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EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
dated as of , 1998
by and among
FINANCIAL SECURITY ASSURANCE INC.
WFS FINANCIAL AUTO LOANS, INC.
WFS FINANCIAL INC
and
DONALDSON, LUFKIN & JENRETTE 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 ____________, 1998, 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"), DONALDSON, LUFKIN & JENRETTE 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 ,
1998 relating to the Certificates and the Notes and the
Preliminary Prospectus dated , 1998 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 1998-A Owner Trust.
"Trust Agreement" means the Trust Agreement dated as of
___________, 1998, as amended and restated as of , 1998, 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 Donaldson, Lufkin and Jenrette
Securities Corporation and BancAmerica Robertson
Stephens.
"Underwriting Agreement" means the Underwriting
Agreement dated , 1998, 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 & Lybrand
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 September
30, 1997 and September 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
September 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
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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 currently assigned to its
claims-paying ability by Moody's Investors Service, Inc. ("Moody's") and/or
Standard & Poor's, a division of The McGraw-Hill 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 1933
Act) 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.
350 Park Avenue
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New York, New York 10022
Attention: Senior Vice President -
Surveillance
If to the Seller: WFS Financial Auto Loans, Inc.
23 Pasteur Road
Irvine, California 92618
Attention: James R. Dowlan
If to WFS: WFS Financial Inc
23 Pasteur Road
Irvine, California 92618
Attention: Harriet Burns Feller
If to the Underwriters: Donaldson, Lufkin & Jenrette
Securities Corporation,
as Representative of the
several Underwriters
277 Park Avenue
9th Floor
New York, New York 10172
Attention: Alan H. Mentle
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:
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Authorized Officer
WFS FINANCIAL AUTO LOANS, INC.
By:
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Title:
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WFS FINANCIAL INC
By:
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Title:
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DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
as Representative of the several
Underwriters
By:
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Title:
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