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EXHIBIT 10.3
R&W DRAFT
1/20/97
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INSURANCE, INDEMNITY AND PLEDGE AGREEMENT
Dated as of March 1, 1997
among
WFS FINANCIAL 1997-A OWNER TRUST,
WFS FINANCIAL AUTO LOANS, INC.,
WFS FINANCIAL INC,
WFS INVESTMENTS, INC.,
FINANCIAL SECURITY ASSURANCE INC.,
and
BANKERS TRUST COMPANY,
as Collateral Agent, Proceeds Agent and Indenture Trustee
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WFS FINANCIAL 1997-A OWNER TRUST
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TABLE OF CONTENTS
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INTRODUCTION ..................................................................................... 1
AGREEMENTS........................................................................................ 2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions..................................................................... 2
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Trust..................................... 7
Section 2.02. Affirmative Covenants of the Trust.............................................. 9
Section 2.03. Negative Covenants of the Trust................................................. 11
Section 2.04. Representations and Warranties of WII........................................... 12
Section 2.05. Affirmative Covenants of WII.................................................... 14
Section 2.06. Negative Covenants of WII....................................................... 16
Section 2.07. Representations and Warranties of the Company................................... 18
Section 2.08. Representations and Warranties of WFS........................................... 23
Section 2.09. Affirmative Covenants of the Company............................................ 25
Section 2.10. Negative Covenants of the Company............................................... 27
Section 2.11. Affirmative Covenants of WFS.................................................... 29
ARTICLE III
THE POLICIES; INDEMNIFICATION
Section 3.01. Agreement to Issue Policies..................................................... 31
Section 3.02. Conditions Precedent to Issuance of Policies.................................... 31
Section 3.03. Premium......................................................................... 35
Section 3.04. Reimbursement Obligation........................................................ 36
Section 3.05. Non-Recourse Obligation......................................................... 37
Section 3.06. Indemnification................................................................. 38
Section 3.07. Liability Absolute.............................................................. 42
Section 3.08. Liability of Financial Security................................................. 43
Section 3.09. Payment of Costs, Fees and Expenses............................................. 43
Section 3.10. Payment Procedure............................................................... 44
Section 3.11. Business Days................................................................... 44
Section 3.12. Waivers and Consents by the Company and WFS..................................... 44
ARTICLE IV
PLEDGE OF COLLATERAL
Section 4.01. Obligations Secured Hereby...................................................... 45
Section 4.02. Granting Clause................................................................. 46
Section 4.03. Release of Collateral........................................................... 46
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ARTICLE V
INTERCREDITOR PROVISIONS
Section 5.01. Financial Security's Direction Upon Servicer
Default......................................................................... 47
Section 5.02. Financial Security's Direction of Insolvency
Proceedings..................................................................... 48
ARTICLE VI
THE COLLATERAL AGENT; REMEDIES
Section 6.01. Appointment and Powers of Collateral Agent...................................... 49
Section 6.02. Successor Collateral Agent...................................................... 49
Section 6.03. Remedies Available to Collateral Agent.......................................... 50
Section 6.04. Waiver of Stay or Extension Laws; Marshalling
of Assets....................................................................... 52
Section 6.05. Restoration of Rights and Remedies.............................................. 52
Section 6.06. Remedies Cumulative............................................................. 52
Section 6.07. Control by Financial Security................................................... 53
Section 6.08. Proceeds Agent as Custodian and Bailee of
Collateral Agent................................................................ 53
Section 6.09. Indemnification of Collateral Agent............................................. 53
Section 6.10. Compensation Payable to Collateral Agent........................................ 54
Section 6.11. Protection of Financial Security's Security
Interest........................................................................ 54
Section 6.12. Representations and Warranties of Indenture
Trustee......................................................................... 55
Section 6.13. Certain Guaranties.............................................................. 56
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Events of Default............................................................... 56
Section 7.02. Remedies; Waivers............................................................... 57
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Changes and Modifications........................................... 58
Section 8.02. Notices......................................................................... 58
Section 8.03. Method of Payment............................................................... 59
Section 8.04. Further Assurances and Corrective Instruments................................... 59
Section 8.05. Term of Agreement............................................................... 59
Section 8.06. Assignments; Third-Party Rights; Reinsurance.................................... 60
Section 8.07. Consent of Financial Security................................................... 61
Section 8.08. Right to Enforce Sale and Servicing Agreement................................... 61
Section 8.09. WFS and WII as Parties Only for Certain
Provisions...................................................................... 61
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Section 8.10. Severability.................................................................... 61
Section 8.11. Reports......................................................................... 61
Section 8.12. Counterparts.................................................................... 61
Section 8.13. Governing Law................................................................... 62
Section 8.14. Headings........................................................................ 62
Section 8.15. Trial by Jury Waived............................................................ 62
Section 8.16. Limited Liability............................................................... 62
Section 8.17. Limited Liability of Chase Manhattan Bank
Delaware........................................................................ 62
EXHIBITS
EXHIBIT A Forms of WFS Assignment and Collateral Assignment
EXHIBIT B-1 Form of Financial Guaranty Insurance Policy with
respect to the Certificates, together with form of
Endorsement No. 1 thereto
EXHIBIT B-2 Form of Financial Guaranty Insurance Policy with
respect to the Notes, together with form of
Endorsement No. 1 thereto
EXHIBIT C Form of Opinion of Counsel to the Company, WFS and
WII
EXHIBIT D Form of Opinion of Special Tax Counsel to WFS
EXHIBIT E Form of Certificate of the Indenture Trustee and the
Collateral Agent
EXHIBIT F Form of Opinion of Counsel to the Indenture Trustee
and the Collateral Agent
EXHIBIT G Form of Opinion of Counsel to the Trust and the
Owner Trustee
EXHIBIT H Form of Letter of Independent Accountants
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INSURANCE, INDEMNITY AND PLEDGE AGREEMENT
THIS INSURANCE, INDEMNITY AND PLEDGE AGREEMENT is made as of
March 1, 1997, by and among WFS FINANCIAL 1997-A OWNER TRUST, a Delaware
business trust (the "Trust"), WFS FINANCIAL AUTO LOANS, INC., a California
corporation (the "Company"), WFS FINANCIAL INC, a California corporation
("WFS"), WFS INVESTMENTS, INC., a California corporation ("WII"), FINANCIAL
SECURITY ASSURANCE INC., a New York financial guaranty insurance company
("Financial Security"), and BANKERS TRUST COMPANY, a New York banking
corporation, in its capacities as Collateral Agent and Proceeds Agent (each as
defined below), and in its capacity as Indenture Trustee under the Indenture
referred to below (the "Indenture Trustee").
INTRODUCTION
The Company is the owner of the Contracts. The Company
proposes to sell to the Trust all of its right, title and interest in and to the
Contracts and certain other property pursuant to the Sale and Servicing
Agreement. The Trust will issue Certificates pursuant to the Trust Agreement and
Notes pursuant to the Indenture.
Each Certificate will represent a fractional undivided
interest in the Trust. Each Note will be secured by the Indenture Property.
The Company has agreed to convey a security interest in the
Collateral and all the property conveyed by the Company to the Trust (with the
exception of the Policies) pursuant to the Sale and Servicing Agreement in favor
of Financial Security prior in right to all liens, claims, rights or interests
other than those of the Trust.
The Trust has requested that Financial Security issue the Note
Policy to the Indenture Trustee to guarantee payment of the Scheduled Payments
(as defined in such Note Policy) on each Distribution Date in respect of the
Notes, and has requested that Financial Security issue the Certificate Policy to
Owner Trustee, as Owner Trustee under the Trust Agreement, to guarantee payment
of the Guaranteed Distributions (as defined in such Certificate Policy) on each
Distribution Date in respect of the Certificates.
Financial Security is willing to issue the Policies for the
purpose stated above if the Trust, the Company, WFS, WII and the Indenture
Trustee enter into this Agreement and, in order to secure the Company's
obligations hereunder, the Company pledges the Collateral to the Collateral
Agent for the benefit of Financial Security, subject to the provisions hereof.
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The parties hereto desire to specify the indemnity and
reimbursement obligations to be provided in respect of amounts paid by Financial
Security under the Policies, the security to be provided in respect of such
indemnity and reimbursement obligations, and certain other matters.
AGREEMENTS
In consideration of the mutual promises, covenants,
representations and warranties hereinafter set forth, the parties hereto agree
to as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. All words and phrases defined in
the Trust Agreement and the Sale and Servicing Agreement shall have the same
meanings in this Agreement unless a different meaning is set forth in this
Agreement. In addition, the following words and phrases shall have the following
respective meanings:
"Administration Agreement" means the Administration Agreement
dated as of March 1, 1997 among the Trust, WFS Financial Inc, as Administrator,
the Seller and the Indenture Trustee.
"Agreement" means this Insurance, Indemnity and Pledge
Agreement, as the same may be amended, modified or supplemented from time to
time.
"Authorized Officer" means, with respect to WFS, the Company,
WII or any corporation, the president, the chief financial officer or any vice
president.
"Bank" means, Western Financial Bank, F.S.B., a
federally-chartered savings association.
"Certificates" means the Certificates issued under the
Trust Agreement.
"Certificate Policy" means the financial guaranty insurance
policy, including any endorsements thereto, issued by Financial Security with
respect to the Certificates, substantially in the form of Exhibit B-1 hereto.
"Collateral" means all of the Contracts listed in the Schedule
of Contracts attached to the Sale and Servicing Agreement, including, without
limitation, all payments of Monthly P&I (exclusive of Retained Yield, if any)
due on or after the Cut-Off Date (excluding the amount allocable to principal
and interest due prior to the Cut-Off Date), all Net Liquidation Proceeds and
Net Insurance Proceeds with respect to any Financed Vehicle to which a
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Contract relates received on or after the Cut-Off Date and all other proceeds
received in respect of such Contracts (other than payments of Monthly P&I due
prior to the Cut-Off Date), and any and all security interests in the Financed
Vehicles; the Contract Documents relating to the Contracts (except the Contract
Documents for Contracts which have been the subject of a Full Prepayment
received on or after the Cut-Off Date but no later than one Business Day prior
to the Closing Date, in lieu of which the Company shall have deposited in or
credited to the Collection Account on or prior to the Closing Date an amount
equal to such Full Prepayment); all Spread Account Collateral; and all proceeds
in any way delivered with respect to the foregoing, all rights to payments with
respect to the foregoing and all rights to enforce the foregoing.
"Collateral Agent" means, initially, Bankers Trust Company, as
collateral agent for Financial Security pursuant to this Agreement and,
thereafter, any successor Collateral Agent named pursuant to this Agreement.
"Collateral Assignment" means, with respect to any Contracts,
the original instrument of collateral assignment of such Contracts by the
Company, as Seller, to the Collateral Agent, substantially in the form included
in Exhibit A hereto.
"Controlling Party" means Financial Security so long as no
Financial Security Insolvency shall have occurred and no Financial Security
Default shall have occurred and be continuing and, at any other time, the
Indenture Trustee.
"Demand Note" means the demand note dated on or before March
__, 1997 issued by WFS to WII.
"Event of Default" has the meaning set forth in Section
7.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Financial Security's Authorized Agent" means each Authorized
Officer of Financial Security and each other Person that Financial Security
designates as its authorized agent with notice to the Company.
"Indemnification Agreement" means the Indemnification
Agreement, dated as of the date hereof, among the Company, WFS, Financial
Security and the Underwriter.
"Indenture Property" means the property pledged to the
Indenture Trustee on behalf of the Noteholders pursuant to the Indenture.
"Independent Accountant" means an independent accountant
within the meaning of the Securities Act and the Exchange Act.
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"Late Payment Rate" means the greater of a per annum rate
equal to 3% in excess of (i) Financial Security's cost of funds, determined on a
monthly basis, or (ii) the arithmetic average of the prime or base lending rates
publicly announced by The Chase Manhattan Bank, N.A. (New York, New York) and
Citibank, N.A. (New York, New York), as in effect on the last day of the month
for which interest is being computed, but in no event greater than the maximum
rate permitted by law.
"Note Policy" means the financial guaranty insurance policy,
including and endorsements thereto, issued by Financial Security with respect to
the Notes, substantially in the form attached as Exhibit B-2 hereto.
"Notice Address" means
(a) as to the Company:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) as to WFS:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇
(c) as to WII:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
(d) as to the Trust:
WFS Financial 1997-A Owner Trust
c/o Chase Manhattan Bank Delaware
as Owner Trustee
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Department
(e) as to Financial Security:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Surveillance Department
Telecopier Nos.: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(in each case in which the notice or other
communication to Financial Security refers to an
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Event of Default or a claim under the Policy or is a
notice or other communication as to which a failure
on the part of Financial Security to respond shall be
deemed to constitute consent or acceptance, then with
a copy to the attention of the Senior Vice President
- Surveillance)
(f) as to the Collateral Agent:
Four Albany ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Department - Asset Backed Group
(g) as to the Proceeds Agent:
Four Albany ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Department - Asset Backed Group
(h) as to the Indenture Trustee:
Four Albany ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Department - Asset Backed Group
"Obligations" has the meaning set forth in Section 4.01
hereof.
"Owner Trustee" means Chase Manhattan Bank Delaware or its
successors in interest, acting not individually but solely on owner trustee
under the Trust Agreement.
"Policies" means the Note Policy and the Certificate
Policy.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement, dated as of March 1, 1997, among the Company, WFS and the Trust, as
the same may be amended or modified from time to time.
"Premium" means the premium payable to Financial Security by
the Company as consideration for the issuance of the Policies, as set forth in a
letter agreement between the Company and Financial Security.
"Proceeds Agent" means, initially, Bankers Trust Company,
as proceeds agent for Financial Security and, thereafter, any
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successor appointed by the Indenture Trustee and Financial Security.
"Prospectus" has the meaning set forth in Section 2.07(g)
of this Agreement.
"Registration Statement" has the meaning set forth in
Section 2.07(g) of this Agreement.
"Rules and Regulations" has the meaning set forth in
Section 2.07(g) of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller Assignments" means the Assignments, as such term is
defined in the Sale and Servicing Agreement.
"Spread Account" means the Spread Account established by the
Company, pursuant to the Sale and Servicing Agreement, in favor of the Indenture
Trustee on behalf of the Holders of Notes and Certificates and as Collateral
Agent for Financial Security.
"Spread Account Collateral" means (i) the Spread Account
Initial Deposit, (ii) all other amounts deposited in or credited to the Spread
Account from time to time under the Sale and Servicing Agreement, (iii) all
Eligible Investments made with amounts on deposit in such Account, and (iv) all
earnings and distributions on, and proceeds of, any and all of the foregoing.
"Transaction Agreements" means this Agreement, the WFS
Assignments, the Seller Assignments, the Collateral Assignment, the
Sale and Servicing Agreement, the Trust Agreement, the Certificate
of Trust, the Indenture, the Administration Agreement, the
Underwriting Agreement, the Subservicing Agreement, the
Indemnification Agreement and the RIC.
"Trust Agreement" means the Trust Agreement, dated as of March
1, 1997 among the Company, WFS, WII, Financial Security and Chase Manhattan Bank
Delaware, as Owner Trustee.
"Underwriter Information" has the meaning set forth in
Section 3.06(a)(i) of this Agreement.
"Underwriter" means ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation.
"Underwriting Agreement" means the Underwriting Agreement,
dated March __, 1997, among the Company, WFS and the Underwriter.
"Western Entities" means the Company, WFS and WII.
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"WFS Assignments" means, with respect to the Contracts, the
original instrument or instruments of assignment of such Contracts by WFS, as
seller, to the Company, substantially in the form included in Exhibit A hereto.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Trust.
The Trust represents and warrants to Financial Security as follows:
(a) Due Organization and Qualification. The Trust is duly
formed and validly existing as a Delaware statutory business trust and is in
good standing under the laws of the State of Delaware, with power and authority
to own its properties and to conduct its business and had at all relevant times,
and has, power, authority, and legal right to acquire the Contracts; the Trust
is duly qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals (together,
"approvals") necessary for the conduct of its business as described in the
Prospectus and the performance of its obligations under the Transaction
Agreements, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render the Contracts in such jurisdiction or any
Transaction Agreement unenforceable in any respect or would otherwise have a
material adverse effect upon the Trust; the Trust holds all material licenses,
certificates and permits from all governmental authorities necessary for the
conduct of its business as presently conducted.
