessed.
"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 Due Date in the Collection Period in which such
repurchase occurs.
"Repurchased Contract" means a Contract repurchased as of the related
Master Servicer Report Date by the Master Servicer pursuant to Section 4.07 or
by the Seller pursuant to Section 3.02.
"Responsible Officer" means any officer within the Corporate Trust and
Agency Group (or any successor group) of the Indenture Trustee, including any
Vice President, assistant secretary or any other officer or assistant officer of
the Indenture Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred at the Indenture Trustee's
Corporate Trust Office because of his knowledge of and familiarity with the
particular subject.
"RIC" means the reinvestment contract provided by the Bank and WFAL2 or a
subsidiary thereof, substantially in the form of Exhibit A.
"RIC Reinvestment Earnings" means, with respect to any Distribution Date,
the related Collection Period and the Contracts that were outstanding at the
beginning of such Collection Period, the amount by which the sum of the Monthly
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 D 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 Contract (other than Liquidated Contracts)
for which the Master Servicer has not received one or more payments of Monthly
P&I due under such Contract).
"Rule of 78's Contract" means a Contract as to which payments thereunder
are applied on the basis of the Rule of 78's.
"Schedule of Contracts" means the list or lists of Contracts attached as
Schedule A to this Agreement, which Contracts are being transferred to the Owner
Trustee as part of the Trust Estate, which list or lists shall set forth the
following information with respect to each such Contract in numbered columns:
20
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 WFSRC3, in its capacity as the Seller of Contracts under
this Agreement, and each successor thereto (in the same capacity) pursuant to
Section 6.03.
"Sequential Payment Trigger" means, with respect to any Distribution Date,
the percentage set forth in Schedule C.
"Servicer Default" means an event specified in Section 8.01.
"Servicing Fee" means, as to any Distribution Date, an amount equal to the
product of the Servicing Fee Percent and the Aggregate Principal Balance as of
the first day of the related Collection Period. The Servicing Fee for the first
Distribution Date will be adjusted to an appropriate amount to account for the
actual number of days in such Collection Period.
"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 Distribution
Date, an amount equal to the lesser of (i) the Outstanding Amount of all Notes
immediately prior to such Distribution Date, (ii) the greater of (a) 1.00% of
the Aggregate Principal Balance as of the last day of the related Collection
Period, (b) 0.50% of the Cut-Off Date Aggregate Principal Balance or (c) if the
Net Cumulative Chargeoff Percentage for the related Distribution Date is greater
than the Spread Account Trigger for that Distribution Date, 1.20% of the Cut-Off
Date Aggregate Principal Balance or (iii) the Outstanding Amount of all Notes
after giving effect to all payments made on such Distribution Date.
"Spread Account" means the account established and maintained as such
pursuant to Section 5.01.
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"Spread Account Balance" means the amount on deposit in the Spread
Account.
"Spread Account Trigger" means, with respect to any Distribution Date, the
percentage set forth in Schedule D.
"Spread Account Initial Deposit" means $22,500,000.
"Standard & Poor's" means Standard & Poor's Rating Services, a Division of
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"State" means any one of the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ or the
District of Columbia.
"Statistical Calculation Date" means April 28, 2004.
"Statistical Calculation Date Principal Balance" means the sum of the
Principal Balances of selected Contracts as of the Statistical Calculation Date,
which amount is equal to $1,221,013,158.32.
"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.
"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.
"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 as of April 21, 2004,
as amended and restated as of May 27, 2004, between the Depositor and the Owner
Trustee.
"Trust Estate" shall have the meaning specified in the Trust Agreement.
"Trustee" means the Indenture Trustee or the Owner Trustee, as the case
may be.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
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"United States" means the United States of America.
"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.
"WFS" means WFS Financial Inc, a majority-owned operating subsidiary of
the Bank.
"WFSRC3" means WFS Receivables Corporation 3.
Section 1.02. Usage of Terms. With respect to all terms in this Agreement,
unless the context otherwise requires: (i) a term has the meaning assigned to
it; (ii) an accounting term not otherwise defined has the meaning assigned to it
in accordance with generally accepted accounting principles as in effect from
time to time in the United States; (iii) "or" is not exclusive; (iv) "including"
means including without limitation; (v) words in the singular include the plural
and words in the plural include the singular; (vi) any agreement, instrument or
statute defined or referred to herein or in any instrument or certificate
delivered in connection herewith means such agreement, instrument or statute as
from time to time amended, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and instruments
incorporated therein; (vii) references to a Person are also to its successors
and permitted assigns; (viii) the words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; (ix)
Section, subsection, Schedule and Exhibit, as applicable, references contained
in this Agreement are references to Sections, subsections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and (x) references
to "writing" include printing, typing, lithography and other means of
reproducing words in a visible form.
Section 1.03. Calculations. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder shall be carried out to at
least (i) four decimal places in the case of the Class A-1 Notes, will be made
on the basis of a 360-day year and the actual number of days elapsed from, and
including, the immediately preceding Distribution Date to, but excluding, the
current Distribution Date or from, and including, the Closing Date in the case
of the first Distribution Date and (ii) two decimal places in the case of each
other Class of Notes, will be made on the basis of a 360-day year and twelve
30-day months from, and including, the 20th day of the month of the preceding
Distribution Date to, but excluding, the 20th day of the month of the current
Distribution Date or from, and including, the Closing Date in the case of the
first Distribution Date. 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.
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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 $1,477,500,000 aggregate principal amount of
Notes, the Seller hereby grants, transfers, assigns and otherwise conveys to the
Issuer, without recourse (subject to the obligations herein), and hereby grants
a security interest in all of its right, title and interest (exclusive of 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 all payments of Monthly P&I received after the
Cut-Off Date; all Net Liquidation Proceeds and Net Insurance Proceeds with
respect to any Financed Vehicle to which a Contract relates received after the
Cut-Off Date and all other proceeds received on or in respect of such Contracts
(other than payments of Monthly P&I received on or prior to the Cut-Off Date)
and any and all security interests in the Financed Vehicles; the Contract
Documents relating to the Contracts; 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.
