1
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
2
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
i
3
INDEMNIFICATION AGREEMENT
This Agreement, effective as of September 1, 1996,
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 June
1, 1996 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
4
(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 $__________ ____% Money Market
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 X- 0.
"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. ________) issued by the
Insurer in support of the Certificates and the
financial guaranty insurance policy (including the
endorsement thereto) (Policy No. ________) issued
by the Insurer in support of the Notes.
"Prospectus" means the Prospectus dated
September __, 1996 relating to the Certificates and
the Notes and the Preliminary Prospectus dated
September __, 1996 relating to the Certificates and
the Notes.
2
5
"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 1996-D Owner Trust.
"Trust Agreement" means the Trust Agreement
dated as of September 1, 1996, by and among the
Seller, WII, the Insurer and The Chase Manhattan
Bank (USA), 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
3
6
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, independent auditors, and the unaudited
interim consolidated balance sheet of the Insurer
as of June 30, 1996 and the related consolidated
statements of income, changes in shareholder's
equity and cashflows for the six-month periods
ended June 30, 1996 and June 30, 1995, 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, 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.
4
7
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 XxXxxx-Xxxx
Corporation, 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).
5
8
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
6
9
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
7
10
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,
8
11
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 June __, 1996, 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
9
12
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.
10
13
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
By:
---------------------------
Title:
---------------------------
11