(b) Power and Authority. The Trust has all necessary trust
power and authority to conduct its business as presently conducted; the Trust
has the power and authority to execute and deliver this Agreement and each other
Transaction Agreement to which the Trust is a party and to carry out the terms
of each such agreement, and has full power and authority to issue the Notes and
the Certificates and pledge and assign its assets pursuant to the Indenture and
has duly authorized the issuance of the Notes and Certificates and the
assignment of its assets by all necessary trust proceedings, and the execution,
delivery and performance of this Agreement and each other Transaction Agreement
to which the Trust is a party has been duly authorized by all necessary action
on the part of the Trust.
(c) Valid and Binding Obligations. Each of the Transaction
Agreements to which the Trust is a party constitutes a legal, valid and binding
obligation of the Trust enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
receivership or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general equitable principles, regardless
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of whether such enforceability shall be considered a proceeding in equity or at
law. The Certificates, when executed, authenticated and delivered in accordance
with the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Trust. The Notes, when executed, authenticated and
delivered in accordance with the Indenture, will be entitled to the benefits of
the Indenture and will constitute legal, valid and binding obligations of the
Trust, enforceable in accordance with their terms.
(d) Noncontravention. The consummation of the transaction
contemplated by this Agreement and by each other Transaction Agreement to which
the Trust is a party, and the fulfillment of the terms hereof and thereof shall
not conflict with, result in any breach of any of the terms and provisions of,
nor constitute a default (nor an event which, with the giving of notice or
passage of time, or both, would constitute a default) under the Certificate of
Trust or the Trust Agreement, or any indenture, agreement or other instrument to
which the Trust is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than this
Agreement and the Collateral Assignment); nor violate any law or any order,
rule, or regulation applicable to the Trust of any court or of any federal or
state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Trust or its properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration, or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by the Trust of this
Agreement or of any other Transaction Agreement to which the Trust is a party,
except (in each case) such as have been obtained and are in full force and
effect.
(f) Pending Litigation or Other Proceeding. To the Trust's
best knowledge, there are no proceedings or investigations pending, or
threatened, before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Trust or its
properties: (A) asserting the invalidity of this Agreement or any other
Transaction Agreement to which the Trust is a party; (B) seeking to prevent the
issuance of the Notes or the Certificates, or the consummation of the
transactions contemplated by any of the Transaction Agreements to which the
Trust is a party; (C) seeking any determination or ruling that might materially
and adversely affect the validity or enforceability of, this Agreement or any
other Transaction Agreement to which the Trust is a party, or (D) involving the
Trust and which might adversely affect the federal or state tax attributes of
the Notes, the Certificates or the Trust.
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(g) Incorporation of Representations and Warranties. The
representations and warranties of the Trust set forth in each Transaction
Document are (in each case) true and correct as if set forth herein.
(h) Security Interest in Contracts. This Agreement, together
with possession of the Collateral by the Master Servicer pursuant to the Sale
and Servicing Agreement and the filing referred to below, creates as security
for the Company's obligations under this Agreement a security interest in favor
of the Collateral Agent, as collateral agent for Financial Security, in each
item of the Collateral, as constituted as of the Closing Date; such security
interest has been perfected and is a valid, binding and enforceable first
priority security interest, subject only, to the extent set forth in Section
5.01(d) hereof, to the interest of the Indenture Trustee with respect to the
Indenture Property and the Securityholders; a financing statement with respect
to the Contracts has been filed with the California Secretary of State pursuant
to the California UCC, and the marking required by Section 3.01(b)(xvi) of the
Sale and Servicing Agreement has been made on each Contract, except to the
extent (if any) that Financial Security has waived in writing compliance with
such requirement; no other filings in any jurisdiction or any other actions are
necessary to perfect the security interest of the Collateral Agent, as
collateral agent for Financial Security, in the Collateral, as constituted as of
the Closing Date, as against any third parties.
(i) Security Interest in Other Collateral. Assuming the
acquisition of Eligible Investments in accordance with the Sale and Servicing
Agreement, such Eligible Investments will be subject to a valid, binding and
enforceable first priority security interest in favor of the Collateral Agent,
as collateral agent for Financial Security, subject only, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Securityholders; assuming deposit of
each check constituting proceeds of the Contracts in the Collection Account or
Holding Account, as applicable, within ten days of receipt of such check by the
Master Servicer, such check will be subject to a valid, first priority perfected
security interest in favor of the Collateral Agent, subject, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Securityholders; at such time as it is
received by the Master Servicer and until deposited in the Collection Account or
Holding Account, as applicable; the proceeds of such deposited check that remain
in the Collection Account or the Holding Account will be subject to a valid,
first priority security interest in favor of the Collateral Agent, subject, to
the extent set forth in Section 5.01(d) hereof, to the interest of the Trust
under the Sale and Servicing Agreement.
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Section 2.02. Affirmative Covenants of the Trust. The Trust
hereby covenants and agrees with Financial Security that, at all times during
the term of this Agreement:
(a) Compliance with Agreements. The Trust will comply with all
terms and conditions of this Agreement and each other Transaction Agreement to
which it is a party. The Trust will not cause or permit to become effective any
amendment to or modification of any of the Transaction Agreements unless
Financial Security shall have previously approved in writing the form of such
amendment or modification.
(b) Financial Statements; Accountants' Reports; Other
Information. The Trust shall keep or cause to be kept proper books and records
in which full and correct entries shall be made of financial transactions and
the assets and business of the Trust in accordance with generally accepted
accounting principles consistently applied. The Trust shall furnish to Financial
Security, simultaneously with the delivery of such documents to the Indenture
Trustee, the Noteholders or the Certificateholders, as the case may be, copies
of all reports, certificates, statements, financial statements or notices
furnished to the Indenture Trustee, the Noteholders or the Certificateholders,
as the case may be, pursuant to the Transaction Agreements.
(c) Certificate of Compliance. The Trust shall deliver to
Financial Security concurrently with the delivery of the financial statements
required pursuant to paragraph (b) above, a certificate signed by an Authorized
Officer of the Administrator stating that:
(i) a review of the Trust's performance under this
Agreement and the other Transaction Agreements to which the Trust is a
party during such period has been made under such officer's
supervision; and
(ii) to the best of such officer's knowledge based upon
such review, the Trust has fulfilled all its obligations under this
Agreement and the other Transaction Agreements to which the Trust is a
party during such period, or, if there has been a default of any such
obligation, specifying each such default known to such officer and the
nature and status thereof.
(d) Access to Records; Discussions with Officers and
Accountants. The Trust shall, upon the reasonable request of Financial Security,
permit Financial Security's Authorized Agent at reasonable times (i) to inspect
such books and records of the Trust as they may relate to the Notes, the
Certificates and the obligations of the Trust under this Agreement and the other
Transaction Agreements to which the Trust is a party; and (ii) to discuss the
affairs, finances and accounts of the Trust with any of its respective officers,
directors and representatives, including its Independent Accountants.
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(e) Financing Statements and Further Assurances. The Trust
will file all necessary financing statements, assignments or other instruments,
and any amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by law to
preserve and protect fully the lien and security interest in, and all rights of
the Collateral Agent with respect to the Collateral, and the Trust shall, upon
the request of Financial Security, from time to time, execute and deliver and,
if necessary, file such further instruments and take such further action as may
be reasonably necessary to effectuate the provisions of this Agreement or to
protect the security interest of the Collateral Agent in the Collateral.
(f) Retirement of Notes and Certificates. The Trust shall,
upon retirement of the Certificates and upon retirement of the Notes furnish to
Financial Security a notice of such retirement, and, upon such retirement and
the expiration of the term of the applicable Policy, to surrender the applicable
Policy to Financial Security for cancellation.
(g) Maintenance of Separate Existence. The Trust shall at all
times hold itself out to the public, including the Company, WFS and the Bank,
under the Trust's own name and as a separate and distinct entity from the
Company, WFS and the Bank. The Trust shall maintain trust records and books of
account separate from those of the Company, WFS and the Bank, shall not
commingle its assets with any other Person (except to the limited extent (if
any) permitted by the approval of Financial Security) and shall obtain proper
authorization from its equity owners of all trust action in accordance with
applicable law. The Trust shall maintain an arm's- length relationship with the
Bank, the Company and WSF and each Affiliate of any of them.
(h) Compliance with Article 76 of New York Insurance Law. The
Trust shall ensure that the Prospectus, and any supplements or amendments
thereto, and every preliminary prospectus delivered with respect to the Notes
and the Certificates, clearly disclose that the Policies are not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law.
(i) Tax Matters. The Trust will take all actions
necessary to ensure that the Trust is taxable as a partnership for
federal and state income tax purposes and not as an association (or
publicly traded partnership), taxable as a corporation.
Section 2.03. Negative Covenants of the Trust. The Trust
agrees and covenants with Financial Security that at all times during the term
of this Agreement:
(a) Amendments to Organizational Documents. The Trust shall
not amend, supplement or otherwise modify or cause to permit any amendment,
supplement or other modification of, any of the
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provisions of the Certificate of Trust or the Trust Agreement without the prior
written consent of Financial Security.
(b) No Liens. Without the prior written consent of Financial
Security, the Trust shall not create, incur, assume or suffer to exist any
mortgage, deed of trust, security interest, assignment, deposit arrangement or
other preferential arrangement, charge or encumbrance (including without
limitation any conditional sale or other title retention agreement or finance
lease) of any nature upon or with respect to any of its properties or assets,
now owned or hereafter acquired, or sign or file under the Uniform Commercial
Code of any jurisdiction any financing statement that names the Trust as debtor,
or sign any security agreement authorizing any secured party thereunder to file
such a financing statement, except as contemplated in the Transaction
Agreements.
(c) Creation of Indebtedness. Without the prior written
consent of Financial Security, the Trust shall not create, incur, assume or
suffer to exist any indebtedness other than indebtedness guaranteed or approved
in writing by Financial Security, except as contemplated in the Transaction
Agreements.
(d) Guarantees, Etc. Without the prior written consent of
Financial Security, the Trust shall not assume, guarantee, endorse or otherwise
be or become directly or contingently liable for the obligations of any Person
by, among other things, agreeing to purchase any obligation of another Person,
agreeing to advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(e) Subsidiaries. Without the prior written consent of
Financial Security, the Trust shall not form, or cause to be formed, any
Subsidiaries.
(f) Insolvency. The Trust shall not commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, consolidation or other relief with respect
to it or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets or make
a general assignment for the benefit of its creditors. The Trust shall not take
any action in furtherance of, or indicating the consent to, approval of, or
acquiescence in any of the acts set forth above. The Trust shall not admit in
writing its inability to pay its debts.
(g) Impairment of Rights. The Trust shall not take any action,
or fail to take any action that will interfere with the enforcement of any
rights under this Agreement or the other Transaction Agreements.
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(h) Successor Parties. The Trust will not remove or replace,
or cause to be removed or replaced, the Master Servicer, the Indenture Trustee,
the Owner Trustee or the Administrator.
Section 2.04. Representations and Warranties of WII. WII
represents and warrants to Financial Security as follows:
(a) Due Organization. WII is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
with power and authority to own its properties and to conduct its business and
had at all relevant times, and has, power, authority, and legal right to
acquire, pledge and sell the Contracts; WII is duly qualified to do business as
a foreign corporation in good standing under the laws of each jurisdiction where
the character of its properties or the nature of its activities makes such
qualification necessary, except such jurisdictions, if any, in which the failure
to be so qualified will not have a material adverse effect on the business or
properties of WII; WII holds all material licenses, certificates and permits
from all governmental authorities necessary for the conduct of its business as
presently conducted. WII's principal place of business, chief executive office
and the office where it keeps its records is located at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b) Corporate Power and Authority. WII has full right, power
and authority to own its properties and to conduct its business as presently
conducted; WII has the power and authority to execute and deliver this Agreement
and each other Transaction Agreement to which WII is a party and to carry out
the terms of each such agreement.
(c) Valid and Binding Obligations. Each of the Transaction
Agreements to which WII is a party constitutes a legal, valid, and binding
obligation of WII, enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
receivership or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principles of equity, regardless of whether
such enforceability shall be considered in a proceeding in equity or at law.
(d) Noncontravention. The consummation of the transactions
contemplated by this Agreement and by each other Transaction Agreement to which
WII is a party and the fulfillment of the terms hereof and thereof shall not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute a default (nor an event which, with the giving of notice or passage
of time, or both, would constitute a default) under, the articles of
incorporation or by-laws of WII, or any indenture, agreement, or other
instrument to which WII is a party or by which it shall be bound; nor result in
the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, or other instrument; nor violate any
law or any order, rule, or regulation applicable to WII of any court or of any
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federal or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over WII or its properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by WII of this Agreement
or of any other Transaction Agreement to which WII is a party, except (in each
case) such as have been obtained and are in full force and effect.
(f) Pending Litigation or Other Proceeding. To WII's best
knowledge, there are no proceedings or investigations pending, or threatened,
before any court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over WII or its properties: (A) asserting
the invalidity of this Agreement, any other Transaction Agreement to which WII
is a party, the Notes or the Certificates, (B) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by any of the Transaction Agreements to which WII is a party, (C)
seeking any determination or ruling that might materially and adversely affect
the performance by WII of its obligations under, or the validity or
enforceability of, this Agreement or any other Transaction Agreement to which
WII is a party, or (D) involving WII and which might adversely affect the
federal income tax attributes of the Notes, the Certificates or the Trust.
(g) Incorporation of Representations and Warranties. All of
the representations and warranties made by WII in the Transaction Agreements are
incorporated herein as if set forth herein and each such representation and
warranty is true and correct as of the Closing Date.
Section 2.05. Affirmative Covenants of WII. WII covenants and
agrees with Financial Security that, at all times during the term of this
Agreement:
(a) Compliance with Agreements. WII will comply with all terms
and conditions of this Agreement and each other Transaction Agreement to which
it is a party. WII will not cause or permit to become effective any amendment to
or modification of the Transaction Agreements unless Financial Security shall
have previously approved in writing the form of such amendment or modification.
(b) Financial Statements, Accountants' Reports, Other
Information. WII shall keep proper books and records, in which full and correct
entries shall be made of financial transactions and the assets and business of
WII in accordance with generally accepted accounting principles consistently
applied. WII shall
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furnish to Financial Security, simultaneously with the delivery of such
documents to the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders, as the case may be, copies of all reports, certificates,
statements or notices furnished to the Owner Trustee, the Indenture Trustee, the
Noteholders or the Certificateholders, as the case may be, pursuant to the Sale
and Servicing Agreement.
(c) Certificate of Compliance. WII shall deliver to Financial
Security, concurrently with the delivery of the financial statements required
pursuant to paragraph (b) above, a certificate signed by an Authorized Officer
of WII stating that:
(i) a review of WII's performance under this Agreement
and the other Transaction Agreements to which WII is a party during
such period has been made under such officer's supervision; and
(ii) to the best of such officer's knowledge, based upon
such review, WII has fulfilled all its obligations under this Agreement
and the other Transaction Agreements to which WII is a party during
such period, or, if there has been a default of any such obligation,
specifying each such default known to such officer and the nature and
status thereof.
(d) Access to Records; Discussions With Officers and
Accountants. WII shall, upon the reasonable request of Financial Security,
permit Financial Security's Authorized Agent at reasonable times (i) to inspect
such books and records of WII as may relate to the Notes, the Certificates and
the obligations of WII under this Agreement and the other Transaction Agreements
to which WII is a party; and (ii) to discuss the affairs, finances and accounts
of WII with any of its respective officers, directors and representatives,
including its Independent Accountants.
(e) Maintain Licenses. WII shall maintain all licenses,
permits, charters and registrations that are material to the performance by WII
of its obligations under the Transaction Agreements to which it is a party or by
which WII is bound.
(f) Maintain Existence; Merger. WII shall keep in full effect
its existence, rights and franchises under the laws of the State of California,
and shall at all times continue to be duly organized, duly qualified and duly
authorized (as described in Sections 2.04(a) and (b) hereof) and shall conduct
its business in accordance with the terms of its corporate charter and bylaws.
WII shall not consolidate with or merge into any other Person or convey,
transfer or lease substantially all of its assets as an entirety to any Person
unless the Person formed by such consolidation or into which WII has merged or
the Person which acquires by conveyance, transfer or lease substantially all the
assets of WII as an entirety, can lawfully perform the obligations of WII
hereunder and executes and delivers to the Owner Trustee an agreement, in form
and substance reasonably satisfactory to the
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Owner Trustee and Financial Security, which contains an assumption by such
Person of the due and punctual performance and satisfaction of each covenant and
condition to be performed or satisfied by WII under this Agreement.
