EXHIBIT 10.2
EXECUTION COPY
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SALE AND SERVICING AGREEMENT
among
WFS FINANCIAL 2003-3 OWNER TRUST,
as Issuer,
WFS RECEIVABLES CORPORATION 2,
as Seller,
WESTCORP
as Indemnifier,
and
WFS FINANCIAL INC,
as Master Servicer
Dated as of August 1, 2003
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TABLE OF CONTENTS
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ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions................................................................................ 1
Section 1.02. Usage of Terms............................................................................. 23
Section 1.03. Calculations............................................................................... 23
ARTICLE TWO
CONVEYANCE OF CONTRACTS
Section 2.01. Conveyance of Contracts.................................................................... 24
Section 2.02. Added Contracts............................................................................ 24
ARTICLE THREE
THE CONTRACTS
Section 3.01. Representations and Warranties of the Seller............................................... 26
Section 3.02. Purchase of Certain Contracts.............................................................. 32
Section 3.03. Custody of Contract Files.................................................................. 33
Section 3.04. Duties of Master Servicer as Custodian..................................................... 33
Section 3.05. Instructions; Authority to Act............................................................. 35
Section 3.06. Indemnification............................................................................ 35
Section 3.07. Effective Period and Termination........................................................... 35
Section 3.08. Nonpetition Covenant....................................................................... 36
Section 3.09. Collecting Title Documents Not Delivered at the Closing Date............................... 36
ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer.................................................................. 37
Section 4.02. Collection of Contract Payments............................................................ 41
Section 4.03. Realization upon Defaulted Contracts and Liquidated Contracts.............................. 41
Section 4.04. Insurance.................................................................................. 42
Section 4.05. Maintenance of Security Interests in Financed Vehicles..................................... 42
Section 4.06. Covenants, Representations and Warranties of the Master Servicer and Westcorp.............. 42
Section 4.07. Repurchase of Contracts upon Breach of Covenant............................................ 45
Section 4.08. Servicing Compensation..................................................................... 45
Section 4.09. Reporting by the Master Servicer........................................................... 46
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Section 4.10. Annual Statement as to Compliance.......................................................... 48
Section 4.11. Annual Independent Certified Public Accountants' Report.................................... 48
Section 4.12. Access to Certain Documentation and Information Regarding Contracts........................ 49
Section 4.13. Fidelity Bond.............................................................................. 49
Section 4.14. Indemnification; Third Party Claims........................................................ 49
Section 4.15. Maintenance of the Interest Rate Swap Agreement............................................ 49
ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT; STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts............................................................ 51
Section 5.02. Collections; Realization Upon Note Policy; Net Deposits.................................... 53
Section 5.03. Application of Collections................................................................. 54
Section 5.04. Advances and Nonrecoverable Advances; Repurchase Amounts................................... 54
Section 5.05. Distributions.............................................................................. 55
Section 5.06. Spread Account............................................................................. 57
Section 5.07. Statements to Securityholders.............................................................. 57
Section 5.08. Calculation of the Class A-3B Rate......................................................... 58
ARTICLE SIX
THE SELLER
Section 6.01. Corporate Existence........................................................................ 59
Section 6.02. Liability of Seller; Indemnities........................................................... 59
Section 6.03. Merger or Consolidation of, or Assumption of the Obligations of, the Seller;
Certain Limitations........................................................................ 60
Section 6.04. Limitation on Liability of Seller and Others............................................... 61
Section 6.05. Seller Not to Resign....................................................................... 62
Section 6.06. Seller May Own Securities.................................................................. 62
ARTICLE SEVEN
THE MASTER SERVICER AND WESTCORP
Section 7.01. Liability of Master Servicer and Westcorp; Indemnities..................................... 63
Section 7.02. Corporate Existence; Status as Westcorp and Master Servicer; Merger........................ 64
Section 7.03. Performance of Obligations................................................................. 64
Section 7.04. Not to Resign; Assignment.................................................................. 64
Section 7.05. Limitation on Liability of Master Servicer, Westcorp and Others............................ 65
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ARTICLE EIGHT
DEFAULT
Section 8.01. Servicer Default........................................................................... 67
Section 8.02. Indenture Trustee to Act; Appointment of Successor......................................... 68
Section 8.03. Repayment of Advances...................................................................... 69
Section 8.04. Notification to Noteholders and Certificateholders......................................... 69
Section 8.05. Waiver of Past Defaults.................................................................... 69
Section 8.06. Insurer Direction of Insolvency Proceedings................................................ 70
ARTICLE NINE
TERMINATION
Section 9.01. Optional Purchase of All Contracts......................................................... 71
Section 9.02. Transfer to the Insurer.................................................................... 72
ARTICLE TEN
MISCELLANEOUS
Section 10.01. Amendment................................................................................. 73
Section 10.02. Protection of Title to Trust.............................................................. 74
Section 10.03. Governing Law............................................................................. 76
Section 10.04. Notices................................................................................... 76
Section 10.05. Severability of Provisions................................................................ 77
Section 10.06. Assignment................................................................................ 77
Section 10.07. Third Party Beneficiaries................................................................. 78
Section 10.08. Insurer Default or Insolvency............................................................. 78
Section 10.09. Counterparts.............................................................................. 78
Section 10.10. Headings.................................................................................. 78
Section 10.11. Assignment by Issuer...................................................................... 78
Section 10.12. Limitation of Liability of Owner Trustee.................................................. 78
Section 10.13. Effect of Policy Expiration Date.......................................................... 78
Section 10.14. Limitation on Recourse Against WFSRC2..................................................... 79
Section 10.15. Replacement Interest Rate Swap Agreement.................................................. 79
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SCHEDULES
Schedule A Schedule of Contracts.................................................................. SA-1
Schedule B Location of Contract Files............................................................. SB-1
Schedule C Net Charge-Off Percentage Triggers..................................................... SC-1
EXHIBITS
Exhibit A Form of Insurance Agreement............................................................ A-1
Exhibit B Form of Note Policy.................................................................... B-1
Exhibit C Form of RIC............................................................................ C-1
Exhibit D Form of Distribution Date Statement.................................................... D-1
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This SALE AND SERVICING AGREEMENT, dated as of August 1, 2003, is among
WFS Financial 2003-3 Owner Trust, as issuer (the "Issuer"), WFS Receivables
Corporation 2, as seller (the "Seller"), Westcorp, as indemnifier, and WFS
Financial Inc ("WFS"), as master servicer (the "Master Servicer").
WHEREAS, the Issuer desires to purchase from the Seller a portfolio of
receivables arising in connection with automobile retail installment sales
contracts and installment loans (collectively, the "Contracts") primarily
originated by motor vehicle dealers and purchased by WFS, which Contracts were
subsequently sold by WFS to the Seller;
WHEREAS, the Seller is willing to sell the Contracts to the Issuer
pursuant to the terms hereof;
WHEREAS, the Master Servicer is willing to service the Contracts
pursuant to the terms hereof; and
WHEREAS, Westcorp is willing to provide certain indemnities pursuant to
the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Agreement. Capitalized terms used herein that are
not otherwise defined herein shall have the meanings ascribed thereto in the
Indenture.
"Added Contract" shall have the meaning specified in Section 2.02.
"Administration Agreement" means the administration agreement, dated as
of August 1, 2003, among the Trust, the Depositor, the Indenture Trustee and the
Administrator, as the same may be amended or supplemented from time to time.
"Administrator" shall have the meaning specified in the Administration
Agreement.
"Advance" means the aggregate amount, as of a Master Servicer Report
Date, that the Master Servicer is required to advance in respect of the
Contracts pursuant to Section 5.04(a).
"Advanced Insurance Premiums" mean any amounts due to the Master
Servicer for amounts advanced by the Master Servicer to acquire an LDI Policy as
to a Financed Vehicle. Advanced Insurance Premiums shall not be a part of
Monthly P&I and shall be reimbursed to the Master Servicer as set forth in
Sections 4.01 and 5.03.
"Affiliate" of any specified Person means any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Aggregate Net Liquidation Losses" means, with respect to any Due
Period, the aggregate of the amounts by which (i) the principal amount of each
Contract that became a Liquidated Contract pursuant to clause (ii) or (iv) of
the definition of the term "Liquidated Contract" during such Due Period plus
accrued and unpaid interest thereon (adjusted to the Net Contract Rate) to the
last Due Date in such Due Period exceeds (ii) the Net Liquidation Proceeds for
such Contract.
"Aggregate Principal Balance" means, with respect to any date and the
Outstanding Contracts, the aggregate of the Principal Balances of such Contracts
as of such date.
"Aggregate Repurchase Amount" means, with respect to the purchase of
Contracts pursuant to Section 9.01(a), an amount equal to the sum of the amounts
described in clauses (i) through (vi) of Section 9.01(e).
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended or supplemented from time to time.
"APR" of a Contract means annual percentage rate and is the annual rate
of finance charges specified in such Contract.
"Assignments" means (i) the original instrument of assignment of a
Contract and all other documents securing such Contract made by the Seller to
the Issuer (or in the case of any Contract acquired by the Seller from another
Person, from such other Person to the Seller and from the Seller to the Issuer),
and (ii) the original instrument granting a security interest in such Contract
and other documents made by the Issuer to the Insurer, which, in the case of
clause (i) above, is in a form sufficient under the laws of the jurisdiction
under which the security interest in the related Financed Vehicle arises to
permit the assignee to exercise all rights granted by the Obligor under such
Contract and such other documents and all rights available under applicable law
to the Obligee under such Contract and such other documents and, in the case of
clause (ii) above, is in a form sufficient under the laws of the jurisdiction
under which the security interest in the related Financed Vehicle arises to
permit the Insurer, as a secured party, to exercise, upon default, all rights
granted by the Obligor under such Contract and such other documents and all
rights available under applicable law to the Obligee under such Contract and
which, in the case of either clause (i) or (ii) above, may, to the extent
permitted by the laws of such jurisdiction, be a blanket instrument of
assignment covering other Contracts as well and which may also, to the extent
permitted by the laws of the jurisdiction governing such Contract, be an
instrument of assignment running directly from the related Seller to the Issuer
and the Insurer.
"Bank" means Western Financial Bank, and its successors.
"Bankruptcy Code" has the meaning specified in the Trust Agreement.
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"Basic Documents" shall have the meaning specified in the Indenture.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which banking institutions in Los Angeles, California, Newark, Delaware
or New York, New York are authorized or obligated by law, executive order or
government decree to remain closed.
"Calculation Day" means the last day of each calendar month.
"Certificate Distributable Amount" means the aggregate amount of the
Excess Spread Amount distributed to Certificateholders pursuant to Section
5.06(b).
"Certificate Distribution Account" shall have the meaning specified in
the Trust Agreement.
"Certificate Percentage Interest" means, with respect to a Certificate,
the percentage specified on such Certificate as the Certificate Percentage
Interest, which percentage represents the beneficial interest of such
Certificate in the Issuer. The initial Certificate Percentage Interest held by
the Seller shall be 100%.
"Certificate Register" shall have the meaning specified in the Trust
Agreement.
"Certificate Registrar" shall have the meaning specified in the Trust
Agreement.
"Certificateholders" shall have the meaning specified in the Trust
Agreement.
"Certificates" means the Trust Certificates (as such term is defined in
the Trust Agreement).
"Chapter 13 Bankruptcy Proceeding" means a bankruptcy proceeding under
Chapter 13 of Title 11 of the United States Code, as amended.
"Chapter 13 Contract" means a Contract with respect to which the
related Obligor is subject to a Chapter 13 Bankruptcy Proceeding and is in
compliance with a Chapter 13 Plan of Reorganization.
"Chapter 13 Plan of Reorganization" means a plan of reorganization (as
such plan may be modified with court approval) that has been approved by a court
with jurisdiction over an Obligor under a Contract in a Chapter 13 Bankruptcy
Proceeding.
"Class" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"Class A-1 Final Scheduled Distribution Date" means the August 2004
Distribution Date.
"Class A-1 Rate" means 1.12875% per annum.
"Class A-2 Final Scheduled Distribution Date" means the May 2006
Distribution Date.
"Class A-2 Rate" means 1.58% per annum.
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"Class A-3 Final Scheduled Distribution Date" means the May 2008
Distribution Date.
"Class A-3A Rate" means 2.29% per annum.
"Class A-3B Rate" means the lesser of (i) the sum of (a) the LIBOR Rate
and (b) 0.13% per annum and (ii) the maximum rate permitted by applicable law.
"Class A-4 Final Scheduled Distribution Date" means the May 2011
Distribution Date.
"Class A-4 Noteholder" means the Person in whose name a Class A-4 Note
is registered in the Note Register.
"Class A-4 Rate" means 3.25% per annum.
"Class Balance" means, with respect to any Class of Notes as of any
Distribution Date, the outstanding principal amount of such Class of Notes
(after giving effect to any reductions thereof to be made on such Distribution
Date).
"Closing Date" means August 28, 2003.
"Collateral Agent" means Deutsche Bank Trust Company Americas, in its
capacity as collateral agent for the Insurer under the Insurance Agreement, and
each successor thereto.
"Collection Account" means the account established and maintained as
such pursuant to Section 5.01.
"Commercial Paper" means commercial paper given the highest rating by
each Rating Agency at the time of such investment; provided that the issuer of
such commercial paper must have a long-term unsecured debt rating of at least
"Aaa" from Moody's and "AAA" from Standard & Poor's or have a short-term
unsecured debt rating of at least "Prime-1" from Moody's and "A-1+" (without an
"r" suffix and with a fixed dollar amount of principal due at maturity that
cannot vary) from Standard & Poor's.
"Contract" means each retail installment sales contract and security
agreement or installment loan agreement and security agreement, in each case
transferred by the Seller to the Issuer hereunder, which has been executed by an
Obligor and pursuant to which such Obligor purchased, financed or pledged the
Financed Vehicle described therein, agreed to pay the deferred purchase price
(i.e., the purchase price net of any down payment) or amount borrowed, together
with interest, as therein provided in connection with such purchase or loan,
granted a security interest in such Financed Vehicle, and undertook to perform
certain other obligations as specified in such Contract and which has been
conveyed to the Issuer pursuant to this Agreement.
"Contract Documents" means, with respect to each Contract, (i) the
Contract; (ii) either the original Title Document for the related Financed
Vehicle or a duplicate copy thereof issued or certified by the Registrar of
Titles which issued the original thereof, together with evidence of perfection
of the security interest in the related Financed Vehicle granted by such
Contract, as determined by the Master Servicer to be permitted or required to
perfect such security interest
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under the laws of the applicable jurisdiction (or, in the case of a Contract
listed on the Schedule of Contracts, written evidence from the Dealer selling
such Financed Vehicle that the Title Document for such Financed Vehicle showing
the Seller as first lienholder has been applied for); (iii) the related
Assignments; (iv) any agreement(s) modifying the Contract (including, without
limitation, any extension agreement(s)); and (v) documents evidencing the
existence of physical damage insurance covering such Financed Vehicle.
"Contract Files" means the Contract Documents and all other papers and
computerized records customarily kept by the Master Servicer and all
Subservicers, as the case may be, in servicing contracts and loans comparable to
the Contracts.
"Contract Number" means, with respect to any Contract included in the
Trust, the number assigned to such Contract by the Master Servicer, which number
is set forth in the related Schedule of Contracts.
"Contract Rate" means, with respect to a Contract, the interest rate
borne by such Contract.
"Contracts" means the Contracts sold to the Issuer by the Seller.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Trust & Agency Services - Structured Finance Services; or
at such other address as the Indenture Trustee may designate from time to time
by notice to the Certificateholders, the Insurer, the Master Servicer and the
Seller.
"Cut-Off Date" means August 27, 2003.
"Cut-Off Date Aggregate Principal Balance" means $1,650,000,000, the
Aggregate Principal Balance as of the Cut-Off Date.
"Dealer" means the seller of a Financed Vehicle, which seller
originated and assigned the related Contract, including the Bank.
"Defaulted Contract" means, with respect to any Due Period, a Contract
(i) which is, at the end of such Due Period, delinquent in the amount of at
least two monthly payments or (ii) with respect to which the related Financed
Vehicle has been repossessed or repossession efforts have been commenced.
"Deficiency Notice" means, with respect to any Distribution Date, the
notice delivered pursuant to Section 5.02(b) by the Master Servicer to the
Indenture Trustee, with a copy to the Insurer and the Owner Trustee.
"Definitive Notes" shall have the meaning specified in the Indenture.
"Delinquency Percentage" means, with respect to any three calendar
month period, the average of the percentages of delinquent Contracts for each
month in such period. For each
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month the percentage of delinquent Contracts shall be the percentage equivalent
of a fraction, the numerator of which is the sum of (i) the aggregate Principal
Balance of all Outstanding Delinquent Contracts (after taking into account
permitted extensions), plus (ii) the aggregate Principal Balance of all
Contracts in respect of which the related Financed Vehicles have been
repossessed but have not been liquidated (to the extent the related Contract is
not otherwise reflected in clause (i) above), and the denominator of which is
the aggregate Principal Balance of all outstanding Contracts, in each case, on
the last day of such calendar month.
"Delinquent Contract" means any Contract that is 60 days or more
delinquent.
"Delivery" means, when used with respect to Trust Account Property:
(i) with respect to certificated securities, bankers'
acceptances, commercial paper, negotiable certificates of deposit and
any other obligations which evidence a right to the payment of money
and is not itself a security agreement or lease and is of a type which
is in ordinary course of business transferred by delivery with
necessary endorsement or assignment (collectively, "Physical
Property"): (A) the Indenture Trustee or the Owner Trustee, as the case
may be, or its Financial Intermediary acquires possession of the
Physical Property, and evidence that any such Physical Property that is
in registerable form has been registered in the name of the Trustee,
its Financial Intermediary, its custodian or its nominee; (B) the
Financial Intermediary, not a clearing corporation, sends the Indenture
Trustee or the Owner Trustee, as the case may be, confirmation of the
transfer and also by book entry or otherwise identifies as belonging to
the Indenture Trustee or the Owner Trustee, as the case may be, the
Physical Property in the Financial Intermediary's possession; or (C)
with respect to a clearing corporation, appropriate entries to the
account of the Indenture Trustee or the Owner Trustee, as the case may
be, or a Person designated by him or her and, if certificated, it is
both, in the custody of the clearing corporation or another clearing
corporation, a custodian bank or a nominee of any of them and, in
bearer form or endorsed in blank by the appropriate person or
registered in the name of the clearing corporation, custodian bank, or
a nominee of any of them;
(ii) with respect to any Trust Account Property that is a
book-entry security held through the Federal Reserve System pursuant to
federal book-entry regulations, the following procedures, all in
accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC: (A) book-entry
registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by the Indenture Trustee or the
Owner Trustee, as the case may be, of a deposit advice or other written
confirmation of such book-entry registration; (B) the making by any
such custodian of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
federal book-entry regulations as belonging to the Indenture Trustee or
the Owner Trustee, as the case may be, and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or the Owner Trustee, as the case may be, and the
making by the Indenture Trustee or the Owner Trustee, as the case may
be, of entries in its books and records establishing that it holds such
Trust Account Property solely as trustee pursuant to Section 5.01; and
(C) such additional or alternative procedures as may hereafter
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become necessary to effect complete transfer of ownership of any such
Trust Account Property to the Indenture Trustee or the Owner Trustee,
as the case may be, consistent with changes in applicable law or
regulations or the interpretation thereof; and
(iii) with respect to any Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (ii) above, registration of the transfer to, and
ownership of such Trust Account Property by, the Indenture Trustee or
the Owner Trustee, as the case may be, its custodian or its nominee by
the issuer of such Trust Account Property.
"Depositor" means the Seller in its capacity as Depositor under the
Trust Agreement, and its successors.
"Distribution Date" means each February 20, May 20, August 20 and
November 20 or, if any such date shall not be a Business Day, the next
succeeding Business Day, commencing November 20, 2003.
"Distribution Date Statement" shall have the meaning specified in
Section 4.09(a).
"Due Date" means, as to any Contract, the date upon which an
installment of Monthly P&I is due.
"Due Period" means, with respect to any Distribution Date, the period
commencing on the first day of the third month preceding the month in which such
Distribution Date occurs (or from the Cut-Off Date in the case of the first
Distribution Date) to the last day of the month immediately preceding the month
in which such Distribution Date occurs.
"Eligible Account" means (i) a segregated trust account in the
corporate trust department that is maintained with a federal depository
institution or trust company, commercial paper or other short-term debt
obligations of which have credit ratings from Standard & Poor's at least equal
to "A-1+," from Moody's equal to "Prime-1" and from Fitch equal to "F1+," which
account is fully insured up to applicable limits by the FDIC or (ii) a general
ledger account or deposit account (A) with an entity whose long-term unsecured
debt obligations are rated "Aa2" by Moody's and "AAA" by each of Standard &
Poor's and Fitch or the commercial paper or other short-term debt obligations of
which have credit ratings from Standard & Poor's at least equal to "A-1+," from
Moody's equal to "Prime-1" and from Fitch equal to "F1+" or (B) that otherwise
will not result in the qualification, reduction or withdrawal by any Rating
Agency of its then-applicable rating on any Class of Notes (without giving
effect to the guaranty under the Note Policy of payments owing to the
Noteholders). If any Eligible Account falls below the ratings specified in (i)
or (ii) above, all monies in such Eligible Account will be moved within 15 days
to an account meeting the requirements of an Eligible Account.
"Eligible Investments" means any one or more of the following
obligations or securities, all of which shall be denominated in United States
dollars:
(i) direct obligations of, and obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality of the United States the
obligations of which are backed by the full faith and credit of the
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United States; general obligations of or obligations guaranteed as to
timely payment of principal and interest by FNMA or FHLMC;
(ii) demand and time deposits in, certificates of deposit
of, banker's acceptances issued by, or federal funds sold by any
depository institution or trust company (including the Indenture
Trustee or the Owner Trustee) incorporated under the laws of the United
States or any state and subject to supervision and examination by
federal or state banking authorities, so long as at the time of such
investment or contractual commitment providing for such investment
either the long-term, unsecured debt obligations of such depository
institution or trust company have credit ratings from Moody's at least
equal to "Aa2" and shall have commercial paper or other short-term debt
obligations rated at least "A-1+" (without an "r" suffix and with a
fixed dollar amount of principal due at maturity that cannot vary) by
Standard & Poor's, "Prime-1" by Moody's and "F1+" by Fitch;
(iii) Commercial Paper;
(iv) Proprietary Funds;
(v) the RIC, provided that (A)(1) it is guaranteed by an
entity which has long-term, unsecured debt obligations rated "AAA" by
each of Standard & Poor's and Fitch and at least "Aa2" by Moody's or
(2) such investment will not result in a qualification, reduction or
withdrawal by any Rating Agency of its then-applicable rating on any
Class of Notes (without giving effect to the guaranty under the Note
Policy of payments owing to the Noteholders) and (B) it has not ceased
to be an Eligible Investment in accordance with Section 2 thereof; if
the investments in this paragraph fall below the specified ratings, the
invested monies shall be moved to Eligible Investments on the fifth
Business Day preceding the next succeeding Distribution Date and no
additional funds may be invested in the RIC until the RIC once again
becomes an Eligible Investment; and
(vi) any other investments which satisfy the Rating Agency
Condition.
"Estimated Sale Value" means, with respect to a Repossessed Vehicle,
the estimated sale value determined in good faith (and in accordance with its
credit and collection policy) by the Master Servicer as of the related
Repossessed Vehicle Redemption Date.
"Excess Spread Amount" means, with respect to a Distribution Date or
Calculation Day, the excess of the Spread Account Balance over the Specified
Spread Account Balance (after giving effect to all deposits to, and withdrawals
(other than withdrawals pursuant to Section 5.06(b)) from the Spread Account on
such Distribution Date or Calculation Day, as the case may be).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIC" means the Federal Deposit Insurance Corporation, and its
successors.