(b) WFS hereby authorizes and will cause, on or prior to the Closing Date,
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 hereby authorizes and
will cause, on or prior to the Closing Date, the filing of UCC-1 financing
statements, naming the Seller as debtor and the Trust as secured party and
describing the Contracts as collateral, with the Office of the Secretary of
State of the State of Nevada. 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 necessary to
continue the perfection of the respective interests of the Indenture Trustee and
the Trust in the Contracts and to continue the first priority security interest
of the Indenture Trustee 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 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 or their
reincorporation in a different jurisdiction 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 and the Securityholders in the Contracts, Financed
Vehicles and the proceeds thereof. Promptly
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thereafter, the Master Servicer shall deliver to the Indenture Trustee and the
Owner Trustee 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 and
Securityholders 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 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 the Issuer is
deemed to have relied in acquiring the Contracts. 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. The representations and warranties set forth in Sections
3.01(b)(ii), (iv), (xvi), (xxviii) and (xxix) may not be waived.
(a) As to the Seller:
(i) Organization and Good Standing. The Seller is duly organized
and validly existing as a corporation in good standing under the laws of
the State of California, with power and authority to own its properties
and to conduct its business, and has the corporate power, authority and
legal right to acquire and own the Contracts;
(ii) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications.
(iii) Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property to be sold and assigned to and deposited with the Issuer, and has
duly authorized such sale and assignment to the Issuer by all necessary
corporate action; and the execution, delivery and performance of this
Agreement has been duly authorized by the Seller by all necessary
corporate action.
(iv) Binding Obligation. This Agreement constitutes (A) a valid
sale, transfer and assignment of the Contracts, enforceable against
creditors of and purchasers from the Seller and (B) a legal, valid and
binding obligation of the Seller enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Seller, or any
indenture, agreement or other instrument to which the Seller is a party or
by which it is bound; nor result in the creation or imposition of any Lien
upon any of its 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
26
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 Tax Liens. The Seller is not aware of any judgment or tax
lien filings against it.
(vii) 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 each 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."
(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
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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; provided, however, the Issuer or Indenture Trustee may be
required to file or record a transfer of the lien on a Financed Vehicle
prior to enforcement of that lien in the name of the Issuer or Indenture
Trustee, respectively.
(v) Current in Payment. As of the Closing 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 which are or may become a lien prior to or equal with the
security interest granted by such Contract.
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(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 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 installment loans in general and motor
vehicle retail installment contracts and installment loans in particular;
and the consummation of the transactions herein contemplated, including
the transfer of ownership of the Contracts to the Issuer, and the pledge
of the Contracts to the Indenture Trustee by 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 Closing Date, there was no default,
breach, violation or event permitting acceleration existing under such
Contract (except payment delinquencies permitted by clause (v) of this
subsection) 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 clause (v) of this
subsection.
(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) an LDI Policy;
provided, however, that if such Financed Vehicle has an unpaid principal
balance of less than $4,000.00 or the related 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; provided further,
to the extent not paid in full by the Obligor, the related Advanced
Insurance Premium then due shall be an expense of the Master Servicer.
Each of the Seller, WFS and the Master Servicer shall at all times comply
with all of the
29
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 Closing 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.
(xvii) Characteristics. With respect to each Contract owned by WFS
at the Statistical Calculation Date, such Contract had (A) a Principal
Balance of not less than $510.13 nor more than $98,429.52, (B) an original
term of not less than 12 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 3.10%.
(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. As of the Closing Date, such Contract did not have a
Maturity Date later than the last day of the Collection Period immediately
preceding the Class D Final Scheduled Distribution Date.
(xx) Principal Balance. At the Closing Date, the initial Principal
Balance of such Contract was not greater than the purchase price of the
related Financed Vehicle and such Principal Balance does not include any
amounts the Master Servicer may have expended in obtaining an LDI Policy,
if any, for such Contract.
(xxi) Location of Contract Files. The Contract Files are kept at one
or more of the locations listed in Schedule B.
30
(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 3.10% for Rule of 78's Contracts and Simple
Interest Contracts.
(xxiii) WFS, Bank and Third Party Lender Originations. With respect
to the Contracts owned by WFS at the Statistical Calculation Date, the
aggregate Principal Balance as of the Statistical Calculation Date of such
Contracts purchased by WFS from the Bank and Third Party Lenders or
originated directly by WFS is not more than approximately 3.34% of the
Statistical Calculation Date Principal Balance.
(xxiv) Simple Interest Contracts. With respect to each Contract
owned by WFS at the Statistical Calculation Date, as of the Statistical
Calculation Date, approximately 98.85% of the Contracts by Statistical
Calculation Date Principal Balance shall be Simple Interest Contracts and
approximately 1.15% of the Contracts by Statistical Calculation Date
Principal Balance shall be Rule of 78's Contracts.
(xxv) New or Pre-Owned Vehicles. At least 35.33% of the Contracts
owned by WFS at the Statistical Calculation Date by Statistical
Calculation Date Principal Balance were Contracts that financed new
vehicles and not greater than 64.67% were Contracts that financed
pre-owned vehicles.
(xxvi) States of Origination. Approximately 37.43% of the Contracts
owned by WFS at the Statistical Calculation Date by Statistical
Calculation Date Principal Balance were originated or purchased by WFS in
California and approximately 62.57% of the Contracts by Statistical
Calculation Date 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 "tangible chattel
paper" as defined in the applicable UCC; provided, however, that upon
satisfaction of the Rating Agency Condition, a Contract may constitute
"electronic chattel paper" as defined in 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, 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 any financing statement relating to the
security interest granted to the Issuer hereunder, the security interest
granted to the Indenture Trustee under the Indenture or that has been
terminated or subordinated to the rights of the Issuer and the Indenture
Trustee.
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(xxx) Contract Characteristics as of the Closing Date. The
representations and warranties made in this Section with respect to
certain Contracts as of the Statistical Calculation Date shall also be
true and correct in every material respect for all Contracts as of the
Closing Date.
(xxxi) Obligor Bankruptcy. As of the Closing Date with respect to
the Contracts, the Seller is not aware of any Obligor that is or has been,
since the origination of the related Contract, the subject of a bankruptcy
proceeding.
(xxxii) No Extensions. The number of, or timing of, scheduled
payments has not been changed on any Contract on or before the Closing
Date, except as reflected on the computer tape delivered in connection
with the sale of the Contracts.
(xxxiii) Repossession. On or prior to the Closing Date, no Financed
Vehicle has been repossessed.
(xxxiv) Prepayment of Contracts. Any prepayment in full of a
Contract by an Obligor to the Master Servicer will consist of the entire
outstanding principal balance of such Contract together with all accrued
and unpaid interest thereon.
