EXHIBIT 10.3
EXECUTION COPY
INSURANCE, INDEMNITY AND PLEDGE AGREEMENT
THIS INSURANCE, INDEMNITY AND PLEDGE AGREEMENT is made as of August 1,
2003, by and among WFS FINANCIAL 2003-3 OWNER TRUST, a Delaware business trust
(the "Trust"), WFS RECEIVABLES CORPORATION 2, a Nevada corporation ("WFSRC2" or
"Seller"), WFS FINANCIAL INC, a California corporation ("WFS"), WESTCORP, a
California corporation ("Westcorp"), FINANCIAL SECURITY ASSURANCE INC., a New
York financial guaranty insurance company ("Financial Security"), and DEUTSCHE
BANK TRUST COMPANY AMERICAS, a New York banking corporation, in its capacities
as Collateral Agent and Proceeds Agent (each as defined below), and in its
capacity as Indenture Trustee under the Indenture referred to below (the
"Indenture Trustee").
INTRODUCTION
WFSRC2 is the owner of the Contracts. WFSRC2 proposes to pledge and
assign to the Trust all of its right, title and interest in and to the Contracts
and certain other property pursuant to the Sale and Servicing Agreement. The
Trust will issue Certificates pursuant to the Trust Agreement, and the Notes
pursuant to the Indenture.
Each Certificate will represent a fractional undivided interest in the
Trust. Each Note will be secured by the Indenture Property.
The Seller has agreed to convey a security interest in the Collateral
and all the property conveyed by it to the Trust (with the exception of the
Policy) pursuant to the Sale and Servicing Agreement in favor of Financial
Security prior in right to all liens, claims, rights or interests other than
those of the Trust.
The Trust has requested that Financial Security issue the Policy to the
Indenture Trustee to guarantee payment of the Scheduled Payments (as defined in
such Policy) on each Distribution Date in respect of the Notes.
Financial Security is willing to issue the Policy for the purpose
stated above if the Trust, the Seller, WFS, Westcorp and the Indenture Trustee
enter into this Agreement and, in order to secure the Seller's obligations
hereunder, the Seller pledges the Collateral to the Collateral Agent for the
benefit of Financial Security, subject to the provisions hereof.
The parties hereto desire to specify the indemnity and reimbursement
obligations to be provided in respect of amounts paid by Financial Security
under the Policy, the security to be provided in respect of such indemnity and
reimbursement obligations, and certain other matters.
AGREEMENTS
In consideration of the mutual promises, covenants, representations and
warranties hereinafter set forth, the parties hereto agree to as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. All words and phrases defined in
the Trust Agreement and the Sale and Servicing Agreement shall have the same
meanings in this Agreement unless a different meaning is set forth in this
Agreement. In addition, the following words and phrases shall have the following
respective meanings:
"Administration Agreement" means the Administration Agreement
dated as of the date hereof, among the Trust, Westcorp, as Administrator, the
Seller and the Indenture Trustee.
"Agreement" means this Insurance, Indemnity and Pledge
Agreement, as the same may be amended, modified or supplemented from time to
time.
"Authorized Officer" means, with respect to WFS, Westcorp, the
Seller or any corporation, the president, the chief financial officer or any
vice president.
"Bank" means, Western Financial Bank, a federally-chartered
savings association.
"Collateral" means all of the Contracts listed in the Schedule
of Contracts attached to the Sale and Servicing Agreement, including, without
limitation, all payments of Monthly P&I due on or after the Cut-Off Date
(excluding the amount allocable to principal and interest due prior to the
Cut-Off Date), all Net Liquidation Proceeds and Net Insurance Proceeds with
respect to any Financed Vehicle to which a Contract relates received on or after
the Cut-Off Date and all other proceeds received in respect of such Contracts
(other than payments of Monthly P&I due prior to the Cut-Off Date), and any and
all security interests in the Financed Vehicles; the Contract Documents relating
to the Contracts (except the Contract Documents for Contracts which have been
the subject of a Full Prepayment received on or after the Cut-Off Date but no
later than one Business Day prior to the Closing Date, in lieu of which the
Seller shall have deposited in or credited to the Collection Account on or prior
to the Closing Date an amount equal to such Full Prepayment); all Spread Account
Collateral; 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.
"Collateral Agent" means, initially, Deutsche Bank Trust
Company Americas, as collateral agent for Financial Security pursuant to this
Agreement and, thereafter, any successor Collateral Agent named pursuant to this
Agreement.
"Collateral Assignment" means, with respect to any Contracts,
the original instrument of collateral assignment of such Contracts by the Seller
to the Collateral Agent, substantially in the form included in Exhibit A hereto.
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"Controlling Party" means Financial Security so long as no Insurer
Insolvency shall have occurred and no Insurer Default shall have occurred and be
continuing and, at any other time, the Indenture Trustee.
"Event of Default" has the meaning set forth in Section 7.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Security's Authorized Agent" means each Authorized Officer
of Financial Security and each other Person that Financial Security designates
as its authorized agent with notice to WFSRC2.
"Indemnification Agreement" means the Indemnification Agreement, dated
as of the date hereof, among the Seller, WFS, Westcorp, Financial Security and
the Representative.
"Indenture Property" means the property pledged to the Indenture
Trustee on behalf of the Noteholders pursuant to the Indenture.
"Independent Accountant" means an independent accountant within the
meaning of the Securities Act and the Exchange Act.
"Late Payment Rate" means the greater of a per annum rate equal to 3%
in excess of (i) Financial Security's cost of funds, determined on a monthly
basis, or (ii) the arithmetic average of the prime or base lending rates
publicly announced by JPMorgan Chase Bank, N.A. (New York, New York) and
Citibank, N.A. (New York, New York), as in effect on the last day of the month
for which interest is being computed, but in no event greater than the maximum
rate permitted by law.
"Notice Address" means
(a) as to WFSRC2:
000 Xxxx Xxxx Xxxxxxx Xxxx, #000
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxx
(b) as to WFS:
00 Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
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(c) as to the Trust:
WFS Financial 2003-3 Owner Trust
c/o Chase Manhattan Bank USA, National
Association
as Owner Trustee
c/o XX Xxxxxx Xxxxx
000 Xxxxxxx Xxxxxxxxxx Xxxx
XXX0/0xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Institutional Trust Services
(d) as to Financial Security:
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Transaction Oversight
Telecopier Nos.: (000) 000-0000
(000) 000-0000
(in each case in which the notice or other communication to
Financial Security refers to an Event of Default or a claim
under the Policy or is a notice or other communication as to
which a failure on the part of Financial Security to respond
shall be deemed to constitute consent or acceptance, then with
a copy to the attention of the Senior Vice President -
Transaction Oversight)
(e) as to the Collateral Agent:
00 Xxxx Xxxxxx, 00xx Xxxxx, Mail Stop
XXX00-0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust & Agency
Services - Structured Finance Services
(f) as to the Proceeds Agent:
00 Xxxx Xxxxxx, 00xx Xxxxx, Mail Stop
XXX00-0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust & Agency
Services - Structured Finance Services
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(g) as to the Indenture Trustee:
00 Xxxx Xxxxxx, 00xx Xxxxx, Mail Stop
XXX00-0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Corporate Trust & Agency
Services - Structured Finance Services
(h) as to Westcorp:
00 Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
"Obligations" has the meaning set forth in Section 4.01 hereof.
"Owner Trustee" means Chase Manhattan Bank USA, National Association or
its successors in interest, acting not individually but solely on owner trustee
under the Trust Agreement.
"Policy" means the financial guaranty insurance policy, including
endorsements thereto, issued by Financial Security with respect to the Notes,
substantially in the form attached as Exhibit B hereto.
"Premium" means the premium payable to Financial Security by the Seller
as consideration for the issuance of the Policy, as set forth in a letter
agreement between the Seller and Financial Security.
"Proceeds Agent" means, initially, Deutsche Bank Trust Company
Americas, as proceeds agent for Financial Security and, thereafter, any
successor appointed by the Indenture Trustee and Financial Security.
"Prospectus" has the meaning set forth in Section 2.05(g) of this
Agreement.
"Registration Statement" has the meaning set forth in Section 2.05(g)
of this Agreement.
"Representative" means Credit Suisse First Boston LLC, as
representative of the several Underwriters.
"Rules and Regulations" has the meaning set forth in Section 2.05(g) of
this Agreement.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Seller, WFS, Westcorp and the Trust, as
the same may be amended or modified from time to time.
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"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means WFSRC2.
"Seller Assignments" means the Assignments, as such term is
defined in the Sale and Servicing Agreement.
"Special Event" means the occurrence of any one of the
following: (a) an Event of Default under this Agreement has occurred and is
continuing, (b) on any Calculation Date, the Net Charge-Off Percentage for the
related Calculation Day exceeds the Net Charge-Off Percentage Trigger, (c) on
any Calculation Date, the Delinquency Percentage for the three calendar month
period ending on such Calculation Day exceeds 2.50%, (d) any legal proceeding or
binding arbitration is instituted with respect to the Transaction, (e) any
governmental or administrative investigation, action or proceeding is instituted
that would, if adversely decided, result in a Material Adverse Change in respect
of Westcorp, the Seller, WFS or the Contracts, or (f) Financial Security pays a
claim under the Policy.
"Spread Account" means the Spread Account established pursuant
to the Sale and Servicing Agreement, in favor of the Indenture Trustee on behalf
of the Holders of the Notes and as Collateral Agent for Financial Security.
"Spread Account Collateral" means (i) the Spread Account
Initial Deposit, (ii) all other amounts deposited in or credited to the Spread
Account from time to time under the Sale and Servicing Agreement, (iii) all
Eligible Investments made with amounts on deposit in such Account, and (iv) all
earnings and distributions on, and proceeds of, any and all of the foregoing.
"Swap Agreement" means the ISDA Master Interest Rate Swap
Agreement dated August 28, 2003 between the Trust and the Swap Counterparty,
including the Schedule thereto, the Credit Support Annex thereto, the
Confirmation relating to the Class A-3B Notes, and together with any replacement
swap agreements thereafter approved by the Insurer.
"Swap Counterparty" means Bank of America, N.A.
"Transaction Agreements" means this Agreement, the WFS
Assignments, the Seller Assignments, the Collateral Assignment, the Sale and
Servicing Agreement, the Trust Agreement, the Certificate of Trust, the
Indenture, the Administration Agreement, the Underwriting Agreement, the
Subservicing Agreement (if any), the Swap Agreement, the Indemnification
Agreement and the RIC.
"Trust Agreement" means the Trust Agreement, dated as of July
31, 2003, as amended and restated as of August 28, 2003, among the Seller,
Financial Security and Chase Manhattan Bank USA, National Association, as Owner
Trustee.
"Underwriter Information" has the meaning set forth in Section
3.06(a)(i) of this Agreement.
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"Underwriters" means Credit Suisse First Boston LLC,, Banc of
America Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc.,
and Deutsche Bank Securities Inc., and each other institution, if any, named as
an underwriter in the Underwriting Agreement.
"Underwriting Agreement" means the Underwriting Agreement,
dated August 5, 2003 among the Seller, WFS and the Representative.
"Western Entities" means WFSRC2, Westcorp and WFS.
"WFS Assignments" means, with respect to the Contracts, the
original instrument or instruments of assignment of such Contracts by WFS, as
seller, to WFSRC2, substantially in the form included in Exhibit A hereto.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Trust. The
Trust represents and warrants to Financial Security as follows:
(a) Due Organization and Qualification. The Trust is duly
formed and validly existing as a Delaware statutory business trust and is in
good standing under the laws of the State of Delaware, with power and authority
to own its properties and to conduct its business and had at all relevant times,
and has, power, authority, and legal right to acquire the Contracts; the Trust
is duly qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals (together,
"approvals") necessary for the conduct of its business as described in the
Prospectus and the performance of its obligations under the Transaction
Agreements, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render the Contracts in such jurisdiction or any
Transaction Agreement unenforceable in any respect or would otherwise have a
material adverse effect upon the Trust; the Trust holds all material licenses,
certificates and permits from all governmental authorities necessary for the
conduct of its business as presently conducted.
(b) Power and Authority. The Trust has all necessary
trust power and authority to conduct its business as presently conducted; the
Trust has the power and authority to execute and deliver this Agreement and each
other Transaction Agreement to which the Trust is a party and to carry out the
terms of each such agreement, and has full power and authority to issue the
Notes and the Certificates and pledge and assign its assets pursuant to the
Indenture and has duly authorized the issuance of the Notes and the Certificates
and the assignment of its assets by all necessary trust proceedings, and the
execution, delivery and performance of this Agreement and each other Transaction
Agreement to which the Trust is a party has been duly authorized by all
necessary action on the part of the Trust.
(c) Valid and Binding Obligations. Each of the
Transaction Agreements to which the Trust is a party constitutes a legal, valid
and binding obligation
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of the Trust enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
receivership or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general equitable principles, regardless of whether
such enforceability shall be considered in a proceeding in equity or at law. The
Certificates, when executed, authenticated and delivered in accordance with the
Trust Agreement, will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Trust. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be entitled to the benefits of
the Indenture and will constitute legal, valid and binding obligations of the
Trust, enforceable in accordance with their terms.
(d) Noncontravention. The consummation of the transaction
contemplated by this Agreement and by each other Transaction Agreement to which
the Trust is a party, and the fulfillment of the terms hereof and thereof shall
not conflict with, result in any breach of any of the terms and provisions of,
nor constitute a default (nor an event which, with the giving of notice or
passage of time, or both, would constitute a default) under the Certificate of
Trust or the Trust Agreement, or any indenture, agreement or other instrument to
which the Trust is a party or by which it shall be 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 this
Agreement and the Collateral Assignment); nor violate any law or any order,
rule, or regulation applicable to the Trust of any court or of any federal or
state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Trust or its properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration, or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by the Trust of this
Agreement or of any other Transaction Agreement to which the Trust is a party,
except (in each case) such as have been obtained and are in full force and
effect.
(f) Pending Litigation or Other Proceeding. To the
Trust's best knowledge, there are no proceedings or investigations pending, or
threatened, before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Trust or its
properties: (A) asserting the invalidity of this Agreement or any other
Transaction Agreement to which the Trust is a party; (B) seeking to prevent the
issuance of the Notes or the Certificates, or the consummation of the
transactions contemplated by any of the Transaction Agreements to which the
Trust is a party; (C) seeking any determination or ruling that might materially
and adversely affect the validity or enforceability of, this Agreement or any
other Transaction Agreement to which the Trust is a party, or (D) involving the
Trust and which might adversely affect the federal or state tax attributes of
the Notes, the Certificates or the Trust.
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(g) Incorporation of Representations and Warranties. The
representations and warranties of the Trust set forth in each Transaction
Document are (in each case) true and correct as if set forth herein.
(h) Security Interest in Contracts. This Agreement,
together with possession of the Collateral by the Master Servicer pursuant to
the Sale and Servicing Agreement and the filing referred to below, creates as
security for the Seller's obligations under this Agreement a security interest
in favor of the Collateral Agent, as collateral agent for Financial Security, in
each item of the Collateral, as constituted as of the Closing Date; such
security interest has been perfected and is a valid, binding and enforceable
first priority security interest, subject only, to the extent set forth in
Section 5.01(d) hereof, to the interest of the Indenture Trustee with respect to
the Indenture Property and the Noteholders; a financing statement with respect
to the Contracts has been filed with the Nevada Secretary of State pursuant to
the Nevada UCC, and the marking required by Section 3.01(b)(xvi) of the Sale and
Servicing Agreement has been made on each Contract, except to the extent (if
any) that Financial Security has waived in writing compliance with such
requirement; no other filings in any jurisdiction or any other actions are
necessary to perfect the security interest of the Collateral Agent, as
collateral agent for Financial Security, in the Collateral, as constituted as of
the Closing Date, as against any third parties.
(i) Security Interest in Other Collateral. Assuming the
acquisition of Eligible Investments in accordance with the Sale and Servicing
Agreement, such Eligible Investments will be subject to a valid, binding and
enforceable first priority security interest in favor of the Collateral Agent,
as collateral agent for Financial Security, subject only, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Noteholders; assuming deposit of each
check constituting proceeds of the Contracts in the Collection Account or
Holding Account, as applicable, within ten days of receipt of such check by the
Master Servicer, such check will be subject to a valid, first priority perfected
security interest in favor of the Collateral Agent, subject, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Noteholders; at such time as it is
received by the Master Servicer and until deposited in the Collection Account;
the proceeds of such deposited check that remain in the Collection Account will
be subject to a valid, first priority security interest in favor of the
Collateral Agent, subject, to the extent set forth in Section 5.01(d) hereof, to
the interest of the Trust under the Sale and Servicing Agreement.
Section 2.02. Affirmative Covenants of the Trust. The Trust
hereby covenants and agrees with Financial Security that, at all times during
the term of this Agreement:
(a) Compliance with Agreements. The Trust will comply
with all terms and conditions of this Agreement and each other Transaction
Agreement to which it is a party. The Trust will not cause or permit to become
effective any amendment to or modification of any of the Transaction Agreements
unless Financial Security shall have previously approved in writing the form of
such amendment or modification.
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(b) Financial Statements; Accountants' Reports; Other
Information. The Trust shall keep or cause to be kept proper books and records
in which full and correct entries shall be made of financial transactions and
the assets and business of the Trust in accordance with generally accepted
accounting principles consistently applied. The Trust shall furnish to Financial
Security, simultaneously with the delivery of such documents to the Indenture
Trustee, the Noteholders or the Certificateholders, as the case may be, copies
of all reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee, the Noteholders or the Certificateholders,
as the case may be, pursuant to the Transaction Agreements (including, but not
limited to, copies of any reports submitted to the Trust by its independent
accountants in connection with any examination of the financial statements of
the Trust). Such reports and financial statements may be delivered to Financial
Security in digital/electronic format as set forth in Section
(c) Certificate of Compliance. The Trust shall deliver to
Financial Security concurrently with the delivery of the financial statements
required pursuant to paragraph (b) above, a certificate signed by an Authorized
Officer of the Administrator stating that:
(i) a review of the Trust's performance under
this Agreement and the other Transaction Agreements to which the Trust
is a party during such period has been made under such officer's
supervision; and
(ii) to the best of such officer's knowledge
based upon such review, the Trust has fulfilled all its obligations
under this Agreement and the other Transaction Agreements to which the
Trust is a party during such period, or, if there has been a default of
any such obligation, specifying each such default known to such officer
and the nature and status thereof.
(d) Access to Records; Discussions with Officers and
Accountants. The Trust shall, upon the reasonable request of Financial Security,
permit Financial Security's Authorized Agent at reasonable times (i) to inspect
such books and records of the Trust as they may relate to the Notes, the
Certificates and the obligations of the Trust under this Agreement and the other
Transaction Agreements to which the Trust is a party; and (ii) to discuss the
affairs, finances and accounts of the Trust with any of its respective officers,
directors and representatives, including its Independent Accountants.
