Document:

Exhibit 4.3

 

Execution Copy

 

 

 

 

 

MASTER SALE AND
SERVICING AGREEMENT

 

among

 

HOUSEHOLD
AUTOMOTIVE TRUST 2004-1,

as Issuer,

 

HOUSEHOLD AUTO
RECEIVABLES CORPORATION,

as Seller,

 

HOUSEHOLD FINANCE
CORPORATION,

as Master Servicer

 

U.S. BANK NATIONAL
ASSOCIATION,

as Indenture
Trustee

 

and

 

HSBC BANK USA,
NATIONAL ASSOCIATION,

as Administrator

 

Dated as of
July 28, 2004

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
   

  
	
   

  	
   

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
  Definitions

  	
   

  
	
  SECTION 1.2.

  	
  Other Interpretive Provisions

  	
   

  
	
  SECTION 1.3.

  	
  Usage of Terms

  	
   

  
	
  SECTION 1.4.

  	
  Certain References

  	
   

  
	
  SECTION 1.5.

  	
  No Recourse

  	
   

  
	
  SECTION 1.6.

  	
  Action by or Consent of Noteholders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  	
   

  
	
  Conveyance of Receivables

  	
   

  
	
   

  	
   

  
	
  SECTION 2.1.

  	
  Conveyance of Receivables

  	
   

  
	
  SECTION 2.2.

  	
  Further Encumbrance of Owner Trust Estate

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  	
   

  
	
  The Receivables

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  Representations and Warranties of Seller

  	
   

  
	
  SECTION 3.2.

  	
  Repurchase upon Breach

  	
   

  
	
  SECTION 3.3.

  	
  Custody of Receivables Files

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  	
   

  
	
  Administration and Servicing of Receivables

  	
   

  
	
   

  	
   

  
	
  SECTION 4.1.

  	
  Duties of the Master Servicer

  	
   

  
	
  SECTION 4.2.

  	
  Collection of Receivable Payments;
  Modifications of Receivables

  	
   

  
	
  SECTION 4.3.

  	
  Realization Upon Receivables

  	
   

  
	
  SECTION 4.4.

  	
  Insurance

  	
   

  
	
  SECTION 4.5.

  	
  Maintenance of Security Interests in
  Vehicles

  	
   

  
	
  SECTION 4.6.

  	
  Covenants, Representations, and Warranties
  of Master Servicer

  	
   

  
	
  SECTION 4.7.

  	
  Repurchase of Receivables Upon Breach of
  Covenant

  	
   

  
	
  SECTION 4.8.

  	
  Total Servicing Fee; Payment of Certain
  Expenses by Master Servicer

  	
   

  
	
  SECTION 4.9.

  	
  Master Servicer’s Certificate

  	
   

  
	
  SECTION 4.10.

  	
  Annual Statement as to Compliance, Notice
  of Master Servicer Termination Event

  	
   

  
	
  SECTION 4.11.

  	
  Annual Independent Accountants’ Report

  	
   

  
				

 

 

	
  SECTION 4.12.

  	
  Access to Certain Documentation and Information
  Regarding Receivables

  	
   

  
	
  SECTION 4.13.

  	
  Fidelity Bond and Errors and Omissions
  Policy

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  	
   

  
	
  Trust Accounts; Distributions;

  Statements to Certificateholders and Noteholders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  Establishment of Trust Accounts

  	
   

  
	
  SECTION 5.2.

  	
  Certain Reimbursements to the Master
  Servicer

  	
   

  
	
  SECTION 5.3.

  	
  Application of Collections

  	
   

  
	
  SECTION 5.4.

  	
  Additional Deposits

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  	
   

  
	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  	
   

  
	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  	
   

  
	
  The Seller

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  Representations of Seller

  	
   

  
	
  SECTION 8.2.

  	
  Corporate Existence

  	
   

  
	
  SECTION 8.3.

  	
  Liability of Seller; Indemnities

  	
   

  
	
  SECTION 8.4.

  	
  Merger or Consolidation of, or Assumption
  of the Obligations of, Seller

  	
   

  
	
  SECTION 8.5.

  	
  Limitation on Liability of Seller and
  Others

  	
   

  
	
  SECTION 8.6.

  	
  Seller May Own Certificates or Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
   

  	
   

  	
   

  
	
  The Master Servicer

  	
   

  
	
   

  	
   

  
	
  SECTION 9.1.

  	
  Representations of Master Servicer

  	
   

  
	
  SECTION 9.2.

  	
  Liability of Master Servicer; Indemnities

  	
   

  
	
  SECTION 9.3.

  	
  Merger or Consolidation of, or Assumption
  of the Obligations of the Master Servicer

  	
   

  
	
  SECTION 9.4.

  	
  Limitation on Liability of Master Servicer
  and Others

  	
   

  
	
  SECTION 9.5.

  	
  Delegation of Duties

  	
   

  
	
  SECTION 9.6.

  	
  Master Servicer Not to Resign

  	
   

  
	
  SECTION 9.7.

  	
  Subservicing Agreements Between Master
  Servicer and Subservicers

  	
   

  
	
  SECTION 9.8.

  	
  Successor Subservicers

  	
   

  

 

ii

 

	
  ARTICLE X

  	
   

  
	
   

  	
   

  	
   

  
	
  Default

  	
   

  
	
   

  	
   

  
	
  SECTION 10.1.

  	
  Master Servicer Termination Event

  	
   

  
	
  SECTION 10.2.

  	
  Consequences of a Master Servicer
  Termination Event

  	
   

  
	
  SECTION 10.3.

  	
  Appointment of Successor

  	
   

  
	
  SECTION 10.4.

  	
  Notification to Noteholders and
  Certificateholders

  	
   

  
	
  SECTION 10.5.

  	
  Waiver of Past Defaults

  	
   

  
	
  SECTION 10.6.

  	
  Successor to Master Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  
	
   

  	
   

  	
   

  
	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.1.

  	
  Optional Purchase of All Receivables

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  
	
   

  	
   

  	
   

  
	
  Administrative Duties of the Master
  Servicer

  	
   

  
	
   

  	
   

  
	
  SECTION 12.1.

  	
  Administrative Duties.

  	
   

  
	
  SECTION 12.2.

  	
  Records

  	
   

  
	
  SECTION 12.3.

  	
  Additional Information to be Furnished to
  the Issuer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  
	
   

  	
   

  	
   

  
	
  Miscellaneous Provisions

  	
   

  
	
   

  	
   

  
	
  SECTION 13.1.

  	
  Amendments

  	
   

  
	
  SECTION 13.2.

  	
  Protection of Title to Series Trust Estate

  	
   

  
	
  SECTION 13.3.

  	
  Notices

  	
   

  
	
  SECTION 13.4.

  	
  Assignment

  	
   

  
	
  SECTION 13.5.

  	
  Limitations on Rights of Others

  	
   

  
	
  SECTION 13.6.

  	
  Severability

  	
   

  
	
  SECTION 13.7.

  	
  Separate Counterparts

  	
   

  
	
  SECTION 13.8.

  	
  Headings

  	
   

  
	
  SECTION 13.9.

  	
  Governing Law

  	
   

  
	
  SECTION 13.10.

  	
  Assignment to Indenture Trustee

  	
   

  
	
  SECTION 13.11.

  	
  Nonpetition Covenants

  	
   

  
	
  SECTION 13.12.

  	
  Limitation of Liability of the Owner
  Trustee and the Indenture Trustee

  	
   

  
	
  SECTION 13.13.

  	
  Limitation of Liability of Issuer

  	
   

  
	
  SECTION 13.14.

  	
  Independence of the Master Servicer.

  	
   

  
	
  SECTION 13.15.

  	
  No Joint Venture

  	
   

  

 

iii

 

EXHIBITS

 

	
  Exhibit A

  	
  -

  	
  Form of Transfer Agreement

  

 

iv

 

MASTER
SALE AND SERVICING AGREEMENT dated as of July 28, 2004, among HOUSEHOLD
AUTOMOTIVE TRUST 2004-1, a Delaware statutory trust (the “Issuer” or the
“Trust”), HOUSEHOLD AUTO RECEIVABLES CORPORATION, a Nevada corporation (the
“Seller”), HOUSEHOLD FINANCE CORPORATION, a Delaware corporation (the “Master
Servicer”), U.S. BANK NATIONAL ASSOCIATION, a national banking association, in
its capacity as Indenture Trustee, and HSBC BANK USA, NATIONAL ASSOCIATION, a
national banking association, in its capacity as Administrator.

 

WHEREAS
the Issuer desires to purchase from time to time Receivables arising in
connection with motor vehicle retail installment sale contracts originated or
acquired by Household Automotive Finance Corporation (“HAFC”) or any of its
predecessors or Affiliates, including, but not limited to, Household Automotive
Credit Corporation (“HACC”);

 

WHEREAS
the Seller will purchase from time to time Receivables from HAFC or one or more
of its Affiliates, including, but not limited to, HACC, and is willing to sell
Receivables to the Issuer;

 

WHEREAS
the Master Servicer is willing to service all such Receivables;

 

NOW,
THEREFORE, in consideration of the promises and the mutual covenants herein
contained, the parties hereto agree as follows:

 

ARTICLE I

Definitions

 

SECTION 1.1.                       Definitions. 
Whenever used in this Agreement, the following words and phrases shall
have the following meanings:

 

“Accountants’
Report” means the report of a firm of nationally recognized independent
accountants described in Section 4.11.

 

“Accounting
Date” means, with respect to a Distribution Date, the last day of the
Collection Period immediately preceding such Distribution Date.

 

“Actuarial
Method” means the method of allocating a fixed level monthly payment on an
obligation between principal and interest, pursuant to which the portion of
such payment that is allocated to interest is equal to the product of (a) 1/12,
(b) the fixed annual rate of interest on such obligation and (c) the
outstanding principal balance of such obligation.

 

“Actuarial
Receivable” means a Receivable under which the portion of the payment allocated
to interest and the portion allocable to principal is determined in accordance
with the Actuarial Method.

 

 

“Addition
Notice” means, with respect to any transfer of Receivables to the Trust
pursuant to Section 2.1 of this Agreement, notice of the Seller’s election
to transfer Receivables to the Trust, such notice to designate the related
Transfer Date, and the approximate principal amount of Receivables to be
transferred on such Transfer Date.

 

“Additional
Principal Amount” has the meaning, if any, assigned to such term in the Series
Supplement.

 

“Administrative
Agent” means the Person, if any, specified in the Note Purchase Agreement.

 

“Administrator”
means HSBC Bank USA, National Association, a national banking association, as
Administrator under the Indenture and the other Basic Documents to which it is
a party, or any successor administrator under the Indenture appointed in
accordance with such agreement.

 

“Affiliate”
means, 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
Principal Balance” means, with respect to any date of determination, the sum of
the Principal Balances for all Receivables (other than (i) any Receivable that
has become a Liquidated Receivable and (ii) any Receivable that has become a
Repurchased Receivable as of the date of determination).

 

“Agreement”
means this Master Sale and Servicing Agreement, as the same may be amended and
supplemented from time to time.

 

“Amount
Financed” means, 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 and related costs.

 

“Annual
Percentage Rate” or “APR” of a Receivable means the annual percentage rate of
finance charges or service charges, as stated in the related Contract.

 

“Basic
Documents” has the meaning assigned to such term in the Series Supplement.

 

“Business
Day” has the meaning assigned to such term in the Series Supplement.

 

“Certificates”
has the meaning assigned to such term in the Trust Agreement.

 

2

 

“Certificateholder”
means the holders of the Certificates.

 

“Class”
means a class of Notes or Certificates, as the context requires.

 

“Closing
Date” has the meaning assigned to such term in the Series Supplement.

 

“Collected
Funds” means, 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
payments 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) and any Substitution Adjustment Amounts with respect to such
Collection Period.

 

“Collection
Account” means the collection account designated in the Series Supplement.

 

“Collection
Period” means, (i) with respect to the first Distribution Date, the period
beginning on the opening of business on the day after the related 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.

 

“Collection
Records” means all manually prepared or computer generated records relating to
collection efforts or payment histories with respect to the Receivables.

 

“Contract”
means a motor vehicle retail installment sales contract.

 

“Controlling
Party” has the meaning assigned to such term in the Series Supplement.

 

“Corporate
Trust Office” has the meaning assigned to such term in the Series Supplement.

 

“Cram
Down Loss” means, 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” means, except as otherwise provided in the Series Supplement, with
respect to a Receivable, the date designated in the related Transfer

 

3

 

Agreement as the Cutoff Date for such Receivable
transferred to the Trust on the related Transfer Date.

 

“Dealer”
means a dealer who sold a Financed Vehicle and who originated and assigned the
respective Receivable, directly or indirectly, to HAFC or one of its Affiliates
under a Dealer Agreement or pursuant to a Dealer Assignment.

 

“Dealer
Agreement” means any agreement between HAFC or one if its Affiliates and a
Dealer relating to the acquisition of Receivables from a Dealer by HAFC or one
of its Affiliates.

 

“Dealer
Assignment” means, with respect to a Receivable, the executed assignment
executed by a Dealer conveying such Receivable to HAFC or one of its
Affiliates.

 

“Delivery”
means, with respect to Trust Account Property:

 

(1)                                  (a)                                  with
respect to bankers’ acceptances, commercial paper, negotiable certificates of
deposit and other obligations that constitute “instruments” within the meaning
of Article 9 of the UCC, transfer thereof:

 

(i)                                     by
physical delivery to the Administrator, indorsed to, or registered in the name
of, the Administrator or its nominee or indorsed in blank;

 

(ii)                                  by
the Administrator continuously maintaining possession of such instrument; and

 

(iii)                               by the Administrator
continuously indicating by book-entry that such instrument is credited to the
related Trust Account;

 

(b)                                 with
respect to a “certificated security” (as defined in Article 8 of the UCC),
transfer thereof:

 

(i)                                     by
(x) physical delivery of such certificated security to the Administrator,
provided that if the certificated security is in registered form, it shall be
indorsed to, or registered in the name of, the Administrator or indorsed in
blank, and (y) the Administrator continuously maintaining possession of such
certificated security; or

 

(ii)                                  by
another Person (not a securities intermediary) (1) acquiring possession of such
certificated security on behalf of the Administrator, provided that if the
certificated security is in registered form, it shall be indorsed to, or
registered in the name of, the Administrator or indorsed in blank, or (2)
having acquired possession of such certificated security, acknowledging that it
holds such certificated security for the Administrator, and, in either such
case, continuously maintaining possession of such certificated security; and

 

4

 

by the Administrator continuously indicating by book-entry that such
certificated security is credited to the related Trust Account;

 

(c)                                  with
respect to any security issued by the U.S. Treasury, the Federal Home Loan
Mortgage Corporation or the Federal National Mortgage Association that is a
book-entry security held through the Federal Reserve System pursuant to Federal
book entry regulations, transfer thereof pursuant to the following procedures,
all in accordance with applicable law, including applicable federal regulations
and Articles 8 and 9 of the UCC:

 

(i)                                     by
(x) book-entry registration of such property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a securities intermediary
that is also a “depositary” pursuant to applicable federal regulations and
issuance by such securities intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Administrator of the
purchase by the securities intermediary on behalf of the Administrator of such
book-entry security; the making by such securities intermediary of entries in
its books and records identifying such book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations as belonging
to the Administrator and continuously indicating that such securities
intermediary holds such book-entry security solely as agent for the
Administrator or such additional or alternative procedures as are appropriate
under applicable law to effect a complete transfer of ownership of such
property to the Administrator or its nominee or custodian; or (y) continuous
book-entry registration of such property to a book-entry account maintained by
the Administrator with a Federal Reserve Bank; and