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"Final Scheduled Distribution Date" means the Class A-1 Final Scheduled
Distribution Date, the Class A-2 Final Scheduled Distribution Date, the Class
A-3 Final Scheduled Distribution Date or the Class A-4 Final Scheduled
Distribution Date, as the case may be.
"Financed Vehicle" means, as to any Contract, an automobile or
light-duty truck, together with all accessions thereto, securing the related
Obligor's indebtedness under such Contract.
"Financial Intermediary" means a bank, broker, clearing corporation or
the Person (or the nominee of any of them) that in the ordinary course of its
business maintains security accounts for its customers and is acting in that
capacity.
"Fiscal Agent" shall have the meaning set forth in the Note Policy.
"FHLMC" means the Federal Home Loan Mortgage Corporation, and its
successors.
"FNMA" means the Federal National Mortgage Association, and its
successors.
"Gross Charge-Off Amount" means, with respect to any Due Period, the
sum of (i) the excess of the outstanding Principal Balances of all Repossessed
Vehicle Contracts as to which the related Repossessed Vehicle Redemption Dates
have occurred during the related Due Period over the aggregate Estimated Sale
Values of the related Repossessed Vehicles, (ii) the excess of the aggregate
Estimated Sale Values of Repossessed Vehicles sold during the related Due Period
over the net sales proceeds of such Repossessed Vehicles, (iii) the outstanding
Principal Balances of Contracts, other than Repossessed Vehicle Contracts and
Chapter 13 Contracts, that have become 120 days past due during the related Due
Period, (iv) the amount by which the outstanding Principal Balances of Contracts
that have become Chapter 13 Contracts during the related Due Period have been
reduced by the related Chapter 13 Plans of Reorganization and (v) the
outstanding Principal Balances, as such balances have been previously reduced by
the related Chapter 13 Plans of Reorganization, of Chapter 13 Contracts that are
no longer in compliance with their Chapter 13 Plans of Reorganization and are
more than 120 days past due as of the last day of the related Due Period;
provided that, with respect to any Contract, in no event shall the aggregate
amount included in the Gross Charge-Off Amounts for all Due Periods exceed the
outstanding Principal Balance of such Contract as of the date it becomes a
Defaulted Contract.
"Holder" means, with respect to a (i) Certificate, the Person in whose
name such Certificate is registered in the Certificate Register and (ii) Note,
the Person in whose name such Note is registered in the Note Register.
"Indenture" means the Indenture, dated as of August 1, 2003, between
the Issuer and the Indenture Trustee, as the same may be amended or supplemented
from time to time.
"Indenture Trustee" means the Person acting as trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture and, initially, will be Deutsche Bank Trust Company Americas.
"Independent", when used with respect to any specified Person, means
such a Person who (i) is in fact independent of the Issuer, the Seller or WFS,
(ii) is not a director, officer or
9
employee of any Affiliate of the Issuer, the Seller or WFS, (iii) is not a
person related to any officer or director of the Issuer, the Seller, WFS or any
of their respective Affiliates, (iv) is not a holder (directly or indirectly) of
more than 10% of any voting securities of the Issuer, the Seller, WFS or any of
their respective Affiliates and (v) is not connected with the Issuer, the Seller
or WFS as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions; provided that a person who is
an Independent director or Independent officer of the Seller may be an
Independent director or Independent officer of an Affiliate of the Seller which
is a special purpose bankruptcy remote entity.
"Insolvency Event" means, with respect to a specified Person, (i) the
entry of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of such Person in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; (ii) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or any other present
or future federal or state bankruptcy, insolvency or similar law and such case
is not dismissed within 60 days; or (iii) the commencement by such Person of a
voluntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future federal or state, bankruptcy, insolvency
or similar law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or other similar official for such Person or for any substantial part of its
property, or the making by such Person of an assignment for the benefit of
creditors or the failure by such Person generally to pay its debts as such debts
become due or the taking of corporate action by such Person in furtherance of
any the foregoing.
"Insolvency Proceeding" shall have the meaning specified in Section
8.06.
"Insolvency Proceeds" shall have the meaning specified in Section
9.01(b).
"Insurance Agreement" means the Insurance, Indemnity and Pledge
Agreement, dated as of the date hereof, among the Insurer, the Issuer, Westcorp,
the Seller, the Master Servicer and the Indenture Trustee, is substantially the
form attached hereto as Exhibit A, as the same may be amended or supplemented
from time to time.
"Insurance Agreement Obligations" means, as of any date, the aggregate
of amounts owing to the Insurer under the Insurance Agreement as of such date,
other than amounts representing payments made under the Note Policy for which
the Insurer has not yet been reimbursed.
"Insurance Policy" means, with respect to a Financed Vehicle, the
policies of comprehensive and collision insurance and the LDI Policy.
"Insurance Proceeds" means proceeds paid pursuant to any Insurance
Policy and amounts (exclusive rebated insurance premiums) paid by any insurer
under any other insurance policy related to a Financed Vehicle, a Contract or an
Obligor.
"Insurer" means Financial Security Assurance Inc., and its successors.
10
"Insurer Insolvency" means (i) the entry of a decree or order for
relief by a court or regulatory authority having jurisdiction in respect of the
Insurer in an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or any other present or future federal or state bankruptcy,
insolvency, rehabilitation or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Insurer or of any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Insurer and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days, or
(ii) the commencement by the Insurer of a voluntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency, rehabilitation or similar law, or the
consent by the Insurer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Insurer or of any substantial part of its property or the making by the
Insurer of an assignment for the benefit of creditors or the failure by the
Insurer generally to pay its debts as such debts become due or the taking of
corporate action by the Insurer in furtherance of any of the foregoing.
"Interest Period" means, with respect to any Distribution Date and (i)
the Class A-1 Notes and the Class A-3B Notes, the period from, and including,
the Distribution Date immediately preceding such Distribution Date (or, in the
case of the first Distribution Date from, and including, August 28, 2003) to,
but excluding, such Distribution Date and (ii) the Class A-2 Notes, the Class
A-3A Notes and the Class A-4 Notes, the period from, and including, the 20th day
of the month in which the Distribution Date immediately preceding such
Distribution Date occurs (or in the case of the first Distribution Date from,
and including, August 28, 2003) to, but excluding, the 20th day of the month of
such Distribution Date.
"Interest Rate" means the Class A-1 Rate, the Class A-2 Rate, the Class
A-3A Rate, the Class A-3B Rate or the Class A-4 Rate, as applicable.
"Interest Rate Swap Agreement" means the confirmation and the ISDA
master agreement, each dated August 28, 2003, between the Issuer and the Swap
Counterparty, as the same may be amended or supplemented from time to time.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on
such Distribution Date pursuant to Section 5.01(b).
"ISDA" means the International Swaps & Derivatives Association, Inc.,
and its successors.
"Issuer" means the WFS Financial 2003-3 Owner Trust, and its
successors.
"LDI Policy" means the limited dual interest policy providing coverage
for physical damage to, or loss of, a Financed Vehicle.
"LIBOR Determination Date" means the second London Business Day prior
to the Closing Date with respect to the first Distribution Date and, as to each
subsequent Distribution Date, the second London Business Day prior to the
immediately preceding Distribution Date.
11
"LIBOR Rate" means, with respect to any Interest Period, the London
interbank offered rate for deposits in U.S. dollars having a maturity of three
months commencing on the related LIBOR Determination Date which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Determination
Date; provided, however, that if such rate does not appear on the Telerate Page
3750, the LIBOR Rate will equal the Reference Bank Rate.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Contract by operation of law.
"Liquidated Contract" means a Contract which (i) has been the subject
of a Prepayment; (ii) was a Defaulted Contract and with respect to which the
related Financed Vehicle was repossessed and, after any cure period required by
law has expired, the Master Servicer has charged-off any losses prior to the end
of the four-month period referred to in clause (iv); (iii) has been paid in full
on or after its Maturity Date; or (iv) has become delinquent as to all or part
of four or more payments of Monthly P&I. The Principal Balance of a Liquidated
Contract will be deemed to be zero.
"Liquidation Expenses" means reasonable out-of-pocket expenses (not to
exceed Liquidation Proceeds), other than any overhead expenses, incurred by the
Master Servicer in connection with the realization of the full amounts due under
any Contract (including the attempted liquidation of a Contract which is brought
current and is no longer in default during such attempted liquidation) and the
sale of any property acquired in respect thereof which are not recoverable under
any Insurance Policy.
"Liquidation Proceeds" means amounts received by the Master Servicer
(before reimbursement for Liquidation Expenses) in connection with the
realization of the amounts due and to become due under any Defaulted Contract
and the sale of any property acquired in respect thereof.
"London Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in London, England are authorized or obligated
by law or government decree to be closed.
"Master Servicer" means WFS in its capacity as the master servicer of
the Contracts under Section 4.01, and, in each case upon succession in
accordance herewith, each successor servicer in the same capacity pursuant to
Section 4.01 and each successor master servicer pursuant to Section 8.02.
"Master Servicer Report Date" means, with respect to any Distribution
Date, the fifth Business Day prior to such Distribution Date.
"Maturity Date" means, with respect to any Contract, the date on which
the last scheduled payment of such Contract shall be due and payable (after
giving effect to all Prepayments received prior to the date of determination) as
such date may be extended pursuant to Section 4.02.
▇▇
"▇▇▇▇▇▇▇ ▇&▇" means, with respect to any Contract, the amount of each
monthly installment of principal and interest payable to the Obligee of such
Contract in accordance with the terms thereof, exclusive of any charges
allocable to the financing of any insurance premium and charges which represent
late payment charges or extension fees.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, and its successors.
"Net Charge-Off Percentage" means, with respect to each Calculation Day
in a Due Period, the percentage equivalent of a fraction, (a) the numerator of
which is equal to the excess of the sum of the Gross Charge-Off Amounts for such
Due Period (as of such Calculation Day) and all prior Due Periods over the sum
of Recoveries for such Due Period (as of such Calculation Day) and all prior Due
Periods and (b) the denominator of which is equal to the Cut-Off Date Aggregate
Principal Balance.
"Net Charge-Off Percentage Trigger" means, with respect to any
Calculation Day, the percentage set forth in Schedule C.
"Net Collections" means, with respect to any Distribution Date and the
related Due Period, the sum of (i) all amounts collected on or in respect of the
Contracts during such Due Period, including, Monthly P&I, the Aggregate
Repurchase Amount, if any, Liquidation Proceeds (only to the extent of the
related Net Liquidation Proceeds), Insurance Proceeds (only to the extent of the
related Net Insurance Proceeds), less the sum of (A) any late payments of
interest retained by the Master Servicer as reimbursement for Advances pursuant
to Section 5.04, (B) any installments of Monthly P&I or Prepayments retained by
the Master Servicer as reimbursement for Nonrecoverable Advances pursuant to
Section 5.04 and (C) any Advanced Insurance Premiums that have been repaid by an
Obligor; (ii) the Advance for such Due Period to the extent actually made; (iii)
the investment earnings on funds in the Collection Account for such Distribution
Date (which, except as otherwise provided in Section 5.01, shall be the RIC
Reinvestment Earnings); (iv) the aggregate Repurchase Amount for Repurchased
Contracts deposited in or credited to the Collection Account pursuant to Section
5.04(c) on the related Master Servicer Report Date; and (v) Net Swap Receipts
excluding any Swap Termination Payments paid by the Swap Counterparty to the
extent such amounts are used to enter into a Replacement Interest Rate Swap
Agreement.
"Net Contract Rate" means, with respect to any Contract, its Contract
Rate less the sum of the Servicing Fee Percent.
"Net Insurance Proceeds" means, with respect to any Contract, Insurance
Proceeds net of any such amount applied to the repair of the related Financed
Vehicle, released to the related Obligor in accordance with the normal servicing
procedures of the Master Servicer or representing expenses incurred by the
Master Servicer and recoverable hereunder.
"Net Liquidation Proceeds" means the amount derived by subtracting from
the Liquidation Proceeds of a Contract the related Liquidation Expenses.
"Net Swap Payment" means any net amount owed by the Issuer to the Swap
Counterparty pursuant to an Interest Rate Swap Agreement including Swap
Termination Payments, but only to the extent such Swap Termination Payments
resulted from (i) a failure of
13
the Issuer to pay to the Swap Counterparty any amount due to it, (ii) an
Insolvency Event with respect to the Issuer or (iii) an Event of Default
specified in Section 5.01(a)(i) and (ii) of the Indenture.
"Net Swap Receipt" means any amount paid by the Swap Counterparty to
the Issuer pursuant to an Interest Rate Swap Agreement including any Swap
Termination Payments.
"Nonrecoverable Advance" means any Advance proposed to be made or
previously made by the Master Servicer which, in its good faith judgment, would
not be or will not be ultimately recoverable by the Master Servicer from late
payments, Insurance Proceeds or Liquidation Proceeds.
"Note" has the meaning set forth in the Indenture.
"Note Deficiency Claim Amount" means, with respect to each Distribution
Date, the amount, if any, by which the Note Distributable Amount for such
Distribution Date exceeds the amount of Net Collections actually deposited in
the Note Distribution Account on such Distribution Date in accordance with
Section 5.05.
"Note Distributable Amount" means, with respect to any Distribution
Date, the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"Note Distribution Account" means the account established and
maintained as such pursuant to Section 5.01.
"Note Interest Carryover Shortfall" means, with respect to any
Distribution Date and a Class of Notes, the excess, if any, of the sum of the
Note Interest Distributable Amount for such Class for the immediately preceding
Distribution Date over the amount in respect of interest that is actually
deposited in the Note Distribution Account with respect to such Class on such
preceding Distribution Date, plus, to the extent permitted by applicable law,
interest on the amount of interest due but not paid to Noteholders of such Class
on the preceding Distribution Date at the related Interest Rate for the related
Interest Period.
"Note Interest Distributable Amount" means, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Quarterly Interest
Distributable Amount for such Class of Notes for such Distribution Date and the
Note Interest Carryover Shortfall, if any, for such Class of Notes for such
Distribution Date. For all purposes of this Agreement and the other Basic
Documents, interest with respect to the (i) Class A-1 Notes and Class A-3B Notes
shall be computed on the basis of a 360-day year and the actual number of days
elapsed since the immediately preceding Distribution Date (or, with respect to
the first Distribution Date, since August 28, 2003) and (ii) Class A-2 Notes,
Class A-3A Notes and Class A-4 Notes shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
"Note Policy" means the financial guaranty insurance policy issued by
the Insurer to the Indenture Trustee on behalf of the Noteholders, the form of
which is attached as Exhibit B.
14
"Note Policy Claim Amount" means, with respect to each Distribution
Date, the amount, if any, by which the Note Distributable Amount for such
Distribution Date exceeds the sum of (i) the amount of Net Collections actually
deposited in the Note Distribution Account on such Distribution Date in
accordance with Section 5.05 and (ii) the amount of the Note Deficiency Claim
Amount, if any, paid to the Note Distribution Account from the Spread Account
pursuant to a Deficiency Notice delivered for such Distribution Date.
"Note Pool Factor" means, with respect to any Class of Notes as of any
Distribution Date, a six-digit decimal figure equal to the outstanding principal
amount of such Class of Notes (after giving effect to any reductions thereof to
be made on such Distribution Date) divided by the original outstanding principal
amount of such Class of Notes.
"Note Principal Carryover Shortfall" means, as of any Distribution
Date, the excess of the sum of the Note Quarterly Principal Distributable Amount
for such Distribution Date and any outstanding Note Principal Carryover
Shortfall, if any, for the immediately preceding Distribution Date over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on the related Distribution Date.
"Note Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Note Quarterly Principal Distributable Amount
for such Distribution Date and the Note Principal Carryover Shortfall, if any,
for the immediately preceding Distribution Date; provided, however, that the
Note Principal Distributable Amount with respect to a Class of Notes shall not
exceed the outstanding principal amount of such Class of Notes; provided,
further, that the Note Principal Distributable Amount on each Final Scheduled
Distribution Date shall not be less than the amount that is necessary (after
giving effect to other amounts to be deposited in the Note Distribution Account
on such Distribution Date and allocable to principal) to reduce the outstanding
principal amount of the related Class of Notes to zero.
"Note Quarterly Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of all interest accrued for the related Interest
Period on each Class of Notes at the related Interest Rate for such Class on the
outstanding principal amount of the Notes of such Class on the immediately
preceding Distribution Date, after giving effect to all payments of principal to
the Noteholders of such Class on or prior to such Distribution Date (or, in the
case of the first Distribution Date, on the original principal amount of such
Class of Notes).
"Note Quarterly Principal Distributable Amount" means, with respect to
any Distribution Date, the amount by which the Aggregate Principal Balance as of
the beginning of the related Due Period (or the Cut-Off Date Aggregate Principal
Balance in the case of the first Distribution Date) exceeds the Aggregate
Principal Balance at the end of such Due Period.
"Note Register" shall have the meaning specified in the Indenture.
"Note Registrar" shall have the meaning specified in the Indenture.
"Noteholder" means, with respect to a Note, the Holder of such Note.
"Obligee" means the Person to whom an Obligor is indebted under a
Contract.
15
"Obligor" on a Contract means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Contract.
"Offered Securities" shall have the meaning specified in Section
6.03(b)(ii).
"Officers' Certificate" means a certificate signed by the chairman, the
president or a Vice President, and by the treasurer, an assistant treasurer, the
controller, an assistant controller, the secretary or an assistant secretary of
any Person delivering such certificate and delivered to the Person to whom such
certificate is required to be delivered. In the case of an Officers' Certificate
of the Master Servicer, at least one of the signing officers must be a Servicing
Officer. Unless otherwise specified, any reference herein to an Officers'
Certificate shall be to an Officers' Certificate of the Master Servicer.
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel to the Seller or the Master Servicer) acceptable to the Indenture
Trustee or the Owner Trustee, as the case may be, and the Insurer.
"Original Pool Balance" means $1,650,000,000.
"Outstanding" means, with respect
(i) to a Contract and as of time of reference thereto, a
Contract that has not reached its Maturity Date, has not been fully
prepaid, has not become a Liquidated Contract and has not been
repurchased pursuant to Section 3.02, 4.07 or 9.01; and
(ii) to the Securities, as of the date of determination,
all Notes of one Class or of all Classes, all Certificates or all Notes
and Certificates, as the case may be, theretofore authenticated and
delivered except:
Securities theretofore cancelled by the applicable
Registrar or delivered to the applicable Registrar for
cancellation;
Securities or portions thereof the payment for which
money in the necessary amount has been theretofore deposited
with the applicable Trustee or any Paying Agent, as the case
may be, in trust for the Holders of such Securities (provided,
however, that if such Securities are to be redeemed or
repurchased, notice of such redemption or repurchase has been
duly given or provision for such notice has been made,
satisfactory to the applicable Trustee); and
Securities in exchange for or in lieu of other
Securities which have been authenticated and delivered unless
proof satisfactory to the applicable Trustee is presented that
any such Securities are held by a bona fide purchaser;
provided, however, that Securities which have been paid with proceeds of the
Note Policy shall continue to remain Outstanding until the Insurer has been paid
as subrogee hereunder or reimbursed pursuant to the Insurance Agreement as
evidenced by a written notice from the Insurer delivered to the applicable
Trustee, and the Insurer shall be deemed to be the Holder thereof to the extent
of any payments thereon made by the Insurer; provided, further, that in
16
determining whether the Holders of a specified Outstanding Amount of Securities
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder or under any other Basic Document, Securities owned by the
Issuer, any other obligor upon the Securities, the Seller, WFS or any of their
respective Affiliates shall be disregarded and deemed not to be Outstanding
prior to the Policy Expiration Date, except that, in determining whether the
applicable Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities that the
applicable Trustee knows to be so owned shall be so disregarded. Securities so
owned that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the applicable Trustee the pledgee's
right so to act with respect to such Securities and that the pledgee is not the
Issuer, any other obligor upon the Securities, the Seller, WFS or any of their
respective Affiliates.
"Outstanding Amount" means the aggregate principal amount of all Notes
of one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"Owner Trustee" means the Person acting as Owner Trustee under the
Trust Agreement, its successors in interest and any successor owner trustee
under the Trust Agreement and, initially, will be Chase Manhattan Bank USA,
National Association.
"Owner Trustee Corporate Trust Office" shall have the meaning specified
in the Trust Agreement.
"Paying Agent" means the "Paying Agent" under the Trust Agreement or
the Indenture, as the case may be.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, limited liability company,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Physical Property" shall have the meaning specified in the definition
of the term "Delivery".
"Policy Expiration Date" means the date on which the Notes have been
paid in full and all outstanding reimbursement obligations and other amounts due
to the Insurer have been paid in full and the Term Of this Policy (as defined in
the Note Policy) has expired.
"Preference Claim" shall have the meaning specified in Section 8.06.
"Preferential Transfer" shall have the meaning specified for the term
"Preference" in the Insurance Agreement.
"Prepayment" means any of the following: (i) payment to the Master
Servicer of 100% of the outstanding principal balance of a Contract, exclusive
of any Contract referred to in clause (ii) or (iv) of the definition of the term
"Liquidated Contract", together with all accrued and unpaid interest thereon to
the date of such payment, or (ii) payment by the Seller or the Master Servicer,
as the case may be, of the purchase price of a Contract in connection with the
purchase of a Contract pursuant to Section 3.02 or 4.07, or payment by the
Seller or the
17
Certificateholder, as the case may be, of the purchase price of a Contract in
connection with the purchase of all Contracts pursuant to Section 9.01.
"Principal Balance" means, with respect to a Contract that is a (i)
Rule of 78's Contract, the amount set forth as the Principal Balance of such
Contract on the Schedule of Contracts, such amount being the total of all
Monthly P&I received on or after August 28, 2003 less any unearned interest as
of the Due Date for such Contract immediately preceding August 28, 2003,
computed in accordance with the Rule of 78's, less all amounts received on or in
respect of such Contract on or after August 28, 2003 that are allocable to
principal and (ii) Simple Interest Contract, the actual principal balance under
the terms thereof.
"Proprietary Funds" means money market funds having a rating of at
least "AAAm" or "AAAm-G", as applicable, from Standard & Poor's and a rating
from each remaining Rating Agency in the highest investment category granted by
such Rating Agency, including funds for which the Indenture Trustee or any of
its affiliates is investment manager or advisor.
"Rating Agency" means Moody's and Standard & Poor's.
"Rating Agency Condition" shall have the meaning specified in the
Indenture.
"Record Date" means, with respect to a Class of Notes or the
Certificates and any Distribution Date or Redemption Date, the close of business
on the Business Day immediately preceding such Distribution Date or Redemption
Date or, in the case of the Notes, in the event that Definitive Notes are
issued, the 15th day of the month preceding the month in which such Distribution
Date occurs.
"Recoveries" means, with respect to any Due Period, the sum of (i) the
excess of actual sales proceeds for Repossessed Vehicles sold during such Due
Period over the sum of (a) the Estimated Sales Values of such Repossessed
Vehicles and (b) any amounts required by law to be remitted to the related
Obligor and (ii) any insurance proceeds and other amounts received in that Due
Period from the related Obligors or otherwise in connection with Repossessed
Vehicle Contracts, Chapter 13 Contracts and Contracts that have become 120 days
past due.
"Redemption Price" shall have the meaning specified in the Indenture.
"Reference Bank Rate" means with respect to any Interest Period, the
arithmetic mean to the nearest 1/100,000 of 1% (0.0000001), with five
one-millionths of a percentage point rounded upward, of the rates, as of 11:00
A.M., London time, on the related LIBOR Determination Date, at which deposits in
United States dollars, having a maturity of three months and a principal amount
of not less than $1,000,000, offered by the Reference Banks from which the
Indenture Trustee has received quotations; provided however, in the event that
the Indenture Trustee has not received quotations from at least two Reference
Banks, the Reference Bank Rate will be the arithmetic mean to the nearest
1/100,000 of 1% (0.0000001), with five one-millionths of a percentage point
rounded upward, of the rates quoted by two or more major banks in New York City,
selected by the Indenture Trustee, as of 11:00 A.M., New York City time, on the
LIBOR Determination Date for loans in United States dollars to leading European
banks having a maturity of three months and a principal in amounts not less than
$1,000,000; provided, further,
18
if less than two such quotations can be obtained, the Reference Bank Rate shall
be the Reference Bank Rate for the preceding Interest Period.
