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EXHIBIT 10.4
[FORM OF FSA NOTE POLICY]
FINANCIAL
SECURITY FINANCIAL GUARANTY
ASSURANCE(R) INSURANCE POLICY
OBLIGOR: WFS Financial 1998-A Owner Trust Policy No.:
OBLIGATIONS: Date of Issuance: , 1998
$ % Auto ReceivableBacked Notes, Class A-1,
$ % Auto Receivable Backed Notes, Class A-2,
$ % Auto Receivable Backed Notes, Class A-3,
$ % Auto Receivable Backed Notes, Class A-4,
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such Holder
that is subsequently avoided in whole or in part as a preference payment under
applicable law (such payment to be made by Financial Security in accordance with
Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as described
in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal on an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term of this Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto, or by the merger,
consolidation or dissolution of the Obligor. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever, including payment, or provision
being made for payment, of the Obligations prior to maturity. This Policy may
not be cancelled or revoked during the Term of this Policy. THIS POLICY IS NOT
COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76
OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By______________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, NY 10022-6022 (212) 826-0100
Form 100NY (5/89)
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ENDORSEMENT NO. 1
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: WFS Financial 1998-A Owner Trust
OBLIGATIONS: $ % Auto Receivable Backed Notes,
Class A-1, $ % Auto Receivable Backed
Notes, Class A-2, $ % Auto
Receivable Backed Notes, Class A-3, and $
% Auto Receivable Backed Notes, Class A-4
Date of Issuance: , 1998
Policy No.:
1. Definitions. For all purposes of this Policy, the terms
specified below shall have the meanings or constructions provided below.
Capitalized terms used and not defined herein shall have the respective meanings
ascribed to such terms in the Sale and Servicing Agreement, dated as of , 1998,
by and among the Trust, WFS Financial Auto Loans, Inc., as Seller, and WFS
Financial Inc, as Master Servicer (as amended from time to time in accordance
with its terms, the "Sale and Servicing Agreement") or, if not defined therein,
then in the Indenture, dated as of , 1998, by and between the Trust and Bankers
Trust Company, unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday,
or (ii) a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to be closed.
"Guaranteed Payments" means, as to each Distribution Date, the
amount equal to the sum of (i) the Guaranteed RIC Payments for such Distribution
Date and (ii) the Scheduled Payments for such Distribution Date less the amount
of any payment under this Policy of the Guaranteed RIC Payments for such
Distribution Date that is required to be applied pursuant to the Sale and
Servicing Agreement to pay such Scheduled Payments; provided, however, that the
aggregate amount of payments guaranteed to be paid under this Policy shall not
exceed the Outstanding Amount of the Notes plus all interest thereon.
"Guaranteed RIC Payments" means (i) with respect to the first
Distribution Date to occur during any period in which Financial Security's
claims-paying ability is not rated Aa2 or higher by Moody's and AAA by Standard
& Poor's and amounts in the Collection Account, Note Distribution Account,
Certificate
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Distribution Account and the Spread Account shall have been invested in the RIC
pursuant to Section 2(a) thereof, an amount equal to the RIC Payment Amount for
such Distribution Date, (ii) with respect to the second Distribution Date to
occur during any period in which Financial Security's claims-paying ability is
not rated Aa2 or higher by Moody's and AAA by Standard & Poor's and amounts in
the Collection Account in respect of such second Distribution Date shall have
been invested in the RIC pursuant to Section 2(a) thereof, an amount equal to
the Supplemental RIC Payment Amount for such second Distribution Date, and (iii)
with respect to any other date, zero; provided, however, that with respect to
clauses (i) and (ii) above, the amount payable in respect of the Guaranteed RIC
Payments under this Policy on any Distribution Date shall not exceed the
Scheduled Payments for such Distribution Date.
"Indenture Trustee" means Bankers Trust Company, as trustee under
the Indenture, and any successor in such capacity.
