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EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
by and among
FINANCIAL SECURITY ASSURANCE INC.
WFS FINANCIAL AUTO LOANS, INC.
WFS FINANCIAL INC
and
XXXXXXXXX, XXXXXX & XXXXXXXX SECURITIES CORPORATION
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TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Insurer . . . . . . . 3
3. Agreements, Representations and
Warranties of the Underwriter . . . . . . . . . . . . . . 5
4. Representation and Warranty of the
Seller and WFS . . . . . . . . . . . . . . . . . . . . . . 5
5. Indemnifications . . . . . . . . . . . . . . . . . . . . . . 6
6. Insurer Undertaking . . . . . . . . . . . . . . . . . . . . 6
7. Notice To Be Given Insurer . . . . . . . . . . . . . . . . . 6
8. Notice To Be Given Underwriter . . . . . . . . . . . . . . . 7
9. Contribution . . . . . . . . . . . . . . . . . . . . . . . . 8
10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. Governing Law, Etc. . . . . . . . . . . . . . . . . . . . . 10
12. Insurance Agreement; Underwriter Agreement . . . . . . . . . 10
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INDEMNIFICATION AGREEMENT
This Agreement, effective as of _____ __, 1997, by and among FINANCIAL
SECURITY ASSURANCE INC. (the "Insurer"), as the Insurer under the Financial
Guaranty Insurance Policies issued in connection with the Certificates and the
Notes (as hereinafter defined), WFS FINANCIAL AUTO LOANS, INC. (the "Seller"),
WFS FINANCIAL INC ("WFS") and XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES
CORPORATION (the "Underwriter").
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings stated below:
"Agreement" means this Indemnification Agreement by
and among the Insurer, the Seller, WFS and the Underwriter.
"Certificates" means $__________ ____% Auto
Receivable Backed Certificates of the Trust.
"Federal Securities Laws" means the Securities Act of
1933 (the "1933 Act"), the Securities Exchange Act of 1934,
the Trust Indenture Act of 1939, the Investment Company Act of
1940, the Investment Advisers Act of 1940 and the Public
Utility Holding Company Act of 1935, all as amended from time
to time, and any rule or regulation in effect from time to
time under any such Act.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 5 below, as the context
requires.
"Indemnifying Party" means any party required to
provide indemnification pursuant to Section 5 below, as the
context requires.
"Indenture" means the Indenture dated as of ________,
1997 by and between the Trust and Bankers Trust Company, as
Indenture Trustee.
"Insurance Agreement" means the Insurance, Indemnity
and Pledge Agreement dated as of the date hereof by and among
the Trust, the Seller, WFS, WFS Investments, Inc. ("WII"), the
Insurer and Bankers Trust Company, as Collateral Agent,
Proceeds Agent and Indenture Trustee.
"Insurance Laws" means any state, local or foreign
statute, and any rule or regulation thereunder, regulating (i)
transactions and dealings in insurance or
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(ii) any Person or entity engaging in the business of issuing,
selling or otherwise providing insurance.
"Insurer Party" means any of the Insurer and/or its
parent, subsidiaries and affiliates, and any shareholder,
director, officer, employee, agent or "controlling person" (as
such term is defined under any Federal Securities Law) of any
of the foregoing.
"Losses" means (i) any actual out-of-pocket loss paid
by the party entitled to indemnification or contribution, (ii)
any actual out-of-pocket costs or expenses paid by such party,
including reasonable fees and expenses of its counsel, to the
extent not paid, satisfied or reimbursed from funds provided
by any other Person (provided that the foregoing shall not
create or imply any obligation to pursue recourse against any
such other Person), plus (iii) interest on the amount paid by
the party entitled to indemnification or contribution from the
date of such payment to the date of payment by the party who
is obligated to indemnify or contribute hereunder at the
statutory rate applicable to judgments for breach of contract.
"Notes" means $_________ ____% Auto Receivable Backed
Notes, Class A-1, $_________ ____% Auto Receivable Backed
Notes, Class A-2, $__________ ____% Auto Receivable Backed
Notes, Class A-3 and $__________ ____% Auto Receivable Backed
Notes, Class A-4.
"Offering Documents" means the Prospectus and any
materials or documents delivered by the Underwriter or any
Underwriter Party to any Person in connection with the offer
or sale of the Certificates and the Notes.
"Person" means any individual, partnership, joint
venture, corporation, trust or unincorporated organization or
any government or agency or political subdivision thereof.
"Policies" means the financial guaranty insurance
policy (including the endorsement thereto) (Policy No.
______-N) issued by the Insurer in support of the Certificates
and the financial guaranty insurance policy (including the
endorsement thereto) (Policy No. ______-N) issued by the
Insurer in support of the Notes.