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 or the Issuer 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 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.
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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
(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 in, the Contract Documents and shall ▇▇▇▇ the Contracts in the
same manner. Notwithstanding the foregoing, if failure to do so will not result
in the qualification, reduction or withdrawal by any Rating Agency of its
then-applicable rating on any Class of Notes, the Master Servicer shall not be
required to segregate or ▇▇▇▇ the Contracts and the 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 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 , as the Master
Servicer deems appropriate, conduct or
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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 and the Indenture Trustee to verify the accuracy of the Master
Servicer's record keeping. The Master Servicer shall promptly report to the
Owner Trustee and the Indenture Trustee 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 or at
such other location as shall be specified to the Owner Trustee and the Indenture
Trustee by 30 days' prior written notice. The Master Servicer shall permit the
Owner Trustee and the Indenture Trustee 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. On or prior to the first Business Day
after the 14th day of each calendar month, the Master Servicer shall deliver a
data tape to the Backup Servicer containing information necessary for the Backup
Servicer to generate the statement required pursuant to Section 3.07(h) of the
Indenture and otherwise necessary for the servicing and administration of the
Contracts.
(c) Release of Documents. Upon instruction from the Indenture Trustee (a
copy of which shall be furnished to the Owner Trustee), 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) Title Documents. The Master Servicer shall deliver to the Indenture
Trustee and the Owner Trustee within (i) 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) 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) 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 Backup Servicer and the Securityholders for any and all liabilities,
obligations, losses, compensatory damages, payments, costs or expenses of any
kind whatsoever (including the reasonable fees and expenses of counsel) that may
be imposed on, incurred by or asserted against the Issuer, the Owner Trustee,
the Indenture Trustee, the Backup Servicer, 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,
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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, the Indenture
Trustee and the Backup Servicer if a claim is made by a third party with respect
to the Contracts, shall assume, with the consent of the Owner Trustee, the
Indenture Trustee and the Backup Servicer, 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 a majority of the Outstanding Amount of the Notes of the Controlling Class,
by the Owner Trustee or by Certificateholders evidencing not less than a
majority of the aggregate Certificate Percentage Interest, in the same manner as
the Indenture Trustee, the Owner Trustee 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.
(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
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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 and the Seller shall purchase such Contract, on
or before the Master Servicer Report Date next succeeding the end of the 180-day
period, from the Issuer for an amount equal to the related Repurchase Amount in
the manner set forth in Section 5.04.
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ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer. The Master Servicer, acting alone
or through one or more Subservicers as provided in this Section, shall, as agent
for the Indenture Trustee and the Owner Trustee, 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 any Rating Agency; provided, however, that the new APR shall not be
less than the sum of (i) the Class D Rate and (ii) the Servicing Fee Percent. In
addition, in order to preserve the Trust Estate, the Master Servicer may,
without the consent of any Rating Agency, 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 Distribution Date nine months prior
to the Class D Final Scheduled Distribution Date and (ii) during a Collection
Period shall not affect Contracts having an aggregate Principal Balance greater
than 0.1% of the Aggregate Principal Balance at the beginning of such Collection
Period (Contracts that the Master Servicer is required to modify pursuant to the
Servicemembers Civil Relief Act, the California Military Reservist Relief Act,
any similar State law or any other law, rule, regulation or court order shall
not be included in either of such calculations). Any such modifications or
reductions exceeding such limits may be made only with the consent of 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 and the Owner
Trustee with respect to distributions and filing applicable United States 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 (except
for those Contracts that are subject to the jurisdiction of any bankruptcy
court). 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 Noteholders, the Certificateholders, the Indenture
Trustee, the Owner Trustee or any of them, any and all
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instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Contracts
or to the Financed Vehicles. The Owner Trustee shall furnish the Master Servicer
all documents necessary or appropriate to enable the Master Servicer to carry
out its servicing and administrative duties hereunder.
On the Closing Date, the Master Servicer shall deliver to the 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 or the Indenture Trustee.
The Master Servicer may enter into Subservicing Agreements with one or
more Subservicers approved by the Indenture Trustee 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. 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, 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; 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 or
Certificateholders 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 Indenture
Trustee 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 an Affiliate of the
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Master Servicer in its capacity as such, and not as an originator of Contracts,
shall be deemed to be between the Subservicer or such 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.
In the event the Master Servicer shall for any reason no longer be acting
as servicer under this Agreement (including by reason of a Servicer 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.
The Master Servicer, each Subservicer, and any new servicer appointed
following the resignation or termination of the Master Servicer, including any
Subservicer, shall at all times comply with all applicable federal, state and
local laws, rules, regulations and ordinances governing or relating to the
privacy rights of the Obligors in connection with its performance of its duties
under this Agreement including the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. The Master Servicer,
each Subservicer, and any new servicer appointed following the resignation or
termination of the Master Servicer, including any Subservicer, shall implement
such physical and other security measures as shall be necessary to (a) ensure
the security and confidentiality of the "nonpublic personal information" of each
Obligor, (b) protect against any threats or hazards to the security and
integrity of such nonpublic personal information and (c) protect against any
unauthorized access to or use of such nonpublic personal information.
The Master Servicer shall deposit in or credit to the Collection Account
within two Business Days of receipt all collections of Monthly P&I received
after the Cut-Off Date 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,
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concurrently with the withholding of any such installment or proceeds from
deposit in or credit to the Collection Account as required above, furnish to the
Indenture Trustee and the Owner Trustee a certificate of a Servicing Officer
setting forth the basis for the Master Servicer's determination, the amount of
and Contract with respect to which such Nonrecoverable Advance was made and the
installment or installments or other proceeds respecting which reimbursement has
been taken. The foregoing requirements for deposit in the Collection Account are
exclusive, it being understood that collections in the nature of late payment
charges or extension fees or collections allocable to payments to be made by the
Master Servicer on behalf of Obligors for payment of insurance premiums,
including Advanced 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.
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, within two Business Days of receipt, 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 Net Collections
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, 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 and the Owner Trustee in holding such monies and
collections. The Master Servicer agrees, for the benefit of the Indenture
Trustee, the Owner Trustee and the Securityholders, 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 and the Owner Trustee, in accordance with
the provisions of this Agreement.
The Master Servicer shall retain all data (including 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
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
and the Owner Trustee 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 or the Owner Trustee, deliver or cause to be delivered to
the Indenture Trustee or the Owner Trustee, as the case may be, all data
(including 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.