"Policy" means this Financial Guaranty Insurance Policy and
includes each endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial
Security and to the Fiscal Agent (as defined below), if any, prior to 12:00
noon, New York City time, on a Business Day; delivery either on a day that is
not a Business Day, or after 12:00 noon, New York City time, shall be deemed to
be receipt on the next succeeding Business Day. If any notice or certificate
given hereunder by the Indenture Trustee is not in proper form or is not
properly completed, executed or delivered, it shall be deemed not to have been
Received, and Financial Security or its Fiscal Agent shall promptly so notify
the Indenture Trustee and the Indenture Trustee may submit an amended notice.
"RIC" means the Reinvestment Contract, dated as of , 1998,
between Western Financial Bank and the Indenture Trustee, as in effect on the
date of this Policy and without regard to any amendment or modification of the
RIC except amendments or modifications to which Financial Security has given its
prior written consent.
"RIC Payment Amount" means, as to any Distribution Date, certain
obligations due and owing under the RIC for such Distribution Date in an amount
equal to the sum of (A) the Spread Account Invested Funds (as defined in the
RIC) plus the Holding Account Deposited Funds (as defined in the RIC) and (B)
the amount that is equal to the lesser of (a) the Specified Account Invested
Funds (as defined in the RIC) and (b) the amount by which (i) the sum of (x) the
aggregate amount due and owing on such Distribution Date to the Holders of the
Notes and the Certificates, (y) the amount (if any) required to be deposited out
of Excess Amounts into the Spread Account on such Distribution Date (after
giving effect to distributions and other payments required to have been made on
such date prior to such required deposit and assuming that the
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Spread Account Invested Funds were available in the Spread Account for such
date), and (z) the amount of Servicing Fee due and owing to the Master Servicer
on such date exceeds (ii) the Net Collections for such Distribution Date that
are otherwise on deposit in the Collection Account and available for payment of
the amounts referred to in clause (i) above pursuant to the Sale and Servicing
Agreement.
"Scheduled Payments" means, as to each Distribution Date, the
payment to be made to Holders in accordance with the original terms of the
Obligations when issued and without regard to any subsequent amendment or
modification of the Obligations or of the Indenture, except amendments or
modifications to which Financial Security has given its prior written consent,
in an amount equal to (i) the Note Interest Distributable Amount and (ii) the
Note Principal Distributable Amount. Scheduled Payments do not include payments
which become due on an accelerated basis as a result of (a) a default by the
Obligor, (b) any election to pay principal on an accelerated basis, (c) the
occurrence of an Event of Default under the Indenture or (d) any other cause,
unless Financial Security elects, in its sole discretion, to pay in whole or in
part such principal due upon acceleration, together with any accrued interest to
the date of acceleration. In the event Financial Security does not so elect,
this Policy will continue to guarantee payment on the Notes in accordance with
their original terms. Scheduled Payments shall not include any portion of a Note
Interest Distributable Amount due to Noteholders because a notice and
certificate in proper form as required by paragraph 2 hereof was not timely
Received by Financial Security, unless, in each case, Financial Security elects,
in its sole discretion, to pay such amount in whole or in part. Scheduled
Payments shall not include any amounts due in respect of the Obligations
attributable to any increase in Interest Rate, penalty or other sum payable by
the Obligor by reason of any default or event of default in respect of the
Obligations, or by reason of any deterioration of the credit worthiness of the
Obligor, nor shall Scheduled Payments include, nor shall coverage be provided
under this Policy in respect of, any taxes, withholding or other charge with
respect to any Holder imposed by any governmental authority due in connection
with the payment of any Scheduled Payment to a Holder. Notwithstanding the
foregoing, the term "Scheduled Payments" that appears on the face of the Policy
(and only on the face of the Policy) shall mean "Guaranteed Payments" as such
term is defined in this Endorsement No. 1 to the Policy.