"Prospectus" means the Prospectus dated ________,
1997 relating to the Certificates and the Notes and the
Preliminary Prospectus dated ________, 1997 relating to the
Certificates and the Notes.
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"Seller Party" means the Seller and WFS and any
director, officer, employee, agent or "controlling person" (as
such term is defined under any Federal Securities Law) of
either the Seller or WFS.
"Trust" means WFS Financial 1997-B Owner Trust.
"Trust Agreement" means the Trust Agreement dated as
of ________, 1997, as amended and restated as of _________,
1997, by and among the Seller, WII, the Insurer and Chase
Manhattan Bank Delaware, as Owner Trustee.
"Underwriter Party" means any of the Underwriter, its
parent, subsidiaries and affiliates and any shareholder,
director, officer, employee, agent or "controlling person" (as
such term is defined under any Federal Securities Law) of any
of the foregoing.
2. Representations and Warranties of the Insurer. The
Insurer represents and warrants as follows:
(a) Organization and Licensing. The Insurer is a
duly incorporated and existing New York financial guaranty
insurance company licensed to do business in the State of New
York.
(b) Corporate Power. The Insurer has the
corporate power and authority to issue the Policies and
execute and deliver this Agreement, the Trust Agreement and
the Insurance Agreement and to perform all of its obligations
hereunder and thereunder.
(c) Authorization; Approvals. The issuance of
the Policies and the execution, delivery and performance of
this Agreement, the Trust Agreement and the Insurance
Agreement have been duly authorized by all necessary corporate
proceedings. No further approvals or filings of any kind,
including, without limitation, any further approvals of or
further filing with any governmental agency or other
governmental authority, or any approval of the Insurer's board
of directors or stockholders, are necessary for the Policies,
this Agreement, the Trust Agreement and the Insurance
Agreement to constitute the legal, valid and binding
obligations of the Insurer.
(d) Enforceability. The Policies, when issued,
this Agreement, the Trust Agreement and the Insurance
Agreement will each constitute a legal, valid and binding
obligation of the Insurer, enforceable in accordance with its
terms subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the enforceability of creditors' rights
generally applicable in the event of
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the bankruptcy, insolvency or reorganization of the Insurer
and to general principles of equity.
(e) Financial Information. The consolidated
balance sheet of the Insurer as of December 31, 1995 and as of
December 31, 1994, and the related consolidated statements of
income, changes in shareholder's equity, and cash flows for
the three fiscal years then ended, and the accompanying
footnotes, together with the report thereon dated January 17,
1996 of Coopers & Xxxxxxx LLP, independent auditors, and the
unaudited interim consolidated balance sheet of the Insurer as
of __________, 1997 and the related consolidated statements of
income, changes in shareholder's equity and cashflows for the
six- month periods ended ____________, 1997 and ____________,
1997, copies of which are included in the Prospectus
(collectively, the "Insurer Financial Statements"), fairly
present in all material respects the financial condition of
the Insurer as of such dates and for the periods covered by
such statements in accordance with generally accepted
accounting principles consistently applied and, since
September 30, 1996, there has been no material change in the
financial condition of the Insurer that would materially and
adversely affect its ability to perform its obligations under
the Policies.
(f) Insurer. The information in the Prospectus
as of the date hereof under the caption "Financial Security
Assurance Inc." that describes the Insurer and certain aspects
of the principal business in which the Insurer is engaged
(collectively, the "Insurer Information"), is true and correct
in all material respects and does not contain any untrue
statement of a fact that is material to the Insurer's ability
to perform its obligations under the Policies or omit to state
a fact (i) required to be stated therein that is material to
the Insurer's ability to perform its obligations under the
Policies or (ii) necessary in order to make statements therein
that are material to the Insurer's ability to perform its
obligations under the Policies, in light of the circumstances
under which such statements are being made, not materially
misleading.
(g) No Litigation. There are no actions, suits,
proceedings or investigations pending, or to the best of the
Insurer's knowledge, threatened against it at law or in equity
or before or by any court, governmental agency, board or
commission or any arbitrator that, if decided adversely, would
materially and adversely affect its condition (financial or
otherwise) or operations or would materially and adversely
affect its ability to perform its obligations under this
Agreement, the Trust Agreement, the Indenture or the Policies.
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Nothing in this Agreement shall be construed as a
representation or undertaking by the Insurer concerning the rating currently
assigned to its claims-paying ability by Xxxxx'x Investors Service, Inc.
("Moody's") and/or Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc. ("S&P") or any other rating agency (collectively,
the "Rating Agencies"). The Rating Agencies, in assigning such rating, may
take into account facts and assumptions not described in the Prospectus and the
facts and assumptions that are considered by the Rating Agencies are subject to
change over time. The Insurer has not attempted to disclose all facts and
assumptions that the Rating Agencies deem relevant in assigning a rating within
a particular rating category to the Insurer's claims-paying ability.
