Exhibit

4.4




 




AMBAC ASSURANCE CORPORATION




 




NOTE GUARANTY INSURANCE POLICY




 




Policy

No.  AB0669BE




 




Insured Party:                                                                                                                                                                     The

Indenture Trustee (as defined herein) for the benefit of the Registered Holders

(as defined herein) of the Household Automotive Trust 2003-1, Series 2003-1

Class A Asset-Backed Notes issued pursuant to the Indenture.




 




Insured

Obligations:                                                                                                                                   To

the extent set forth herein, the aggregate interest on and the aggregate

outstanding principal balance of all Class A Notes owned by Registered

Holders, such principal amount not to exceed in the aggregate $1,049,000,000.




 




Policy Claim

Amounts:                                                                                                                       (i) With

respect to each Distribution Date, the excess, if any, without duplication, of

(a) the Class A Interest Distributable Amount and (b) the Insured

Principal Balance Shortfall, if any, minus (c) the Payment Funds

available pursuant to the Basic Documents for payment of the amounts listed in

(i)(a) and (b) in accordance with the priorities set forth in the

Indenture, the Series Supplement and the Master Sale and Servicing Agreement;

(ii) with respect to any Scheduled Maturity Date, the excess of

(a) the outstanding principal balance of (A) the Class A-1 Notes,

with respect to the Class A-1 Scheduled Maturity Date, (B) the Class A-2

Notes, with respect to the Class A-2 Scheduled Maturity Date, (C) the

Class A-3 Notes, with respect to the Class A-3 Scheduled Maturity Date or

(D) the Class A-4 Notes, with respect to the Class A-4 Scheduled Maturity

Date, as applicable, minus (b) the Payment Funds available pursuant

to the Basic Documents for payment of the applicable amount listed in

(ii)(a) with respect to such Scheduled Maturity Date in accordance with

the priorities set forth in the Indenture, the Series Supplement and the Master

Sale and Servicing Agreement; and (iii) with respect to any Preference

Payment Date, Preference Amounts, provided, however, that the aggregate

amount of all such Preference Amounts shall be subject to the limitations in

such definition; provided, further, that in no event shall the amount

payable by the Insurer under this Policy exceed the Maximum Insured Amount.




 




For

consideration received, AMBAC ASSURANCE CORPORATION, a Wisconsin domiciled

stock insurance corporation (“Ambac” or the “Insurer”),

in consideration of




 





























 




the payment of the premium, hereby unconditionally and

irrevocably guarantees, subject only to (i) proper presentation of a

Notice in accordance with the terms of this Note Guaranty Insurance Policy

(together with each and every endorsement, if any, hereto, the “Policy”)

and (ii) the terms of this Policy, the payment to, or at the direction of,

the Indenture Trustee, for the benefit of the Registered Holders of the Insured

Obligations, that portion of the Policy Claim Amounts which are Due for Payment

but are unpaid by reason of Nonpayment.




 




1.             Definitions.  Capitalized terms used herein and not

otherwise defined shall have the meaning assigned to them in the Insurance

Agreement or, if not defined therein, in the Master Sale and Servicing

Agreement, or, if not defined therein, in the Series Supplement, or, if not

defined therein, in the Indenture, without giving effect to any subsequent

amendment or modification thereto unless such amendment or modification has

been approved in writing by the Insurer. 

For purposes of this Policy, the following terms shall have the

following meanings:




 




“Accounting Date”

shall mean, with respect to a Distribution Date, the last day of the Collection

Period immediately preceding such Distribution Date.




 




“Affiliate” shall

mean, with respect to any specified Person, any other Person controlling or

controlled by or under common control with such specified Person.  For the purposes of this definition,

“control” when used with respect to any Person means the power to direct the

management and policies of such Person, directly or indirectly, whether through

the ownership of voting securities, by contract or otherwise; and the terms

“controlling” and “controlled” have meanings correlative to the foregoing.




 




“Aggregate Note Principal Balance”

shall mean, (i) with respect to all of the Class A Notes, as of any date,

the aggregate outstanding principal amount of all of the Class A Notes on such

date, and (ii) with respect to any class of the Class A Notes, as of any

date, the aggregate outstanding principal amount of all of the Class A Notes of

such class on such date.




 




“Aggregate Optimal Note Principal Balance”

shall mean, with respect to any Distribution Date, the product of (x) 87%

and (y) the Pool Balance as of the close of business on the last day of

the prior Collection Period.




 




“Amount Financed”

shall mean, with respect to a Receivable, the aggregate amount advanced under

such Receivable toward the purchase price of the Financed Vehicle and any

related costs, including amounts advanced in respect of accessories, insurance

premiums, service and warranty contracts, other items customarily financed as

part of retail motor vehicle installment sale contracts or promissory notes,

and related costs.




 




“Available Funds”

shall mean, with respect to any Distribution Date and the related Collection

Period, the sum of (i) the Collected Funds for such Collection Period,

(ii) investment earnings realized on the Collection Account and the

Reserve Account during such Collection Period, (iii) all Repurchase Amounts

deposited in the Collection Account during such Collection Period and

(iv) all proceeds of any liquidation, in whole or in part, of the assets

of the Issuer.




 




“Bankruptcy Code”

shall mean Title 11 of the United States Code.