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The Master Servicer shall, or cause the Administrator to, prepare, execute
and deliver all certificates or other documents required to be delivered by the
Trust pursuant to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or the rules and regulations
promulgated thereunder.
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
Collection Period ending immediately prior to the Class D 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 proviso that, in the case of damage to a Financed Vehicle from an
uninsured cause, the Master Servicer shall not be required to expend its own
funds in repairing such Financed Vehicle unless it shall determine (i) that such
restoration will increase the proceeds of liquidation of the related Contract,
after reimbursement to itself for such expenses, and (ii) that such expenses
will be recoverable by it either as Liquidation Expenses or as expenses
recoverable under an applicable Insurance Policy. In the event that the Master
Servicer determines that, in its best judgment, further collection efforts by it
as to a Liquidated Contract will not result in the realization of additional Net
Liquidation Proceeds to the Trust, the Master Servicer may, in the name of the
Owner Trustee, and for the benefit of the Trust, sell the Liquidated Contract to
any party not affiliated with the Master Servicer free and clear of the rights
of the 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,
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however, that it shall be entitled to reimbursement of such costs and expenses
to the extent they are paid by an Obligor. 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 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 the Issuer is deemed to have relied in
acquiring the Contracts. 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 the Certificateholders in the Contracts.
(iii) Amendments. The Master Servicer shall not amend the terms of
any Contract, except that extensions or modifications may be granted in
accordance with Section 4.02.
(iv) Transfers. The Master Servicer may consent to the sale or
transfer by an Obligor of any Financed Vehicle only if the original
Obligor under the related
42
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, and such
covenants, representations and warranties speak as of the execution and delivery
of this Agreement and as of the Closing Date (and shall continue to be true and
correct as of the effective date of the Proposed Merger), 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.
(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 and after
giving effect to the Proposed Merger will be duly organized and validly
existing as a banking 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 power of the Master Servicer and
have been duly authorized by all necessary action, corporate or otherwise,
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 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
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terms, subject to applicable bankruptcy and insolvency laws and other
similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity (whether applied in a proceeding in equity
or at law), and after giving effect to the Proposed Merger constitutes a
legal, valid and binding instrument enforceable against the Master
Servicer in accordance with its terms, subject to applicable bankruptcy,
insolvency laws and other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity (whether
applied in a proceeding in equity or at law), and except as enforcement of
such terms may be limited by receivership, conservatorship and supervisory
powers of bank regulatory agencies 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.
(vii) Proposed Merger. After the Proposed Merger, the Bank shall
succeed to all of the rights, duties and obligations of WFS, in its
individual capacity, as well as in its capacity as Seller, as Master
Servicer and as Administrator, as the case may be, under each of the
Underwriting Agreement, the Letter Indemnity Agreement and each Basic
Document, as applicable.
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 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 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
44
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. As servicing compensation in addition to the Servicing
Fee, the Master Servicer shall be entitled to retain all late payment charges,
extension fees and similar items paid in respect of the Contracts. The Master
Servicer shall pay all expenses incurred by it in connection with its servicing
activities hereunder, which expenses shall include all out-of-pocket expenses
incurred in connection with the repossession of a Financed Vehicle and any
Advanced Insurance Premium to the extent that any such amounts are not paid or
otherwise reimbursed by the related Obligor, and shall not be entitled to
reimbursement of such expenses except to the extent provided in this Section or
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, the Backup Servicer and
each Rating Agency a statement, substantially in the form of Exhibit B (the
"Distribution Date Statement"), setting forth with respect to the next
succeeding Distribution Date:
(i) the Interest Distributable Amount for each Class of Notes;
(ii) the Class A Principal Distributable Amount, the Class B
Principal Distributable Amount, the Class C Principal Distributable Amount
and the Class D Principal Distributable Amount for such Distribution Date;
(i) the amount of principal actually distributed to each Class of
Noteholders on such Distribution Date;
(ii) with respect to each Class of Notes, the excess, if any, of
the Aggregate Principal Distributable Amount over the amount of principal
actually distributed on the Notes on such Distribution Date;
(iii) the Net Collections for such Distribution Date;
(iv) the Servicing Fee with respect to the related Collection
Period;
(v) the amount of any Interest Carryover Shortfall on such
Distribution Date and the change in such amounts from those with respect
to the immediately preceding Distribution Date;
(vi) the aggregate amount of Monthly P&I which was due on the
Contracts during the related Collection Period and was delinquent as of
the end of the related Collection 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 Collection Period);
45
(vii) the amount set forth in clause (vi) 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;
(viii) 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
Collection Period;
(ix) the Aggregate Net Liquidation Losses for the related
Collection Period;
(x) the Spread Account Balance and the Excess Spread Amount, if
any, for such Distribution Date;
(xi) the Certificate Distributable Amount;
(xii) the Net Chargeoff Percentage;
(xiii) the sum of the Principal Balances of Delinquents Contracts;
(xiv) the sum of the Principal Balance of Contracts that became
Defaulted Contracts during the related Collection Period;
(xv) the Aggregate Principal Balance at the beginning and end of
the related Collection Period;
(xvi) Repurchase Amounts included in Net Collections for such
Distribution Date;
(xvii) the Overcollateralization Amount and the amount by which the
Aggregate Principal Balance exceeds the Outstanding Amount of the Notes
(after giving effect to any payments made to Holders of the Notes on that
Distribution Date);
(xviii) Net Collections excluding any Advance and Repurchase Amounts
included in Net Collections for such Distribution Date; and
(xix) the amount otherwise distributable to the Certificateholders.
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 and each Rating Agency a
report, in respect of the immediately preceding Collection Period, setting forth
the following:
46
(i) the aggregate amount, if any, paid by or due from it for the
purchase of Contracts which the Seller or the Master Servicer has become
obligated to purchase pursuant to Section 3.02 or 4.07 or the Seller has
elected to purchase pursuant to Section 9.01;
(ii) the net amount of funds which have been deposited in or
credited to the Collection Account in respect of such Collection Period
after giving effect to all permitted deductions therefrom pursuant to
Section 5.02;
(iii) upon request of any of the Owner Trustee, the Indenture
Trustee or a Rating Agency, with respect to each Contract that became a
Liquidated Contract during such Collection 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) upon request of any of the Owner Trustee, the Indenture
Trustee or a Rating Agency, the Contract Numbers, Monthly P&I, Principal
Balances and Maturity Dates of all Contracts which became Defaulted
Contracts during such Collection Period; and
(v) any other information relating to the Contracts reasonably
requested by the Owner Trustee, the Indenture Trustee and each Rating
Agency.