(g) Maintenance of Separate Corporate Existence. WII shall at
all times hold itself out to the public, including the Company, WFS and the
Bank, under WII's own name and as a separate and distinct entity from the
Company, WFS and the Bank. At all times at least one director and one executive
officer of WII (or one individual serving in both capacities) shall be a Person
who is not a director, officer or employee of any Person owning beneficially
more than 10% of the outstanding common stock of WII. WII shall maintain
separate corporate records and books of account from those of the Company, WFS
and the Bank, shall not commingle its assets with any other Person (except to
the limited extent (if any) permitted by the approval of Financial Security) and
shall authorize its corporate actions in accordance with applicable law. WII
shall not engage in business transactions with any of its Affiliates on terms
and conditions less favorable to WII than those available to WII for comparable
transactions from Persons who are not Affiliates of WII. WII shall maintain its
chief executive office, principal place of business and the office where it
keeps its records in the State of California and separate and apart from any
office of the Company, the Bank, the Master Servicer or any Affiliate of any of
them.
(h) Retirement of Notes and Certificates. WII shall cause the
Trust, upon retirement of the Certificates, to furnish to Financial Security a
notice of such retirement, and, upon such retirement and the expiration of the
term of the Certificate Policy, to surrender the Certificate Policy to Financial
Security for cancellation.
(i) Incorporation of Covenants. WII agrees to comply with each
of the covenants of WII set forth in the Transaction Agreements and hereby
incorporates such covenants by reference as if each were set forth herein.
(j) Tax Matters. As of the Closing Date, the Trust is, and
shall remain during the term of this Agreement, taxable as a partnership for
federal and state income tax purposes and not as an association (or publicly
traded partnership) taxable as a corporation.
(k) Certificates. WII shall purchase from the Underwriter and
thereafter retain beneficial and record ownership of Certificates representing
at least 1% of the Certificate Balance.
Section 2.06. Negative Covenants of WII. WII agrees and
covenants with Financial Security that at all times during the term of this
Agreement:
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(a) Amendments to Organizational Documents. WII shall not
amend, supplement or otherwise modify, or cause to permit any amendment,
supplement or other modification of, Articles 2 or 4 of its charter (or any
other Articles of its charter that relate to the matters addressed by such
Articles 2 or 4) or its bylaws without the prior written consent of Financial
Security.
(b) No Liens. Without the prior written consent of Financial
Security, WII shall not create, incur, assume or suffer to exist any mortgage,
deed of trust, security interest, assignment, deposit arrangement or other
preferential arrangement, charge or encumbrance (including, without limitation,
any conditional sale or other title retention agreement or finance lease) of any
nature upon or with respect to any of its properties or assets, now owned or
hereafter acquired, or sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement that names WII as a debtor, or sign any
security agreement authorizing any secured party thereunder to file such
financing statement.
(c) Creation of Indebtedness. Without the prior written
consent of Financial Security, WII shall not create, incur, assume or suffer to
exist any indebtedness other than indebtedness guaranteed or approved in writing
by Financial Security.
(d) Guarantees, Etc. Without the prior written consent of
Financial Security, WII shall not assume, guarantee, endorse or otherwise be or
become directly or contingently liable for the obligations of any Person by,
among other things, agreeing to purchase any obligation of another Person,
agreeing to advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(e) Subsidiaries. Without the prior written consent of
Financial Security, WII shall not form, or cause to be formed, any subsidiaries.
(f) Insolvency. WII shall not commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seek appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets, or make a general
assignment for the benefit of its creditors. WII shall not take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in
any of the acts set forth above. WII shall not be unable to, or admit in writing
its inability to, pay its debts.
(g) Impairment of Rights. WII shall not take any action or
fail to take any action that will interfere with the enforcement
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of any rights under this Agreement or the other Transaction Agreements.
(h) Insolvency of Trust. WII shall not, for any reason,
institute proceedings for the Trust to be adjudicated a bankrupt or insolvent,
or consent to the institution of bankruptcy or insolvency proceedings against
the Trust, or file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to the bankruptcy of the
Trust, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trust or a substantial
part of the property of the Trust or cause or permit the Trust to make any
assignment for the benefit of creditors, or admit in writing the inability of
the Trust to pay its debt generally as they become due, or declare or effect a
moratorium on the debt of the Trust or take any action in furtherance of any
such action.
(i) No Withdrawal. WII shall not, for any reason, withdraw or
attempt to withdraw from the Trust Agreement, dissolve, institute proceedings
for it to be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against it, or file a petition seeking
or consenting to reorganize or relief under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of it or a
substantial part of its property, or make any assignment for the benefit of
creditors, or admit in writing its inability to pay its debts generally as they
become due, or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
(j) Demand Note. WII shall not (i) assign, sell, convey,
pledge, transfer, reconvey, cancel, forgive, compromise or otherwise dispose of
the Demand Note held by it, in whole or in part, (ii) make any distribution
other than to the Trust or unless the aggregate net worth of WII following such
distribution shall be at least equal to 10% of the Original Certificate Balance
or (iii) except as specifically permitted by the Trust Agreement, sell,
transfer, assign, give or encumber by operation of law or otherwise any of its
assets.
(k) Compliance with Transaction Agreements and similar
transactions. The provisions of subsections 2.06(c), (d) and (g),
notwithstanding, WII's execution and performance of its covenants and
obligations under the Transaction Agreements and under any similar documents
executed in connection with one or more other owner trust transactions as to
which Financial Security has issued one or more insurance policy similar to the
Policies shall not require the prior writen consent of Financial Security and
shall not be deemed to impair the rights of WII under this Agreement or the
other Transaction Agreements.
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Section 2.07. Representations and Warranties of the Company.
The Company represents and warrants to Financial Security as follows:
(a) Due Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, with power and authority to own its properties and to conduct its
business and had at all relevant times, and has, power, authority, and legal
right to acquire, pledge and sell the Contracts; the Company is duly qualified
to do business as a foreign corporation in good standing under the laws of each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, except such jurisdictions, if
any, in which the failure to be so qualified will not have a material adverse
effect on the business or properties of the Company; the Company holds all
material licenses, certificates and permits from all governmental authorities
necessary for the conduct of its business as presently conducted. The Company's
principal place of business, chief executive office and the office where it
keeps its records is located at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
(b) Corporate Power and Authority. The Company has full right,
power and authority to own its properties and to conduct its business as
presently conducted; the Company has the power and authority to execute and
deliver this Agreement and each other Transaction Agreement to which the Company
is a party and to carry out the terms of each such agreement, and has full power
and authority to sell and assign the property to be sold and assigned to and
deposited with the Owner Trustee as part of the Trust and has duly authorized
such sale and assignment to the Trustee by all necessary corporate action; and
the execution, delivery, and performance of this Agreement and each other
Transaction Agreement to which the Company is a party has been duly authorized
by the Company by all necessary corporate action.
(c) Valid and Binding Obligations. Each of the Transaction
Agreements to which the Company is a party constitutes a legal, valid, and
binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, receivership or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity, regardless of
whether such enforceability shall be considered in a proceeding in equity or at
law. The Certificates, when executed, authenticated and delivered in accordance
with the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership in the Trust. The Notes when executed, authenticated and delivered in
accordance with the Indenture, will be entitled to the benefits of the Indenture
and will constitute legal, valid and binding obligations of the Trust,
enforceable in accordance with their terms.
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(d) Noncontravention. The consummation of the transactions
contemplated by this Agreement and by each other Transaction Agreement to which
the Company is a party and the fulfillment of the terms hereof and thereof shall
not conflict with, result in any breach of any of the terms and provisions of,
nor constitute a default (nor an event which, with the giving of notice or
passage of time, or both, would constitute a default) under, the articles of
incorporation or by-laws of the Company, or any indenture, agreement, or other
instrument to which the Company is a party or by which it shall be bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, or other instrument
(other than this Agreement and the Collateral Assignment); nor violate any law
or any order, rule, or regulation applicable to the Company of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Company or its
properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by the Company of this
Agreement or of any other Transaction Agreement to which the Company is a party,
except (in each case) such as have been obtained and are in full force and
effect.
(f) Pending Litigation or Other Proceeding. To the Company's
best knowledge, there are no proceedings or investigations pending, or
threatened, before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Company or its
properties: (A) asserting the invalidity of this Agreement, any other
Transaction Agreement to which the Company is a party, the Notes or the
Certificates, (B) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by any
of the Transaction Agreements to which the Company is a party, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement or any other Transaction Agreement to which
the Company is a party, or (D) involving the Company and which might adversely
affect the federal income tax attributes of the Notes, the Certificates or the
Trust.
(g) Registration Statement; Prospectus. The Company has filed
with the Securities and Exchange Commission (the "Commission") a registration
statement on Form S-1, and a related preliminary prospectus for the registration
of the Certificates and the Notes under the Securities Act, has filed such
amendments thereto, if any, and such amended preliminary prospectuses as may
have been required to the date hereof, and will file such
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additional amendments thereto and such amended prospectuses as may hereafter be
required. Such registration statement (as amended, if applicable) and the
prospectus constituting a part thereof (including in each case all documents, if
any, incorporated by reference therein and the information, if any, deemed to be
part thereof pursuant to the rules and regulations of the Commission under the
Securities Act (the "Rules and Regulations")), as from time to time amended or
supplemented pursuant to the Securities Act or otherwise, are hereinafter
referred to as the "Registration Statement" and the "Prospectus," respectively,
except that if any revised prospectus shall be provided by the Company for use
in connection with the offering of the Certificates or the Notes which differs
from the Prospectus on file at the Commission at the time the Registration
Statement became effective (whether or not such revised prospectus is required
to be filed by the Company pursuant to Rule 424 of the Rules and Regulations),
the term "Prospectus" shall refer to such revised prospectus from and after the
time it is first provided to the Underwriter for such use. As of the date
hereof, the Registration Statement and Prospectus filed under the Securities Act
or pursuant to the Rules and Regulations complies in all material respects with
the Securities Act and the Rules and Regulations, and the Registration Statement
at the time it became effective and at all times subsequent thereto complied,
and at each time that the Prospectus is provided to the Underwriter for use in
connection with the offering or sale of any Certificate will comply, in all
material respects with the requirements of the Securities Act and the Rules and
Regulations. The Registration Statement and the Prospectus at the time the
Registration Statement became effective did not and on the date hereof does not,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and the Prospectus at the time it was filed under the Securities Act
or the Rules and Regulations and at the time it was first provided to the
Underwriters for use in connection with the offering of the Certificates and the
Notes did not, and on the Closing Date does not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, except that the
representations and warranties in this subparagraph shall not apply to
statements in or omissions from the Registration Statement or the Prospectus or
any preliminary prospectus made in reliance upon information furnished to the
Company in writing by Financial Security expressly for use therein.
(h) Incorporation of Representations and Warranties. All of
the representations and warranties made by the Company as Seller in Section
3.01(b) of the Sale and Servicing Agreement and as Depositor in, Section 2.10 of
the Trust Agreement and in the Underwriting Agreement are incorporated herein as
if set forth herein and each such representation and warranty is true and
correct as of the Closing Date.
(i) Security Interest in Contracts. This Agreement, together
with possession of the Collateral by the Master Servicer
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pursuant to the Sale and Servicing Agreement and the filing referred to below,
creates as security for the Company's obligations under this Agreement a
security interest in favor of the Collateral Agent, as collateral agent for
Financial Security, in each item of the Collateral, as constituted as of the
Closing Date; such security interest has been perfected and is a valid, binding
and enforceable first priority security interest, subject only, to the extent
set forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee
with respect to the Indenture Property and the Securityholders; a financing
statement with respect to the Contracts has been filed with the California
Secretary of State pursuant to the California UCC, and the marking required by
Section 3.01(b)(xvi) of the Sale and Servicing Agreement has been made on each
Contract, except to the extent (if any) that Financial Security has waived in
writing compliance with such requirement; no other filings in any jurisdiction
or any other actions are necessary to perfect the security interest of the
Collateral Agent, as collateral agent for Financial Security, in the Collateral,
as constituted as of the Closing Date, as against any third parties.
(j) Security Interest in Other Collateral. Assuming the
acquisition of Eligible Investments in accordance with the Sale and Servicing
Agreement, such Eligible Investments will be subject to a valid, binding and
enforceable first priority security interest in favor of the Collateral Agent,
as collateral agent for Financial Security, subject only, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Securityholders; assuming deposit of
each check constituting proceeds of the Contracts in the Collection Account or
Holding Account, as applicable, within ten days of receipt of such check by the
Master Servicer, such check will be subject to a valid, first priority perfected
security interest in favor of the Collateral Agent, subject, to the extent set
forth in Section 5.01(d) hereof, to the interest of the Indenture Trustee with
respect to the Indenture Property and the Securityholders; at such time as it is
received by the Master Servicer and until deposited in the Collection Account or
Holding Account, as applicable; the proceeds of such deposited check that remain
in the Collection Account or the Holding Account will be subject to a valid,
first priority security interest in favor of the Collateral Agent, subject, to
the extent set forth in Section 5.01(d) hereof, to the interest of the Trust
under the Sale and Servicing Agreement.
(k) Valid Transfer of Contracts. The Sale and Servicing
Agreement and the Seller Assignments constitute a valid sale, transfer and
assignment of the Contracts, enforceable against creditors of and purchasers
from the Company, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
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(l) Financial Information. The audited financial statements of
the Company for the fiscal year ended December 31, [1995] and the unaudited
financial statements of the Company for the fiscal quarter ended [September 30,
1996], copies of which have been furnished to Financial Security, as of the
dates and for the periods referred to therein (i) are true, complete and correct
in all material respects, (ii) fairly present the financial condition of the
Company and the results of operations and changes in financial position of the
Company and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied (subject, in the case of the
quarterly financial statements, to normal year-end adjustments), and such
financial statements indicate that the Company is solvent and will not be
rendered insolvent by the execution, delivery and performance of the Transaction
Agreements. Since [September 30, 1996], there has been no material adverse
change in the business, financial condition or operations of the Company.
Section 2.08. Representations and Warranties of WFS. WFS
represents and warrants to Financial Security as follows:
(a) Due Organization. WFS is duly organized and validly
existing as a licensed consumer finance company organized and existing and in
good standing under the laws of the State of California, with power and
authority to own its properties and to conduct its business and had at all
relevant times, and has, power, authority, and legal right to acquire and own
the Contracts and is duly qualified to do business as a foreign corporation in
good standing, and shall have obtained all necessary licenses and approvals, in
all jurisdictions in which the ownership or lease of property or the conduct of
its business requires such qualification.
(b) Corporate Power and Authority. WFS has the power and
authority to execute and deliver this Agreement and each other Transaction
Agreement to which WFS is a party and to carry out the terms of each such
agreement, and has full power and authority to sell and assign the property to
be sold and assigned to the Company for inclusion in the Trust and the Spread
Account and has duly authorized such sale and assignment to the Company by all
necessary corporate action; and the execution, delivery, and performance of this
Agreement and each other Transaction Agreement to which WFS is a party has been
duly authorized by WFS by all necessary corporate action.
(c) Valid and Binding Obligations. The WFS Assignments
constitute a valid sale, transfer, and assignment of the Contracts to the
Company, enforceable against creditors of and purchasers from WFS, and each of
the Transaction Agreements to which WFS is a party constitutes a legal, valid,
and binding obligation of WFS, enforceable in accordance with its terms, except
as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, receivership or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general
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principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law. The Certificates, when executed,
authenticated and delivered in accordance with the Trust Agreement, will be
validly issued and outstanding and entitled to the benefits of the Trust
Agreement and will evidence the entire beneficial ownership in the Trust. The
Notes when executed, authenticated and delivered in accordance with the
Indenture, will be entitled to the benefits of the Indenture and will constitute
legal, valid and binding obligations of the Trust, enforceable in accordance
with their terms.
(d) Noncontravention. The consummation of the transactions
contemplated by this Agreement and by each other Transaction Agreement to which
WFS is a party and the fulfillment of the terms hereof and thereof shall not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute a default (nor an event which, with the giving of notice or passage
of time, or both, would constitute a default) under, the articles of
organization or by-laws of WFS, or any indenture, agreement, or other instrument
to which WFS is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, or other instruments; nor violate any
law or any order, rule, or regulation applicable to WFS of any court or of any
federal or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over WFS or its properties.