(e) Financing Statements and Further Assurances. The
Trust will file all necessary financing statements, assignments or other
instruments, and any amendments or continuation statements relating thereto,
necessary to be kept and filed in such manner and in such places as may be
required by law to preserve and protect fully the lien and security interest in,
and all rights of the Collateral Agent with respect to the Collateral, and the
Trust shall, upon the request of Financial Security, from time to time, execute
and deliver and, if necessary, file such further instruments and take such
further action as may be reasonably necessary to effectuate the provisions of
this Agreement or to protect the security interest of the Collateral Agent in
the Collateral.
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(f) Retirement of Notes. The Trust shall, upon retirement
of the Notes, furnish to Financial Security a notice of such retirement and,
upon such retirement and the expiration of the term of the Policy, surrender the
Policy to Financial Security for cancellation.
(g) Maintenance of Separate Existence. The Trust shall at
all times hold itself out to the public, including the Seller, WFS, Westcorp and
the Bank, under the Trust's own name and as a separate and distinct entity from
the Seller, WFS, Westcorp and the Bank. The Trust shall maintain trust records
and books of account separate from those of the Seller, WFS, Westcorp and the
Bank, shall not commingle its assets with any other Person (except to the
limited extent (if any) permitted by the approval of Financial Security) and
shall obtain proper authorization from its equity owners of all trust action in
accordance with applicable law. The Trust shall maintain an arm's-length
relationship with the Bank, the Seller, Westcorp and WFS and each Affiliate of
any of them. The annual financial statements of the Trust shall disclose the
effects of the Trust's transactions in accordance with generally accepted
accounting principals and shall disclose that the assets of the Trust are not
available to pay creditors of WFS, Westcorp, Seller or any Affiliate thereof.
(h) Compliance with Article 76 of New York Insurance Law.
The Trust shall ensure that the Prospectus, and any supplements or amendments
thereto, and every preliminary prospectus delivered with respect to the Notes,
clearly disclose that the Policy is not covered by the property/casualty
insurance security fund specified in Article 76 of the New York Insurance Law.
(i) Tax Matters. The Trust will take all actions
necessary to ensure that the Trust is taxable as a partnership for federal,
state and local income and franchise tax purposes and not as an association (or
publicly traded partnership), taxable as a corporation.
Section 2.03. Negative Covenants of the Trust. The Trust
agrees and covenants with Financial Security that at all times during the term
of this Agreement:
(a) Amendments to Organizational Documents. The Trust
shall not amend, supplement or otherwise modify or cause to permit any
amendment, supplement or other modification of, any of the provisions of the
Certificate of Trust or the Trust Agreement without the prior written consent of
Financial Security.
(b) No Liens. Without the prior written consent of
Financial Security, the Trust shall not create, incur, assume or suffer to exist
any mortgage, deed of trust, security interest, assignment, deposit arrangement
or other preferential arrangement, charge or encumbrance (including without
limitation any conditional sale or other title retention agreement or finance
lease) of any nature upon or with respect to any of its properties or assets,
now owned or hereafter acquired, or sign or file under the Uniform Commercial
Code of any jurisdiction any financing statement that names the Trust as debtor,
or sign any security agreement authorizing any secured party thereunder to file
such a financing statement, except as contemplated in the Transaction
Agreements.
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(c) Creation of Indebtedness. Without the prior written
consent of Financial Security, the Trust shall not create, incur, assume or
suffer to exist any indebtedness other than indebtedness guaranteed or approved
in writing by Financial Security, except as contemplated in the Transaction
Agreements.
(d) Guarantees, Etc. Without the prior written consent of
Financial Security, the Trust shall not assume, guarantee, endorse or otherwise
be or become directly or contingently liable for the obligations of any Person
by, among other things, agreeing to purchase any obligation of another Person,
agreeing to advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(e) Subsidiaries. Without the prior written consent of
Financial Security, the Trust shall not form, or cause to be formed, any
Subsidiaries.
(f) Insolvency. The Trust shall not commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, consolidation or other relief with respect
to it or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets or make
a general assignment for the benefit of its creditors. The Trust shall not take
any action in furtherance of, or indicating the consent to, approval of, or
acquiescence in any of the acts set forth above. The Trust shall not admit in
writing its inability to pay its debts.
(g) Impairment of Rights. The Trust shall not take any
action, or fail to take any action that will interfere with the enforcement of
any rights under this Agreement or the other Transaction Agreements.
(h) Successor Parties. The Trust will not remove or
replace, or cause to be removed or replaced, the Master Servicer, the Indenture
Trustee, the Owner Trustee or the Administrator.
Section 2.04. [Reserved].
Section 2.05. Representations and Warranties of WFSRC2. WFSRC2
represents and warrants to Financial Security as follows:
(a) Due Organization. WFSRC2 is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, with power and authority to own its properties and to conduct its
business and had at all relevant times, and has, power, authority, and legal
right to acquire, pledge and sell the Contracts; WFSRC2 is duly qualified to do
business as a foreign corporation in good standing under the laws of each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, except such jurisdictions, if
any, in which the failure to be so qualified will not have a material adverse
effect on the business or properties of WFSRC2; WFSRC2 holds all material
licenses, certificates and permits from all governmental authorities necessary
for the conduct of its business as presently
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conducted. WFSRC2's principal place of business, chief executive office and the
office where it keeps its records is located at 000 Xxxx Xxxx Xxxxxxx Xxxx,
#000, Xxx Xxxxx, Xxxxxx, 00000.
(b) Corporate Power and Authority. WFSRC2 has full right,
power and authority to own its properties and to conduct its business as
presently conducted; WFSRC2 has the power and authority to execute and deliver
this Agreement and each other Transaction Agreement to which WFSRC2 is a party
and to carry out the terms of each such agreement, and has full power and
authority to transfer and assign the property to be transferred and assigned to
and deposited with the Owner Trustee as part of the Trust and has duly
authorized such transfer and assignment to the Trustee by all necessary
corporate action; and the execution, delivery, and performance of this Agreement
and each other Transaction Agreement to which WFSRC2 is a party has been duly
authorized by WFSRC2 by all necessary corporate action.
(c) Valid and Binding Obligations. Each of the
Transaction Agreements to which WFSRC2 is a party constitutes a legal, valid,
and binding obligation of WFSRC2, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, receivership or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding in equity or at
law. The Certificates, when executed, authenticated and delivered in accordance
with the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership in the Trust. The Notes when executed, authenticated and delivered in
accordance with the Indenture, will be entitled to the benefits of the Indenture
and will constitute legal, valid and binding obligations of the Trust,
enforceable in accordance with their terms.
(d) Noncontravention. The consummation of the
transactions contemplated by this Agreement and by each other Transaction
Agreement to which WFSRC2 is a party and the fulfillment of the terms hereof and
thereof shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute a default (nor an event which, with the giving of
notice or passage of time, or both, would constitute a default) under, the
articles of incorporation or by-laws of WFSRC2, or any indenture, agreement, or
other instrument to which WFSRC2 is a party or by which it shall be 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 this Agreement and the Collateral Assignment); nor violate any law
or any order, rule, or regulation applicable to WFSRC2 of any court or of any
federal or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over WFSRC2 or its properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and
13
performance by WFSRC2 of this Agreement or of any other Transaction Agreement to
which WFSRC2 is a party, except (in each case) such as have been obtained and
are in full force and effect.
(f) Pending Litigation or Other Proceeding. To WFSRC2's
best knowledge, there are no proceedings or investigations pending, or
threatened, before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over WFSRC2 or its properties:
(A) asserting the invalidity of this Agreement, any other Transaction Agreement
to which WFSRC2 is a party, 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 any of the Transaction Agreements to which
WFSRC2 is a party, (C) seeking any determination or ruling that might materially
and adversely affect the performance by WFSRC2 of its obligations under, or the
validity or enforceability of, this Agreement or any other Transaction Agreement
to which WFSRC2 is a party, or (D) involving WFSRC2 and which might adversely
affect the federal income tax attributes of the Notes, the Certificates or the
Trust.
(g) Registration Statement; Prospectus. The Seller has
filed with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-3 (No. 333-106649), including a base prospectus
and prospectus supplement for the registration of the Notes under the Securities
Act, (the "Registration Statement") and Seller has filed such amendments
thereto, if any, and such amended prospectuses and prospectus supplements as may
have been required to the date hereof, and will file such additional amendments
thereto and such amended prospectuses and prospectus supplements as may
hereafter be required. As used herein, the term "Registration Statement" means
the Registration Statement including the exhibits thereto and any material
incorporated by reference therein pursuant to the Securities Act and the
Exchange Act, and the information, if any, deemed to be part thereof pursuant to
the rules and regulations of the Commission under the Securities Act (the "Rules
and Regulations"). "Prospectus" means the Base Prospectus dated August 5, 2003,
that was filed pursuant to Rule 424(b) on August 19, 2003, together with the
Prospectus Supplement, also dated August 5, 2003. "Prospectus Supplement" means
the supplement to the Base Prospectus included in the Prospectus. As of the date
hereof, the Registration Statement and Prospectus filed under the Securities Act
or pursuant to the Rules and Regulations complies in all material respects with
the Securities Act and the Rules and Regulations, and the Registration Statement
at the time it became effective and at all times subsequent thereto complied,
and at each time that the Prospectus is provided to the Underwriters for use in
connection with the offering or sale of any Note will comply, in all material
respects with the requirements of the Securities Act and the Rules and
Regulations. The Registration Statement and the Prospectus at the time the
Registration Statement became effective did not and on the date hereof does not,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and the Prospectus at the time it was filed under the Securities Act
or the Rules and Regulations and at the time it was first provided to the
Underwriters for use in connection with the offering of the Notes did not, and
on the Closing Date does not, contain any untrue statement of a material fact or
omit
14
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, except that the representations and
warranties in this subparagraph shall not apply to statements in or omissions
from the Registration Statement or the Prospectus or any preliminary prospectus
made in reliance upon information furnished to the Seller in writing by
Financial Security expressly for use therein.
(h) Incorporation of Representations and Warranties. All
of the representations and warranties made by WFSRC2 in Section 3.01(b) of the
Sale and Servicing Agreement and as Depositor in, Section 2.09 of the Trust
Agreement and in the Underwriting Agreement are incorporated herein as if set
forth herein and each such representation and warranty is true and correct as of
the Closing Date.
(i) Security Interest in Contracts. This Agreement,
together with possession of the Collateral by the Master Servicer pursuant to
the Sale and Servicing Agreement and the filing referred to below, creates as
security for WFSRC2's obligations under this Agreement a security interest in
favor of the Collateral Agent, as collateral agent for Financial Security, in
each item of the Collateral owned by WFSRC2, as constituted as of the Closing
Date; such security interest has been perfected and is a valid, binding and
enforceable first priority security interest, subject only, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Noteholders; a financing statement
with respect to the Contracts has been filed with the Nevada Secretary of State
pursuant to the Nevada UCC, and the marking required by Section 3.01(b)(xvi) of
the Sale and Servicing Agreement has been made on each Contract, except to the
extent (if any) that Financial Security has waived in writing compliance with
such requirement; no other filings in any jurisdiction or any other actions are
necessary to perfect the security interest of the Collateral Agent, as
collateral agent for Financial Security, in the Collateral, as constituted as of
the Closing Date, as against any third parties.
(j) Security Interest in Other Collateral. Assuming the
acquisition of Eligible Investments in accordance with the Sale and Servicing
Agreement, such Eligible Investments will be subject to a valid, binding and
enforceable first priority security interest in favor of the Collateral Agent,
as collateral agent for Financial Security, subject only, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Noteholders; assuming deposit of each
check constituting proceeds of the Contracts in the Collection Account, within
ten days of receipt of such check by the Master Servicer, such check will be
subject to a valid, first priority perfected security interest in favor of the
Collateral Agent, subject, to the extent set forth in Section 5.01(d) hereof, to
the interest of the Indenture Trustee with respect to the Indenture Property and
the Noteholders; at such time as it is received by the Master Servicer and until
deposited in the Collection Account; the proceeds of such deposited check that
remain in the Collection Account will be subject to a valid, first priority
security interest in favor of the Collateral Agent, subject, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Trust under the Sale and
Servicing Agreement.
15
(k) Valid Transfer of Contracts. The Sale and Servicing
Agreement and the Seller Assignments constitute a valid sale, transfer and
assignment, as applicable, of the Contracts, enforceable against creditors of
and purchasers from WFSRC2, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
(l) [Reserved].
Section 2.06. Affirmative Covenants of WFSRC2. WFSRC2
covenants and agrees with Financial Security that, at all times during the term
of this Agreement:
(a) Compliance with Agreements. WFSRC2 will comply with
all terms and conditions of this Agreement and each other Transaction Agreement
to which it is a party. WFSRC2 will not cause or permit to become effective any
amendment to or modification of the Transaction Agreements unless Financial
Security shall have previously approved in writing the form of such amendment or
modification.
(b) Financial Statements, Accountants' Reports, Other
Information.
(i) WFSRC2 shall keep proper books and records,
in which full and correct entries shall be made of financial
transactions and the assets and business of WFSRC2 in accordance with
generally accepted accounting principles consistently applied. WFSRC2
shall furnish to Financial Security, simultaneously with the delivery
of such documents to the Owner Trustee, Indenture Trustee, the
Noteholders or the Certificateholders, as the case may be, copies of
all reports, certificates, statements or notices furnished to the Owner
Trustee, the Noteholders or the Certificateholders, as the case may be,
pursuant to the Transaction Agreements, including:
(1) Annual Financial Statements. The
unaudited balance sheets of WFSRC2, as of the end of such fiscal year
and the unaudited statements of income, changes in equity and cash
flows of WFSRC2 for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently
applied, and by the certificate specified in Section 2.06(c) hereof.
(2) Quarterly Financial Statements. The
unaudited balance sheets of WFSRC2, as of the end of such quarter and
the unaudited statements of income, changes in equity and cash flows of
WFSRC2 for the portion of the fiscal year then ended, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently
applied (subject to normal year-end
16
adjustments), and accompanied by the certificate specified in Section
2.06(c) hereof if such certificate is required to be provided pursuant
to such Section.
(ii) Accountants' Reports. [Reserved]
(iii) Other Information. Promptly upon receipt
thereof, copies of all reports, statements, certifications, schedules,
or other similar items delivered to or by WFSRC2 pursuant to the terms
of the Transaction Agreements and, promptly upon request, such other
data as Financial Security may reasonably request; provided, however,
that WFSRC2 shall not be required to deliver any such items if
provision by some other party to Financial Security is required under
the Transaction Agreements unless such other party fails to deliver
such item and notice of such failure is given to WFSRC2. WFSRC2 shall,
upon the request of Financial Security, permit Financial Security or
its authorized agents (A) to inspect the books and records of WFSRC2 as
they may relate to the Notes, the Certificates, the obligations of
WFSRC2 under the Transaction Agreements, the Transaction and, but only
following the occurrence of a Special Event, WFSRC2's respective
businesses; (B) to discuss the affairs, finances and accounts of WFSRC2
with its respective Chief Operating Officer and Chief Financial Officer
(or a Responsible Officer with responsibilities and functions
equivalent thereto), no more frequently than annually, unless a Special
Event has occurred; and (C) to discuss the affairs, finances and
accounts of WFSRC2 with its independent accountants following the
occurrence of a Special Event, provided that an officer of WFSRC2 shall
have the right to be present during such discussions. Such inspections
and discussions shall be conducted during normal business hours and
shall not unreasonably disrupt the business of WFSRC2. The books and
records of WFSRC2 will be maintained at the respective addresses
designated herein for receipt of notices, unless WFSRC2 shall otherwise
advise the parties hereto in writing.
(iv) Executed Originals. WFSRC2 shall provide or
cause to be provided to Financial Security an executed original copy of
each document executed in connection with the Transaction within 60
days after the Closing Date (without duplication of documents provided
to Financial Security by an Affiliate of WFSRC2), provided, that WFSRC2
shall provide or cause to be provided to any of the Rating Agencies an
executed copy of any document executed in connection with the
Transaction within such earlier time frame after the Closing Date, as
may be requested by such Rating Agency.
(v) Additional Documents. Promptly after the
filing or sending thereof, copies of all proxy statements, financial
statements, reports and registration statements which WFSRC2 files, or
delivers to, the IRS, the Commission, or any other Federal, state or
foreign government agency, authority or body which supervises the
issuance of securities by WFSRC2 or any national securities exchange.
17
(vi) Delivery by digital/electronic means. The
delivery by WFSRC2 to Financial Security of (i) the annual financial
statements and quarterly financial statements pursuant to Sections
2.06(b)(i)(1) and (2), respectively, and (iii) minutes of meetings of
its board of directors pursuant to Section 2.06(h) hereof, may be made
via digital/electronic means as set forth in Section 8.19 hereof.
(c) Certificate of Compliance. WFSRC2 shall deliver to
Financial Security, concurrently with the delivery of the financial statements
required pursuant to paragraph (b) above, a certificate signed by an Authorized
Officer of WFSRC2 stating that:
(i) a review of WFSRC2's performance under this
Agreement and the other Transaction Agreements to which WFSRC2 is a
party during such period has been made under such officer's
supervision;
(ii) to the best of such officer's knowledge,
based upon such review, WFSRC2 has fulfilled all its obligations under
this Agreement and the other Transaction Agreements to which WFSRC2 is
a party during such period, or, if there has been a default of any such
obligation, specifying each such default known to such officer and the
nature and status thereof.; and
(iii) the attached financial reports submitted
pursuant to paragraph (b) above are complete and correct in all
material respects and present fairly the financial condition and
results of operations of WFSRC2 as of the dates and for the periods
indicated, in accordance with generally accepted accounting principals
consistently applied (subject as to interim statements to normal
year-end adjustments).
(d) Access to Records; Discussions With Officers and
Accountants. WFSRC2 shall, upon the reasonable request of Financial Security,
permit an authorized agent of Financial Security at reasonable times (i) to
inspect such books and records of WFSRC2 as may relate to the Notes, the
Certificates and the obligations of WFSRC2 under this Agreement and the other
Transaction Agreements to which WFSRC2 is a party; and (ii) to discuss the
affairs, finances and accounts of WFSRC2 with any of its respective officers,
directors and representatives, including its Independent Accountants.
(e) Maintain Licenses. WFSRC2 shall maintain all
licenses, permits, charters and registrations that are material to the
performance by WFSRC2 of its obligations under the Transaction Agreements to
which it is a party or by which WFSRC2 is bound.