"Reference Banks" means four major banks that are engaged in the London
interbank market that are selected by the Indenture Trustee.
"Registrar" means the Note Registrar or the Certificate Registrar, as
the case may be.
"Registrar of Titles" means the agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and issuing
documents evidencing such titles in the jurisdiction in which a particular
Financed Vehicle is registered.
"Replacement Interest Rate Swap Agreement" has the meaning set forth in
Section 3.13 of the Insurance Agreement.
"Repossessed Vehicle" means the Financed Vehicle under a Repossessed
Vehicle Contract.
"Repossessed Vehicle Contract" means a Defaulted Contract for which the
related Financed Vehicle has been repossessed by the Master Servicer.
"Repossessed Vehicle Redemption Date" means, with respect to a
Repossessed Vehicle Contract, the date 10 days (or longer if required by
applicable law) from the date the related Repossessed Vehicle is repossessed.
"Repurchase Amount" means, with respect to any Contract, the amount, as
of the date of repurchase, required to prepay in full the principal of and
accrued interest on such Contract to the last Due Date in the Due Period in
which such repurchase occurs.
"Repurchased Contract" means a Contract repurchased as of the related
Master Servicer Report Date by the Master Servicer pursuant to Section 4.07 or
by the Seller pursuant to Section 3.02.
"Responsible Officer" means any officer within the Corporate Trust and
Agency Group (or any successor group) of the Indenture Trustee including any
vice president, assistant secretary or any other officer or assistant officer of
the Indenture Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred at the Indenture Trustee's
Corporate Trust Office because of his knowledge of and familiarity with the
particular subject.
"RIC" means the reinvestment contract provided by the Bank and WFAL2
or, with the prior written consent of the Insurer, a subsidiary thereof,
substantially in the form of Exhibit C.
"RIC Reinvestment Earnings" means, with respect to any Distribution
Date, the related Due Period and the Contracts that were Outstanding at the
beginning of such Due Period, the amount by which the sum of the Note Quarterly
Interest Distributable Amount for such Distribution Date exceeds the sum of (i)
the aggregate amount of interest on the Contracts (adjusted with respect to each
Contract to the Class A-4 Rate and exclusive of such collections
19
that have been paid to the Master Servicer in reimbursement of a previous
Advance) that is part of Net Collections for such Distribution Date and (ii) the
amount of the Advance as to interest for such Distribution Date (assuming for
this purpose that an Advance was made in respect of each Contract (other than
Liquidated Contracts) for which the Master Servicer has not received one or more
payments of Monthly P&I due under such Contract).
"Rule of 78's Contract" means a Contract as to which payments
thereunder are applied on the basis of the Rule of 78's.
"Schedule of Contracts" means the list or lists of Contracts attached
as Schedule A to this Agreement, which Contracts are being transferred to the
Owner Trustee as part of the Trust Estate, which list or lists shall set forth
the following information with respect to each such Contract in numbered
columns:
Information Column Number
----------- -------------
Contract Number ("ACCT NBR").......................................... 2
Date of Origination ("ORG DT")........................................ 9
Maturity Date ("MAT DT").............................................. 15
Monthly P&I ("P&I")................................................... 10
Original Principal Balance ("ORIG AMT")............................... 16 Top
Principal Balance ("PRIN BAL")........................................ 16 Bottom
Discount Rate ("APR")................................................. 7
"Securities" means the Notes and the Certificates.
"Securityholders" means the Holders of the Notes and the Certificates.
"Seller" means WFSRC2, in its capacity as the Seller of Contracts under
this Agreement, and each successor thereto (in the same capacity) pursuant to
Section 6.03.
"Servicer Default" means an event specified in Section 8.01.
"Servicing Fee" means, as to any Distribution Date, the aggregate
amount calculated in respect to the Servicing Fee for each month in the related
Due Period, which for each such month shall equal the product of one-twelfth of
the Servicing Fee Percent and the Aggregate Principal Balance as of the first
day of such month or, in the case of the first month of the first Due Period,
the Closing Date. The Servicing Fee attributable to the first month in the first
Due Period will be prorated based on the number of days from the Closing Date to
the last day of such month.
"Servicing Fee Percent" means one-twelfth of 1.25% per annum.
"Servicing Officer" means any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of the Contracts whose
name appears on a list of servicing officers furnished to the Indenture Trustee
and the Owner Trustee by the Master Servicer pursuant to Section 4.01.
20
"Simple Interest Contract" means a Contract as to which interest is
calculated each day on the basis of the actual principal balance of such
Contract on such day.
"Specified Spread Account Balance" means, with respect to any
Calculation Day or Distribution Date, 6.50% of the Aggregate Principal Balance
on such Calculation Day, except that if on any Calculation Day (i) the Net
Charge-Off Percentage for the related Calculation Day exceeds the Net Charge-Off
Percentage Trigger or (ii) the Delinquency Percentage for the three calendar
month period ending on such Calculation Day exceeds 2.50%, then the Specified
Spread Account Balance shall equal 10.00% of the Aggregate Principal Balance on
such Calculation Day (but only for so long as such Net Charge-Off Percentage or
Delinquency Percentage thresholds continue to be exceeded on any subsequent
Calculation Day). Notwithstanding the foregoing, in no event shall the Specified
Spread Account Balance be greater than $165,000,000 or less than $29,700,000;
provided, however, the Specified Spread Account Balance shall not be greater
than the Outstanding Amount of the Notes.
"Spread Account" means the account established and maintained as such
pursuant to Section 5.01.
"Spread Account Balance" means the amount on deposit in the Spread
Account.
"Spread Account Initial Deposit" means $33,000,000.
"Standard & Poor's" means Standard & Poor's Rating Services, a Division
of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and its successors.
"State" means any one of the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ or the
District of Columbia.
"Statistical Calculation Date" means July 21, 2003.
"Statistical Calculation Date Principal Balance" means the sum of the
Principal Balances of selected Contracts as of the Statistical Calculation Date,
which amount is equal to $1,049,372,912.92.
"Subservicer" means any subservicer engaged by the Master Servicer to
subservice a Contract pursuant to Section 4.01.
"Subservicing Agreement" means an agreement between the Master Servicer
and a Subservicer relating to the servicing of one or more Contracts.
"Swap Counterparty" means Bank of America, N.A., as the swap
counterparty under the Interest Rate Swap Agreement, and its successors in such
capacity.
"Swap Termination Payments" means payment due to the Swap Counterparty
by the Issuer or to the Issuer by the Swap Counterparty due to the termination
of an Interest Rate Swap Agreement pursuant to the occurrence of an event of
default or termination event under the Interest Rate Swap Agreement or as
otherwise agreed between the parties to the Interest Rate Swap Agreement and
consented to by the Insurer.
21
"Telerate Page 3750" is the display page designated as page 3750 by
Moneyline Telerate Service (or any other page that replaces that page on that
service for the purpose of displaying comparable name or rates).
"Third Party Lender" means an independent finance company, which has
originated or acquired one or more Contracts and assigned such Contract(s) to
WFS.
"Title Document" means, with respect to any Financed Vehicle, the
certificate of title for, or other evidence of ownership of, such Financed
Vehicle issued by the Registrar of Titles in the jurisdiction in which such
Financed Vehicle is registered.
"Trust" means the Issuer, and its successors.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise) and all proceeds of the foregoing.
"Trust Accounts" shall have the meaning specified in Section 5.01(a).
"Trust Agreement" means the Trust Agreement, dated as of July 31, 2003,
as amended and restated as of August 28, 2003, among the Depositor, the Insurer
and the Owner Trustee, as the same may be amended or supplemented from time to
time.
"Trust Estate" shall have the meaning specified in the Trust Agreement.
"Trustee" means the Indenture Trustee or the Owner Trustee, as the case
may be.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"United States" means the United States of America.
"Unreimbursed Insurer Amounts" means, on any date, the amount that is
the sum of (i) all payments (if any) made under the Note Policy for which the
Insurer has not yet been reimbursed as of such date, plus (ii) all Insurance
Agreement Obligations as of such date.
"Vehicle Receivables" shall have the meaning specified in Section
6.03(b)(ii).
"Vice President" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "Vice
President," who is a duly elected officer of such Person.
"Westcorp" means Westcorp, and its successors.
"WFAL2" means WFS Financial Auto Loans 2, Inc., a wholly owned
subsidiary of WFS, and its successors.
"WFS" means WFS Financial Inc, a majority-owned operating subsidiary of
the Bank, and its successors.
22
"WFSRC2" means WFS Receivables Corporation 2, a Nevada corporation and
wholly owned subsidiary of Westcorp, and its successors.
Section 1.02. Usage of Terms. With respect to all terms in this
Agreement, unless the context otherwise requires: (i) a term has the meaning
assigned to it; (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time in the United States; (iii) "or" is not exclusive; (iv)
"including" means including without limitation; (v) words in the singular
include the plural and words in the plural include the singular; (vi) any
agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such agreement,
instrument or statute as from time to time amended, modified or supplemented and
includes (in the case of agreements or instruments) references to all
attachments thereto and instruments incorporated therein; (vii) references to a
Person are also to its permitted successors and assigns; (viii) the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; (ix) Section, subsection, Schedule and Exhibit, as
applicable, references contained in this Agreement are references to Sections,
subsections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and (x) references to "writing" include printing, typing, lithography
and other means of reproducing words in a visible form.
Section 1.03. Calculations. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder will be made on the basis
of a 360-day year and the actual number of days elapsed since the immediately
preceding Distribution Date or the Closing Date, in the case of the first
Distribution Date (or, in the case of the Class A-2 Notes, the Class A-3A Notes
and the Class A-4 Notes, on the basis of a 360-day year and twelve 30-day
months) and will be carried out to at least six decimal places. Collections of
interest on Rule of 78's Contracts shall be calculated as if such Contracts were
actuarial contracts the scheduled principal balances of which are the Principal
Balances thereof, and collections of interest on Simple Interest Contracts will
be calculated in accordance with the terms thereof.
23
ARTICLE TWO
CONVEYANCE OF CONTRACTS
Section 2.01. Conveyance of Contracts.
(a) In consideration of the Issuer's delivery to or upon the order
of the Seller of the Certificates and $1,650,000,000 aggregate principal amount
of Notes, the Seller hereby grants, transfers, assigns and otherwise conveys to
the Issuer, without recourse (subject to the obligations herein), and hereby
grants a security interest in, all of its right, title and interest (exclusive
of the amount, if any, allocable to any rebatable insurance premium financed by
any Contract) in, to and under the Contracts (which Contracts shall be listed in
the Schedule of Contracts), including, without limitation, all payments of
Monthly P&I received after the Cut-Off Date; all Net Liquidation Proceeds and
Net Insurance Proceeds with respect to any Financed Vehicle to which a Contract
relates received after the Cut-Off Date and all other proceeds received on or in
respect of such Contracts (other than payments of Monthly P&I received on or
prior to the Cut-Off Date) and any and all security interests in the Financed
Vehicles; the Contract Documents relating to the Contracts; and all proceeds in
any way delivered with respect to the foregoing, all rights to payments with
respect to the foregoing and all rights to enforce the foregoing.
(b) WFS hereby authorizes and will cause the filing of UCC-1
financing statements naming WFS as debtor and the Seller as secured party and
describing the Contracts as collateral with the office of the Secretary of State
of the State of California. The Seller hereby authorizes and will cause on or
prior to the Closing Date the filing of UCC-1 financing statements, naming the
Seller as debtor and the Collateral Agent, on behalf of the Insurer, as secured
party and describing the Contracts as collateral, with the Office of the
Secretary of State of the State of Nevada. The grant of a security interest to
the Collateral Agent on behalf of the Insurer and the rights of the Collateral
Agent and the Insurer in respect of such security interest shall be governed by
the Insurance Agreement. The Seller hereby authorizes, and will cause on or
prior to the Closing Date, the filing of UCC-1 financing statements, naming the
Seller as debtor and the Trust as secured party and describing the Contracts
being sold by it to the Trust as collateral, with the Office of the Secretary of
State of the State of Nevada. The Trust has caused the filing of UCC-1 financing
statements, naming the Trust as debtor and the Indenture Trustee, on behalf of
the Noteholders, as secured party and describing the Contracts as collateral,
with the office of the Secretary of State of the State of Delaware. The grant of
a security interest to the Indenture Trustee and the rights of the Indenture
Trustee in the Contracts shall be governed by the Indenture. From time to time,
the Master Servicer shall cause to be taken such actions as are necessary to
continue the perfection of the respective interests of the Indenture Trustee,
the Trust and the Collateral Agent on behalf of the Insurer in the Contracts and
to continue the first priority security interest of the Indenture Trustee
(subject to the security interest of the Insurer pursuant to the Insurance
Agreement) in the Financed Vehicles and their proceeds (other than, as to such
priority, any statutory lien arising by operation of law after the Closing Date
which is prior to such interest), including, without limitation, the filing of
financing statements, amendments thereto or continuation statements and the
making of notations on records or documents of title.
24
If any change in the name, identity or corporate structure of the
Seller or WFS or the relocation of the chief executive office of any of them or
their reincorporation in a different jurisdiction would make any financing or
continuation statement or notice of lien filed under this Agreement or the other
Basic Documents seriously misleading within the meaning of applicable provisions
of the UCC or any title statute, the Master Servicer, within the time period
required by applicable law, shall file such financing statements or amendments
as may be required to preserve and protect the interests of the Indenture
Trustee, the Owner Trustee, the Securityholders and the Insurer in the
Contracts, Financed Vehicles and the proceeds thereof. Promptly thereafter, the
Master Servicer shall deliver to the Indenture Trustee, the Owner Trustee and
the Insurer an Opinion of Counsel stating that, in the opinion of such counsel,
all financing statements or amendments necessary fully to preserve and protect
the interests of the Indenture Trustee, the Owner Trustee, Securityholders and
the Insurer in the Contracts, Financed Vehicles and the proceeds thereof have
been filed, and reciting the details of such filings.
During the term of this Agreement, the Seller and WFS shall each
maintain its chief executive office in one of the states of the United States,
other than Louisiana or Tennessee.
The Master Servicer shall pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Indenture Trustee's right, title and interest in and to
the Contracts and in connection with maintaining the first priority security
interest (subject to the security interest of the Insurer pursuant to the
Insurance Agreement) in the Financed Vehicles and the proceeds thereof.
Section 2.02. Added Contracts. If the Contracts set forth on the
preliminary schedule of contracts delivered to the Insurer on August 24, 2003
have an aggregate Principal Balance as of the close of business on the Cut-Off
Date of less than $1,645,000,000, the following procedures shall be applicable:
With respect to any Contract sold to the Trust that was originated by WFS during
the period from and including August 25, 2003 to and including August 27, 2003
(each such Contract, an "Added Contract" and collectively, the "Added
Contracts"), the Insurer shall have right to review each Added Contract for up
to 30 days following the Closing Date and if the Insurer determines in its sole
and absolute discretion that an Added Contract is not satisfactory in any
respect, the Insurer shall notify the Seller, within 40 days of the Closing
Date, that such Added Contract is not satisfactory to the Insurer and the Seller
shall purchase such Added Contract on the next Master Servicer Report Date from
the Trust for an amount equal to the related Repurchase Amount. The obligation
to repurchase an Added Contract is independent of the Seller's duties pursuant
to Section 3.02 and is not limited to those failures to comply with the
requirements of Section 3.01(b) which materially and adversely affect the
interests of the Noteholders, Certificateholders, the Indenture Trustee, the
Owner Trustee, the Issuer or the Insurer. The Seller or the Master Servicer, as
the case may be, shall remit or credit to the Collection Account the aggregate
Repurchase Amount with respect to the Added Contracts purchased on the
applicable Master Servicer Report Date. Upon any such purchase, the Owner
Trustee shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as shall be necessary to vest in the Seller title to
any Added Contract purchased hereunder.
25
ARTICLE THREE
THE CONTRACTS
Section 3.01. Representations and Warranties of the Seller. The Seller
hereby makes the following representations and warranties on which (i) the
Issuer is deemed to have relied in acquiring the Contracts and (ii) the Insurer
is deemed to have relied in issuing the Note Policy. Such representations and
warranties speak as of the execution and delivery of this Agreement and as of
the Closing Date, but shall survive the sale, transfer and assignment of the
Contracts to the Issuer and the pledge thereof to the Indenture Trustee pursuant
to the Indenture. The representations and warranties set forth in Sections
3.01(b)(ii), (iv), (xvi), (xxviii) and (xxix) may not be waived.
(a) As to the Seller:
(i) Organization and Good Standing. The Seller is duly
organized and validly existing as a corporation in good standing under
the laws of the State of Nevada, with power and authority to own its
properties and to conduct its business, and has the corporate power,
authority and legal right to acquire and own the Contracts.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and shall have
obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of property or the conduct of its business
shall require such qualifications.
(iii) Power and Authority. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry
out its terms; the Seller has full power and authority to sell and
assign the property to be sold and assigned to and deposited with the
Issuer, and has duly authorized such sale and assignment to the Issuer
by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the Seller by
all necessary corporate action.
(iv) Binding Obligation. This Agreement constitutes (A) a
valid sale, transfer and assignment of the Contracts, enforceable
against creditors of and purchasers from the Seller and (B) a legal,
valid and binding obligation of the Seller enforceable in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights in general and by general
principles of equity, regardless of whether such enforceability shall
be considered in a proceeding in equity or at law.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of the Seller,
or any indenture, agreement or other instrument to which the Seller is
a party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement or other instrument (other than
26
pursuant to the Basic Documents to which the Seller is a party); nor
violate any law or, to the best of the Seller's knowledge, any order,
rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
(vi) No Tax Liens. The Seller is not aware of any judgment
or tax lien filings against it.
(vii) No Proceedings. There are no proceedings or
investigations pending, or to the Seller's best knowledge, threatened,
before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of this Agreement or any of
the other Basic Documents, the Notes or the Certificates, (B) seeking
to prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions contemplated by this Agreement
or any of the other Basic Documents, (C) seeking any determination or
ruling that might materially and adversely affect the performance by
the Seller of its obligations under, or the validity or enforceability
of, this Agreement, any of the other Basic Documents, the Notes or the
Certificates or (D) which might adversely affect the federal or state
income tax attributes of the Notes or the Certificates.
(b) As to each Contract or all of the Contracts, as the case may
be:
(i) Schedule of Contracts. The information pertaining to
such Contract set forth in the related Schedule of Contracts was true
and correct in all material respects at the Closing Date and the
calculations of the Principal Balances appearing in such Schedule of
Contracts for each such Contract at the Closing Date and at each
Distribution Date thereafter prior to the related Maturity Date have
been performed in accordance with this Agreement and are accurate.
(ii) Security Interests. As of the Closing Date, the
Seller has taken all steps necessary to perfect its security interest
against the Obligors in the Financed Vehicles securing the Contracts
and such Contract granted a valid and enforceable first priority
security interest in favor of WFS (or to the Bank, a Dealer or a Third
Party Lender, which security interest has been assigned to WFS) in the
related Financed Vehicle, and such security interest has been duly
perfected and is prior to all other liens upon and security interests
in such Financed Vehicle which now exist or may hereafter arise or be
created (except, as to priority, for any lien for unpaid taxes or
unpaid storage or repair charges which may arise after the Closing
Date). The Seller has caused the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions
under applicable law in order to perfect the security interest in the
Contracts granted to the Issuer hereunder. All financing statements
filed against the Seller in favor of the Issuer in connection herewith
describing the Contracts contain a statement to the following effect:
"A purchase of or security interest in any collateral described in this
financing statement will violate the rights of the Issuer unless the
Issuer authorizes it."
(iii) Title Documents. (A) If the related Financed Vehicle
was originated in a State in which notation of a security interest on
the Title Document is required or
27
permitted to perfect such security interest, the Title Document for
such Financed Vehicle shows, or if a new or replacement Title Document
is being applied for with respect to such Financed Vehicle the Title
Document will be received within 180 days of the Closing Date and will
show WFS named as the original secured party under the related Contract
as the holder of a first priority security interest in such Financed
Vehicle, and (B) if the related Financed Vehicle was originated in a
State in which the filing of a financing statement under the UCC is
required to perfect a security interest in motor vehicles, such filings
or recordings have been duly made and show WFS named as the original
secured party under the related Contract, and in either case, the
Indenture Trustee and the Owner Trustee have the same rights as such
secured party has or would have (if such secured party were still the
owner of the Contract) against all parties claiming an interest in such
Financed Vehicle. With respect to each Contract for which the Title
Document has not yet been returned from the Registrar of Titles, WFS
has received written evidence from the related Dealer that such Title
Document showing WFS as first lienholder has been applied for.
(iv) Title to the Contracts. Immediately prior to the
issuance of the Notes and the Certificates, the Seller had good and
indefeasible title to and was the sole owner of each Contract to be
transferred to the Issuer pursuant to Section 2.01 free of liens,
claims, encumbrances and rights of any Person and, upon transfer of
such Contract to the Issuer pursuant to Section 2.01, the Issuer will
have good and indefeasible title to and will be the sole owner of such
Contract free of liens, claims, encumbrances and rights of any Person,
except for the Lien of the Indenture Trustee under the Indenture and
the security interest granted to the Insurer under the Insurance
Agreement.
(v) Current in Payment. As of the Closing Date, such
Contract is no more than 30 days delinquent in payment as to all or any
portion of any installment of Monthly P&I.
(vi) Tax Liens. As of the Closing Date, there is no lien
against the related Financed Vehicle for delinquent taxes.
(vii) Rescission, Offset, Etc. As of the Closing Date,
there is no right of rescission, offset, defense or counterclaim to the
obligation of the Obligor to pay the unpaid principal or interest due
under such Contract; the operation of the terms of such Contract or the
exercise of any right thereunder will not render such Contract
unenforceable in whole or in part or subject to any right of
rescission, offset, defense or counterclaim, and no such right of
rescission, offset, defense or counterclaim has been asserted.
(viii) Mechanics' Liens. As of the Closing Date, there are
no liens or claims for work, labor, material or storage affecting the
related Financed Vehicle which are or may become a lien prior to or
equal with the security interest granted by such Contract.
(ix) Compliance with Laws. Such Contract, and the sale of
the Financed Vehicle sold thereunder, complied, at the time it was
made, in all material respects with all applicable state and federal
laws (and regulations thereunder), including without limitation usury,
equal credit opportunity, fair credit reporting, truth-in-lending or
other
28
similar laws, the Federal Trade Commission Act, and applicable state
laws regulating retail installment sales contracts and loans in general
and motor vehicle retail installment contracts and loans in particular;
and the consummation of the transactions herein contemplated,
including, without limitation, the transfer of ownership of the
Contracts to the Issuer, and the pledge of the Contracts to the
Indenture trustee by the Issuer, and the receipt of interest by the
Securityholders, will not involve the violation of any applicable state
or federal law.
(x) Valid and Binding. Such Contract is the legal, valid
and binding obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally; all parties to such Contract had full
legal capacity to execute and deliver such Contract and all other
documents related thereto and to grant the security interest purported
to be granted thereby; and the terms of such Contract have not been
waived or modified in any respect, except by instruments that are part
of the Contract Documents.
(xi) Enforceability. Such Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder or assignee thereof adequate for the realization against the
collateral of the benefits of the security, subject, as to
enforceability, to bankruptcy, insolvency, reorganization or similar
laws affecting the enforcement of creditors' rights generally.