 

(ii)                                  by
the Administrator continuously indicating by book-entry that such property is
credited to the related Trust Account;

 

(d)                                 with
respect to any asset in the Trust Accounts that is an “uncertificated security”
(as defined in Article 8 of the UCC) and that is not governed by clause
(c) above or clause (e) below:

 

(i)                                     transfer
thereof:

 

(A)                              by
registration to the Administrator as the registered owner thereof, on the books
and records of the issuer thereof; or

 

(B)                                by
another Person (not a securities intermediary) (1) becoming the registered
owner of the uncertificated security on behalf of the Administrator, or (2)
having become the registered owner of the uncertificated security,
acknowledging that it holds such uncertificated security for the Administrator;
or

 

5

 

(ii)                                  the
issuer of the uncertificated security has agreed that it will comply with
instructions originated by the Administrator with respect to such uncertificated
security without further consent of the registered owner thereof; and

 

the Administrator continuously indicating by
book-entry that such uncertificated security is credited to the related Trust
Account;

 

(e)                                  in
the case of a security in the custody of or maintained on the books of a
clearing corporation (as defined in Article 8 of the UCC) or its nominee,
transfer thereof by causing:

 

(i)                                     the
relevant clearing corporation to credit such security to a securities account
of the Administrator at such clearing corporation; and

 

(ii)                                  the
Administrator to continuously indicate by book-entry that such security is
credited to the related Trust Account; or

 

(f)                                    with
respect to a “security entitlement” (as defined in Article 8 of the UCC)
to be transferred to or for the benefit of the Administrator and not governed
by clauses (c) or (e) above, transfer thereof by:

 

(i)                                     a
securities intermediary’s (A) indicating by book entry that the underlying
“financial asset” (as defined in Article 8 of the UCC) has been credited
to the Administrator’s “securities account” (as defined in Article 8 of
the UCC), (B) receiving a financial asset from the Administrator or acquiring
the underlying financial asset for the Administrator, and in either case,
accepting it for credit to the Administrator’s securities account, or (C)
becoming obligated under other law, regulation or rule to credit the underlying
financial asset to the Administrator’s securities account,

 

(ii) the making by the securities intermediary of
entries on its books and records continuously identifying such security
entitlement as belonging to the Administrator; and continuously indicating by
book-entry that such securities entitlement is credited to the Administrator’s
securities account; and

 

(iii) the Administrator’s continuously indicating by
book-entry that such security entitlement (or all rights and property of the
Administrator representing such securities entitlement) is credited to the
related Trust Account; and/or

 

(2)                                  In
the case of any such asset, (i) compliance with such additional or alternative
procedures as are now or may hereafter become appropriate to effect the
complete transfer of ownership of, or control over, any such Trust Account
Property to the Administrator free and clear of any adverse claims, consistent
with changes in applicable law or regulations or the interpretation thereof,
and (ii) the Administrator’s

 

6

 

continuously indicating by book entry that such asset
is credited to the related Trust Account.

 

In
each case of delivery contemplated herein, the Administrator shall make
appropriate notations on its records, and shall cause the same to be made on
the records of its nominees, indicating that securities are held in trust
pursuant to and as provided in this Agreement.

 

“Depositor”
means the Seller in its capacity as Depositor under the Trust Agreement.

 

“Determination
Date” means, unless otherwise provided in the Series Supplement, 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.

 

“Distribution
Date” has the meaning assigned to such term in the Series Supplement.

 

“Eligibility
Criteria” means the criteria set forth in the Schedule of Eligibility
Criteria.

 

“Eligible
Account” means, except as otherwise provided in the Series Supplement, either
(a) a segregated account with an Eligible Bank or (b) a segregated trust
account with the corporate trust department of a depository institution with
corporate trust powers organized under the laws of the United States of America
or any state thereof or the District of Columbia (or any United States branch
or agency of a foreign bank), provided that such institution also must have a
rating of Baa3 or higher from Moody’s, a rating of BBB- or higher from Standard
& Poor’s and a rating of BBB- or higher from Fitch, in each case only if
such Person is a Rating Agency, with respect to long-term deposit obligations,
or such other lower ratings acceptable to the Rating Agency.

 

“Eligible
Bank” means, except as otherwise provided in the Series Supplement, any
depository institution (which shall initially be the Administrator), organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any United States branch or agency of a foreign
bank), which is subject to supervision and examination by federal or state
banking authorities and which at all times (a) has a net worth in excess of $50,000,000
and (b) (i) has a rating of P-1 from Moody’s, A-1 from Standard & Poor’s
and F1 from Fitch, in each case only if such Person is a Rating Agency, with
respect to short-term deposit obligations, or such other lower ratings
acceptable to the Rating Agency, or (ii) if such institution has issued
long-term unsecured debt obligations, a rating acceptable to the Rating Agency
with respect to long-term unsecured debt obligations.

 

“Eligible
Investments” shall mean, except as otherwise provided in a Series Supplement,
(i) negotiable instruments or securities represented by instruments in bearer
or registered form (or, in the case of Eligible Investments described in clause
(a) of

 

7

 

this definition, book-entry securities representing
such obligations), or (ii) securities entitlements (as defined in
Article 8 of the UCC) arising from Delivery of any such negotiable
instruments or securities in accordance with the provisions of clause (1)(f) of
the definition of such term, or (iii) in the case of deposits described below,
deposit accounts held in the name of the Administrator in trust for the benefit
of the Holders of the Securities, subject to the exclusive custody and control
of the Administrator and for which the Administrator has sole signature
authority, which evidence or arise out of, as the case may be:

 

(a)                                  direct
obligations of, or obligations fully guaranteed as to timely payment by, the
United States of America;

 

(b)                                 demand
deposits, time deposits or certificates of deposit (having original maturities
of no more than 365 days) of depositary institutions or trust companies
incorporated under the laws of the United States of America or any state
thereof (or domestic branches of foreign banks) and subject to supervision and
examination by federal or state banking or depositary institution authorities; provided,
that at the time of the Trust’s investment or contractual commitment to invest
therein, the short-term debt rating of such depository institution or trust
company shall be satisfactory to the Rating Agency, and provided  further
that the “jurisdiction” of such depositary institution or trust company, for
purposes of Article 9 of the UCC, shall be a state in which Revised
Article 9 of the UCC has become effective and in which security interests
in deposit accounts are subject to Article 9, as in effect therein;

 

(c)                                  commercial
paper (having original or remaining maturities of not more than 30 days)
having, at the time of the Trust’s investment or contractual commitment to
invest therein, a rating satisfactory to the Rating Agency;

 

(d)                                 investments
in money market funds having, at the time of the Trust’s investment therein, a
rating satisfactory to the Rating Agency;

 

(e)                                  demand
deposits, time deposits and certificates of deposit which are fully insured by
the FDIC having, at the time of the Trust’s investment therein, a rating
satisfactory to the Rating Agency;

 

(f)                                    bankers’
acceptances (having original maturities of no more than 365 days) issued by a
depository institution or trust company referred to in (b) above;

 

(g)                                 (x)
time deposits (having maturities not later than the succeeding Distribution
Date) other than as referred to in clause (e) above, with a Person the
commercial paper of which has a credit rating satisfactory to the Rating Agency
or (y) notes which are payable on demand issued by Household Finance
Corporation; provided such notes will constitute Eligible Investments
only if Household Finance Corporation has, at the time of the Trust’s investment
in such notes, a commercial paper rating of not less than A-1 by Standard &
Poor’s, P-1 by Moody’s and F1 by Fitch (or such other rating as shall be
satisfactory to such Rating Agency); or

 

8

 

(h)                                 any
other investment of a type or rating that is acceptable to the Rating Agency.

 

Any of
the foregoing Eligible Investments may be purchased by or through the
Administrator, the Indenture Trustee or through any of their respective
Affiliates.

 

“Eligible
Servicer” means Household Finance Corporation which at the time of its
appointment as Master Servicer, (i) is servicing a portfolio of motor vehicle
retail installment sales contracts and/or motor vehicle installment loans, (ii)
is legally qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability professionally and competently to service a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans similar to the Receivables with reasonable skill and care,
(iv) is qualified and entitled to use, pursuant to a license or other written
agreement, and agrees to maintain the confidentiality of, the software which
the Master Servicer uses in connection with performing its duties and responsibilities
under this Agreement or otherwise has available software which is adequate to
perform its duties and responsibilities under this Agreement and (v) has a net
worth of at least $50,000,000.

 

“Eligible
Subservicer” means Household Automotive Finance Corporation or any wholly owned
subsidiary of Household Finance Corporation which at the time of its
appointment as Subservicer, (i) is servicing a portfolio of motor vehicle
retail installment sales contracts and/or motor vehicle installment loans, (ii)
is legally qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability professionally and competently to service a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans similar to the Receivables with reasonable skill and care,
and (iv) is qualified and entitled to use, pursuant to a license or other
written agreement, and agrees to maintain the confidentiality of, the software
which the Master Servicer uses in connection with performing its duties and
responsibilities under this Agreement or otherwise has available software which
is adequate to perform its duties and responsibilities under this Agreement.

 

“Financed
Vehicle” means a new or used automobile, light duty truck or van securing an
Obligor’s indebtedness under the respective Receivable.

 

“Fitch”
means Fitch Inc., or its successor.

 

“Grant”
has the meaning assigned to such term in the Indenture.

 

“HACC”
means Household Automotive Credit Corporation, a Delaware corporation.  For the avoidance of doubt, HACC is an
Affiliate of HAFC.

 

“HAFC”
means Household Automotive Finance Corporation, a Delaware corporation.

 

“Indenture”
has the meaning assigned to such term in the Series Supplement.

 

9

 

“Indenture
Trustee” means the Person acting as Indenture Trustee under the Indenture, its
successors in interest and any successor Indenture Trustee under the Indenture.

 

“Indenture
Trustee Fee” means the fees and reasonable out-of-pocket expenses due to the
Indenture Trustee as may be set forth in that certain fee agreement dated as of
the date hereof between the Master Servicer and the Indenture Trustee.

 

“Insolvency
Event” means, with respect to a specified Person, (a) the filing of a petition
against such Person or the entry of a decree or order for relief by a court
having jurisdiction in respect of such Person or any substantial part of its
property in an involuntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator,
or similar official for such Person or for any substantial part of its
property, or ordering the winding-up or liquidation of such Person’s affairs,
and such petition, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by, a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors,
or the failure by such Person generally to pay its debts as such debts become
due, or the taking of action by such Person in furtherance of any of the
foregoing.

 

“Insurance
Policy” means, with respect to a Receivable, any insurance policy (including
the insurance policies described in Section 4.4 hereof) benefiting the
holder of the Receivable providing loss or physical damage, credit life, credit
disability, theft, mechanical breakdown or similar coverage with respect to the
Financed Vehicle or the Obligor.

 

“Interest
Period” has the meaning assigned to such term in the Series Supplement.

 

“Issuer”
means Household Automotive Trust 2004-1, a Delaware statutory trust formed
under the laws of the State of Delaware.

 

“Lien”
means a security interest, lien, charge, pledge, equity, or encumbrance of any
kind, other than tax liens, mechanics’ liens and any liens that attach to the
respective Receivable by operation of law as a result of any act or omission by
the related Obligor, provided that the lien created by this Agreement or the
Indenture shall not be deemed to constitute a Lien.

 

“Lien
Certificate” means, with respect to a Financed Vehicle, an original certificate
of title, certificate of lien or other notification issued by the Registrar of
Titles of the applicable state to a secured party which indicates that the lien
of the secured party

 

10

 

on the Financed Vehicle is recorded on the original
certificate of title.  In any
jurisdiction in which the original certificate of title is required to be given
to the Obligor, the term “Lien Certificate” shall mean only a certificate or
notification issued to a secured party.

 

“Liquidated
Receivable” means, 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.

 

“Managing
Agent” means, with respect to any Purchaser Group, the Person specified as the
Managing Agent for such Purchaser Group from time to time pursuant to the Note
Purchase Agreement (including, without limitation, Schedule I thereto) or
any Joinder Agreement thereto or any Assignment and Acceptance Agreement
thereto.

 

“Majority
Purchaser” has the meaning assigned to such term in the Note Purchase
Agreement.

 

“Master
Receivables Purchase Agreements” has the meaning assigned to such term in the Series
Supplement.

 

“Master
Servicer” means Household Finance Corporation, as the servicer of the
Receivables, and each successor Master Servicer pursuant to Section 10.3.

 

“Master
Servicer Credit Facility” means the credit facility maintained by the Master
Servicer with a Master Servicer Credit Facility Issuer pursuant to
Section 4.2(e).

 

“Master
Servicer Credit Facility Issuer” means a depository institution or insurance
company that qualifies pursuant to Section 4.2(e).

 

“Master
Servicer Termination Event” means an event specified in Section 10.1.

 

“Master
Servicer’s Certificate” has the meaning assigned to such term in the Series
Supplement.

 

11

 

“Monthly
Extension Rate” means, with respect to any Accounting Date, the fraction,
expressed as a percentage, the numerator of which is the aggregate Principal
Balance of Receivables whose payments were extended during the Collection
Period ended on such Accounting Date and the denominator of which is the
Aggregate Principal Balance as of the Accounting Date on which such Collection
Period began.

 

“Monthly
Records” means all records and data maintained by the Master Servicer with
respect to the Receivables, including the following with respect to each
Receivable:  the account number; the
originating Dealer, if any; Obligor name; Obligor address; Obligor home phone
number; Obligor business phone number; original Principal Balance; original
term; Annual Percentage Rate; current Principal Balance; current remaining term;
origination date; first payment date; final scheduled payment date; next
payment due date; date of most recent payment; new/used classification;
collateral description; days currently delinquent; number of contract
extensions (months) to date; amount of Scheduled Payment; current Insurance
Policy expiration date; and past due late charges.

 

“Moody’s”
means Moody’s Investors Service, Inc., or its successor.

 

“Net
Liquidation Proceeds” means, with respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
or received from any Series Support) net of (i) reasonable expenses incurred by
the Master Servicer in connection with the collection of such Receivable and
the repossession and disposition of the Financed Vehicle and (ii) amounts that
are required to be refunded to the Obligor on such Receivable; provided, however,
that the Net Liquidation Proceeds with respect to any Receivable shall in no
event be less than zero; provided, further, that, so long
as amounts are not traced to specific Receivables the Master Servicer shall
reasonably estimate, on or prior to each Accounting Date, the amount of Net
Liquidation Proceeds attributable to the Series Trust Estate.

 

“Noteholder”
means the Person in whose name a Note is registered on the Note Register.

 

“Note
Purchase Agreement” has the meaning, if any, assigned to such term in the
Series Supplement.

 

“Notes”
has the meaning assigned to such term in the Indenture.

 

“Obligor”
on a Receivable means the purchaser or co-purchasers of the Financed Vehicle
and any other Person who owes payments under the Receivable.

 

“Officers’
Certificate” means a certificate signed by the chairman of the board, the
president, any executive vice president or any vice president, any treasurer,
assistant treasurer, secretary or assistant secretary of the Seller or the
Master Servicer, as appropriate.

 

12

 

“Opinion
of Counsel” means an opinion of counsel who may be counsel to the Master Servicer
or the Seller, acceptable to the Indenture Trustee or the Administrator, as the
case may be.