Notwithstanding the foregoing, the Insurer is not aware of any facts that, if
disclosed to Moody's or S&P, would be reasonably expected to result in a
downgrade of the rating of the claims-paying ability of the Insurer by either
of such Rating Agencies.
3. Agreements, Representations and Warranties of the
Underwriter. The Underwriter represents and warrants to and agrees with the
Insurer as follows:
(a) The Underwriter agrees not to use any
information relating to the Insurer (other than the
information contained in the Prospectus) unless such
information has been approved by the Insurer in writing, such
approval not to be unreasonably withheld.
(b) The Underwriter represents and warrants that
all material provided by the Underwriter for inclusion in the
Prospectus (being the information set forth in the last
paragraph of the cover page of the Prospectus, the first
paragraph on page 2 of the Prospectus and the second paragraph
under "Underwriting" in the Prospectus, including any
information in any amendment or supplement to the Prospectus
furnished that amends or supplements such information),
insofar as such information relates to the Underwriter (all
such information being collectively referred to herein as the
"Underwriter Information"), is true and correct in all
material respects.
4. Representation and Warranty of the Seller and WFS.
The Seller and WFS jointly and severally represent and warrant to the Insurer
and the Underwriter that the Prospectus does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading (except that no representation or warranty is made
with respect to the Insurer Information, the Insurer Financial Statements or
the Underwriter Information).
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5. Indemnifications.
(a) The Insurer hereby agrees, upon the terms and
subject to the conditions of this Agreement, to indemnify,
defend and hold harmless each Seller Party and each
Underwriter Party against any and all Losses incurred by them
with respect to the offer and sale of the Certificates and the
Notes and resulting from the Insurer's breach of any of its
representations and warranties set forth in Section 2 of this
Agreement.
(b) The Underwriter hereby agrees, upon the terms
and subject to the conditions of this Agreement, to indemnify,
defend and hold harmless each Insurer Party and each Seller
Party against any and all Losses incurred by them with respect
to the offer and sale of the Certificates and the Notes and
resulting from the Underwriter's breach of any of its
representations and warranties set forth in Section 3 of this
Agreement.
(c) Upon the incurrence of any Losses for which a
party is entitled to indemnification hereunder, the
Indemnifying Party shall reimburse the Indemnified Party
promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
6. Insurer Undertaking. The Insurer hereby agrees that,
for a period of five years hereafter, the Insurer will furnish to the
Underwriter or the Seller, upon request and at the expense of the Underwriter
or the Seller, as the case may be, copies of the Insurer's most recent
financial statements (annual or interim, as the case may be) prepared in
accordance with generally accepted accounting principles (subject, as to
interim statements, to normal year-end adjustments) within a reasonable time
after they are available.
7. Notice To Be Given Insurer. Except as provided in
Section 9, the indemnification provided herein by the Insurer shall be the
exclusive remedy of any Underwriter Party or Seller Party for the Insurer's
breach of a representation or warranty hereunder; provided, however, that any
Underwriter Party or Seller Party shall be entitled to pursue any other remedy
at law or in equity for any such breach so long as the damages sought to be
recovered shall not exceed the Losses incurred thereby resulting from such
breach. In the event that any action or regulatory proceeding shall be
commenced or claim asserted that may entitle an Underwriter Party or Seller
Party to be indemnified under this Agreement, such party shall give the Insurer
written or telegraphic notice of such action or claim reasonably promptly after
receipt of written notice thereof. The Insurer 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 Seller Party or
Underwriter Party, as the case may be. The Indemnified Party will have the
right to employ its own counsel in any such action in
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addition to the counsel of the Insurer, but the fees and expenses of such
counsel will be at the expense of such Indemnified Party, unless (1) the
employment of counsel by the Indemnified Party at its expense has been
authorized in writing by the Insurer, (2) the Insurer 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 Insurer and the Indemnified Party, and the 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 Insurer
(it being understood, however, that the Insurer shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Party, which firm shall be designated in writing by the Indemnified
Party), in each of which cases the fees and expenses of counsel will be at the
expense of the Insurer 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 the Seller Party or Underwriter Party,
as the case may be, on the one hand and each Insurer Party who is subject to
such claim or action on the other hand. Any failure by a Seller Party or
Underwriter Party, as the case may be, to comply with the provisions of this
Section shall relieve the Insurer of liability only if such failure is
substantially prejudicial to the Insurer's position and then only to the extent
of such prejudice.