Section 4.10. Annual Statement as to Compliance. The Master Servicer shall
deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency, on
or before 90 days after the end of each fiscal year of the Master Servicer,
beginning with the fiscal year ended December 31, 2004, 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
(i) Certificateholder or Certificate Owner by a request in writing to the Owner
Trustee addressed to the Owner Trustee Corporate Trust Office or (ii) Noteholder
or Note Owner by a request in writing to the Indenture Trustee addressed to
47
the 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 and each Rating Agency 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 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 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
48
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.
49
ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT; STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts.
(a) Prior to the Closing Date, the Master Servicer shall open, at a
depository institution (which may be the Indenture Trustee or the Bank), 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 "Spread
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 "Note
Distribution Account") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders; and
(iv) 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 and the Owner Trustee 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 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).
(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. For so long as the RIC is an
Eligible Investment, all funds in such Trust Accounts, in each case that are
available for investment in Eligible Investments, shall be invested in the RIC;
provided, however, that, only with the prior consent of ▇▇▇▇▇'▇, may funds in
the Spread Account, the Note Distribution Account and the Certificate
Distribution Account be invested in the RIC. If the RIC is no longer an Eligible
Investment then, subject to the limitations set forth herein, the Master
Servicer shall direct the Indenture Trustee in writing to invest funds in the
foregoing Trust Accounts in Eligible Investments, other than the RIC. 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 the RIC Reinvestment Earnings) shall be deposited in or credited to
the Collection Account immediately upon receipt, and any
50
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 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 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 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 one 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. No investment in Eligible Investments may be
sold prior to its maturity.
(c) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts, other
than the Certificate Distribution Account, 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; provided however, that the Indenture
Trustee shall invest funds in the Certificate Distribution Account pursuant to
Section 5.01(b). 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 new Trust Account as an Eligible Account and
shall transfer any cash 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(c)(i); and each such Eligible
Account shall be subject to the exclusive custody and continuous
control of the Indenture Trustee within the meaning of Section
9-104(a) of the applicable UCC, 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
51
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; Net Deposits.
(a) Subject to Sections 4.01, 5.02 (b) and 5.03, 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.
(b) 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. On or prior to the last day of
each Collection Period, all collections for such Collection Period shall be
applied by the Master Servicer as
52
follows: with respect to each Contract (including a Defaulted Contract),
payments by or on behalf of an Obligor shall be applied in the following order:
(a) unpaid amounts due on the Contract in a prior Collection Period; (b)
interest due on the Contract; (c) interest due on any Advanced Insurance
Premium; (d) principal due on the Contract; (e) principal due on any Advanced
Insurance Premium; (f) extension fees, if any; (g) late payment fees, if any;
and (h) 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 Collection Period, one or more payments of
Monthly P&I due under any Contract (other than a Liquidated Contract)
Outstanding at the end of such Collection 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 Collection Period by
depositing in or crediting to the Collection Account with respect to each
Contract 30 days of interest on the Principal Balance of such Contract at a rate
equal to the sum of (i) the Class D Rate and (ii) the Servicing Fee Percent for
each month that the related Monthly P&I is delinquent at the end of such
Collection 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 and the Owner Trustee
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 and the Owner Trustee 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 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) Subject to Section 5.05(d), on each Distribution Date, the Master
Servicer shall instruct the Indenture Trustee (based on the information
contained in the Distribution Date Statement 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 Available
Funds 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 Collection
Periods;
(ii) to the Indenture Trustee, any accrued and unpaid fees and
expenses payable to the Indenture Trustee (up to a maximum of $200,000 in
any given calendar year) and to the Owner Trustee, any accrued and unpaid
fees and expenses payable to the Owner Trustee (up to a maximum of
$100,000 in any given calendar year), in each case to the extent such fees
and expenses have not been previously paid by the Master Servicer;
(iii) to the Note Distribution Account, the Interest Distributable
Amount for each class of Class A Notes, for payment of interest on each
class of Class A Notes, pro rata in proportion to their respective
outstanding principal amounts;
(iv) to the Note Distribution Account, the Class A
Undercollateralization Amount, for payment of principal on the Notes in
the priority set forth in Section 5.05(b);
(v) to the Note Distribution Account, the Interest Distributable
Amount for the Class B Notes, for payment of interest on the Class B
Notes;
(vi) to the Note Distribution Account, the Class B
Undercollateralization Amount, for payment of principal on the Notes in
the priority set forth in Section 5.05(b);
(vii) to the Note Distribution Account, the Interest Distributable
Amount for the Class C Notes, for payment of interest on the Class C
Notes;
(viii) to the Note Distribution Account, the Class C
Undercollateralization Amount, for payment of principal on the Notes in
the priority set forth in Section 5.05(b);
(ix) to the Note Distribution Account, the Interest Distributable
Amount for the Class D Notes, for payment of interest on the Class D
Notes;
(x) to the Note Distribution Account, an amount equal to the sum
of the Class D Undercollateralization Amount, for payment of principal on
the Notes in the priority set forth in Section 5.05(b);
(xi) to the Spread Account, the Specified Spread Account Balance;
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(xii) to the Note Distribution Account, the Overcollateralization
Distributable Amount, for payment of principal on the Notes in the
priority set forth in Section 5.05(b); and
(xiii) to the Spread Account, any excess amounts remaining from
Available Funds after making the distributions described in clauses (i)
through (xii) of this subsection, and the Master Servicer shall instruct
the Indenture Trustee to distribute any Excess Spread Amount pursuant to
Section 5.06(c).
(b) On each Distribution Date, the Master Servicer shall instruct the
Indenture Trustee (based on the information contained in the Distribution Date
Statement delivered on the related Master Servicer Report Date pursuant to
Section 4.09), to distribute any amount deposited into the Note Distribution
Account as payment of principal on the Notes pursuant to Section 5.05(a) in the
following amounts and order of priority:
(i) to the Holders of the Class A Notes, in the priority set forth
in Section 5.05(c), the Class A Principal Distributable Amount, until the
Class A Notes are paid in full;
(ii) to the Holders of the Class B Notes, the Class B Principal
Distributable Amount, until the Class B Notes are paid in full;
(iii) to the Holders of the Class C Notes, the Class C Principal
Distributable Amount, until the Class C Notes are paid in full; and
(iv) to the Holders of the Class D Notes, the Class D Principal
Distributable Amount, until the Class D Notes are paid in full.