(e) No Consents. No consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency, nor any consent, approval, waiver or notification
of any creditor, lessor or other non-governmental person, is required in
connection with the execution, delivery and performance by WFS of this Agreement
or of any other Transaction Agreement to which WFS is a party, except (in each
case) such as have been obtained and are in full force and effect.
(f) Pending Litigation or Other Proceeding. To WFS's best
knowledge, there are no proceedings or investigations pending, or threatened,
before any court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over WFS or its properties: (A) asserting
the invalidity of this Agreement or any other Transaction Agreement to which WFS
is a party, (B) seeking to prevent the consummation of any of the transactions
contemplated by any of the Transaction Agreements to which WFS is a party, (C)
seeking any determination or ruling that might materially and adversely affect
the performance by WFS of its obligations under, or the validity or
enforceability of, this Agreement or any other Transaction Agreement to which
WFS is a party, or (D) involving WFS and which might adversely affect the
federal income tax attributes of the Certificates.
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(g) Affirmation and Incorporation of Certain Representations
and Warranties. WFS represents and warrants to Financial Security that the
representations and warranties of the Company set forth in Section 2.07 hereof,
in the Underwriting Agreement and in Section 3.01(b) of the Sale and Servicing
Agreement and Section 2.10 of the Trust Agreement are (in each case) true and
correct as if set forth herein and that the representations and warranties of
WFS set forth in the Underwriting Agreement and by WFS as Master Servicer set
forth in Section 4.06 of the Sale and Servicing Agreement are (in each case)
true and correct as if set forth herein.
(h) Valid Transfer of Contracts. The WFS Assignments
constitute a valid sale, transfer and assignment of the Contracts to the
Company, enforceable against creditors of and purchasers from WFS, except as
such enforceability may be limited by (i) bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity, regardless of whether such enforceability
shall be considered in a proceeding in equity or at law.
(i) Financial Information. The audited consolidated financial
statements of WFS for the fiscal year ended December 31, [1995] and the
unaudited consolidated financial statements of WFS for the fiscal quarter ended
[September 30, 1996], copies of which have been furnished to Financial Security,
as of the dates and for the periods referred to therein (i) are true, complete
and correct in all material respects, (ii) fairly present the consolidated
financial condition of WFS and the consolidated results of operations and
changes in cash flows of WFS and its consolidated subsidiaries, and (iii) have
been prepared in accordance with generally accepted accounting principles
consistently applied (subject, in the case of the quarterly financial
statements, to normal year-end adjustments), and such financial statements
indicate that WFS is solvent and will not be rendered insolvent by the
execution, delivery and performance of the Transaction Agreements. Since
[September 30, 1996], there has been no material adverse change in the business,
financial condition or operations of WFS.
Section 2.09. Affirmative Covenants of the Company. The
Company covenants and agrees with Financial Security that, at all times during
the term of this Agreement:
(a) Compliance with Agreements. The Company will comply with
all terms and conditions of this Agreement and each other Transaction Agreement
to which it is a party. The Company will not cause or permit to become effective
any amendment to or modification of the Transaction Agreements unless Financial
Security shall have previously approved in writing the form of such amendment or
modification.
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(b) Financial Statements, Accountants' Reports, Other
Information. The Company shall keep proper books and records, in which full and
correct entries shall be made of financial transactions and the assets and
business of the Company in accordance with generally accepted accounting
principles consistently applied. The Company shall furnish to Financial
Security, simultaneously with the delivery of such documents to the Owner
Trustee, Indenture Trustee, the Noteholders or the Certificateholders, as the
case may be, copies of all reports, certificates, statements or notices
furnished to the Owner Trustee, the Noteholders or the Certificateholders, as
the case may be, pursuant to the Transaction Agreements.
(c) Certificate of Compliance. The Company shall deliver to
Financial Security, concurrently with the delivery of the financial statements
required pursuant to paragraph (b) above, a certificate signed by an Authorized
Officer of the Company stating that:
(i) a review of the Company's performance under this
Agreement and the other Transaction Agreements to which the Company is
a party during such period has been made under such officer's
supervision; and
(ii) to the best of such officer's knowledge, based upon
such review, the Company has fulfilled all its obligations under this
Agreement and the other Transaction Agreements to which the Company is
a party during such period, or, if there has been a default of any such
obligation, specifying each such default known to such officer and the
nature and status thereof.
(d) Access to Records; Discussions With Officers and
Accountants. The Company shall, upon the reasonable request of Financial
Security, permit an authorized agent of Financial Security at reasonable times
(i) to inspect such books and records of the Company as may relate to the Notes,
the Certificates and the obligations of the Company under this Agreement and the
other Transaction Agreements to which the Company is a party; and (ii) to
discuss the affairs, finances and accounts of the Company with any of its
respective officers, directors and representatives, including its Independent
Accountants.
(e) Maintain Licenses. The Company shall maintain all
licenses, permits, charters and registrations that are material to the
performance by the Company of its obligations under the Transaction Agreements
to which it is a party or by which the Company is bound.
(f) Financing Statements and Further Assurances. The Company
will file all necessary financing statements, assignments or other instruments,
and any amendments or continuation statements relating thereto, necessary to be
kept and filed in such manner and in such places as may be required by law to
preserve and protect
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fully the Lien and security interest in and all rights of Financial Security
with respect to the Collateral, subject to the Sale and Servicing Agreement, and
the Company shall, upon the request of Financial Security, from time to time,
execute and deliver and, if necessary, file such further instruments and take
such further action as may be reasonably necessary to effectuate the provisions
of this Agreement or to protect the security interest of Financial Security,
subject to the Sale and Servicing Agreement, in the Collateral.
(g) Maintain Existence; Merger. The Company shall keep in full
effect its existence, rights and franchises under the laws of the State of
California, and will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of the Contract
Documents and the Transaction Agreements to which the Company is a party. The
Company shall not consolidate with or merge into any other Person or convey,
transfer or lease substantially all of its assets as an entirety to any Person
unless the Person formed by such consolidation or into which the Company has
merged or the Person which acquires by conveyance, transfer or lease
substantially all the assets of the Company as an entirety, can lawfully perform
the obligations of the Company hereunder and executes and delivers to the Owner
Trustee an agreement, in form and substance reasonably satisfactory to the Owner
Trustee and Financial Security, which contains an assumption by such Person of
the due and punctual performance and satisfaction of each covenant and condition
to be performed or satisfied by the Company under this Agreement.
(h) Maintenance of Separate Corporate Existence. The Company
shall at all times hold itself out to the public, including WFS and the Bank,
under the Company's own name and as a separate and distinct entity from WFS and
the Bank. At all times at least one director and one executive officer of the
Company (or one individual serving in both capacities) shall be a Person who is
not a director, officer or employee of any Person owning beneficially more than
10% of the outstanding common stock of the Company. The Company shall maintain
separate corporate records and books of account from those of WFS and the Bank,
shall not commingle its assets with any other Person (except to the limited
extent (if any) permitted by the approval of Financial Security) and shall
authorize its corporate actions in accordance with applicable law. The Company
shall not engage in business transactions with any of its Affiliates on terms
and conditions less favorable to the Company than those available to the Company
for comparable transactions from Persons who are not Affiliates of the Company.
The Company shall maintain its chief executive office, principal place of
business and the office where it keeps its records in the State of California
and separate and apart from any office of the Master Servicer.
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(i) Compliance with Article 76 of New York Insurance Law. The
Company shall ensure that the Prospectus, and any supplements or amendments
thereto, and every preliminary prospectus delivered with respect to the Notes
and the Certificates, clearly disclose that the Policies are not covered by the
property/casualty insurance security fund specified in Article 76 of the New
York Insurance Law.
Section 2.10. Negative Covenants of the Company. The Company
agrees and covenants with Financial Security that at all times during the term
of this Agreement:
(a) Amendments to Organizational Documents. The Company shall
not amend, supplement or otherwise modify, or cause to permit any amendment,
supplement or other modification of, Articles 2 or 5 of its charter (or any
other Articles of its charter that relate to the matters addressed by such
Article 2 or 5) or its bylaws without the prior written consent of Financial
Security.
(b) No Liens. Without the prior written consent of Financial
Security, the Company shall not create, incur, assume or suffer to exist any
mortgage, deed of trust, security interest, assignment, deposit arrangement or
other preferential arrangement, charge or encumbrance (including, without
limitation, any conditional sale or other title retention agreement or finance
lease) of any nature upon or with respect to any of its properties or assets,
now owned or hereafter acquired, or sign or file under the Uniform Commercial
Code of any jurisdiction any financing statement that names the Company as a
debtor, or sign any security agreement authorizing any secured party thereunder
to file such financing statement.
(c) Creation of Indebtedness. Without the prior written
consent of Financial Security, the Company shall not create, incur, assume or
suffer to exist any indebtedness other than indebtedness guaranteed or approved
in writing by Financial Security.
(d) Guarantees, Etc. Without the prior written consent of
Financial Security, the Company shall not assume, guarantee, endorse or
otherwise be or become directly or contingently liable for the obligations of
any Person by, among other things, agreeing to purchase any obligation of
another Person, agreeing to advance funds to such Person or causing or assisting
such Person to maintain any amount of capital.
(e) Subsidiaries. Without the prior written consent of
Financial Security, the Company shall not form, or cause to be formed, any
subsidiaries.
(f) Insolvency. The Company shall not commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or
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seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seek appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets, or make a general
assignment for the benefit of its creditors. The Company shall not take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in any of the acts set forth above. The Company shall not be unable
to, or admit in writing its inability to, pay its debts.
(g) Impairment of Rights. The Company shall not take any
action or fail to take any action that will interfere with the enforcement of
any rights under this Agreement or the other Transaction Agreements.
Section 2.11. Affirmative Covenants of WFS. WFS covenants and
agrees with Financial Security that, at all times during the term of this
Agreement:
(a) Compliance With Agreements. WFS will comply with all terms
and conditions of this Agreement and each other Transaction Agreement to which
it is a party. WFS will not cause or permit to become effective any amendment to
or modification of the Transaction Agreements to which it is a party unless
Financial Security shall have previously approved in writing the form of such
amendment or modification.
(b) Financial Statements, Accountants' Reports, Other
Information. WFS shall keep proper books and records, in which full and correct
entries shall be made of financial transactions and the assets and business of
WFS in accordance with generally accepted accounting principles consistently
applied. WFS shall furnish to Financial Security, simultaneously with the
delivery of such documents to the Indenture Trustee, the Noteholders or the
Certificateholders, as the case may be, copies of all reports, certificates,
statements or notices furnished to the Indenture Trustee or the
Certificateholders, as the case may be, pursuant to the Sale and Servicing
Agreement. WFS shall also deliver to Financial Security, simultaneously with the
delivery of such documents to the relevant federal or state department or agency
copies of all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and
periodic reports on Form 8-K required to be filed by WFS with the Securities and
Exchange Commission.
(c) Certificate of Compliance. WFS shall deliver to Financial
Security, concurrently with the delivery of the financial statements required
pursuant to paragraph (b) above, a certificate signed by an Authorized Officer
of WFS stating that:
(i) a review of WFS's performance under this Agreement
and the other Transaction Agreements to which WFS is a party during
such period has been made under such officer's supervision; and
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(ii) to the best of such officer's knowledge, based upon
such review, WFS has fulfilled all its obligations under this Agreement
and the other Transaction Agreements to which WFS is a party during
such period, or, if there has been a default of any such obligation,
specifying each such default known to such officer and the nature and
status thereof.
(d) Access to Records; Discussions With Officers and
Accountants. WFS shall, upon the reasonable request of Financial Security,
permit Financial Security's Authorized Agent at reasonable times (i) to inspect
such books and records of WFS as may relate to the Notes, the Certificates and
the obligations of WFS under this Agreement and the other Transaction Agreements
to which WFS is a party; and (ii) to discuss the affairs, finances and accounts
of WFS with any of its respective officers, directors and representatives,
including its Independent Accountants.
(e) Maintain Licenses. WFS shall maintain all licenses,
permits, charters and registrations that are material to the performance by WFS
of its obligations under the Transaction Agreements to which it is a party or by
which WFS is bound.
(f) Maintain Existence; Merger. WFS shall keep in full effect
its existence, rights and franchises under the laws of the State of California,
and will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Contract Documents
and the Transaction Agreements to which WFS is a party. WFS shall not
consolidate with or merge into any other Person or convey, transfer or lease
substantially all of its assets as an entirety to any Person unless the Person
formed by such consolidation or into which WFS has merged or the Person which
acquires by conveyance, transfer or lease substantially all the assets of WFS as
an entirety, can lawfully perform the obligations of WFS hereunder and executes
and delivers to the Owner Trustee an agreement, in form and substance reasonably
satisfactory to the Owner Trustee and Financial Security, which contains an
assumption by such Person of the due and punctual performance and satisfaction
of each covenant and condition to be performed or satisfied by WFS under this
Agreement.
(g) Subservicing. WFS, as Master Servicer, shall not appoint,
pursuant to Section 4.01 of the Sale and Servicing Agreement, any Subservicer
that has not been approved in advance by Financial Security. WFS as Master
Servicer shall not cause or permit to become effective any Subservicing
Agreement that is in a form that varies substantially from the form thereof set
forth as [Exhibit B] to the Sale and Servicing Agreement unless the form of such
varying agreement shall have been approved in writing by Financial Security.
(h) No Petition Agreement. WFS covenants and agrees that, for
a period of one year plus one day after payment in full of all amounts payable
in respect of the Notes and the
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Certificates, it will not institute against, or join any other Person in
instituting against the Company any bankruptcy, reorganization, arrangement,
conservatorship, receivership, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy, receivership or similar law,
in connection with any amounts due WFS (or any Affiliate or parent thereof)
under any Transaction Agreement or otherwise without the prior written consent
of Financial Security. The provisions of this paragraph shall survive
termination of this Agreement.
ARTICLE III
THE POLICIES; INDEMNIFICATION
Section 3.01. Agreement to Issue Policies. Financial Security
agrees to issue the Policies subject to the satisfaction of the conditions
hereinafter set forth.
Section 3.02. Conditions Precedent to Issuance of Policies.
(a) The obligation of Financial Security to issue the Policies
is subject to the following having occurred or being true (as the case may be):
(i) WFS shall have assigned, conveyed and transferred, or caused to be assigned,
conveyed and transferred, the Collateral to the Company, (ii) the Company shall
have created a valid security interest in the Collateral in favor of the
Collateral Agent, (iii) the Company shall have assigned, conveyed and
transferred the Collateral to the Trust, (iv) no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the best knowledge
of the Company, threatened by the Commission and any request for additional
information on the part of the Commission (to be included in the Registration
Statement, the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Commission, (v) the Premium shall have been paid
in accordance with Section 3.03 hereof, (vi) the representations and warranties
of the Trust and each Western Entity set forth or incorporated by reference in
this Agreement shall be true and correct on and as of the Closing Date, and
(vii) each Transaction Agreement shall be in full force and effect as of the
Closing Date and no default (or event which, with the giving of notice or
passage of time, or both, would become a default) thereunder shall have occurred
and be continuing.