(f) Financing Statements and Further Assurances. WFSRC2
will file all necessary financing statements, assignments or other instruments,
and any amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by law to
preserve and protect fully
18
the Lien and security interest in and all rights of Financial Security with
respect to the Collateral, subject to the Sale and Servicing Agreement, and
WFSRC2 shall, upon the request of Financial Security, from time to time, execute
and deliver and, if necessary, file such further instruments and take such
further action as may be reasonably necessary to effectuate the provisions of
this Agreement or to protect the security interest of Financial Security,
subject to the Sale and Servicing Agreement, in the Collateral.
(g) Maintain Existence; Merger. WFSRC2 shall keep in full
effect its existence, rights and franchises under the laws of the State of
Nevada, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Contract
Documents and the Transaction Agreements to which WFSRC2 is a party. WFSRC2
shall not consolidate with or merge into any other Person or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless the
Person formed by such consolidation or into which WFSRC2 has merged or the
Person which acquires by conveyance, transfer or lease substantially all the
assets of WFSRC2 as an entirety, can lawfully perform the obligations of WFSRC2
hereunder and executes and delivers to the Owner Trustee an agreement, in form
and substance reasonably satisfactory to the Owner Trustee and Financial
Security, which contains an assumption by such Person of the due and punctual
performance and satisfaction of each covenant and condition to be performed or
satisfied by WFSRC2 under this Agreement.
(h) Maintenance of Separate Corporate Existence. WFSRC2
shall at all times hold itself out to the public, including WFS, Westcorp and
the Bank, under WFSRC2's own name and as a separate and distinct entity from
WFS, Westcorp and the Bank. At all times at least one director and one executive
officer of WFSRC2 (or one individual serving in both capacities) shall be a
Person who is not a director, officer or employee of any Person owning
beneficially more than 10% of the outstanding common stock of WFSRC2. WFSRC2
shall maintain separate corporate records and books of account from those of
WFS, Westcorp and the Bank, shall not commingle its assets with any other Person
(except to the limited extent (if any) permitted by the approval of Financial
Security) and shall authorize its corporate actions in accordance with
applicable law. WFSRC2 shall not engage in business transactions with any of its
Affiliates on terms and conditions less favorable to WFSRC2 than those available
to WFSRC2 for comparable transactions from Persons who are not Affiliates of
WFSRC2. WFSRC2 shall maintain its chief executive office, principal place of
business and the office where it keeps its records in the State of Nevada and
separate and apart from any office of the Master Servicer. WFSRC2 shall obtain
proper authorization from its board of directors of all corporate actions
requiring such authorization. Meetings of the board of directors will be held at
least two times per annum and copies of the minutes of each such board meeting
shall be delivered to Financial Security within two weeks of the approval of
such minutes by the board of directors but no later than 120 days after the
occurrence of the board meeting relating to such minutes. WFSRC2 shall obtain
proper authorization from its shareholders for all actions requiring shareholder
approval. Meetings of the shareholders of WFSRC2 shall be held not less
frequently than one time per annum and copies of each such authorization and the
minutes of each such shareholder meeting shall be delivered to Financial
Security within two weeks of such authorization or meeting, as
19
the case may be. The annual financial statements of WFSRC2 shall disclose the
effects of WFSRC2's transactions in accordance with generally accepted
accounting principals and shall disclose that the assets of WFSRC2 are not
available to pay creditors of WFS, Westcorp and any Affiliate thereof.
(i) [Reserved.]
(j) Compliance with Article 76 of New York Insurance Law.
WFSRC2 shall ensure that the Prospectus, and any supplements or amendments
thereto, and every preliminary prospectus delivered with respect to the Notes,
clearly disclose that the Policy is not covered by the property/casualty
insurance security fund specified in Article 76 of the New York Insurance Law.
(k) Incorporation of Covenants. WFSRC2 agrees to comply
with each of the covenants of WFSRC2 set forth in the Transaction Agreements and
hereby incorporates such covenants by reference as if each were set forth
herein.
(l) Certificates. Except as may be agreed to by Financial
Security, in its sole discretion, WFSRC2 shall purchase from the Trust and
thereafter retain beneficial and record ownership of the WFSRC2 Certificate.
(m) Notification of Failure to Perform or Observe Certain
Covenants or Agreements. WFSRC2 shall promptly deliver to WFS a copy of any
written notice delivered to WFSRC2 pursuant to Section 5.01(d) hereof concerning
any failure to perform or observe any covenant or agreement contained in any of
the Transaction Agreements by WFS.
Section 2.07. Negative Covenants of WFSRC2. WFSRC2 agrees and
covenants with Financial Security that at all times during the term of this
Agreement:
(a) Amendments to Organizational Documents. WFSRC2 shall
not amend, supplement or otherwise modify, or cause to permit any amendment,
supplement or other modification of, Articles 2 or 5 of its charter (or any
other Articles of its charter that relate to the matters addressed by such
Article 2 or 5) or its bylaws without the prior written consent of Financial
Security.
(b) No Liens. Except as contemplated in connection with
the transaction to which this Agreement relates, without the prior written
consent of Financial Security, WFSRC2 shall not create, incur, assume or suffer
to exist any mortgage, deed of trust, security interest, assignment, deposit
arrangement or other preferential arrangement, charge or encumbrance (including,
without limitation, any conditional sale or other title retention agreement or
finance lease) of any nature upon or with respect to any of its properties or
assets, now owned or hereafter acquired, or sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement that names WFSRC2 as
a debtor, or sign any security agreement authorizing any secured party
thereunder to file such financing statement.
20
(c) Creation of Indebtedness. Except as contemplated in
connection with the transaction to which this Agreement relates, without the
prior written consent of Financial Security, WFSRC2 shall not create, incur,
assume or suffer to exist any indebtedness other than indebtedness guaranteed or
approved in writing by Financial Security.
(d) Guarantees, Etc. Without the prior written consent of
Financial Security, WFSRC2 shall not assume, guarantee, endorse or otherwise be
or become directly or contingently liable for the obligations of any Person by,
among other things, agreeing to purchase any obligation of another Person,
agreeing to advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(e) Subsidiaries. Without the prior written consent of
Financial Security, WFSRC2 shall not form, or cause to be formed, any
subsidiaries.
(f) Insolvency. WFSRC2 shall not commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seek appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its assets,
or make a general assignment for the benefit of its creditors. WFSRC2 shall not
take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in any of the acts set forth above. WFSRC2 shall not be unable to,
or admit in writing its inability to, pay its debts.
(g) Impairment of Rights. WFSRC2 shall not take any
action or fail to take any action that will interfere with the enforcement of
any rights under this Agreement or the other Transaction Agreements.
(h) Insolvency of Trust. WFSRC2 shall not, for any
reason, institute proceedings for the Trust to be adjudicated a bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against the Trust, or file a petition seeking or consenting to reorganization or
relief under any applicable federal or state law relating to the bankruptcy of
the Trust, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trust or a substantial
part of the property of the Trust or cause or permit the Trust to make any
assignment for the benefit of creditors, or admit in writing the inability of
the Trust to pay its debt generally as they become due, or declare or effect a
moratorium on the debt of the Trust or take any action in furtherance of any
such action.
Section 2.08. Representations and Warranties of WFS. WFS
represents and warrants to Financial Security as follows:
(a) Due Organization. WFS is a corporation duly organized
and validly existing and in good standing under the laws of the State of
California, with power and authority to own its properties and to conduct its
business and had at all
21
relevant times, and has, power, authority, and legal right to acquire and own
the Contracts and 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 requires such qualification.
(b) Corporate Power and Authority. WFS has the power and
authority to execute and deliver this Agreement and each other Transaction
Agreement to which WFS is a party and to carry out the terms of each such
agreement, and has full power and authority to sell and assign the property to
be sold and assigned to WFSRC2 for inclusion in the Trust and the Spread Account
and has duly authorized such sale and assignment to WFSRC2 by all necessary
corporate action; and the execution, delivery, and performance of this Agreement
and each other Transaction Agreement to which WFS is a party has been duly
authorized by WFS by all necessary corporate action.
(c) Valid and Binding Obligations. The WFS Assignments
constitute a valid sale, transfer, and assignment of the Contracts to WFSRC2,
enforceable against creditors of and purchasers from WFS, and each of the
Transaction Agreements to which WFS is a party constitutes a legal, valid, and
binding obligation of WFS, enforceable in accordance with its terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, receivership or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding in equity or at
law. The Certificates, when executed, authenticated and delivered in accordance
with the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership in the Trust. The Notes when executed, authenticated and delivered in
accordance with the Indenture, will be entitled to the benefits of the Indenture
and will constitute legal, valid and binding obligations of the Trust,
enforceable in accordance with their terms.
(d) Noncontravention. The consummation of the
transactions contemplated by this Agreement and by each other Transaction
Agreement to which WFS is a party and the fulfillment of the terms hereof and
thereof shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute a default (nor an event which, with the giving of
notice or passage of time, or both, would constitute a default) under, the
articles of organization or by-laws of WFS, or any indenture, agreement, or
other instrument to which WFS is a party or by which it shall be 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 instruments;
nor violate any law or any order, rule, or regulation applicable to WFS of any
court or of any federal or state regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over WFS or its
properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by WFS of this Agreement
or of any other Transaction Agreement to which
22
WFS is a party, except (in each case) such as have been obtained and are in full
force and effect.
(f) Pending Litigation or Other Proceeding. To WFS's best
knowledge, there are no proceedings or investigations pending, or threatened,
before any court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over WFS or its properties: (A) asserting
the invalidity of this Agreement or any other Transaction Agreement to which WFS
is a party, (B) seeking to prevent the consummation of any of the transactions
contemplated by any of the Transaction Agreements to which WFS is a party, (C)
seeking any determination or ruling that might materially and adversely affect
the performance by WFS of its obligations under, or the validity or
enforceability of, this Agreement or any other Transaction Agreement to which
WFS is a party, or (D) involving WFS and which might adversely affect the
federal income tax attributes of the Notes or the Certificates.
(g) Affirmation and Incorporation of Certain
Representations and Warranties. WFS represents and warrants to Financial
Security that the representations and warranties of WFSRC2 set forth in Section
2.05 hereof, in the Underwriting Agreement, in Section 3.01(b) of the Sale and
Servicing Agreement and in Section 2.09 of the Trust Agreement are (in each
case) true and correct as if set forth herein and that the representations and
warranties of WFS set forth in the Underwriting Agreement and by WFS as Master
Servicer set forth in Section 4.06 of the Sale and Servicing Agreement are (in
each case) true and correct as if set forth herein.
(h) Valid Transfer of Contracts. The WFS Assignments
constitute a valid sale, transfer and assignment of the Contracts to WFSRC2,
enforceable against creditors of and purchasers from WFS, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and (ii)
general principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
(i) Financial Information. The audited consolidated
financial statements of WFS for the fiscal year ended December 31, 2002 and the
unaudited consolidated financial statements of WFS for the fiscal quarter ended
June 30, 2003, copies of which have been furnished to Financial Security, as of
the dates and for the periods referred to therein (i) are true, complete and
correct in all material respects, (ii) fairly present the consolidated financial
condition of WFS and the consolidated results of operations and changes in cash
flows of WFS and its consolidated subsidiaries, and (iii) have been prepared in
accordance with generally accepted accounting principles consistently applied
(subject, in the case of the quarterly financial statements, to normal year-end
adjustments), and such financial statements indicate that WFS is solvent and
will not be rendered insolvent by the execution, delivery and performance of the
Transaction Agreements. Since June 30, 2003, there has been no material adverse
change in the business, financial condition or operations of WFS.
Section 2.09. [Reserved].
23
Section 2.10. [Reserved].
Section 2.11. Affirmative Covenants of WFS. WFS covenants and
agrees with Financial Security that, at all times during the term of this
Agreement:
(a) Compliance With Agreements. WFS will comply with all
terms and conditions of this Agreement and each other Transaction Agreement to
which it is a party. WFS will not cause or permit to become effective any
amendment to or modification of the Transaction Agreements to which it is a
party unless Financial Security shall have previously approved in writing the
form of such amendment or modification.
(b) Financial Statements, Accountants' Reports, Other
Information.
(i) WFS shall keep proper books and records, in
which full and correct entries shall be made of financial transactions
and the assets and business of WFS in accordance with generally
accepted accounting principles consistently applied. WFS shall deliver
to Financial Security, simultaneously with the delivery of such
documents to the relevant federal or state department or agency copies
of all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and
periodic reports on Form 8-K required to be filed by WFS with the
Commission. WFS shall also furnish to Financial Security,
simultaneously with the delivery of such documents to the Indenture
Trustee, the Noteholders or the Certificateholders, as the case may be,
copies of all reports, certificates, statements or notices furnished to
the Indenture Trustee, the Noteholders or the Certificateholders, as
the case may be, pursuant to the Transaction Agreements, including:
(1) Annual Financial Statements. The audited
balance sheets of WFS as of the end of such fiscal year and the audited
statements of income, shareholders' equity and cash flows of WFS for
such fiscal year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in
the preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied
by the certificate of independent accountants (which shall be a
nationally recognized firm or otherwise acceptable to Financial
Security) for WFS and by the certificate specified in Section 2.11(c)
hereof.
(2) Quarterly Financial Statements. The
unaudited balance sheets of WFS as of the end of each such quarter and
the unaudited statements of income and cash flows of WFS for the
portion of the fiscal year then ended, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently
applied (subject to normal year-end adjustments), and accompanied by
the certificate specified in Section 2.11(c) hereof if such certificate
is required to be provided pursuant to such Section.
24
(ii) Accountants' Reports. If a Special Event has
occurred, the balance sheets of WFS as of the end of WFS's most recent
fiscal year (and the most recent fiscal half) and the statements of
income, shareholders' equity and cash flows of WFS for such fiscal year
(and for such half), all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles, consistently applied, and, in
the case of financial statements as of the end of a fiscal year,
audited and accompanied by the certificate of independent accountants
(which shall be a nationally recognized firm or otherwise acceptable to
Financial Security) for WFS.
(iii) Other Information. Promptly upon receipt
thereof, copies of all reports, statements, certifications, schedules,
or other similar items delivered to or by WFS pursuant to the terms of
the Transaction Agreements and, promptly upon request, such other data
as Financial Security may reasonably request; provided, however, that
WFS shall not be required to deliver any such items if provision by
some other party to Financial Security is required under the
Transaction Agreements unless such other party wrongfully fails to
deliver such item. WFS shall, upon the request of Financial Security,
permit Financial Security or its authorized agents to inspect its books
and records as they may relate to the Notes, the Certificates, the
obligations of WFS under the Transaction Agreements or the Transaction.
Such inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of WFS.
The fees and expenses of Financial Security or any such authorized
agents shall be for the account of WFS. The books and records of WFS
will be maintained at the address for it designated herein for receipt
of notices, unless it shall otherwise advise the parties hereto in
writing.
(iv) Executed Originals. WFS shall provide, or
cause to be provided, to Financial Security an executed original copy
of each document executed in connection with the Transaction within 60
days after the date of closing (without duplication of documents
provided to Financial Security by an Affiliate of WFS).
(v) Delivery by digital/electronic means. The
delivery by WFS to Financial Security of (i) Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, and periodic reports on Form 8-K
pursuant to Section 2.11(b)(i) hereof and (ii) annual financial
statements and quarterly financial statements pursuant to Sections
2.11(b)(i)(1) and (2), respectively, may be made via digital/electronic
means as set forth in Section 8.19 hereof.
(c) Certificate of Compliance. WFS shall deliver to
Financial Security, concurrently with the delivery of the financial statements
required pursuant to paragraph (b) above, a certificate signed by an Authorized
Officer of WFS stating that:
25
(i) a review of WFS's performance under this
Agreement and the other Transaction Agreements to which WFS is a party
during such period has been made under such officer's supervision; and
(ii) to the best of such officer's knowledge,
based upon such review, WFS has fulfilled all its obligations under
this Agreement and the other Transaction Agreements to which WFS is a
party during such period, or, if there has been a default of any such
obligation, specifying each such default known to such officer and the
nature and status thereof.
(d) Access to Records; Discussions With Officers and
Accountants. WFS shall, upon the reasonable request of Financial Security,
permit Financial Security's Authorized Agent at reasonable times (i) to inspect
such books and records of WFS as may relate to the Notes, the Certificates and
the obligations of WFS under this Agreement and the other Transaction Agreements
to which WFS is a party; and (ii) to discuss the affairs, finances and accounts
of WFS with any of its respective officers, directors and representatives,
including its Independent Accountants.
(e) Maintain Licenses. WFS shall maintain all licenses,
permits, charters and registrations that are material to the performance by WFS
of its obligations under the Transaction Agreements to which it is a party or by
which WFS is bound.
(f) Maintain Existence; Merger. WFS shall keep in full
effect its existence, rights and franchises under the laws of the State of
California, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Contract
Documents and the Transaction Agreements to which WFS is a party. WFS shall not
consolidate with or merge into any other Person or convey, transfer or lease
substantially all of its assets as an entirety to any Person unless the Person
formed by such consolidation or into which WFS has merged or the Person which
acquires by conveyance, transfer or lease substantially all the assets of WFS as
an entirety, can lawfully perform the obligations of WFS hereunder and executes
and delivers to the Owner Trustee an agreement, in form and substance reasonably
satisfactory to the Owner Trustee and Financial Security, which contains an
assumption by such Person of the due and punctual performance and satisfaction
of each covenant and condition to be performed or satisfied by WFS under this
Agreement.
(g) Subservicing. WFS, as Master Servicer, shall not
appoint, pursuant to Section 4.01 of the Sale and Servicing Agreement, any
Subservicer that has not been approved in advance by Financial Security. WFS as
Master Servicer shall not cause or permit to become effective any Subservicing
Agreement that is in a form that varies substantially from the form thereof set
forth as Exhibit E to the Sale and Servicing Agreement unless the form of such
varying agreement shall have been approved in writing by Financial Security.
(h) No Petition Agreement. WFS covenants and agrees that,
for a period of one year plus one day after payment in full of all amounts
payable in respect of
26
the Notes and the Certificates, it will not institute against, or join any other
Person in instituting against WFSRC2 any bankruptcy, reorganization,
arrangement, conservatorship, receivership, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy,
receivership or similar law, in connection with any amounts due WFS (or any
Affiliate or parent thereof) under any Transaction Agreement or otherwise
without the prior written consent of Financial Security. The provisions of this
paragraph shall survive termination of this Agreement.
(i) For so long as WFS has any securitization
transactions (including warehouse facilities) outstanding as to which Financial
Security has provided credit enhancements, WFS shall disclose, in (a) any
financial statement provided to a creditor of WFS and (ii) all financial
statements included as part of its Form 10-Qs and Form 10-Ks subsequently filed
by WFS with the Commission, that automobile contracts sold by WFS to its special
purpose entity subsidiaries in connection with securitization transactions are
treated as having been sold for bankruptcy remoteness purposes, thereby
isolating those assets in its special purpose entity subsidiaries and the assets
of such special purpose entity subsidiaries are not available to satisfy the
obligations of WFS to its creditors.
