EXHIBIT 10.17
INTEREST RATE SWAP GUARANTEE AGREEMENT
This Interest Rate Swap Guarantee Agreement ("Agreement") is made as of this
10th day of May, 2001, by and between Western Financial Bank, a federal savings
and loan company, ("Bank" or "WFB"), Westcorp, a California corporation, and WFS
Receivables Corporation 2, a Nevada corporation ("WFSRC2") and is based upon the
following recitals.
RECITALS
A. Westcorp is the holding company of WFB, which in turn is the parent
company of WFS Financial Inc ("WFS").
B. Westcorp desires to reduce the level of risk assets maintained by the
Bank for the determination of the Bank's regulatory capital requirement
while concurrently avoiding the creation of additional amounts of
retained interest in securitized assets ("RISA") on the consolidated
financial statements of the Bank.
C. WFSRC2 is a first tier subsidiary of Westcorp acting as the originator
or co-originator of one or more asset securitization trusts and as a
seller of WFS auto contracts to each of such trusts, this reduction of
risk and avoidance of additional amounts of RISA on the consolidated
financial statements of the Bank can be accomplished upon the
non-recourse sale of WFS originated auto contracts on a whole loan
servicing released basis to WFSRC2.
D. Regulatory review and approval has been obtained to allow WFS to sell
auto contracts to WFSRC2.
E. The sale of automobile contracts by WFS to WFSRC2 is subject to
obtaining a written fairness opinion from Xxxxxxxx Xxxxx Xxxxxx &
Zukin, an unrelated third party qualified to render such opinions, to
provide support for the conclusion that the terms of the sale of WFS
auto contracts to WFSRC2 and the terms of any subsequent servicing by
WFS of those contracts for the benefit of WFSRC2 or any securitization
trust to which those auto contracts are subsequently transferred by
WFSRC2 meet the standards imposed by Federal Reserve Act Section 23B
and Office of Thrift Supervision Regulation Section 563.42.
F. Westcorp desires to limit the amount of collateral required and
prepayment risk related to the floating rate note classes A3 and A4
issued by the WFS 2001-B Owner Trust,
which supported the most economic secured financing available to
facilitate the aforementioned loan sale.
AGREEMENT
In consideration of the mutual promises set forth herein, and in reliance upon
the recitals set forth above, the parties agree as follows:
1. Further Assurances. The Companies agree that they will modify, amend,
or restate any provision of this agreement as necessary in order to
insure that this agreement complies with all applicable federal laws
and OTS regulations with respect to transacting business between the
parties.
2. Cash Deposit. Westcorp shall deposit the sum of $3,000,000 into a
non-interest bearing account at WFB to support the guarantee of the
timely exchange of interest payments required pursuant to the
Prepayment Differential Interest Rate Swap Agreement between the Bank
and Citibank, N. A., dated as of May 9, 2001, and to reduce the
collateral requirements that would have been required of WFSRC2 had
this agreement not been made. Further, if Westcorp elects to place the
cash deposit in an interest bearing account at the Bank, then Westcorp
shall pay a fee of 0.125% per annum times the amount deposited in the
interest bearing account. The cash shall be deposited no later than 24
hours after the closing of the aforementioned loan sale.
3. Term.
3.1. This Agreement shall commence as of the date stated above and
shall continue until terminated by the parties.
3.2. This Agreement may be terminated immediately for breach of any
covenant, obligation, or duty herein contained or for
violation of law, ordinance, statute, rule or regulation
(collectively referred to as "law") governing the conduct of
any party hereto.
3.3. Termination shall not effect the obligations of the Companies
with respect to any event occurring before termination. Each
Company shall be bound by and responsible for any transaction
or expense properly agreed to or incurred by the other Company
in connection with services performed hereunder but not
settled, paid or reimbursed prior to the date of any such
termination. Upon termination of this Agreement, the fee
referred to above will be prorated, but the due date thereof
shall not be changed.
4. Representations and Warranties of Each Company. Each Company on its
behalf alone represents and warrants to and for the benefit of the
other Company as follows:
4.1. Corporate Existence and Qualifications. Each Company is either
a corporation or association duly organized, validly existing
and in good standing under the laws of the United States or of
the State of California, as applicable, with full corporate
power to own its properties and to carry on its business as
now owned and operated by Company.