(xii) No Default. As of the Closing Date, there was no
default, breach, violation or event permitting acceleration existing
under such Contract (except payment delinquencies permitted by clause
(v) of this subsection) and no event which, with notice and the
expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such
Contract, and the Seller has not waived any such default, breach,
violation or event permitting acceleration except payment delinquencies
permitted by clause (v) of this subsection.
(xiii) Insurance. At the Closing Date, the related Financed
Vehicle will be covered by (A) a comprehensive and collision insurance
policy (1) in an amount at least equal to the lesser of (a) its actual
cash value or (b) the principal amount due from the Obligor under the
related Contract, (2) naming WFS as a loss payee and (3) insuring
against loss and damage due to fire, theft, transportation, collision
and other risks generally covered by comprehensive and collision
coverage or (B) an LDI Policy; provided, however, that if such Financed
Vehicle has an unpaid principal balance of less than $4,000.00 or the
related Contract has six or fewer months remaining before its Maturity
Date, it will not be required to be covered by the insurance described
in this subparagraph; provided further, to the extent not paid in full
by the Obligor, the related Advanced Insurance Premium shall be an
expense of the Master Servicer. Each of the Seller, WFS and the Master
Servicer shall at all times comply with all of the provisions of such
insurance policies and the LDI Policy applicable to such Financed
Vehicle.
(xiv) Acquisition of Contract. Such Contract was either
acquired by WFS (or its predecessor in interest) from a Dealer or a
Third Party Lender with which it ordinarily
29
does business or the Bank or originated directly by WFS in the ordinary
course of its business, and no adverse selection procedures have been
utilized in selecting such Contract from all other similar contracts
purchased by the Seller.
(xv) Scheduled Payments. As of the Closing Date, scheduled
payments under such Contract are applied in accordance with the Rule of
78's method or the simple interest method and are due monthly in level
payments through its Maturity Date sufficient to fully amortize the
principal balance of such Contract by its Maturity Date, assuming
timely payment by Obligors on Simple Interest Contracts, except that
the payment in the first or last month in the life of the Contract may
be minimally different from the level payment.
(xvi) One Original. There is only one original of such
Contract and such original, together with all other Contract Documents,
is being held by the Master Servicer pursuant to Section 3.04. The
Seller has received a written acknowledgement from the Master Servicer
that the Master Servicer is holding the Contract Documents that
constitute or evidence the Contracts solely on behalf and for the
benefit of the Issuer. None of the Contract Documents that constitute
or evidence each Contract has any marks or notations indicating that it
has been pledged, assigned or otherwise conveyed to any Person other
than the Issuer. Each original Contract has been segregated and marked
to show the Issuer as owner thereof, unless the Insurer has waived the
requirement for such segregation and marking by notice in writing to
the Owner Trustee, the Indenture Trustee and the Master Servicer.
(xvii) Characteristics. With respect to each Contract owned
by WFS at the Statistical Calculation Date, such Contract had (A) an
Principal Balance of not less than $597.67 nor more than $137,612.49,
(B) an original term of not less than 11 months nor greater than 84
months, (C) a remaining maturity of not less than three months nor
greater than 84 months and (D) an APR of not less than 2.90%.
(xviii) Identification. The Master Servicer and WFS have
clearly marked their electronic records to indicate that such Contract
is owned by the Issuer.
(xix) Maturity. As of the Closing Date such Contract did
not have a Maturity Date later than the 90th day prior to the end of
the Due Period immediately preceding the Class A-4 Final Scheduled
Principal Distribution Date.
(xx) Principal Balance. At the Closing Date the initial
Principal Balance of such Contract was not greater than the purchase
price of the related vehicle and such Principal Balance does not
include any amounts the Master Servicer may have expended in obtaining
an LDI Policy, if any, for such Contract.
(xxi) Location of Contract Files. The Contract Files are
kept at one or more of the locations listed in Schedule B.
(xxii) Finance Charge. With respect to each Contract, such
Contract provides for the payment of a finance charge calculated at its
APR based on the Rule of 78's or the
30
simple interest method and such APR shall be equal to or greater than
2.90%. for Rule of 78's Contracts and Simple Interest Contracts.
(xxiii) WFS, Bank and Third Party Lender Originations. With
respect to the Contracts owned by WFS at the Statistical Calculation
Date, the aggregate Principal Balance as of the Statistical Calculation
Date of such Contracts purchased by WFS from the Bank and Third Party
Lenders or originated directly by WFS is not more than approximately
2.53% of the Statistical Calculation Date Principal Balance.
(xxiv) Simple Interest Contracts. With respect to the
Contracts owned by WFS at the Statistical Calculation Date, as of the
Statistical Calculation Date, approximately 98.68% of the Contracts by
Statistical Calculation Date Principal Balance shall be Simple Interest
Contracts and approximately 1.32% of the Contracts by Statistical
Calculation Date Principal Balance shall be Rule of 78's Contracts.
(xxv) New or Pre-Owned Vehicles. At least 33.48% of the
Contracts owned by WFS at the Statistical Calculation Date by
Statistical Calculation Date Principal Balance were Contracts that
financed new vehicles and not greater than 66.52% were Contracts that
financed pre-owned vehicles.
(xxvi) States of Origination. Approximately 37.61% of the
Contracts owned by WFS at the Statistical Calculation Date by
Statistical Calculation Date Principal Balance were originated or
purchased by WFS or the Bank in California and approximately 62.39% of
the Contracts by Statistical Calculation Date Principal Balance were
originated in states other than California.
(xxvii) No Government Entity Obligors. Each Contract shall
have an Obligor that is not a local, state or federal governmental
entity.
(xxviii) Chattel Paper. Each Contract (A) constitutes
"tangible chattel paper" as defined in the applicable UCC and (B) shall
be maintained in its original "tangible" form, unless the Insurer has
consented in writing to such chattel paper being maintained in another
form or medium.
(xxix) Priority of Interest. This Agreement creates a valid
and continuing security interest (as defined in the UCC) in the
Contracts in favor of the Issuer, which security interest subject to
the Insurance Agreement is prior to all other Liens, and is enforceable
as such as against creditors of and purchasers from the Seller. Other
than the security interest granted to the Issuer pursuant to this
Agreement and subject to the Insurance Agreement, the Seller has not
pledged, assigned, sold, granted a security interest in, or otherwise
conveyed any of the Contracts. The Seller has not authorized the filing
of and is not aware of any financing statements against the Seller that
include a description of collateral covering the Contracts other than
any financing statement relating to the security interest granted to
the Issuer hereunder, the security interest granted to the Indenture
Trustee under the Indenture and the security interest granted to the
Insurer under the Insurance Agreement or that has been terminated or
subordinated to the rights of the Issuer and the Indenture Trustee.
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(xxx) Contract Characteristics as of the Closing Date. The
representations and warranties made in this Section with respect to
certain Contracts as of the Statistical Calculation Date shall also be
true and correct in every material respect for all Contracts as of the
Closing Date.
(xxxi) Obligor Bankruptcy. As of the Closing Date with
respect to the Contracts, the Seller is not aware of any Obligor that
is or has been, since the origination of the related Contract, the
subject of a bankruptcy proceeding.
(xxxii) No Extensions. The number of, or timing of, scheduled
payments has not been changed on any Contract on or before the Closing
Date, except as reflected on the computer tape delivered in connection
with the sale of the Contracts.
(xxxiii) Repossession. On or prior to the Closing Date, no
Financed Vehicle has been repossessed.
(xxxiv) Prepayment of Contracts. Any prepayment in full of a
Contract by an Obligor to the Master Servicer will consist of the
entire outstanding principal balance of such Contract together with all
accrued and unpaid interest thereon.
Section 3.02. Purchase of Certain Contracts. The representations and
warranties of the Seller set forth in Section 3.01 shall survive delivery of the
Contract Documents to the Owner Trustee and shall continue until the termination
of this Agreement. Upon discovery by the Seller, the Master Servicer or the
Owner Trustee, as the case may be, that any of such representations and
warranties was incorrect as of the time made or that any of the Contract
Documents relating to any such Contract has not been properly executed by the
Obligor or contains a material defect or has not been received by the Owner
Trustee, such Person making such discovery shall give prompt notice to the other
such Persons. If any such defect, incorrectness or omission materially and
adversely affects the interest of the Noteholders, the Certificateholders, the
Indenture Trustee, the Owner Trustee, the Issuer or the Insurer, the Seller
shall, within 90 days after discovery thereof or receipt of notice thereof, cure
the defect or eliminate or otherwise cure the circumstances or condition in
respect of which such representation or warranty was incorrect as of the time
made. If the Seller is unable to do so, it shall purchase such Contract on the
Master Servicer Report Date next succeeding the end of such 90-day period from
the Issuer for an amount equal to the related Repurchase Amount in the manner
set forth in Section 5.04. Upon any such purchase, the Owner Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest in the Seller title to any
Contract purchased hereunder. The sole remedy of the Issuer, the Owner Trustee,
the Indenture Trustee or the Securityholders with respect to a breach of the
Seller's representations and warranties pursuant to Section 3.01 shall be to
enforce the Seller's obligation to repurchase Contracts pursuant to this
Section; provided, however, that the Seller shall indemnify the Owner Trustee,
the Indenture Trustee, the Insurer, the Issuer and the Securityholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third-party claims arising out of the
events or facts giving rise to such breach.
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Section 3.03. Custody of Contract Files.
(a) Subject to Sections 3.07, 7.04 and 8.01, the Owner Trustee
hereby irrevocably appoints the Master Servicer, and the Master Servicer hereby
accepts such appointment, to act as the agent of the Owner Trustee as custodian
of the Contract Documents and any and all other documents that the Master
Servicer shall keep on file, in accordance with its customary procedures,
relating to a Contract, Obligor or Financed Vehicle, which are hereby
constructively delivered to the Owner Trustee with respect to each Contract:
(i) the original of the Contract;
(ii) documents evidencing the existence of physical damage
insurance covering the Financed Vehicles;
(iii) the original credit application fully executed by the
Obligor; and
(iv) the original certificate of title or such documents
that the Master Servicer shall keep on file, in accordance with its
customary procedures, evidencing the security interest of the Master
Servicer in the Financed Vehicle.
(b) The Master Servicer shall maintain the Contract Documents held
by it (by itself or through one or more Subservicers) in a file area physically
separate from the other installment sales contracts and installment loans owned
or serviced by it or any of its Affiliates, which area shall be clearly marked
to indicate the Issuer as the owner of, and the security interest of the
Indenture Trustee and the Insurer in, the Contract Documents and shall ▇▇▇▇ the
Contracts in the same manner; except that if the Indenture Trustee and the
Insurer have waived the requirement for such segregation and marking by notice
in writing to the Owner Trustee, the Indenture Trustee and the Master Servicer,
such file area may contain contract documents for other motor vehicle retail
installment sales contracts and installment loans owned or serviced by the
Master Servicer.
The Master Servicer shall cause the electronic record of the Contracts
maintained by it to be clearly marked to indicate that the Contracts have been
sold to the Issuer and shall not in any way assert or claim an ownership
interest in the Contracts. It is intended by the Master Servicer's and the
Seller's agreement pursuant to this Section that the Owner Trustee shall be
deemed to have possession of the Contract Documents for purposes of Section
9-313 of the UCC of the state in which the Contract Documents are located.
Section 3.04. Duties of Master Servicer as Custodian.
(a) Safekeeping. The Master Servicer shall hold the Contract Files
on behalf of the Owner Trustee, the Indenture Trustee and the Insurer for the
use and benefit of all present and future Securityholders, and maintain such
accurate and complete accounts, records and computer systems pertaining to each
Contract File as shall enable the Issuer to comply with this Agreement. In
performing its duties as custodian the Master Servicer shall act with reasonable
care, using that degree of skill and attention that the Master Servicer
exercises with respect to the files relating to all comparable automobile
contracts that the Master Servicer owns or services for itself or others. The
Master Servicer shall conduct, or cause to be conducted, periodic physical
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inspections of the Contract Files held by it under this Agreement and of the
related accounts, records and computer systems, and shall maintain them in such
a manner as shall enable the Owner Trustee, the Indenture Trustee and the
Insurer to verify the accuracy of the Master Servicer's record keeping. The
Master Servicer shall promptly report to the Owner Trustee, the Indenture
Trustee and the Insurer any failure on its part to hold the Contract Files and
maintain its accounts, records and computer systems as herein provided and shall
promptly take appropriate action to remedy any such failure.
(b) Maintenance of and Access to Records. The Master Servicer
shall maintain each Contract File at one of its offices specified in Schedule B
or at such other location as shall be specified to the Owner Trustee, the
Indenture Trustee and the Insurer by 30 days' prior written notice. The Master
Servicer shall permit the Owner Trustee, the Indenture Trustee and the Insurer
or their respective duly authorized representatives, attorneys or auditors to
inspect the Contract Files and the related accounts, records and computer
systems maintained by the Master Servicer at such times as such Persons may
request.
(c) Release of Documents. Upon instruction from the Indenture
Trustee (a copy of which shall be furnished to the Owner Trustee and the
Insurer), the Master Servicer shall release any Contract File to the Indenture
Trustee, the Indenture Trustee's agent, or the Indenture Trustee's designee, as
the case may be, at such place or places as the Indenture Trustee may designate,
as soon as practicable.
(d) Monthly Reports. On the twentieth calendar day or, if such day
is not a Business Day, the next succeeding Business Day, of each month, other
than a month in which a Distribution Date occurs, commencing with the month next
succeeding the month of the Closing Date, the Master Servicer shall mail to the
Indenture Trustee and the Owner Trustee, by first class mail, a certificate of a
Servicing Officer stating (i) the Contract Number and outstanding principal
balance of each Contract that has become a Liquidated Contract since the
Business Day next preceding the date of the last certificate delivered pursuant
to this subsection (or since the Closing Date in the case of the first such
certificate); (ii) that all proceeds received in respect of such Contract have
been deposited in or credited to the Collection Account as required by Section
5.02; (iii) that, if such Contract has been the subject of a Prepayment pursuant
to clause (i) of the definition of the term "Prepayment" or is a Liquidated
Contract pursuant to clause (iii) of the definition of the term "Liquidated
Contract," all proceeds received in respect thereof have been deposited in or
credited to the Collection Account in accordance with Section 5.02; (iv) that,
if such Contract has been the subject of a Prepayment pursuant to clause (ii) of
the definition of the term "Prepayment," the correct Repurchase Amount has been
deposited in or credited to the Collection Account in accordance with Section
4.07 or 5.04; (v) that, if such Contract is a Liquidated Contract pursuant to
clause (ii) of the definition of the term "Liquidated Contract," there have been
deposited in or credited to the Collection Account the related Net Liquidation
Proceeds in accordance with Section 5.02; (vi) the current Aggregate Principal
Balance; (vii) Gross Charge-Off Amount for the most recent Due Period; (viii)
the total dollar amount of Delinquent Contracts; (ix) the total dollar amount of
all Contracts in respect of which the related Financed Vehicles have been
repossessed but have not been liquidated; (x) the Net Charge-Off Percentage for
the most recent Calculation Day; and (xi) the current Delinquency Percentage.
The information called for in clauses (vi) through (xi) above shall be
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presented as of the Calculation Day in the month preceding the month in which
such information is required to be delivered
(e) Title Documents. The Master Servicer shall deliver to the
Indenture Trustee, the Owner Trustee and the Insurer (i) within 120 days of the
Closing Date, a schedule of Title Documents for Financed Vehicles which, as of
the Closing Date did not show the Master Servicer as first lienholder and (ii)
within 180 days of the Closing Date, a schedule of Title Documents for Financed
Vehicles which as of the date prior to such delivery do not show the Master
Servicer as first lienholder and as to which the Seller is obligated to
repurchase pursuant to the provisions hereof.
Section 3.05. Instructions; Authority to Act. The Master Servicer shall
be deemed to have received proper instructions (a copy of which shall be
furnished to the Owner Trustee and the Insurer) with respect to the Contract
Files upon its receipt of written instructions signed by a Responsible Officer
of the Indenture Trustee.
Section 3.06. Indemnification. Subject to Section 8.02, the Master
Servicer shall indemnify the Issuer, the Owner Trustee, the Indenture Trustee,
the Insurer and the Securityholders for any and all liabilities, obligations,
losses, compensatory damages, payments, costs or expenses of any kind whatsoever
(including the reasonable fees and expenses of counsel) that may be imposed on,
incurred by or asserted against the Issuer, the Owner Trustee, the Indenture
Trustee, the Insurer, the Noteholders or the Certificateholders as the result of
any improper act or omission in any way relating to the maintenance and custody
by the Master Servicer of the Contract Files, or the failure of the Master
Servicer to perform its duties and service the Contracts in compliance with the
terms of this Agreement; provided, however, that the Master Servicer shall not
be liable to the Owner Trustee for any portion of any such amount resulting from
the willful misfeasance, bad faith or negligence of the Owner Trustee and the
Master Servicer shall not be liable to the Indenture Trustee for any portion of
any such amount resulting from the willful misfeasance, bad faith or negligence
of the Indenture Trustee. The Master Servicer shall also indemnify and hold
harmless the Issuer, the Trust Estate and the Securityholders against any taxes
that may be asserted at any time against any of them with respect to the
Contracts, including any sales, gross receipts, general corporation, personal
property, privilege or license taxes (but exclusive of federal or other income
taxes arising out of payments on the Contracts) and the costs and expenses in
defending against such taxes. The Master Servicer shall immediately notify the
Owner Trustee and the Indenture Trustee if a claim is made by a third party with
respect to the Contracts, shall assume, with the consent of the Owner Trustee
and the Indenture Trustee, the defense of any such claim, pay all expenses in
connection therewith, including counsel fees, and shall promptly pay, discharge
and satisfy any judgment or decree which may be entered against it or the
Issuer.
Section 3.07. Effective Period and Termination. The Master Servicer's
appointment as custodian shall become effective as of the Cut-Off Date and shall
continue in full force and effect until terminated under this Section, upon the
termination of the Issuer or the repurchase of all of the Contracts by the
Seller, whichever is first to occur. If the Master Servicer shall resign in
accordance with the provisions of this Agreement or if all of the rights and
obligations of the Master Servicer shall have been terminated pursuant to
Section 8.01, the appointment of the Master Servicer as custodian shall be
terminated by the Indenture Trustee, by the Holders of
35
Notes evidencing not less than a majority of the Outstanding Amount of the
Notes, voting together as a single class, by the Owner Trustee, by
Certificateholders evidencing not less than a majority of the aggregate
Certificate Percentage Interest, or by the Insurer, in the same manner as the
Indenture Trustee, the Owner Trustee, the Insurer or such Holders may terminate
the rights and obligations of the Master Servicer pursuant to Section 8.01. As
soon as practicable after any termination of such appointment, the Master
Servicer shall, at its own expense, deliver the Contract Files to the Owner
Trustee or its agent or as designated by the Owner Trustee at such place or
places as the Owner Trustee may reasonably designate and shall cooperate in good
faith to effect such delivery.
Section 3.08. Nonpetition Covenant.
(a) Neither the Seller nor the Master Servicer shall petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) The Master Servicer shall not, nor cause the Seller to,
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Seller under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Seller or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Seller.
Section 3.09. Collecting Title Documents Not Delivered at the Closing
Date. In the case of any Contract in respect of which written evidence from the
Dealer selling or transferring the related Financed Vehicle that the Title
Document for such Financed Vehicle showing the Master Servicer as first
lienholder has been applied for from the Registrar of Titles was delivered to
the Owner Trustee on the Closing Date in lieu of a Title Document, the Master
Servicer shall use its best efforts to collect such Title Document from the
Registrar of Titles as promptly as possible. If such Title Document showing the
Master Servicer as first lienholder is not received by the Master Servicer or
the related Subservicer within 180 days after the Closing Date, then the
representation and warranty in Section 3.01(b)(iii) in respect of such Contract
shall be deemed to have been incorrect in a manner that materially and adversely
affects the Certificateholders.
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ARTICLE FOUR
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Master Servicer. The Master Servicer, acting
alone and/or through one or more Subservicers as provided in this Section,
shall, as agent for the Indenture Trustee, the Owner Trustee and the Insurer,
manage, service, administer and make collections on the Contracts. The Master
Servicer agrees that its servicing of the Contracts shall be carried out in
accordance with customary and usual procedures of financial institutions which
service motor vehicle retail installment sales contracts and installment loans
and, to the extent more exacting, the procedures used by the Master Servicer in
respect of such contracts serviced by it for its own account. In accordance with
the foregoing, the Master Servicer may, whenever an Obligor has become
delinquent or the Master Servicer believes an Obligor may become delinquent, in
order to preserve the ultimate collectability of amounts due on a Contract,
modify the payment schedule on any Contract by reducing the APR on such Contract
without the consent of the Insurer or any Rating Agency; provided, however, that
the new APR shall not be less than the sum of (i) the Class A-4 Rate and (ii)
the Servicing Fee Percent. In addition, in order to preserve the Trust Estate,
the Master Servicer may, without the consent of any Rating Agency or the
Insurer, reduce the principal amount of a Contract (i.e., write-down a portion
of the principal amount due on such Contract and, accordingly, lower the Monthly
P&I on such Contract) to the extent funds are available in the Spread Account to
cover such reduction; provided, however, the total amount of such modifications
pursuant to the immediately preceding sentence and this sentence and reductions
(i) may not affect more than 1% of the Original Pool Balance through the
Distribution Date nine months prior to the Class A-4 Final Scheduled
Distribution Date and (ii) during each three-month period between Distribution
Dates (or in the case of the first Distribution Date, from the Cut-Off Date to
such Distribution Date) shall not affect Contracts having an aggregate Principal
Balance greater than 0.1% of the Aggregate Principal Balance at the beginning of
such period. Any such modifications or reductions exceeding such limits may be
made only with the consent of the Insurer and each Rating Agency. The Master
Servicer may also extend the Maturity Date on a Contract in accordance with
Section 4.02. The Master Servicer's duties shall include collection and posting
of all payments, responding to inquiries of Obligors on the Contracts,
investigating delinquencies, sending payment coupons to Obligors, reporting tax
information to Obligors, accounting for collections, furnishing monthly and
annual statements to the Indenture Trustee, the Owner Trustee and the Insurer
with respect to distributions and filing applicable United States tax returns
for the Issuer on an annual basis, based on a tax year for the Issuer that is
the calendar year. The Master Servicer shall have, subject to the terms hereof,
full power and authority, acting alone, and subject only to the specific
requirements and prohibitions of this Agreement, to do any and all things in
connection with such managing, servicing, administration and collection that it
may deem necessary or desirable; provided, however, that the Master Servicer
shall commence repossession efforts in respect of any Financed Vehicle
respecting which the related Contract is four or more months delinquent. Without
limiting the generality of the foregoing, but subject to the provisions of this
Agreement, the Master Servicer is authorized and empowered by the Indenture
Trustee and the Owner Trustee to execute and deliver, on behalf of itself, the
Trust, the Insurer, the Noteholders, the Certificateholders, the Indenture
Trustee, the Owner Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Contracts or to the
Financed Vehicles. The Owner
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Trustee shall furnish the Master Servicer all documents necessary or appropriate
to enable the Master Servicer to carry out its servicing and administrative
duties hereunder.
On the Closing Date, the Master Servicer shall deliver to the Insurer,
the Indenture Trustee and the Owner Trustee a list of Servicing Officers
involved in, or responsible for, the administration and servicing of the
Contracts, which list shall from time to time be updated by the Master Servicer
on request of the Owner Trustee, the Indenture Trustee or the Insurer.
The Master Servicer may enter into Subservicing Agreements with one or
more Subservicers approved by the Insurer for the servicing and administration
of certain of the Contracts (including holding the related Contract Files as
custodian). The Master Servicer shall notify each Rating Agency promptly if a
Subservicer is hired. References herein to actions taken or to be taken by the
Master Servicer in servicing the Contracts include actions taken or to be taken
by a Subservicer on behalf of the Master Servicer and the Insurer. Each
Subservicing Agreement will be upon such terms and conditions as are not
inconsistent with this Agreement and as the Master Servicer and the Subservicer
have agreed. With the approval of the Master Servicer and the Insurer, a
Subservicer may delegate its servicing obligations to third-party servicers, but
such Subservicer will remain obligated under the related Subservicing Agreement.