(b) The obligation of Financial Security to issue the Policies
is further subject to the condition precedent that Financial Security shall have
received on the Closing Date, or, in its sole and absolute discretion, received
the opportunity to review prior to and on the Closing Date, the following, each
dated the Closing Date and in full force and effect on such date, except as
otherwise provided herein, in form and substance satisfactory to Financial
Security and its counsel:
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(i) a certificate of an Authorized Officer of each
Western Entity other than WII stating that nothing has come to the
attention of such Western Entity to indicate that the Registration
Statement or the Prospectus, on the date the Registration Statement
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus on any date on which it was furnished to the Underwriter for
use in connection with the offering of the Certificates and Notes
contained, or on the Closing Date contains, any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements made therein not
misleading;
(ii) copies, certified to be true copies by the
Secretary or an Assistant Secretary of each Western Entity, of (i) the
resolutions of the Board of Directors of such Western Entity
authorizing the execution, delivery and performance of this Agreement
and each other Transaction Agreement to which such Western Entity is a
party and all other transactions and documents contemplated hereby and
thereby, and of all other documents evidencing any other necessary
action of such Western Entity (which certification shall state that
such resolutions have not been modified, are in full force and effect
and constitute the only resolutions adopted by such Western Entity's
Board of Directors or any committee thereof with respect thereto), (ii)
the articles of association, as amended, of such Western Entity and
(iii) the by-laws, as amended, of such Western Entity;
(iii) copies, certified to be true copies by an
Authorized Officer of the Owner Trustee, of (i) the resolutions of the
board of directors of the Owner Trustee authorizing the execution,
delivery and performance by the Owner Trustee of this Agreement and
each other Transaction Agreement to which the Owner Trustee is a party
and all transactions and documents contemplated hereby and thereby, and
of all other documents evidencing any other necessary action of the
Owner Trustee (which certification shall state that such resolutions
have not been modified, are in full force and effect and constitute the
only resolutions adopted by the Owner Trustee's board of directors or
any committee thereof with respect thereto and (ii) the Certificate of
Trust, certified by the Secretary of State or other appropriate
official of the State of Delaware;
(iv) a certificate of an Authorized Officer of each
Western Entity stating that (i) attached thereto are true and complete
copies, if any, of all consents, licenses and approvals necessary for
each Western Entity to execute, deliver and perform this Agreement, the
other Transaction Agreements to which such Western Entity is a party
and all other documents and instruments on the part of such Western
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Entity to be delivered pursuant hereto or thereto, and (ii) all such
consents, licenses and approvals are in full force and effect, such
Western Entity has not received any notice of any proceeding for the
revocation of any such license, charter, permit or approval, and, to
such Western Entity's knowledge, there is no threatened action or
proceeding or any basis therefor;
(v) a certificate of an Authorized Officer of the Owner
Trustee stating that (i) attached thereto are true and complete copies,
if any, of all consents, licenses and approvals necessary for the Owner
Trustee to execute, deliver and perform this Agreement, the other
Transaction Agreements to which the Owner Trustee is a party and all
other documents and instruments on the part of the Owner Trustee to be
delivered pursuant hereto or thereto have been obtained, and (ii) all
such consents, licenses and approvals are in full force and effect, the
Owner Trustee has not received any notice of any proceeding for the
revocation of any such license, charter, permit or approval, and, to
the Owner Trustee's knowledge, there is no threatened action or
proceeding or any basis therefor;
(vi) a certificate of the Secretary or an Assistant
Secretary of such Western Entity certifying (i) the names and true
signatures of the officers of such Western Entity executing and
delivering this Agreement, the other Transaction Agreements to which
such Western Entity is a party and the other documents to be executed
and delivered by such Western Entity hereunder and thereunder, (ii)
that approval by such Western Entity's stockholders of the execution
and delivery of this Agreement, the other Transaction Agreements and
all other such documents to be executed and delivered, by such Western
Entity hereunder, has been obtained or is not required, and (iii) that
no resolution for the dissolution of such Western Entity has been
adopted or contemplated and that no such proceedings have been
commenced or are contemplated;
(vii) a certificate of an Authorized Officer of the Owner
Trustee certifying (i) the names and the true signatures of the
officers of the Owner Trustee executing and delivering this Agreement,
the other Transaction Agreements to which the Owner Trustee is a party
and the other documents to be executed and delivered by the Owner
Trustee hereunder and thereunder, (ii) that approval by the Owner
Trustee's equity holders of the execution and delivery of this
Agreement, the other Transaction Agreements and all other such
documents to be executed and delivered, by the Owner Trustee hereunder,
has been obtained or its not required, and (iii) that no action for the
dissolution of the Owner Trustee has been adopted or contemplated and
that no such proceedings have commenced or contemplated;
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(viii) a certificate of an Authorized Officer of each
Western Entity to the effect that (x) the representations and
warranties of such Western Entity set forth or incorporated by
reference in this Agreement are true and correct on and as of the
Closing Date and (y) confirming that the conditions precedent set forth
herein with respect to such Western Entity are satisfied;
(ix) a certificate of an Authorized Officer of the Trust
to the effect that (x) the representations and warranties of the Trust
set forth or incorporated by reference in this Agreement are true and
correct on and as of the Closing Date and (y) confirming that the
conditions precedent set forth herein with respect to the Trust are
satisfied;
(x) a favorable opinion of Messrs. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇, LLP, counsel to the Company, WFS, the Bank and WII, and such
counsel shall have been instructed by its client to deliver such
opinion to the addressees thereof, in form and substance satisfactory
to counsel to Financial Security;
(xi) a letter dated the Closing Date from Messrs.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, counsel to the Company, WFS and the
Bank, to the effect that Financial Security may rely upon their
opinions as to certain bankruptcy and insolvency matters as if such
opinions were addressed to Financial Security, and such counsel shall
have been instructed by its client to deliver such reliance letter to
Financial Security;
(xii) a favorable opinion of Messrs. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇, LLP, special tax counsel to the Company, WFS, the Bank and
WII, and such counsel shall have been instructed by its client to
deliver such opinion to the addressees thereof, in form and substance
satisfactory to counsel to Financial Security;
(xiii) a favorable opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger,
counsel to the Trust and the Owner Trustee, and such counsel shall have
been instructed by its client to deliver such opinion to the addressees
thereof, substantially in the form of Exhibit G hereto;
(xiv) a certificate from the Collateral Agent and the
Indenture Trustee, substantially in the form of Exhibit E
hereto;
(xv) a favorable opinion of White & Case, counsel to the
Collateral Agent, the Proceeds Agent and the Indenture Trustee, and
such counsel shall have been instructed by its client to deliver such
opinion to the addressees thereof, substantially in the form of Exhibit
F hereto;
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(xvi) evidence that amounts due and payable to Financial
Security under Section 3.03 of this Agreement have been paid or that
acceptable provisions therefor have been made;
(xvii) a fully executed copy of each of the
Transaction Agreements;
(xviii) evidence that all actions necessary or, in the
opinion of Financial Security, desirable to perfect and protect the
interests transferred by the Sale and Servicing Agreement and the liens
and security interests created by this Agreement, including, without
limitation, the filing of any financing statements required by
Financial Security or its counsel, have been taken or promptly shall be
taken;
(xix) a certificate or opinion of Independent
Accountants addressed to Financial Security to the effect set
forth in Exhibit H hereto;
(xx) a certificate of the Master Servicer, signed by an
Authorized Officer, identifying those Contracts as to which the Title
Documents are not in the possession of the Company and certifying that
such Title Documents showing WFS or the Bank as first lienholder have
been applied for and as to which Section 3.09 of the Sale and Servicing
Agreement applies;
(xxi) evidence that the Company shall have deposited, or
caused to have been deposited, in the Collection Account, the deposits
required under the eighth paragraph of Section 4.01 of the Sale and
Servicing Agreement, the deposits required in the Spread Account and
any other deposits required to be made on the Closing Date under the
Transaction Agreements to which the Company is a party; and
(xxii) such other documents, instruments, approvals (and,
if requested by Financial Security, certified duplicates of executed
copies thereof) or opinions as Financial Security may reasonably
request.
Section 3.03. Premium. In consideration of the issuance by
Financial Security of the Policies, the Company shall pay to Financial Security
the initial installment of the Premium at the time of delivery of the Policies
and further installments of the Premium, all in accordance with the terms of the
letter agreement between the Company and Financial Security referred to in the
definition of "Premium" set forth herein. Failure by the Company to pay any such
further installments of the Premium shall not cause the Policies to be cancelled
and shall not in any way relieve Financial Security of its obligations to make
any payments under the Policies. Anything herein to the contrary
notwithstanding, it is hereby agreed between the parties hereto that the full
amount of the Premium shall have been earned by Financial Security upon its
issuance of the Policies on the Closing Date and upon the
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occurrence of a Servicer Default under Section 8.01 of the Sale and Servicing
Agreement (including without limitation, the failure of the Company to pay any
installment of the Premium as and when due), the entire outstanding balance of
further installments of the Premium shall be immediately due and payable. The
Premium shall be nonrefundable without regard to whether Financial Security
makes any payment under the Policies, any prepayment or early retirement of the
Notes or the Certificates occur or any other circumstances occur relating to the
Notes or the Certificates.
Section 3.04. Reimbursement Obligation.
(a) Each of the Trust and the Company agrees absolutely
and unconditionally to pay to Financial Security, in the manner
provided in Section 3.04(b), as follows:
(i) a sum equal to the total of all amounts which
may be paid by Financial Security under the Policies;
(ii) any accrued but unpaid installments of the Premium
and any and all reasonable charges and expenses which Financial
Security may pay or incur relating to any payment under the Policies,
including, but not limited to, any fees and charges in connection with
any accounts established to facilitate payments under the Policies, to
the extent Financial Security has not been immediately reimbursed on
the date that any amount is paid by Financial Security under the
Policies;
(iii) the amount of any reasonable costs or expenses
(including attorneys' and accountants' fees and expenses) incurred by
Financial Security (A) in connection with the enforcement of this
Agreement or any of the other Transaction Agreements or (B) in
connection with the foreclosure upon, sale or other disposition of the
Collateral, to the extent that such costs and expenses are not
recovered from such foreclosure, sale or other disposition;
(iv) the amount of any payments made by Financial
Security on behalf of the Company other than amounts specified under
Section 3.04(a)(i) above, including, without limitation, the fees and
expenses of the Collateral Agent, the Indenture Trustee, the Owner
Trustee, the Trust and any Independent Accountants, and the amount of
any payments made by Financial Security to (i) the Owner Trustee in
respect of amounts (if any) owing by the Trust to the Owner Trustee
pursuant to, Section 8.02 of the Trust Agreement and (ii) the Indenture
Trustee pursuant to Section 6.07 of the Sale and Servicing Agreement to
the extent that such amounts shall not have been paid by the Trust and
are paid by Financial Security;
(v) any federal, state or local tax (other than taxes
payable in respect of the gross income of Financial Security) or other
governmental charge imposed in connection
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with the issuance of the Policies or the business or operations of the
Company, including, without limitation, by reason of the Company's
being deemed to do business in the State of California;
(vi) Financial Security's cost of providing to the
Company (or to any Person at the request of the Company) any audited or
unaudited financial statements, including, without limitation, the fees
and expenses of Financial Security's Independent Accountants in
reviewing such financial statements in connection with such provision
and mailing and incremental printing costs;
(vii) any amount otherwise required to be paid to or on
behalf of Financial Security under this Agreement;
(viii) any payments made by Financial Security as, or in
lieu of, servicing, management, trustee, custodial or administrative
fees payable, in the sole discretion of Financial Security, to third
parties in connection with the transaction, to the extent (in each
case) that such payment occurs following (i) the occurrence of an Event
of Default (or event or circumstance that, with the giving of notice or
the passage of time or both, would become an Event of Default) or (ii)
the failure of any Person to perform its obligation to pay any such
amount at the time and in the manner specified in this Agreement or any
other Transaction Agreement; and
(ix) interest on any and all such amounts from the date
of payment by Financial Security of such amounts until payment thereof
in full and interest on any and all amounts described in Sections 3.03
and 3.09 hereof, from the date due until payment thereof in full, in
each case, payable at the Late Payment Rate.
(b) All amounts to be paid by the Trust or the Company
pursuant to subsection (a) above shall be due and payable without demand, and
shall be payable in the priority and in the manner provided in the Sale and
Servicing Agreement; provided, however, that upon the occurrence of any Servicer
Default under the Sale and Servicing Agreement, Financial Security shall have
the rights provided for herein and therein.
Section 3.05. Non-Recourse Obligation. Notwithstanding any
provision to the contrary contained in Section 3.04(a), the payment obligations
provided in Sections 3.04(a)(i) (to the extent that such payment obligations do
not arise from any failure or default in the performance by the Bank of any of
its payment obligations under the RIC), 3.04(a)(ii) and (to the extent that such
payment obligations do not arise from any failure or default in the performance
by the Company of any of its obligations under the Transaction Agreements)
3.04(a)(iii)(A) and (B), and any interest on the foregoing in accordance with
Section 3.04(a)(ix), shall not be recourse to the Company, WFS, WII, the Owner
Trustee,
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the Indenture Trustee, the Collateral Agent or the Proceeds Agent, but shall be
payable solely by application of moneys (excluding the Retained Yield) received
from time to time in accordance with the Sale and Servicing Agreement (including
but not limited to all amounts paid into the Collection Account, the Note
Distribution Account, the Certificate Distribution Account or the Holding
Account pursuant to the Sale and Servicing Agreement by any Western Entity, but
not including the Retained Yield to the extent that any amount thereof is
deposited into either such Account) and by realization on the Collateral
pursuant to Section 6.03 hereof. Such payment obligations shall be limited,
except as set forth in the preceding sentence, solely to application of monies,
if any, in the Spread Account from time to time in accordance with Transaction
Agreements.
Section 3.06. Indemnification.
(a) In addition to any and all rights of indemnification or
any other rights of Financial Security pursuant hereto or under law or equity,
the Company agrees to pay, and to protect, indemnify and save harmless,
Financial Security and its officers, directors, shareholders, employees, agents
and each person, if any, who controls Financial Security within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including,
without limitation, fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) or obligations whatsoever (herein
collectively referred to as "Liabilities") of any nature arising out of or
relating to the transactions contemplated by this Agreement and the other
Transaction Agreements by reason of:
(i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or the
Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as such Liabilities arise out of or are based upon any
such untrue statement or omission or allegation thereof based upon (A)
information set forth in the Prospectus under the caption "Financial
Security" or in the financial statements of Financial Security,
including any information in any amendment or supplement to the
Prospectus furnished by Financial Security in writing expressly for use
therein that amends or supplements such information (all such
information being referred to herein as "Financial Security
Information"), or (B) information set forth under the caption
"Underwriting" in the Prospectus, including any information in any
amendment or supplement to the Prospectus furnished by the Underwriter
in writing expressly for use therein that amends or supplements
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such information (all such information being referred to herein as\
"Underwriter Information");
(ii) to the extent not covered by clause (i) above, any
act or omission of the Company, WII or the Trust in connection with the
offering, issuance, sale or delivery of the Notes or the Certificates
other than by reason of false or misleading Financial Security
Information;
(iii) the misfeasance or malfeasance of, or theft
committed by, any director, officer, employee or agent of the
Company, WII or the Trust;
(iv) the violation by the Company, the Trust or WII of
any federal or state securities, banking or antitrust laws, rules or
regulations in connection with the issuance, offer and sale of the
Notes or the Certificates or the transactions contemplated by this
Agreement and the other Transaction Agreements;
(v) the violation by the Company, WII or the Trust of
any federal or state laws, rules or regulations relating to the maximum
amount of interest permitted to be received on account of the loan of
money or with respect to the Contracts;
(vi) the negligence or willful misconduct of the
Company, the Trust or WII or any of its directors, officers,
employees or agents;
(vii) the breach by the Company, WII or the Trust of
its obligations under this Agreement or any of the other
Transaction Agreements;
(viii) the breach by the Company, WII or the Trust of any
representation or warranty on the part of the Company, WII or the
Trust, respectively, contained in or incorporated by reference in this
Agreement or any other Transaction Agreement or in any certificate
furnished or delivered to Financial Security hereunder and thereunder,
or the occurrence, in respect of the Company or the Trust, under any of
the Transaction Agreements of any event of default or any event which,
with the giving of notice or lapse of time or both, would constitute
any event of default; and
(ix) the use, ownership or operation by the Company
or the Trust, WII or any affiliate of the Company, of a
Financed Vehicle.