 

“Other
Conveyed Property” means all property conveyed by the Seller to the Trust
pursuant to Section 2.1(a)(ii) through (xii) of this Agreement.

 

“Outstanding”
has the meaning assigned to such term in the Indenture.

 

“Outstanding
Amount” has the meaning assigned to such term in the Indenture.

 

“Owner
Trust Estate” has the meaning assigned to such term in the Trust Agreement.

 

“Owner
Trustee” means the Person acting as Owner Trustee under the Trust Agreement,
its successors-in-interest or any successor Owner Trustee under the Trust
Agreement.

 

“Payment
Record” means the record maintained by the Master Servicer for the Trust as
provided in Section 4.2(f) hereof.

 

“Person”
means 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.

 

“Principal
Balance” means, 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.

 

“Rating
Agency” has the meaning assigned to such term in the Series Supplement.

 

“Receivables”
has the meaning assigned to such term in the Series Supplement.

 

“Receivable
Files” means the documents specified in Section 3.3.

 

“Receivables
Purchase Agreement Supplement” means any Receivables Purchase Agreement
Supplement to any Master Receivables Purchase Agreement.

 

“Record
Date” with respect to each Distribution Date means the Business Day immediately
preceding such Distribution Date, unless otherwise specified in the Series
Supplement.

 

13

 

“Registrar
of Titles” means, with respect to any state, the governmental agency or body
responsible for the registration of, and the issuance of certificates of title
relating to, motor vehicles and liens thereon.

 

“Related
Documents” has the meaning assigned to such term in the Series Supplement.

 

“Repurchase
Amount” means, with respect to a Receivable, the Principal Balance and all
accrued and unpaid interest on the Receivable, after giving effect to the
receipt 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” means a Receivable purchased by the Master Servicer pursuant to
Section 4.7 or repurchased by the Seller pursuant to Section 3.2 or
the Master Servicer pursuant to Section 11.1(a).

 

“Schedule of
Eligibility Criteria” means the Schedule of Eligibility Criteria attached
as Schedule I to the Series Supplement.

 

“Schedule of
Receivables” has the meaning assigned to such term in the Series Supplement.

 

“Scheduled
Payment” means, 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 Servicemembers Civil
Relief Act, as amended, or (iii) modifications or extensions of the Receivable
permitted by Sections 4.2(b) and (c), 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.

 

“Secured
Parties” has the meaning assigned to such term in the Series Supplement.

 

“Securities”
means the Notes and the Certificates.

 

“Securityholders”
means the Noteholders and the Certificateholders.

 

“Seller”
means Household Auto Receivables Corporation, a Nevada corporation, and its
successors in interest to the extent permitted hereunder.

 

“Series”
means the Notes and Certificates issued pursuant to the Series Supplement.

 

14

 

“Series
2004-1 Notes” shall have the meaning assigned to such term in the Series
Supplement.

 

“Series
Supplement” means, the Series Supplement, dated as of the Closing Date, to this
Agreement, the Indenture and the Trust Agreement, among the Master Servicer,
the Issuer, the Seller, the Indenture Trustee, the Owner Trustee and the
Administrator, as such agreement may be amended or supplemented from time to
time.

 

“Series
Support” means any such rights and benefits as specified in the Series
Supplement provided to the Indenture Trustee or the Noteholders of any Class
pursuant to any letter of credit, surety bond, cash collateral account, spread
account, reserve account, guaranteed rate agreement, maturity liquidity
facility, interest rate swap agreement, tax protection agreement or other
similar arrangement.  The subordination
of any Class to another Class shall be deemed to be Series Support.  Notwithstanding that such Series Support may
be held by or in favor of the Indenture Trustee for the benefit of any Class,
only those Class(es) to which such Series Support relates shall have any rights
with respect thereto and all payments thereunder received by the Indenture
Trustee (or the Administrator on its behalf) shall be distributed exclusively
as prescribed in the Series Supplement.

 

“Series
Trust Estate” has the meaning assigned to such term in the Series Supplement.

 

“Service
Contract” means, with respect to a Financed Vehicle, the agreement, if any,
financed under the related Receivable that provides for the repair of such
Financed Vehicle.

 

“Servicing
Fee” has the meaning assigned to such term in the Series Supplement.

 

“Servicing
Fee Rate” means the rate per annum specified in the Series Supplement.

 

“Simple
Interest Method” means the method of allocating a fixed level monthly payment
on an obligation between principal and interest, pursuant to which the portion
of such payment that is allocated to interest is equal to the product of (a)
the fixed rate of interest on such obligation, (b) the period of time
(expressed as a fraction of a year, based on the actual number of days in the
calendar month and 365 or 360 days (as applicable in the underlying document)
in the calendar year) elapsed since the preceding payment under the obligation
was made and (c) the outstanding principal balance of such obligation.

 

“Simple
Interest Receivable” means a Receivable under which the portion of the payment
allocable to interest and the portion allocable to principal is determined in
accordance with the Simple Interest Method.

 

“Standard
& Poor’s” means Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc., or its successor.

 

15

 

“Subservicer”
means, initially, Household Automotive Finance Corporation, or any Eligible
Subservicer with whom the Master Servicer has entered into an agreement
relating to subservicing the Receivables.

 

“Successor
Master Servicer” has the meaning assigned to such term in Section 10.3(a).

 

“Support
Default” means a default relating to an Insolvency Event with respect to, or
the performance of, a Support Provider.

 

“Support
Provider” means the Person, if any, designated in the Series Supplement, as
providing any Series Support, other than Household Finance Corporation or any
of its Affiliates or the Noteholders of any Class which is subordinated to any
other Class.

 

“Transfer
Agreement” means the agreement among the Issuer, the Seller, the Master
Servicer, the Indenture Trustee and the Administrator, substantially in the
form of Exhibit A.

 

“Transfer
Date” means, with respect to Receivables, any date on which Receivables are to be
transferred to the Trust pursuant to this Agreement and a related Transfer
Agreement.

 

“Trust”
means the Issuer.

 

“Trust
Account Property” means the Trust Accounts, all amounts and investments held
from time to time in any Trust Account (whether in the form of deposit
accounts, book-entry securities, uncertificated securities or otherwise), and
all proceeds of the foregoing.

 

“Trust
Accounts” has the meaning assigned to such term in the Series Supplement.

 

“Trust
Agreement” has the meaning assigned to such term in the Series Supplement.

 

“Trust
Officer” means, (i) in the case of the Indenture Trustee, any officer within
the Corporate Trust Office of the Indenture Trustee, including any President,
Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary, Financial Services Officer or any other officer of the Indenture
Trustee, customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of the Indenture, (ii) in the case of the Administrator, any
officer within the Corporate Trust Office of the Administrator, and (iii) in
the case of the Owner Trustee, any officer in the corporate trust office of the
Owner Trustee or any agent of the Owner Trustee under a power of attorney with
direct responsibility for the administration of this Agreement or any of the
Basic Documents or Related Documents on behalf of the Owner Trustee.

 

16

 

“UCC”
means the Uniform Commercial Code as in effect in the relevant jurisdiction on
the date of this Agreement.

 

SECTION 1.2.                       Other Interpretive Provisions.  (a) 
Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture, the Series Supplement or the Trust
Agreement.

 

(b)                                 All
terms defined in this Agreement shall have the defined meanings when used in
any instrument governed hereby and in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.

 

(c)                                  As
used in this Agreement, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such instrument, certificate
or other document, and accounting terms partly defined in this Agreement or in
any such instrument, certificate or other document to the extent not defined,
shall have the respective meanings given to them under generally accepted
accounting principles as in effect on the date of this Agreement or any such
instrument, certificate or other document, as applicable.  To the extent that the definitions of
accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.

 

(d)                                 Any
agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein.

 

(e)                                  Any
term defined herein, which is otherwise defined in the Series Supplement, shall
have the meaning specified therefor in the Series Supplement, whether or not
the definition in this Agreement includes a phrase to the effect that such term
may be otherwise defined in the Series Supplement.

 

(f)                                    In
the event that with respect to the Series there is no Support Provider, any
references herein or in any other of the Basic Documents to the consent of, or
acceptability to, the Support Provider shall be deemed to be deleted.

 

(g)                                 In
the event that with respect to the Series, the Indenture and Series Supplement
do not provide for the purchase by the Noteholders of Additional Principal
Amounts, any references herein or in any other Basic Document to Additional
Principal Amounts shall be deemed to be deleted.

 

(h)                                 In
the event that with respect to the Series, the Indenture and Series Supplement
do not provide for an Administrative Agent or any Managing Agent, any
references herein or in any other Basic Document to an Administrative Agent
shall be deemed to be deleted.

 

17

 

SECTION 1.3.                       Usage of Terms. 
With respect to all terms used in this Agreement, the singular includes
the plural and the plural includes the singular; words importing any gender
include the other gender; references to “writing” include printing, typing,
lithography, and other means of reproducing words in a visible form; references
to agreements and other contractual instruments include all subsequent
amendments thereto or changes therein entered into in accordance with their
respective terms and not prohibited by this Agreement; references to Persons
include their permitted successors and assigns; the terms “include” or
“including” mean “include without limitation” or “including without
limitation;” the words “herein”, “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, and Article, Section,
Schedule and Exhibit references, unless otherwise specified, refer to
Articles and Sections of Schedules and Exhibits to this Agreement.

 

SECTION 1.4.                       Certain References.  All references to the Principal Balance of a
Receivable as of any date of determination shall refer to the close of business
on such day, or as of the first day of an Interest Period shall refer to the
opening of business on such day.  All
references to the last day of an Interest Period shall refer to the close of
business on such day.

 

SECTION 1.5.                       No Recourse. 
Without limiting the obligations of the Master Servicer or Seller
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of the
Master Servicer or Seller, or of any of their respective Affiliates,
predecessors or successors.

 

SECTION 1.6.                       Action by or Consent of Noteholders.  Whenever any provision of this Agreement
refers to action to be taken, or consented to, by Noteholders, such provision
shall be deemed to refer to the Noteholders of record as of the Record Date
immediately preceding the date on which such action is to be taken, or consent
given, by Noteholders.  Solely for the
purposes of any action to be taken, or consented to, by Noteholders, any Note
registered in the name of HAFC or any Affiliate thereof shall be deemed not to
be outstanding; provided, however, that, solely for the purpose of
determining whether the Indenture Trustee is entitled to rely upon any such
action or consent, only Notes which a Trust Officer of the Indenture Trustee
actually knows to be so owned shall be so disregarded.

 

ARTICLE II

Conveyance of Receivables

 

SECTION 2.1.                       Conveyance of Receivables.  (a) 
Subject to the conditions set forth in paragraph (b) below, in
consideration of the Issuer’s delivery to or upon the order of the Seller on a
Transfer Date (which may include the Closing Date) of the net proceeds of the
issuance of Notes or from any Additional Principal Amount thereunder and the
other amounts to be distributed from time to time to the Seller in accordance
with the terms of this Agreement and the Series Supplement, the Seller shall,

 

18

 

from time to time, sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
(subject to the obligations set forth herein), all right, title and interest of
the Seller in and to:

 

(i)                                     each
and every Receivable listed on the Schedule of Receivables and all monies
paid or payable thereon or in respect thereof after the related Cutoff Date
(including amounts due on or before such Cutoff Date but received by HFC, the
Master Servicer, HAFC or any Affiliate of HAFC that is a seller under a Master
Receivables Purchase Agreement or the Seller after such Cutoff Date);

 

(ii)                                  the
security interests in the related Financed Vehicles granted by Obligors
pursuant to the related Receivables and any other interest of the Seller in
such Financed Vehicles;

 

(iii)                               all
rights of HAFC or any Affiliate of HAFC that is the seller under a Master
Receivables Purchase Agreement against the Dealers pursuant to Dealer
Agreements or Dealer Assignments related to such Receivables;

 

(iv)                              any
proceeds and the right to receive proceeds with respect to such Receivables
repurchased by a Dealer pursuant to a Dealer Agreement;

 

(v)                                 all
rights under any Service Contracts on the related Financed Vehicles;

 

(vi)                              any
proceeds and the right to receive proceeds with respect to such Receivables
from claims on any physical damage, credit life or disability insurance
policies covering the related Financed Vehicles or Obligors, including rebates
of insurance premiums relating to the Receivables;

 

(vii)                           all
items contained in the related Receivables Files with respect to the
Receivables; and any and all other documents that HAFC or any Affiliate of HAFC
that is a seller under a Master Receivables Purchase Agreement, the Seller or
the Master Servicer, as applicable, keeps on file in accordance with its
customary procedures relating to the related Receivables, the Obligors or the
Financed Vehicles;

 

(viii)                        all
funds on deposit from time to time in the Trust Accounts (including all
investments and proceeds thereof);

 

(ix)                                all
property (including the right to receive future Net Liquidation Proceeds) that
secures a Receivable and that has

 

19

 

been acquired by
or on behalf of the Seller pursuant to liquidation of such Receivable;

 

(x)                                   all
of the Seller’s right, title and interest in its rights and benefits, but none
of its obligations or burdens, under each of the Master Receivables Purchase
Agreements and the Receivables Purchase Agreement Supplements, including the
delivery requirements, representations and warranties and the cure and
repurchase obligations of HAFC or any Affiliate of HAFC that is a seller under
a Master Receivables Purchase Agreement or Household Finance Corporation, as
applicable, under each of the Master Receivables Purchase Agreements and the
related Receivables Purchase Agreement Supplements, after the related Cutoff
Date;

 

(xi)                                on
the Closing Date, one share of Class SV Preferred Stock of the Seller together
with the exclusive right to vote such share; and

 

(xii)                             all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, investment property, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing.

 

(b)                                 The
Seller shall transfer to the Issuer the Receivables and the other property and
rights related thereto described in paragraph (a) above only upon the
satisfaction of each of the following conditions on or prior to the related
Transfer Date (if the Transfer Date is not also the Closing Date):

 

(i)                                     the
Seller shall have provided the Indenture Trustee, the Administrator and the
Owner Trustee with an Addition Notice not later than five days prior to such
Transfer Date and shall have provided any information reasonably requested by
any of the foregoing with respect to the related Receivables;

 

(ii)                                  the
Seller shall have delivered to the Owner Trustee a duly executed Transfer
Agreement which shall include supplements to Schedule A (which may be in
electronic format), listing the Receivables to be transferred to the Issuer;

 

20

 

(iii)                               the
Master Servicer, on behalf of the Issuer, shall have delivered to the Indenture
Trustee and the Administrator a supplemental schedule to the Series
Supplement (which may be in electronic format), listing the Receivables to be
pledged to the Indenture Trustee under the Indenture;

 

(iv)                              the
Seller shall, to the extent required by Section 4.2, have deposited in the
Collection Account all collections received after the related Cutoff Date in
respect of the Receivables to be transferred;

 

(v)                                 as
of each Transfer Date, (A) the Seller shall not be insolvent and shall not
become insolvent as a result of the transfer of Receivables on such Transfer
Date, (B) the Seller shall not intend to incur or believe that it shall incur
debts that would be beyond its ability to pay as such debts mature, (C) such
transfer shall not have been made with actual intent to hinder, delay or
defraud any Person and (D) the assets of the Seller shall not constitute
unreasonably small capital to carry out its business as conducted;

 

(vi)                              each
of the representations and warranties made by the Seller pursuant to Section 3.1
with respect to the Receivables to be transferred on such Transfer Date shall
be true and correct as of the related Transfer Date, and the Seller shall have
performed all obligations to be performed by it hereunder on or prior to such
Transfer Date;

 

(vii)                           the
Seller shall, at its own expense, on or prior to the Transfer Date indicate in
its computer files that the Receivables identified in the Transfer Agreement
have been sold to the Trust pursuant to this Agreement;

 

(viii)                        the
Seller shall have taken any action necessary or, if required by the Indenture
Trustee, advisable to obtain and maintain the first priority perfected
ownership interest of the Trust in the Owner Trust Estate;

 

(ix)                                the
Issuer shall have taken any action necessary or, if required by the Indenture
Trustee, advisable to obtain and maintain the first priority perfected security
interest of the Indenture Trustee, for the benefit of the Noteholders, in the
Series Trust Estate;

 

(x)                                   no
selection procedures adverse to the interests of the Noteholders or any Support
Provider shall have been utilized in selecting the related Receivables;

 

21

 

(xi)                                the
addition of any such Receivables shall not result in a material adverse tax
consequence to the Trust or the Noteholders;

 

(xii)                             if
required by any of the Related Documents, the Issuer shall simultaneously
transfer to the Administrator any amounts required to be deposited in the
related Trust Accounts with respect to the Receivables transferred on such
Transfer Date; and

 

(xiii)                          the
Seller shall have delivered to the Indenture Trustee and the Administrator an
Officers’ Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b).