The Master Servicer and a Subservicer may enter into amendments thereto or
different forms of Subservicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement or materially adversely affect the rights of
Noteholders, Certificateholders or the Insurer hereunder.
The Master Servicer shall be entitled to terminate any Subservicing
Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this Agreement;
provided, however, that in the event of termination of any Subservicing
Agreement by the Master Servicer or the related Subservicer, the Master Servicer
shall either act directly as servicer of the related Contract or enter into a
Subservicing Agreement with a successor Subservicer approved by the Insurer
which will be bound by the terms of the related Subservicing Agreement.
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or a Subservicer or reference to actions taken through such Persons or
otherwise, the Master Servicer shall remain obligated and liable to the
Indenture Trustee, the Owner Trustee and the Securityholders for the servicing
and administering of the Contracts in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from a
Subservicer and to the same extent and under the same terms and conditions as if
the Master Servicer alone were servicing and administering the Contracts. The
Master Servicer shall be entitled to enter into an agreement with a Subservicer
for indemnification of the Master Servicer and nothing contained in this
Agreement shall be deemed to limit or modify such indemnification.
Any Subservicing Agreement that may be entered into and any other
transactions or servicing arrangements relating to the Contracts involving a
Subservicer or an Affiliate of the Master Servicer in its capacity as such, and
not as an originator of Contracts, shall be deemed to be between the Subservicer
or such Affiliate, as the case may be, and the Master Servicer alone,
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and none of the Indenture Trustee, the Owner Trustee, the Noteholders nor the
Certificateholders shall be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in the immediately succeeding paragraph; provided that the
Insurer may rely upon the representations and warranties of the Subservicer
contained therein.
In the event the Master Servicer shall for any reason no longer be
acting as servicer under this Agreement (including, but not limited to, by
reason of a Servicer Default), the Indenture Trustee or its designee may, at the
sole discretion of the Indenture Trustee, thereupon assume all of the rights and
obligations of such Master Servicer under each Subservicing Agreement selected
by the Indenture Trustee in its sole discretion. In such event, the Indenture
Trustee, its designee or the successor servicer for the Indenture Trustee shall
be deemed to have assumed all of the Master Servicer's interest therein and to
have replaced the Master Servicer as a party to each such Subservicing Agreement
to the same extent as if such Subservicing Agreement had been assigned to the
assuming party except that the Master Servicer shall not thereby be relieved of
any liability or obligations under the Subservicing Agreement. The Master
Servicer shall, upon request of the Indenture Trustee but at the expense of the
Master Servicer, deliver to the assuming party all documents and records
relating to each such Subservicing Agreement and the Contracts then being
serviced and an accounting of amounts collected and held by it and otherwise use
its best efforts to effect the orderly and efficient transfer of the
Subservicing Agreement to the assuming party.
The Master Servicer, each Subservicer, and any new servicer appointed
following the resignation or termination of the Master Servicer, including any
Subservicers, shall at all times comply with all applicable federal, state and
local laws, rules, regulations and ordinances governing or relating to the
privacy rights of the Obligors in connection with its performance of its duties
under this Agreement including, without limitation, the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
The Master Servicer, each Subservicer, and any new servicer appointed following
the resignation or termination of the Master Servicer, including any
Subservicers, shall implement such physical and other security measures as shall
be necessary to (a) ensure the security and confidentiality of the "nonpublic
personal information" of each Obligor, (b) protect against any threats or
hazards to the security and integrity of such nonpublic personal information and
(c) protect against any unauthorized access to or use of such nonpublic personal
information.
The Master Servicer shall deposit in or credit to the Collection
Account within two Business Days of receipt all collections of Monthly P&I
received after the Cut-Off Date on or in respect of the Contracts together with
the proceeds of all Prepayments and any accompanying interest; provided,
however, that, to the extent any such installment of Monthly P&I or any such
Prepayment proceeds are received in respect of a Contract as to which there is
an outstanding and unreimbursed Advance or Advances, such installment or
proceeds shall, to the extent of any such unreimbursed Advance or Advances, be
retained by the Master Servicer in reimbursement of itself. The Master Servicer
shall likewise deposit in the Collection Account within two Business Days of
receipt all Net Liquidation Proceeds and Net Insurance Proceeds after deducting
therefrom the amount of any outstanding and unreimbursed Advances made by it in
respect of such Contract. The foregoing notwithstanding, the Master Servicer
may, in the event it determines that it has made a Nonrecoverable Advance or
Advances, reimburse itself from unrelated installments of Monthly P&I or
Prepayment proceeds to the extent it shall,
39
concurrently with the withholding of any such installment or proceeds from
deposit in or credit to the Collection Account as required above, furnish to the
Indenture Trustee, the Owner Trustee and the Insurer a certificate of a
Servicing Officer setting forth the basis for the Master Servicer's
determination, the amount of and Contract with respect to which such
Nonrecoverable Advance was made and the installment or installments or other
proceeds respecting which reimbursement has been taken; provided, however, that
the Master Servicer must provide such certificate within three months of such
Nonrecoverable Advance or Advances. The foregoing requirements for deposit in
the Collection Account are exclusive, it being understood that collections in
the nature of late payment charges or extension fees or collections allocable to
payments to be made by the Master Servicer on behalf of Obligors for payment of
insurance premiums, including Advanced Insurance Premiums, or similar items need
not be deposited in the Collection Account and may be retained by the Master
Servicer as additional servicing compensation or for application on behalf of
Obligors, as the case may be.
With respect to payments of Monthly P&I made by Obligors to the Master
Servicer's lock box, the Master Servicer shall direct the Person maintaining the
lock box to deposit, within two Business Days, the amount collected on or in
respect of the Contracts to the Collection Account.
In those cases where a Subservicer is servicing a Contract pursuant to
a Subservicing Agreement, the Master Servicer shall cause the Subservicer to
remit to the Master Servicer for deposit in the Collection Account, on a daily
basis, within two Business Days after receipt by the Subservicer, all proceeds
of the Contracts and all Net Liquidation Proceeds and Net Insurance Proceeds
received by the Subservicer.
In order to facilitate the servicing of the Contracts by the Master
Servicer, the Master Servicer shall retain, subject to and only to the extent
permitted by the provisions of this Agreement, all collections on or in respect
of the Contracts prior to the time they are remitted or credited, in accordance
with such provisions, to the Collection Account, as the case may be. The Master
Servicer acknowledges that the unremitted collections on the Contracts are part
of the Trust Estate and the Master Servicer agrees to act as custodian and
bailee of the Indenture Trustee, the Owner Trustee and the Insurer in holding
such monies and collections. The Master Servicer agrees, for the benefit of the
Indenture Trustee, the Owner Trustee, the Securityholders and the Insurer, to
act as such custodian and bailee, and to hold and deal with such monies and such
collections, as custodian and bailee for the Indenture Trustee, the Owner
Trustee and the Insurer, in accordance with the provisions of this Agreement.
The Master Servicer shall retain all data (including, without
limitation, computerized records) relating directly to or maintained in
connection with the servicing of the Contracts at the address of the Master
Servicer set forth as Schedule B to this Agreement, at the office of any
Subservicer or, upon 15 days' notice to the Insurer, the Indenture Trustee and
the Owner Trustee, at such other place where the servicing offices of the Master
Servicer are located, and shall give the Indenture Trustee, the Owner Trustee
and the Insurer access to all data at all reasonable times. While a Servicer
Default shall be continuing, the Master Servicer shall, on demand of the
Indenture Trustee, the Owner Trustee or the Insurer, deliver or cause to be
delivered to the Indenture Trustee, the Owner Trustee or the Insurer, as the
case may be, all data (including, without limitation, computerized records and,
to the extent transferable, related operating soft-
40
▇▇▇▇) necessary for the servicing of the Contracts and all monies collected by
it and required to be deposited in or credited to the Collection Account.
The Master Servicer shall, or cause the Administrator to, prepare,
execute and deliver all certificates or other documents required to be delivered
by the Trust pursuant to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or the rules and
regulations promulgated thereunder.
Section 4.02. Collection of Contract Payments. The Master Servicer
shall use its best efforts to collect all payments called for under the terms
and provisions of the Contracts as and when the same shall become due and shall
use its best efforts to cause each Obligor to make all payments in respect of
his or her Contract to the Master Servicer. Consistent with the foregoing, the
Master Servicer may in its discretion (i) waive any late payment charges in
connection with delinquent payments on a Contract or prepayment charges and (ii)
in order to work out a default or an impending default due to the financial
condition of the Obligor, modify the payment schedule of a Delinquent Contract
(subject to the next sentence) or extend the Maturity Date of a Delinquent
Contract by up to 90 days in the aggregate past the originally scheduled date of
the last payment on such Contract; provided, however, the Master Servicer shall
not defer payments more than three times over the life of such Contract;
provided, further, that in the case of any extension granted pursuant to clause
(ii) the Master Servicer makes an Advance in respect of such extension and in no
event can the last payment on such Contract be extended beyond the last day of
the Due Period ending immediately prior to the Class A-4 Final Scheduled
Distribution Date. The Master Servicer shall not extend the Maturity Date of a
Contract except as provided in clause (ii) of the preceding sentence and shall
not modify any Contracts except in accordance with the criteria and limitations
specified in Section 4.01.
Section 4.03. Realization upon Defaulted Contracts and Liquidated
Contracts. The Master Servicer shall use its best efforts, consistent with the
servicing standard specified in Section 4.01, to repossess or otherwise convert
the ownership of the Financed Vehicle securing any Contract as to which no
satisfactory arrangements can be made for collection of delinquent payments.
Such servicing procedures may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
In connection with such repossession or other conversion, the Master Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual for prudent holders of motor vehicle
retail installment sales contracts and installment loans and as shall be in
compliance with all applicable laws, and, in connection with the repossession of
any Financed Vehicle or any Contract in default, may commence and prosecute any
proceedings in respect of such Contract in its own name or, if the Master
Servicer deems it necessary, in the name of the Owner Trustee or on behalf of
the Owner Trustee. The Master Servicer's obligations under this Section are
subject to the provision that, in the case of damage to a Financed Vehicle from
an uninsured cause, the Master Servicer shall not be required to expend its own
funds in repairing such Financed Vehicle unless it shall determine (i) that such
restoration will increase the proceeds of liquidation of the related Contract,
after reimbursement to itself for such expenses, and (ii) that such expenses
will be recoverable by it either as Liquidation Expenses or as expenses
recoverable under an applicable Insurance Policy. In the event that the Master
Servicer determines that, in its best judgment, further collection efforts by it
as to a Liquidated Contract will not result in the realization of additional Net
Liquidation Proceeds to the Trust, the Master Servicer may, in the name of the
Owner Trustee, and for the benefit of the Trust, sell the
41
Liquidated Contract to any party not affiliated with the Master Servicer free
and clear of the rights of the Issuer. The Master Servicer shall be responsible
for all other costs and expenses incurred by it in connection with any action
taken in respect of a Defaulted Contract; provided, however, that it shall be
entitled to reimbursement of such costs and expenses to the extent they are paid
by an Obligor. All Net Liquidation Proceeds, Net Insurance Proceeds and proceeds
of the sale of Contracts hereunder shall be deposited directly in or credited to
the Collection Account (without deposit in any intervening account) to the
extent required by Section 5.02.
Section 4.04. Insurance. To the extent the Obligor fails to maintain a
comprehensive and collision insurance policy in an amount at least equal to the
lesser of (i) the actual cash value of the Financed Vehicle or (ii) the
principal amount due from the Obligor under the related Contract, the Master
Servicer shall obtain the LDI Policy in respect of such Financed Vehicle;
provided, however, that the Master Servicer shall not be required to maintain
such insurance in respect of any Financed Vehicle as to which the related
Contract has an unpaid principal balance of less than $4,000 or the related
Contract has six or fewer months remaining before its Maturity Date.
Section 4.05. Maintenance of Security Interests in Financed Vehicles.
The Master Servicer shall take such steps as are necessary to maintain
continuous perfection and priority of the security interest created by each
Contract in the related Financed Vehicle, including obtaining the execution by
the Obligors and the recording, registering, filing, re-recording,
re-registering and refiling of all security agreements, financing statements,
continuation statements or other instruments as are necessary to maintain the
security interest granted by Obligors under the respective Contracts. The Owner
Trustee and the Indenture Trustee each hereby authorizes the Master Servicer to
take such steps as are necessary to re-perfect such security interest on behalf
of the Issuer in the event of the relocation of a Financed Vehicle or for any
other reason.
Section 4.06. Covenants, Representations and Warranties of the Master
Servicer and Westcorp. The Master Servicer and Westcorp, as applicable, hereby
make the following covenants, representations and warranties on which (i) the
Issuer is deemed to have relied in acquiring the Contracts and (ii) the Insurer
is deemed to have relied in issuing the Note Policy. Such covenants,
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Contracts to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) The Master Servicer covenants as to the Contracts:
(i) Lien in Force. The Financed Vehicle securing each
Contract shall not be released from the lien granted by the Contract in
whole or in part, except as contemplated herein.
(ii) Impairment. The Master Servicer shall not impair the
rights of the Noteholders and the Certificateholders in the Contracts.
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(iii) Amendments. The Master Servicer shall not amend the
terms of any Contract, except that extensions or modifications may be
granted in accordance with Section 4.02.
(iv) Transfers. The Master Servicer may consent to the
sale or transfer by an Obligor of any Financed Vehicle only if the
original Obligor under the related Contract remains liable under such
Contract and the transferee assumes all of the Obligor's obligations
thereunder.
(v) Security Interest. The Master Servicer shall maintain
the perfection and priority of the Issuer's and the Indenture Trustee's
security interests in the Contracts.
(b) The Master Servicer represents, warrants and covenants:
(i) Organization and Good Standing. The Master Servicer
(A) has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of California, (B) has
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of its properties or
the nature of its activities makes such qualification necessary and (C)
has full power, authority and legal right to own its property, to carry
on its business as presently conducted and to enter into and perform
its obligations under this Agreement.
(ii) Power and Authority. The execution and delivery by
the Master Servicer of this Agreement are within the corporate power of
the Master Servicer and have been duly authorized by all necessary
corporate action on the part of the Master Servicer. Neither the
execution and delivery of this Agreement, nor the consummation of the
transactions herein contemplated, nor compliance with the provisions
hereof, will conflict with or result in a breach of, or constitute a
default under, any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Master Servicer or
its properties or the articles of incorporation or bylaws of the Master
Servicer, or any of the provisions of any indenture, mortgage, contract
or other instrument to which the Master Servicer is a party or by which
it is bound or result in the creation or imposition of any lien, charge
or encumbrance upon any of its property pursuant to the terms of any
such indenture, mortgage, contract or other instrument.
(iii) Governmental Consents. The Master Servicer is not
required to obtain the consent of any other party or consent, license,
approval or authorization, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except (in each case) such as have been obtained and are in
full force and effect.
(iv) Binding Obligation. This Agreement has been duly
executed and delivered by the Master Servicer and, assuming the due
authorization, execution and delivery thereof by the Owner Trustee and
the Indenture Trustee, constitutes a legal, valid and binding
instrument enforceable against the Master Servicer in accordance with
its terms (subject to applicable bankruptcy and insolvency laws and
other similar laws affecting the enforcement of creditors' rights
generally).
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(v) No Proceedings. There are no actions, suits or
proceedings pending or, to the knowledge of the Master Servicer,
threatened against or affecting the Master Servicer, before or by any
court, administrative agency, arbitrator or governmental body with
respect to any of the transactions contemplated by this Agreement, or
which will, if determined adversely to the Master Servicer, materially
and adversely affect it or its business, assets, operations or
condition, financial or otherwise, or adversely affect the Master
Servicer's ability to perform its obligations hereunder. The Master
Servicer is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to
materially and adversely affect the transactions contemplated by the
above-mentioned documents.
(vi) Other Consents. The Master Servicer has obtained or
made all necessary consents, approvals, waivers and notifications of
creditors, lessors and other nongovernmental persons, in each case in
connection with the execution and delivery of, and the consummation of
the transactions contemplated by, this Agreement.
(c) Westcorp represents, warrants and covenants:
(i) Organization and Good Standing. Westcorp (A) has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of California, (B) has qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary and (C) has full power,
authority and legal right to own its property, to carry on its business
as presently conducted and to enter into and perform its obligations
under this Agreement.
(ii) Power and Authority. The execution and delivery by
Westcorp of this Agreement are within the corporate power of Westcorp
and have been duly authorized by all necessary corporate action on the
part of Westcorp. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof, will conflict with or result in
a breach of, or constitute a default under, any of the provisions of
any law, governmental rule, regulation, judgment, decree or order
binding on Westcorp or its properties or the articles of incorporation
or bylaws of Westcorp, or any of the provisions of any indenture,
mortgage, contract or other instrument to which Westcorp is a party or
by which it is bound or result in the creation or imposition of any
lien, charge or encumbrance upon any of its property pursuant to the
terms of any such indenture, mortgage, contract or other instrument.
(iii) Governmental Consents. Westcorp is not required to
obtain the consent of any other party or consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except (in
each case) such as have been obtained and are in full force and effect.
(iv) Binding Obligation. This Agreement has been duly
executed and delivered by Westcorp and, assuming the due authorization,
execution and delivery
44
thereof by the Owner Trustee and the Indenture Trustee, constitutes a
legal, valid and binding instrument enforceable against Westcorp in
accordance with its terms (subject to applicable bankruptcy and
insolvency laws and other similar laws affecting the enforcement of
creditors' rights generally).
(v) No Proceedings. There are no actions, suits or
proceedings pending or, to the knowledge of Westcorp, threatened
against or affecting Westcorp, before or by any court, administrative
agency, arbitrator or governmental body with respect to any of the
transactions contemplated by this Agreement, or which will, if
determined adversely to Westcorp, materially and adversely affect it or
its business, assets, operations or condition, financial or otherwise,
or adversely affect Westcorp's ability to perform its obligations
hereunder. Westcorp is not in default with respect to any order of any
court, administrative agency, arbitrator or governmental body so as to
materially and adversely affect the transactions contemplated by the
above-mentioned documents.
(vi) Other Consents. Westcorp has obtained or made all
necessary consents, approvals, waivers and notifications of creditors,
lessors and other nongovernmental persons, in each case in connection
with the execution and delivery of, and the consummation of the
transactions contemplated by, this Agreement.
Section 4.07. Repurchase of Contracts upon Breach of Covenant. The
Master Servicer or the Owner Trustee shall inform the other party and the
Indenture Trustee and the Insurer promptly, in writing, upon the discovery of
any breach pursuant to Section 4.02, 4.05 or 4.06. Unless the breach shall have
been cured within 30 days following such discovery, the Master Servicer shall
purchase any Contract materially and adversely affected by such breach. In
consideration of the purchase of such Contract, the Master Servicer shall remit
the Repurchase Amount in the manner specified in Section 5.04. The sole remedy
of the Issuer, the Owner Trustee, the Indenture Trustee, the Certificateholders
or the Noteholders with respect to a breach pursuant to Section 4.02, 4.05 or
4.06 shall be to require the Master Servicer to purchase Contracts pursuant to
this Section; provided, however, that the Master Servicer shall indemnify the
Owner Trustee, the Indenture Trustee, the Insurer, the Issuer and the
Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third-party claims
arising out of the events or facts giving rise to such breach. The Owner Trustee
shall have no duty to conduct any affirmative investigation as to the occurrence
of any condition requiring the repurchase of any Contract pursuant to this
Section.
Section 4.08. Servicing Compensation. As compensation for the
performance of its obligations under this Agreement and subject to the terms of
this Section, the Master Servicer shall be entitled to receive on each
Distribution Date the Servicing Fee. As servicing compensation in addition to
the Servicing Fee, the Master Servicer shall be entitled to retain all late
payment charges, extension fees and similar items paid in respect of the
Contracts. The Master Servicer shall pay all expenses incurred by it in
connection with its servicing activities hereunder, which expenses shall include
all out-of-pocket expenses incurred in connection with the repossession of a
Financed Vehicle and any Advanced Insurance Premium to the extent that any such
amounts are not paid or otherwise reimbursed by the related Obligor, and shall
not be
45
entitled to reimbursement of such expenses except to the extent provided in this
Section or in Section 4.03.
Section 4.09. Reporting by the Master Servicer.
(a) On each Master Servicer Report Date, the Master Servicer shall
transmit to the Owner Trustee, the Indenture Trustee, each Rating Agency, the
Swap Counterparty and the Insurer a statement, substantially in the form of
Exhibit D (the "Distribution Date Statement"), setting forth with respect to the
next succeeding Distribution Date:
(i) the Note Interest Distributable Amount for such
Distribution Date;
(ii) the Note Principal Distributable Amount for such
Distribution Date;
(iii) the Net Collections for such Distribution Date;
(iv) the amount otherwise distributable to each Class of
Noteholders that will be distributed to a different Class of
Noteholders on such Distribution Date;
(v) the amount to be on deposit in the Spread Account on
such Distribution Date, before and after giving effect to deposits
thereto and withdrawals therefrom to be made in respect of such
Distribution Date;
(vi) the Servicing Fee with respect to the related Due
Period;
(vii) the amount of any Note Interest Carryover Shortfall
and Note Principal Carryover Shortfall on such Distribution Date and
the change in such amounts from those with respect to the immediately
preceding Distribution Date;
(viii) the aggregate amount of Monthly P&I which was due on
the Contracts during the related Due Period and was delinquent as of
the end of the related Due Period (any such payment of Monthly P&I
being presumed to be delinquent to the extent that it was not deposited
in or credited to the Collection Account during such Due Period);
(ix) the amount set forth in clause (viii) above which is
being advanced concurrently with such Distribution Date Statement by
the Master Servicer pursuant to Section 5.04, the amount of any such
Advance being deposited in or credited to the Collection Account on
such Master Servicer Report Date;
(x) the aggregate amount of any Nonrecoverable Advances
deducted by the Master Servicer from amounts otherwise required to be
deposited by the Master Servicer in the Collection Account during the
related Due Period;
(xi) the Aggregate Net Liquidation Losses for the related
Due Period;
(xii) the Delinquency Percentage and the Net Charge-Off
Percentage for the most recent Calculation Day;
46
(xiii) the amount of Contracts which have had their APR or
principal amount modified pursuant to Section 4.01 and the percentage
that amount constitutes of the Original Principal Balance on a
cumulative basis; in addition the aggregate Principal Balance of
Contracts so modified as a percentage of the Aggregate Principal
Balance for the most recent Distribution Date;
(xiv) the Note Deficiency Claim Amount, if any, for such
Distribution Date, separately setting forth the amount thereof payable
in respect of each Class of Notes;
(xv) the Note Policy Claim Amount, if any, for such
Distribution Date, separately setting forth the amount thereof payable
in respect of each Class of Notes;
(xvi) the Certificate Distributable Amount;
(xvii) the Net Swap Receipts and Net Swap Payments, if any;
(xviii) the sum of the Principal Balances of Delinquents
Contracts;
(xix) the sum of the Principal Balance of Contracts that
became Defaulted Contracts during the related Due Period;
(xx) the Class Balance of each Class of Notes;
(xxi) the Aggregate Principal Balance at the beginning and
end of the related Due Period; and
(xxii) the amount otherwise distributable to the
Certificateholders.
Each such Distribution Date Statement shall be accompanied by an Officers'
Certificate of the Master Servicer stating that the computations reflected in
such statement were made in conformity with the requirements of this Agreement.