(c) On each Distribution Date, the Master Servicer shall instruct the
Indenture Trustee (based on the information contained in the Distribution Date
Statement delivered on the related Master Servicer Report Date pursuant to
Section 4.09), to distribute the Class A Principal Distributable Amount in the
following order of priority:
(i) to the Holders of the Class A-1 Notes until the Class A-1
Notes are paid in full;
(ii) to the Holders of the Class A-2 Notes until the Class A-2
Notes are paid in full;
(iii) to the Holders of the Class A-3 Notes until the Class A-3
Notes are paid in full; and
(iv) to the Holders of the Class A-4 Notes until the Class A-4
Notes are paid in full.
(d) Notwithstanding Section 5.02(a), after the Notes have been declared
due and payable pursuant to Section 5.02 of the Indenture, all Available Funds
shall be remitted to the
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Indenture Trustee for distribution in accordance with Sections 2.07(c) and
5.06(a) of the Indenture.
Section 5.06. Spread Account.
(a) On or prior to the Closing Date, WFSRC3 shall deposit the Spread
Account Initial Amount into the Spread Account. The Spread Account will be held
for the benefit of the Securityholders in order to effectuate the subordination
of the rights of the Securityholders to the extent described above.
(b) On each Distribution Date, the Master Servicer shall instruct the
Indenture Trustee to withdraw the Spread Account Balance from the Spread Account
and distribute such amount as part of Available Funds in accordance with Section
5.05(a).
(c) If any Class of Notes has not been paid in full on any Distribution
Date on and after its Final Scheduled Distribution Date (after giving effect to
the distribution of Available Funds on such Distribution Date), the Master
Servicer shall instruct the Indenture Trustee to distribute from amounts on
deposit in the Spread Account to the Holders of that Class of Notes, an amount
equal to the lesser of (i) the amount on deposit in the Spread Account and (ii)
the Outstanding Amount of that Class of Notes. On each Distribution Date, the
Master Servicer shall instruct the Indenture Trustee to distribute the Excess
Spread Amount, after giving effect to the distribution described in the
preceding sentence, first, to the Trustees for all fees and expenses due to each
of them and not previously paid, second, to WFSRC3 until WFSRC3 has received
full payment of the Spread Account Initial Deposit and third, all remaining
funds to the Certificate Distribution Account for distribution to
Certificateholders in accordance with Section 5.02 of the Trust Agreement.
(d) 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.
(e) Upon termination of the Issuer pursuant to Section 9.01, any amounts
on deposit in the Spread Account, after payments of amounts due to the
Securityholders, will be distributed first, to WFSRC3 until WFSRC3 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 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
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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 Interest Distributable Amount for each Class of Notes;
(iv) the amount of any Interest Carryover Shortfall on such
Distribution Date and the change in such amounts from those with respect
to the immediately preceding Distribution Date;
(v) the amount of the Servicing Fee paid to the Master Servicer
with respect to the related Collection Period;
(vi) the Class A Principal Distributable Amount, the Class B
Principal Distributable Amount, the Class C Principal Distributable Amount
and the Class D Principal Distributable Amount;
(vii) with respect to each Class of Notes, the excess, if any, of
the amount distributable in respect of principal on such Class of Notes
over the amount allocated for the payment of principal on such Class of
Notes;
(viii) the Aggregate Net Liquidation Losses for the related
Collection Period;
(ix) the aggregate Principal Balance of Delinquent Contracts as of
the close of business on the last day of such Collection Period;
(x) the Aggregate Principal Balance as of the close of business on
the last day of such Collection Period;
(xi) the principal amount of each Class of Notes as of such
Distribution Date, after giving effect to payments allocated to principal
reported under clause (i) above;
(xii) the Certificate Distributable Amount;
(xiii) 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;
(xiv) the Overcollateralization Amount and the amount by which the
Aggregate Principal Balance exceeds the Outstanding Amount of the Notes
(after giving effect to any payments made to Holders of the Notes on that
Distribution Date);
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(xv) the disposition amounts withdrawn from the Spread Account,
including the amounts used to increase the level of overcollateralization
to the Overcollateralization Amount, and the Excess Spread Amount, if any,
for such Distribution Date; and
(xvi) the amount of Net Collections.
Each amount set forth pursuant to clauses (i), (ii), (iv) and (v) above shall be
expressed in the aggregate and 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) of 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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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, the Backup Servicer 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, the Backup Servicer 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, the Indenture Trustee and the Backup Servicer 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, (ii) the Indenture Trustee, shall be due to the willful
misfeasance, bad faith or negligence of the Indenture Trustee or (iii) the
Backup Servicer, shall be due to the willful misfeasance, bad faith or
negligence of the Backup Servicer.
Indemnification under this Section shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Seller shall have made
any indemnity payments pursuant to this
59
Section and the Person to or on behalf of whom such payments are made thereafter
shall collect any of such amounts from others, such Person shall promptly repay
such amounts to 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 Owner Trustee and the Indenture Trustee an agreement in form and
substance reasonably satisfactory to the Owner Trustee and the Indenture
Trustee, 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 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 clause (b)(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 the State of California.
(ii) Notwithstanding clause (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 any sale
and servicing agreement, indenture, reimbursement agreement, credit
support agreement, receivables purchase agreement or underwriting
agreement or similar agreements or to engage in any lawful activity which
is incidental to the activities contemplated by any such agreement. So
long as any outstanding debt of the Seller or Offered Securities are rated
by any nationally recognized statistical rating organization, the 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 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
60
which shall provide for payment only after payment in respect of all
outstanding rated debt 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 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 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 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
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indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement.
Section 6.05. Seller Not to Resign. Subject to the provisions of Section
6.03, the Seller shall not resign from the obligations and duties hereby imposed
on it as Seller hereunder.