 

The
Seller covenants that in the event any of the foregoing conditions precedent
are not satisfied with respect to any Receivable on the date required as
specified above, the Seller will immediately repurchase such Receivable from
the Trust, at a price equal to the Repurchase Amount thereof, in the manner
specified in Section 5.4.

 

It is
the intention of the Seller that the transfer and assignment contemplated by
this Agreement and each related Transfer Agreement shall constitute a sale of
the related Receivables and the related Other Conveyed Property from the Seller
to the Issuer and the beneficial interest in and title to such property shall
not be part of the Seller’s estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law.  In the event that, notwithstanding the intent
of the Seller, the transfer and assignment contemplated hereby and thereby is
held not to be a sale, this Agreement and the related Transfer Agreement and
financing statements described in this Agreement, shall constitute a Grant by
the Seller of a valid and continuing first priority perfected security interest
in the property referred to in this Section 2.1 to the Issuer.  The Seller hereby authorizes the Issuer to
file such financing statements as it deems necessary in connection with the
security interest granted pursuant to the preceding sentence.

 

(c)                                  Notwithstanding
the provisions of this Section 2.1 and any other provisions of any
Transaction Document that purport to allow multiple conveyances of Receivables
from the Seller to the Issuer, the parties hereto agree that, other than the
conveyance of (i) the Receivables on the Closing Date and (ii) any Eligible
Substitute Receivables on any date hereafter, the Seller shall not convey any
Receivables to the Trust pursuant to this Agreement or any Transfer Agreement.

 

SECTION 2.2.                       Further Encumbrance of Owner
Trust Estate.  (a)  Immediately upon the conveyance to the Trust
by the Seller of Receivables and the related Other Conveyed Property pursuant
to Section 2.1, all right, title and interest of the Seller in and to such
Receivables and such Other Conveyed Property shall terminate, and all such
right, title and interest shall vest in the Issuer, in accordance with the
Trust Agreement and Sections 3802 and 3805 of the Statutory Trust Statute (as
defined in the Trust Agreement).

 

22

 

(b)                                 Immediately
upon the vesting of any Receivables and the related Other Conveyed Property,
the Trust shall have the sole right to pledge or otherwise encumber such
property subject to the terms of the Basic Documents.  Pursuant to the Indenture and the Series
Supplement, the Trust will grant a security interest in the Series Trust Estate
to secure the repayment of the Notes. 
The Certificates shall represent the beneficial ownership interest in
the Receivables and the Other Conveyed Property, and the Certificateholders
shall be entitled to receive distributions with respect thereto as set forth in
the Series Supplement.

 

(c)                                  The
Indenture Trustee shall hold the Series Trust Estate for the benefit of the
Secured Parties.  Following the payment
in full of the Notes and the release and discharge of the Indenture and the
Series Supplement, all covenants of the Issuer under Article III of the
Indenture and the Series Supplement shall, until payment in full of the
Certificates, remain as covenants of the Issuer for the benefit of the
Certificateholders, enforceable by the Certificateholders to the same extent as
such covenants were enforceable by the Secured Parties prior to the discharge
of the Indenture.  Any rights of the
Indenture Trustee under Article III of the Indenture and the Series
Supplement, following the discharge of the Indenture and the Series Supplement,
shall vest in the Certificateholders.

 

(d)                                 The
Indenture Trustee shall, at such time as there are no Securities outstanding
and all sums due to the Indenture Trustee or any agent or counsel thereof
pursuant to the Indenture as supplemented by the Series Supplement, have been
paid, pursuant to Section 4.1 of the Indenture, and subject to
satisfaction of the conditions set forth therein, release the Lien of the
Series Supplement and the Indenture with respect to the Series Trust Estate.

 

ARTICLE III

The Receivables

 

SECTION 3.1.                       Representations and Warranties
of Seller.  The Seller represents
and warrants as to the related Receivables that the representations and
warranties set forth on the Schedule of Eligibility Criteria are, or will
be, true and correct as of the respective dates specified in such
Schedule.  The Issuer is deemed to have
relied on such representations and warranties in acquiring the related
Receivables and the related Securityholders shall be deemed to rely on such
representations and warranties in purchasing the Notes and Certificates or any
Additional Principal Amounts thereunder. 
Such representations and warranties shall survive the sale, transfer and
assignment of the Owner Trust Estate to the Issuer and any pledge of the Series
Trust Estate to the Indenture Trustee pursuant to the Indenture and the Series
Supplement.

 

SECTION 3.2.                       Repurchase upon Breach.  (a) 
The Seller, the Master Servicer, any Trust Officer of the Indenture
Trustee, the Administrator or the Owner Trustee, as the case may be, shall
inform each of the other parties to this Agreement promptly, in writing, upon
the discovery of any breach of the Seller’s representations and warranties made
pursuant to Section 3.1; provided, however, that the failure to give any

 

23

 

such notice shall not
derogate from any obligations of the Seller under this Section 3.2.  As of the last day of the second (or, if the
Seller so elects, the first, or with respect to any exceptions appearing on any
exception report delivered by the Indenture Trustee, the first) month following
the discovery by the Seller or receipt by the Seller of notice of such breach
(or such longer period not in excess of 120 days, as may be agreed upon by the
Indenture Trustee and the Master Servicer), unless such breach is cured by such
date, the Seller shall have an obligation to repurchase or cause HAFC or an
Affiliate of HAFC that is the seller under a Master Receivables Purchase
Agreement or Household Finance Corporation, as applicable, to repurchase any
Receivable in which the interests of the Securityholders are materially and
adversely affected by any such breach. 
In consideration of and simultaneously with the repurchase of the
Receivables, the Seller shall remit, or cause HAFC or an Affiliate of HAFC that
is the seller under a Master Receivables Purchase Agreement or Household
Finance Corporation, as applicable, to remit, to the Collection Account the
Repurchase Amount in the manner specified in Section 5.4 and the Issuer
shall execute such assignments and other documents reasonably requested by such
person in order to effect such repurchase. 
The sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee,
the Administrator and the related holders with respect to a breach of
representations and warranties pursuant to Section 3.1 and the agreement
contained in this Section shall be the repurchase by the Seller of the
Receivables pursuant to this Section, subject to the conditions contained
herein or to enforce the obligation of HAFC or an Affiliate of HAFC that is the
seller under a Master Receivables Purchase Agreement or Household Finance
Corporation, as applicable, to the Seller to repurchase such Receivables
pursuant to the related Master Receivables Purchase Agreement.  None of the Owner Trustee, the Indenture
Trustee or the Administrator shall have a duty to conduct any affirmative
investigation as to the occurrence of any conditions requiring the repurchase
of any Receivable pursuant to this Section.

 

(b)                                 Pursuant
to Section 2.1 of this Agreement and pursuant to the related Transfer
Agreement, the Seller conveyed to the Trust all of the Seller’s right, title
and interest in its rights and benefits, but none of its obligations or
burdens, under the Master Receivables Purchase Agreements and the related
Receivables Purchase Agreement Supplements, including the Seller’s rights under
the Master Receivables Purchase Agreements and the delivery requirements,
representations and warranties and the cure or repurchase obligations of HAFC
or an Affiliate of HAFC that is the seller under a Master Receivables Purchase
Agreement or Household Finance Corporation, as applicable, thereunder.  The Seller hereby represents and warrants to
the Trust that such assignment is valid, enforceable and effective to permit
the Trust to enforce such obligations of HAFC or an Affiliate of HAFC that is
the seller under a Master Receivables Purchase Agreement and Household Finance
Corporation under the Master Receivables Purchase Agreements.

 

SECTION 3.3.                       Custody of Receivables Files.  In connection with the sale, transfer and
assignment of the Receivables to the Trust pursuant to this Agreement and
pursuant to the related Transfer Agreement, the Master Servicer shall act,
until such time as the Master Servicer resigns as Master Servicer or is
replaced as Master Servicer

 

24

 

pursuant to the
terms of this Agreement, as custodian for the benefit of the Indenture Trustee
of the following documents or instruments with respect to each Receivable:

 

(i)                                     The
fully executed original of the Receivable (together with any agreements
modifying the Receivable, including, without limitation, any extension
agreements);

 

(ii)                                  The
original credit application, or a copy thereof, of each Obligor, fully executed
by each such Obligor on the customary form used by HAFC, an Affiliate of HAFC,
or the related Dealer, as applicable, or on a form approved by HAFC or an
Affiliate of HAFC, as applicable, for such application; and

 

(iii)                               The
original certificate of title (when received) and otherwise such documents, if
any, that HAFC or any Affiliate of HAFC that is the seller under a Master
Receivables Purchase Agreement, as applicable, keeps on file in accordance with
its customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of HAFC or any Affiliate of HAFC that is
the seller under a Master Receivables Purchase Agreement as first lienholder or
secured party (including any Lien Certificate received by HAFC or any Affiliate
of HAFC that is the seller under a Master Receivables Purchase Agreement, as
applicable), or, if such original certificate of title has not yet been
received, a copy of the application therefor, showing any of HAFC, any
Affiliate of HAFC that is a seller under a Master Receivables Purchase
Agreement or a Dealer as secured party (in the case of a Dealer, the
application shall be to obtain title in the name of HAFC or any Affiliate of
HAFC that is a seller under a Master Receivables Purchase Agreement); and

 

(iv)                              Documents
evidencing or relating to any Insurance Policy, to the extent such documents
are maintained by or on behalf of the Seller, HAFC or any Affiliate of HAFC
that is a seller under a Master Receivables Purchase Agreement.

 

At such time as the
Master Servicer resigns as Master Servicer or is replaced as Master Servicer
pursuant to the terms of this Agreement, the successor Master Servicer shall
act as custodian of the Receivables Files.

 

Notwithstanding the
foregoing, the Master Servicer may appoint a subcustodian, which subcustodian
may hold physical possession of some or all of the Receivable Files.  The Indenture Trustee shall have no liability
for the acts or omissions of any such custodian or subcustodian.

 

25

 

ARTICLE IV

Administration and Servicing of Receivables

 

SECTION 4.1.                       Duties of the Master Servicer.  The Master Servicer is hereby authorized to
act as agent for the Trust (and also on behalf of the Indenture Trustee and the
Noteholders) and in such capacity shall manage, service, administer and make
collections on the Receivables, and perform the other actions required by the
Master Servicer under this Agreement, the Indenture and the Series Supplement.  The Master Servicer agrees that its servicing
of the Receivables shall be carried out in accordance with customary and usual
procedures of institutions which service motor vehicle retail installment sales
contracts and, to the extent more exacting, the degree of skill and attention
that the Master Servicer exercises with respect to all comparable motor vehicle
receivables that it services for itself or others.  In performing such duties, so long as
Household Finance Corporation is the Master Servicer, it shall comply with the
standard and customary procedures for servicing all of its comparable motor
vehicle receivables.  The Master
Servicer’s duties shall include, without limitation, collection and posting of
all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending monthly billing statements to Obligors,
reporting any required tax information to Obligors, monitoring the collateral,
accounting for collections and furnishing monthly and annual statements to the
Indenture Trustee, the Administrator and the Noteholders with respect to
distributions, monitoring the status of Insurance Policies with respect to the
Financed Vehicles and performing the other duties specified herein.  The Master Servicer shall also administer and
enforce all rights and responsibilities of the holder of the Receivables
provided for in the Dealer Agreements (and Household Finance Corporation shall
make commercially reasonable efforts to obtain possession of the Dealer
Agreements, to the extent it is necessary to do so), the Dealer Assignments,
the Master Receivables Purchase Agreements, and the Insurance Policies, to the
extent that such Dealer Agreements, Dealer Assignments, the Master Receivables
Purchase Agreements, and Insurance Policies relate to the Receivables, the
Financed Vehicles or the Obligors.  To
the extent consistent with the standards, policies and procedures otherwise
required hereby, the Master Servicer shall follow its customary standards,
policies, and procedures and shall have full power and authority, acting alone,
to do any and all things in connection with such managing, servicing,
administration and collection that it may deem necessary or desirable.  In performing such duties, the Master Servicer
or any Subservicer may delegate their duties in accordance with
Section 9.5 hereof.  Without
limiting the generality of the foregoing, the Master Servicer is hereby
authorized and empowered by the Trust to execute and deliver, on behalf of the Trust,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the
Receivables and with respect to the Financed Vehicles.  The Master Servicer is hereby authorized to
commence, in it’s own name or in the name of the Trust, a legal proceeding to
enforce a Receivable pursuant to Section 4.3 or to commence or participate
in any other legal proceeding (including, without limitation, a bankruptcy
proceeding) relating to or involving a Receivable, an Obligor or a Financed
Vehicle.  If the Master Servicer
commences or participates in such a legal proceeding in its own name, the Trust
shall thereupon be deemed to have automatically assigned such Receivable to the
Master

 

26

 

Servicer solely
for purposes of commencing or participating in any such proceeding as a party
or claimant, and the Master Servicer is authorized and empowered by the Trust
to execute and deliver in the Master Servicer’s name any notices, demands,
claims, complaints, responses, affidavits or other documents or instruments in
connection with any such proceeding.  The
Indenture Trustee and the Owner Trustee shall furnish the Master Servicer with
any powers of attorney and other documents which the Master Servicer may
reasonably request and which the Master Servicer deems necessary or appropriate
and take any other steps which the Master Servicer may deem reasonably
necessary or appropriate to enable the Master Servicer to carry out its
servicing and administrative duties under this Agreement.

 

SECTION 4.2.                       Collection of Receivable
Payments; Modifications of Receivables.  (a) 
Consistent with the standards, policies and procedures required by this
Agreement, the Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due, and shall follow such collection procedures as
it follows with respect to all comparable motor vehicle receivables that it services
for itself or others and otherwise act with respect to the Receivables, the
Dealer Agreements, the Dealer Assignments, the Master Receivables Purchase
Agreements, the Insurance Policies and the Other Conveyed Property in such
manner as will, in the reasonable judgment of the Master Servicer, maximize the
amount to be received by the Trust with respect thereto.  Consistent with the foregoing, the Master
Servicer may, if it determines in its reasonable judgment that such action
would maximize the amount to be received by the Trust, arrange for the sale by
the Trust of Liquidated Receivables with respect to which the related Financed
Vehicle has been sold, and the net proceeds of such sale shall be included in
Net Liquidation Proceeds.  The Master
Servicer is authorized in its discretion to waive any prepayment charge, late
payment charge or any other similar fees that may be collected in the ordinary
course of servicing any Receivable.