4.2. Licenses: Compliance with Laws. Each Company has all licenses,
franchises, permits and authorizations necessary ("Licenses"),
or is otherwise exempt from having to obtain such Licenses,
for the lawful conduct by the respective Company of its
business. Neither Company has violated, nor is in violation
of, any such licenses, franchises, permits or authorizations
or any applicable statues, laws, ordinances, rules or
regulations of any federal, state, or local governmental
bodies, agencies or subdivisions having, asserting or claiming
jurisdiction over it or over any part of its operations.
5. Covenants Regarding Corporate Existence.
5.1 Preservation of Corporate Existence and Qualifications. Each
Company shall keep in full effect its existence, rights and
franchises as a corporation or association under the laws of
the jurisdiction in which each is organized and will obtain
and preserve its qualifications to carry on business as a
foreign corporation in each jurisdiction in which such
qualification is or shall be necessary.
5.2 Observation of Corporate Formalities. Each Company shall at
all times observe the applicable legal requirements for the
recognition of Company as a corporate entity separate and
apart from any other Company, including without limitation the
following:
(a) Each Company shall maintain corporate records and
books of account separate from those of every other Company;
(b) Each Company shall hold meetings of its Board of
Directors as appropriate to authorize its corporate actions;
(c) Each Company shall hold meetings of its
shareholder(s) as appropriate and as required by applicable law in the
jurisdiction in which organized to authorize its corporate actions;
(d) Each Company shall file all reports required by the
Secretary of State in any and all jurisdictions in which that Company is
licensed or qualified, including the annual statement by whatever name
denominated, in a timely manner; and
(e) Each Company shall ensure that any applicable yearly
franchise taxes are paid in a timely manner so as to maintain its corporate
existence uninterrupted.
5.3 Advertising. Each Company will at all times hold itself out to
the public as an entity separate from every other Company and
its advertising and marketing shall reflect such separate
corporate existence.
5.4 OTS Regulations. Each Company shall comply with all applicable
OTS regulations. If required by 12 C.F.R. Section 563.37(b),
any instrument evidencing borrowing by a Company shall
indicate that no other Company is responsible for any such
debt.
6. Liability: Consultation with Counsel. With respect to the obligations
hereunder, no Company shall assume responsibility or liability with respect to
the business or affairs of any other Company except to the extent provided for
in this Agreement. Each benefiting Company under this Agreement ("Indemnitor")
shall indemnify, defend and hold harmless the performing Company against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies (collectively the "Claims"),
including without limitation interest penalties and attorney's fees, that such
performing Company shall incur or suffer, which arise, result from or relate to
(i) conduct by Indemnitor of its business and operations and (ii) breach by
Indemnitor of its obligations pursuant to this Agreement. Notwithstanding
anything contained herein to the contrary, Indemnitor's obligations pursuant to
this section shall not be applicable to Claims arising directly from the
performing Company's bad faith, gross negligence or willful misconduct. This
Agreement shall create no right, benefit or privilege in favor of any person not
a party hereto, and no person not a party hereto shall have any recourse against
the performing Company for any advice, service or facility provided or omitted
by performing Company pursuant to this Agreement. The performing Company may
consult with legal counsel (who may also be counsel to Indemnitor) concerning
any questions that may arise with respect to its duties and obligations
hereunder, and it shall be fully protected in respect of any action taken or
omitted by it hereunder in good faith reliance on any opinion of such counsel
with respect to any such duty or obligation.
7. General.
7.1 This Agreement may be modified, amended or superseded in whole
or in part, at any time, by a writing executed by the parties
hereto.
7.2 The laws of California shall govern this Agreement, except to
the extent federal law or regulation supersedes any such laws.
7.3 This Agreement may be executed in counterparts, all of which,
taken together shall constitute one agreement.
7.4 No Company shall assign this Agreement without the prior
written consent of each of the other Companies, which consent
shall not unreasonably be withheld.
Wherefore, the undersigned have executed this Agreement as of the date first set
forth above.
WESTERN FINANCIAL BANK
By:________________________________
Its:_______________________________
WFS RECEIVABLES CORPORATION 2
By:________________________________
Its:_______________________________
WESTCORP
By:________________________________
Its:_______________________________