(b) On each Master Servicer Report Date, the Master Servicer shall
deliver to the Owner Trustee, the Indenture Trustee, each Rating Agency and the
Insurer a report, in respect of the immediately preceding Due Period, setting
forth the following:
(i) the aggregate amount, if any, paid by or due from it
for the purchase of Contracts which the Seller or the Master Servicer
has become obligated to purchase pursuant to Section 3.02 or 4.07, or
the Seller has elected to purchase pursuant to Section 9.01;
(ii) the net amount of funds which have been deposited in
or credited to the Collection Account in respect of such Due Period
after giving effect to all permitted deductions therefrom pursuant to
Section 5.02;
(iii) upon request of any of the Insurer, the Owner
Trustee, the Indenture Trustee or a Rating Agency, with respect to each
Contract that became a Liquidated Contract during such Due Period, the
following information:
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(A) its Contract Number;
(B) the effective date as of which such Contract
became a Liquidated Contract;
(C) its Monthly P&I and Principal Balance as of
the immediately preceding Distribution Date (or as of the
Cut-Off Date in the case of the first Distribution Date); and
(D) if less than 100% of the outstanding
principal balance of and accrued and unpaid interest was
recovered on such Liquidated Contract, the amount of the Net
Liquidation Proceeds or Net Insurance Proceeds;
(iv) upon request of any of the Insurer, the Owner
Trustee, the Indenture Trustee or a Rating Agency, the Contract
Numbers, Monthly P&I, Principal Balances and Maturity Dates of all
Contracts which became Defaulted Contracts during such Due Period;
(v) the amount of Net Liquidation Proceeds and Net
Insurance Proceeds which have been deposited in or credited to the
Collection Account in respect of the Due Period ending immediately
prior to such Master Servicer Report Date and the cumulative amount of
Net Liquidation Proceeds and Net Insurance Proceeds deposited in or
credited to the Collection Account during the preceding Due Periods;
and
(vi) any other information relating to the Contracts
reasonably requested by the Owner Trustee, the Indenture Trustee, each
Rating Agency or the Insurer.
Section 4.10. Annual Statement as to Compliance. The Master Servicer
shall deliver to the Owner Trustee, the Indenture Trustee, each Rating Agency,
the Swap Counterparty and the Insurer, on or before 90 days after the end of
each fiscal year of the Master Servicer, beginning with the fiscal year ended
December 31, 2003, an Officers' Certificate of the Master Servicer stating that
(i) a review of the activities of the Master Servicer during the preceding
fiscal year (or since the Closing Date in the case of the first such Officers'
Certificate) and of its performance under this Agreement has been made under
such officers' supervision and (ii) to the best of such officers' knowledge,
based on such review, the Master Servicer has fulfilled all its obligations
under this Agreement throughout such year and that no default under this
Agreement has occurred and is continuing, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate and the
report referred to in Section 4.11 may be obtained by any Certificateholder,
Noteholder or Note Owner by a request in writing to the Owner Trustee addressed
to the Owner Trustee Corporate Trust Office. Upon the telephone request of the
Owner Trustee, the Indenture Trustee will promptly furnish the Owner Trustee a
list of Noteholders as of the date specified by the Owner Trustee.
Section 4.11. Annual Independent Certified Public Accountants' Report.
On or before 90 days after the end of the first fiscal year of the Master
Servicer which ends more than three months after the Closing Date and each
fiscal year thereafter, the Master Servicer at its expense shall cause a firm of
nationally-recognized independent certified public accountants (who may
48
also render other services to the Master Servicer) to furnish a report to the
Indenture Trustee, the Owner Trustee, each Rating Agency and the Insurer to the
effect that (i) they have audited the balance sheet of the Master Servicer as of
the last day of said fiscal year and the related statements of operations,
retained earnings and cash flows for such fiscal year and have issued an opinion
thereon, specifying the date thereof, (ii) they have also audited certain
documents and the records relating to the servicing of the Contracts and the
distributions on the Notes and the Certificates hereunder, (iii) their audit as
described under clauses (i) and (ii) above was made in accordance with generally
accepted auditing standards and accordingly included such tests of the
accounting records and such other auditing procedures as they considered
necessary in the circumstances and (iv) their audits described under clauses (i)
and (ii) above disclosed no exceptions which, in their opinion, were material,
relating to the servicing of such Contracts in accordance with this Agreement
and the making of distributions on the Notes and Certificates in accordance with
this Agreement, or, if any such exceptions were disclosed thereby, setting forth
such exceptions which, in their opinion, were material.
Section 4.12. Access to Certain Documentation and Information Regarding
Contracts. The Master Servicer shall provide to the Insurer, the Indenture
Trustee and the Securityholders access to the Contract Files in such cases where
the Certificateholders or Noteholders shall be required by applicable statutes
or regulations to review such documentation. Access shall be afforded without
charge, but only upon reasonable request and during the normal business hours at
the designated offices of the Master Servicer and each related Subservicer, if
any. Nothing in this Section shall affect the obligation of the Master Servicer
to observe any applicable law prohibiting disclosure of information regarding
the Obligors and the failure of the Master Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section.
Section 4.13. Fidelity Bond. The Master Servicer shall maintain a
fidelity bond in such form and amount as is customary for banks acting as
custodian of funds and documents in respect of mortgage loans or consumer
contracts on behalf of institutional investors.
Section 4.14. Indemnification; Third Party Claims. Subject to Section
8.02, the Master Servicer agrees to indemnify and hold the Indenture Trustee,
the Owner Trustee, the Swap Counterparty and the Securityholders harmless
against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments and any reasonable other costs, fees and
expenses that the Indenture Trustee, the Owner Trustee, the Noteholders or the
Certificateholders may sustain because of the failure of the Master Servicer to
perform its duties and service the Contracts in compliance with the terms of
this Agreement. The Master Servicer shall immediately notify the Indenture
Trustee and the Owner Trustee if a claim is made by a third party with respect
to the Contracts, assume, with the consent of the Indenture Trustee and the
Owner Trustee, the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against it or Indenture Trustee, the
Owner Trustee, the Swap Counterparty, the Noteholders or the Certificateholders.
Section 4.15. Maintenance of the Interest Rate Swap Agreement. As long
as the Class A-3B Notes are Outstanding, the Master Servicer shall cause the
Trust to maintain in effect an interest rate swap agreement acceptable to the
Insurer with respect to the Class A-3B Notes;
49
provided, that, the issuance of the Note Policy on the Closing Date shall
conclusively evidence the Insurer's approval of the Interest Rate Swap
Agreement.
50
ARTICLE FIVE
DISTRIBUTIONS; SPREAD ACCOUNT; STATEMENTS TO SECURITYHOLDERS
Section 5.01. Establishment of Trust Accounts.
(a) Prior to the Closing Date, the Master Servicer shall open, at
a depository institution (which may be the Indenture Trustee or the Bank), the
following accounts (the "Trust Accounts"):
(i) an account in the name of the Indenture Trustee (the
"Collection Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the
Securityholders;
(ii) an account in the name of the Indenture Trustee (the
"Spread Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the
Securityholders;
(iii) an account in the name of the Indenture Trustee (the
"Note Distribution Account") bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Noteholders; and
(iv) an account in the name of the Owner Trustee (the
"Certificate Distribution Account") bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Certificateholders.
The Trust Accounts shall be Eligible Accounts and relate solely to the
Securities and to the Contracts and Eligible Investments. The Master Servicer
shall give the Indenture Trustee, the Owner Trustee and the Insurer at least
five Business Days' written notice of any change in the location of any Trust
Account and any related account identification information. All monies deposited
in or credited to, from time to time, the Trust Accounts shall be part of the
Trust Estate and all monies deposited in or credited to, from time to time, the
Collection Account, the Spread Account, the Certificate Distribution Account and
the Note Distribution Account shall be invested by the Indenture Trustee in
Eligible Investments pursuant to Section 5.01(b).
(b) All funds in the Collection Account, the Spread Account, the
Note Distribution Account and the Certificate Distribution Account shall be
invested by the Indenture Trustee in Eligible Investments. Unless and until the
RIC is no longer an Eligible Investment, all funds in such Trust Accounts, in
each case that are available for investment in Eligible Investments, shall be
invested in the RIC. If the RIC is no longer an Eligible Investment then,
subject to the limitations set forth herein, the Master Servicer shall direct
the Indenture Trustee in writing to invest funds in the foregoing Trust Accounts
in Eligible Investments other than the RIC; provided that in the absence of such
directions from the Master Servicer, the Insurer may so direct the Indenture
Trustee. All such investments shall be in the name of the Indenture Trustee for
the benefit of the Noteholders and the Certificateholders, as applicable. All
income or other gain from investment of monies deposited in or credited to the
Collection Account (including without limitation the RIC Reinvestment Earnings)
shall be deposited in or credited to the Collection Account immediately upon
receipt, and any loss resulting from such investment shall
51
be charged to the Collection Account. All income or other gain from investment
of monies deposited in or credited to the Spread Account (including without
limitation the RIC Reinvestment Earnings) shall be deposited in or credited to
the Spread Account immediately upon receipt, and any loss resulting from such
investment shall be charged to the Spread Account. All income or other gain from
investment of monies deposited in or credited to the Note Distribution Account
(including without limitation the RIC Reinvestment Earnings) shall be deposited
in or credited to the Note Distribution Account immediately upon receipt, and
any loss resulting from such investment shall be charged to the Note
Distribution Account. All income or other gain from investment of monies
deposited in or credited to the Certificate Distribution Account (including
without limitation the RIC Reinvestment Earnings) shall be deposited in or
credited to the Certificate Distribution Account immediately upon receipt, and
any loss resulting from such investment shall be charged to the Certificate
Distribution Account. The maximum permissible maturities of any investments of
funds in the Collection Account, the Spread Account, the Note Distribution
Account and the Certificate Distribution Account on any date shall not be later
than one Business Day immediately preceding the Distribution Date next
succeeding the date of such investment; provided, however, that such funds may
be invested by the Indenture Trustee in Eligible Investments (other than the
RIC) that mature on the Business Day before the Distribution Date, or, in the
case of Commercial Paper or Proprietary Funds, that mature on the Distribution
Date for a period not to exceed one Business Day. No investment in Eligible
Investments may be sold prior to its maturity and all investments in Proprietary
Funds shall be for a period not to exceed one Business Day.
(c)
(i) The Indenture Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Trust
Accounts, other than the Certificate Distribution Account, and in all
proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. The
Trust Accounts, other than the Certificate Distribution Account, shall
be under the sole dominion and control of the Indenture Trustee for the
benefit of the Noteholders and the Certificateholders, as the case may
be; provided however, that the Indenture Trustee shall invest funds in
the Certificate Distribution Account pursuant to Section 5.01(b). The
Certificate Distribution Account shall be in the name of the Owner
Trustee for the benefit of the Certificateholders. If, at any time, any
of the Trust Accounts ceases to be an Eligible Account, the Indenture
Trustee (or the Master Servicer on its behalf) shall within ten
Business Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency may consent) establish a new Trust
Account as an Eligible Account and shall transfer any cash and/or any
investments to such new Trust Account.
(ii) With respect to the Trust Account Property, the
Indenture Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in
deposit accounts shall be held solely in the Eligible
Accounts, subject to the last sentence of Section 5.01(c)(i);
and each such Eligible Account shall be subject to the
exclusive custody and continuous control of the Indenture
Trustee within the
52
meaning of Section 9-104(a) of the applicable UCC, and the
Indenture Trustee shall have sole signature authority with
respect thereto;
(B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture Trustee
in accordance with paragraph (i) of the definition of the term
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a Financial Intermediary
acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a
book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations shall be delivered
in accordance with paragraph (ii) of the definition of the
term "Delivery" and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as
described in such paragraph; and
(D) any Trust Account Property that is an
"uncertificated security" under Article Eight of the UCC and
that is not governed by clause (C) above shall be delivered to
the Indenture Trustee in accordance with paragraph (iii) of
the definition of the term "Delivery" and shall be maintained
by the Indenture Trustee, pending maturity or disposition,
through continued registration of the Indenture Trustee's (or
its nominee's) ownership of such security.
(iii) The Master Servicer shall have the power, revocable
by the Indenture Trustee or by the Owner Trustee with the consent of
the Indenture Trustee, to instruct the Indenture Trustee to make
withdrawals and payments from the Trust Accounts for the purpose of
permitting the Master Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Indenture Trustee to
carry out its duties under the Indenture.
Section 5.02. Collections; Realization Upon Note Policy; Net Deposits.
(a) Subject to Sections 4.01, 5.02(d) and 5.03, the Master
Servicer shall remit or credit all payments by the Obligors on the Contracts,
all payments on behalf of Obligors on the Contracts and all Net Liquidation
Proceeds and Net Insurance Proceeds to the Collection Account (within two
Business Days as specified in Section 4.01); provided that the Master Servicer
shall retain from collection of late payments and Net Liquidation Proceeds or
Net Insurance Proceeds in respect of a Contract an amount equal to previously
unreimbursed Advances in respect of such Contract made pursuant to Section 5.04.
(b) Not later than 12:00 p.m., New York City time, on the fifth
Business Day prior to each Distribution Date, based on the information set forth
in the related Distribution Date Statement to the extent that there are
insufficient funds to make the distributions required to be made to each Class
of Notes as described in Sections 5.05 and 5.06, the Master Servicer shall
deliver to the Indenture Trustee, with a copy to the Insurer, the Owner Trustee
and the Fiscal Agent, if any, by hand delivery, telex or facsimile transmission,
a written notice (a "Deficiency Notice") specifying the Note Deficiency Claim
Amount, if any, for such Distribution Date,
53
separately identifying the amount of the applicable Note Deficiency Claim Amount
payable in respect of each Class of Notes. Such Deficiency Notice shall direct
the Indenture Trustee to remit such Note Deficiency Claim Amount (to the extent
of funds then on deposit in the Spread Account are insufficient) to the
Indenture Trustee for deposit in the Note Distribution Account.
(c) Not later than 12:00 p.m., New York City time, on the fourth
Business Day prior to each Distribution Date, the Indenture Trustee shall make a
claim under the Note Policy for any Note Policy Claim Amount for such
Distribution Date by delivering to the Insurer and the Fiscal Agent, if any,
with a copy to the Master Servicer, by hand delivery, telex or facsimile
transmission, a claim for the related Note Policy Claim Amount, as the case may
be. In making any such claim, the Owner Trustee or the Indenture Trustee shall
comply with all the terms and conditions of the related Policy. The notice of
such claim shall direct the Insurer to remit such Note Policy Claim Amount to
the Owner Trustee or the Indenture Trustee for deposit in the Note Distribution
Account.
(d) So long as the Master Servicer is WFS, the Master Servicer
shall have the right, on a basis not more frequently than once per month
(although deposits shall be made into the Collection Account within two Business
Days pursuant to Section 4.01), to deduct from amounts received that are
otherwise required to be deposited in or credited to the Collection Account and,
to the extent such amounts are insufficient, to require that the Indenture
Trustee withdraw and deliver to it from the Collection Account, amounts due to
be paid hereunder to the Master Servicer or to the Seller after giving effect to
application of the payment priorities specified in this Article for the month
(or other applicable period), and to pay such amounts to itself as Master
Servicer or to the Seller, as the case may be. Notwithstanding the foregoing,
the Master Servicer shall maintain the records and accounts for such deposits
and credits on a gross basis.
(e) With respect to each Due Period and the related Distribution
Date, Net Swap Receipts, if any, will be deposited into the Collection Account
on the Business Day immediately preceding that Distribution Date.
Section 5.03. Application of Collections. On or prior to each
Calculation Day, all collections for the related month shall be applied by the
Master Servicer as follows: with respect to each Contract (including a Defaulted
Contract), payments by or on behalf of an Obligor shall be applied in the
following order: (a) unpaid amounts due on the Contract in the prior month; (b)
interest due on the Contract; (c) interest due on any Advanced Insurance
Premium; (d) principal due on the Contract; (e) principal due on any Advanced
Insurance Premium; (f) extension fees, if any; (g) late payment fees, if any;
and (h) administrative charges, if any. Any excess shall be applied to prepay
the principal balance of the Contract.
Section 5.04. Advances and Nonrecoverable Advances; Repurchase Amounts.
(a) If, as of the end of any Due Period, one or more payments of
Monthly P&I due under any Contract (other than a Liquidated Contract)
Outstanding at the end of such Due Period shall not have been received by the
Master Servicer and deposited in or credited to the Collection Account pursuant
to Section 5.02(a), the Master Servicer shall make, concurrently with the
furnishing of the related Distribution Date Statement to the Indenture Trustee
and the Owner Trustee, the Advance for such Due Period by depositing in or
crediting to the Collection
54
Account with respect to each Contract 30 days of interest on the Principal
Balance of such Contract at a rate equal to the sum of (i) the Class A-4 Rate
and (ii) the Servicing Fee Percent for each month that the related Monthly P&I
is delinquent at the end of such Due Period. The Master Servicer shall account
for such deposit or credit in accordance with Section 4.01. The foregoing
notwithstanding, the Master Servicer shall not make an Advance in respect of a
Contract if the Master Servicer shall have determined that any such Advance, if
made, would constitute a Nonrecoverable Advance. Any such determination shall be
evidenced by an Officers' Certificate furnished to the Indenture Trustee, the
Owner Trustee and the Insurer setting forth the basis for such determination.
(b) If the Master Servicer determines that it has made a
Nonrecoverable Advance or Advances, the Master Servicer shall reimburse itself,
without interest, from unrelated installments of Monthly P&I or Prepayment
proceeds to the extent it shall, concurrently with the withholding of any such
installment or proceeds from deposit in or credit to the Collection Account as
required by Section 5.02, furnish to the Indenture Trustee, the Owner Trustee
and the Insurer a certificate of a Servicing Officer setting forth the basis for
the Master Servicer's determination, the amount of, and Contract with respect to
which, such Nonrecoverable Advance was made and the installment or installments
or other proceeds respecting which reimbursement has been taken; provided,
however, that the Master Servicer must provide such certificate within three
months of such Nonrecoverable Advance or Advances.
(c) The Master Servicer or the Seller, as the case may be, shall
remit or credit to the Collection Account the aggregate Repurchase Amount with
respect to Repurchased Contracts on the Master Servicer Report Date next
succeeding the last day of the related cure period specified in Section 3.02 or
4.07, as the case may be. In addition, the Master Servicer and the Seller shall
deposit or cause to be deposited in the Collection Account the aggregate
Repurchase Amount with respect to Repurchased Contracts.
(d) The Master Servicer and the Seller shall deposit or caused to
be deposited into the Collection Account the Aggregate Repurchase Amount of
Contracts purchased pursuant to Section 9.01(a).
Section 5.05. Distributions.
(a) On each Distribution Date, unless otherwise noted, the Master
Servicer shall instruct the Indenture Trustee (based on the information
contained in the Distribution Date Statement delivered on the related Master
Servicer Report Date pursuant to Section 4.09) to make the following deposits
and distributions for receipt by the Master Servicer or deposit in the
applicable account by 11:00 a.m. (New York time), to the extent of the Net
Collections for such Distribution Date, in the following amounts and order of
priority (or, if the Notes have been accelerated upon an Event of Default, in
the amounts and priority set forth in Section 2.07(e) of the Indenture):
(i) to the Master Servicer, the Servicing Fee, including
any unpaid Servicing Fees with respect to one or more prior Due
Periods;
55
(ii) to the Swap Counterparty, any unpaid Net Swap
Payments, including any unpaid Net Swap Payments with respect to one or
more Due Periods, which amount will be paid to the Swap Counterparty on
the Business Day immediately preceding that Distribution Date;
(iii) to the Indenture Trustee, any accrued and unpaid fees
and expenses payable to the Indenture Trustee, and to the Owner
Trustee, any accrued and unpaid fees and expenses payable to the Owner
Trustee, in each case to the extent such fees and expenses have not
been previously paid by the Master Servicer;
(iv) to the Note Distribution Account, the Note Interest
Distributable Amount for each Class of Notes, for payment of interest
on each Class of Notes, pro rata, in proportion to their respective
Outstanding Amounts;
(v) to the Note Distribution Account, the Note Principal
Distributable Amount, (which amount includes, if such Distribution Date
is a Final Scheduled Distribution Date, the remaining Outstanding
Amount of the related Class of Notes), for payment on principal on the
Notes, first to the Holders of the Class A-1 Notes until the
Outstanding Amount of the Class A-1 Notes has been reduced to zero,
second to the Holders of the Class A-2 Notes until the Outstanding
Amount of the Class A-2 Notes has been reduced to zero, third to the
Holders of the Class A-3A Notes and the Class A-3B Notes, pro rata, in
proportion to their respective Outstanding Amounts, until the
Outstanding Amount of each of the Class A-3A Notes and the Class A-3B
Notes has been reduced to zero; and fourth to the Holders of the Class
A-4 Notes until the Outstanding Amount of the Class A-4 Notes has been
reduced to zero;
(vi) from Net Collections to the Swap Counterparty, any
Swap Termination Payment not paid to it pursuant to clause (ii) above,
which amount will be paid to the Swap Counterparty on the Business Day
immediately preceding that Distribution Date; and
(vii) to the Insurer, any Unreimbursed Insurer Amounts.
(b) On each Distribution Date, the Master Servicer shall instruct
the Indenture Trustee (based on the information contained in the Distribution
Date Statement delivered on the related Master Servicer Report Date pursuant to
Section 4.09), to distribute any excess amounts remaining from Net Collections
after making the distributions described in Section 5.05(a) to the Spread
Account. On each Distribution Date, the Master Servicer shall instruct the
Indenture Trustee to distribute the Excess Spread Amount pursuant to Section
5.06(b).
(c) To the extent that on any Distribution Date the amount on
deposit in the Note Distribution Account (after giving effect to any deposits
thereto on such Distribution Date) is less than the Note Distributable Amount,
Noteholders shall be entitled to receive distributions in respect of such
deficiency first, from amounts on deposit in the Spread Account pursuant to a
Deficiency Notice; and second, if such amounts are still insufficient, from a
claim made under the Note Policy for the Note Policy Claim Amount pursuant to
Section 5.02(c).
56
Section 5.06. Spread Account.
(a) On or prior to the Closing Date, WFSRC2 shall deposit the
Spread Account Initial Amount into the Spread Account. The Spread Account will
be held for the benefit of the Securityholders and the Insurer in order to
effectuate the subordination of the rights of the Securityholders to the extent
described above.
(b) On each Calculation Day and Distribution Date, the Master
Servicer shall instruct the Indenture Trustee to distribute the Excess Spread
Amount, (i) first, to the Insurer, to the extent of any Unreimbursed Insurer
Amounts, (ii) second, to WFSRC2 until WFSRC2 has received full payment of the
Spread Account Initial Deposit and (iii) third, on a Calculation Day that is not
a Distribution Date, all remaining funds to the Certificateholders in accordance
with their Certificate Percentage Interests and in the case of a Distribution
Date, to the Certificate Distribution Account for distribution to
Certificateholders in accordance with Section 5.02 of the Trust Agreement. Upon
any such distribution to the Insurer, neither the Seller nor the Securityholders
will have further rights in, or claims to, such amounts.
(c) Amounts held in the Spread Account shall be invested in the
manner specified in Section 5.01(b), and such investments shall be made in
accordance with written instructions from the Master Servicer; provided that, if
the Indenture Trustee does not receive any such written instructions prior to
any date on which an investment decision must be made, the Indenture Trustee
shall invest such amounts held in the Spread Account in Eligible Investments
consisting of commercial paper given the highest rating by each Rating Agency at
the time of such investment. All such investments shall be made in the name of
the Indenture Trustee or its nominee and such investments shall not be sold or
disposed of prior to their maturity.
(d) Upon termination of the Issuer pursuant to Section 9.01, any
amounts on deposit in the Spread Account, after payments of amounts due to the
Securityholders and the Insurer (if there exists any Unreimbursed Insurer
Amounts), will be distributed first, to WFSRC2 until WFSRC2 has received full
repayment of the Spread Account Initial Deposit and second, to the Certificate
Distribution Account for distribution to Certificateholders in accordance with
the Section 5.02 of the Trust Agreement.
Section 5.07. Statements to Securityholders.
(a) On each Distribution Date, (i) the Indenture Trustee shall
include with each distribution to each Noteholder of record as of the related
Record Date and (ii) the Owner Trustee shall include with each distribution to
each Certificateholder of record as of the related Record Date a statement,
prepared by the Master Servicer, based on the information in the Distribution
Date Statement furnished pursuant to Section 4.09, setting forth for such
Distribution Date the following information as of the related Record Date or
such Distribution Date, as the case may be:
(i) the amount of such distribution allocable to
principal (stated separately for each Class of Notes);
(ii) the amount of such distribution allocable to interest
(stated separately for each Class of Notes);
57
(iii) the Aggregate Principal Balance as of the close of
business on the last day of such Due Period;
(iv) the amount of the Servicing Fee paid to the Master
Servicer with respect to the related Due Period;
(v) the amount of any Note Interest Carryover Shortfall
and Note Principal Carryover Shortfall on such Distribution Date and
the change in such amounts from those with respect to the immediately
preceding Distribution Date;
(vi) the Note Pool Factor for each Class of Notes as of
such Distribution Date, after giving effect to payments allocated to
principal reported under clause (i) above;
(vii) the Certificate Distributable Amount; and
(viii) the amount on deposit in the Spread Account on such
Distribution Date, after giving effect to distributions made on such
Distribution Date, and the change in such balance from the immediately
preceding Distribution Date.
Each amount set forth pursuant to clauses (i), (ii), (iv) and (v) above shall be
expressed in the aggregate and as a dollar amount per $1,000.00 original
principal amount of a Note.
(b) Within a reasonable period of time after the end of each
calendar year, but not later than the latest date permitted by law, the
Indenture Trustee shall mail to each Person who at any time during such calendar
year shall have been a Holder of a Note a statement or statements, prepared by
the Master Servicer, which in the aggregate contain the sum of the amounts set
forth in clauses (i), (ii), (iv) and (v) above for such calendar year or, in the
event such Person shall have been a Holder of a Note during a portion of such
calendar year, for the applicable portion of such year, for the purposes of such
Noteholder's preparation of federal income tax returns. In addition, the Master
Servicer shall furnish to the Indenture Trustee for distribution to such Person
at such time any other information necessary under applicable law for the
preparation of such income tax returns.
Section 5.08. Calculation of the Class A-3B Rate. With respect to the
Class A-3B Notes, on each LIBOR Determination Date, the Indenture Trustee shall
determine the LIBOR Rate for the Interest Period commencing on such Distribution
Date and inform the Master Servicer (at the facsimile number given to the
Indenture Trustee in writing) of such rates. If necessary to calculate the LIBOR
Rate, the Indenture Trustee will, in a timely manner, request the principal
London office of each Reference Bank to provide a quotation of its rates. On or
prior to each LIBOR Determination Date, the Indenture Trustee shall determine
the Interest Rate for the Class A-3B Notes for the related Distribution Date.
58
ARTICLE SIX
THE SELLER
Section 6.01. Corporate Existence. During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other Basic
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
Section 6.02. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by such Seller under this Agreement.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Master Servicer from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated herein and in the other Basic Documents,
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to, and as of the date of, the sale of
the Contracts to the Issuer or the issuance and original sale of the Securities,
or asserted with respect to ownership of the Contracts, or federal or other
income taxes arising out of distributions on the Certificates or the Notes) and
costs and expenses in defending against the same.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee and the Securityholders from and against
any loss, liability or expense incurred by reason of such Seller's willful
misfeasance, bad faith or negligence (other than errors in judgment) in the
performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement.
The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against all costs, expenses,
losses, claims, damages and liabilities arising out of or incurred in connection
with the acceptance or performance of the trusts and duties herein and, in the
case of the Owner Trustee, in the Trust Agreement and, in the case of the
Indenture Trustee, in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability, in the case of (i) the Owner Trustee,
shall be due to the willful misfeasance, bad faith or negligence of the Owner
Trustee or shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in Section 7.03 of the Trust Agreement,
or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence of the Indenture Trustee.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are
59
made thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to such Seller, without interest.
Section 6.03. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller; Certain Limitations.
(a) The Seller shall not consolidate with nor merge into any other
corporation or convey, transfer or lease substantially all of its assets as an
entirety to any Person unless the corporation formed by such consolidation or
into which such Seller has merged or the Person which acquires by conveyance,
transfer or lease substantially all the assets of the Seller as an entirety, can
lawfully perform the obligations of the Seller hereunder and executes and
delivers to the Insurer, the Owner Trustee and the Indenture Trustee an
agreement in form and substance reasonably satisfactory to the Owner Trustee,
the Indenture Trustee and the Insurer, which contains an assumption by such
successor entity of the due and punctual performance and observance of each
covenant and condition to be performed or observed by the Seller under this
Agreement. The Seller shall provide notice of any merger, consolidation or
succession pursuant to this Section to each Rating Agency and will deliver to
the Insurer, the Owner Trustee and the Indenture Trustee a letter from each
Rating Agency to the effect that such merger, consolidation or succession will
not result in a qualification, downgrading or withdrawal of its then-current
ratings of each Class of Notes. The Seller, Westcorp and WFS each shall maintain
separate corporate offices.
(b)
(i) Subject to clause (b)(ii) below, the purpose of the
Seller shall be to engage in any lawful activity for which a
corporation may be organized under the Nevada Revised Statutes.
(ii) Notwithstanding clause (b)(i) above, the actual
business activities of the Seller shall be limited to those activities
incident to and necessary or convenient to accomplish the following
purposes: (A) to acquire, own, hold, sell, transfer, assign, pledge,
finance, refinance and otherwise deal with, retail installment sales
contracts and installment loans secured by automobiles and light duty
trucks (the "Vehicle Receivables"); (B) to authorize, issue, sell and
deliver one or more series of obligations, consisting of one or more
classes of notes, certificates or other securities (the "Offered
Securities") that are collateralized by or evidence an interest in
Vehicle Receivables and are rated in an investment grade category by at
least one nationally recognized statistical rating agency; and (C) to
negotiate, authorize, execute, deliver and assume the obligations of
any agreement relating to the activities set forth in clauses (A) and
(B) above, including any sale and servicing agreement, indenture,
reimbursement agreement, credit support agreement, receivables purchase
agreement or underwriting agreement or similar agreements or to engage
in any lawful activity which is incidental to the activities
contemplated by any such agreement. So long as any outstanding debt of
the Seller or Offered Securities are rated by any nationally recognized
statistical rating organization, the Seller shall not issue notes or
otherwise incur debt unless (1) the Seller has made a written request
to the related nationally recognized statistical rating organization to
issue notes or incur borrowings which notes or borrowings are rated by
the related nationally
60
recognized statistical rating organization the same as or higher than
the rating afforded such debt or securities or (2) such notes or
borrowings (a) are fully subordinated (and which shall provide for
payment only after payment in respect of all outstanding rated debt or
Offered Securities) or are nonrecourse against any assets of the Seller
other than the assets pledged to secure such notes or borrowings, (b)
do not constitute a claim against the Seller in the event such assets
are insufficient to pay such notes or borrowings and (c) where such
notes or borrowings are secured by the rated debt or Offered
Securities, are fully subordinated (and which shall provide for payment
only after payment in respect of all outstanding rated debt or Offered
Securities) to such rated debt or Offered Securities.
(c) Notwithstanding any other provision of this Section and any
provision of law, the Seller shall not do any of the following:
(i) engage in any business or activity other than as set
forth in clause (b) above;
(ii) without the affirmative vote of a majority of the
members of the board of directors of the Seller (which must include the
affirmative vote of at least two duly appointed Independent directors)
(A) dissolve or liquidate, in whole or in part, or institute
proceedings to be adjudicated bankrupt or insolvent, (B) consent to the
institution of bankruptcy or insolvency proceedings against it, (C)
file a petition seeking or consent to reorganization or relief under
any applicable federal or state law relating to bankruptcy, (D) consent
to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the corporation or a
substantial part of its property, (E) make a general assignment for the
benefit of creditors, (F) admit in writing its inability to pay its
debts generally as they become due or (G) take any corporate action in
furtherance of the actions set forth in clauses (A) through (F) above;
provided, however, that no director may be required by any shareholder
of the Seller to consent to the institution of bankruptcy or insolvency
proceedings against the Seller so long as it is solvent; or
(iii) merge or consolidate with any other corporation,
company or entity or sell all or substantially all of its assets or
acquire all or substantially all of the assets or capital stock or
other ownership interest of any other corporation, company or entity
(except for the acquisition of Vehicle Receivables and the sale of
Vehicle Receivables to one or more trusts in accordance with the terms
of clause (b)(ii) above, which shall not be otherwise restricted by
Section 6.03(c)).
Section 6.04. Limitation on Liability of Seller and Others. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on any document of any kind, prima facie properly executed and submitted
by any Person respecting any matters arising hereunder. The Seller and any
director or officer or employee or agent of the Seller shall be reimbursed by
the Owner Trustee or the Indenture Trustee, as the case may be, for any
contractual damages, liability or expense incurred by reason of the Owner
Trustee's or the Indenture Trustee's willful misfeasance, bad faith or
negligence (except for errors in judgment) in the performance of their
respective duties hereunder, or by reason of reckless disregard of their
respective obligations and duties hereunder. The Seller shall not be under any
obligation to
61
appear in, prosecute or defend any legal action that shall not be incidental to
its obligations under this Agreement, and that in its opinion may involve it in
any expense or liability. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement.
Section 6.05. Seller Not to Resign. Subject to the provisions of
Section 6.03, the Seller shall not resign from the obligations and duties hereby
imposed on it as Seller hereunder.
Section 6.06. Seller May Own Securities. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Securities with the same rights as it would have if it were not such Seller
or an Affiliate thereof, except as expressly provided herein or in any Basic
Document. Securities so owned by or pledged to the Seller or an Affiliate
thereof shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority or distinction as among all of the
Notes.
62
ARTICLE SEVEN
THE MASTER SERVICER AND WESTCORP
Section 7.01. Liability of Master Servicer and Westcorp; Indemnities.
Subject to Section 8.02, the Master Servicer and Westcorp shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Master Servicer and Westcorp under this Agreement. Such
obligations shall include the following:
(a) The Master Servicer shall indemnify, defend and hold
harmless the Issuer, the Owner Trustee, the Indenture Trustee, the
Securityholders and the Insurer from and against any and all costs,
expenses, losses, damages, claims and liabilities, arising out of or
resulting from the use, ownership or operation by the Master Servicer,
any Subservicer or any of their respective Affiliates of a Financed
Vehicle.
(b) Westcorp shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee, the Indenture Trustee and the Insurer
from and against any taxes that may at any time be asserted against the
Owner Trustee, the Indenture Trustee or the Issuer with respect to the
transactions contemplated herein, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale of the Contracts to the
Issuer or the issuance and original sale of the Securities, or asserted
with respect to ownership of the Contracts, or federal or other income
taxes arising out of distributions on the Securities) and costs and
expenses in defending against the same.
(c) The Master Servicer shall indemnify, defend and hold
harmless the Issuer, the Owner Trustee, the Indenture Trustee, the
Insurer and the Securityholders from and against any and all costs,
expenses, losses, claims, damages and liabilities to the extent that
such cost, expense, loss, claim, damage or liability arose out of, or
was imposed upon any such Person through, the negligence, willful
misfeasance or bad faith of the Master Servicer in the performance of
its duties under this Agreement or by reason of reckless disregard of
its obligations and duties under this Agreement.
(d) Westcorp shall indemnify, defend and hold harmless
the Owner Trustee, the Indenture Trustee and the Insurer from and
against any and all costs, expenses, losses, claims, damages and
liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties herein or the Trust
Agreement contained, except to the extent that such cost, expense,
loss, claim, damage or liability (i) shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of
the Owner Trustee or the Indenture Trustee, as the case may be; (ii)
relates to any tax other than the taxes with respect to which any of
the Seller, Westcorp or Master Servicer shall be required to indemnify
the Owner Trustee and the Indenture Trustee; (iii) shall arise from the
Owner Trustee's or the Indenture Trustee's breach of any of their
respective representations or warranties set forth herein, in the Trust
Agreement or in the Indenture; or (iv) shall be one as to which the
Seller is required to indemnify the Owner Trustee or the Indenture
Trustee, as the case may be.
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(e) Westcorp shall pay the Owner Trustee compensation,
reimbursement or other payments owed to it by the Seller pursuant to
Sections 8.01 and 8.02 of the Trust Agreement if the Seller fails to
remit such compensation, reimbursement or payment in a timely manner.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement of the Trust Agreement and shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Master Servicer shall have made any indemnity payments pursuant to this Section
and the Person to or on behalf of whom such payments are made thereafter
collects any of such amounts from others, such Person shall promptly repay such
amounts to the Master Servicer, without interest.
Section 7.02. Corporate Existence; Status as Westcorp and Master
Servicer; Merger. Each of Westcorp and the Master Servicer shall not consolidate
with or merge into any other corporation or convey, transfer or lease all or
substantially all of its assets as an entirety to any Person unless the
corporation formed by such consolidation or into which Westcorp or the Master
Servicer, as applicable, has merged or the Person which acquires by conveyance,
transfer or lease substantially all the assets of Westcorp or the Master
Servicer, as applicable, as an entirety can lawfully perform the obligations of
Westcorp or the Master Servicer, as applicable, hereunder and executes and
delivers to the Indenture Trustee and the Owner Trustee an agreement in form and
substance reasonably satisfactory to the Indenture Trustee, the Owner Trustee
and the Insurer, which contains an assumption by such successor entity of the
due and punctual performance or observance of each covenant and condition to be
performed or observed by Westcorp or the Master Servicer, as applicable, under
this Agreement. Notice shall be sent to each Rating Agency by Westcorp or the
Master Servicer, as applicable, of any consolidation, merger or succession
pursuant to this Section.
Section 7.03. Performance of Obligations.
(a) Each of Westcorp and the Master Servicer shall punctually
perform and observe all of its obligations and agreements contained in this
Agreement.
(b) Neither Westcorp nor the Master Servicer shall take any
action, or permit any action to be taken by others, which would excuse any
Person from any of its covenants or obligations under any of the Contract
Documents or under any other instrument included in the Trust Estate, or which
would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the Contract
Documents or any such instrument, except as expressly provided herein and
therein.
Section 7.04. Not to Resign; Assignment.
(a) Each of Westcorp and the Master Servicer shall not resign from
the duties and obligations hereby imposed on it except upon determination by its
board of directors that by reason of change in applicable legal requirements the
continued performance by Westcorp or the Master Servicer, respectively, of its
duties hereunder would cause it to be in violation of such legal requirements in
a manner which would result in a material adverse effect on Westcorp or
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the Master Servicer, respectively, or its financial condition, said
determination to be evidenced by a resolution of its board of directors to such
effect accompanied by an Opinion of Counsel, satisfactory to the Owner Trustee
and the Indenture Trustee, to such effect. No such resignation of the Master
Servicer shall become effective unless and until (i) a new servicer acceptable
to the Owner Trustee, the Indenture Trustee and the Insurer is willing to
service the Contracts and enters into a servicing agreement with the Issuer and
the Insurer in form and substance substantially similar to this Agreement and
satisfactory to the Owner Trustee, the Indenture Trustee and the Insurer and
(ii) the Rating Agency Condition has been satisfied. No such resignation shall
affect the obligation of the Master Servicer to repurchase Contracts pursuant to
Section 4.07. No such resignation of Westcorp as indemnifier shall become
effective unless and until the Rating Agency Condition has been satisfied.
(b) Except as specifically permitted in this Agreement, neither
Westcorp nor the Master Servicer, as applicable, may assign this Agreement or
any of its rights, powers, duties or obligations hereunder; provided that each
of Westcorp and the Master Servicer may assign this Agreement in connection with
a consolidation, merger, conveyance, transfer or lease made in compliance with
Section 7.02.
(c) Except as provided in Sections 7.04(a) and (b), the duties and
obligations of each of Westcorp and the Master Servicer under this Agreement
shall continue until this Agreement shall have been terminated as provided in
Section 9.01 or the Issuer shall have been terminated as provided by the terms
of the Trust Agreement, and shall survive the exercise by the Owner Trustee, the
Indenture Trustee or the Insurer of any right or remedy under this Agreement, or
the enforcement by the Owner Trustee, the Indenture Trustee, any
Certificateholder or Noteholder, or the Insurer of any provision of the Notes,
the Certificates, the Insurance Agreement or this Agreement.
(d) The resignation of either Westcorp or the Master Servicer in
accordance with this Section shall not affect the rights of the Seller
hereunder. If the Master Servicer resigns pursuant to this Section, its
appointment as custodian can be terminated pursuant to Section 3.07.
Section 7.05. Limitation on Liability of Master Servicer, Westcorp and
Others.
(a) Neither Westcorp nor the Master Servicer, as applicable, nor
any of the directors, officers, employees or agents of Westcorp or the Master
Servicer, as applicable, shall be under any liability to the Issuer, the
Noteholders or the Certificateholders, except as provided under this Agreement,
for any action taken or for refraining from the taking of any action pursuant to
this Agreement or for errors in judgment; provided, however, that this provision
shall not protect Westcorp or the Master Servicer, as applicable, or any such
person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence (except errors in judgment) in the
performance of duties or by reason of reckless disregard of obligations and
duties under this Agreement. Each of Westcorp and the Master Servicer and any
director, officer, employee or agent of Westcorp or the Master Servicer, as
applicable, may rely in good faith on any document of any kind prima facie
properly executed and submitted by any person respecting any matters arising
under this Agreement.
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(b) Each of Westcorp and the Master Servicer, as applicable, and
any director or officer or employee or agent of Westcorp or the Master Servicer,
as applicable, shall be reimbursed by the Owner Trustee or the Indenture
Trustee, as the case may be, for any contractual damages, liability or expense
incurred by reason of such Trustee's willful misfeasance, bad faith or
negligence (except errors in judgment) in the performance of such Trustee's
duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
Except as provided in this Agreement, neither Westcorp nor the Master
Servicer shall be under any obligation to appear in, prosecute or defend any
legal action that shall not be incidental to Westcorp's duties hereunder or the
Master Servicer's duties to service the Contracts in accordance with this
Agreement, and that in Westcorp's or the Master Servicer's, as applicable,
opinion may involve it in any expense or liability; provided, however, that each
of Westcorp and the Master Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the other Basic
Documents and the rights and duties of the parties to this Agreement and the
other Basic Documents and the interests of the Securityholders under the Basic
Documents.
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ARTICLE EIGHT
DEFAULT
Section 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) a claim being made under the Note Policy;
(b) any failure by the Master Servicer or the Issuer, to
deposit or credit, or to deliver to the Indenture Trustee for deposit,
in any of the Trust Accounts any amount required hereunder to be as
deposited, credited or delivered or to direct the Indenture Trustee to
make any required distributions therefrom, that shall continue
unremedied for a period of three Business Days after written notice of
such failure is received from the Owner Trustee, the Indenture Trustee
or the Insurer or after discovery of such failure by an officer of the
Master Servicer;
(c) any failure by the Master Servicer to deliver to the
Insurer, the Indenture Trustee or the Owner Trustee a report in
accordance with Section 4.09 or Section 4.10 by the fourth Business Day
prior to the Distribution Date with respect to which such report is
due, or the Master Servicer shall have defaulted in the due observance
of any provision of Section 7.02 (other than failure to enter into an
assumption agreement under Section 7.02, which is a Servicer Default
only if such failure continues for ten Business Days);
(d) failure on the part of the Seller, the Issuer or the
Master Servicer duly to observe or to perform in any material respect
any other covenants or agreements of the Master Servicer or the Seller
set forth in this Agreement or any other Basic Document, which failure
shall (i) materially and adversely affect the rights of the Insurer,
the Owner Trustee, the Indenture Trustee, the Certificateholders or
Noteholders and (ii) continue unremedied for a period of 30 days after
the date on which written notice of such failure, requiring the same to
be remedied, shall have been given (A) to the Master Servicer or the
Seller (as the case may be) by the Insurer, the Owner Trustee or the
Indenture Trustee or (B) to the Master Servicer or the Seller (as the
case may be), and to the Owner Trustee and the Indenture Trustee by the
Holders of Notes evidencing not less than 25% of the Outstanding Amount
of the Notes, voting together as a single Class, or, if the Notes have
been paid in full, by Certificateholders evidencing not less than 25%
of the aggregate Certificate Percentage Interest, or so long as no
default under the Note Policy has occurred and is continuing and no
insolvency of the Insurer has occurred, by the Insurer;
(e) the occurrence of an Insolvency Event with respect to
the Seller, the Issuer or the Master Servicer; or
(f) any representation, warranty or statement of the
Master Servicer, the Issuer or the Seller made in this Agreement or any
certificate, report or other writing delivered by the Master Servicer
prepared based on information provided by the Master Servicer pursuant
hereto shall prove to be incorrect in any material respect as of the
time
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when the same shall have been made (excluding, however, any
representation or warranty to which Section 3.01 or 4.06 shall be
applicable so long as the Master Servicer or the Seller shall be in
compliance with Section 3.02 or 4.07, as the case may be), and the
incorrectness of such representation, warranty or statement has a
material adverse effect on the Noteholders or the Certificateholders
and, within 30 days after written notice thereof shall have been given
to the Master Servicer or the Seller by the Indenture Trustee or the
Owner Trustee or by the Holders of Notes evidencing not less than 25%
of the Outstanding Amount of the Notes, voting together as a single
Class, or Certificateholders evidencing not less than 25% of the
aggregate Certificate Percentage Interest or, so long as no default has
occurred under the Note Policy and is continuing and no Insurer
Insolvency has occurred, by the Insurer, the circumstance or condition
in respect of which such representation, warranty or statement was
incorrect shall not have been eliminated or otherwise cured;
then, and in each and every case, so long as such Servicer Default shall not
have been remedied and subject to the limitations set forth in Section 6.07 of
the Insurance Agreement, either the Indenture Trustee, the Insurer, the Holders
of Notes evidencing not less than a majority of the Outstanding Amount of the
Notes, voting together as a single Class (or, if the Notes have been paid in
full and the Indenture has been discharged in accordance with its terms, by the
Owner Trustee or by Certificateholders evidencing not less than a majority of
the aggregate Certificate Percentage Interest), by notice then given in writing
to the Master Servicer (and to the Insurer, the Indenture Trustee and the Owner
Trustee if given by the Noteholders or the Certificateholders) may terminate all
the rights and obligations of the Master Servicer under this Agreement. Upon
such termination, termination of the Master Servicer as custodian can be made
pursuant to Section 3.07. On or after the receipt by the Master Servicer of such
written notice, all authority and power of the Master Servicer under this
Agreement, whether with respect to the Notes, the Certificates, the Contracts or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Master Servicer as may be appointed under Section
8.02; and, without limitation, the Indenture Trustee and the Owner Trustee are
hereby authorized and empowered to execute and deliver, for the benefit of the
predecessor Master Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Contracts
and related documents, or otherwise. The Master Servicer shall cooperate with
the Indenture Trustee and the Owner Trustee in effecting the termination of the
responsibilities and rights of the predecessor Master Servicer under this
Agreement, including the transfer to the Indenture Trustee for administration by
it of all cash amounts that shall at the time be held by the predecessor Master
Servicer for deposit, or shall thereafter be received by it with respect to any
Contract.