 

(b)                                 The
Master Servicer may at any time agree to a modification or amendment of a
Receivable in order to (i) change the
Obligor’s regular due date to a date within 30 days of when such due date
occurs; provided, however, that no modification of a Receivable
in connection with a due date change pursuant to this clause (i) shall be
considered an extension for purposes of Section 4.2(c) below and therefore
shall not be subject to the restrictions on extensions, modifications or
amendments specified in Section 4.2(c) below or (ii) re-amortize the
Scheduled Payments on the Receivable following a partial prepayment of
principal; provided, however, that no re-amortization permitted
by this clause (ii) shall extend the maturity date of any Receivable.

 

(c)                                  The
Master Servicer may grant payment extensions on, or other modifications or
amendments to, a Receivable in accordance with its customary procedures if the
Master Servicer believes in good faith that such extension, modification or
amendment is necessary to avoid a default on such Receivable, will maximize the
amount to be received with respect to such Receivable, and is otherwise in the
best interests of the Trust; provided,
however, that unless otherwise specified
in the Series Supplement:

 

27

 

(i)                                     The
aggregate period of all extensions on a Receivable shall not exceed six months;
provided, however, that not more than three months can be in any
consecutive twelve month period;

 

(ii)                                  In
no event may a Receivable be extended by the Master Servicer beyond the
Collection Period immediately preceding the Final Scheduled Distribution Date
of the Notes;

 

(iii)                               The
average Monthly Extension Rate for any three consecutive calendar months shall
not exceed 4%; and

 

(iv)                              Not
more than 7% of the Pool Balance may be subject to a modified interest rate at
any time (exclusive of Cram Down Losses).

 

(d)                                 Except
as otherwise provided below in Section 4.2(e) hereof, the Master Servicer
shall deposit collections in immediately available funds on or with respect to
Receivables into the Collection Account as promptly as possible after the date
of processing of such collections, but in no event later than the second
Business Day following the date of processing.

 

(e)                                  Subject
to the express terms of the Series Supplement, but notwithstanding anything
else in this Agreement to the contrary, for so long as (i) Household Finance
Corporation remains the Master Servicer and maintains a commercial paper rating
of not less than A-1 by Standard & Poor’s, P-1 by Moody’s and F1 by Fitch
(or such other rating as shall be satisfactory to such Rating Agency), in each
case only if such Person is a Rating Agency, and for five Business Days
following any reduction of any such rating or (ii) a Master Servicer Credit
Facility is maintained in effect by the Master Servicer in form and substance
acceptable to the Rating Agency (such acceptability to be evidenced in writing
by the Rating Agency to the effect that failure to make the aforementioned
deposit on the basis of the maintenance of the Master Servicer Credit Facility
will not adversely affect the then current rating of the Notes) issued by a
Master Servicer Credit Facility Issuer having a rating on its (A) short-term
obligations of at least P-1 by Moody’s, A-1 by Standard & Poor’s and F1 by
Fitch (or such other rating as shall be satisfactory to such Rating Agency), in
each case only if such Person is a Rating Agency, and (B) long term obligations
of at least A2 by Moody’s, A by Standard & Poor’s, and A by Fitch, in each
case only if such Person is a Rating Agency, the Master Servicer shall not be
required to make deposits of collections on or with respect to Receivables as
provided in Section 4.2(d), but may make one or more deposits of Collected
Funds (excluding any portion of such funds which the Master Servicer may retain
in accordance with Section 4.8 or pay directly to the Seller in its
capacity as Certificateholder in accordance with Section 5.1(f)) with
respect to the Series Trust Estate with respect to a Collection Period into the
Collection Account in immediately available funds not later than 1:00 P.M.,
Central time, on the Business Day immediately preceding the related
Distribution Date.  The Master Servicer
shall give written notice to the Indenture Trustee and the Administrator if it
is required to deposit funds in

 

28

 

accordance with
Section 4.2(d).  If, during any
Collection Period that the Master Servicer is required to deposit funds in
accordance with Section 4.2(d), the Master Servicer satisfies either
condition of the first sentence of this Section 4.2(e) such that the
Master Servicer is no longer required to deposit funds in accordance with
Section 4.2(d), the Master Servicer may, as of the date of such
satisfaction but subject to the provisions of this Section 4.2(e),
withdraw from the Collection Account all of the collections which it has
deposited thereto in accordance with Section 4.2(d) during such Collection
Period, and retain such funds in the manner provided in the first sentence of
this Section 4.2(e).

 

(f)                                    In
the event that a Master Servicer Credit Facility is maintained, the Master
Servicer shall within two Business Days of the date of processing of
collections on or with respect to Receivables notify the Indenture Trustee, the
Administrator and the Master Servicer Credit Facility Issuer in writing of the
amounts that would otherwise be deposited in the Collection Account and the
Master Servicer shall establish and maintain for the Trust a Payment Record in
which the payments on or with respect to the Receivables shall be credited and
the Master Servicer shall notify the Indenture Trustee, the Administrator and
the Master Servicer Credit Facility Issuer in writing as promptly as
practicable (but in any event prior to the Determination Date for the following
Distribution Date) of the amounts so credited on or with respect to the
Receivables that are to be included in Collected Funds (as determined for this
purpose after giving effect to the exclusions described above) for the related
Distribution Date and of the amounts so credited which will constitute a part
of Collected Funds (as determined for this purpose after giving effect to the
exclusions described above) for the second following Distribution Date.  The Payment Record shall be made available
for inspection during normal business hours of the Master Servicer upon request
of the Indenture Trustee, the Administrator or any Master Servicer Credit
Facility Issuer.

 

SECTION 4.3.                       Realization Upon Receivables.  (a) 
Consistent with the standards, policies and procedures required by this
Agreement, the Master Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Master Servicer has determined
that payments thereunder are not likely to be resumed, as soon as is
practicable after default on such Receivable but in no event later than the
date on which 10% or more of a Scheduled Payment has become 150 days delinquent
(other than in the case of Financed Vehicles where neither the Financed Vehicle
nor the Obligor can be physically located by the Master Servicer (using
procedures consistent with the standards, policies and procedures of the Master
Servicer required by this Agreement) and other than in the case of an Obligor
who is subject to a bankruptcy proceeding); provided,
however, that the Master Servicer may elect
not to repossess a Financed Vehicle within such time period if in its good
faith judgment it determines that the proceeds ultimately recoverable with
respect to such Receivable would be increased by forbearance.  The Master Servicer is authorized to follow
such customary practices and procedures as it shall deem necessary or
advisable, consistent with the standard of care required by Section 4.1,
which practices and procedures may include reasonable efforts to realize upon
any recourse to Dealers, the sale of the related Financed Vehicle at public or
private sale, the submission of claims under an Insurance Policy and other
actions, including, without limitation, entering into settlements with
Obligors, by the Master Servicer in

 

29

 

order to realize upon
such a Receivable.  The foregoing is
subject to the provision that, in any case in which the Financed Vehicle shall
have suffered damage, the Master Servicer shall not expend funds in connection
with any repair or towards the repossession of such Financed Vehicle unless it
shall determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the related Receivable by an amount
greater than the amount of such expenses. The Master Servicer shall be entitled
to recover all reasonable expenses incurred by it in the course of repossessing
and liquidating a Financed Vehicle but only from the liquidation proceeds of
the vehicle or under the related Dealer Agreement.  The Master Servicer shall pay on behalf of
the Trust any personal property taxes assessed on repossessed Financed
Vehicles.  The Master Servicer shall be
entitled to reimbursement of any such tax from Net Liquidation Proceeds with
respect to such Receivable.

 

(b)                                 If
the Master Servicer elects to commence a legal proceeding to enforce a Dealer
Agreement or Dealer Assignment, the act of commencement shall be deemed to be
an automatic assignment from the Trust to the Master Servicer of the rights
under such Dealer Agreement and Dealer Assignment for purposes of collection
only.  If, however,
in any enforcement suit or legal proceeding it is held that the Master Servicer
may not enforce a Dealer Agreement or Dealer Assignment on the grounds that it
is not a real party in interest or a Person entitled to enforce the Dealer
Agreement or Dealer Assignment, the Indenture Trustee, at the Master Servicer’s
written direction and expense, or the Seller, at the Seller’s expense, shall
take such steps as the Master Servicer deems reasonably necessary to enforce
the Dealer Agreement or Dealer Assignment, including bringing suit in its name
or the name of the Seller, the Trust or the Owner Trustee.  All amounts recovered shall be remitted
directly by the Master Servicer as provided in Section 4.2(d) or 4.2(e),
as applicable.

 

SECTION 4.4.                       Insurance. 
(a)  The Master Servicer shall
require, in accordance with its customary servicing policies and procedures,
that each Financed Vehicle be insured by the related Obligor under an insurance
policy covering physical loss and damage to the related Financed Vehicle and
shall monitor the status of such physical loss and damage insurance coverage
thereafter, in accordance with its customary servicing procedures.  Each Receivable requires the Obligor to
obtain such physical loss and damage insurance, naming HAFC or any Affiliate of
HAFC that is the seller under a Master Receivables Purchase Agreement, as
applicable, and its successors and assigns as loss payee, and with respect to
liability coverage, additional insureds, and permits the holder of such
Receivable to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to maintain such insurance.  If the Master Servicer shall determine that
an Obligor has failed to obtain or maintain a physical loss and damage
Insurance Policy covering the related Financed Vehicle which satisfies the
conditions set forth in the related Eligibility Criteria (including, without
limitation, during the repossession of such Financed Vehicle) the Master
Servicer shall be diligent in carrying out its customary servicing procedures
to enforce the rights of the holder of the Receivable under the Receivable to
require the Obligor to obtain such physical loss and damage insurance in
accordance with its customary servicing policies and procedures.

 

30

 

(b)                                 The
Master Servicer may sue to enforce or collect upon the Insurance Policies, in
its own name, if possible, or as agent of the Trust.  If the Master Servicer elects to commence a
legal proceeding to enforce an Insurance Policy, the act of commencement shall
be deemed to be an automatic assignment of the rights of the Trust under such
Insurance Policy to the Master Servicer for purposes of collection only.  If, however,
in any enforcement suit or legal proceeding it is held that the Master Servicer
may not enforce an Insurance Policy on the grounds that it is not a real party
in interest or a holder entitled to enforce the Insurance Policy, the Indenture
Trustee, at the Master Servicer’s written direction and expense, or the Seller,
at the Seller’s expense, shall take such steps as the Master Servicer deems
reasonably necessary to enforce such Insurance Policy, including bringing suit
in its name or the name of the Trust or the Owner Trustee.

 

SECTION 4.5.                       Maintenance of Security
Interests in Vehicles. 
Consistent with the policies and procedures required by this Agreement,
the Master Servicer shall take such steps on behalf of the Trust as are
necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle on behalf of the Trust or as the
Indenture Trustee shall reasonably request, including, but not limited to,
obtaining the execution by the Obligors and the recording, registering, filing,
re-recording, re-filing, and re-registering of all security agreements, financing
statements and continuation statements as are necessary to maintain the
security interest granted by the Obligors under the respective
Receivables.  The Owner Trustee, on
behalf of the Trust, hereby authorizes the Master Servicer, and the Master Servicer
agrees, to take any and all steps necessary to re-perfect such security
interest on behalf of the Trust as necessary because of the relocation of a
Financed Vehicle or for any other reason. 
In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle’s certificate
of title, or without fulfilling any additional administrative requirements
under the laws of the state in which the Financed Vehicle is located, to
perfect a security interest in the related Financed Vehicle in favor of the
Trust, the Seller hereby agrees to cause HAFC or any Affiliate of HAFC that is
the seller under a Master Receivables Purchase Agreement, as applicable, to
treat the designation of HAFC or any Affiliate of HAFC that is the seller under
a Master Receivables Purchase Agreement, as applicable, as the secured party on
the certificate of title as a designation in its capacity as agent of the Trust
for such limited purpose.

 

SECTION 4.6.                       Covenants, Representations, and
Warranties of Master Servicer. 
By its execution and delivery of this Agreement, the Master Servicer
makes the following representations, warranties and covenants on which the
Issuer relies in accepting the Receivables, on which the Administrator relies
in authenticating the Notes, on which the Noteholders rely in purchasing the
Notes and any Additional Principal Amount thereunder, on which the Owner
Trustee relies in executing the Certificates.

 

The
Master Servicer covenants as follows:

 

(i)                                     Liens
in Force.  The Financed Vehicle
securing each Receivable shall not be released in whole or in part from the

 

31

 

security interest
granted by the Receivable, except upon payment in full of the Receivable or as
otherwise contemplated herein;

 

(ii)                                  No
Impairment.  The Master Servicer
shall do nothing to impair the rights of the Trust or the Noteholders in the
Receivables, the Dealer Agreements, the Dealer Assignments, the Master
Receivables Purchase Agreements, the Insurance Policies or the Other Conveyed
Property;

 

(iii)                               No
Amendments.  The Master Servicer
shall not extend or otherwise amend the terms of any Receivable, except in
accordance with Section 4.2;

 

(iv)                              Restrictions
on Liens.  The Master Servicer shall
not (i) create, incur or suffer to exist, or agree to create, incur or suffer
to exist, or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien or
restriction on transferability of the Receivables except for the Lien in favor
of the Indenture Trustee for the benefit of the Secured Parties, and the
restrictions on transferability imposed by this Agreement or (ii) sign or file
under the Uniform Commercial Code of any jurisdiction any financing statement
which names HAFC, the Master Servicer or any Affiliate thereof as a debtor, or
sign any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Receivables, except in each case
any such instrument solely securing the rights and preserving the Lien in favor
of the Indenture Trustee for the benefit of the Secured Parties;

 

(v)                                 Servicing
of Receivables.  The Master Servicer
shall service the Receivables as required by the terms of this Agreement and in
material compliance with its standard and customary procedures for servicing
all its other comparable motor vehicle receivables and in compliance with
applicable law; and

 

(vi)                              Relocations
of Principal Office.  The Master
Servicer shall notify in writing the Indenture Trustee of any relocation of the
Master Servicer’s principal office set forth in Section 13.3 hereof and
all Receivables Files shall be maintained by the Master Servicer in the United
States.

 

SECTION 4.7.                       Repurchase of Receivables Upon
Breach of Covenant.  Upon
discovery by any of the Master Servicer, the Seller, or a Trust Officer of the
Owner Trustee, the Indenture Trustee or the Administrator of a breach of any of
the covenants set forth in Sections 4.5 or 4.6, the party discovering such
breach shall give prompt written notice to the others; provided, however, that the
failure to give any such notice shall not affect any obligation of the Master
Servicer under this Section 4.7.  As
of the

 

32

 

second Accounting
Date following its discovery or receipt of notice of any breach of any covenant
set forth in Sections 4.5 or 4.6 which materially and adversely affects the
interests of the Securityholders in any Receivable (including any Liquidated
Receivable) or the related Financed Vehicle (or, if such second Accounting Date
is more than 45 days after discovery or receipt by the Master Servicer of
notice of such breach, then the first Accounting Date so following), the Master
Servicer shall, unless such breach shall have been cured in all material
respects, repurchase from the Trust the Receivable affected by such breach and,
on the date specified in Section 5.4, the Master Servicer shall pay the
related Repurchase Amount and deposit such Repurchase Amounts into the
Collection Account.  It is understood and
agreed that the obligation of the Master Servicer to repurchase any Receivable
(including any Liquidated Receivable) with respect to which such a breach has
occurred and is continuing shall, if such obligation is fulfilled, constitute
the sole remedy against the Master Servicer for such breach.