Section 2.12. Representations and Warranties of Westcorp.
Westcorp represents and warrants to Financial Security as follows:
(a) Due Organization. Westcorp is a corporation duly
organized and validly existing and in good standing under the laws of the State
of California, with power and authority to own its properties and to conduct its
business and 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 requires such qualification.
(b) Corporate Power and Authority. Westcorp has the power
and authority to execute and deliver this Agreement and each other Transaction
Agreement to which Westcorp is a party and to carry out the terms of each such
agreement, and the execution, delivery, and performance of this Agreement and
each other Transaction Agreement to which Westcorp is a party has been duly
authorized by Westcorp by all necessary corporate action.
(c) Valid and Binding Obligations. Each of the
Transaction Agreements to which Westcorp is a party constitutes a legal, valid,
and binding obligation of Westcorp, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, receivership or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding in equity or at
law.
(d) Noncontravention. The consummation of the
transactions contemplated by this Agreement and by each other Transaction
Agreement to which Westcorp is a party and the fulfillment of the terms hereof
and thereof shall not conflict with, result in any breach of any of the terms
and provisions of, nor constitute a default
27
(nor an event which, with the giving of notice or passage of time, or both,
would constitute a default) under, the articles of organization or by laws of
Westcorp, or any indenture, agreement, or other instrument to which Westcorp is
a party or by which it shall be 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 instruments; nor violate any law or any order,
rule, or regulation applicable to Westcorp of any court or of any federal or
state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over Westcorp or its properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non governmental person, is required in
connection with the execution, delivery and performance by Westcorp of this
Agreement or of any other Transaction Agreement to which Westcorp is a party,
except (in each case) such as have been obtained and are in full force and
effect.
(f) Pending Litigation or Other Proceeding. To Westcorp's
best knowledge, there are no proceedings or investigations pending, or
threatened, before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Westcorp or its
properties: (A) asserting the invalidity of this Agreement or any other
Transaction Agreement to which Westcorp is a party, (B) seeking to prevent the
consummation of any of the transactions contemplated by any of the Transaction
Agreements to which Westcorp is a party, (C) seeking any determination or ruling
that might materially and adversely affect the performance by Westcorp of its
obligations under, or the validity or enforceability of, this Agreement or any
other Transaction Agreement to which Westcorp is a party, or (D) involving
Westcorp and which might adversely affect the federal income tax attributes of
the Notes or the Certificates.
(g) Affirmation and Incorporation of Certain
Representations and Warranties. Westcorp represents and warrants to Financial
Security that the representations and warranties of WFSRC2 set forth in: (i)
Section 2.05 hereof, (ii) in the Underwriting Agreement, (iii) in Section 3.01
of the Sale and Servicing Agreement and (iv) Section 2.09 of the Trust Agreement
are (in each case) true and correct as if set forth herein.
Section 2.13. Affirmative Covenants of Westcorp.. Westcorp
covenants and agrees with Financial Security that, at all times during the term
of this Agreement:
(a) Compliance With Agreements. Westcorp will comply with
all terms and conditions of this Agreement and each other Transaction Agreement
to which it is a party. Westcorp will not cause or permit to become effective
any amendment to or modification of the Transaction Agreements to which it is a
party unless Financial Security shall have previously approved in writing the
form of such amendment or modification.
28
(b) Financial Statements, Accountants' Reports, Other
Information.
(i) Westcorp shall keep proper books and
records, in which full and correct entries shall be made of financial
transactions and the assets and business of Westcorp in accordance with
generally accepted accounting principles consistently applied. Westcorp
shall deliver to Financial Security, simultaneously with the delivery
of such documents to the relevant federal or state department or agency
copies of all Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q, and periodic reports on Form 8-K required to be filed by Westcorp
with the Commission. Westcorp shall also furnish to Financial Security,
simultaneously with the delivery of such documents to the Indenture
Trustee, the Noteholders or the Certificateholders, as the case may be,
copies of all reports, certificates, statements or notices furnished to
the Indenture Trustee, the Noteholders or the Certificateholders, as
the case may be, pursuant to the Transaction Agreements, including:
(1) Annual Financial Statements. The
audited balance sheets of Westcorp as of the end of such fiscal year
and the audited statements of income, shareholders' equity and cash
flows of Westcorp for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by the certificate of independent accountants
(which shall be a nationally recognized firm or otherwise acceptable to
Financial Security) for Westcorp and by the certificate specified in
Section 2.12(c) hereof.
(2) Quarterly Financial Statements. The
unaudited balance sheets of Westcorp as of the end of each such quarter
and the unaudited statements of income and cash flows of Westcorp for
the portion of the fiscal year then ended, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently
applied (subject to normal year-end adjustments), and accompanied by
the certificate specified in Section 2.12(c) hereof if such certificate
is required to be provided pursuant to such Section.
(ii) Accountants' Reports. If a Special Event has
occurred, upon the request of Financial Security, the balance sheets of
Westcorp as of the end of Westcorp's most recent fiscal year (and the
most recent fiscal half) and the statements of income, shareholders'
equity and cash flows of Westcorp for such fiscal year (and for such
half), all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied, and, in the case of
financial statements as of the end of a fiscal year, audited and
accompanied by the certificate of independent accountants (which shall
be a nationally recognized firm or otherwise acceptable to Financial
Security) for Westcorp.
29
(iii) Other Information. Promptly upon receipt
thereof, copies of all reports, statements, certifications, schedules,
or other similar items delivered to or by Westcorp pursuant to the
terms of the Transaction Agreements and, promptly upon request, such
other data as Financial Security may reasonably request; provided,
however, that Westcorp shall not be required to deliver any such items
if provision by some other party to Financial Security is required
under the Transaction Agreements unless such other party wrongfully
fails to deliver such item. Westcorp shall, upon the request of
Financial Security, permit Financial Security or its authorized agents
to inspect its books and records as they may relate to the Notes, the
Certificates, the obligations of Westcorp under the Transaction
Agreements or the Transaction. Such inspections and discussions shall
be conducted during normal business hours and shall not unreasonably
disrupt the business of Westcorp. The fees and expenses of Financial
Security or any such authorized agents shall be for the account of
Westcorp. The books and records of Westcorp will be maintained at the
address for it designated herein for receipt of notices, unless it
shall otherwise advise the parties hereto in writing.
(iv) Westcorp shall provide, or cause to be
provided, to Financial Security an executed original copy of each
document executed in connection with the Transaction within 60 days
after the date of closing (without duplication of documents provided to
Financial Security by an Affiliate of Westcorp).
(v) Delivery by digital/electronic means. The
delivery by WFSRC2 to Financial Security of (i) Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, and periodic reports on Form 8-K
pursuant to Section 2.13(b)(i) hereof and (ii) annual financial
statements and quarterly financial statements pursuant to Sections
2.13(i)(1) and (2), respectively, may be made via digital/electronic
means as set forth in Section 8.19 hereof.
(c) Certificate of Compliance. Westcorp shall deliver to
Financial Security, concurrently with the delivery of the financial statements
required pursuant to paragraph (b) above, a certificate signed by an Authorized
Officer of Westcorp stating that:
(i) a review of Westcorp's performance under
this Agreement and the other Transaction Agreements to which Westcorp
is a party during such period has been made under such officer's
supervision; and
(ii) to the best of such officer's knowledge,
based upon such review, Westcorp has fulfilled all its obligations
under this Agreement and the other Transaction Agreements to which
Westcorp is a party during such period, or, if there has been a default
of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(d) Access to Records; Discussions With Officers and
Accountants. Westcorp shall, upon the reasonable request of Financial Security,
permit Financial
30
Security's Authorized Agent at reasonable times (i) to inspect such books and
records of Westcorp as may relate to the Notes, the Certificates and the
obligations of Westcorp under this Agreement and the other Transaction
Agreements to which Westcorp is a party; and (ii) to discuss the affairs,
finances and accounts of Westcorp with any of its respective officers, directors
and representatives, including its Independent Accountants.
(e) Maintain Licenses. Westcorp shall maintain all
licenses, permits, charters and registrations that are material to the
performance by Westcorp of its obligations under the Transaction Agreements to
which it is a party or by which Westcorp is bound.
(f) Maintain Existence; Merger. Westcorp shall keep in
full effect its existence, rights and franchises under the laws of the State of
California, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Contract
Documents and the Transaction Agreements to which Westcorp is a party. Westcorp
shall not consolidate with or merge into any other Person or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless the
Person formed by such consolidation or into which Westcorp has merged or the
Person which acquires by conveyance, transfer or lease substantially all the
assets of Westcorp as an entirety, can lawfully perform the obligations of
Westcorp hereunder and executes and delivers to the Owner Trustee an agreement,
in form and substance reasonably satisfactory to the Owner Trustee and Financial
Security, which contains an assumption by such Person of the due and punctual
performance and satisfaction of each covenant and condition to be performed or
satisfied by Westcorp under this Agreement.
(g) No Petition Agreement. Westcorp covenants and agrees
that, for a period of one year plus one day after payment in full of all amounts
payable in respect of the Notes and the Certificates, it will not institute
against, or join any other Person in instituting against WFSRC2 any bankruptcy,
reorganization, arrangement, conservatorship, receivership, insolvency or
liquidation proceedings, or other proceedings under any federal or state
bankruptcy, receivership or similar law, in connection with any amounts due
Westcorp (or any Affiliate or parent thereof) under any Transaction Agreement or
otherwise without the prior written consent of Financial Security. The
provisions of this paragraph shall survive termination of this Agreement.
(h) For so long as Westcorp has any securitization
transactions (including warehouse facilities) outstanding as to which Financial
Security has provided credit enhancements, Westcorp shall disclose, in (a) any
financial statement provided to a creditor of Westcorp and (ii) all financial
statements included as part of its Form 10-Qs and Form 10-Ks subsequently filed
by Westcorp with the Commission, that automobile contracts sold by Westcorp to
its special purpose entity subsidiaries in connection with securitization
transactions are treated as having been sold for bankruptcy remoteness purposes,
thereby isolating those assets in its special purpose entity subsidiaries and
the assets of such special purpose entity subsidiaries are not available to
satisfy the obligations of Westcorp to its creditors..
31
ARTICLE III
THE POLICIES; INDEMNIFICATION
Section 3.01. Agreement to Issue Policy. Financial Security
agrees to issue the Policy subject to the satisfaction of the conditions
hereinafter set forth.
Section 3.02. Conditions Precedent to Issuance of Policy.
(a) The obligation of Financial Security to issue the
Policy is subject to the following having occurred or being true (as the case
may be): (i) WFS shall have assigned, conveyed and transferred, or caused to be
assigned, conveyed and transferred, the Collateral to WFSRC2, (ii) WFSRC2 shall
have created a valid security interest in the Collateral in favor of the
Collateral Agent, (iii) WFSRC2 shall have assigned, conveyed, pledged and
transferred the Collateral to the Trust, (iv) no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the best knowledge
of WFSRC2, threatened by the Commission and any request for additional
information on the part of the Commission (to be included in the Registration
Statement, the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Commission, (v) the Premium shall have been paid
in accordance with Section 3.03 hereof, (vi) the representations and warranties
of the Trust and each Western Entity set forth or incorporated by reference in
this Agreement shall be true and correct on and as of the Closing Date, and
(vii) each Transaction Agreement shall be in full force and effect as of the
Closing Date and no default (or event which, with the giving of notice or
passage of time, or both, would become a default) thereunder shall have occurred
and be continuing.
(b) The obligation of Financial Security to issue the
Policy is further subject to the condition precedent that Financial Security
shall have received on the Closing Date, or, in its sole and absolute
discretion, received the opportunity to review prior to and on the Closing Date,
the following, each dated the Closing Date and in full force and effect on such
date, except as otherwise provided herein, in form and substance satisfactory to
Financial Security and its counsel:
(i) a certificate of an Authorized Officer of
each Western Entity stating that nothing has come to the attention of
such Western Entity to indicate that the Registration Statement, the
Prospectus or the Prospectus Supplement, on the date the Registration
Statement became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus on any date on which it was furnished to the Underwriters
for use in connection with the offering of the Notes contained, or on
the Closing Date contains, any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary in order to make the statements made therein not misleading;
32
(ii) copies, certified to be true copies by the
Secretary or an Assistant Secretary of each Western Entity, of (i) the
resolutions of the Board of Directors of such Western Entity
authorizing the execution, delivery and performance of this Agreement
and each other Transaction Agreement to which such Western Entity is a
party and all other transactions and documents contemplated hereby and
thereby, and of all other documents evidencing any other necessary
action of such Western Entity (which certification shall state that
such resolutions have not been modified, are in full force and effect
and constitute the only resolutions adopted by such Western Entity's
Board of Directors or any committee thereof with respect thereto), (ii)
the articles of association, as amended, of such Western Entity and
(iii) the by-laws, as amended, of such Western Entity;
(iii) copies, certified to be true copies by an
Authorized Officer of the Owner Trustee, of (i) the resolutions of the
board of directors of the Owner Trustee authorizing the execution,
delivery and performance by the Owner Trustee of this Agreement and
each other Transaction Agreement to which the Owner Trustee is a party
and all transactions and documents contemplated hereby and thereby, and
of all other documents evidencing any other necessary action of the
Owner Trustee (which certification shall state that such resolutions
have not been modified, are in full force and effect and constitute the
only resolutions adopted by the Owner Trustee's board of directors or
any committee thereof with respect thereto and (ii) the Certificate of
Trust, certified by the Secretary of State or other appropriate
official of the State of Delaware;
(iv) a certificate of an Authorized Officer of
each Western Entity stating that (i) attached thereto are true and
complete copies, if any, of all consents, licenses and approvals
necessary for each Western Entity to execute, deliver and perform this
Agreement, the other Transaction Agreements to which such Western
Entity is a party and all other documents and instruments on the part
of such Western Entity to be delivered pursuant hereto or thereto, and
(ii) all such consents, licenses and approvals are in full force and
effect, such Western Entity has not received any notice of any
proceeding for the revocation of any such license, charter, permit or
approval, and, to such Western Entity's knowledge, there is no
threatened action or proceeding or any basis therefore;
(v) a certificate of an Authorized Officer of
the Owner Trustee stating that (i) attached thereto are true and
complete copies, if any, of all consents, licenses and approvals
necessary for the Owner Trustee to execute, deliver and perform this
Agreement, the other Transaction Agreements to which the Owner Trustee
is a party and all other documents and instruments on the part of the
Owner Trustee to be delivered pursuant hereto or thereto have been
obtained, and (ii) all such consents, licenses and approvals are in
full force and effect, the Owner Trustee has not received any notice of
any proceeding for the revocation of any such license, charter, permit
or approval, and, to the Owner Trustee's knowledge, there is no
threatened action or proceeding or any basis therefor;
33
(vi) a certificate of the Secretary or an
Assistant Secretary of such Western Entity certifying (i) the names and
true signatures of the officers of such Western Entity executing and
delivering this Agreement, the other Transaction Agreements to which
such Western Entity is a party and the other documents to be executed
and delivered by such Western Entity hereunder and thereunder, (ii)
that approval by such Western Entity's stockholders of the execution
and delivery of this Agreement, the other Transaction Agreements and
all other such documents to be executed and delivered, by such Western
Entity hereunder, has been obtained or is not required, and (iii) that
no resolution for the dissolution of such Western Entity has been
adopted or contemplated and that no such proceedings have been
commenced or are contemplated;
(vii) a certificate of an Authorized Officer of
the Owner Trustee certifying (i) the names and the true signatures of
the officers of the Owner Trustee executing and delivering this
Agreement, the other Transaction Agreements to which the Owner Trustee
is a party and the other documents to be executed and delivered by the
Owner Trustee hereunder and thereunder, (ii) that approval by the Owner
Trustee's equity holders of the execution and delivery of this
Agreement, the other Transaction Agreements and all other such
documents to be executed and delivered, by the Owner Trustee hereunder,
has been obtained or its not required, and (iii) that no action for the
dissolution of the Owner Trustee has been adopted or contemplated and
that no such proceedings have commenced or contemplated;
(viii) a certificate of an Authorized Officer of
each Western Entity to the effect that (x) the representations and
warranties of such Western Entity set forth or incorporated by
reference in this Agreement are true and correct on and as of the
Closing Date and (y) confirming that the conditions precedent set forth
herein with respect to such Western Entity are satisfied;
(ix) a certificate of an Authorized Officer of
the Trust to the effect that (x) the representations and warranties of
the Trust set forth or incorporated by reference in this Agreement are
true and correct on and as of the Closing Date and (y) confirming that
the conditions precedent set forth herein with respect to the Trust are
satisfied;
(x) a favorable opinion of Xxxxxxxx Xxxxxxxxxx &
Xxxxx, LLP, counsel to the Seller, WFS and the Bank, as to certain
corporate, securities law and other matters, and such counsel shall
have been instructed by its client to deliver such opinion to the
addressees thereof, in form and substance satisfactory to counsel to
Financial Security;
(xi) a favorable opinion of Xxxxxxxx Xxxxxxxxxx &
Xxxxx, LLP, counsel to the Seller, WFS and the Bank, as to certain
bankruptcy and insolvency matters, and such counsel shall have been
instructed by its client to deliver such opinion to the addressees
thereof, in form and substance satisfactory to Financial Security;
34
(xii) a favorable opinion of Xxxxxxxx Xxxxxxxxxx &
Xxxxx, LLP, special tax counsel to the Seller, WFS and the Bank, as to
certain tax matters (which may be included in the opinion referred to
in clause (x) above), and such counsel shall have been instructed by
its client to deliver such opinion to the addressees thereof, in form
and substance satisfactory to counsel to Financial Security;
(xiii) a favorable opinion of Xxxxxxxx, Xxxxxx &
Finger, P.A., counsel to the Trust and the Owner Trustee, and such
counsel shall have been instructed by its client to deliver such
opinion to the addressees thereof, substantially in the form of Exhibit
G hereto;
(xiv) a certificate from the Collateral Agent and
the Indenture Trustee, substantially in the form of Exhibit E hereto;
(xv) a favorable opinion of White & Case LLP,
counsel to the Collateral Agent, the Proceeds Agent and the Indenture
Trustee, and such counsel shall have been instructed by its client to
deliver such opinion to the addressees thereof, substantially in the
form of Exhibit F hereto;
(xvi) evidence that amounts due and payable to
Financial Security under Section 3.03 of this Agreement have been paid
or that acceptable provisions therefor have been made;
(xvii) a fully executed copy of each of the
Transaction Agreements;
(xviii) evidence that all actions necessary or, in
the opinion of Financial Security, desirable to perfect and protect the
interests transferred by the Sale and Servicing Agreement and the liens
and security interests created by this Agreement, including, without
limitation, the filing of any financing statements required by
Financial Security or its counsel, have been taken or promptly shall be
taken;
(xix) a certificate or opinion of Independent
Accountants addressed to Financial Security to the effect set forth in
Exhibit H hereto;
(xx) a certificate of the Master Servicer, signed
by an Authorized Officer, identifying those Contracts as to which the
Title Documents are not in the possession of WFSRC2 and certifying that
such Title Documents showing WFS or the Bank as first lienholder have
been applied for and as to which Section 3.09 of the Sale and Servicing
Agreement applies;
(xxi) evidence that the Seller shall have
deposited, or caused to have been deposited, in the Collection Account,
the deposits required under the eighth paragraph of Section 4.01 of the
Sale and Servicing Agreement, the deposits required in the Spread
Account and any other deposits required to be
35
made on the Closing Date under the Transaction Agreements to which the
Seller is a party; and
(xxii) such other documents, instruments, approvals
(and, if requested by Financial Security, certified duplicates of
executed copies thereof) or opinions as Financial Security may
reasonably request.