8. Notice To Be Given Underwriter. Except as provided
in Section 9, the indemnification provided herein by the Underwriter shall be
the exclusive remedy of any Insurer Party for the Underwriter's breach of a
representation, warranty or agreement hereunder; provided, however, that each
Insurer Party shall be entitled to pursue any other remedy at law or in equity
for any such breach so long as the damages sought to be recovered shall not
exceed the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim asserted
that may entitle an Insurer Party to be indemnified under this Agreement, such
party shall give the Underwriter written or telegraphic notice of such action
or claim reasonably promptly after receipt of written notice thereof. The
Underwriter 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 Insurer Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Underwriter,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (1) the employment of counsel by the Indemnified
Party at its expense has been authorized in writing by the Underwriter; (2) the
Underwriter has not in fact employed counsel to assume the defense of such
action within a reasonable
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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 Insurer and the Indemnified Party, and the Insurer 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
Indemnified Party (it being understood, however, that the Indemnified Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Insurer, which firm shall be designated in
writing by the Insurer), in each of which cases the fees and expenses of
counsel will be at the expense of the Underwriter 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 the
Insurer and each Underwriter Party. Any failure by an Insurer Party to comply
with the provisions of this Section shall relieve the Underwriter of liability
only if such failure is substantially prejudicial to the Underwriter's position
and then only to the extent of such prejudice.
9. Contribution. To provide for just and equitable
contribution if the indemnification provided for pursuant to this Agreement is
determined to be unavailable for any Underwriter Party, Insurer Party or Seller
Party (other than due to application of this Section), the Insurer, the Seller,
WFS and the Underwriter, as the case may be, shall contribute to the aggregate
costs of liabilities arising from any breach of a representation or warranty
set forth in this Agreement (i) in such proportion as is appropriate to reflect
the relative benefits received by the Insurer, the Seller, WFS and the
Underwriter from the offering of the Certificates and the Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Insurer, the
Seller, WFS and the Underwriter in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Seller and WFS, the Insurer and the Underwriter shall be deemed to be,
respectively, in the same proportions as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Seller, the premiums on the Policies to be paid to the Insurer
and the underwriting discounts and commissions received by the Underwriter.
The relative fault of each Indemnifying Party, on the one hand, and of each
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section 2, 3 or 4 of this Agreement
relates to information supplied by, or an action within the control of, the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge,
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access to information and the opportunity to correct or prevent such breach.
The parties agree that the Insurer shall be solely responsible for the Insurer
Information, the Underwriter shall be solely responsible for the Underwriter
Information and the Seller and WFS shall be jointly and severally responsible
for all other information in the Prospectus.
Notwithstanding anything in this Section 9 to the contrary,
with respect to contribution between any Seller Party and any Underwriter
Party, the Underwriter Parties shall not be required to contribute an amount in
excess of the amount by which the total price of the sum of the Certificates
and the Notes sold by such Underwriter Parties exceeds the amount of any
damages that such Underwriter Parties have otherwise been required to pay in
respect of such untrue or alleged untrue statement or omission or alleged
omission. The terms of the contribution between any Seller Party and any
Underwriter Party contained in the Underwriting Agreement relating to the
Certificates and the Notes, dated ________, 1997, among the Underwriter, the
Seller and WFS shall control to the extent they are inconsistent with or in
addition to the terms of this Section 9. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Agreement shall remain operative and in full force and effect, regardless of
(a) any investigation made by or on behalf of any Underwriter Party or any
Insurer Party (b) the issuance of the Certificates, the Notes or the Policies
or (c) any termination of this Agreement. The indemnification provided in this
Agreement will be in addition to any liability that the parties may otherwise
have.
Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution of the Losses
incurred.
10. Notices. All notices and other communications
provided for under this Agreement shall be addressed to the address set forth
below as to each party or at such other address as shall be designated by a
party in a written notice to the other party.
If to the Insurer: Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Senior Vice President -
Surveillance
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If to the Seller: WFS Financial Auto Loans, Inc.
00 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
If to WFS: WFS Financial Inc
00 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx Xxxxxx
If to the Underwriter: Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation
000 Xxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
11. Governing Law, Etc. This Agreement shall be deemed
to be a contract under the laws of the State of New York and shall be governed
by and construed in accordance with the laws of the State of New York. This
Agreement may not be assigned by any party without the express written consent
of each other party. Any assignment made in violation of this Agreement shall
be null and void. Amendments of this Agreement shall be in writing signed by
each party. This Agreement shall not be effective until executed by each of
the Insurer, the Seller, WFS and the Underwriter.
12. Insurance Agreement; Underwriter Agreement. This
Agreement in no way limits or otherwise affects the indemnification and
contribution obligations of the Seller and WFS under (a) the Insurance
Agreement, or (b) any agreement between the Underwriter and the Seller with
respect to the underwriting of the Certificates and the Notes.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized, all as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
------------------------------------------
Authorized Officer
WFS FINANCIAL AUTO LOANS, INC.
By:
------------------------------------------
Title:
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WFS FINANCIAL INC
By:
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Title:
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XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
By:
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Title:
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