 

SECTION 4.8.                       Total Servicing Fee; Payment of
Certain Expenses by Master Servicer.  So as long as:  (i) Household Finance Corporation is the
Master Servicer, (ii) the Master Servicer is permitted to make deposits of
collections in accordance with Section 4.2(e) hereof and (iii) the Master
Servicer’s Certificate delivered with respect to such Distribution Date
indicates that Available Funds with respect to such Distribution Date are
sufficient to make the distributions required to be made on such Distribution
Date in respect of the Servicing Fee payable to Household Finance Corporation
as Master Servicer (and all other distributions required to be made on such
Distribution Date having a higher priority than the distribution of the
Servicing Fee payable to Household Finance Corporation as Master Servicer), the
Master Servicer shall be entitled to retain out of amounts otherwise to be
deposited in the Collection Account with respect to a Collection Period, the
Servicing Fee payable to Household Finance Corporation as Master Servicer for
such Collection Period.  The Master
Servicer shall be required to pay all expenses incurred by it in connection
with its activities under this Agreement (including taxes imposed on the Master
Servicer, expenses incurred in connection with distributions and reports made
by the Master Servicer to Securityholders, all fees and expenses of the Owner
Trustee, the Indenture Trustee and the Administrator), except taxes levied or
assessed against the Trust, and claims against the Trust in respect of
indemnification, which taxes and claims in respect of indemnification against
the Trust are expressly stated to be for the account of Household Finance
Corporation.  The Master Servicer shall
be liable for the fees, charges and expenses of the Owner Trustee, the
Indenture Trustee, the Administrator any Subservicer and their respective
agents.

 

SECTION 4.9.                       Master Servicer’s Certificate.  No later than 10:00 a.m. Central time on each
Determination Date, the Master Servicer shall deliver, and cause to be
delivered via access to its or its Affiliate’s web-site address, to the Rating
Agencies, the Indenture Trustee, the Administrator and the Owner Trustee, a
Master Servicer’s Certificate executed by a responsible officer or agent of the
Master Servicer containing among other things, all information necessary to
enable the Administrator to give any notice required by Section 3.03(c) of
the Series Supplement and make the distributions with respect to the related
Distribution Date pursuant to the Series Supplement.  In addition to the information set forth in
the preceding sentence, the Master Servicer’s Certificate shall also contain
the information required by the Series Supplement.

 

33

 

SECTION 4.10.                 Annual Statement as to
Compliance, Notice of Master Servicer Termination Event.  (a) 
The Master Servicer shall deliver or cause to be delivered to the
Indenture Trustee, the Administrator and the Owner Trustee on or before
April 30 (or 120 days after the end of the Master Servicer’s fiscal year,
if other than December 31) of each year, beginning on April 30 in
calendar year 2005, an Officer’s Certificate signed by any responsible officer
of the Master Servicer, or such Eligible Subservicer who is performing the
servicing duties of the Master Servicer, dated as of December 31 (or other
applicable date) of the immediately preceding year, stating that (i) a review
of the activities of the Master Servicer, or such Eligible Subservicer who is
performing the servicing duties of the Master Servicer, during the preceding
12-month period (or such shorter or longer, as applicable, period since the
Closing Date) and of its performance under this Agreement has been made under
such officer’s supervision, and (ii) to such officer’s knowledge, based on such
review, the Master Servicer, or such Eligible Subservicer who is performing the
servicing duties of the Master Servicer, has in all material respects fulfilled
all its obligations under this Agreement throughout such period, or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof.

 

(b)                                 The
Master Servicer, or such Eligible Subservicer who is performing the servicing
duties of the Master Servicer, shall deliver to the Indenture Trustee, the
Administrator and the Owner Trustee, and, in the event that such notice is
delivered by the Subservicer, to the Master Servicer, promptly after having
obtained knowledge thereof, but in no event later than two (2) Business Days
thereafter, written notice in an Officer’s Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Master Servicer
Termination Event under Section 10.1(a). 
The Seller or the Master Servicer shall deliver to the Indenture
Trustee, the Administrator, the Owner Trustee, the Master Servicer or the Seller
(as applicable) promptly after having obtained knowledge thereof, but in no
event later than two (2) Business Days thereafter, written notice in an
Officer’s Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Master Servicer Termination Event under any other
clause of Section 10.1.

 

SECTION 4.11.                 Annual Independent Accountants’
Report.  (a)  The Master Servicer shall cause a firm of
nationally recognized independent certified public accountants (the “Independent
Accountants”), who may also render other services to the Master Servicer or to
the Seller, to deliver to the Indenture Trustee, the Administrator and the
Owner Trustee on or before April 30 (or 120 days after the end of the
Master Servicer’s fiscal year, if other than December 31) of each year,
beginning on April 30 in calendar year 2005 with respect to the twelve
months (or shorter applicable period) ended the immediately preceding
December 31 (or other applicable date), a report showing that, for the
prior calendar year the accounting firm
has performed procedures in order to provide a report on management’s assertion
that the servicing of receivables has been conducted in compliance with the
terms and conditions set forth in Articles IV and V of this Agreement and
applicable provisions of the Series Supplement related to the servicing of
receivables and the reporting thereof and that assertion is fairly presented,
and the accounting firm has applied certain agreed-upon procedures including
comparing amounts set forth in the periodic reports prepared by the servicer
(the Master Servicer’s

 

34

 

Certificates),
pursuant to Section 4.9, for certain periods in the prior calendar year
with the servicer’s computer reports and that the amounts are in agreement,
except for any discrepancies disclosed.

 

(b)                                 On
or before April 30 of each calendar year, beginning with April 30 in
calendar year 2005, the Master Servicer shall cause a firm of nationally
recognized independent public accountants (who may also render other services
to the Master Servicer or the Seller) to furnish a report to the Indenture
Trustee, the Administrator and the Master Servicer to the effect that they have
compared the mathematical calculations of each amount set forth in the Master
Servicer’s Certificates delivered pursuant to Section 4.9 during the
period covered by such report with the Master Servicer’s computer reports which
were the source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.

 

(c)                                  In
the event such Independent Accountants require the Indenture Trustee and/or the
Administrator to agree to the procedures to be performed by such firm in any of
the reports required to be prepared pursuant to this Section 4.11, the
Master Servicer shall direct the Indenture Trustee and/or the Administrator in
writing to so agree; it being understood and agreed that the Indenture Trustee
and/or the Administrator will deliver such letter of agreement in conclusive
reliance upon the direction of the Master Servicer, and the Indenture Trustee
and/or the Administrator has not made any independent investigation as to, and
shall have no obligation or liability in respect of, the sufficiency, validity
or correctness of such procedures.

 

SECTION 4.12.                 Access to Certain Documentation
and Information Regarding Receivables.  The Master Servicer shall provide to
representatives of the Indenture Trustee and the Owner Trustee reasonable
access to the documentation regarding the Receivables.  In each case, such access shall be afforded
without charge but only upon reasonable request and during normal business
hours.  Nothing in this
Section shall derogate from the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors, and the failure of the Master Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a
breach of this Section.

 

SECTION 4.13.                 Fidelity Bond and Errors and
Omissions Policy.  The
Master Servicer or such Eligible Subservicer that is performing the servicing
duties of the Master Servicer, has obtained, and shall continue to maintain in
full force and effect, a Fidelity Bond and Errors and Omissions Policy of a
type and in such amount as is customary for servicers engaged in the business
of servicing motor vehicle receivables.

 

35

 

ARTICLE V

Trust Accounts; Distributions;

Statements to Certificateholders and Noteholders

 

SECTION 5.1.                       Establishment of Trust Accounts.  (a) 
(i)  The Administrator shall
establish and maintain the Trust Accounts required to be established and
maintained pursuant to the Series Supplement, and such Trust Accounts shall be
subject to the sole dominion and control of the Administrator on behalf of the
Indenture Trustee for the benefit of the Noteholders.

 

(ii)                                                          No
Trust Account shall be maintained with an institution other than the
Administrator unless such institution agrees in writing to the provisions of
this Section 5.1 as if such institution were the Administrator, except
that the Administrator shall continue to be the “entitlement holder” of the
related Trust Account.

 

(iii)                                                       With
respect to any Trust Account Property held from time to time in any Trust
Account, the Administrator agrees that (A) such Trust Account Property shall at
all times be credited in the Administrator’s books and records to the relevant
Trust Account, (B) any Eligible Investment constituting a deposit account shall
be, except as otherwise provided herein, subject to the exclusive custody and
control of the Administrator, and, if the Administrator is not the depositary
bank with which such deposit account is maintained, the Administrator shall be
the depositary bank’s customer with respect thereto, and (C) any Eligible
Investment other than a deposit account shall be held, pending maturity or
disposition by the Administrator, in accordance with the relevant terms of the
definition of “Delivery.”  The
Administrator acknowledges and agrees that (i) each item of property (whether
investment property, financial asset, security, instrument, cash or any other
type of property) credited to a Trust Account that is a “securities account,”
(as defined in Article 8 of the UCC) shall be treated as a “financial
asset” within the meaning of Article 8 of the UCC, (ii) it shall act as a
“securities intermediary” (as defined in Article 8 of the UCC) with
respect to each Trust Account which is a “securities account” and a “bank” (as
defined in Article 9 of the UCC) with respect to each Trust Account that
is a “deposit account” (as defined in Article 9 of the UCC), and (iii)
each Trust Account is either a “securities account” or a “deposit account.”

 

(b)                                 Except
as otherwise provided in the Series Supplement, funds on deposit in the Trust
Accounts shall be invested by the Administrator (or any custodian with respect
to funds on deposit in any such account) in Eligible Investments selected in
writing by the Master Servicer (pursuant to standing instructions or otherwise)
which absent any instruction shall be the investments specified in clause (d)
of the definition of Eligible Investments set forth herein.  Unless otherwise agreed in writing by the
Rating Agencies, funds on deposit in any Trust Account shall be invested in
Eligible Investments that will mature so that such funds will be available at
the close of business on the Business Day immediately preceding the following
Distribution Date.  Funds deposited in a
Trust Account on the day immediately preceding a Distribution Date and
representing the proceeds of Eligible Investments are required to be held
overnight in an

 

36

 

Eligible Account and
shall be included in Available Funds (as defined in the Series Supplement) for
the succeeding Distribution Date.  All
Eligible Investments will be held to maturity.

 

(c)                                  All
investment earnings of monies deposited in the Trust Accounts shall be
deposited (or caused to be deposited) by the Administrator in the Collection
Account no later than the close of business on the Business Day immediately
preceding the related Distribution Date, and any loss resulting from such
investments shall be charged to the Collection Account.  The Master Servicer will not direct the
Administrator to make any investment of any funds held in any of the Trust
Accounts unless the security interest granted and perfected in such account
will continue to be perfected in such investment, in either case without any
further action by any Person, and, in connection with any direction to the
Administrator, to make any such investment, if necessary, the Master Servicer
shall deliver to the Administrator and the Indenture Trustee an Opinion of
Counsel to such effect.

 

(d)                                 The
Administrator shall not in any way be held liable by reason of any
insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Administrator’s negligence or bad faith.

 

(e)                                  If
(i) the Master Servicer shall have failed to give investment directions for any
funds on deposit in the Trust Accounts to the Administrator by 2:00 p.m.
Eastern Time (or such other time as may be agreed by the Issuer and the
Administrator) on any Business Day; or (ii) an Event of Default shall have
occurred and be continuing, the Administrator shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments in accordance with paragraph (b) above; provided
that, if following an Event of Default amounts are to be distributed to Securityholders
other than on a Distribution Date, investments shall mature on the Business Day
preceding any such proposed date of distribution.

 

(f)                                    The
Administrator shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts and in all proceeds thereof and
all such funds, investments, proceeds and income shall be part of the Series
Trust Estate.  Except as otherwise
provided herein, the Trust Accounts shall be under the sole dominion and
control of the Administrator for the benefit of the Secured Parties.  If, at any time, any Trust Account ceases to
be an Eligible Account, the Administrator (or the Master Servicer on its
behalf) shall within five Business Days (or such longer period as to which each
Rating Agency may consent) establish a new Trust Account as an Eligible Account
and shall transfer any cash and/or any investments to such new Trust
Account.  In connection with the
foregoing, the Master Servicer agrees that, in the event that any of the Trust
Accounts are not accounts with the Administrator, the Master Servicer shall
notify the Administrator in writing promptly upon any of such Trust Accounts
ceasing to be an Eligible Account. The Master Servicer may net against any
deposits required to be made to the Collection Account on the Business Day
before any Determination Date amounts that the Seller, as Certificateholder or
otherwise, is entitled to receive as distributions from the Collection Account
on the related Distribution Date.

 

37

 

SECTION 5.2.                       Certain Reimbursements to the
Master Servicer.  The
Master Servicer shall be entitled to withhold from amounts otherwise required
to be remitted to the Collection Account with respect to a Collection Period an
amount in respect of funds deposited with respect to prior Collection Periods
in the Collection Account but later determined by the Master Servicer to have
resulted from mistaken deposits or postings or checks returned for insufficient
funds; provided, that, such withholding may be made only
following certification by the Master Servicer of such amounts and the
provision of such information to the Indenture Trustee and the Administrator as
may be necessary in the opinion of the Indenture Trustee and the Administrator
to verify the accuracy of such certification.

 

SECTION 5.3.                       Application of Collections.  All collections for the Collection Period
shall be applied by the Master Servicer as follows:  with respect to each Simple Interest
Receivable (other than a Repurchased Receivable), payments by or on behalf of
the Obligor, (other than amounts, if any, collected with respect to
administrative fees, including late fees, prepayment fees and liquidation fees
collected on the Receivable) shall be applied to interest and principal in
accordance with the Simple Interest Method. 
With respect to each Actuarial Receivable, (other than a Repurchased
Receivable), payments by or on behalf of the Obligor, (other than amounts, if
any, collected with respect to administrative fees, including late fees,
prepayment fees and liquidation fees collected on the Receivable) shall be
applied to interest and principal in accordance with the Actuarial Method.

 

SECTION 5.4.                       Additional Deposits.

 

(a)                                  HAFC,
any Affiliate of HAFC that is the seller under a Master Receivables Purchase
Agreement, Household Finance Corporation and the Seller, as applicable, shall
deposit or cause to be deposited in the Collection Account on the Business Day
preceding the Distribution Date following the date on which such obligations
are due the aggregate Repurchase Amount with respect to Repurchased
Receivables.

 

(b)                                 The
Master Servicer agrees for the benefit of the Indenture Trustee that any
amounts payable by the Master Servicer to the Seller under the Master
Receivables Purchase Agreement to which the Master Servicer is a party which
are to be paid by the Seller to the Indenture Trustee for the benefit of the
Secured Parties shall be paid by the Master Servicer, on behalf of the Seller,
directly to the Administrator (on behalf of the Indenture Trustee).