Section 3.03. Premium. In consideration of the issuance by
Financial Security of the Policy, the Seller shall pay to Financial Security the
initial installment of the Premium at the time of delivery of the Policy and
further installments of the Premium, all in accordance with the terms of the
letter agreement between the Seller and Financial Security referred to in the
definition of "Premium" set forth herein. Failure by the Seller to pay any such
further installments of the Premium shall not cause the Policy to be cancelled
and shall not in any way relieve Financial Security of its obligations to make
any payments under the Policy. Anything herein to the contrary notwithstanding,
it is hereby agreed between the parties hereto that the full amount of the
Premium shall have been earned by Financial Security upon its issuance of the
Policy on the Closing Date and upon the occurrence of a Servicer Default under
Section 8.01 of the Sale and Servicing Agreement (including without limitation,
the failure of the Seller to pay any installment of the Premium as and when
due), the entire outstanding balance of further installments of the Premium
shall be immediately due and payable. The Premium shall be nonrefundable without
regard to whether Financial Security makes any payment under the Policy, any
prepayment or early retirement of the Notes or the Certificates occur or any
other circumstances occur relating to the Notes or the Certificates.
Section 3.04. Reimbursement Obligation.
(a) Each of the Trust and WFSRC2 agrees absolutely and
unconditionally to pay to Financial Security, in the manner provided in Section
3.04(b), as follows:
(i) a sum equal to the total of all amounts paid
by Financial Security under the Policy;
(ii) any accrued but unpaid installments of the
Premium and any and all reasonable charges, fees, costs and expenses
that Financial Security or any of its Affiliates may pay or incur
relating to any payment under the Policy, including, but not limited
to, any fees and charges in connection with any accounts established to
facilitate payments under the Policy, to the extent Financial Security
has not been immediately reimbursed on the date that any amount is paid
by Financial Security under the Policy, and the prepayment of any
borrowings made or the implementation or cancellation of any financial
contracts (including, without limitation, interest rate and currency
swaps or xxxxxx) entered into in connection with, or (following an
Event of Default hereunder) in anticipation of, funding payments under
the Policy;
36
(iii) the amount of any reasonable costs or
expenses incurred by Financial Security or any of its Affiliates
(including attorneys' and accountants' fees and expenses, and the
reasonable fees and expenses charged by Transaction Services
Corporation, an affiliate of Financial Security, in connection with the
actions described in clauses (A) and (B) herein), (A) in connection
with the administration, enforcement, defense or preservation of any
rights in respect of this Agreement or any of the other Transaction
Agreements, including defending, monitoring or participating in any
litigation or proceeding (including the bankruptcy proceeding in
respect of any Transaction participant or any affiliate thereof)
relating to any of the Transaction Agreements, any party to any of the
Transaction Agreements with respect to the Transaction Agreements or
the Transaction, or the Transaction, (B) in connection with the
foreclosure against, sale or other disposition of the Collateral, or
pursuit of any other remedies under any of the Transaction Agreements,
to the extent that such costs and expenses are not recovered from such
foreclosure, sale or other disposition, (C) in connection with any
amendment, waiver or other action with respect to, or related to, any
Transaction Agreement whether or not executed or completed, (D) in
connection with any review or approval by Financial Security or any of
its Affiliates in connection with the delivery of any additional or
substitute collateral under any of the Transaction Agreements;
(iv) the amount of any payments made by Financial
Security or any of its Affiliates on behalf of the Seller other than
amounts specified under Section 3.04(a)(i) above, including, without
limitation, the fees and expenses of the Collateral Agent, the
Indenture Trustee, the Owner Trustee, the Trust and any Independent
Accountants, and the amount of any payments made by Financial Security
to (i) the Owner Trustee in respect of amounts (if any) owing by the
Trust to the Owner Trustee pursuant to, Section 8.02 of the Trust
Agreement and (ii) the Indenture Trustee pursuant to Section 6.07 of
the Indenture to the extent that such amounts shall not have been paid
by the Trust and are paid by Financial Security;
(v) any federal, state or local tax (other than
taxes payable in respect of the gross income of Financial Security) or
other governmental charge imposed in connection with the issuance of
the Policy or the business or operations of the Seller including,
without limitation, by reason of the Seller being deemed to do business
in the State of California;
(vi) Financial Security's or any of its
Affiliates' cost of providing to the Seller (or to any Person at the
request of the Seller) any audited or unaudited financial statements,
including, without limitation, the fees and expenses of Financial
Security's or any of its Affiliates' Independent Accountants in
reviewing such financial statements in connection with such provision
and mailing and incremental printing costs;
(vii) any amount otherwise required to be paid to
or on behalf of Financial Security or any of its Affiliates under this
Agreement;
37
(viii) any payments made by Financial Security or
any of its Affiliates as, or in lieu of, servicing, management,
trustee, custodial or administrative fees payable, in the sole
discretion of Financial Security, to third parties in connection with
the transaction, to the extent (in each case) that such payment occurs
following (i) the occurrence of an Event of Default (or event or
circumstance that, with the giving of notice or the passage of time or
both, would become an Event of Default) or (ii) the failure of any
Person to perform its obligation to pay any such amount at the time and
in the manner specified in this Agreement or any other Transaction
Agreement; and
(ix) interest on any and all such amounts
described in this Section 3.04 from the date of payment by Financial
Security or any of its Affiliates of such amounts until payment thereof
in full and interest on any and all amounts described in Sections 3.03
and 3.09 hereof from the date due until payment thereof in full, in
each case, payable at the Late Payment Rate per annum, together with
interest on overdue interest, compounded monthly.
(b) All amounts to be paid by the Trust or WFSRC2
pursuant to subsection (a) above shall be due and payable without demand, in
full without any requirement on the part of Financial Security to seek
reimbursement from any other sources of indemnity therefor or to allocate
expenses to other transactions benefiting therefrom, and all such amounts shall
be payable in the priority and in the manner provided in the Sale and Servicing
Agreement; provided, however, that upon the occurrence of any Servicer Default
under the Sale and Servicing Agreement, Financial Security shall have the rights
provided for herein and therein.
Section 3.05. Non-Recourse Obligation. Notwithstanding
anything to the contrary contained in this Agreement, the obligations of WFSRC2
under Section 3.04(a) are solely the corporate obligations of WFSRC2, and shall
be payable by WFSRC2, solely as provided in this Section 3.05. WFSRC2 shall only
be required to pay (a) any fees, expenses, indemnities or other liabilities that
it may incur under Section 3.04(a) (i) from funds available pursuant to, and in
accordance with, the payment priorities set forth in Section 5.05 of the Sale
and Servicing Agreement and (ii) to the extent WFSRC2 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 WFSRC2 incurred in accordance with WFSRC2's certificate of
incorporation and all financing documents to which WFSRC2 is a party and (b) any
expenses, indemnities or other liabilities that it may incur under Section
3.04(a) (i) from funds available pursuant to, and in accordance with, the
payment priorities set forth in Section 5.05 of the Sale and Servicing Agreement
and (ii) only to the extent it receives additional funds designated for such
purposes or to the extent it 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 WFSRC2 incurred in
accordance with WFSRC2's certificate of incorporation and all financing
documents to which WFSRC2 is a party. In addition, no amount owing by WFSRC2
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
38
Bankruptcy Code) against it. No recourse shall be had for the payment of any
amount owing hereunder or for the payment of any fee hereunder or any other
obligation of, or claim against, WFSRC2 arising out of or based upon Section
3.04(a), against any stockholder, employee, officer, agent, director or
authorized person of WFSRC2 or Affiliate thereof; provided, however, that the
foregoing shall not relieve any such person or entity of any liability they
might otherwise have as a result of fraudulent actions or omissions taken by
them.
Section 3.06. Indemnification.
(a) In addition to any and all rights of indemnification
or any other rights of Financial Security pursuant hereto or under law or
equity, WFSRC2 agrees to pay, and to protect, indemnify and save harmless,
Financial Security and its officers, directors, shareholders, employees, agents
and each person, if any, who controls Financial Security within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including,
without limitation, fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) or obligations whatsoever (herein
collectively referred to as "Liabilities") of any nature arising out of or
relating to the transactions contemplated by this Agreement and the other
Transaction Agreements by reason of:
(i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
the Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as such Liabilities arise out of or are based upon any
such untrue statement or omission or allegation thereof based upon (A)
information set forth in the Prospectus under the caption "Financial
Security Assurance Inc." in the Prospectus and "Capitalization of
Financial Security Assurance Inc." in the prospectus supplement or in
the financial statements of Financial Security, including any
information in any amendment or supplement to the Prospectus furnished
by Financial Security in writing expressly for use therein that amends
or supplements such information (all such information being referred to
herein as "Financial Security Information"), or (B) information set
forth under the caption "Underwriting" in the Prospectus, including any
information in any amendment or supplement to the Prospectus furnished
by the Underwriters through the Representative in writing expressly for
use therein that amends or supplements such information (all such
information being referred to herein as "Underwriter Information");
(ii) to the extent not covered by clause (i)
above, any act or omission of WFSRC2 or the Trust in connection with
the offering, issuance, sale or delivery of the Notes or the
Certificates other than by reason of false or misleading Financial
Security Information;
39
(iii) the misfeasance or malfeasance of, or theft
committed by, any director, officer, employee or agent of WFSRC2 or the
Trust;
(iv) the violation by WFSRC2 or the Trust of any
federal or state securities, banking or antitrust laws, rules or
regulations in connection with the issuance, offer and sale of the
Notes or the transactions contemplated by this Agreement and the other
Transaction Agreements;
(v) the violation by WFSRC2 or the Trust of any
federal or state laws, rules or regulations relating to the maximum
amount of interest permitted to be received on account of the loan of
money or with respect to the Contracts;
(vi) the negligence or willful misconduct of
WFSRC2 or the Trust or any of its directors, officers, employees or
agents;
(vii) the breach by WFSRC2 or the Trust of its
obligations under this Agreement or any of the other Transaction
Agreements;
(viii) the breach by WFSRC2 or the Trust of any
representation or warranty on the part of WFSRC2 or the Trust,
respectively, contained in or incorporated by reference in this
Agreement or any other Transaction Agreement or in any certificate
furnished or delivered to Financial Security hereunder and thereunder,
or the occurrence, in respect of WFSRC2 or the Trust, under any of the
Transaction Agreements of any event of default or any event which, with
the giving of notice or lapse of time or both, would constitute any
event of default; and
(ix) the use, ownership or operation by WFSRC2 or
the Trust, or any affiliate of WFSRC2, of a Financed Vehicle.
(b) In addition to any and all rights of indemnification
or any other rights of Financial Security pursuant hereto or under law or
equity, Westcorp agrees to pay, and to protect, indemnify and save harmless,
Financial Security and its officers, directors, shareholders, employees, agents
and each person, if any, who controls Financial Security within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including,
without limitation, fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) or obligations whatsoever (herein
collectively referred to as "Liabilities") of any nature arising out of or
relating to the transactions contemplated by this Agreement and the other
Transaction Agreements by reason of:
(i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
the Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
40
misleading, except insofar as such Liabilities arise out of or are
based upon any such untrue statement or omission or allegation thereof
based upon (A) information set forth in the Prospectus under the
caption "Financial Security Assurance Inc." or in the financial
statements of Financial Security, including any information in any
amendment or supplement to the Prospectus furnished by Financial
Security in writing expressly for use therein that amends or
supplements such information (all such information being referred to
herein as "Financial Security Information"), or (B) information set
forth under the caption "Underwriting" in the Prospectus, including any
information in any amendment or supplement to the Prospectus furnished
by the Underwriters through the Representative in writing expressly for
use therein that amends or supplements such information (all such
information being referred to herein as "Underwriter Information");
(ii) to the extent not covered by clause (i)
above, any act or omission of Westcorp in connection with the offering,
issuance, sale or delivery of the Notes or the Certificates other than
by reason of false or misleading Financial Security Information;
(iii) the misfeasance or malfeasance of, or theft
committed by, any director, officer, employee or agent of Westcorp;
(iv) the violation by Westcorp or any Affiliate
thereof of any federal or state securities, banking or antitrust laws,
rules or regulations in connection with the issuance, offer and sale of
the Notes or the Certificates or the transactions contemplated by this
Agreement and the other Transaction Agreements;
(v) the violation by Westcorp or any Affiliate
thereof of any federal or state laws, rules or regulations relating to
the maximum amount of interest permitted to be received on account of
the loan of money or with respect to the Contracts;
(vi) the negligence or willful misconduct of
Westcorp or any of their respective directors, officers, employees or
agents;
(vii) the breach by Westcorp of its obligations
under this Agreement or any of the other Transaction Agreements;
(viii) the breach by Westcorp of any representation
or warranty on the part of Westcorp contained in or incorporated by
reference in this Agreement or any other Transaction Agreement or in
any certificate furnished or delivered to Financial Security hereunder
and thereunder;
(ix) the use, ownership or operation by Westcorp,
or any Affiliate thereof, of a Financed Vehicle; and
41
(x) the violation by WFSRC2 or the Trust of any
of the provisions of (a) above caused by or at the direction of WFS or
Westcorp, as the case may be.
(c) If any action or proceeding (including any
governmental investigation) shall be brought or asserted against Financial
Security or any person controlling Financial Security (hereinafter collectively
referred to as a Financial Security Indemnified Party) in respect of which
indemnity may be sought from WFSRC2 pursuant to Section 3.06(a)(i) or (ii) or
Westcorp pursuant to Section 3.06(b)(i), (ii) or (x) (such Western Entity or
Western Entities, as the case may be, herein referred to as the Indemnifying
Western Entity), then Financial Security or such controlling person shall give
the Indemnifying Western Entity written or telegraphic notice of such action or
claim reasonably promptly after receipt of written notice thereof. The
Indemnifying Western Entity shall be entitled to participate in the defense of
any such action or claim in reasonable cooperation with, and with the reasonable
cooperation of, the Financial Security Indemnified Party. The Financial Security
Indemnified Party shall have the right to employ its own counsel in any such
action in addition to the counsel of the Indemnifying Western Entity, but fees
and expenses of such counsel will be at the expense of the Financial Security
Indemnified Party unless (1) the employment of counsel by the Financial Security
Indemnified Party has been authorized in writing by the Indemnifying Western
Entity or (2) the Indemnifying Western Entity has not in fact employed counsel
to assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action or (3) the named parties to any such
action or proceeding (including any impleaded parties) include both the
Indemnifying Western Entity on the one hand and the Financial Security
Indemnified Party on the other hand, and the Financial Security Indemnified
Party shall have been advised by counsel that there may be one or more legal
defenses available to it that are different from or additional to those
available to the Indemnifying Western Entity (it being understood, however, that
the Indemnifying Western Entity shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Financial Security
Indemnified Party, which firm shall be designated in writing by the Financial
Security Indemnified Party), in each of which cases the fees and expenses of
counsel will be at the expense of the Indemnifying Western Entity and all such
fees and expenses will be reimbursed promptly as they are incurred. No
settlement of any such claim or action shall be entered into without the consent
of Financial Security on the one hand and the Indemnifying Western Entity who is
subject to such claim or action on the other hand. Any failure by Financial
Security to comply with the provisions of this Section shall relieve the
Indemnifying Western Entity of liability only if substantially prejudicial to
the position of the Indemnifying Western Entity and then only to the extent of
such prejudice.
(d) The rights to indemnification provided for in this
Section 3.06 shall survive the termination of this Agreement and shall survive
until the statute of limitations has run on any causes of action that arise from
these provisions and until all suits filed as a result thereof have been finally
concluded.
42
(e) Notwithstanding anything to the contrary contained in
this Agreement, the obligations of WFSRC2 under this Section 3.06 are solely the
corporate obligations of WFSRC2, and shall be payable by WFSRC2, solely as
provided in this Section 3.06. WFSRC2 shall only be required to pay (a) any
fees, expenses, indemnities or other liabilities that it may incur under this
Section 3.06 (i) from funds available pursuant to, and in accordance with, the
payment priorities set forth in Section 5.05 of the Sale and Servicing Agreement
and (ii) to the extent WFSRC2 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 WFSRC2 incurred in
accordance with WFSRC2's certificate of incorporation and all financing
documents to which WFSRC2 is a party and (b) any expenses, indemnities or other
liabilities that it may incur under this Section 3.06 (i) from funds available
pursuant to, and in accordance with, the payment priorities set forth in Section
5.05 of the Sale and Servicing Agreement and (ii) only to the extent it receives
additional funds designated for such purposes or to the extent it 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 WFSRC2 incurred in accordance with WFSRC2's certificate of
incorporation and all financing documents to which WFSRC2 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 WFSRC2 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. No
recourse shall be had for the payment of any amount owing hereunder or for the
payment of any fee hereunder or any other obligation of, or claim against,
WFSRC2 arising out of or based upon this Section 3.06, against any stockholder,
employee, officer, agent, director or authorized person of WFSRC2 or Affiliate
thereof; provided, however, that the foregoing shall not relieve any such person
or entity of any liability they might otherwise have as a result of fraudulent
actions or omissions taken by them.
Section 3.07. Liability Absolute. The obligations of each of
WFSRC2, Westcorp, WFS and the Trust hereunder shall be absolute, unconditional
and irrevocable and shall be paid and performed strictly in accordance with the
terms of this Agreement under all circumstances whatsoever, including, without
limitation, the following circumstances:
(a) any lack of validity or enforceability of the Policy
or all or any provision of this Agreement or of any of the other Transaction
Agreements;
(b) any amendment or waiver of or any consent to
departure from all or any provision of this Agreement or of any other
Transaction Agreement;
(c) the existence of any claim, setoff, defense,
reduction, abatement or other right which either Western Entity may have at any
time against Financial Security or any other Person;
43
(d) any statement, instrument of assignment or any other
document presented to Financial Security in connection with the Policy proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
(e) payment by Financial Security under the Policy
against presentation of a certificate or other document which does not comply
with the terms of the Policy, provided that such payment shall not have been the
result of the gross negligence or willful misconduct of Financial Security;
(f) any nonapplication or misapplication by the Indenture
Trustee, the Owner Trustee, or any paying agent of the proceeds of the demand
for payment under the Policy;
(g) the failure of WFSRC2, or, indirectly, WFS, to
receive the proceeds of the sale of the Notes; or
(h) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, provided that such circumstance
or happening shall not have been the result of the gross negligence or willful
misconduct of Financial Security.