Section 6.06. Seller May Own Securities. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Securities with the same rights as it would have if it were not the Seller or
an Affiliate thereof, except as expressly provided herein or in any Basic
Document. Securities so owned by or pledged to the Seller or 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 Backup Servicer
and the Securityholders 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 Backup
Servicer 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 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 Backup Servicer
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 and the Indenture Trustee 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 the 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 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 of 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 and the Owner Trustee, which contains an assumption by such
successor entity of the due and punctual performance or observance of each
covenant and condition to be performed or observed by the Master Servicer under
this Agreement. Notice shall be sent to each Rating Agency by the Master
Servicer of any consolidation, merger or succession pursuant to this Section.
Section 7.03. Performance of Obligations.
(a) The Master Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement.
(b) The Master Servicer shall not take any action, or permit any action
to be taken by others, which would excuse any Person from any of its covenants
or obligations under any of the Contract Documents or under any other instrument
included in the Trust Estate, or which would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any of the Contract Documents or any such
instrument, except as expressly provided herein and therein.
Section 7.04. Master Servicer Not to Resign; Assignment.
(a) The Master Servicer shall not resign from the duties and obligations
hereby imposed on it except upon determination by its board of directors that by
reason of change in applicable legal requirements the continued performance by
the Master Servicer of its duties hereunder would cause it to be in violation of
such legal requirements in a manner which would result in a material adverse
effect on the Master Servicer or its financial condition, said determination to
be evidenced by a resolution of its board of directors to such effect
accompanied by an Opinion of Counsel, satisfactory to the Owner Trustee and the
Indenture Trustee, to such effect. No such resignation shall become effective
unless and until (i) a new
64
servicer acceptable to the Owner Trustee and the Indenture Trustee is willing to
service the Contracts and enters into a servicing agreement with the Issuer in
form and substance substantially similar to this Agreement and satisfactory to
the Owner Trustee and the Indenture Trustee and (ii) the Rating Agency Condition
has been satisfied. 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 or the Indenture
Trustee of any right or remedy under this Agreement, or the enforcement by the
Owner Trustee, the Indenture Trustee or any Certificateholder or Noteholder of
any provision of the Notes, the Certificates 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 its directors, officers,
employees or agents 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 of its directors, officers, employees or agents 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 of its directors, officers, employees or
agents 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.
(c) 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 the Master Servicer's opinion may involve it in
any expense or liability; provided, however, that the Master
65
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) 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 or the Indenture Trustee or after
discovery of such failure by an officer of the Master Servicer;
(b) any failure by the Master Servicer to deliver to the Indenture
Trustee or the Owner Trustee a report in accordance with Section 4.09 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);
(c) 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 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 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 of the Controlling Class, or, if the Notes
have been paid in full, by Certificateholders evidencing not less than 25%
of the aggregate Certificate Percentage Interest;
(d) the occurrence of an Insolvency Event with respect to the
Seller, the Issuer or the Master Servicer; or
(e) 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 by the Master Servicer
prepared based on information provided by the Master Servicer pursuant
hereto shall prove to be incorrect in any material respect as of the time
when the same shall have been made (excluding, however, any representation
or warranty to which Section 3.01 or 4.06 shall be applicable so long as
the Master Servicer or the Seller shall be in compliance with Section 3.02
or 4.07, as the case may be), and the incorrectness of such
representation, warranty or statement has a material adverse effect
67
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
of the Controlling Class, or Certificateholders evidencing not less than
25% of the aggregate Certificate Percentage Interest, 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, either the Indenture Trustee, the Holders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes of
the Controlling Class (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 a majority of the aggregate
Certificate Percentage Interest), by notice then given in writing to the Master
Servicer (and to 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
or a termination pursuant to Section 8.06, 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 written notice of termination pursuant to this Section or
Section 8.06, 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, the Backup Servicer or such successor Master Servicer as may be
appointed under Section 8.02, as the case may be; 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 or the Backup Servicer, as the case may be, 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
Section 8.06 or resignation pursuant to Section 7.04, the Indenture Trustee, or
in the case of a termination pursuant to Section 8.06, the Backup Servicer,
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 neither the Indenture Trustee nor the
Backup Servicer shall 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 Section
8.06, as the case may be, 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 predecessor Master Servicer. Any successor
Master Servicer, including the Backup Servicer, shall have the rights (including
any right of indemnity) of the Master Servicer.
68
Furthermore, the Backup Servicer shall have a right of indemnity under Articles
Six and Seven hereof in connection with the performance of its duties prior to
becoming the successor Master Servicer. As compensation therefor, the Indenture
Trustee or the Backup Servicer, as the case may be, 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 or the Noteholders from
effecting a transfer of servicing. Notwithstanding the above, in the event of a
termination of the Master Servicer pursuant to Section 8.01, 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. 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 a majority of the Outstanding Amount of the Notes of the Controlling
Class, 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 a majority 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 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.
69
Section 8.06. Backup Servicer. If a Backup Servicer Event has occurred and
continuing, the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes of the Controlling Class, by notice then given
in writing to the Master Servicer, the Indenture Trustee and the Owner Trustee
may terminate all the rights and obligations of the Master Servicer under this
Agreement. Upon such termination, the Backup Servicer shall become successor
Master Servicer in accordance with Sections 8.01 and 8.02.
70
Article Nine
TERMINATION
Section 9.01. Optional Purchase of All Contracts.
(a) On any Distribution Date following the last day of a Collection
Period as of which the Aggregate Principal Balance is less than or equal to
$150,000,000, 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 and the Indenture Trustee 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 Collection Period. In addition, if the Master Servicer
or the Seller has outstanding senior debt and such debt is not rated "investment
grade" by ▇▇▇▇▇'▇ 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 Moody's an Opinion of Counsel to the effect that such
optional purchase is not a fraudulent conveyance.
(b) Upon any sale of the assets of the Issuer pursuant to Section 5.04
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 distribute funds on deposit in
the Collection Account (including such Insolvency Proceeds and any funds on
deposit in the Spread Account in accordance with Section 5.06(a) of the
Indenture.
(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 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) of all remaining Contracts of the Issuer occur, the Master
Servicer shall instruct the Indenture Trustee to make the following
distributions of the Aggregate Repurchase Amount 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 Collection Periods;
71
(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) to WFSRC3 until WFSRC3 has received full repayment of
the Spread Account Initial Deposit; and
(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.