 




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“Basic Documents”

shall mean the Series Supplement, the Master Sale and Servicing Agreement, the

Certificate of Trust filed for the Issuer, the Trust Agreement, the Insurance

Agreement, the Indemnification Agreement, the Indenture, the Master Receivables

Purchase Agreements, each Transfer Agreement related to the Owner Trust Estate

and all other documents and certificates delivered in connection therewith or

pursuant thereto in connection with the Class A Notes or the Certificates (as

defined in the Trust Agreement).




 




“Business Day” shall

mean a day other than a Saturday, a Sunday or other day on which commercial

banks located in the states of Illinois or New York are authorized or obligated

by law to be closed.




 




“Class A Interest Carryover Shortfall”

shall mean, with respect to any Distribution Date, the sum of: (i) the

excess of (a) the related Class A Interest Distributable Amount for the

preceding Distribution Date, over (b) the amount actually paid as interest

to the Class A Noteholders on such preceding Distribution Date (under the

Indenture or this Policy), plus (ii) interest on such excess, to the extent

permitted by law, at a rate per annum equal to the related Note Rate with

respect to the Class A Notes from such preceding Distribution Date to but

excluding the current Distribution Date.




 




“Class A Interest Distributable Amount”

shall mean, with respect to any Distribution Date and each class of Class A

Notes, an amount equal to the sum of: (i) the aggregate amount of interest

accrued on the Class A Notes at the related Note Rate from and including the

preceding Distribution Date (or, in the case of the First Distribution Date,

from and including the Closing Date) to but excluding the current Distribution

Date plus

(ii) the related Class A Interest Carryover Shortfall for the current

Distribution Date.




 




“Class A Minimum Principal Distributable

Amount” shall mean, with respect to any Distribution

Date, the greatest of (i) the lesser of (A) the Optimal Principal

Distributable Amount for such Distribution Date, (B) the excess of the

aggregate of the Principal Balances of the Receivables as of the last day of

the second preceding Collection Period, over the aggregate of the Principal

Balances of the Receivables as of the last day of the immediately preceding

Collection Period, and (C) the Aggregate Note Principal Balance,

(ii) on the Scheduled Maturity Date for any Class of the Notes, the amount

necessary to reduce the Aggregate Note Principal Balance of such Class to zero

and (iii) the positive excess, if any, of the Aggregate Note Principal

Balance prior to making any distribution on such Distribution Date over the

Pool Balance as of the last day of the preceding Collection Period.




 




“Class A Notes” shall

mean, collectively, the Class A-1 Notes, the Class A-2 Notes, the

Class A-3 Notes and the Class A-4 Notes.




 




“Class A-1 Notes”

shall mean the Class A-1 Notes in an aggregate initial principal amount of

$227,000,000 issued pursuant to the Series Supplement and the Indenture.




 




“Class A-1 Scheduled Maturity Date”

shall mean May 17, 2004.




 




“Class A-2 Notes”

shall mean the Class A-2 Notes in an aggregate initial principal amount of

$296,000,000 issued pursuant to the Series Supplement and the Indenture.




 




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“Class A-2 Scheduled Maturity Date”

shall mean September 18, 2006.




 




“Class A-3 Notes”

shall mean the Class A-3 Notes in an aggregate initial principal amount of

$268,000,000 issued pursuant to the Series Supplement and the Indenture.




 




“Class A-3 Scheduled Maturity Date”

shall mean December 17, 2007.




 




“Class A-4 Notes”

shall mean the Class A-4 Notes in an aggregate initial principal amount of

$258,000,000 issued pursuant to the Series Supplement and the Indenture.




 




“Class A-4 Scheduled Maturity Date”

shall mean November 17, 2009.




 




“Closing Date” shall

mean May 29, 2003.




 




“Collected Funds”

shall mean, with respect to any Collection Period, the amount of funds in the

Collection Account representing collections (including, where applicable, all

payment cancellation fees and all administrative fees, expenses and charges

actually paid by or on behalf of Obligors, including late fees, payment fees

and liquidation fees but excluding taxes, assessments, credit insurance charges

or similar items) received by the Master Servicer on or with respect to the

Receivables during such Collection Period, including all Net Liquidation

Proceeds collected during such Collection Period (but excluding any Repurchase

Amounts).




 




“Collection Account”

shall mean the Eligible Deposit Account created pursuant to Section 3.01 of the

Series Supplement, which initially shall be account no. 77125301, reference

Household Auto 2003-1 Collection Account at the Indenture Trustee, ABA No.

091000022.




 




“Collection Period”

shall mean, (i) with respect to the First Distribution Date, the period

beginning on the opening of business on the day after the Cutoff Date and

ending on the close of business on the last day of the calendar month preceding

such Distribution Date, and (ii) with respect to each subsequent

Distribution Date, the preceding calendar month.  Any amount stated “as of the close of business of the last day of

a Collection Period” shall give effect to all applications of collections on

such day.




 




“Cram Down Loss”

shall mean, with respect to a Receivable, if a court of appropriate

jurisdiction in an insolvency proceeding shall have issued a final order

reducing the amount owed on a Receivable or otherwise modifying or

restructuring the scheduled payments to be made on a Receivable, an amount equal

to the excess of the Principal Balance of such Receivable immediately prior to

such order over the Principal Balance of such Receivable as so reduced.  A “Cram Down Loss”

shall be deemed to have occurred on the date of issuance of such order.