Section 3.08. Liability of Financial Security. Neither
Financial Security nor any of its officers, directors or employees shall be
liable or responsible for (a) the unauthorized use which may be made of the
Policy by the Indenture Trustee or the Owner Trustee or any unauthorized acts or
omissions of the Indenture Trustee or the Owner Trustee in connection with the
Policy; or (b) the validity, sufficiency, accuracy or genuineness of documents,
or of any endorsement(s) thereto, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged; or (c)
any acts or omissions to act of the Indenture Trustee in connection with the
Collateral other than such acts or omissions that are at the direction of
Financial Security. In furtherance and not in limitation of the foregoing,
Financial Security (or its Fiscal Agent) may accept documents that appear on
their face to be in order, without responsibility for further investigation.
Each of the Owner Trustee, the Indenture Trustee and each Western Entity
acknowledges that it has not relied on any information or materials provided by
Financial Security in connection with the issuance of the Notes and the
Certificates except for the information furnished in writing by Financial
Security for inclusion in the Registration Statement. Each of them also
acknowledges that it has not relied on any investigation by Financial Security
of the Collateral or of the financial statements or other financial statistical
data used in connection with the issuance of the Notes and Certificates.
Section 3.09. Payment of Costs, Fees and Expenses.
(a) WFSRC2 shall pay on demand any and all charges, fees,
costs and expenses which Financial Security may reasonably pay or incur,
including, but not limited to, attorneys' and accountants' fees and expenses, in
connection with (A) the enforcement, defense or preservation of any rights in
respect of any of this Agreement or
44
any other Transaction Agreements, including defending, monitoring or
participating in any litigation or proceeding (including any bankruptcy
proceeding in respect of any transaction participant or any Affiliate thereof)
relating to any of the Transaction Agreements and this Agreement, any party to
any of the Transaction Agreements and this Agreement, or the transaction, (B)
any amendment, waiver or other action with respect to, or related to, any
Transaction Agreements and this Agreement whether or not executed or completed
or (C) any review or approval by Financial Security in connection with the
delivery of any additional or substitute collateral under any of the Transaction
Agreements and this Agreement. In addition, WFSRC2 shall reimburse Financial
Security for its expenses, including, without limitation, legal fees and
disbursements, incurred in connection with the preparation of this Agreement and
the Transaction Agreements and the consummation of the initial transactions
contemplated hereby and thereby, it being understood that WFSRC2's obligations
to reimburse Financial Security pursuant to this sentence shall be limited in
the aggregate to the dollar amount set forth in the letter agreement between the
Seller and Financial Security referred to in the definition of "Premium" set
forth herein, plus rating agency fees, to the extent paid by Financial Security.
(b) Westcorp shall pay on demand any and all charges,
fees, costs and expenses not paid by WFSRC2 which Financial Security may
reasonably pay or incur, including, but not limited to, attorneys' and
accountants' fees and expenses, in connection with (A) the enforcement, defense
or preservation of any rights in respect of this Agreement or any other
Transaction Agreements, including defending, monitoring or participating in any
litigation or proceeding (including any bankruptcy proceeding in respect of any
transaction participant or any Affiliate thereof) relating to this Agreement or
any other Transaction Agreements, any party to any of the Transaction Agreements
and this Agreement, or the transaction, (B) any amendment, waiver or other
action with respect to, or related to, this Agreement or any other Transaction
Agreements, whether or not executed or completed or (C) any review or approval
by Financial Security in connection with the delivery of any additional or
substitute collateral under any of the Transaction Agreements and this
Agreement.
Section 3.10. Payment Procedure. All payments made pursuant to
this Agreement shall be made to Financial Security in lawful currency of the
United States of America and in one-day clearing-house funds at Financial
Security's Notice Address before 1:00 p.m. (New York City time) on the date when
due.
Section 3.11. Business Days. In any case where the date of any
payment to Financial Security or the expiration of any time period hereunder
occurs on a day which is not a Business Day, then such payment may be made, or
such expiration shall occur, on the next succeeding Business Day with the same
force and effect as if made on the day of maturity or expiration of such period,
except that interest shall continue to accrue for the period after such date to
the next Business Day.
Section 3.12. Waivers and Consents by Seller, Westcorp and
WFS. WFSRC2, WFS, Westcorp and any and all others who are now or may become
liable for all or part of the obligations of WFSRC2, Westcorp and WFS under this
Agreement (all
45
of the foregoing being referred to collectively in this Section as the
"Obligors") agree to be bound by this Agreement and (a) waive and renounce any
and all redemption and exemption rights and the benefit of all valuation and
appraisement privileges against any amounts to be paid hereunder or any
extension or renewal hereof; (b) waive presentment and demand for payment,
notices of nonpayment and of dishonor, protest of dishonor and notice of
protest; (c) waive all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of the payment hereof except as required by this Agreement; (d)
waive any and all lack of diligence and delays in the enforcement of the payment
hereof; (e) agree that the liability of each of the Obligors shall be
unconditional and without regard to the liability of any other person or entity
for the payment hereof and shall not in any manner be affected by any indulgence
or forbearance granted or consented to by Financial Security with respect
hereto; (f) consent to any and all extensions of time, renewals, waivers or
modifications that may be granted by Financial Security with respect to the
payment or other provisions hereof, and to the release of any security at any
time given for the payment hereof, or any part thereof, with or without
substitution, and to the release of any person or entity liable for the payment
hereof; and (g) consent to the addition of any and all other makers, endorsers,
guarantors and other obligors for the payment hereof, and to the acceptance of
any and all other security for the payment hereof or thereof, and agree that the
addition of any such obligors or security shall not affect the liability of any
of the Obligors for the payment hereof.
Section 3.13. Purchase of Replacement Swap Agreement. Upon the
occurrence of (i) an Event of Default or Termination Event under the Swap
Agreement and (ii) the failure of the Swap Counterparty to pay when due any
amounts payable by the Swap Counterparty pursuant to the Swap Agreement or
otherwise to perform under the Swap Agreement, Financial Security shall have the
right, but no obligation, to purchase, in Financial Security's sole and absolute
discretion, a replacement swap agreement or agreements (collectively, the
"Replacement Swap Agreement") with a replacement swap provider or providers in
form and substance satisfactory to Financial Security, and the parties hereto
agree that they shall direct the Collateral Agent in writing to cause the Trust
to enter into such Replacement Swap Agreement; provided, however, that under the
Replacement Swap Agreement (a) the Swap Interest Rate shall not be lower than
the Swap Interest Rate under the Swap Agreement and (b) the aggregate Fixed
Amount shall not be greater than the Fixed Amount under the Swap Agreement,
provided further, however, that in connection with the purchase of each
replacement swap agreement that shall collectively constitute the Replacement
Swap Agreement, Financial Security shall, prior to such purchase, obtain quotes
from at least two potential replacement swap providers (each a "Potential
Replacement Swap Provider") and the parties hereto shall direct the Collateral
Agent in writing to cause the Trust to enter into such Replacement Swap
Agreement with the Potential Replacement Provider that quoted a less expensive
purchase price than the other Potential Replacement Swap Provider or, if
Financial Security shall obtain quotes from more than two Potential Replacement
Swap Providers, the least expensive purchase price of all the Potential
Replacement Swap Providers. For the purposes of this Section 3.13 the terms
"Event of Default", "Termination Event", "Swap Interest Rate" and "Fixed Amount"
shall have the meanings assigned thereto in the Swap Agreement.
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ARTICLE IV
PLEDGE OF COLLATERAL
Section 4.01. Obligations Secured Hereby. The agreements
contained in this Article IV are made to provide for and secure repayment of the
following indebtedness and liabilities of WFSRC2 (such indebtedness and
liabilities being herein called the "Obligations") in the order of priority
indicated:
First, (i) the repayment of all amounts, if any,
advanced or expended by the Collateral Agent, in its capacity as
Collateral Agent, for the account of WFSRC2 hereunder, (ii) the payment
of all reasonable costs and expenses at any time and from time to time
incurred by the Collateral Agent, in its capacity as Collateral Agent,
in connection with the administration or enforcement of this Agreement
or any related document (including, without limitation, the fees and
out-of-pocket expenses of counsel employed by the Collateral Agent in
connection therewith) and (iii) the payment of all indemnities at any
time and from time to time payable hereunder to the Collateral Agent,
by WFSRC2, and
Second, (i) the repayment of all amounts advanced or
paid by Financial Security under the Policy pursuant to this Agreement
and (ii) the payment of any accrued but unpaid installments of the
Premium and all costs and expenses at any time and from time to time
incurred by Financial Security in connection with the administration or
enforcement of this Agreement or any other Transaction Agreement or any
related document (including, without limitation, the fees and
out-of-pocket expenses of counsel employed by Financial Security in
connection therewith) and under or in connection with this Agreement
and the Policy.
Section 4.02. Granting Clause. In order to secure and to
provide for the repayment of the Obligations, WFSRC2 hereby assigns, conveys,
transfers, delivers and sets over unto the Collateral Agent, as collateral agent
for Financial Security, and hereby grants the Collateral Agent, as collateral
agent for Financial Security, a security interest in all of its right, title and
interest in the Collateral owned by it, to have and to hold said Collateral unto
the Collateral Agent, its successors and assigns, forever in pledge and trust
for the benefit and security of Financial Security, subject to the terms and
provisions set forth in Article V of this Agreement. The assignment and security
interest so granted to the Collateral Agent shall not relieve WFSRC2 from the
performance of any term, covenant, condition or agreement on WFSRC2's part to be
performed or observed under or in connection with this Agreement or any other
Transaction Agreement, or impose any obligation on the Collateral Agent or
Financial Security to perform or observe any such term, covenant, condition or
agreement on WFSRC2's part to be so performed or observed or impose any
liability on the Collateral Agent or Financial Security for any act or omission
on the part of WFSRC2 relative thereto or for any breach of any representation
or warranty on the part of WFSRC2 contained therein, or made in connection
therewith, and WFSRC2 hereby agrees to indemnify and hold harmless the
47
Collateral Agent and Financial Security from and against any and all losses,
liabilities (including liabilities for penalties), claims, demands, actions,
suits, judgments, costs and expenses arising out of or resulting from the
assignment and security interest granted hereby by virtue of any act or omission
on the part of WFSRC2 (other than an act or omission on the part of such party
pursuant to or in accordance with an express direction from the Collateral Agent
or Financial Security), including, without limitation, the reasonable costs,
expenses and disbursements (including attorneys' fees) incurred by the
Collateral Agent or Financial Security in enforcing this Agreement or any other
Transaction Agreement. The assignment and security interest granted to the
Collateral Agent pursuant to this Section shall become effective prior to the
effectiveness of the Seller Assignments, and the assignment by WFSRC2 to the
Trust under Section 2.01 of the Sale and Servicing Agreement and the assignment
by the Trust to the Indenture Trustee under the Indenture and, upon the
effectiveness of such assignments and security interest, such assignment and
security interest shall be subject to the provisions of Section 5.01(d) hereof.
Section 4.03. Release of Collateral. Financial Security hereby
instructs the Collateral Agent that, at such time as a Contract is reconveyed by
the Trust pursuant to Section 9.01 of the Sale and Servicing Agreement, the
Collateral Agent shall release such Contract from the lien of the security
interest created hereby upon receipt by Financial Security and the Collateral
Agent of a Certificate of the Seller that the conditions set forth in Section
9.01 with respect to the Optional Purchase under that Section 9.01 of the Sale
and Servicing Agreement have been satisfied.
ARTICLE V
INTERCREDITOR PROVISIONS
Section 5.01. Financial Security's Direction Upon Servicer
Default.
(a) So long as no Insurer Insolvency has occurred and no
Insurer Default has occurred and is continuing, if there exists any Servicer
Default pursuant to Section 8.01 of the Sale and Servicing Agreement, Financial
Security shall, notwithstanding the provisions of Article VIII of the Sale and
Servicing Agreement, have the sole right to direct the Indenture Trustee as to
any and all actions to be taken under the Indenture or the Sale and Servicing
Agreement, as applicable, including, without limitation, all actions with
respect to (i) the giving of directions to the Master Servicer and any
Subservicer with respect to the servicing of the Contracts and any of the
respective obligations of WFSRC2 under the Sale and Servicing Agreement, (ii)
the exercise of all rights, remedies, powers, privileges and claims against any
obligor under the Sale and Servicing Agreement and (iii) the giving or
withholding of all consents, requests, notices, directions, approvals,
extensions or waivers under or with respect to the Indenture or the Sale and
Servicing Agreement, as applicable, in each case to the same extent as the
Noteholders or the Certificateholders might do but for the collateral assignment
and security interests granted to Financial Security hereunder, provided,
however, that the Indenture Trustee, without obtaining the consent or direction
of Financial Security, may at all times take any action permitted or required to
be taken by it
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under the terms of the Indenture or as a fiduciary in order to protect the
Indenture Trustee's, the Noteholders' and the Certificateholders' interest in
the Trust Estate or to preserve any available claims against WFSRC2 on behalf of
the Noteholders and the Certificateholders. Financial Security shall indemnify
the Indenture Trustee in full for any costs and expenses incurred (including the
reasonable fees and expenses of the Indenture Trustee's counsel) in connection
with the Indenture Trustee's due performance of directions pursuant to this
subsection (a) or in connection with any inaction of the Indenture Trustee as a
result of a direction from Financial Security at any time when Financial
Security holds the right to direct the Indenture Trustee as provided for in this
paragraph (a).
(b) Financial Security shall not unreasonably withhold
any consent required of it under the Sale and Servicing Agreement or the
Indenture, as applicable, and shall promptly respond when any approval or
consent is required of it under the Sale or Servicing Agreement and the
Indenture, as applicable.
(c) Notwithstanding any provision of the Sale and
Servicing Agreement or the Indenture, as applicable, to the contrary, so long as
no Insurer Insolvency has occurred and no Insurer Default has occurred and is
continuing,
(i) without the prior written consent of
Financial Security, the Owner Trustee shall not (A) terminate the
rights and powers of the Master Servicer pursuant to Section 8.01 of
the Sale and Servicing Agreement or (B) waive any Servicer Default
thereunder;
(ii) without the prior written consent of
Financial Security, (A) neither WFSRC2 nor the Trust shall cause to be
appointed any successor Indenture Trustee, and, (B) neither the
Indenture Trustee nor the Administrator shall cause to be appointed any
Co-Trustee under the Indenture;
(iii) without the prior written consent of
Financial Security, none of WFSRC2, Westcorp, WFS, the Owner Trustee or
the Indenture Trustee shall appoint new Independent Accountants;
(iv) without the prior written consent of
Financial Security, none of WFSRC2, Westcorp, WFS, the Owner Trustee or
the Indenture Trustee shall consent to the amendment of or supplement
to any of the Transaction Agreements; and
(v) Financial Security shall have the power to
direct the actions to be taken by WFSRC2 pursuant to Section 3.02 of
the Sale and Servicing Agreement.
(d) Financial Security agrees that, until such time that
all required payments shall have been made with respect to the Notes, the
security interest in the Collateral granted to Financial Security under this
Agreement shall be junior and subordinate to the interest of the Indenture
Trustee and the Noteholders. Financial Security further agrees that, until such
time that all required payments shall have been
49
made with respect to the Notes, neither Financial Security nor any Person acting
on its behalf may take any action to foreclose or otherwise pursue remedies with
respect to the Collateral other than in accordance with the Sale and Servicing
Agreement and the Indenture.
Section 5.02. Financial Security's Direction of Insolvency
Proceedings. Financial Security shall have the rights provided for in Section
8.06 of the Sale and Servicing Agreement.
ARTICLE VI
THE COLLATERAL AGENT; REMEDIES
Section 6.01. Appointment and Powers of Collateral Agent.
Financial Security hereby appoints Deutsche Bank Trust Company Americas as the
Collateral Agent, and Deutsche Bank Trust Company Americas accepts such
appointment hereunder, and Financial Security hereby authorizes the Collateral
Agent to take such action on its behalf and to exercise such rights, remedies,
powers and privileges hereunder as Financial Security may direct and as are
specifically authorized to be exercised by the Collateral Agent by the terms
hereof, together with such rights, remedies, powers and privileges as are
reasonably incidental thereto. The Collateral Agent may execute any of its
duties as agent hereunder by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of such
counsel concerning all matters pertaining to the agencies hereby created and its
duties hereunder, and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of counsel selected by
it. The Collateral Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement. The duties of the Collateral Agent shall
be mechanical and administrative in nature. The Collateral Agent shall not have
by reason of this Agreement a fiduciary relationship. Nothing in this Agreement,
express or implied, is intended to or shall be so construed as to impose upon
the Collateral Agent any obligations in respect of this Agreement except as
expressly set forth herein. Neither the Collateral Agent nor Financial Security,
nor any of its or their respective directors, officers or employees, shall be
liable for any action taken or omitted to be taken by it or them hereunder, or
in connection herewith, except for its or their own gross negligence or willful
misconduct; nor shall the Collateral Agent or Financial Security be responsible
for the validity, effectiveness, value, sufficiency or enforceability against
WFSRC2 of this Agreement or any other document furnished pursuant hereto or in
connection herewith, or of the Collateral (or any part thereof). The Collateral
Agent shall be entitled to rely on any communication, instrument, paper or other
document believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons.