72
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;
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 and the Indenture Trustee 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 and the Master Servicer
shall provide Moody's and Fitch 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 holding not less than 66 2/3% of the Outstanding
Amount of the Notes and the consent of Certificateholders evidencing not less
than 66 2/3% 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 or (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
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.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish the
written notification of the substance of the amendment or consent described in
Section 10.01(c), at the expense of the Seller, the Master Servicer or the Owner
Trustee on behalf of the Issuer, as the case may be, to
73
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 and the Owner Trustee 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 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. The prior sentence notwithstanding, WFS may change its
name to Western Financial Auto and the Seller may change its name to Western
Financial ABS 3 without prior notice to the Owner Trustee or the Indenture
Trustee, provided it shall timely comply with the requirements of Section
2.01(b).
(c) WFS, the Seller and the Master Servicer shall give 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) or the reincorporation of any of them in a different jurisdiction if,
as a result of such relocation or reincorporation, 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
74
know at any time the status of such Contract, including payments and recoveries
made and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Contract and the amounts
from time to time deposited in or credited to the Collection Account 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 or installment loans
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 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
and the Indenture Trustee, 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 and each Rating Agency:
(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
(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
75
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 under this
Agreement shall be in writing personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt in the case of:
(a) if to the Seller, to:
WFS Receivables Corporation 3
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ #▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
(b) if to the Master Servicer, to:
WFS Financial Inc
▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
(c) if to the Issuer or Owner Trustee, to:
WFS Financial 2004-2 Owner Trust
Chase Manhattan Bank USA, National Association
c/o JPMorgan Chase
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ /▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Institutional Trust Services
(d) if to the Indenture Trustee, to:
Deutsche Bank Trust Company Americas
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
MS ▇▇▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust & Agency Services - Structured Finance
Services
(e) if to Moody's, to:
76
▇▇▇▇▇'▇ Investors Service, Inc.
ABS Monitoring Department
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(f) if to Standard & Poor's, to:
Standard & Poor's
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Asset Backed Surveillance Department
(g) if to Fitch, to:
Fitch Ratings
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Asset Backed Securities - Auto Group, 32nd Floor
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above. 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 and 7.02, this Agreement may not
be assigned by the Seller or the Master Servicer without the prior written
consent of Holders of Notes of each Class evidencing not less than 66 2/3% of
the Outstanding Amount of Notes of such Class and Certificateholders evidencing
not less than 66 2/3% of the aggregate Certificate Percentage Interest.
Section 10.07. Third Party Beneficiaries. Except as otherwise specifically
provided herein, no third party 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. 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.
77
Section 10.09. 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 10.10. 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 or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Indenture Trustee.
Section 10.11. 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 10.12. Limitation on Recourse Against WFSRC3. Notwithstanding
anything to the contrary contained in this Agreement, the obligations of WFSRC3
under the Basic Documents are solely the corporate obligations of WFSRC3, and
shall be payable by WFSRC3, solely as provided by the Basic Documents. WFSRC3
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 WFSRC3 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 WFSRC3
incurred in accordance with WFSRC3's certificate of incorporation and all
financing documents to which WFSRC3 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 WFSRC3
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.
78
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 2004-2 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 3,
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:
DEUTSCHE BANK TRUST COMPANY
AMERICAS, not in its individual
capacity but solely as Indenture
Trustee and Backup Servicer
By: ____________________________
Name:
Title:
Sale and Servicing Agreement
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 ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
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SB-1
SCHEDULE C
SEQUENTIAL PAYMENT TRIGGERS
Distribution Date Sequential Payment Trigger
----------------- --------------------------
July 2004 0.15%
August 2004 0.30%
September 2004 0.45%
October 2004 0.60%
November 2004 0.75%
December 2004 0.90%
January 2005 1.05%
February 2005 1.20%
March 2005 1.37%
April 2005 1.54%
May 2005 1.71%
June 2005 1.88%
July 2005 2.05%
August 2005 2.22%
September 2005 2.39%
October 2005 2.56%
November 2005 2.73%
December 2005 2.90%
January 2006 3.07%
February 2006 3.24%
March 2006 3.37%
April 2006 3.50%
May 2006 3.63%
June 2006 3.76%
July 2006 3.89%
August 2006 4.02%
September 2006 4.15%
October 2006 4.28%
November 2006 4.41%
December 2006 4.54%
January 2007 4.67%
February 2007 4.80%
March 2007 4.93%
April 2007 5.07%
May 2007 5.20%
June 2007 5.33%
July 2007 5.47%
August 2007 5.60%
September 2007 5.73%
October 2007 5.87%
SC-1
Distribution Date Sequential Payment Trigger
----------------- --------------------------
November 2007 6.00%
December 2007 6.13%
January 2008 6.27%
February 2008 6.40%
March 2008 6.53%
April 2008 6.67%
May 2008 6.80%
June 2008 6.93%
July 2008 7.07%
August 2008 7.20%
September 2008 7.33%
October 2008 7.47%
November 2008 7.60%
December 2008 7.73%
January 2009 7.87%
On and after February 2009 8.00%
SC-2
SCHEDULE D
SPREAD ACCOUNT TRIGGERS
Distribution Date Spread Account Trigger
----------------- ----------------------
July 2004 0.15%
August 2004 0.30%
September 2004 0.45%
October 2004 0.60%
November 2004 0.75%
December 2004 0.90%
January 2005 1.05%
February 2005 1.20%
March 2005 1.37%
April 2005 1.54%
May 2005 1.71%
June 2005 1.88%
July 2005 2.05%
August 2005 2.22%
September 2005 2.39%
October 2005 2.56%
November 2006 2.73%
December 2006 2.90%
January 2006 3.07%
February 2006 3.24%
March 2006 3.37%
April 2006 3.50%
May 2006 3.63%
June 2006 3.75%
July 2006 3.95%
August 2006 4.15%
September 2006 4.25%
October 2006 4.25%
November 2006 4.35%
December 2006 4.45%
January 2007 4.55%
February 2007 4.65%
March 2007 4.65%
April 2007 4.75%
May 2007 4.85%
June 2007 4.95%
July 2007 4.95%
August 2007 5.05%
September 2007 5.05%
October 2007 5.15%
SD-1
Distribution Date Spread Account Trigger
----------------- ----------------------
November 2007 5.15%
December 2007 5.15%
January 2008 5.25%
February 2008 5.25%
March 2008 5.25%
April 2008 5.25%
On or after May 2008 5.35%
SD-2
EXHIBIT A
[FORM OF RIC]
A-1
EXHIBIT B
[FORM OF DISTRIBUTION DATE STATEMENT]
B-1