"Supplemental RIC Payment Amount" means, as to the first
Distribution Date following the Distribution Date (if any) on which the
Guaranteed RIC Payment shall have been equal to the RIC Payment Amount, the
amount that is equal to the lesser of (A) the amount of remaining Specified
Account Invested Funds (if any) that is required to be a part of the Net
Collections for such Distribution Date and (B) the amount (if any) by which (i)
the sum of (x) the aggregate amount due and owing on such Distribution Date to
Holders of the Notes and the Certificates plus (y) the amount (if any)
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required to be deposited out of Excess Amounts into the Spread Account on such
Distribution Date (after giving effect to distributions and other payments
required to have been made on such date prior to such required deposit) exceeds
(ii) the Net Collections for such Distribution Date that are otherwise on
deposit in the Collection Account and available for payment of the amounts
referred to in clause (i) above pursuant to the Sale and Servicing Agreement.
"Term of this Policy" means the period from and including the
Closing Date to and including the date on which (i) all Scheduled Payments have
been paid or deemed to be paid within the meaning of Section 4.01 of the
Indenture, (ii) any period during which any Scheduled Payment could have been
voided in whole or in part as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law has expired, and (iii) if any
proceedings requisite to voidance as a preference payment have been commenced
prior to the occurrence of (i) and (ii), a final and nonappealable order in
resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Guaranteed
Payments. Following Receipt by Financial Security of a notice and certificate
from the Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of
Guaranteed Payments out of the funds of Financial Security on the later to occur
of (a) 12:00 noon, New York City time, on the fourth Business Day following
Receipt of such notice and certificate and (b) 12:00 noon, New York City time,
on the Distribution Date to which such claim relates. Payments due hereunder, in
respect of Guaranteed Payments, will be disbursed by wire transfer of
immediately available funds to the Indenture Trustee.
Financial Security shall be entitled to pay any amount hereunder
in respect of Guaranteed Payments, including any acceleration payment, whether
or not any notice and certificate shall have been Received by Financial Security
as provided above. Financial Security's obligations hereunder in respect of
Guaranteed Payments shall be discharged to the extent funds are disbursed by
Financial Security as provided herein, whether or not such funds are properly
applied by the Indenture Trustee.
3. Notices and Conditions to Payment in Respect of Guaranteed
Payments Avoided as Preference Payments. If any Guaranteed Payments is avoided
as a preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (A) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (a) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that (i) the Holder is required to
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return payments of principal of or interest paid on the Obligations or (ii) the
Indenture Trustee is required to return payments of the RIC Payment Amount or
the Supplemental RIC Payment Amount paid under the RIC, during (in each case)
the Term of this Policy because such distributions or payments were avoidable as
preference payments under applicable bankruptcy law (the "Order"), (b) a
certificate of the Holder (or, in the case of the RIC, of the Indenture Trustee)
that the Order has been entered and is not subject to any stay and (c) an
assignment duly executed and delivered by the Holder (or, in the case of the
RIC, by the Indenture Trustee), in such form as is reasonably required by
Financial Security and provided by Financial Security (i) to the Holder
irrevocably assigning to Financial Security all rights and claims of the Holder
relating to or arising under the Obligations or (ii) to the Indenture Trustee
irrevocably assigning to Financial Security all rights and claims of the
Indenture Trustee relating to or arising under the RIC, to the extent of the RIC
Payment Amount and the Supplemental RIC Payment Amount, as the case may be, in
each case (as to clauses (i) and (ii)) against the debtor which made such
preference payment or otherwise with respect to such preference payment or (B)
the date of Receipt by Financial Security from the Indenture Trustee of the
items referred to in clauses (a), (b) and (c) above if, at least four Business
Days prior to such date of Receipt, Financial Security shall have Received
written notice from the Indenture Trustee that such items were to be delivered
on such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, and not to the Indenture Trustee or any Holder
directly (unless a Holder (or, in the case of the RIC, the Indenture Trustee)
has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Indenture Trustee for distribution to
such Holder (or, in the case of the RIC, for application in accordance with the
Sale and Servicing Agreement) upon proof of such payment reasonably satisfactory
to Financial Security). In connection with the foregoing, Financial Security
shall have the rights provided pursuant to Section 5.19 of the Indenture.