 




“Cutoff Date” shall

mean the close of business on April 30, 2003.




 




“Determination Date”

shall mean the earlier of the fifth calendar day (or if such day is not a

Business Day, the next preceding Business Day) or the third Business Day

preceding each Distribution Date.




 




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“Distribution Date”

shall mean, with respect to each Collection Period, the seventeenth (17th)

day of the calendar month next commencing after the last day of such Collection

Period or, if such day is not a Business Day, the immediately following

Business Day, commencing on June 17, 2003.




 




“Due for Payment”

shall mean, with respect to any Policy Claim Amounts, such amount as is due and

payable pursuant to the terms of the Indenture.




 




“Financed Vehicle”

shall mean a new or used automobile, light duty truck or van securing an

Obligor’s indebtedness under the respective Receivable.




 




“First Distribution Date”

shall mean June 17, 2003.




 




“Indenture” shall

mean that certain Indenture, dated as of May 29, 2003, by and between the

Issuer and the Indenture Trustee, as supplemented by the Series Supplement.




 




“Indenture Trustee”

shall mean U.S. Bank National Association, not in its individual capacity but

as trustee under the Indenture, and its successors and assigns in such

capacity.




 




“Initial Aggregate Note Principal Balance”

shall mean $1,049,000,000.




 




“Insurance Agreement”

shall mean that certain Insurance and Indemnity Agreement, dated as of

May 29, 2003, among the Insurer, the Issuer, the Master Servicer, the

Originators, the Seller, and the Indenture Trustee, as such agreement may be

amended, modified or supplemented from time to time.




 




“Insured Payments”

shall mean, (i) with respect to any Distribution Date, the aggregate

amount actually paid by the Insurer to, or at the direction of, the Indenture

Trustee in respect of Policy Claim Amounts for such Distribution Date and

(ii) the aggregate amount of any Preference Amounts paid by the Insurer on

any given Business Day.




 




“Insured Principal Balance Shortfall”

shall mean, with respect to a Distribution Date, the positive excess, if any,

of the Aggregate Note Principal Balance with respect to the Class A Notes

(after giving effect to the distribution of the Class A Minimum Principal

Distributable Amount on such Distribution Date pursuant to

Section 3.03(a)(iv) of the Series Supplement and after making any

distribution from the Reserve Account pursuant to Section 3.03(b) of the

Series Supplement on such Distribution Date) over the Pool Balance as of the close

of business on the last day of the preceding Collection Period.




 




“Insurer” shall mean

Ambac, or any successor thereto, as issuer of this Policy.




 




“Interest Period”

shall mean, with respect to any Distribution Date, the period from and

including the prior Distribution Date (or, in the case of the first Interest

Period, from and including the Closing Date) through (and including) the day

preceding such Distribution Date.




 




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“Issuer” shall mean

Household Automotive Trust 2003-1, a Delaware statutory trust.




 




“Late Payment Rate”

shall mean the lesser of (a) the greater of (i) the per annum rate of

interest publicly announced from time to time by Citibank, N.A. as its prime or

base lending rate (any change in such rate of interest to be effective on the

date such change is announced by Citibank, N.A.), plus 2% per annum and

(ii) the then applicable highest rate of interest on the Class A

Notes and (b) the maximum rate permissible under applicable usury or

similar laws limiting interest rates. 

The Late Payment Rate shall be computed on the basis of the actual

number of days elapsed over a year of 360 days.




 




“Liquidated Receivable”

shall mean, with respect to any Collection Period, upon the earliest of any of

the following to occur, a Receivable as to which (i) such Receivable has

been liquidated by the Master Servicer through the sale of the Financed

Vehicle, (ii) 90 days have elapsed since the Master Servicer repossessed

the Financed Vehicle, (iii) proceeds have been received in respect of such

Receivable which, in the Master Servicer’s reasonable judgment, constitute the

final amounts recoverable in respect of such Receivable or (iv) 10% or

more of a Scheduled Payment shall have become 150 or more days delinquent (or,

in the case where the Obligor of such Receivable is subject to an Insolvency

Event, 10% or more of a Scheduled Payment shall have become 210 or more days

delinquent); provided, however, that the number of days specified in

either clause (ii) or (iv) may at the election of the Master Servicer

be such shorter number of days as may from time to time be consistent with the

Master Servicer’s then-current collection policy.  Any Receivable that becomes a Repurchased Receivable on or before

the related Accounting Date shall not be a Liquidated Receivable.




 




“Master Receivables Purchase Agreements”

shall mean, collectively, (i) the Master Receivables Purchase Agreement

dated as of December 18, 2001 between Household Automotive Finance Corporation,

as Originator, and the Seller, as such agreement may be amended or supplemented

from time to time, (ii) the Master Receivables Purchase Agreement dated as

of June 24, 2002 between the Seller and Household Automotive Credit

Corporation, as Originator, as such agreement may be amended or supplemented

from time to time, (iii) the Master Receivables Purchase Agreement dated as of

August 8, 2002 between the Seller and Household Automotive Credit Corporation,

as Originator, as such agreement may be amended or supplemented from time to time,

and (iv) the Master Receivables Purchase Agreement dated as of November

18, 2002, between the Seller and Household Automotive Finance Corporation, as

Originator, as such agreement may be amended or supplemented from time to time.