Section 6.02. Successor Collateral Agent. The Collateral Agent
acting hereunder at any time may resign by an instrument in writing addressed
and delivered to WFSRC2 and Financial Security. If the Collateral Agent is also
the Indenture Trustee and, as such, determines that it has a conflicting
interest on account of its acting as Collateral Agent, the Collateral Agent
shall eliminate such conflicting interest by
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resigning as Collateral Agent hereunder rather than resigning as Indenture
Trustee. Financial Security shall appoint a successor to the Collateral Agent
upon any such resignation by an instrument of substitution complying with the
requirements of applicable law, or, in the absence of any such requirements,
without formality other than appointment and designation in writing, a copy of
which instrument or writing shall be sent to WFSRC2; provided, however, that the
validity of any such appointment shall not be impaired or affected by any
failure to give any such notice to WFSRC2 or by any defect therein. Upon the
making and acceptance of such appointment, the execution and delivery by such
successor Collateral Agent of a ratifying instrument pursuant to which such
successor Collateral Agent agrees to assume the duties and obligations imposed
on the Collateral Agent by the terms of this Agreement, and the delivery to such
successor Collateral Agent of the Collateral and related documents then held by
the retiring Collateral Agent, such successor Collateral Agent shall thereupon
succeed to and become vested with all the estate, rights, powers, remedies,
privileges, immunities, indemnities, duties and obligations hereby granted to or
conferred or imposed upon the Collateral Agent named herein, and one such
appointment and designation shall not exhaust the right to appoint and designate
further successor Collateral Agents hereunder. No Collateral Agent shall be
discharged from its duties or obligations hereunder until the Collateral and
related documents then held by such Collateral Agent shall have been transferred
and delivered to the successor Collateral Agent and such retiring Collateral
Agent shall have executed and delivered to the successor Collateral Agent
appropriate instruments establishing the successor Collateral Agent as the
record holder of all liens and security interests in favor of Financial Security
in the Collateral and transferring to such successor Collateral Agent all power
given to it by the Indenture Trustee to act as attorney-in-fact of the Indenture
Trustee for purposes of this Agreement. Each such successor Collateral Agent
shall provide WFSRC2 and Financial Security with its address (which shall
thereupon become such successor Collateral Agent's Notice Address for purposes
of this Agreement), and its telephone, Telex, TWX and telecopier numbers, to be
used for purposes of Section 7.02 hereof, in a notice complying with the terms
of said Section.
Section 6.03. Remedies Available to Collateral Agent.
(a) To the fullest extent permitted by applicable law and
subject to Article V hereof, if the Master Servicer shall have been terminated
upon the occurrence of any Servicer Default pursuant to Section 8.01 of the Sale
and Servicing Agreement, then in every such case, the Collateral Agent may, to
the extent permitted by applicable law and subject to Article V hereof, exercise
the following rights, privileges and remedies:
(i) Collection of the Collateral. The Collateral
Agent shall have the right to collect all proceeds of the Collateral,
to pay all expenses of such collection, including the reasonable
expenses and compensation of the Collateral Agent, its agents and
attorneys, and to apply the remainder of the moneys so received as
provided herein.
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(ii) Sale of Collateral. The Collateral Agent may
sell, or cause to be sold, the Collateral or any part thereof or
interest therein, at public auction to the highest bidder for cash or
at private sale or auction with or without demand, advertisement or
notice of the date, time or place of sale or any adjournment thereof,
upon such terms as Financial Security may approve, and upon such sale
the Collateral Agent shall make and deliver to the purchaser or
purchasers an appropriate instrument or instruments of transfer. The
Collateral Agent is hereby irrevocably appointed the true and lawful
attorney of the Indenture Trustee, in its name and stead, to make all
necessary transfers of property thus sold; and for that purpose it may
execute all necessary instruments of transfer, and may substitute one
or more Persons with like power, the Indenture Trustee hereby ratifying
and confirming all that its said attorney, or such substitute or
substitutes, shall lawfully do by virtue hereof. Nevertheless, if so
requested by the Collateral Agent or any purchaser of the Collateral or
any part thereof, the Indenture Trustee shall ratify and confirm any
such sale or transfer by executing and delivering to the Collateral
Agent or such purchaser all proper instruments of transfer and releases
as may be designated in any such request. The Collateral Agent may
proceed at law or in equity to foreclose the lien of this Agreement
against all or any part of the Collateral and to have the same sold
under the judgment or decree of a court having jurisdiction or as
otherwise may be required or permitted by law. Upon any such sale,
whether made under the power of sale hereby given or by virtue of
judicial proceedings, any Noteholder, Certificateholder or Financial
Security may bid for and purchase the Collateral or any part thereof
and, upon compliance with the terms of such sale, may hold, retain,
possess or dispose of such property in its or their own absolute right
without accountability; and any purchaser at any such sale may, in
paying the purchase money, turn in any of the Notes or Certificates, as
applicable, in lieu of cash up to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon. Said
Notes or Certificates, in case the amounts so payable thereon shall be
less than the amount due thereon, shall be returned to the Holders
thereof after being properly stamped to show partial payment. Upon any
sale, whether made under the power of sale hereby given or by virtue of
judicial proceedings, a receipt of the Collateral Agent, or of the
officer making such sale under judicial proceedings, shall be a
sufficient discharge to the purchaser or purchasers at such sale for
its or their purchase money, and such purchaser or purchasers shall not
be obliged to see to the application thereof. Any such sale, whether
under the power of sale hereby given or by virtue of judicial
proceedings, shall bind the Collateral Agent, WFSRC2, the Indenture
Trustee, the Noteholders and the Certificateholders, shall operate to
divest all right, title and interest whatsoever, either at law or in
equity, of each of them in and to the property sold, and shall be a
perpetual bar, both at law and in equity, against each of them and
their successors and assigns, and against any and all Persons claiming
through or under them.
(iii) Other Actions. The Collateral Agent shall
have the right to cause any other action permitted at law or in equity
to be initiated and prosecuted to enforce this Agreement and any rights
granted by virtue of the pledge of the Collateral hereunder and to
collect or enforce the Notes and the Certificates.
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Section 6.04. Waiver of Stay or Extension Laws; Marshalling of
Assets. Each of WFSRC2, the Owner Trustee, and the Indenture Trustee (in each
case to the extent permitted by applicable law) covenants that it will not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any appraisement, valuation, stay, extension or
redemption law wherever enacted, now or at any time hereafter in force, in order
to prevent or hinder the enforcement of this Agreement or the absolute sale of
the Collateral or any part thereof, or the possession thereof by any purchaser
at any sale under this Article; and each of WFSRC2 and the Indenture Trustee (in
each case to the extent permitted by applicable law), for itself and all who may
claim under it, hereby waives the benefit of all such laws, and covenants that
none of them will hinder, delay or impede the execution of any power herein
granted to the Collateral Agent, but will suffer and permit the execution of
every such power as though no such law had been enacted. Each of WFSRC2, the
Owner Trustee and the Indenture Trustee, for itself and all who may claim under
it, waives (in each case to the extent permitted by applicable law) all right to
have the Collateral marshalled upon any foreclosure hereof, and agrees that any
court having jurisdiction to foreclose this Agreement may order the sale of the
Collateral as an entirety without the marshalling thereof.
Section 6.05. Restoration of Rights and Remedies. If the
Collateral Agent has instituted any proceeding to enforce any right or remedy
under this Agreement, and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Collateral Agent, then and
in every such case WFSRC2, the Collateral Agent and the Indenture Trustee shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Collateral Agent shall continue as though no such proceeding had
been instituted.
Section 6.06. Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Collateral Agent is intended to be exclusive
of any other right or remedy, and every right shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law, in equity or otherwise, and each
and every right, power and remedy, whether specifically herein given or
otherwise existing, may be exercised from time to time and as often and in such
order as may be deemed expedient by the Collateral Agent, and the exercise or
the beginning of the exercise of any power or remedy shall not be construed to
be a waiver of the right to exercise at the same time or thereafter any other
right, power or remedy.
Section 6.07. Control by Financial Security. So long as no
Insurer Insolvency has occurred and no Insurer Default has occurred and is
continuing, Financial Security shall, upon the occurrence and during the
continuation of any of the Servicer Defaults described in Section 8.01 of the
Sale and Servicing Agreement, subject to Article V hereof, have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Collateral Agent hereunder or otherwise or exercising any trust
or power conferred upon the Collateral Agent hereunder provided that:
53
(1) such direction shall not be in conflict with
any rule of law or with this Agreement or the Sale and Servicing
Agreement; and
(2) such Collateral Agent may take any other
action deemed proper by such Collateral Agent that is not inconsistent
with such direction.
Section 6.08. Proceeds Agent as Custodian and Bailee of
Collateral Agent. In order to facilitate the making of payments under the
Contracts, such payments shall be deposited by the Master Servicer in the
Collection Account, and certain amounts in the Collection Account shall be
deposited in the Spread Account, in accordance with the Sale and Servicing
Agreement. The Proceeds Agent shall retain all proceeds deposited in the
Collection Account and the Spread Account as custodian and bailee of the
Collateral Agent for Financial Security. Financial Security hereby acknowledges
that the Proceeds Agent will also hold all such proceeds for the benefit of the
Noteholders and the Certificateholders. Solely for purposes of perfection under
Section 9-313(c) of the UCC, Financial Security and the Proceeds Agent hereby
acknowledge that the Proceeds Agent is acting as agent and bailee of the
Collateral Agent for Financial Security in holding such property in the
Collection Account and the Spread Account, and any other items constituting a
part of the Collateral which from time to time come into the possession of the
Proceeds Agent. It is intended that, by the Proceeds Agent's acceptance of such
custodianship and bailment pursuant to this Agreement, the Collateral Agent for
Financial Security, as secured party, will be deemed to have possession of such
Collateral, items, moneys and such other items for purposes of Section 9-313(c)
of the UCC.
Section 6.09. Indemnification of Collateral Agent. Financial
Security hereby indemnifies and holds the Collateral Agent harmless from and
against any and all judgments, claims, defenses, charges, losses, liabilities,
costs or expenses that the Collateral Agent may incur or that may be claimed
against the Collateral Agent by any Person by reason of any action taken, or any
failure to act, in connection with the duties and responsibilities of the
Collateral Agent under the terms of this Agreement; provided, however, that
Financial Security shall not be required to indemnify the Collateral Agent
pursuant to this Section for any judgments, claims, defenses, charges, losses,
liabilities, costs or expenses to the extent caused by such Collateral Agent's
willful misconduct or gross negligence in any action taken, or any failure to
act, in connection with the duties and responsibilities of the Collateral Agent
under the terms of this Agreement. The Collateral Agent shall have the right to
retain counsel in any action for which indemnification from Financial Security
is provided herein, and the reasonable fees and expenses of such counsel shall
constitute costs and expenses of such Collateral Agent for which indemnification
from Financial Security is provided herein. The Collateral Agent shall be
entitled to submit a written request, with supporting documentation, for any
amounts expended by it for which indemnification is provided herein, as such
amounts are expended or on a periodic basis, as the Collateral Agent shall
choose, and Financial Security shall reimburse to the Collateral Agent the
amount specified in each such written request promptly. The indemnity agreements
contained in this Section shall remain operative and in full force and effect
regardless of the termination of this Agreement.
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Section 6.10. Compensation Payable to Collateral Agent. In
consideration of the Collateral Agent's services to be rendered hereunder, the
Master Servicer agrees to pay to the Collateral Agent, on behalf of Financial
Security, the compensation set forth in a separate letter agreement dated as of
the date hereof between the Master Servicer and the Collateral Agent
incorporated herein by this reference. The Collateral Agent acknowledges,
notwithstanding the fact that, in the event that payments from the Collection
Account are insufficient, it shall look solely to the Master Servicer for
payment of its compensation hereunder, that the Collateral Agent is acting
solely as the agent for Financial Security for purposes of this Agreement.
Failure by the Master Servicer to pay the Collateral Agent's compensation
hereunder shall not cause this Agreement to be cancelled, void or voidable or
otherwise terminated or otherwise affect the Collateral Agent's obligations
hereunder.
Section 6.11. Protection of Financial Security's Security
Interest.
(a) The Seller shall execute and file (or cause to be
executed and filed) such financing statements and execute and file (or cause to
be executed and filed) such continuation statements, against the Seller, all in
such manner and in such places as may be required by law (whether in the event
of a change of the Seller's name, identity or corporate structure, or otherwise)
fully to preserve, maintain, and protect the interest of Financial Security in
the Collateral. The Seller shall deliver (or cause to be delivered) to Financial
Security file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing. Furthermore, to
effectuate the provisions and purposes of this Agreement, including for the
purpose of perfecting the security interest granted hereunder, the Trust, WFS
and the Seller, respectively, hereby authorize the filing by Financial Security,
on or prior to the Closing Date and any subsequent Closing Dates, an appropriate
Uniform Commercial Code financing statement in California or Nevada, as
appropriate, in form sufficient to assure that the Collateral Agent, as agent
for Financial Security, has a first priority perfected security interest in all
Collateral which can be perfected by the filing of a financing statement.
(b) The Seller shall not change its name, identity, or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed by the Seller, in accordance with
paragraph (a) above, seriously misleading within the meaning of Section 9-507(c)
of the UCC, unless it shall have given the Collateral Agent and Financial
Security at least 60 days' prior written notice thereof.
(c) The Seller shall give Financial Security at least 60
days' prior written notice of any relocation of the Seller's place of
incorporation if, as a result of such relocation, the applicable provisions of
the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement. WFS shall
at all times maintain each office from which it shall service the Contracts, and
its principal executive office, within the United States of America.
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(d) The Seller agrees that, upon request by Financial
Security, such Seller shall furnish to Financial Security, within seven Business
Days, a list of the Contracts then held as part of the Trust, together with a
reconciliation of such list to the Schedule of Contracts and to each of the
Master Servicer's certificates furnished pursuant to the Sale and Servicing
Agreement before such request; provided, however, that Financial Security shall
not make such request more than four times in any calendar year. None of WFSRC2
or the Master Servicer shall grant a security interest in, or lien upon, or in
any manner encumber the Collateral, or release or waive the security interest
granted hereunder, except as contemplated herein.
(e) In the event that either the Master Servicer or
WFSRC2 relocates its principal executive office, such party shall provide an
Opinion of Counsel to Financial Security, in form and substance satisfactory to
Financial Security, to the effect that upon the filing of any necessary
amendment to any previously filed financing or continuation statement or a new
financing statement, the Collateral Agent's security interest in the Collateral
granted hereunder shall remain valid and effective.
(f) WFSRC2 shall be obligated to pay all reasonable costs
and disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of Financial Security's right, and
security interest in and to the Collateral.
Section 6.12. Representations and Warranties of Indenture
Trustee. The representations and warranties of the Indenture Trustee, made as
Indenture Trustee, in Section 6.13 of the Indenture are incorporated by
reference herein as if set forth in full herein and Financial Security may rely
upon such representations and warranties.
Section 6.13. Certain Guaranties. Each of the Indenture
Trustee and the Master Servicer agrees that it (i) shall not treat any ledger
account or deposit account as an "Eligible Account" by reason of a guaranty of
the type described in clause (ii)(a) of the definition of "Eligible Account" in
the Sale and Servicing Agreement unless Financial Security shall have previously
approved in writing the form of such guaranty and (ii) shall not treat any
investment as an "Eligible Investment" by reason of a guaranty of the type
described in clause (iii)(b) or clause (vii) of the definition of "Eligible
Investments" in the Sale and Servicing Agreement unless Financial Security shall
have previously approved in writing the form of such guaranty.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Events of Default. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) any demand for payment shall be made under the
Policy;
(b) any representation or warranty made by the Trust,
WFSRC2, Westcorp or WFS under any of the Transaction Agreements, or in any
certificate or
56
report furnished under any of the Transaction Agreements, shall prove to be
untrue or incorrect in any material respect, provided however, a violation of
Section 3.01(b) or 4.06 of the Sale and Servicing Agreement as to which the
Seller or the Master Servicer, as the case may be, shall have in a timely manner
cured or repurchased the Contract as to each such Financed Vehicle pursuant to
Section 3.02 or 4.07, as the case may be, of the Sale and Servicing Agreement
shall not constitute an Event of Default hereunder;
(c) (i) the Trust, WFSRC2, Westcorp or WFS shall fail to
pay when due any amount payable by it under any of the Transaction Agreements
(other than payments of principal and interest on the Notes); (ii) the Trust,
WFSRC2, Westcorp or WFS shall have asserted that any of the Transaction
Agreements to which it is a party is not valid and binding on the parties
thereto; or (iii) any court, governmental authority or agency having
jurisdiction over any of the parties to any of the Transaction Agreements or
property thereof shall find or rule that any material provision of any of the
Transaction Agreements is not valid and binding on the parties thereto; provided
that as a result of such finding or ruling the rights or remedies of Financial
Security under this Agreement shall have been directly or indirectly impaired in
any material respect;
(d) the Trust, WFSRC2, Westcorp or WFS shall fail to
perform or observe any other covenant or agreement by it contained in any of the
Transaction Agreements (except for the obligations described under clause (b) or
(c) above) and such failure shall continue for a period of 30 days after written
notice given to the Trust and WFSRC2; provided that, if such failure shall be of
a nature that it cannot be cured within 30 days, such failure shall not
constitute an Event of Default hereunder if within such 30-day period such party
shall have given notice to Financial Security of corrective action it proposes
to take, which corrective action is agreed in writing by Financial Security to
be satisfactory and such party shall thereafter pursue such corrective action
diligently until such default is cured, and provided further as a result of such
failure the rights or remedies of Financial Security under this Agreement shall
have been directly or indirectly impaired in any material respect;
(e) there shall have occurred an "Event of Default" as
specified in Section 5.01 of the Indenture;
(f) the Trust shall adopt a voluntary plan of liquidation
or shall fail to pay its debts generally as they come due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or shall institute any proceeding
seeking to adjudicate the Trust insolvent or seeking a liquidation, or shall
take advantage of any insolvency act, or shall commence a case or other
proceeding naming the Trust as debtor under the United States Bankruptcy Code or
similar law, domestic or foreign, or a case or other proceeding shall be
commenced against the Trust under the United States Bankruptcy Code or similar
law, domestic or foreign, or any proceeding shall be instituted against the
Trust seeking liquidation of its assets and the Trust shall fail to take
appropriate action resulting in the withdrawal or dismissal of such proceeding
within 30 days or there shall be appointed or the Trust consent to, or acquiesce
in, the appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Trust or the whole or any substantial part of its
57
properties or assets, or the Trust shall take any corporate action in
furtherance of any of the foregoing or the Trust terminates pursuant to Section
9.02 of the Trust Agreement;
(g) the Trust becomes taxable as an association (or
publicly traded partnership) taxable as a corporation for federal or state
income tax purposes;
(h) on any Distribution Date, the sum of Net Collections
with respect to such Distribution Date and the amounts available in the Spread
Account is less than the sum of the amounts payable on such Distribution Date
pursuant to clauses (i) through (v) of Section 5.05(a) of the Sale and Servicing
Agreement;
(i) the Trust, WFSRC2 or WFS shall fail to deliver to
Financial Security within 30 days of the Closing Date an "agreed upon
procedures" letter in a form acceptable to Financial Security from a firm of
nationally-recognized independent certified public accountants with respect to
the Contracts that were not included in the "agreed upon procedures" letter
dated as of the Statistical Calculation Date; and
(j) WFSRC2 shall fail to purchase any Added Contract
required to be purchased from the Trust pursuant to Section 2.02 of the Sale and
Servicing Agreement.
Section 7.02. Remedies; Waivers.