(b) In addition to any and all rights of indemnification or
any other rights of Financial Security pursuant hereto or under law or equity,
WFS agrees to pay, and to protect, indemnify and save harmless, Financial
Security and its officers, directors, shareholders, employees, agents and each
person, if any, who controls Financial Security within the meaning of either
Section 15
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of the Securities Act or Section 20 of the Exchange Act, from and against any
and all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including, without limitation,
fees and expenses of attorneys, consultants and auditors and reasonable costs of
investigations) or obligations whatsoever (herein collectively referred to as
"Liabilities") of any nature arising out of or relating to the transactions
contemplated by this Agreement and the other Transaction Agreements by reason
of:
(i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or the
Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as such Liabilities arise out of or are based upon any
such untrue statement or omission or allegation thereof based upon (A)
information set forth in the Prospectus under the caption "Financial
Security" or in the financial statements of Financial Security,
including any information in any amendment or supplement to the
Prospectus furnished by Financial Security in writing expressly for use
therein that amends or supplements such information (all such
information being referred to herein as "Financial Security
Information"), or (B) information set forth under the caption
"Underwriting" in the Prospectus, including any information in any
amendment or supplement to the Prospectus furnished by the Underwriter
in writing expressly for use therein that amends or supplements such
information (all such information being referred to herein as
"Underwriter Information");
(ii) to the extent not covered by clause (i) above, any
act or omission of WFS in connection with the offering, issuance, sale
or delivery of the Notes or the Certificates other than by reason of
false or misleading Financial Security Information;
(iii) the misfeasance or malfeasance of, or theft
committed by, any director, officer, employee or agent of WFS;
(iv) the violation by WFS or any Affiliate (other than
Westcorp) thereof of any federal or state securities, banking or
antitrust laws, rules or regulations in connection with the issuance,
offer and sale of the Notes or the Certificates or the transactions
contemplated by this Agreement and the other Transaction Agreements;
(v) the violation by WFS or any Affiliate (other than
Westcorp) thereof of any federal or state laws, rules or regulations
relating to the maximum amount of interest permitted to be received on
account of the loan of money or with respect to the Contracts;
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(vi) the negligence or willful misconduct of WFS or
any of their respective directors, officers, employees or
agents;
(vii) the breach by WFS of its obligations under this
Agreement or any of the other Transaction Agreements;
(viii) the breach by WFS of any representation or warranty
on the part of WFS contained in or incorporated by reference in this
Agreement or any other Transaction Agreement or in any certificate
furnished or delivered to Financial Security hereunder and thereunder;
(ix) the use, ownership or operation by WFS, or any
Affiliate thereof (other than Westcorp), of a Financed
Vehicle; and
(x) the violation by the Company, the Trust or WII
of any of the provisions of (a) above caused by or at the
direction of WFS.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against Financial Security or any
person controlling Financial Security (hereinafter collectively referred to as a
Financial Security Indemnified Party) in respect of which indemnity may be
sought from the Company pursuant to Section 3.06(a)(i) or (ii) or WFS pursuant
to Section 3.06(b)(i), (ii) or (x) (such Western Entity or Western Entities, as
the case may be, herein referred to as the Indemnifying Western Entity), then
Financial Security or such controlling person shall give the Indemnifying
Western Entity written or telegraphic notice of such action or claim reasonably
promptly after receipt of written notice thereof. The Indemnifying Western
Entity shall be entitled to participate in the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
the Financial Security Indemnified Party. The Financial Security Indemnified
Party shall have the right to employ its own counsel in any such action in
addition to the counsel of the Indemnifying Western Entity, but fees and
expenses of such counsel will be at the expense of the Financial Security
Indemnified Party unless (1) the employment of counsel by the Financial Security
Indemnified Party has been authorized in writing by the Indemnifying Western
Entity or (2) the Indemnifying Western Entity has not in fact employed counsel
to assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action or (3) the named parties to any such
action or proceeding (including any impleaded parties) include both the
Indemnifying Western Entity on the one hand and the Financial Security
Indemnified Party on the other hand, and the Financial Security Indemnified
Party shall have been advised by counsel that there may be one or more legal
defenses available to it that are different from or additional to those
available to the Indemnifying Western Entity (it being understood, however, that
the Indemnifying Western Entity shall not, in connection with any one
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such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for the Financial Security
Indemnified Party, which firm shall be designated in writing by the Financial
Security Indemnified Party), in each of which cases the fees and expenses of
counsel will be at the expense of the Indemnifying Western Entity and all such
fees and expenses will be reimbursed promptly as they are incurred. No
settlement of any such claim or action shall be entered into without the consent
of Financial Security on the one hand and the Indemnifying Western Entity who is
subject to such claim or action on the other hand. Any failure by Financial
Security to comply with the provisions of this Section shall relieve the
Indemnifying Western Entity of liability only if substantially prejudicial to
the position of the Indemnifying Western Entity and then only to the extent of
such prejudice.
(d) The rights to indemnification provided for in this Section
3.06 shall survive the termination of this Agreement and shall survive until the
statute of limitations has run on any causes of action that arise from these
provisions and until all suits filed as a result thereof have been finally
concluded.
Section 3.07. Liability Absolute. The obligations of the
Company, WFS, WII and the Trust hereunder shall be absolute, unconditional and
irrevocable and shall be paid and performed strictly in accordance with the
terms of this Agreement under all circumstances whatsoever, including, without
limitation, the following circumstances:
(a) any lack of validity or enforceability of the
Policies or all or any provision of this Agreement or of any of the
other Transaction Agreements;
(b) any amendment or waiver of or any consent to departure
from all or any provision of this Agreement or of any other Transaction
Agreement;
(c) the existence of any claim, setoff, defense, reduction,
abatement or other right which either Western Entity may have at any time
against Financial Security or any other Person;
(d) any statement, instrument of assignment or any other
document presented to Financial Security in connection with the Policies proving
to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
(e) payment by Financial Security under the Policies against
presentation of a certificate or other document which does not comply with the
terms of the Policies, provided that such payment shall not have been the result
of the gross negligence or willful misconduct of Financial Security;
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(f) any nonapplication or misapplication by the Indenture
Trustee, the Owner Trustee, or any paying agent of the proceeds of the demand
for payment under the Policies;
(g) the failure of the Company or, indirectly, WFS, to receive
the proceeds of the sale of the Notes or the Certificates; or
(h) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, provided that such circumstance or
happening shall not have been the result of the gross negligence or willful
misconduct of Financial Security.
Section 3.08. Liability of Financial Security. Neither
Financial Security nor any of its officers, directors or employees shall be
liable or responsible for (a) the unauthorized use which may be made of the
Policies by the Indenture Trustee or the Owner Trustee or any unauthorized acts
or omissions of the Indenture Trustee or the Owner Trustee in connection with
the Policies; or (b) the validity, sufficiency, accuracy or genuineness of
documents, or of any endorsement(s) thereto, even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged; or (c) any acts or omissions to act of the Indenture Trustee in
connection with the Collateral other than such acts or omissions that are at the
direction of Financial Security. In furtherance and not in limitation of the
foregoing, Financial Security (or its Fiscal Agent) may accept documents that
appear on their face to be in order, without responsibility for further
investigation. Each of the Owner Trustee, the Indenture Trustee and each Western
Entity acknowledges that it has not relied on any information or materials
provided by Financial Security in connection with the issuance of the Notes and
the Certificates except for the information furnished in writing by Financial
Security for inclusion in the Registration Statement. Each of them also
acknowledges that it has not relied on any investigation by Financial Security
of the Collateral or of the financial statements or other financial statistical
data used in connection with the issuance of the Certificates.
Section 3.09. Payment of Costs, Fees and Expenses.
(a) The Company shall pay on demand any and all charges, fees,
costs and expenses which Financial Security may reasonably pay or incur,
including, but not limited to, attorneys' and accountants' fees and expenses, in
connection with (A) the enforcement, defense or preservation of any rights in
respect of any of this Agreement or any other Transaction Agreements, including
defending, monitoring or participating in any litigation or proceeding
(including any bankruptcy proceeding in respect of any transaction participant
or any Affiliate (other than WII or Westcorp) thereof) relating to any of the
Transaction Agreements and this Agreement, any party to any of the Transaction
Agreements and this Agreement, or the transaction, (B) any amendment, waiver or
other action with respect to, or related to, any Transaction
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Agreements and this Agreement whether or not executed or completed or (C) any
review or approval by Financial Security in connection with the delivery of any
additional or substitute collateral under any of the Transaction Agreements and
this Agreement. In addition, the Company shall reimburse Financial Security for
its expenses, including, without limitation, legal fees and disbursements,
incurred in connection with the preparation of this Agreement and the
Transaction Agreements and the consummation of the initial transactions
contemplated hereby and thereby, it being understood that the Company's
obligation to reimburse Financial Security pursuant to this sentence shall be
limited in the aggregate to the dollar amount set forth in the letter agreement
between the Company and Financial Security referred to in the definition of
"Premium" set forth herein, plus rating agency fees, to the extent paid by
Financial Security.
(b) WFS shall pay on demand any and all charges, fees, costs
and expenses not paid by the Company which Financial Security may reasonably pay
or incur, including, but not limited to, attorneys' and accountants' fees and
expenses, in connection with (A) the enforcement, defense or preservation of any
rights in respect of this Agreement or any other Transaction Agreements,
including defending, monitoring or participating in any litigation or proceeding
(including any bankruptcy proceeding in respect of any transaction participant
or any Affiliate (other than Westcorp) thereof) relating to this Agreement or
any other Transaction Agreements, any party to any of the Transaction Agreements
and this Agreement, or the transaction, (B) any amendment, waiver or other
action with respect to, or related to, this Agreement or any other Transaction
Agreements, whether or not executed or completed or (C) any review or approval
by Financial Security in connection with the delivery of any additional or
substitute collateral under any of the Transaction Agreements and this
Agreement.
Section 3.10. Payment Procedure. All payments made pursuant to
this Agreement shall be made to Financial Security in lawful currency of the
United States of America and in one-day clearing-house funds at Financial
Security's Notice Address before 1:00 p.m. (New York City time) on the date when
due.
Section 3.11. Business Days. In any case where the date of any
payment to Financial Security or the expiration of any time period hereunder
occurs on a day which is not a Business Day, then such payment may be made, or
such expiration shall occur, on the next succeeding Business Day with the same
force and effect as if made on the day of maturity or expiration of such period,
except that interest shall continue to accrue for the period after such date to
the next Business Day.
Section 3.12. Waivers and Consents by the Company and WFS. The
Company, WFS and any and all others who are now or may become liable for all or
part of the obligations of the Company and WFS under this Agreement (all of the
foregoing being referred to collectively in this Section as the "Obligors")
agree to be bound
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by this Agreement and (a) waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement privileges
against any amounts to be paid hereunder or any extension or renewal hereof; (b)
waive presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor and notice of protest; (c) waive all notices in connection
with the delivery and acceptance hereof and all other notices in connection with
the performance, default or enforcement of the payment hereof except as required
by this Agreement; (d) waive any and all lack of diligence and delays in the
enforcement of the payment hereof; (e) agree that the liability of each of the
Obligors shall be unconditional and without regard to the liability of any other
person or entity for the payment hereof and shall not in any manner be affected
by any indulgence or forbearance granted or consented to by Financial Security
with respect hereto; (f) consent to any and all extensions of time, renewals,
waivers or modifications that may be granted by Financial Security with respect
to the payment or other provisions hereof, and to the release of any security at
any time given for the payment hereof, or any part thereof, with or without
substitution, and to the release of any person or entity liable for the payment
hereof; and (g) consent to the addition of any and all other makers, endorsers,
guarantors and other obligors for the payment hereof, and to the acceptance of
any and all other security for the payment hereof or thereof, and agree that the
addition of any such obligors or security shall not affect the liability of any
of the Obligors for the payment hereof.
ARTICLE IV
PLEDGE OF COLLATERAL
Section 4.01. Obligations Secured Hereby. The agreements
contained in this Article IV are made to provide for and secure repayment of the
following indebtedness and liabilities of the Company (such indebtedness and
liabilities being herein called the "Obligations") in the order of priority
indicated:
First, (i) the repayment of all amounts, if any,
advanced or expended by the Collateral Agent, in its capacity as
Collateral Agent, for the account of the Company hereunder, (ii) the
payment of all reasonable costs and expenses at any time and from time
to time incurred by the Collateral Agent, in its capacity as Collateral
Agent, in connection with the administration or enforcement of this
Agreement or any related document (including, without limitation, the
fees and out-of-pocket expenses of counsel employed by the Collateral
Agent in connection therewith) and (iii) the payment of all indemnities
at any time and from time to time payable hereunder to the Collateral
Agent, by the Company, and
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Second, (i) the repayment of all amounts advanced or
paid by Financial Security under the Policies pursuant to this
Agreement and (ii) the payment of any accrued but unpaid installments
of the Premium and all costs and expenses at any time and from time to
time incurred by Financial Security in connection with the
administration or enforcement of this Agreement or any other
Transaction Agreement or any related document (including, without
limitation, the fees and out-of-pocket expenses of counsel employed by
Financial Security in connection therewith) and under or in connection
with this Agreement and the Policies.
Section 4.02. Granting Clause. In order to secure and to
provide for the repayment of the Obligations, the Company hereby assigns,
conveys, transfers, delivers and sets over unto the Collateral Agent, as
collateral agent for Financial Security, and hereby grants the Collateral Agent,
as collateral agent for Financial Security, a security interest in the
Collateral, to have and to hold said Collateral unto the Collateral Agent, its
successors and assigns, forever in pledge and trust for the benefit and security
of Financial Security, subject to the terms and provisions set forth in Article
V of this Agreement. The assignment and security interest so granted to the
Collateral Agent shall not relieve the Company from the performance of any term,
covenant, condition or agreement on the Company's part to be performed or
observed under or in connection with this Agreement or any other Transaction
Agreement, or impose any obligation on the Collateral Agent or Financial
Security to perform or observe any such term, covenant, condition or agreement
on the Company's part to be so performed or observed or impose any liability on
the Collateral Agent or Financial Security for any act or omission on the part
of the Company relative thereto or for any breach of any representation or
warranty on the part of the Company contained therein, or made in connection
therewith, and the Company hereby agrees to indemnify and hold harmless the
Collateral Agent and Financial Security from and against any and all losses,
liabilities (including liabilities for penalties), claims, demands, actions,
suits, judgments, costs and expenses arising out of or resulting from the
assignment and security interest granted hereby by virtue of any act or omission
on the part of the Company (other than an act or omission on the part of the
Company pursuant to or in accordance with an express direction from the
Collateral Agent or Financial Security), including, without limitation, the
reasonable costs, expenses and disbursements (including attorneys' fees)
incurred by the Collateral Agent or Financial Security in enforcing this
Agreement or any other Transaction Agreement. The assignment and security
interest granted to the Collateral Agent pursuant to this Section shall become
effective prior to the effectiveness of the Seller Assignments and the
assignment by the Seller to the Trust under Section 2.01 of the Sale and
Servicing Agreement and the assignment by the Trust to the Indenture Trustee
under the Indenture and, upon the effectiveness of such assignment and
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security interest, such assignment and security interest shall be subject to the
provisions of Section 5.01(d) hereof.
Section 4.03. Release of Collateral. Financial Security hereby
instructs the Collateral Agent that, at such time as a Contract is reconveyed by
the Trust pursuant to Sections 3.02, 4.07 and 9.01 of the Sale and Servicing
Agreement, the Collateral Agent shall release such Contract from the lien of the
security interest created hereby upon receipt of the Owner Trustee's assignment
delivered pursuant to Section 9.02 of the Sale and Servicing Agreement.
ARTICLE V
INTERCREDITOR PROVISIONS
Section 5.01. Financial Security's Direction Upon Servicer
Default.
(a) So long as no Financial Security Insolvency has occurred
and no Financial Security Default has occurred and is continuing, if there
exists any Servicer Default pursuant to Section 8.01 of the Sale and Servicing
Agreement, Financial Security shall, notwithstanding the provisions of Article
VIII of the Sale and Servicing Agreement, have the sole right to direct the
Indenture Trustee as to any and all actions to be taken under the Indenture or
the Sale and Servicing Agreement, as applicable, including, without limitation,
all actions with respect to (i) the giving of directions to the Master Servicer
and any Subservicer with respect to the servicing of the Contracts and any of
the respective obligations of the Company under the Sale and Servicing
Agreement, (ii) the exercise of all rights, remedies, powers, privileges and
claims against any obligor under the Sale and Servicing Agreement and (iii) the
giving or withholding of all consents, requests, notices, directions, approvals,
extensions or waivers under or with respect to the Indenture or the Sale and
Servicing Agreement, as applicable, in each case to the same extent as the
Noteholders or the Certificateholders might do but for the collateral assignment
and security interests granted to Financial Security hereunder, provided,
however, that the Indenture Trustee, without obtaining the consent or direction
of Financial Security, may at all times take any action permitted or required to
be taken by it under the terms of the Indenture or as a fiduciary in order to
protect the Indenture Trustee's, the Noteholders' and the Certificateholders'
interest in the Trust Estate or to preserve any available claims against the
Company on behalf of the Noteholders and the Certificateholders. Financial
Security shall indemnify the Indenture Trustee in full for any costs and
expenses incurred (including the reasonable fees and expenses of the Indenture
Trustee's counsel) in connection with the Indenture Trustee's due performance of
directions pursuant to this subsection (a) or in connection with any inaction of
the Indenture Trustee as a result of a direction from Financial Security at any
time when Financial
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Security holds the right to direct the Indenture Trustee as provided for in this
paragraph (a).