 




“Master Sale and Servicing Agreement”

shall mean that certain Master Sale and Servicing Agreement, dated as of May

29, 2003, by and among the Issuer, the Seller, the Master Servicer and the

Indenture Trustee, as such agreement may be amended or supplemented from time

to time.




 




“Master Servicer”

shall mean Household Finance Corporation, as Master Servicer under the Master

Sale and Servicing Agreement.




 




“Maximum Insured Amount”

shall mean $1,049,000,000 in respect of principal, plus interest thereon

calculated at the applicable Note Rate for the Class A Notes.




 




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“Nonpayment” shall

mean, with respect to any Distribution Date, Policy Claim Amounts which are Due

for Payment but have not been paid pursuant to the Indenture.




 




“Note Paying Agent”

shall mean the Indenture Trustee or any other Person that meets the eligibility

standards for the Indenture Trustee specified in Section 6.11 of the Indenture

and is authorized by the Issuer to make payments to and distributions from the

Collection Account, including payment of principal of or interest on the Class

A Notes on behalf of the Issuer.




 




“Note Rate” shall

mean with respect to (i) the Class A-1 Notes, 1.24% per annum,

(ii) the Class A-2 Notes, 1.30% per annum, (iii) the

Class A-3 Notes, 1.73% per annum, (iv) the Class A-4 Notes,

2.22% per annum (in the case of the Class A-1 Notes, computed on the basis

of a 360-day year and the actual number of days in the related Interest Period;

in the case of the Class A-2, Class A-3 and Class A-4 Notes, computed

on the basis of a 360-day year consisting of twelve 30-day months; and in the

case of the Class A-2, Class A-3 and Class A-4 Notes with respect to the

initial Interest Period only, computed on the basis of a 360-day year and the

actual number of days elapsed in such initial Interest Period).




 




“Notice” shall mean

the telephonic or telegraphic notice, promptly confirmed in writing by telecopy

substantially in the form of Exhibit A or Exhibit B, as

applicable, to this Policy, the original of which is subsequently delivered by

registered or certified mail, from the Indenture Trustee specifying the amount

of any Insured Payment which shall be due and owing.




 




“Obligor” on a

Receivable shall mean the purchaser or co-purchasers of the Financed Vehicle

and any other Person who owes payments under the Receivable.




 




“Optimal Principal Distributable Amount”

shall mean, with respect to any Distribution Date, the excess, if any, of

(i) the Aggregate Note Principal Balance immediately prior to such

Distribution Date over (ii) the Aggregate Optimal Note Principal Balance

for such Distribution Date.




 




“Order” shall have

the meaning given such term in Section 8 hereto.




 




“Originators” shall

mean Household Automotive Finance Corporation and Household Automotive Credit

Corporation, as Originators under the Master Receivables Purchase Agreements.




 




“Payment Funds” shall

mean the sum of, without duplication, (i) all amounts of Available Funds,

(ii) all other funds on deposit in the Collection Account, the Reserve

Account and any other Trust Accounts and (iii) all other funds available

pursuant to the Basic Documents for payment in accordance with the priorities

set forth therein.




 




“Person” shall mean

any individual, corporation, limited liability company, estate, partnership,

joint venture, association, joint stock company, trust (including any

beneficiary thereof), unincorporated organization or government or any agency

or political subdivision thereof.




 




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“Pool Balance” shall

mean, as of any date of determination, the aggregate of the outstanding

Principal Balances of the Receivables as of the close of business on the

preceding Business Day.




 




“Preference Amount”

shall mean any interest on or principal of the Class A Notes which has

become Due for Payment, the Nonpayment of which would have been covered by this

Policy, and which was made to a Registered Holder by or on behalf of the Issuer

which has been deemed a preferential transfer and recoverable, or theretofore

recovered, from its Registered Holder pursuant to the Bankruptcy Code in

accordance with a final, nonappealable order of a court of competent

jurisdiction; provided that any Preference Amount that constitutes

interest shall be limited to the amount of interest on the outstanding

principal amount of the Class A Notes (calculated at the Note Rate for the

relevant class of Class A Notes) accrued as of the last day of the applicable

interest accrual period with respect to the Class A Notes and shall not, in any

event, include any interest on the Class A Notes accrued after such date or any

interest on such interest amount; provided, further, that in no event

shall the Insurer be obligated to make any payment in respect to any Preference

Amount to the extent that such payment, when added to all prior payments of

Policy Claim Amounts, would exceed the Maximum Insured Amount.




 




“Preference Payment Date”

shall have the meaning given such term in Section 8 hereto.




 




“Principal Balance”

shall mean, with respect to any Receivable, as of any date, the Amount Financed

minus (i) that portion of all amounts received on or prior to such date

and allocable to principal in accordance with the Actuarial Method, or the

Simple Interest Method, as appropriate and (ii) any Cram Down Loss in respect

of such Receivable.  The “Principal

Balance” of a Repurchased Receivable or Liquidated Receivable shall be deemed

to be zero.




 




“Receivable” shall

mean each receivable listed on the Schedule of Receivables, which (a) has

not been released from the Series Trust Estate as provided in the Series

Supplement or in the Indenture and (b) is not a Liquidated Receivable.




