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EXHIBIT 10.6
R&W DRAFT:
10/9/97
INDEMNIFICATION AGREEMENT
dated as of , 1997
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 Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . 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 Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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"), XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION, as representative (the "Representative") of the several
Underwriters named in the Underwriting Agreement referred to below.
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 Representative.
"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 the date
hereof, 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.
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"Insurance Laws" means any state, local or foreign
statute, and any rule or regulation thereunder, regulating (i)
transactions and dealings in insurance or (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 an 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, limited liability company, 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-D 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 Underwriters,
their parents, 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.
"Underwriters" means Xxxxxxxxx, Xxxxxx and Xxxxxxxx
Securities Corporation and BancAmerica Securities, Inc.
"Underwriting Agreement" means the Underwriting
Agreement dated , 1997, among the Seller, WFS and
the Representative.
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.
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(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 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, 1996 and as of
December 31, 1995, 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 24,
1997 of Coopers & Xxxxxxx LLP, independent auditors, and the
unaudited interim consolidated balance sheet of the Insurer as
of June 30, 1997 and the related consolidated statements of
income, changes in shareholder's equity and cashflows for the
three-month periods ended June 30, 1997 and June 30, 1996,
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 June 30, 1997, 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
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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.
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
Underwriters. The Underwriters, severally and not jointly, represent, warrant
and agree with the Insurer as follows:
(a) Each of the Underwriters 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) Each of the Underwriters 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 Underwriters that the Prospectus does not
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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).
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) Each of the Underwriters hereby agrees,
severally and not jointly, 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 such
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
Underwriters or the Seller, upon request and at the expense of the Underwriters
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
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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 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 Underwriters. Except as provided
in Section 9, the indemnification provided herein by the Underwriters shall be
the exclusive remedy of any Insurer Party for any 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 Underwriters written or telegraphic notice of such action
or claim reasonably promptly after receipt of written notice thereof. The
Underwriters shall be entitled to participate in the defense of any such action
or claim in reasonable cooperation with, and with the
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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 Underwriters, 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
Underwriters; (2) the Underwriters have 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 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 Underwriters 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
Underwriters of liability only if such failure is substantially prejudicial to
the Underwriters' 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 Underwriters, 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 (including
amounts payable to WestFin Securities Corporation ("WestFin") pursuant to the
Underwriting Agreement and the Underwriters 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, WestFin and the
Underwriters 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,
WestFin and WFS, the Insurer and the Underwriters shall be deemed to be,
respectively, in the same proportions as the total proceeds from the offering
(net of underwriting discounts and
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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 Underwriters. 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, 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 Underwriters 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 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
0
00
Xxx Xxxx, Xxx Xxxx 00000
Attention: Senior Vice President -
Surveillance
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 Underwriters: Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation,
as Representative of the
several Underwriters
000 Xxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx
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 Representative.
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 Underwriters 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:
------------------------------
WFS FINANCIAL INC
By:
---------------------------------
Title:
------------------------------
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION,
as Representative of the several
Underwriters
By:
---------------------------------
Title:
------------------------------
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