4. Governing Law. This Policy shall be governed by, and shall be
construed in accordance with, the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy,
Financial Security may appoint a fiscal agent (the "Fiscal Agent") for purposes
of this Policy by written notice to the Indenture Trustee at the notice address
specified in the Sale and Servicing Agreement specifying the name and notice
address of the Fiscal Agent. From and after the date of receipt of such notice
by the Indenture Trustee, (i) copies of all notices and documents required to be
delivered to Financial Security pursuant to this Policy shall be simultaneously
delivered to the Fiscal Agent and to
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Financial Security and shall not be deemed Received until Received by both and
(ii) all payments required to be made by Financial Security under this Policy
may be made directly by Financial Security or by the Fiscal Agent on behalf of
Financial Security. The Fiscal Agent is the agent of Financial Security only and
the Fiscal Agent shall in no event be liable to any Holder for any acts of the
Fiscal Agent or any failure of Financial Security to deposit, or cause to be
deposited, sufficient funds to make payments when due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by
applicable law, Financial Security agrees not to assert, and hereby waives, for
the benefit of each Holder, all rights (whether by counterclaim, set-off or
otherwise) and defenses (including, without limitation, the defense of fraud),
whether acquired by subrogation, assignment or otherwise, to the extent that
such rights and defenses may be available to Financial Security to avoid payment
of its obligations under this Policy in accordance with the express provisions
of this Policy.
7. Notices. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses
by writing mailed or delivered to the Trustee.
8. Priorities. In the event that any term or provision of the
face of this Policy is inconsistent with the provisions of this Endorsement, the
provisions of this Endorsement shall take precedence and shall be binding.
9. Exclusions from Insurance Guaranty Funds. This Policy is not
covered by the Property/Casualty Insurance Security Fund specified in Article 76
of the New York Insurance Law. This Policy is not covered by the Florida
Insurance Guaranty Association created under Part II of Chapter 631 of the
Florida Insurance Code. In the event that Financial Security were to become
insolvent, any claims arising under this Policy are excluded from coverage by
the California Insurance Guaranty Association, established pursuant to Article
14.2 of Chapter 1 of Part 2 of Division 1 of the California Insurance Code.
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10. Surrender of Policy. The Indenture Trustee shall, upon
request, surrender this Policy to Financial Security for cancellation upon
expiration of the Term of this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has
caused this Endorsement No. 1 to be executed by its Authorized
Officer.
FINANCIAL SECURITY ASSURANCE INC.
By
----------------------------
Authorized Officer
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EXHIBIT A
CERTIFICATE OF CLAIM
(Letterhead of Trustee)
Dated:
------------------------
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Senior Vice President
Re: WFS Financial 1998-A Owner Trust
The undersigned, a duly authorized officer of Bankers Trust
Company (the "Indenture Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. -N dated , 1998 (the "Policy") issued by Financial
Security in respect of the $ % Auto Receivable Backed Notes, Class A-1, $ %
Auto Receivable Backed Notes, Class A-2, $
% Auto Receivable Backed Notes, Class A-3, and $
% Auto Receivable Backed Notes, Class A-4 (collectively,
the "Obligations") that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Holders.
(ii) the sum of all amounts on deposit (or scheduled to be on
deposit) in the Collection Account and Spread Account and available for
application in accordance with the Sale and Servicing Agreement will be
$_________ (the "RIC Shortfall") less than the Guaranteed RIC Payment.
Of such RIC Shortfall, $__________ is attributable to the Guaranteed RIC
Payment amount to be paid to the Indenture Trustee for deposit into the
Collection Account and $__________ is attributable to Guaranteed RIC
Payment amount to be paid to the Indenture Trustee as collateral agent
for deposit into the Spread Account.