 




“Registered Holder”

shall mean any registered or beneficial owner of a Class A Note (other than the

Issuer, the Seller, the Master Servicer, the Originators or any of their

respective Affiliates).




 




“Reimbursement Amount”

shall mean, as of any Distribution Date, the sum of (x)(i) all Insured

Payments paid by the Insurer, but for which the Insurer has not been reimbursed

prior to such Distribution Date pursuant to Section 3.3 of the Insurance

Agreement and Section 3.03 of the Series Supplement, plus

(ii) interest accrued on such Insured Payments not previously repaid

calculated at the Late Payment Rate from the date the Indenture Trustee, or any

other Person at its direction, received the related Insured Payments or the

date such Insured Payments were made, and (y) without duplication

(i) any amounts then due and owing to the Insurer under the Insurance

Agreement and Section 3.03 of the Series Supplement, as certified to the

Indenture Trustee by the Insurer




plus (ii) interest on such amounts at the Late

Payment Rate.








 




“Repurchase Amount”

shall mean, with respect to a Receivable, the Principal Balance and all accrued

and unpaid interest on the Receivable, after giving effect to the receipt




 




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of any moneys collected (from whatever source) on such

Receivable, if any, as of the date of repurchase, provided that, reductions in

the Principal Balance resulting from such Receivable becoming a Liquidated

Receivable shall be disregarded.




 




“Repurchased Receivable”

shall mean a Receivable purchased by the Master Servicer pursuant to Section

4.7 of the Master Sale and Servicing Agreement or repurchased by the Seller

pursuant to Section 3.2 of the Master Sale and Servicing Agreement or the

Master Servicer pursuant to Section 11.1(a) of the Master Sale and Servicing

Agreement.




 




“Reserve

Account” shall

mean the account designated as such in the Series Supplement, and established

and maintained pursuant to Section 3.01 of the Series Supplement.




 




“Scheduled Maturity Date”

shall mean with respect to (i) the Class A-1 Notes, the Class A-1

Scheduled Maturity Date, (ii) the Class A-2 Notes, the Class A-2

Scheduled Maturity Date, (iii) the Class A-3 Notes, the Class A-3

Scheduled Maturity Date and (iv) the Class A-4 Notes, the Class A-4

Scheduled Maturity Date.




 




“Scheduled Payment”

shall mean, with respect to any Collection Period for any Receivable, the

amount set forth in such Receivable as required to be paid by the Obligor in

such Collection Period.  If after the

Closing Date, the Obligor’s obligation under a Receivable with respect to a

Collection Period has been modified so as to differ from the amount specified

in such Receivable as a result of (i) the order of a court in an

insolvency proceeding involving the Obligor, (ii) pursuant to the

Soldiers’ and Sailors’ Civil Relief Act of 1940, as amended, or

(iii) modifications or extensions of the Receivable permitted by Sections

4.2(b) and (c) of the Master Sale and Servicing Agreement, the Scheduled

Payment with respect to such Collection Period shall refer to the Obligor’s

payment obligation with respect to such Collection Period as so modified.




 




“Seller”

shall mean Household Auto Receivables Corporation, a Nevada corporation, as

Seller under the Master Sale and Servicing Agreement, and its successors in

interest to the extent permitted under the Master Sale and Servicing Agreement.




 




“Series Supplement”

shall mean that certain Series Supplement to the Indenture, the Master Sale and

Servicing Agreement and the Trust Agreement, dated as of May 29, 2003, executed

pursuant to Section 9.3 of the Indenture and Section 3.2 of the Trust

Agreement, by and among the Master Servicer, the Issuer, the Seller, the

Indenture Trustee and Wilmington Trust Company, a Delaware banking corporation,

as Owner Trustee.




 




“Series

Trust Estate”

shall mean the property Granted to the Indenture Trustee pursuant to

Section 1.02 of the Series Supplement.




 




“Transaction

Party” shall mean

the Indenture Trustee, the Issuer, the Originators, the Master Servicer or the

Seller.




 




“Trust

Accounts” shall

mean the Collection Account and the Reserve Account and any other account

designated as such under the Series Supplement.




 




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“Trust

Agreement” shall

mean the Trust Agreement, dated as of April 15, 2003, between the Seller

and Wilmington Trust Company, a Delaware banking corporation, as Owner Trustee,

as amended and restated as of May 29, 2003 and as supplemented by the Series

Supplement.




 




2.             Payments

under the Policy. 

(a)  Upon the presentation by the Indenture Trustee to the

Insurer at the Insurer’s principal office in respect of the applicable

Distribution Date of a duly executed Notice, the Insurer will make or cause to

be made to the Indenture Trustee, on the guarantee set forth in the first

paragraph of this Policy, payment in an amount equal to the applicable Policy

Claim Amounts.




 




(b)           Amounts

payable in respect of any Policy Claim Amounts due hereunder, unless otherwise

stated herein, will be distributed by the Insurer to, or at the direction of,

the Indenture Trustee, by wire transfer of immediately available funds.  Solely the Indenture Trustee on behalf of

the Registered Holders shall have the right to make a claim for an Insured

Payment under this Policy.