(b) Financial Security shall not unreasonably withhold any
consent required of it under the Sale and Servicing Agreement or the Indenture,
as applicable, and shall promptly respond when any approval or consent is
required of it under the Sale or Servicing Agreement and the Indenture, as
applicable.
(c) Notwithstanding any provision of the Sale and Servicing
Agreement or the Indenture, as applicable, to the contrary, so long as no
Financial Security Insolvency has occurred and no Financial Security Default has
occurred and is continuing,
(i) without the prior written consent of Financial
Security, the Owner Trustee shall not (A) terminate the rights and
powers of the Master Servicer pursuant to Section 8.01 of the Sale and
Servicing Agreement or (B) waive any Servicer Default thereunder;
(ii) without the prior written consent of Financial
Security, (A) neither the Company nor the Trust shall cause to be
appointed any successor Indenture Trustee, and, (B) neither the
Indenture Trustee nor the Administrator shall cause to be appointed any
Co-Trustee under the Indenture;
(iii) without the prior written consent of Financial
Security, neither the Company or WFS nor the Owner Trustee or the
Indenture Trustee shall appoint new Independent Accountants;
(iv) without the prior written consent of Financial
Security, neither the Company or WFS nor the Owner Trustee or the
Indenture Trustee shall consent to the amendment of or supplement to
any of the Transaction Agreements; and
(v) Financial Security shall have the power to direct
the actions to be taken by the Company pursuant to Section 3.02(a) of
the Sale and Servicing Agreement.
(d) Financial Security agrees that, until such time that all
required payments shall have been made with respect to the Notes and the
Certificates, the security interest in the Collateral granted to Financial
Security under this Agreement shall be junior and subordinate to the interest of
the Indenture Trustee and the Securityholders. Financial Security further agrees
that, until such time that all required payments shall have been made with
respect to the Notes and the Certificates, neither Financial Security nor any
Person acting on its behalf may take any action to foreclose or otherwise pursue
remedies with respect to the Collateral other than in accordance with the Sale
and Servicing Agreement and the Indenture.
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Section 5.02. Financial Security's Direction of Insolvency
Proceedings. Financial Security shall have the rights provided for in Section
8.06 of the Sale and Servicing Agreement.
ARTICLE VI
THE COLLATERAL AGENT; REMEDIES
Section 6.01. Appointment and Powers of Collateral Agent.
Financial Security hereby appoints Bankers Trust Company as the Collateral
Agent, and Bankers Trust Company accepts such appointment hereunder, and
Financial Security hereby authorizes the Collateral Agent to take such action on
its behalf and to exercise such rights, remedies, powers and privileges
hereunder as Financial Security may direct and as are specifically authorized to
be exercised by the Collateral Agent by the terms hereof, together with such
rights, remedies, powers and privileges as are reasonably incidental thereto.
The Collateral Agent may execute any of its duties as agent hereunder by or
through agents or employees and shall be entitled to retain counsel and to act
in reliance upon the advice of such counsel concerning all matters pertaining to
the agencies hereby created and its duties hereunder, and shall not be liable
for any action taken or omitted to be taken by it in good faith in accordance
with the advice of counsel selected by it. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
The duties of the Collateral Agent shall be mechanical and administrative in
nature. The Collateral Agent shall not have by reason of this Agreement a
fiduciary relationship. Nothing in this Agreement, express or implied, is
intended to or shall be so construed as to impose upon the Collateral Agent any
obligations in respect of this Agreement except as expressly set forth herein.
Neither the Collateral Agent nor Financial Security, nor any of its or their
respective directors, officers or employees, shall be liable for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith,
except for its or their own gross negligence or willful misconduct; nor shall
the Collateral Agent or Financial Security be responsible for the validity,
effectiveness, value, sufficiency or enforceability against the Company of this
Agreement or any other document furnished pursuant hereto or in connection
herewith, or of the Collateral (or any part thereof). The Collateral Agent shall
be entitled to rely on any communication, instrument, paper or other document
believed by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons.
Section 6.02. Successor Collateral Agent. The Collateral Agent
acting hereunder at any time may resign by an instrument in writing addressed
and delivered to the Company and Financial Security. If the Collateral Agent is
also the Indenture Trustee and, as such, determines that it has a conflicting
interest on account of its acting as Collateral Agent, the Collateral Agent
shall eliminate such conflicting interest by resigning as
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Collateral Agent hereunder rather than resigning as Indenture Trustee. Financial
Security shall appoint a successor to the Collateral Agent upon any such
resignation by an instrument of substitution complying with the requirements of
applicable law, or, in the absence of any such requirements, without formality
other than appointment and designation in writing, a copy of which instrument or
writing shall be sent to the Company; provided, however, that the validity of
any such appointment shall not be impaired or affected by any failure to give
any such notice to the Company or by any defect therein. Upon the making and
acceptance of such appointment, the execution and delivery by such successor
Collateral Agent of a ratifying instrument pursuant to which such successor
Collateral Agent agrees to assume the duties and obligations imposed on the
Collateral Agent by the terms of this Agreement, and the delivery to such
successor Collateral Agent of the Collateral and related documents then held by
the retiring Collateral Agent, such successor Collateral Agent shall thereupon
succeed to and become vested with all the estate, rights, powers, remedies,
privileges, immunities, indemnities, duties and obligations hereby granted to or
conferred or imposed upon the Collateral Agent named herein, and one such
appointment and designation shall not exhaust the right to appoint and designate
further successor Collateral Agents hereunder. No Collateral Agent shall be
discharged from its duties or obligations hereunder until the Collateral and
related documents then held by such Collateral Agent shall have been transferred
and delivered to the successor Collateral Agent and such retiring Collateral
Agent shall have executed and delivered to the successor Collateral Agent
appropriate instruments establishing the successor Collateral Agent as the
record holder of all liens and security interests in favor of Financial Security
in the Collateral and transferring to such successor Collateral Agent all power
given to it by the Indenture Trustee to act as attorney-in-fact of the Indenture
Trustee for purposes of this Agreement. Each such successor Collateral Agent
shall provide the Company and Financial Security with its address (which shall
thereupon become such successor Collateral Agent's Notice Address for purposes
of this Agreement), and its telephone, Telex, TWX and telecopier numbers, to be
used for purposes of Section 7.02 hereof, in a notice complying with the terms
of said Section.
Section 6.03. Remedies Available to Collateral Agent.
(a) To the fullest extent permitted by applicable law and
subject to Article V hereof, if the Master Servicer shall have been terminated
upon the occurrence of any Servicer Default pursuant to Section 8.01 of the Sale
and Servicing Agreement, then in every such case, the Collateral Agent may, to
the extent permitted by applicable law and subject to Article V hereof, exercise
the following rights, privileges and remedies:
(i) Collection of the Collateral. The Collateral
Agent shall have the right to collect all proceeds of the
Collateral, to pay all expenses of such collection, including
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the reasonable expenses and compensation of the Collateral Agent, its
agents and attorneys, and to apply the remainder of the moneys so
received as provided herein.
(ii) Sale of Collateral. The Collateral Agent may sell,
or cause to be sold, the Collateral or any part thereof or interest
therein, at public auction to the highest bidder for cash or at private
sale or auction with or without demand, advertisement or notice of the
date, time or place of sale or any adjournment thereof, upon such terms
as Financial Security may approve, and upon such sale the Collateral
Agent shall make and deliver to the purchaser or purchasers an
appropriate instrument or instruments of transfer. The Collateral Agent
is hereby irrevocably appointed the true and lawful attorney of the
Indenture Trustee, in its name and stead, to make all necessary
transfers of property thus sold; and for that purpose it may execute
all necessary instruments of transfer, and may substitute one or more
Persons with like power, the Indenture Trustee hereby ratifying and
confirming all that its said attorney, or such substitute or
substitutes, shall lawfully do by virtue hereof. Nevertheless, if so
requested by the Collateral Agent or any purchaser of the Collateral or
any part thereof, the Indenture Trustee shall ratify and confirm any
such sale or transfer by executing and delivering to the Collateral
Agent or such purchaser all proper instruments of transfer and releases
as may be designated in any such request. The Collateral Agent may
proceed at law or in equity to foreclose the lien of this Agreement
against all or any part of the Collateral and to have the same sold
under the judgment or decree of a court having jurisdiction or as
otherwise may be required or permitted by law. Upon any such sale,
whether made under the power of sale hereby given or by virtue of
judicial proceedings, any Noteholder, Certificateholder or Financial
Security may bid for and purchase the Collateral or any part thereof
and, upon compliance with the terms of such sale, may hold, retain,
possess or dispose of such property in its or their own absolute right
without accountability; and any purchaser at any such sale may, in
paying the purchase money, turn in any of the Notes or Certificates, as
applicable, in lieu of cash up to the amount which shall, upon
distribution of the net proceeds of such sale, be payable thereon. Said
Notes or Certificates, in case the amounts so payable thereon shall be
less than the amount due thereon, shall be returned to the Holders
thereof after being properly stamped to show partial payment. Upon any
sale, whether made under the power of sale hereby given or by virtue of
judicial proceedings, a receipt of the Collateral Agent, or of the
officer making such sale under judicial proceedings, shall be a
sufficient discharge to the purchaser or purchasers at such sale for
its or their purchase money, and such purchaser or purchasers shall not
be obliged to see to the application thereof. Any such sale, whether
under the power of sale hereby given or by virtue of judicial
proceedings, shall bind the Collateral Agent, the
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Company, the Indenture Trustee, the Noteholders and the
Certificateholders, shall operate to divest all right, title and
interest whatsoever, either at law or in equity, of each of them in and
to the property sold, and shall be a perpetual bar, both at law and in
equity, against each of them and their successors and assigns, and
against any and all Persons claiming through or under them.
(iii) Other Actions. The Collateral Agent shall have the
right to cause any other action permitted at law or in equity to be
initiated and prosecuted to enforce this Agreement and any rights
granted by virtue of the pledge of the Collateral hereunder and to
collect or enforce the Notes and the Certificates.
Section 6.04. Waiver of Stay or Extension Laws; Marshalling of
Assets. Each of the Company, the Owner Trustee, and the Indenture Trustee (in
each case to the extent permitted by applicable law) covenants that it will not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any appraisement, valuation, stay, extension or
redemption law wherever enacted, now or at any time hereafter in force, in order
to prevent or hinder the enforcement of this Agreement or the absolute sale of
the Collateral or any part thereof, or the possession thereof by any purchaser
at any sale under this Article; and each of the Company and the Indenture
Trustee (in each case to the extent permitted by applicable law), for itself and
all who may claim under it, hereby waives the benefit of all such laws, and
covenants that none of them will hinder, delay or impede the execution of any
power herein granted to the Collateral Agent, but will suffer and permit the
execution of every such power as though no such law had been enacted. Each of
the Company, the Owner Trustee and the Indenture Trustee, for itself and all who
may claim under it, waives (in each case to the extent permitted by applicable
law) all right to have the Collateral marshalled upon any foreclosure hereof,
and agrees that any court having jurisdiction to foreclose this Agreement may
order the sale of the Collateral as an entirety without the marshalling thereof.
Section 6.05. Restoration of Rights and Remedies. If the
Collateral Agent has instituted any proceeding to enforce any right or remedy
under this Agreement, and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Collateral Agent, then and
in every such case the Company, the Collateral Agent and the Indenture Trustee
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Collateral Agent shall continue as though no such proceeding
had been instituted.
Section 6.06. Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Collateral Agent is intended to be exclusive
of any other right or remedy, and every
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right shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law, in equity or otherwise, and each and every right, power and remedy, whether
specifically herein given or otherwise existing, may be exercised from time to
time and as often and in such order as may be deemed expedient by the Collateral
Agent, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any other right, power or remedy.
Section 6.07. Control by Financial Security. So long as no
Financial Security Insolvency has occurred and no Financial Security Default has
occurred and is continuing, Financial Security shall, upon the occurrence and
during the continuation of any of the Servicer Default described in Section 8.01
of the Sale and Servicing Agreement, subject to Article V hereof, have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Collateral Agent hereunder or otherwise or exercising any trust
or power conferred upon the Collateral Agent hereunder provided that:
(1) such direction shall not be in conflict with
any rule of law or with this Agreement or the Sale and
Servicing Agreement; and
(2) such Collateral Agent may take any other action
deemed proper by such Collateral Agent that is not inconsistent with
such direction.
Section 6.08. Proceeds Agent as Custodian and Bailee of
Collateral Agent. In order to facilitate the making of payments under the
Contracts, such payments shall be deposited by the Master Servicer in the
Collection Account or the Holding Account, and certain amounts in the Collection
Account shall be deposited in the Spread Account, in accordance with the Sale
and Servicing Agreement. The Proceeds Agent shall retain all proceeds deposited
in the Collection Account, the Spread Account and Holding Account as custodian
and bailee of the Collateral Agent for Financial Security. Financial Security
hereby acknowledges that the Proceeds Agent will also hold all such proceeds for
the benefit of the Noteholders and the Certificateholders. Solely for purposes
of perfection under Section 9-305 of the UCC, Financial Security and the
Proceeds Agent hereby acknowledge that the Proceeds Agent is acting as agent and
bailee of the Collateral Agent for Financial Security in holding such property
in the Collection Account, the Spread Account and the Holding Account, and any
other items constituting a part of the Collateral which from time to time come
into the possession of the Proceeds Agent. It is intended that, by the Proceeds
Agent's acceptance of such custodianship and bailment pursuant to this
Agreement, the Collateral Agent for Financial Security, as secured party, will
be deemed to have possession of such Collateral, items, moneys and such other
items for purposes of Section 9-305 of the UCC.
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Section 6.09. Indemnification of Collateral Agent. Financial
Security hereby indemnifies and holds the Collateral Agent harmless from and
against any and all judgments, claims, defenses, charges, losses, liabilities,
costs or expenses that the Collateral Agent may incur or that may be claimed
against the Collateral Agent by any Person by reason of any action taken, or any
failure to act, in connection with the duties and responsibilities of the
Collateral Agent under the terms of this Agreement; provided, however, that
Financial Security shall not be required to indemnify the Collateral Agent
pursuant to this Section for any judgments, claims, defenses, charges, losses,
liabilities, costs or expenses to the extent caused by such Collateral Agent's
willful misconduct or gross negligence in any action taken, or any failure to
act, in connection with the duties and responsibilities of the Collateral Agent
under the terms of this Agreement. The Collateral Agent shall have the right to
retain counsel in any action for which indemnification from Financial Security
is provided herein, and the reasonable fees and expenses of such counsel shall
constitute costs and expenses of such Collateral Agent for which indemnification
from Financial Security is provided herein. The Collateral Agent shall be
entitled to submit a written request, with supporting documentation, for any
amounts expended by it for which indemnification is provided herein, as such
amounts are expended or on a periodic basis, as the Collateral Agent shall
choose, and Financial Security shall reimburse to the Collateral Agent the
amount specified in each such written request promptly. The indemnity agreements
contained in this Section shall remain operative and in full force and effect
regardless of the termination of this Agreement.
Section 6.10. Compensation Payable to Collateral Agent. In
consideration of the Collateral Agent's services to be rendered hereunder, the
Master Servicer agrees to pay to the Collateral Agent, on behalf of Financial
Security, the compensation set forth in a separate letter agreement dated as of
the date hereof between the Master Servicer and the Collateral Agent
incorporated herein by this reference. The Collateral Agent acknowledges,
notwithstanding the fact that, in the event that payments from the Collection
Account are insufficient, it shall look solely to the Master Servicer for
payment of its compensation hereunder, that the Collateral Agent is acting
solely as the agent for Financial Security for purposes of this Agreement.
Failure by the Master Servicer to pay the Collateral Agent's compensation
hereunder shall not cause this Agreement to be cancelled, void or voidable or
otherwise terminated or otherwise affect the Collateral Agent's obligations
hereunder.
Section 6.11. Protection of Financial Security's Security
Interest.
(a) The Company shall execute and file (or cause to be
executed and filed) such financing statements and execute and file (or cause to
be executed and filed) such continuation statements, against the Company, all in
such manner and in such places as may
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be required by law (whether in the event of a change of the Company's name,
identity or corporate structure, or otherwise) fully to preserve, maintain, and
protect the interest of Financial Security in the Collateral. The Company shall
deliver (or cause to be delivered) to Financial Security file-stamped copies of,
or filing receipts for, any document filed as provided above, as soon as
available following such filing.