(iii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Note Distribution Account and available for distribution
to the Holders pursuant to the Indenture will be $ (the "Note
Shortfall") less than the aggregate amount of Scheduled Payments with
respect to [DISTRIBUTION DATE]. Of such Note Shortfall, $__________ is
attributable to Scheduled Payments to be made to Holders of the
Obligations.
(iv) The Indenture Trustee is making a claim under the Policy
[(i) for the RIC Shortfall to be applied to payment of
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the Guaranteed RIC Payment and (ii)] for the Note Shortfall to be
applied to distributions of principal or interest or both with respect
to the Obligations.
(v) The Indenture Trustee agrees that, following receipt of
funds from Financial Security, it shall (a) hold such amounts in trust
and apply the same directly to the payment of Guaranteed Payments; (b)
not apply such funds for any other purpose; (c) not commingle such funds
with other funds held by the Indenture Trustee; and (d) maintain an
accurate record of such payments with respect to each Obligation and
with respect to the RIC and the corresponding claim on the Policy and
proceeds thereof and, if the Obligation is required to be surrendered or
presented for such payment, shall stamp on each such Obligation the
legend $"[insert applicable amount] paid by Financial Security and the
balance hereof has been cancelled and reissued" and then shall deliver
such Obligation to Financial Security.
(vi) The Indenture Trustee, on behalf of the Holders, hereby
assigns to Financial Security the rights of the Holders with respect to
the Obligations to the extent of any payments under the Policy,
including, without limitation, any amounts due to the Holders in respect
of securities law violations arising from the offer and sale of the
Obligations and any amounts due and owing but unpaid under the RIC. The
foregoing assignment is in addition to, and not in limitation of, rights
of subrogation otherwise available to Financial Security in respect of
such payments. Payments to Financial Security in respect of the
foregoing assignment shall in all cases be subject to and subordinate to
the rights of the Holders to receive all Guaranteed Payments in respect
of the Obligations. The Indenture Trustee shall take such action and
deliver such instruments as may be reasonably requested or required by
Financial Security to effectuate the purpose or provisions of this
clause (vi).
(vii) The Indenture Trustee, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and
attorney-in-fact for the Indenture Trustee and each such Holder in any
legal proceeding with respect to the Obligations. The Indenture Trustee
hereby agrees that Financial Security may at any time during the
continuation of any proceeding by or against any debtor with respect to
which a preference claim (as defined below) or other claim with respect
to the Obligations or the RIC is being asserted under the United States
Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding")
direct all matters relating to such Insolvency Proceeding, including
without limitation, (A) all matters relating to any claim in connection
with an Insolvency Proceeding seeking the avoidance as a preferential
transfer of any payment made with respect to the Obligations or the RIC
(a "Preference Claim"), (B) the
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direction of any appeal of any order relating to any Preference Claim at
the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition,
the Indenture Trustee hereby agrees that Financial Security shall be
subrogated to, and the Indenture Trustee on its behalf and on behalf of
each Holder, hereby delegates and assigns, to the fullest extent
permitted by law, the rights of the Indenture Trustee and each Holder in
the conduct of any Insolvency Proceeding, including, without limitation,
all rights of any party to an adversary proceeding or action with
respect to any court order issued in connection with any such Insolvency
Proceeding.
(viii) Payment should be made by wire transfer directed to
[SPECIFY ACCOUNT].
Unless the context otherwise requires, any capitalized term used
in this Certificate of Claim shall have the meaning assigned thereto in the
Policy, including in the Endorsement thereto.
IN WITNESS WHEREOF, the Indenture Trustee has executed
and delivered this Certificate of Claim as of the day of
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, 19 .
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--------------------------
not in its individual capacity
but solely as Indenture Trustee
By:
-------------------------
Name:
Title:
For Financial Security Assurance Inc. or Fiscal Agent use only.
Wire transfer sent on by
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Confirmation Number .
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