 




(c)           The

Insurer’s payment obligations hereunder with respect to particular Policy Claim

Amounts shall be discharged to the extent funds equal to the applicable Policy

Claim Amounts are paid by the Insurer to, or at the direction of, the Indenture

Trustee in accordance with the Indenture Trustee’s request, whether or not such

funds are properly applied by the Indenture Trustee or the Note Paying Agent.  Payments of Policy Claim Amounts shall be

made only at the time set forth in this Policy, and no accelerated Insured

Payments shall be made except to the extent that the Insurer has specified an

earlier date for payment at its sole option. 

This Policy does not insure against loss of any prepayment or other

acceleration payment which at any time may become due in respect of any Insured

Obligation, other than at the sole option of the Insurer, nor against any risk

other than Nonpayment, including failure of the Indenture Trustee or the Note

Paying Agent to pay any Policy Claim Amounts due to Registered Holders.




 




(d)           Notwithstanding

anything to the contrary set forth herein, in no event shall the aggregate

amount paid by the Insurer hereunder exceed the Maximum Insured Amount

hereunder.




 




3.             Presentation

of Notice of Non-Payment and Demand. 

(a)  Notwithstanding any other provision of this Policy but

subject to Section 8 hereof with respect to Preference Amounts, the Insurer

will pay any Policy Claim Amounts payable hereunder to, or at the direction of,

the Indenture Trustee no later than 12:00 noon, New York City time, on the

later of (i) the Distribution Date or Scheduled Maturity Date, as the case

may be, on which the related Policy Claim Amount is due for payment under the

Indenture or (ii) the second Business Day following actual receipt in New

York, New York on a Business Day by the Insurer of a Notice in the form

attached as Exhibit A, appropriately completed and executed by the

Indenture Trustee; provided that, if such Notice is received after 12:00

noon, New York City time, on such Business Day, it will be deemed to be

received before 12:00 noon, New York City time, on the following Business Day.




 




(b)           If any

such Notice is not in proper form or is otherwise insufficient for the purpose

of making a claim under this Policy, it shall be deemed not to have been

received for




 




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purposes

of this Policy, and the Insurer shall promptly so advise the Indenture Trustee

in writing and the Indenture Trustee may submit an amended or corrected

Notice.  If such an amended or corrected

Notice is in proper form and is otherwise sufficient for the purpose of making

a claim under this Policy, it shall be deemed to have been timely received on

the Business Day of such resubmission subject to the proviso in (a) above.




 




4.             Waiver.  To the fullest extent permitted by

applicable law, the Insurer hereby waives and agrees not to assert any and all

rights and defenses (including, set-offs, counterclaims,

fraud in the inducement or fact or any other circumstances that would have the

effect of discharging a surety at law or in equity), to the extent such rights

and defenses may be available to the Insurer, so as to avoid payment of any

amount due in respect of this Policy in accordance with express provisions

hereof, including, without limitation, any such rights acquired by subrogation,

assignment or otherwise.  For the

avoidance of doubt, the Insurer undertakes not to impose any defense to payment,

but reserves all rights to assert any claim it may have against any Registered

Holder or any other person and none of the foregoing waivers shall prejudice

any claim the Insurer may have, whether directly or as subrogee or otherwise,

subsequent to making such payment to the Registered Holders.  For the avoidance of doubt, the Insurer does

not waive its right to seek payment of all Reimbursement Amounts to which it is

entitled.




 




5.             Subrogation.  Upon any payment hereunder, in furtherance

and not in limitation of the Insurer’s equitable right of subrogation and the Insurer’s

rights under the Insurance Agreement, the Insurer will, to the extent of such

payment by the Insurer hereunder, be subrogated to the rights of any Registered

Holder to receive any and all amounts due in respect of the Insured Obligations

as to which such Insured Payment was made. 

In so doing, the Insurer does not waive its rights to seek full payment

of all Reimbursement Amounts owed it.




 




6.             Communications.  All notices, presentations, transmissions,

deliveries and communications made by the Indenture Trustee to the Insurer with

respect to this Policy shall specifically refer to the number of this Policy

and shall be made to the Insurer at:




 




Ambac Assurance

Corporation




One State Street Plaza




New York, New York

10004




Attention:  Asset-Backed Securities Department Head


General Counsel – URGENT




Phone:  (212) 208-3357




Fax:  (212) 208-3547




 




or to such other address, officer, telephone number or facsimile number

as the Insurer may designate to the Indenture Trustee from time to time.




 




7.             Nature

of the Obligations.  Except as

expressly provided herein, the obligations of the Insurer under this Policy are

irrevocable, absolute and unconditional.




 




8.             Termination.  This Policy and the obligations of the

Insurer hereunder shall terminate upon the earlier of:




 




11

























 




(a)           the

date on which all of the Policy Claim Amounts have been paid in full by the

Insurer to, or at the direction of, the Indenture Trustee;  or




 




(b)           the

close of business on the third (3rd) Business Day after the date on which all

principal and interest on the Class A Notes has been paid in full;