(b) The Company shall not change its name, identity, or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed by the Company, in accordance with
paragraph (a) above, seriously misleading within the meaning of Section 9-402(7)
of the UCC, unless it shall have given the Collateral Agent and Financial
Security at least 60 days' prior written notice thereof.
(c) The Company shall give Financial Security at least 60
days' prior written notice of any relocation of its principal executive offices
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement. The Company shall at
all times maintain each office from which it shall service the Contracts, and
its principal executive office, within the United States of America.
(d) Upon request, the Company shall furnish to Financial
Security, within seven Business Days, a list of the Contracts then held as part
of the Trust, together with a reconciliation of such list to the Schedule of
Contracts and to each of the Master Servicer's certificates furnished pursuant
to the Sale and Servicing Agreement before such request; provided, however, that
Financial Security shall not make such request more than four times in any
calendar year. Neither the Company nor the Master Servicer shall grant a
security interest in, or lien upon, or in any manner encumber the Collateral, or
release or waive the security interest granted herein, except as contemplated
herein.
(e) In the event that either the Master Servicer or the
Company relocates its principal executive office, the Company shall provide an
Opinion of Counsel to Financial Security, in form and substance satisfactory to
Financial Security, to the effect that upon the filing of any necessary
amendment to any previously filed financing or continuation statement or a new
financing statement, the Collateral Agent's security interest in the Collateral
granted hereunder shall remain valid and effective.
(f) The Company shall pay all reasonable costs and
disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of Financial Security's right, and
security interest in and to the Collateral.
Section 6.12. Representations and Warranties of Indenture
Trustee. The representations and warranties of the
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Indenture Trustee, made as Indenture Trustee, in Section 6.13 of the Indenture
are incorporated by reference herein as if set forth in full herein and
Financial Security may rely upon such representations and warranties.
Section 6.13. Certain Guaranties. Each of the Indenture
Trustee and the Master Servicer agrees that it (i) shall not treat any ledger
account or deposit account as an "Eligible Account" by reason of a guaranty of
the type described in clause (ii)(a) of the definition of "Eligible Account" in
the Sale and Servicing Agreement unless Financial Security shall have previously
approved in writing the form of such guaranty and (ii) shall not treat any
investment as an "Eligible Investment" by reason of a guaranty of the type
described in clause (iii)(b) or clause (vii) of the definition of "Eligible
Investments" in the Sale and Servicing Agreement unless Financial Security shall
have previously approved in writing the form of such guaranty.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Events of Default. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) any demand for payment shall be made under either of the
Policies;
(b) any representation or warranty made by the Trust, the
Company, WFS, WII under any of the Transaction Agreements, or in any certificate
or report furnished under any of the Transaction Agreements, shall prove to be
untrue or incorrect in any material respect, provided however, a violation of
Section 3.01(b) of the Sale and Servicing Agreement as to which the Company
shall have in a timely manner cured or repurchased the Contract as to each such
Financed Vehicle pursuant to Section 3.02 of the Sale and Servicing Agreement
shall not constitute an Event of Default hereunder;
(c) (i) the Trust, WII, the Company or WFS shall fail to pay
when due any amount payable by the Company or WFS under any of the Transaction
Agreements (other than payments of principal and interest on the Notes and the
Certificates); (ii) the Trust, WII, the Company or WFS shall have asserted that
any of the Transaction Agreements to which it is a party is not valid and
binding on the parties thereto; or (iii) any court, governmental authority or
agency having jurisdiction over any of the parties to any of the Transaction
Agreements or property thereof shall find or rule that any material provision of
any of the Transaction Agreements is not valid and binding on the parties
thereto; provided that as a result of such finding or ruling the rights or
remedies of Financial Security under this Agreement shall have been directly or
indirectly impaired in any material respect;
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(d) the Trust, WII, the Company or WFS shall fail to perform
or observe any other covenant or agreement contained in any of the Transaction
Agreements (except for the obligations described under clause (b) or (c) above)
and such failure shall continue for a period of 30 days after written notice
given to the Trust, WII, the Company or WFS (as applicable); provided that, if
such failure shall be of a nature that it cannot be cured within 30 days, such
failure shall not constitute an Event of Default hereunder if within such 30-day
period such party shall have given notice to Financial Security of corrective
action it proposes to take, which corrective action is agreed in writing by
Financial Security to be satisfactory and such party shall thereafter pursue
such corrective action diligently until such default is cured, and provided
further as a result of such failure the rights or remedies of Financial Security
under this Agreement shall have been directly or indirectly impaired in any
material respect;
(e) there shall have occurred an "Event of Default" as
specified in Section 5.01 of the Indenture;
(f) the Trust shall adopt a voluntary plan of liquidation or
shall fail to pay its debts generally as they come due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or shall institute any proceeding
seeking to adjudicate the Trust insolvent or seeking a liquidation, or shall
take advantage of any insolvency act, or shall commence a case or other
proceeding naming the Trust as debtor under the United States Bankruptcy Code or
similar law, domestic or foreign, or a case or other proceeding shall be
commenced against the Trust under the United States Bankruptcy Code or similar
law, domestic or foreign, or any proceeding shall be instituted against the
Trust seeking liquidation of its assets and the Trust shall fail to take
appropriate action resulting in the withdrawal or dismissal of such proceeding
within 30 days or there shall be appointed or the Trust consent to, or acquiesce
in, the appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Trust or the whole or any substantial part of its
properties or assets, or the Trust shall take any corporate action in
furtherance of any of the foregoing or the Trust terminates pursuant to Section
9.02 of the Trust Agreement;
(g) the Trust becomes taxable as an association (or publicly
traded partnership) taxable as a corporation for federal or state income tax
purposes;
(h) on any Distribution Date, the sum of Net Collections with
respect to such Distribution Date and the amounts available in the Spread
Account is less than the sum of the amounts payable on such Distribution Date
pursuant to clauses (i) through (ix) of Section 5.05 of the Sale and Servicing
Agreement; and
Section 7.02. Remedies; Waivers.
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(a) Upon the occurrence of an Event of Default, Financial
Security may exercise any one or more of the rights and remedies set forth
below:
(i) declare all indebtedness of every type or
description owed by the Trust, the Company, WFS or WII to Financial
Security, including, without limitation, the entire outstanding balance
of further installments of the Premium, to be immediately due and
payable, and shall there upon be immediately due and payable; and
(ii) the Collateral Agent, subject to Article V hereof,
shall have the right to take any action or initiate any proceeding at
law or equity available to it to enforce the terms of this Agreement.
(b) Financial Security shall have the right, to be exercised
in its complete discretion, to waive any Event of Default hereunder, by a
writing setting forth terms, conditions, and extent of such waiver signed by
Financial Security and delivered to an Authorized Officer of the Company. Unless
such writing expressly provides to the contrary, any waiver so granted shall
extend only to the specific event or occurrence that gave rise to the Event of
Default so waived and not to any other similar event or occurrence that occurs
subsequent to the date of such waiver.
(c) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to other
remedies given under the Transaction Agreements or existing at law or in equity.
No delay or failure to exercise any right or power accruing under any
Transaction Agreements upon the occurrence of any Event of Default or otherwise
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle Financial Security to
exercise any remedy reserved to Financial Security in this Article, it shall not
be necessary to give any notice.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Changes and Modifications. This
Agreement may be amended, changed, modified, altered or terminated only by
written instrument or written instruments signed by the parties hereto.
Section 8.02. Notices. All notices, certificates or other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, sent by overnight courier, or sent by
certified or registered mail, postage prepaid, return receipt requested,
addressed to the appropriate
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Notice Address. A duplicate copy of each notice, certificate or other
communication given hereunder to the Company, WFS, WII, Financial Security, the
Trust, the Indenture Trustee or the Collateral Agent shall also be given to each
of the others. Each party hereto may, by telecopy notice or by such other notice
described hereunder, designate any further or different address to which
subsequent notices, certificates or other communications shall be sent without
any requirement of execution of any amendment to this Agreement.
Section 8.03. Method of Payment. Except as otherwise expressly
provided herein, all payments to be made hereunder shall be made by wire
transfer or by certified or bank check payable to the appropriate party.
Section 8.04. Further Assurances and Corrective Instruments.
(a) To the fullest extent permitted by law, the parties hereto
agree that they will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such supplements hereto and
such further instruments as Financial Security may reasonably request and as may
be reasonably required in Financial Security's judgment to effectuate the
intention of or facilitate the performance of this Agreement and to protect the
interests of Financial Security and the Collateral Agent, including, without
limitation, the creation and maintenance of Financial Security's security
interest in the Collateral pursuant to this Agreement, subject to the
Intercreditor Agreement. The Company and the Master Servicer hereby authorize
the Collateral Agent to file, at the direction of Financial Security, financing
statements and amendments thereto relating to all or any part of the Collateral
without the signature of an officer of such entity where permitted by law in
order to maintain and perfect the security interests granted by this Agreement.
(b) In order to facilitate the servicing of the Contracts by
the Master Servicer, the Master Servicer is hereby authorized, in the name and
on behalf of Financial Security, the Trust, the Indenture Trustee and the
Company, to execute instruments of satisfaction or cancellation, or of partial
or full release or discharge, and other comparable instruments with respect to
the Contracts and with respect to the Financed Vehicles (and the Indenture
Trustee shall execute any such documents on request of the Master Servicer),
subject to the obligations of the Master Servicer under the Sale and Servicing
Agreement.
Section 8.05. Term of Agreement. This Agreement shall continue
in effect until the later of (a) the date on which Financial Security has no
further liability under the Policies or (b) the date on which each Western
Entity shall have paid or caused to be paid to Financial Security all amounts to
be paid by such Western Entity hereunder.
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Section 8.06. Assignments; Third-Party Rights; Reinsurance.
(a) This Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither the
Company, WFS, WII, nor the Collateral Agent may assign its rights or obligations
under this Agreement, or delegate any of its duties hereunder, without the prior
written consent of Financial Security. Any assignment made in violation of this
Agreement shall be null and void.
(b) Financial Security shall have the right to give
participations in its rights under this Agreement and to enter into contracts of
reinsurance with respect to the Policies upon such terms and conditions as
Financial Security may in its discretion determine; provided, however, that no
such participation or reinsurance agreement or arrangement shall relieve
Financial Security of any of its obligations hereunder or under the Policies and
provided further that Financial Security shall reimburse the Company, WFS or
WII, as the case may be, for any expense incurred by such Western Entity in
connection with the giving by Financial Security of participations or the
entering into such contracts of reinsurance.
(c) In addition, Financial Security shall be entitled to
assign or pledge to any bank or other lender providing liquidity or credit with
respect to the transactions contemplated by the Transaction Agreements or this
Agreement or the obligations of Financial Security in connection therewith any
rights of Financial Security under the Transaction Agreements or this Agreement
or with respect to any real or personal property or other interests pledged to
Financial Security, or in which Financial Security has a security interest, in
connection with the transactions contemplated by the Transaction Agreements or
this Agreement; provided that Financial Security shall reimburse the Company,
WFS or WII, as the case may be, for any expense incurred by either such Western
Entity in connection with the making by Financial Security of any such
assignment or pledge.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any Person, including, particularly, any Noteholder or
Certificateholder, other than Financial Security, against the Company, WFS or
WII, and all the terms, covenants, conditions, promises and agreements contained
herein shall be for the sole and exclusive benefit of the parties hereto and
their successors and permitted assigns. Neither the Owner Trustee or the
Indenture Trustee nor any Noteholder or Certificateholder shall have any right
to payment from any premiums paid or payable hereunder or from any other amounts
paid by the Company, WFS or WII pursuant to Section 3.03 or 3.04 hereof.
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Section 8.07. Consent of Financial Security. In the event that
Financial Security's consent is required under the terms hereof, or under the
terms of any other Transaction Agreement, it is understood and agreed that,
except as otherwise provided expressly herein or in any other Transaction
Agreement, the determination whether to grant or withhold such consent shall be
made solely by Financial Security in its absolute discretion.
Section 8.08. Right to Enforce Sale and Servicing Agreement.
The parties hereto acknowledge that Financial Security is a beneficiary of the
Sale and Servicing Agreement, and without limiting or restricting any of the
provisions thereof or hereof, Financial Security shall have the right to enforce
the provisions of the Sale and Servicing Agreement to the extent that it could
if it were a signatory of such agreement.
Section 8.09. WFS and WII as Parties Only for Certain
Provisions.
(a) Notwithstanding any provision to the contrary contained in
this Agreement, the parties hereto agree that WFS is joined as a party to this
Agreement solely for purposes of Sections 2.08, 2.11, 3.02, 3.06, 3.07, 3.08,
3.09, 3.10, 3.11, 3.12 and 6.13 of this Agreement and the other Sections
contained in Article VII of this Agreement.
(b) Notwithstanding any provisions to the contrary contained
in this Agreement, the parties hereto agree that WII is joined as a party to
this Agreement solely for purposes of Sections 2.04, 2.05, 2.06, 3.02, 3.07 and
3.08, of this Agreement and the other Sections contained in Article VII of this
Agreement.
Section 8.10. Severability. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by Financial Security hereunder is unavailable or unenforceable shall
not affect in any way the ability of Financial Security to pursue any other
remedy available to it.
Section 8.11. Reports. Any report, certificate, statement or
notice which the Company, WFS as the Master Servicer, and any successor Master
Servicer, is required to provide to the Owner Trustee, Indenture Trustee,
Noteholders or the Certificateholders under the Sale and Servicing Agreement
shall also be provided to Financial Security within the same time period
specified in the Sale and Servicing Agreement.
Section 8.12. Counterparts. This Agreement may be executed in
counterparts by the parties hereto and each such counterpart shall be considered
an original and all such counterparts shall constitute one and the same
instrument.
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Section 8.13. Governing Law. This Agreement shall be
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of New York.
Section 8.14. Headings. The headings of articles and sections
and the table of contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not affect its
construction or interpretation. Unless otherwise indicated, all references to
articles and sections in this Agreement refer to the corresponding articles and
sections of this Agreement.
Section 8.15. Trial by Jury Waived. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN
CONNECTION WITH ANY OF THE TRANSACTION AGREEMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE
TRANSACTION AGREEMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS
WAIVER.
Section 8.16. Limited Liability. No recourse under any
Transaction Agreement shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate or shareholder of any
party hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Transaction Agreements, the Notes, the Certificates or the Policies, it
being expressly agreed and understood that each Transaction Agreement is solely
a corporate obligation of each party hereto, and that any and all personal
liability, either in common law or in equity, or by statute or constitution, of
every such officer, employee, director, affiliate or shareholder for breaches by
any party hereto of any obligations under any Transaction Agreement is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Agreement.
Section 8.17. Limited Liability of Chase Manhattan Bank
Delaware. It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by Chase Manhattan Bank Delaware not
individually or personally but solely as Owner Trustee on behalf of the Trust,
(b) each of the representations, undertakings and agreements herein made on the
part of the Trust is made and intended not as personal representations,
undertakings and agreements by Chase Manhattan Bank Delaware, but are made and
intended for the purpose of binding only the Trust Estate, (c) nothing herein
contained shall be construed as creating any liability on Chase Manhattan Bank
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Delaware, individually or personally, to perform any covenant of the Trust
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties hereto and by any person claiming by, through or
under such parties and (d) under no circumstances shall Chase Manhattan Bank
Delaware be personally liable for the payment of any indebtedness or expenses of
the Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under this
Agreement.
Section 8.18. Entire Agreement. This Agreement and the
Policies set forth the entire agreement between the parties with respect to the
subject matter thereof, and this Agreement supersedes and replaces any agreement
or understanding that may have existed between the parties prior to the date
hereof in respect of such subject matter.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above mentioned.
WFS FINANCIAL 1997-A OWNER TRUST
By: CHASE MANHATTAN BANK DELAWARE
not in its individual capacity, but
solely in its capacity as Owner
Trustee under the Trust Agreement
By: _________________________________________
Title:
WFS FINANCIAL AUTO LOANS, INC.
By: _________________________________________
Title:
WFS FINANCIAL INC
By: _________________________________________
Title:
WFS INVESTMENTS, INC.
By: _________________________________________
Title:
FINANCIAL SECURITY ASSURANCE INC.
By: _________________________________________
Title: Authorized Officer
BANKERS TRUST COMPANY,
as Collateral Agent, Proceeds Agent
and Indenture Trustee
By: _________________________________________
Title: