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R&W DRAFT:
9/14/98
INDEMNIFICATION AGREEMENT
dated as of , 1998
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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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"), 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 _________ , 1998
relating to the Certificates and the Notes, as filed with the
Securities and Exchange Commission pursuant to Rule 424(b) under
the Securities Act of 1933, as amended,
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and the Preliminary Prospectus dated ______________ , 1998
relating to the Certificates and the Notes.
"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-D Owner Trust.
"Trust Agreement" means the Trust Agreement effective 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 Xxxxxxxxx, Xxxxxx and Xxxxxxxx
Securities Corporation and BancAmerica Xxxxxxxxx
Xxxxxxxx.
"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
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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.
(e) Financial Information. The consolidated balance sheet
of the Insurer as of December 31, 1997 and as of December 31,
1996, 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 of Coopers & Xxxxxxx LLP, independent
auditors, and the unaudited interim consolidated balance sheet of
the Insurer as of March 31, 1998 and the related consolidated
statements of income, changes in shareholder's equity and
cashflows for the three-month periods ended March 31, 1998 and
March 31, 1997, copies of which are included in the Prospectus
(collectively, the "Insurer Financial Statements"), fairly
present in all material respects the financial condition of the
Insurer as of such dates and for the periods covered by such
statements in accordance with generally accepted accounting
principles consistently applied and, since March 31, 1998, 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.
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(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 currently assigned to its
claims-paying ability by Xxxxx'x Investors Service, Inc. ("Moody's") and/or
Standard & Poor's, 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.
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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 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. In
addition, until the ninety-first (91st) day following the date of the
Prospectus, the Insurer will promptly provide the Underwriters and the Seller
with any revisions to the Insurer Information that are in the judgment of the
Insurer necessary to prepare an amended Prospectus or a supplement to the
Prospectus or to be incorporated by reference into the Prospectus (as may then
be amended or supplemented) as described in the Prospectus under "Incorporation
of Certain Documents by Reference".
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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 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
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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 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
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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 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
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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
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:
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Title:
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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........................ 6
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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