 




provided, however, that notwithstanding the occurrence of any of

the foregoing events, the Insurer shall pay any Preference Amount when due to

be paid pursuant to an Order referred to below, but in any event no earlier

than the fifth Business Day following actual receipt by the Insurer of

(i) a certified copy of a final, nonappealable order of a court or other

body exercising jurisdiction to the effect that a Registered Holder is required

to return such Preference Amount paid during the term of this Policy because

the payments of such amounts were avoided as a preferential transfer or

otherwise rescinded or required to be restored by the Indenture Trustee or such

Registered Holder (the “Order”),

(ii) an opinion of counsel satisfactory to the Insurer that the Order has

been entered and is final and not subject to any stay, (iii) an

assignment, in form and substance satisfactory to the Insurer, duly executed

and delivered by such Registered Holder and the Indenture Trustee, irrevocably

assigning to the Insurer all rights and claims of the Indenture Trustee and

such Registered Holder relating to or arising under the Indenture or otherwise

with respect to such Preference Amount, (iv) appropriate instruments in

form satisfactory to the Insurer to effect the appointment of the Insurer as

agent for such Registered Holder in any legal proceeding related to such

Preference Payment, and (v) a Notice (in the form attached as Exhibit

B) appropriately completed and executed by the Indenture Trustee, (the

“Preference Payment Date”); provided,

further, that (I) if such documents are received by the Insurer after

12:00 noon, New York City time, on such Business Day, they will be deemed to be

received before 12:00 noon, New York City time, on the following Business Day

and (II) the Insurer shall not be obligated to pay any Preference Amount

in respect of principal (other than the Insured Principal Balance Shortfall)

prior to the Scheduled Maturity Date for the relevant class of Class A

Notes.  Such payment shall be disbursed

to the receiver, conservator, debtor-in-possession or trustee in bankruptcy

named in the Order, and not to the Indenture Trustee or the Registered Holder

directly, unless the Indenture Trustee or the relevant Registered Holder has

made a payment of the Preference Amount to the court or such receiver,

conservator, debtor-in-possession or trustee in bankruptcy named in the Order,

in which case the Insurer will pay the Indenture Trustee, or as directed by the

Indenture Trustee, to the extent of the payment of the Preference Amount,

subject to the delivery of (a) the items referred to in clauses (i), (ii),

(iii), (iv) and (v) above to the Insurer and (b) evidence

satisfactory to the Insurer that payment has been made to such court or

receiver, conservator, debtor-in-possession or trustee in bankruptcy named in

the Order.




 




Notwithstanding the foregoing, in no event shall the Insurer be obligated

to make any payment in respect of any Preference Amount (i) to the extent

that such payment, when added to all prior payments of Insured Amounts, would

exceed the Maximum Insured Amount or (ii) prior to the time the Insurer

would have been required to make an Insured Payment pursuant to Section 3 of

this Policy.




 




There shall be no acceleration payment due under this Policy unless such

acceleration is at the sole option of the Insurer.  This Policy does not cover (i) premiums, if any, payable in

respect of the Class A Notes, (ii) shortfalls, if any, attributable

to any payment of 




 




12

























 




withholding taxes (including penalties and interest in

respect of any such liability) or (iii) any risk other than Nonpayment,

including the failure of the Indenture Trustee or the Note Paying Agent to

apply, disburse, transfer or direct Policy payments or Available Funds or other

amounts in accordance with the Indenture to Registered Holders or to any other

party.




 




9.             Miscellaneous.  (a)  This Policy sets forth the

full understanding of the Insurer, and except as expressly provided herein, or

as otherwise agreed in writing hereafter by the Insurer and the Indenture

Trustee, may not be modified, altered or affected by any other agreement or

instrument, including any modification or amendment thereto, and may not be

canceled or revoked.




 




(b)           This

Policy is issued pursuant to, and shall be construed under, the laws of the

State of New York, without giving effect to the conflicts of laws rules

thereof, as contemplated in Section 5-1401 of the New York General Obligations

Law.




 




(c)           THE

INSURANCE PROVIDED BY THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY

INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.




 




(d)           Any

notice hereunder or service of process on the Insurer may be made at the

address listed above for the Insurer or such other address as the Insurer shall

specify in writing to the Indenture Trustee.




 




(e)           The

premium of this Policy is not refundable for any reason.  The premium will be payable on this Policy

on each Distribution Date as provided in the Insurance Agreement, beginning

with the First Distribution Date.




 




ANY PERSON WHO

KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON

FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY

MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING,

INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT

INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY

NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH

SUCH VIOLATION.




 




13

























 




IN WITNESS WHEREOF, the Insurer has

caused this Note Guaranty Insurance Policy to be executed and attested this 29th

day of May, 2003.




 




	

   


  	

  AMBAC ASSURANCE CORPORATION


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

  /s/ Michael Babick


  
	

   


  	

   


  	

  Name: Michael Babick


  
	

   


  	

   


  	

  Title: First Vice President


  
	

   


  	

   


  	

   


  
	

  Attest:


  	

   


  
	

   


  	

   


  
	

   /s/ Melissa L. Velia


  	

   


  	

   


  
	

  Name: Melissa L. Velia


  	

   


  
	

  Title: Asst. Secretary, Asst. Vice

  President


  	

   


  
				





 




14

























 




EXHIBIT

A




 




TO

THE NOTE GUARANTY INSURANCE POLICY




 




Policy No. AB0669BE




 




NOTICE

OF NONPAYMENT AND DEMAND


FOR PAYMENT OF INSURED AMOUNTS


(OTHER THAN PREFERENCE AMOUNT)




 




Date: 

[        ]




 




Ambac

Assurance Corporation




One State

Street Plaza




New York, New

York 10004




Attention:    Asset-Backed

Securities Department Head


General Counsel – URGENT




 




Reference is made to Note Guaranty Insurance Policy No. AB0669BE

(the “Policy”) issued by Ambac Assurance Corporation

(“Ambac”). 

Terms capitalized herein and not otherwise defined shall have the

meanings specified in the Policy, unless the context otherwise requires.




 




The undersigned hereby certifies as

follows:




 




1.             It

is the Indenture Trustee under the Indenture, and is acting for the Registered

Holders.




 




2.             The

relevant [Distribution Date] / [Scheduled Maturity Date] is [date].




 




3.             There

is an amount of $          

with respect to such [Distribution Date] / [Scheduled Maturity Date], which

amount is a Policy Claim Amount which is Due for Payment.




 




4.             The

Indenture Trustee has not heretofore made a demand for the Policy Claim Amount

in respect of such [Distribution Date] / [Scheduled Maturity Date].




 




5.             The

Indenture Trustee hereby requests the payment of the Policy Claim Amount that

is Due for Payment be made by Ambac under the Policy and directs that payment

under the Policy be made to the Indenture Trustee to the following account by

bank wire transfer of federal or other immediately available funds in

accordance with the terms of the Policy

to:                         .(1)




 




6.             The

Indenture Trustee hereby agrees that, following receipt by the Indenture

Trustee of the Insured Payment from Ambac, it shall (a) hold such amounts

in trust and apply the same directly to the distribution of payments in respect

of the Class A Notes when 




 


















(1)           The

account number of the Indenture Trustee.




 




 




A-1

























 




due, (b) not apply such funds for any other purpose,

and (c) maintain an accurate record of such payments with respect to the

Class A Notes and the corresponding claim on the Policy and proceeds

thereof.




 




7.             The

Indenture Trustee hereby assigns to Ambac all rights, and confirms that the

Registered Holders have assigned all rights, under the Insured Obligations in

respect of which payment is being requested to Ambac.




 




ANY PERSON WHO

KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES

AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY

FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING, INFORMATION

CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH

IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY NOT TO EXCEED FIVE

THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH VIOLATION.




 




 




	

   


  	

  By:


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  Title:


  	

   


  
	

   


  	

  (Officer)


  
				





 




A-2

























 




EXHIBIT

B




 




TO

THE NOTE GUARANTY INSURANCE POLICY




 




Policy No. AB0669BE




 




NOTICE

OF NONPAYMENT AND DEMAND


FOR PAYMENT OF PREFERENCE AMOUNT




 




Date: 

[       ]




 




Ambac

Assurance Corporation




One State

Street Plaza




New York, New

York 10004




Attention:            Asset-Backed

Securities Department Head


General Counsel – URGENT




 




Reference is made to Financial Guaranty Insurance Policy

No. AB0669BE (the “Policy”) issued by

Ambac Assurance Corporation (“Ambac”).  Terms capitalized herein and not otherwise

defined shall have the meanings specified in the Policy, unless the context

otherwise requires.




 




The undersigned hereby certifies as

follows:




 




1.             It

is the Indenture Trustee under the Indenture, and is acting for the Registered

Holders.




 




2.             [A

payment previously made in respect of the Class A Notes pursuant to the Indenture

has become a Preference Amount, as indicated by the attached Order.]




 




3.             The

Registered Holder of the applicable Class A Notes has certified that the

Order has been entered and is not subject to stay.




 




4.             The

amount of the Preference Amount is $         ,

and consists of interest in the amount of

$          paid

on         ,

         , [and principal in the

amount of $          paid

on         ,         .]




 




5.             Neither

the Indenture Trustee nor the Registered Holder has heretofore made a demand

for such Preference Amount.




 




6.             The

Indenture Trustee hereby requests the payment of the Insured Payment be made by

Ambac under the Policy and directs that payment under the Policy be made




 




B-1

























 




to the Indenture Trustee to the following account by bank

wire transfer of federal or other immediately available funds in accordance

with the terms of the Policy

to:         .(2)




 




7.             The

Indenture Trustee hereby agrees that if such Insured Payment is made to the

Indenture Trustee, following receipt of such Insured Payment from Ambac, it

shall (a) hold such amounts in trust and apply the same directly to the

Registered Holder for payment of the Preference Amount, (b) not apply such

funds for any other purpose, and (c) maintain an accurate record of such

payments with respect to the Class A Notes and the corresponding claim on

the Policy and proceeds thereof.




 




8.             The

Indenture Trustee hereby assigns to Ambac all rights, and confirms that the

Registered Holders have assigned all rights, under the Insured Obligations in

respect of which payment is being requested to Ambac.




 




ANY PERSON WHO

KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON

FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY

MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING,

INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT

INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY

NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH

SUCH VIOLATION.




 




	

   


  	

  By:


  	

   


  
	

   


  	

   


  	

   


  
	

   


  	

  Title:


  	

   


  
	

   


  	

  (Officer)


  
				





 


















(2)           The account of the relevant receiver, conservator,

debtor-in-possession or trustee in bankruptcy named in the Order, unless the

Holder or Indenture Trustee has already paid such Preference Amount to such

party, in which case, the account of the payor.




 




B-2