Section 8.02. Indenture Trustee to Act; Appointment of Successor. Upon
the Master Servicer's receipt of notice of termination pursuant to Section 8.01
or resignation pursuant to Section 7.04, the Indenture Trustee shall be the
successor to the Master Servicer in its capacity as servicer under this
Agreement, and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions of this Agreement, except that the Indenture Trustee shall not be
obligated to purchase Contracts pursuant to Section 4.07 unless the obligation
to repurchase arose after the date of the notice of
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termination given to the Master Servicer pursuant to Section 8.01 or be subject
to any obligation of the Master Servicer to indemnify or hold harmless any
Person as set forth in this Agreement arising from the acts or omissions of the
previous Master Servicer. As compensation therefor, the Indenture Trustee shall
be entitled to such compensation (whether payable out of the Collection Account
or otherwise) as the Master Servicer would have been entitled to under this
Agreement if no such notice of termination shall have been given. If, however, a
bankruptcy trustee or similar official has been appointed for the Master
Servicer, and no Servicer Default other than such appointment has occurred, such
trustee or official may have the power to prevent the Indenture Trustee, Insurer
or the Noteholders from effecting a transfer of servicing. Notwithstanding the
above, in the event of a termination of the Master Servicer pursuant to Section
8.01, the Indenture Trustee may, if it shall be unwilling to act, or shall, if
it shall be legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, any established financial institution, having a net
worth of not less than $50,000,000 and whose regular business shall include the
servicing of motor vehicle retail installment sales contracts, as the successor
to the Master Servicer under this Agreement. Pending appointment of any such
successor Master Servicer, the Indenture Trustee shall act in such capacity as
provided above. In connection with such appointment, the Indenture Trustee may
make such arrangements for the compensation of such successor out of payments on
Contracts it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Master Servicer under this
Agreement without the consent of the Insurer. The Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.
Section 8.03. Repayment of Advances. If the identity of the Master
Servicer shall change, the predecessor Master Servicer shall be entitled to
receive reimbursement for outstanding Advances pursuant to Section 5.04 with
respect to all Advances made by the predecessor Master Servicer.
Section 8.04. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to, the Master Servicer
pursuant to this Article, the Owner Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register, and the Indenture Trustee shall give prompt written notice
thereof to Noteholders at their respective addresses appearing in the Note
Register and to each Rating Agency.
Section 8.05. Waiver of Past Defaults. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes, voting together
as a single Class, or, if all the Notes have been paid in full and the Indenture
has been discharged in accordance with its terms, Certificateholders evidencing
not less than a majority of the aggregate Certificate Percentage Interest (in
the case of any default which does not adversely affect the Indenture Trustee or
the Noteholders) may, on behalf of all Securityholders, with the consent of the
Insurer, waive in writing any default by the Master Servicer in the performance
of its obligations hereunder and its consequences, except a default in making
any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement or in respect of a covenant or provisions hereof
which cannot be modified without the consent of each Securityholder. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Default arising
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therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereto.
Section 8.06. Insurer Direction of Insolvency Proceedings. Upon receipt
of actual knowledge thereof by a Responsible Officer, the Indenture Trustee
shall promptly notify the Insurer of (i) the commencement of any of the events
or proceedings (individually, an "Insolvency Proceeding") described in the
definition of the term "Insolvency Event" or any such event or proceeding
applicable to an Obligor under a Contract and (ii) the making of any claim in
connection with any Insolvency Proceeding seeking the avoidance as a
preferential transfer (a "Preference Claim") of any payment of principal of, or
interest on, a Contract or any Notes or Certificates. Each Noteholder and Note
Owner, by its purchase of Notes or a beneficial interest therein, each
Certificateholder, by its purchase of Certificates or a beneficial interest
therein, the Owner Trustee and the Indenture Trustee hereby agree that, so long
as neither a default under the Note Policy nor an Insurer Insolvency has
occurred and is continuing, the Insurer may at any time during the continuation
of an Insolvency Proceeding direct all matters relating to such Insolvency
Proceeding, including, without limitation, (i) all matters relating to any
Preference Claim, (ii) the direction of any appeal of any order relating to any
Preference Claim and (iii) the posting of any surety, supersedes or performance
bond pending any such appeal. The Insurer shall be subrogated to the rights of
the Indenture Trustee, the Owner Trustee and each Securityholder in the conduct
of any Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Insolvency Proceeding. In addition, for so long as
the Insurer guarantees amounts owing under the RIC and has not defaulted in the
making of any payment required to be made by it pursuant to such guaranty, the
Insurer shall have the right to initiate and control a proceeding against the
obligor under the RIC but only to the extent such proceeding relates to the
amounts so guaranteed and no settlement of any other proceeding or claim that
would adversely affect the Insurer's rights to recover such amounts shall be
effected without the prior written consent of the Insurer.
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ARTICLE NINE
TERMINATION
Section 9.01. Optional Purchase of All Contracts.
(a) On any Distribution Date following the last day of a Due
Period as of which the Aggregate Principal Balance is less than or equal to
$165,000,000, the Seller shall have the option to purchase the remaining
Contracts from the Issuer. Notice of the exercise of such option shall be given
by the Seller to the Owner Trustee, the Indenture Trustee and the Insurer not
later than the 25th day of the month immediately preceding the month of the
related Distribution Date. To exercise such option, the Seller shall pay to the
Indenture Trustee for the benefit of the Securityholders, by deposit in the
Collection Account on the Business Day immediately preceding the related
Distribution Date, the Aggregate Repurchase Amount, and shall succeed to all
interests in and to the Issuer. Such purchase shall be deemed to have occurred
on the last day of such Due Period. In addition, if the Master Servicer or the
Seller has outstanding senior debt and such debt is not rated "investment grade"
by ▇▇▇▇▇'▇ at the time of exercising the option pursuant to this Section, then
the Master Servicer or such Seller shall deliver to the Owner Trustee, the
Indenture Trustee and ▇▇▇▇▇'▇, an Opinion of Counsel to the effect that such
optional purchase is not a fraudulent conveyance.
(b) Upon any sale of the assets of the Issuer pursuant to Section
5.02(b) or Section 5.04 of the Indenture, the Master Servicer shall instruct the
Indenture Trustee to deposit the proceeds from such sale after all payments and
reserves therefrom have been made (the "Insolvency Proceeds") in the Collection
Account. On the Distribution Date on which the Insolvency Proceeds are deposited
in the Collection Account (or, if such proceeds are not so deposited on a
Distribution Date, on the Distribution Date immediately following such deposit),
the Master Servicer shall instruct the Indenture Trustee to distribute funds on
deposit in the Collection account (including such Insolvency Proceeds) and any
funds on deposit in the Spread Account in accordance with Section 5.06(a) of the
Indenture.
(c) As described in Article Nine of the Trust Agreement, notice of
any termination of the Issuer shall be given by the Master Servicer to the Owner
Trustee, the Insurer, the Swap Counterparty and the Indenture Trustee as soon as
practicable after the Master Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and
the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
(e) On a Distribution Date on which an optional purchase pursuant
to Section 9.01(a) of all remaining Contracts of the Issuer occur, the Master
Servicer shall instruct the Indenture Trustee to make the following
distributions of the Aggregate Repurchase Amount and any Net Collections on
deposit in the Collection Account in the following priorities:
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(i) to the Master Servicer, any accrued and unpaid
Servicing Fees with respect to one or more prior Due Periods;
(ii) to the Swap Counterparty, any accrued and unpaid Net
Swap Payments with respect to one or more prior Due Periods;
(iii) to the Owner Trustee and Indenture Trustee, any
accrued and unpaid fees and expenses;
(iv) to the Note Distribution Account, the Redemption
Price for full payment of outstanding principal and accrued interest on
the Notes;
(v) to the Swap Counterparty, any Swap Termination
Payment owed to it by the Trust and not paid to it pursuant to clause
(ii) above;
(vi) to the Insurer, to the extent of any Unreimbursed
Insurer Amounts;
(vii) to WFSRC2 until WFSRC2 has received full repayment of
the Spread Account Initial Deposit; and
(viii) to the Certificate Distribution Account, for
distribution to Certificateholders in accordance with Section 5.02 of
the Trust Agreement as determined by the Master Servicer.
Section 9.02. Transfer to the Insurer. If (i) there is one or more
Outstanding Contracts at the end of the Due Period ending immediately prior to
the Class A-4 Final Scheduled Distribution Date and (ii) an amount sufficient to
pay the Note Distributable Amount on the Class A-4 Final Scheduled Distribution
Date has been deposited with the Indenture Trustee by the Insurer for the
benefit of the Class A-4 Noteholders then on the Class A-4 Final Scheduled
Distribution Date the Class A-4 Notes shall be deemed to be transferred by the
Class A-4 Noteholders, respectively, to the Insurer or its designee as purchaser
thereof at the opening of business on the Class A-4 Final Scheduled Distribution
Date and the Owner Trustee, on behalf of the Trust, shall execute, and the
Indenture Trustee shall authenticate and deliver to the Insurer or its designee,
in the name of the Insurer or its designee, as the case may be, a new Class A-4
Note evidencing the entire respective Class Balance. Such new Class A-4 Note
shall have the same terms as the Class A-4 Notes deemed transferred by the Class
A-4 Noteholders. No service charge shall be made for the issuance of such Class
A-4 Note to the Insurer or its designee, but the Owner Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith. Such transfer shall not diminish or restrict
the Insurer's rights hereunder or under the Insurance Agreement.
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ARTICLE TEN
MISCELLANEOUS
Section 10.01. Amendment.
(a) This Agreement may be amended by the Seller, the Master
Servicer and the Owner Trustee on behalf of the Issuer, collectively, without
the consent of any Securityholders, (i) to cure any ambiguity, to correct or
supplement any provisions in this Agreement which are inconsistent with the
provisions herein, or to add any other provisions with respect to matters or
questions arising under this Agreement that shall not be inconsistent with the
provisions of this Agreement, (ii) to add or provide any credit enhancement for
any Class of Notes and (iii) to change any provision applicable for determining
the Specified Spread Account Balance or the manner in which the Spread Account
is funded (in each case with the approval of the Insurer); provided, however,
that any such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Securityholder and provided,
further, that in connection with any amendment pursuant to clause (ii) and (iii)
above, the Master Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and the Insurer a letter from Standard & Poor's to the effect that such
amendment will not cause its then-current rating on any Class of Notes to be
qualified, reduced or withdrawn, without giving any consideration to the effect
of the guaranty under the Note Policy of payments owing to Noteholders, and the
Master Servicer shall provide ▇▇▇▇▇'▇ notice of such amendment; and provided,
further, that this Agreement may not be amended to alter the rights or
obligations of the Indenture Trustee without the prior consent of the Indenture
Trustee.
(b) This Agreement may also be amended from time to time by the
Seller, the Master Servicer and the Owner Trustee on behalf of the Issuer, with
the consent of the Holders of Notes holding not less than 66 2/3% of the
Outstanding Amount of the Notes and the consent of Certificateholders evidencing
not less than 66 2/3% of the Certificate Percentage Interest, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that no such amendment
shall increase or reduce in any manner the amount of, or accelerate or delay the
timing of (i)(A) collections of payments on the Contracts or distributions that
shall be required to be made on any Note or Certificate or any Interest Rate,
(B) except as otherwise provided in Section 10.01(a), the Specified Spread
Account Balance, or the manner in which the Spread Account is funded or (ii)
reduce the aforesaid percentage of the Outstanding Amount of the Notes, the
Holders of which are required to consent to any such amendment, without the
consent of the Insurer, the Swap Counterparty and the Holders of all Notes and
Certificates of the relevant Class then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent, as prepared by the Seller, the Master Servicer and the
Owner Trustee on behalf of the Issuer, at the expense of the such party,
together with a copy thereof, to each Rating Agency and the Insurer.
(d) Promptly after the execution of any such amendment or consent,
the Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
the written notification of the
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substance of the amendment or consent described in Section 10.01(c) above, at
the expense of the Seller, the Master Servicer or the Owner Trustee on behalf of
the Issuer, as the case may be, to each Certificateholder and Noteholder,
respectively. It shall not be necessary for the consent of Noteholders and
Certificateholders pursuant to Section 10.01(b) to approve the particular form
of any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization by Noteholders and Certificateholders of the
execution thereof shall be subject to such reasonable requirements as the Owner
Trustee or the Indenture Trustee may prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 10.02. Protection of Title to Trust.
(a) The Master Servicer shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain and protect the perfection and priority of the interest of the Issuer,
the Securityholders, the Indenture Trustee, the Owner Trustee and the Insurer in
the Contracts and in the proceeds thereof. The Master Servicer shall deliver (or
cause to be delivered) to the Owner Trustee and the Indenture Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither WFS, the Seller nor the Master Servicer shall change
its name, identity or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed in accordance
with Section 10.02(a) seriously misleading within the meaning of Section 9-507
of the UCC, unless it shall have given the Insurer, the Owner Trustee and the
Indenture Trustee at least 60 days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) WFS, the Seller and the Master Servicer shall give the
Insurer, the Owner Trustee and the Indenture Trustee at least 60 days' prior
written notice of any relocation of the principal executive office of WFS or the
Seller and the Master Servicer or the Subservicers (in the case of notice
provided by the Master Servicer) or the reincorporation of any of them in a
different jurisdiction if, as a result of such relocation or reincorporation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall promptly file any such amendment or new financing
statement. The Master Servicer shall at all times maintain each office from
which it shall service Contracts, and its principal executive office, within the
United States.
(d) The Master Servicer shall maintain or cause to be maintained
accounts and records as to each Contract accurately and in sufficient detail to
permit (i) the reader thereof to know at any time the status of such Contract,
including payments and recoveries made and
74
payments owing (and the nature of each) and (ii) reconciliation between payments
or recoveries on (or with respect to) each Contract and the amounts from time to
time deposited in or credited to the Collection Account in respect of such
Contract.
(e) The Master Servicer shall maintain or cause to be maintained
its computer systems and those of Subservicers so that, from and after the time
of sale under this Agreement of the Contracts, the Master Servicer's and
Subservicer's master computer records (including any backup archives) that shall
refer to a Contract indicate clearly the interest of the Issuer and the
Indenture Trustee in such Contract and that such Contract is owned by the Issuer
and has been pledged to the Indenture Trustee. Indication of the Issuer's
ownership of and the Indenture Trustee's interest in a Contract shall be deleted
from or modified on the Master Servicer's computer systems when, and only when,
the related Contract shall have been paid in full or repurchased or shall have
become a Liquidated Contract.
(f) If at any time the Seller, the Master Servicer or a
Subservicer shall propose to sell, grant a security interest in, or otherwise
transfer any interest in automotive retail installment sales contracts to any
prospective purchaser, lender or other transferee, the Master Servicer shall
give or cause to be given to such prospective purchaser, lender or other
transferee computer tapes, records or print-outs (including any restored from
back-up archives) that, if they shall refer in any manner whatsoever to any
Contract, shall indicate clearly that such Contract has been sold and is owned
by the Issuer and has been pledged to the Indenture Trustee.
(g) The Master Servicer shall permit the Owner Trustee, the
Indenture Trustee and the Insurer and its agents, at any time during normal
business hours, to inspect, audit and make copies of and abstracts from the
Master Servicer's records regarding any Contract.
(h) Upon request, the Master Servicer shall furnish to the Owner
Trustee, the Indenture Trustee and the Insurer, within five Business Days, a
list of all Contracts then held as part of the Trust Estate, together with a
reconciliation of such list to the Schedule of Contracts and to each of the
Distribution Date Statements furnished before such request indicating removal of
Contracts from the Issuer.
(i) The Master Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, each Rating Agency and the Insurer:
(i) promptly after the execution and delivery of this
Agreement and of each amendment hereto, an Opinion of Counsel stating
that, in the opinion of such counsel, the Indenture Trustee holds a
perfected security interest in the Contracts, that the Issuer holds
title to the Contracts subject to the security interest of the
Indenture Trustee and the lien of the Insurer pursuant to the Insurance
Agreement, and that the Insurer holds a lien on the Contracts under the
Insurance Agreement, subject to applicable subordination; and
(ii) within 90 days after the beginning of each calendar
year beginning with the first calendar year beginning more than three
months after the Cut-Off Date, an Opinion of Counsel, dated as of a
date during such 90-day period, either (A) stating that, in the opinion
of such counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and
protect the interest of the
75
Owner Trustee and the Indenture Trustee in the Contracts, and reciting
the details of such filings or referring to prior Opinions of Counsel
in which such details are given or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect
such interest.
Section 10.03. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of California and the obligations, rights,
and remedies of the parties under the Agreement shall be determined in
accordance with such laws, except that the duties of the Owner Trustee and the
Indenture Trustee shall be governed by the laws of the State of New York.
Section 10.04. Notices. All demands, notices and communications under
this Agreement shall be in writing personally delivered or mailed by certified
mail, return receipt requested, and shall be deemed to have been duly given upon
receipt in the case of:
(a) if to the Seller, to:
WFS Receivables Corporation 2
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
(b) if to the Master Servicer, to:
WFS Financial Inc
▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
(c) if to Westcorp, to:
Westcorp
▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
(d) if to the Issuer or Owner Trustee, to:
WFS Financial 2003-3 Owner Trust
Chase Manhattan Bank USA, National Association
c/o ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
500 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Rd., OPS4 /▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Institutional Trust Services
76
(e) if to the Indenture Trustee, to:
Deutsche Bank Trust Company Americas
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust & Agency Services - Structured
Finance Services
(f) if to the Insurer, to:
Financial Security Assurance Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Transaction Oversight Department, with a copy to
the Senior Vice President - Transaction Oversight
(g) if to Moody's, to:
▇▇▇▇▇'▇ Investors Service, Inc.
ABS Monitoring Department
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(h) if to Standard & Poor's, to:
Standard & Poor's
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention of Asset Backed Surveillance Department
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above. Any notice required or permitted
to be to be mailed to a Securityholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Note Register or
the Certificate Register, as the case may be. Any notice so mailed within the
time prescribed herein shall be conclusively presumed to have been duly given,
whether or not such Securityholder shall receive such notice.
Section 10.05. Severability of Provisions. If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
Certificates or the rights of the Holders thereof.
Section 10.06. Assignment. Notwithstanding anything to the contrary
contained herein, as provided in Sections 6.03, 7.02 and 8.04, this Agreement
may not be assigned by the Seller or
77
the Master Servicer without the prior written consent of Holders of Notes of
each Class evidencing not less than 66 2/3% of the Outstanding Amount of Notes
of such Class and Certificateholders evidencing not less than 66 2/3% of the
aggregate Certificate Percentage Interest.
Section 10.07. Third Party Beneficiaries. Except as otherwise
specifically provided herein, the parties hereto hereby manifest their intent
that no third party other than the Insurer and the Swap Counterparty shall be
deemed a third party beneficiary of this Agreement, and specifically that the
Obligors are not third party beneficiaries of this Agreement.
Section 10.08. Insurer Default or Insolvency. If a default under the
Note Policy has occurred and is continuing or an Insurer Insolvency has
occurred, any provision giving the Insurer the right to direct, appoint or
consent to, approve of, or take any action under this Agreement, shall be
inoperative during the period of such default or the period from and after such
Insurer Insolvency and such consent or approval shall be deemed to have been
given for the purpose of such provisions.
Section 10.09. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
Section 10.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 10.11. Assignment by Issuer. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Noteholders of all right, title and interest of the Issuer in, to and under
the Contracts and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Indenture Trustee.
Section 10.12. Limitation of Liability of Owner Trustee.
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by Chase Manhattan Bank USA, National Association not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Chase Manhattan Bank USA, National Association in its
individual capacity or any beneficial owner of the Issuer have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles Six, Seven and Eight of the Trust Agreement.
Section 10.13. Effect of Policy Expiration Date. Notwithstanding
anything to the contrary set forth herein, all references to any right of the
Insurer to direct, appoint, consent to, accept, approve of, take or omit to take
any action under this Sale and Servicing Agreement or any other Basic Document
shall be inapplicable at all times after the Policy Expiration Date, and (i) if
such reference provides for another party or parties to take or omit to take any
such action following an Insurer Default, such party or parties shall be
entitled to take or omit to take such
78
action following the Policy Expiration Date and (ii) if such reference does not
provide for another party or parties to take or omit to take any such action
following an Insurer Default, then the Indenture Trustee acting at the written
direction of Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes, voting together as a single Class, with the
consent of Certificateholders holding not less than a majority of the
Certificate Percentage Interest shall have the right to take or omit to take any
such action following the Policy Expiration Date. In addition, any other
provision of this Sale and Servicing Agreement or any other Basic Document which
is operative based in whole or in part on whether an Insurer Default has or has
not occurred shall, at all times on or after the Policy Expiration Date, be
deemed to refer to whether or not the Policy Expiration Date has occurred.
Section 10.14. Limitation on Recourse Against WFSRC2. Notwithstanding
anything to the contrary contained in this Agreement, the obligations of WFSRC2
under the Basic Documents are solely the corporate obligations of WFSRC2, and
shall be payable by WFSRC2, solely as provided by the Basic Documents. WFSRC2
shall only be required to pay (i) any fees, expenses, indemnities or other
liabilities that it may incur under the Basic Documents from funds available
pursuant to, and in accordance with, the payment priorities set forth in this
Agreement and (ii) to the extent 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. 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.
Section 10.15. Replacement Interest Rate Swap Agreement. In accordance
with Section 3.13 of the Insurance Agreement, the Issuer at the direction of the
Collateral Agent shall enter into a Replacement Interest Rate Swap Agreement
with a replacement swap provider(s) in form and substance satisfactory to the
Insurer. Any payment by a replacement swap provider(s) to enter into a
Replacement Interest Rate Swap Agreement shall be applied first to pay all Net
Swap Payments payable to the Swap Counterparty until such payment obligations
are satisfied.
79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
WFS FINANCIAL 2003-3 OWNER TRUST
By: CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Owner Trustee on behalf of the Trust
By: ____________________________________________
Name:
Title:
WFS RECEIVABLES CORPORATION 2,
as Seller
By: ____________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
WFS FINANCIAL INC,
as Master Servicer
By: ____________________________________________
▇▇▇ ▇▇▇▇▇
Vice President and Assistant Controller
WESTCORP,
as Indemnifier
By: ____________________________________________
▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President, Chief Financial
Officer and Chief Operating Officer
Sale and Servicing Agreement
Acknowledged and accepted as of the day
and year first above written:
DEUTSCHE BANK TRUST COMPANY
AMERICAS, not in its individual capacity
but solely as Indenture Trustee
By: _________________________________________
Name:
Title:
Sale and Servicing Agreement
SCHEDULE A
SCHEDULE OF CONTRACTS
[Omitted--Schedule of Contracts on file at the offices of the Seller,
the Master Servicer, the Owner Trustee and the Indenture Trustee.]
SA-1
SCHEDULE B
LOCATION OF CONTRACT FILES
WFS Financial Inc WFS Financial Inc
23 Pasteur ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇-▇▇▇-▇▇▇▇
SB-1
SCHEDULE C
NET CHARGE-OFF PERCENTAGE TRIGGERS
Net Charge-Off Percentage
Calculation Day Trigger
--------------- --------------------------
August 2003 0.00%
September 2003 - November 2003 0.34%
December 2003 - February 2004 1.03%
March 2004 - May 2004 1.72%
June 2004 - August 2004 2.32%
September 2004 - November 2004 2.87%
December 2004 - February 2005 3.35%
March 2005 - May 2005 3.77%
June 2005 - August 2005 4.12%
September 2005 - November 2005 4.39%
December 2005 - February 2006 4.61%
March 2006 - May 2006 4.77%
June 2006 - August 2006 4.90%
September 2006 - November 2006 5.00%
December 2006 - February 2007 5.07%
March 2007 - May 2007 5.11%
June 2007 - August 2007 5.15%
September 2007 - November 2007 5.18%
December 2007 - February 2008 5.21%
March 2008 - August 2010 5.22%
September 2010 - November 2010 5.24%
December 2010 - February 2011 5.24%
March 2011 - May 2011 5.25%
SC-1
EXHIBIT A
FORM OF INSURANCE AGREEMENT
A-1
EXHIBIT B
FORM OF NOTE POLICY
▇-▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇ ▇▇▇
▇-▇
▇▇▇▇▇▇▇ ▇
FORM OF DISTRIBUTION DATE STATEMENT
B-1