(a) Upon the occurrence of an Event of Default, Financial
Security may exercise any one or more of the rights and remedies set forth
below:
(i) declare all indebtedness of every type or
description owed by the Trust, WFSRC2, Westcorp or WFS to Financial
Security, including, without limitation, the entire outstanding balance
of further installments of the Premium, to be immediately due and
payable, and shall there upon be immediately due and payable; and
(ii) the Collateral Agent, subject to Article V
hereof, shall have the right to take any action or initiate any
proceeding at law or equity available to it to enforce the terms of
this Agreement.
(b) Financial Security shall have the right, to be
exercised in its complete discretion, to waive any Event of Default hereunder,
by a writing setting forth terms, conditions, and extent of such waiver signed
by Financial Security and delivered to an Authorized Officer of WFSRC2. Unless
such writing expressly provides to the contrary, any waiver so granted shall
extend only to the specific event or occurrence that gave rise to the Event of
Default so waived and not to any other similar event or occurrence that occurs
subsequent to the date of such waiver.
(c) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to other
remedies given under the
58
Transaction Agreements or existing at law or in equity. No delay or failure to
exercise any right or power accruing under any Transaction Agreements upon the
occurrence of any Event of Default or otherwise shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle Financial Security to exercise any remedy reserved to Financial
Security in this Article, it shall not be necessary to give any notice.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Changes and Modifications. This
Agreement may be amended, changed, modified, altered or terminated only by
written instrument or written instruments signed by the parties hereto.
Section 8.02. Notices. All notices, certificates or other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, sent by overnight courier, or sent by
certified or registered mail, postage prepaid, return receipt requested,
addressed to the appropriate Notice Address. A duplicate copy of each notice,
certificate or other communication given hereunder to WFSRC2, Westcorp, WFS,
Financial Security, the Trust, the Indenture Trustee or the Collateral Agent
shall also be given to each of the others. Each party hereto may, by telecopy
notice or by such other notice described hereunder, designate any further or
different address to which subsequent notices, certificates or other
communications shall be sent without any requirement of execution of any
amendment to this Agreement.
Section 8.03. Method of Payment. Except as otherwise expressly
provided herein, all payments to be made hereunder shall be made by wire
transfer or by certified or bank check payable to the appropriate party.
Section 8.04. Further Assurances and Corrective Instruments.
(a) To the fullest extent permitted by law, the parties
hereto agree that they will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such supplements
hereto and such further instruments as Financial Security may reasonably request
and as may be reasonably required in Financial Security's judgment to effectuate
the intention of or facilitate the performance of this Agreement and to protect
the interests of Financial Security and the Collateral Agent, including, without
limitation, the creation and maintenance of Financial Security's security
interest in the Collateral pursuant to this Agreement, subject to the
Intercreditor Agreement. WFSRC2 and the Master Servicer hereby authorize the
Collateral Agent to file, at the direction of Financial Security, financing
statements and amendments thereto relating to all or any part of the Collateral
without the signature of an officer of such entity where permitted by law in
order to maintain and perfect the security interests granted by this Agreement.
59
(b) In order to facilitate the servicing of the Contracts
by the Master Servicer, the Master Servicer is hereby authorized, in the name
and on behalf of Financial Security, the Trust, the Indenture Trustee and
WFSRC2, to execute instruments of satisfaction or cancellation, or of partial or
full release or discharge, and other comparable instruments with respect to the
Contracts and with respect to the Financed Vehicles (and the Indenture Trustee
shall execute any such documents on request of the Master Servicer), subject to
the obligations of the Master Servicer under the Sale and Servicing Agreement.
Section 8.05. Term of Agreement. This Agreement shall continue
in effect until the later of (a) the date on which Financial Security has no
further liability under the Policy or (b) the date on which each Western Entity
shall have paid or caused to be paid to Financial Security all amounts to be
paid by such Western Entity hereunder.
Section 8.06. Assignments; Third-Party Rights; Reinsurance.
(a) This Agreement shall be a continuing obligation of
the parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
WFSRC2, Westcorp, WFS, nor the Collateral Agent may assign its rights or
obligations under this Agreement, or delegate any of its duties hereunder,
without the prior written consent of Financial Security. Any assignment made in
violation of this Agreement shall be null and void.
(b) Financial Security shall have the right to give
participations in its rights under this Agreement and to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions as
Financial Security may in its discretion determine; provided, however, that no
such participation or reinsurance agreement or arrangement shall relieve
Financial Security of any of its obligations hereunder or under the Policy and
provided further that Financial Security shall reimburse WFSRC2, Westcorp or
WFS, as the case may be, for any expense incurred by such Western Entity in
connection with the giving by Financial Security of participations or the
entering into such contracts of reinsurance.
(c) In addition, Financial Security shall be entitled to
assign or pledge to any bank or other lender providing liquidity or credit with
respect to the transactions contemplated by the Transaction Agreements or this
Agreement or the obligations of Financial Security in connection therewith any
rights of Financial Security under the Transaction Agreements or this Agreement
or with respect to any real or personal property or other interests pledged to
Financial Security, or in which Financial Security has a security interest, in
connection with the transactions contemplated by the Transaction Agreements or
this Agreement; provided that Financial Security shall reimburse WFSRC2,
Westcorp or WFS, as the case may be, for any expense incurred by such Western
Entity in connection with the making by Financial Security of any such
assignment or pledge.
(d) Except as provided herein with respect to
participants and reinsurers, nothing in this Agreement shall confer any right,
remedy or claim, express or
60
implied, upon any Person, including, particularly, any Noteholder or
Certificateholder, other than Financial Security, against WFSRC2, Westcorp or
WFS, and all the terms, covenants, conditions, promises and agreements contained
herein shall be for the sole and exclusive benefit of the parties hereto and
their successors and permitted assigns. Neither the Owner Trustee or the
Indenture Trustee nor any Noteholder or Certificateholder shall have any right
to payment from any premiums paid or payable hereunder or from any other amounts
paid by WFSRC2, Westcorp or WFS pursuant to Section 3.03 or 3.04 hereof.
Section 8.07. Consent of Financial Security. In the event that
Financial Security's consent is required under the terms hereof, or under the
terms of any other Transaction Agreement, it is understood and agreed that,
except as otherwise provided expressly herein or in any other Transaction
Agreement, the determination whether to grant or withhold such consent shall be
made solely by Financial Security in its absolute discretion.
Section 8.08. Right to Enforce Sale and Servicing Agreement.
The parties hereto acknowledge that Financial Security is a beneficiary of the
Sale and Servicing Agreement, and without limiting or restricting any of the
provisions thereof or hereof, Financial Security shall have the right to enforce
the provisions of the Sale and Servicing Agreement to the extent that it could
if it were a signatory of such agreement.
Section 8.09. Each of WFS and Westcorp as Party Only for
Certain Provisions. Notwithstanding any provision to the contrary contained in
this Agreement, the parties hereto agree that WFS is joined as a party to this
Agreement solely for purposes of Sections 2.08, 2.11, 3.02, 3.06, 3.07, 3.08,
3.09, 3.10, 3.11, 3.12 and 6.13 of this Agreement and the other Sections
contained in Article VII of this Agreement, and Westcorp is joined as a party to
this Agreement solely for purposes of Sections 2.01, 2.12, 3.02, 3.06, 3.07,
3.08, 3.09, 3.10, 3.11, 3.12 and 6.13 of this Agreement and the other Sections
contained in Article VII of this Agreement.
Section 8.10. Severability. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by Financial Security hereunder is unavailable or unenforceable shall
not affect in any way the ability of Financial Security to pursue any other
remedy available to it.
Section 8.11. Reports. Any report, certificate, statement or
notice which WFSRC2, WFS as the Master Servicer, and any successor Master
Servicer, is required to provide to the Owner Trustee, Indenture Trustee,
Noteholders or the Certificateholders under the Sale and Servicing Agreement
shall also be provided to Financial Security within the same time period
specified in the Sale and Servicing Agreement.
61
Section 8.12. Counterparts. This Agreement may be executed in
counterparts by the parties hereto and each such counterpart shall be considered
an original and all such counterparts shall constitute one and the same
instrument.
Section 8.13. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 8.14. Headings. The headings of articles and sections
and the table of contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not affect its
construction or interpretation. Unless otherwise indicated, all references to
articles and sections in this Agreement refer to the corresponding articles and
sections of this Agreement.
Section 8.15. Trial by Jury Waived. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN
CONNECTION WITH ANY OF THE TRANSACTION AGREEMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE
TRANSACTION AGREEMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS
WAIVER.
Section 8.16. Limited Liability. No recourse under any
Transaction Agreement shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate or shareholder of any
party hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Transaction Agreements, the Notes, the Certificates or the Policy, it being
expressly agreed and understood that each Transaction Agreement is solely a
corporate obligation of each party hereto, and that any and all personal
liability, either in common law or in equity, or by statute or constitution, of
every such officer, employee, director, affiliate or shareholder for breaches by
any party hereto of any obligations under any Transaction Agreement is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Agreement.
Section 8.17. Limited Recourse. Notwithstanding anything to
the contrary contained in this Agreement, the obligations of WFSRC2 under
Sections 3.04, 3.06 and 3.09 are solely the corporate obligations of WFSRC2, and
shall be payable by WFSRC2 solely as provided in Sections 3.05, 3.06 and 3.09.
WFSRC2 shall only be required to pay (i) any fees, expenses, indemnities or
other liabilities that it may incur under Sections 3.04, 3.06 or 3.09, as
applicable, (y) from funds available pursuant to, and in accordance with, the
payment priorities set forth in Section 5.06 of the Sale and
62
Servicing Agreement and (z) to the extent WFSRC2 has additional funds available
(other than funds described in the preceding clause (y)) that would be in excess
of amounts that would be necessary to pay the debt and other obligations of such
entity incurred in accordance with its certificate of incorporation and all
financing documents to which it is a party and (ii) any expenses, indemnities or
other liabilities that it may incur under Sections 3.04, 3.06 or 3.09, as
applicable, (y) from funds available pursuant to, and in accordance with, the
payment priorities set forth in Section 5.06 of the Sale and Servicing Agreement
and (z) only to the extent it receives additional funds designated for such
purposes or to the extent it has additional funds available (other than funds
described in the preceding clause (y)) that would be in excess of amounts that
would be necessary to pay its debt and other obligations incurred in accordance
with its certificate of incorporation and all financing documents to which it is
a party. In addition, no amount owing by WFSRC2 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. No recourse shall be had for the payment of any amount owing
hereunder or for the payment of any fee hereunder or any other obligation of, or
claim against, WFSRC2 arising out of or based upon Sections 3.04, 3.06 or 3.09,
as applicable, against any stockholder, employee, officer, agent, director or
authorized person of the WFSRC2 or Affiliate thereof; provided, however, that
the foregoing shall not relieve any such person or entity of any liability they
might otherwise have as a result of fraudulent actions or omissions taken by
them.
Section 8.18. Limited Liability of Chase Manhattan Bank USA,
National Association. It is expressly understood and agreed by the parties
hereto that (a) this Agreement is executed and delivered by Chase Manhattan Bank
USA, National Association not individually or personally but solely as Owner
Trustee on behalf of the Trust, (b) each of the representations, undertakings
and agreements herein made on the part of the Trust is made and intended not as
personal representations, undertakings and agreements by Chase Manhattan Bank
USA, National Association, but are made and intended for the purpose of binding
only the Trust Estate, (c) nothing herein contained shall be construed as
creating any liability on Chase Manhattan Bank USA, National Association,
individually or personally, to perform any covenant of the Trust either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through or
under such parties and (d) under no circumstances shall Chase Manhattan Bank
USA, National Association be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Agreement.
Section 8.19. Delivery by Digital/Electronic Means . Documents
that are to be delivered to Financial Security in a digital/electronic format
pursuant to this Agreement shall be sent to xxxxxx@xxx.xxx and
XXXxxxxxxx@xxx.xxx, or such other address or addresses (but not more than three
separate addresses) as Financial Security may specify from time to time.
Digital/electronic documents that cannot be read by Financial Security shall be
converted to a format that is readable by Financial Security upon Financial
Security's request.
63
Section 8.20. Entire Agreement. This Agreement and the Policy
set forth the entire agreement between the parties with respect to the subject
matter thereof, and this Agreement supersedes and replaces any agreement or
understanding that may have existed between the parties prior to the date hereof
in respect of such subject matter.
64
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above mentioned.
WFS FINANCIAL 2003-3 OWNER TRUST
By: CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION
not in its individual capacity, but
solely in its capacity as Owner
Trustee under the Trust Agreement
By: ____________________________________________
Name:
Title:
WFS RECEIVABLES CORPORATION 2
By: ____________________________________________
Name: Xxxx X. Xxxxxxxx
Title: President
WFS FINANCIAL INC
By: ____________________________________________
Name: Xxx Xxxxx
Title: Vice President and Assistant
Controller
WESTCORP
By: ____________________________________________
Name: Xxx Xxxxxxxx
Title: Executive Vice President, Chief Financial
Officer and Chief Operating Officer
FINANCIAL SECURITY ASSURANCE INC.
By: ____________________________________________
Title: Authorized Officer
65
DEUTSCHE BANK TRUST COMPANY
AMERICAS,
as Collateral Agent, Proceeds Agent
and Indenture Trustee
By: ____________________________________________
Name:
Title:
66
INSURANCE, INDEMNITY AND PLEDGE AGREEMENT
Dated as of August 1, 2003
among
WFS FINANCIAL 2003-3 OWNER TRUST,
WFS RECEIVABLES CORPORATION 2
WFS FINANCIAL INC,
WESTCORP,
FINANCIAL SECURITY ASSURANCE INC.,
and
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Collateral Agent, Proceeds Agent and Indenture Trustee
WFS FINANCIAL 2003-3 OWNER TRUST
ARTICLE I DEFINITIONS...................................................................... 2
Section 1.01. Definitions............................................................. 2
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS........................................ 7
Section 2.01. Representations and Warranties of the Trust............................. 7
Section 2.02. Affirmative Covenants of the Trust...................................... 10
Section 2.03. Negative Covenants of the Trust......................................... 11
Section 2.04. [Reserved].............................................................. 12
Section 2.05. Representations and Warranties of WFSRC2................................ 12
Section 2.06. Representations and Warranties of WFS................................... 16
Section 2.07. [Reserved].............................................................. 18
Section 2.08. Affirmative Covenants of WFSRC2......................................... 18
Section 2.09. [Reserved].............................................................. 20
Section 2.10. Negative Covenants of WFSRC2............................................ 20
Section 2.11. Representations and Warranties of Westcorp.............................. 22
Section 2.12. Affirmative Covenants of Westcorp....................................... 23
ARTICLE III THE POLICIES; INDEMNIFICATION.................................................... 25
Section 3.01. Agreement to Issue Policy............................................... 25
Section 3.02. Conditions Precedent to Issuance of Policy.............................. 25
Section 3.03. Premium................................................................. 29
Section 3.04. Reimbursement Obligation................................................ 30
Section 3.05. Non-Recourse Obligation................................................. 31
Section 3.06. Indemnification......................................................... 32
Section 3.07. Liability Absolute...................................................... 36
Section 3.08. Liability of Financial Security......................................... 37
Section 3.09. Payment of Costs, Fees and Expenses..................................... 37
Section 3.10. Payment Procedure....................................................... 38
Section 3.11. Business Days........................................................... 38
Section 3.12. Waivers and Consents by Seller, Westcorp and WFS........................ 38
Section 3.13. Purchase of Replacement Swap Agreement.................................. 39
ARTICLE IV PLEDGE OF COLLATERAL............................................................. 40
Section 4.01. Obligations Secured Hereby.............................................. 40
Section 4.02. Granting Clause......................................................... 40
Section 4.03. Release of Collateral................................................... 41
ARTICLE V INTERCREDITOR PROVISIONS......................................................... 41
Section 5.01. Financial Security's Direction Upon Servicer Default.................... 41
Section 5.02. Financial Security's Direction of Insolvency Proceedings................ 43
ARTICLE VI THE COLLATERAL AGENT; REMEDIES................................................... 43
Section 6.01. Appointment and Powers of Collateral Agent.............................. 43
Section 6.02. Successor Collateral Agent.............................................. 43
Section 6.03. Remedies Available to Collateral Agent.................................. 44
Section 6.04. Waiver of Stay or Extension Laws; Marshalling of Assets................. 46
Section 6.05. Restoration of Rights and Remedies...................................... 46
Section 6.06. Remedies Cumulative..................................................... 46
Section 6.07. Control by Financial Security........................................... 46
Section 6.08. Proceeds Agent as Custodian and Bailee of Collateral Agent.............. 47
Section 6.09. Indemnification of Collateral Agent..................................... 47
Section 6.10. Compensation Payable to Collateral Agent................................ 48
Section 6.11. Protection of Financial Security's Security Interest.................... 48
Section 6.12. Representations and Warranties of Indenture Trustee..................... 49
Section 6.13. Certain Guaranties...................................................... 49
ARTICLE VII EVENTS OF DEFAULT................................................................ 49
Section 7.01. Events of Default....................................................... 49
Section 7.02. Remedies; Waivers....................................................... 51
ARTICLE VIII MISCELLANEOUS.................................................................... 52
Section 8.01. Amendments, Changes and Modifications................................... 52
Section 8.02. Notices................................................................. 52
Section 8.03. Method of Payment....................................................... 52
Section 8.04. Further Assurances and Corrective Instruments........................... 52
Section 8.05. Term of Agreement....................................................... 53
Section 8.06. Assignments; Third-Party Rights; Reinsurance............................ 53
Section 8.07. Consent of Financial Security........................................... 54
Section 8.08. Right to Enforce Sale and Servicing Agreement........................... 54
Section 8.09. Each of WFS and Westcorp as Party Only for Certain Provisions........... 54
Section 8.10. Severability............................................................ 54
Section 8.11. Reports................................................................. 54
Section 8.12. Counterparts............................................................ 54
Section 8.13. GOVERNING LAW........................................................... 54
Section 8.14. Headings................................................................ 55
Section 8.15. Trial by Jury Waived.................................................... 55
Section 8.16. Limited Liability....................................................... 55
Section 8.17. Limited Recourse........................................................ 55
Section 8.18. Limited Liability of Chase Manhattan Bank USA, National Association..... 56
Section 8.19. Entire Agreement........................................................ 56
EXHIBITS
EXHIBIT A Forms of WFS Assignment and Collateral Assignment
EXHIBIT B Form of Financial Guaranty Insurance Policy with respect to
the Notes, together with form of Endorsement No. 1 thereto
EXHIBIT C Form of Opinion of Counsel to WFSRC2 and WFS
EXHIBIT D Form of Opinion of Special Tax Counsel to WFS
EXHIBIT E Form of Certificate of the Indenture Trustee and the
Collateral Agent
EXHIBIT F Form of Opinion of Counsel to the Indenture Trustee and the
Collateral Agent
EXHIBIT G Form of Opinion of Counsel to the Trust and the Owner Trustee
EXHIBIT H Form of Letter of Independent Accountants
