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EXHIBIT 10.6
R&W DRAFT
1/20/97
INDEMNIFICATION AGREEMENT
by and among
FINANCIAL SECURITY ASSURANCE INC.
WFS FINANCIAL AUTO LOANS, INC.
WFS FINANCIAL INC
and
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
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TABLE OF CONTENTS
Page
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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 March 1, 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 ▇▇▇▇▇▇▇▇▇, LUFKIN & ▇▇▇▇▇▇▇▇ 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 March 1,
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 $_____________ ___% 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 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.
__________ B-N) issued by the Insurer in support of the
Certificates and the financial guaranty insurance policy
(including the endorsement thereto) (Policy No. __________
A-N) issued by the Insurer in support of the Notes.
"Prospectus" means the Prospectus dated March __,
1997 relating to the Certificates and the Notes and the
Preliminary Prospectus dated March __, 1997 relating to
the Certificates and the Notes.
"Seller Party" means the Seller and WFS and any
director, officer, employee, agent or "controlling
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person" (as such term is defined under any Federal Securities
Law) of either the Seller or WFS.
"Trust" means WFS Financial 1997-A Owner Trust.
"Trust Agreement" means the Trust Agreement dated as
of March __, 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 the bankruptcy, insolvency or reorganization
of the Insurer and to general principles of equity.
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(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 & ▇▇▇▇▇▇▇, independent auditors, and the
unaudited interim consolidated balance sheet of the Insurer as
of [September 30, 1996] and the related consolidated
statements of income, changes in shareholder's equity and
cashflows for the six-month periods ended [September 30, 1996]
and [September 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
[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.
Nothing in this Agreement shall be construed as a
representation or undertaking by the Insurer concerning the rating
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currently assigned to its claims-paying ability by ▇▇▇▇▇'▇ Investors Service,
Inc. ("Moody's") and/or Standard & Poor's Ratings Services, a division of
▇▇▇▇▇▇-▇▇▇▇ 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).
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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
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 ▇▇▇▇ ▇▇▇) 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.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President -
Surveillance
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If to the Seller: WFS Financial Auto Loans, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to WFS: WFS Financial Inc
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
If to the Underwriter: ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, 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:_________________________
WFS FINANCIAL INC
By:____________________________
Title:_________________________
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
By:____________________________
Title:_________________________
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