 

ARTICLE VI

RESERVED

 

ARTICLE VII

RESERVED

 

38

 

ARTICLE VIII

The Seller

 

SECTION 8.1.                       Representations of Seller.  The Seller makes the following representations
on which the Issuer is deemed to have relied in acquiring the Receivables and
on which the Noteholders are deemed to have relied on in the purchasing of
Notes and any Additional Principal Amount and on which each Support Provider
shall be deemed to have relied on providing the Series Support.  Except as otherwise specifically provided,
the representations speak as of the Closing Date and as of each Transfer Date
and shall survive each sale of the Receivables to the Issuer and each pledge
thereof to the Indenture Trustee pursuant to the Indenture and the Series
Supplement.

 

(a)                                  Representations
in Transfer Agreement.  The
representations and warranties set forth on the Schedule of Eligibility
Criteria attached as Schedule I to the Series Supplement are true and
correct with respect to the Receivables included in the Series Trust Estate.

 

(b)                                 Organization
and Good Standing.  The Seller has
been duly organized and is validly existing as a corporation in good standing
under the laws of the State of Nevada, with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all relevant times, and
now has, power, authority and legal right to acquire, own and sell the Owner
Trust Estate transferred to the Trust.

 

(c)                                  Due
Qualification.  The Seller is duly
qualified to do business as a foreign corporation in good standing and has
obtained all necessary licenses and approvals in all jurisdictions where the
failure to do so would materially and adversely affect the Seller’s ability to
transfer the Receivables and the Other Conveyed Property to the Trust pursuant
to this Agreement, or the validity or enforceability of the Receivables and the
Other Conveyed Property or to perform the Seller’s obligations hereunder and
under the Related Documents to which the Seller is a party.

 

(d)                                 Power
and Authority.  The Seller has the
power and authority to execute and deliver this Agreement and the Related
Documents to which it is a party and to carry out its terms and their terms,
respectively; the Seller has full power and authority to sell and assign the
Owner Trust Estate to be sold and assigned to and deposited with the Trust by
it and has duly authorized such sale and assignment to the Trust by all
necessary corporate action; and the execution, delivery and performance of this
Agreement and the Related Documents to which the Seller is a party have been
duly authorized by the Seller by all necessary corporate action.

 

(e)                                  Valid
Sale, Binding Obligations. This Agreement and each related Transfer
Agreement effects a valid sale, transfer and assignment of the Owner Trust
Estate, enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement and the Related Documents to which the Seller is a
party, when duly executed and delivered, shall constitute legal, valid and
binding obligations of

 

39

 

the Seller enforceable in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.

 

(f)                                    No
Violation.  The consummation of the
transactions contemplated by this Agreement and the Related Documents and the
fulfillment of the terms of this Agreement and the Related Documents shall not
(A) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice, lapse of time or both) a default under,
the articles of incorporation or by-laws of the Seller, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party or
by which it is bound, (B) result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement, or (C)
violate any law, order, rule or regulation applicable to the Seller of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Seller or any
of its properties, except in the case of (A), (B) or (C) where any such
default, Lien or violation shall not materially and adversely affect the
interest of the Noteholders or the Trust in the Series Trust Estate.

 

(g)                                 No
Proceedings.  There are no
proceedings or investigations pending or, to the Seller’s knowledge, threatened
against the Seller, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this Agreement or any
of the Related Documents, (B) seeking to prevent the issuance of any Securities
or the consummation of any of the transactions contemplated by this Agreement
or any of the Related Documents, (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or any
of the Related Documents, or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of the Securities.

 

(h)                                 Approvals.  All approvals, authorizations, consents,
orders or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection with
the execution and delivery by the Seller of this Agreement and the other
Related Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby have been or will be taken or
obtained on or prior to the Closing Date and each Transfer Date.

 

(i)                                     No
Consents.  The Seller is not required
to obtain the consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery, performance,
validity or enforceability of this Agreement which has not already been
obtained.

 

40

 

(j)                                     No
Lien Filings.  The Seller is not
aware of any judgment lien filings or tax lien filings against itself.

 

(k)                                  Chief
Executive Office.  The chief
executive office of the Seller is at 1111 Town Center Drive, Las Vegas, Nevada
89134.

 

SECTION 8.2.                       Corporate Existence.  (a) 
During the term of this Agreement, the Seller will keep in full force
and effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Related Documents and each other instrument or agreement necessary or
appropriate to the proper administration of this Agreement and the transactions
contemplated hereby.

 

(b)                                 During
the term of this Agreement, the Seller shall observe the applicable legal
requirements for the recognition of the Seller as a legal entity separate and
apart from its Affiliates, including as follows:

 

(i)                                     the
Seller shall not engage in any other business other than as provided in
Article THIRD of Seller’s Articles of Incorporation.

 

(ii)                                  the
Seller shall maintain corporate records and books of account separate from
those of its Affiliates;

 

(iii)                               except
as otherwise provided in this Agreement, the Seller shall not commingle its
assets and funds with those of its Affiliates;

 

(iv)                              the
Seller shall hold such appropriate meetings of its Board of Directors as are
necessary to authorize all the Seller’s corporate actions required by law to be
authorized by the Board of Directors, shall keep minutes of such meetings and
of meetings of its stockholder(s) and observe all other customary corporate
formalities or shall obtain written consents in lieu of formal meetings of its
Board of Directors or stockholder(s) (and any successor Seller that is not a
corporation shall observe similar procedures in accordance with its governing
documents and applicable law);

 

(v)                                 the
Seller shall at all times hold itself out to the public under the Seller’s own
name as a legal entity separate and distinct from its Affiliates;

 

(vi)                              the
Seller shall not become involved in the day-to-day management of any other
Person;

 

41

 

(vii)                           the
Seller shall not guarantee any other Person’s obligations or advance funds to
any other Person for the payment of expenses or otherwise;

 

(viii)                        the
Seller shall not act as an agent of any other Person in any capacity;

 

(ix)                                the
Seller shall not dissolve or liquidate, in whole or in part; and

 

(x)                                   all
transactions and dealings between the Seller and its Affiliates will be
conducted on an arm’s-length basis.

 

(c)                                  During
the term of this Agreement, the Seller will comply with the limitations on its
business and activities, as set forth in its Articles of Incorporation, and
will not incur indebtedness other than pursuant to or as expressly permitted by
the Related Documents.

 

(d)                                 During
the term of this Agreement, the Seller will ensure that its corporate records
indicate that the Indenture Trustee has the exclusive right to vote the Class
SV Preferred Stock.

 

SECTION 8.3.                       Liability of Seller; Indemnities.  The Seller shall be liable in accordance
herewith only to the extent of the obligations specifically undertaken under
this Agreement by the Seller and the representations made by the Seller under
this Agreement.

 

(a)                                  The
Seller shall indemnify, defend and hold harmless the Issuer, the Owner Trustee,
the Indenture Trustee and the Administrator from and against any taxes that may
at any time be asserted against any such Person with respect to the
transactions contemplated in this Agreement and any of the Basic Documents
(except any income taxes arising out of fees paid to the Owner Trustee, the
Indenture Trustee or the Administrator, and except any taxes to which the Owner
Trustee, the Indenture Trustee or the Administrator may otherwise be subject
to), including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to federal or other income taxes
arising out of distributions on the Certificates and the Notes) and costs and
expenses in defending against the same.

 

(b)                                 The
Seller shall indemnify, defend and hold harmless the Issuer, the Owner Trustee,
the Indenture Trustee and the Administrator against any loss, liability or
expense incurred by reason of (i) the Seller’s willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement, or by
reason of reckless disregard of its obligations and duties under this Agreement
and (ii) the Seller’s or the Issuer’s violation of Federal or state securities
laws in connection with the offering and sale of the Notes.

 

42

 

(c)                                  The
Seller shall indemnify, defend and hold harmless the Owner Trustee, the
Indenture Trustee and the Administrator and their respective officers,
directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or incurred in
connection with, the acceptance or performance of the trusts and duties set
forth herein and in the Basic Documents, except to the extent that such cost,
expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Person seeking indemnification.

 

Indemnification
under this Section shall survive the resignation or removal of the Owner
Trustee, the Indenture Trustee or the Administrator and the termination of this
Agreement or the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation.  If the Seller shall have
made any indemnity payments pursuant to this Section and the Person to or
on behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.

 

SECTION 8.4.                       Merger or Consolidation of, or
Assumption of the Obligations of, Seller.  Any Person (a) into which the Seller may be
merged or consolidated, (b) which may result from any merger or consolidation
to which the Seller shall be a party or (c) which may succeed to the properties
and assets of the Seller substantially as a whole, which Person in any of the
foregoing cases (x) has articles of incorporation containing provisions
relating to limitations on business and other matters substantially identical
to those contained in the Seller’s articles of incorporation and (y) executes
an agreement of assumption to perform every obligation of the Seller under this
Agreement and the other Related Documents shall be the successor to the Seller
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement.

 

SECTION 8.5.                       Limitation on Liability of Seller
and Others.  (a)  The Seller and any director or officer or
employee or agent of the Seller may rely in good faith on the written advice of
counsel or on any document of any kind, prima facie properly executed and
submitted by any Person respecting any matters arising under any Basic
Document.  The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action that shall
not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability.  Except as provided in Section 8.3 hereof,
neither the Seller nor any of the directors, officers, employees or agents of
the Seller acting in such capacities shall be under any liability to the Trust,
the Securityholders, any Support Provider or any other Person for any action
taken or for refraining from the taking of any action in good faith in such
capacities pursuant to this Agreement; provided, however, that
this provision shall not protect the Seller or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.

 

43

 

(b)                                 All
obligations of the Seller under this Agreement (including, but not limited to,
repurchase and indemnification obligations) and under any of the Related
Documents shall be limited in recourse to property, if any, which the Seller
may hold from time to time, not subject to any Lien.

 

SECTION 8.6.                       Seller May Own Certificates or Notes.  The Seller and any Affiliate thereof may in
its individual or any other capacity become the owner or pledgee of
Certificates or Notes with the same rights as it would have if it were not the
Seller or an Affiliate thereof, except as expressly provided herein or in any
Basic Document.  Notes or Certificates so
owned by the Seller or such Affiliate shall have an equal and proportionate
benefit under the provisions of the Basic Documents, without preference,
priority, or distinction as among all of the Notes or Certificates; provided, however, except
in the event that all outstanding Notes and Certificates are owned by the
Seller and/or any Affiliates thereof, that any Notes or Certificates owned by
the Seller or any Affiliate thereof, during the time such Notes or Certificates
are owned by them, shall be without voting rights for any purpose set forth in
the Basic Documents.  The Seller shall
notify the Owner Trustee, the Indenture Trustee and the Administrator promptly
after it or any of its Affiliates become the owner or pledgee of a Certificate
or a Note.

 

ARTICLE IX

The Master Servicer

 

SECTION 9.1.                       Representations of Master Servicer.  The Master Servicer makes the following
representations on which the Issuer is deemed to have relied in acquiring the
Owner Trust Estate, on which the Noteholders are deemed to have relied in the
purchasing of Notes and any Additional Principal Amount, and on which Support
Provider shall be deemed to have relied in providing the Series Support.  The representations speak as of the execution
and delivery of this Agreement, the Closing Date and as of each Transfer Date
and shall survive the sale of the Owner Trust Estate to the Issuer and the
pledge of the Series Trust Estate to the Indenture Trustee pursuant to the
Indenture.

 

(i)                                     Organization
and Good Standing.  The Master
Servicer has been duly organized and is validly existing and in good standing
under the laws of its jurisdiction of organization, with power, authority and
legal right to own its properties and to conduct its business as such
properties are currently owned and such business is currently conducted, and
had at all relevant times, and now has, power, authority and legal right to
enter into and perform its obligations under this Agreement and the other
Related Documents to which it is a party.

 

(ii)                                  Due
Qualification.  The Master Servicer
is duly qualified to do business as a foreign corporation in good standing and
has obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of property or the

 

44

 

conduct of its
business (including the servicing of the Receivables as required by this
Agreement) requires or shall require such qualification; except where the
failure to qualify or obtain licenses or approvals would not have a material
adverse effect on its ability to perform its obligations as Master Servicer
under this Agreement and the other Related Documents to which it is a party.

 

(iii)                               Power
and Authority.  The Master Servicer
has the power and authority to execute and deliver this Agreement and the
Related Documents to which it is a party 
and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Related Documents
to which the Master Servicer is a party have been duly authorized by the Master
Servicer by all necessary corporate action.

 

(iv)                              Binding
Obligation.  This Agreement and the
Related Documents to which the Master Servicer is a party shall constitute
legal, valid and binding obligations of the Master Servicer enforceable in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors’ rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.

 

(v)                                 No
Violation.  The consummation of the
transactions contemplated by this Agreement and the Related Documents to which
the Master Servicer is a party, and the fulfillment of the terms of this
Agreement and the Related Documents to which the Master Servicer is a party,
shall not (A) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the articles of incorporation or bylaws of the Master Servicer,
or any indenture, agreement, mortgage, deed of trust or other instrument to
which the Master Servicer is a party or by which it is bound, or (B) result in
the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (C) violate any law, order, rule or regulation applicable to the
Master Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Master Servicer or any of its properties, except in the case of (A),
(B) or (C) where any such default, Lien or violation shall not materially and
adversely affect the interest of the Noteholders or the Trust in the Series
Trust Estate or affect the Master Servicer’s ability to perform its obligations
under this Agreement.

 

45

 

(vi)                              No
Proceedings.  There are no
proceedings or investigations pending or, to the Master Servicer’s knowledge,
threatened against the Master Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over the Master Servicer or its properties (A) asserting the
invalidity of this Agreement or any of the Related Documents, (B) seeking to
prevent the issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or any of the Related Documents, or
(C) seeking any determination or ruling that might materially and adversely
affect the performance by the Master Servicer of its obligations under, or the
validity or enforceability of, this Agreement or any of the Related Documents
or (D) seeking to adversely affect the federal income tax or other federal,
state or local tax attributes of the Securities.

 

(vii)                           Approvals.  All approvals, authorizations, consents,
orders or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection with
the execution and delivery by the Master Servicer of this Agreement and the
consummation of the transactions contemplated hereby have been or will be taken
or obtained on or prior to the Closing Date.

 

(viii)                        No
Consents.  The Master Servicer is not
required to obtain the consent of any other party or any consent, license,
approval or authorization, or registration or declaration with, any
governmental authority, bureau or agency in connection with the execution,
delivery, performance, validity or enforceability of this Agreement which has
not already been obtained.

 

(ix)                                Chief
Executive Office.  The chief
executive office of the Master Servicer is located at 2700 Sanders Road,
Prospect Heights, Illinois  60070.

 

SECTION 9.2.                       Liability of Master Servicer;
Indemnities.  (a)  The Master Servicer (in its capacity as such)
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Master Servicer and the
representations made by the Master Servicer.

 

(b)                                 The
Master Servicer shall defend, indemnify and hold harmless the Trust, the
Administrator, the Indenture Trustee, the Owner Trustee, each Support Provider
and their respective officers, directors, agents and employees, from and
against any and all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel and expenses of litigation
arising out of or resulting from the use, ownership or operation of, or lien
on, any Financed Vehicle.

 

46

 

(c)                                  The
Master Servicer (when the Master Servicer is Household Finance Corporation or
an Affiliate of Household Finance Corporation) shall indemnify, defend and hold
harmless the Trust, the Administrator, the Indenture Trustee, the Owner
Trustee, each Support Provider and their respective officers, directors, agents
and employees and from and against any taxes that may at any time be asserted
against any of such parties with respect to the transactions contemplated in
this Agreement, including, without limitation, any sales, gross receipts,
tangible or intangible personal property, privilege or license taxes (but not
including any federal or other income taxes) and costs and expenses in
defending against the same, except to the extent that such costs, expenses,
losses, damages, claims and liabilities arise out of the negligence or willful
misconduct of such parties.  The Master
Servicer hereby agrees to indemnify the Administrator as set forth in
Section 6.17(b) of the Indenture.

 

(d)                                 The
Master Servicer (when the Master Servicer is not Household Finance Corporation)
shall indemnify, defend and hold harmless the Trust, the Administrator, the
Indenture Trustee, the Owner Trustee, each Support Provider and their
respective officers, directors, agents and employees from and against any taxes
with respect to the sale of Receivables in connection with servicing hereunder
that may at any time be asserted against any of such parties with respect to
the transactions contemplated in this Agreement, including, without limitation,
any sales, gross receipts, tangible or intangible personal property, privilege
or license taxes (but not including any federal or other income taxes) and
costs and expenses in defending against the same, except to the extent that
such costs, expenses, losses, damages, claims and liabilities arise out of the
negligence or willful misconduct of such parties.

 

(e)                                  The
Master Servicer shall indemnify, defend and hold harmless the Trust, the
Administrator, the Indenture Trustee, the Owner Trustee, each Support Provider
and their respective officers, directors, agents and employees from and against
any and all costs, expenses, losses, claims, damages, and liabilities to the
extent that such cost, expense, loss, claim, damage, or liability arose out of,
or was imposed upon the Trust, the Administrator, the Indenture Trustee or the
Owner Trustee, by reason of the breach of this Agreement by the Master
Servicer, the negligence, misfeasance, or bad faith of the Master Servicer in
the performance of its duties under this Agreement or the Series Supplement or
by reason of reckless disregard of its obligations and duties under this
Agreement or the Series Supplement, except to the extent that such costs,
expenses, losses, damages, claims, and liabilities arise out of the negligence
or willful misconduct of the Person seeking indemnification.

 

(f)                                    The
Master Servicer (when the Master Servicer is Household Finance Corporation or
an Affiliate of Household Finance Corporation) shall indemnify, defend and hold
harmless the Trust, the Administrator, the Indenture Trustee, the Owner Trustee
and their respective officers, directors, agents and employees from and against
any loss, liability or expense incurred by reason of the violation by Master
Servicer of federal or state securities laws in connection with the
registration or the sale of the Securities, except to the extent that such
costs, expenses, losses, damages, claims, and liabilities arise out of the
negligence or willful misconduct of such parties.

 

47

 

(g)                                 Indemnification
under this Article shall survive the termination of this Agreement and
will survive the early resignation or removal of any of the parties hereto and
shall include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation.  If the Master
Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Master Servicer, without
interest.  Notwithstanding any other
provision of this Agreement, the obligations of the Master Servicer shall not
terminate or be deemed released upon the resignation or termination of
Household Finance Corporation as the Master Servicer and shall survive any
termination of this Agreement.

 

SECTION 9.3.                       Merger or Consolidation of, or
Assumption of the Obligations of the Master Servicer.  Any Person (i) into which the Master Servicer
may be merged or consolidated, (ii) resulting from any merger or consolidation
to which the Master Servicer shall be a party, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of the Master
Servicer, or (iv) succeeding to the business of the Master Servicer, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of the Master Servicer under this Agreement and each Related
Document and, whether or not such assumption agreement is executed, shall be
the successor to the Master Servicer under this Agreement and each Related
Document without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement or the Series Supplement, anything
in this Agreement or the Series Supplement to the contrary
notwithstanding.  Notwithstanding the
foregoing, the Master Servicer shall not merge or consolidate with any other
Person or permit any other Person to become a successor to the Master Servicer’s
business, unless the Master Servicer shall have delivered to the Owner Trustee
and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement
of assumption comply with this Section 9.3 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with.

 

SECTION 9.4.                       Limitation on Liability of
Master Servicer and Others. 
(a)  None of the Master Servicer,
the Administrator, the Indenture Trustee, or any of the directors or officers
or employees or agents of any such Persons shall be under any liability to the
Trust, except as provided in this Agreement and each Related Document, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or a Related Document; provided, however, that this provision shall not protect
the Master Servicer, the Administrator, the Indenture Trustee or any such
Persons against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence (excluding errors in judgment) in
the performance of duties (including negligence with respect to the Master
Servicer’s indemnification obligations hereunder), by reason of reckless
disregard of obligations and duties under this Agreement and each Related
Document or any violation of law by the Master Servicer, the Administrator, the
Indenture Trustee or such person, as the case may be; provided, further,
that this provision shall not affect any liability to indemnify the Indenture
Trustee, the Administrator or the Owner Trustee for costs, taxes, expenses,
claims, liabilities, losses or damages paid by the Indenture Trustee, the
Administrator or the

 

48

 

Owner Trustee, in their
individual capacities.  The Master
Servicer, the Administrator, the Indenture Trustee and any director, officer,
employee or agent of such Persons may rely in good faith on the written advice
of counsel or on any document of any kind prima facie properly executed and
submitted by any Person pertaining to any matters arising under this
Agreement.  The Indenture Trustee shall
not be required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if the repayment of such funds or adequate
written indemnity against such risk or liability is not reasonably assured to
it in writing prior to the expenditure of risk of such funds or incurrence of
financial liability.

 

(b)                                 Unless
serving as Successor Master Servicer pursuant to Sections 10.2 and 10.3 hereof,
and notwithstanding any other provision to the contrary herein, the Indenture
Trustee and the Administrator shall not be liable for any obligation of the
Master Servicer contained in this Agreement or any Related Document, and the
Owner Trustee, the Seller and the Noteholders shall look only to the Master
Servicer to perform such obligations.

 

(c)                                  The
parties expressly acknowledge and consent to the initial Indenture Trustee
acting in the potential dual capacity of successor Master Servicer and in the
capacity as Indenture Trustee.  Such
Indenture Trustee may, in such dual or other capacity, discharge its separate
functions fully, without hindrance or regard to conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to
the extent that any such conflict or breach arises from the performance by such
Indenture Trustee of express duties set forth in this Agreement in any of such
capacities, all of which defenses, claims or assertions are hereby expressly
waived by the other parties hereto and the Noteholders except in the case of
negligence or willful misconduct by such Indenture Trustee.

 

SECTION 9.5.                       Delegation of Duties.  Subject to Section 9.7, in the ordinary
course of business, the Master Servicer and the Subservicer, provided it is
HAFC, at any time may delegate any of their duties hereunder to any Person,
including any of their Affiliates, who agrees to conduct such duties in
accordance with standards employed by the Master Servicer or such Subservicer
in compliance with Section 4.1. 
Such delegation shall not relieve the Master Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 9.6.

 

SECTION 9.6.                       Master Servicer Not to Resign.  Subject to the provisions of
Section 9.3, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it or its subsidiaries or Affiliates, or (ii)
upon satisfaction of the following conditions: 
(a) the Master Servicer has proposed a successor servicer to the
Indenture Trustee in writing and such proposed successor servicer is reasonably
acceptable to the Indenture Trustee and the Administrative Agent, where one
exists, or otherwise, the Managing Agents; (b) such

 

49

 

proposed successor
servicer has agreed in writing to assume the obligations of Master Servicer
hereunder and under each Basic Document to which it is a party and (c) the
Master Servicer has delivered to the Indenture Trustee an Opinion of Counsel to
the effect that all conditions precedent to the resignation of the Master
Servicer and the appointment of and acceptance by the proposed successor
servicer have been satisfied; provided, however, that, in the case of clause (i) above, no such resignation
by the Master Servicer shall become effective until the Indenture Trustee shall
have assumed the Master Servicer’s responsibilities and obligations hereunder
or the Indenture Trustee shall have designated a successor servicer in
accordance with Section 10.3 which shall have assumed such
responsibilities and obligations.  Any
such resignation shall not relieve the Master Servicer of responsibility for
any of its obligations hereunder arising prior to the effective date of such
resignation.  Any such determination
permitting the resignation of the Master Servicer pursuant to clause (i) above
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Indenture Trustee.

 

SECTION 9.7.                       Subservicing Agreements Between
Master Servicer and Subservicers. The Master Servicer initially
appoints HAFC to subservice the Receivables. 
From time to time after the Closing Date, the Master Servicer may enter
into a subservicing agreement with any Person other than HAFC which is an
Eligible Subservicer and is in compliance with the laws of each state necessary
to enable it to perform the obligations of the Master Servicer pursuant to this
Agreement.  Any such subservicing
agreement shall be consistent with and not violate the provisions of this
Agreement.  The Master Servicer shall not
be relieved of its obligations under this Agreement and each Basic Document to
which it is a party notwithstanding any agreement relating to subservicing and
the Master Servicer shall be obligated to the same extent and under the same
terms and conditions as if it alone were servicing and administering the
Receivables.  For purposes of this
Agreement and each Related Document, the Master Servicer shall be deemed to
have received payments on Receivables when any Subservicer has received such
payments.  The parties hereto acknowledge
that with respect to statements or certificates required to be delivered by the
Master Servicer in accordance with this Agreement and the Series Supplement,
including, but not limited to, Sections 4.9, 4.10 and 4.11 hereof, that a
statement or certificate delivered by a subservicer shall be sufficient to
discharge the Master Servicer’s obligation to deliver such certificate or
statement.

 

SECTION 9.8.                       Successor Subservicers.  The Master Servicer may terminate any
Subservicer and either directly service the related Receivables itself or enter
into an agreement with a successor Subservicer that is an Eligible
Subservicer.  None of the Owner Trustee,
the Administrator or the Indenture Trustee shall have a duty or obligation to
monitor or supervise the performance of any Subservicer.

 

50

 

ARTICLE X

Default

 

SECTION 10.1.                 Master Servicer Termination Event.  For purposes of this Agreement, each of the
following shall constitute a “Master Servicer Termination Event”:

 

(a)                                  Any
failure by the Master Servicer to deliver, or cause to be delivered, to the
Administrator for distribution pursuant to the terms of this Agreement or any
Basic Document, any proceeds or payment required to be so delivered by the
Master Servicer under the terms of this Agreement or any Basic Document (including
deposits of the Repurchase Amount pursuant to Section 4.7) that continues
unremedied for a period of three Business Days after written notice is received
by the Master Servicer from the Administrator or the Indenture Trustee or after
discovery of such failure by a responsible officer of the Master Servicer (but
in no event later than three Business Days after the Master Servicer is
required to make such delivery or deposit);

 

(b)                                 Failure
on the part of the Master Servicer duly to observe or perform any other
covenants or agreements of the Master Servicer set forth in this Agreement or
the Basic Documents, which failure (i) materially and adversely affects the
rights of Noteholders (determined without regard to the availability of funds
under any Series Support) and (ii) continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Master Servicer by the Administrator
or the Indenture Trustee or after discovery thereof by the Master Servicer;

 

(c)                                  The
entry of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of the Master Servicer in an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or another present or
future, federal bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Master Servicer or of any substantial part of its property
or ordering the winding up or liquidation of the affairs of the Master Servicer
or the commencement of an involuntary case under the federal bankruptcy laws,
as now or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law and such case is not dismissed within 60
days; or

 

(d)                                 The
commencement by the Master Servicer of a voluntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or the consent by the
Master Servicer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Master Servicer or of any substantial part of its property or
the making by the Master Servicer of an assignment for the benefit of creditors
or the failure by the Master Servicer generally to pay its debts as such debts
become due or the taking of corporate action by the Master Servicer in
furtherance of any of the foregoing; or

 

51

 

(e)                                  Any
representation, warranty or certification of the Master Servicer made in this
Agreement or any Basic Document or any certificate, report or other writing
delivered pursuant hereto or thereto shall prove to be incorrect in any
material respect as of the time when the same shall have been made, and the
incorrectness of such representation, warranty or statement has a material
adverse effect on the interests of the Indenture Trustee in the Series Trust
Estate and, within 60 days after written notice thereof shall have been given
to the Master Servicer by the Indenture Trustee or after discovery thereof by
the Master Servicer, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.

 

Notwithstanding
the foregoing, a delay in or failure of performance under Section 10.1(a)
for a period of three Business Days or under Section 10.1(b) for a period
of 60 days, shall not constitute a Master Servicer Termination Event if such
delay or failure could not be prevented by the exercise of reasonable diligence
by the Master Servicer and such delay or failure was caused by an act of God,
acts of declared or undeclared war, terrorism, public disorder, rebellion or
sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes,
floods or similar causes.  The preceding
sentence shall not relieve the Master Servicer from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of this
Agreement, and the Master Servicer shall provide the Administrator, the
Indenture Trustee and the Seller with an Officers’ Certificate giving prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations.

 

SECTION 10.2.                 Consequences of a Master Servicer
Termination Event.  If a
Master Servicer Termination Event shall occur and be continuing, the Indenture
Trustee (to the extent a Trust Officer of the Indenture Trustee has actual
knowledge or has received written notice thereof), by notice given in writing
to the Rating Agencies and the Master Servicer may and shall, at the written
direction of the Controlling Party, terminate all of the rights and obligations
of the Master Servicer, including in its capacity as custodian, under this
Agreement and the other Basic Documents to which it is a party.  On or after the receipt by the Master
Servicer of such written notice, all authority, power, obligations and
responsibilities of the Master Servicer, including in its capacity as
custodian, under this Agreement, whether with respect to the Notes, the
Receivables or the Other Conveyed Property or otherwise, automatically shall
pass to, be vested in, and become obligations and responsibilities, of the
Indenture Trustee (or such other successor Master Servicer appointed by the
Controlling Party pursuant to Section 10.3); provided, however, that the
successor Master Servicer shall have (i) no liability with respect to any
obligation which was required to be performed by the terminated Master Servicer
prior to the date that the successor Master Servicer becomes the Master
Servicer or any claim of a third party based on any alleged action or inaction
of the terminated Master Servicer, (ii) no obligation to perform any repurchase
or advancing obligations, if any, of the terminated Master Servicer, (iii) no
obligation to pay any of the fees and expenses of any other party involved in
this transaction not expressly assumed by the Master Servicer and (iv) no
liability or obligation with respect to any Master Servicer indemnification
obligations of any prior master servicer including the original master
servicer.

 

52

 

Notwithstanding
anything contained in this Agreement to the contrary, the Indenture Trustee as
successor Master Servicer and any Successor Master Servicer, are authorized to
accept and rely on all of the accounting, records (including computer records)
and work of the prior Master Servicer relating to the Receivables
(collectively, the “Predecessor Servicer Work Product”) without any audit or
other examination thereof, and the Indenture Trustee or Successor Master
Servicer shall have no duty, responsibility, obligation or liability for the
acts and omissions of the prior Master Servicer.  If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, “Errors”) exist
in any Predecessor Servicer Work Product and such Errors make it materially
more difficult to service or should cause or materially contribute to the
Indenture Trustee or Successor Master Servicer making or continuing any Errors
(collectively, “Continued Errors”), the Indenture Trustee or Successor Master
Servicer, as the case may be, shall have no duty, responsibility, obligation or
liability for such Continued Errors; provided, however, that the Indenture Trustee or Successor Master Servicer
agrees to use its best efforts to prevent further Continued Errors.  In the event that the Indenture Trustee or
Successor Master Servicer becomes aware of Errors or Continued Errors, such
Indenture Trustee or Successor Master Servicer shall, with the prior consent of
Noteholders representing 66-2/3% of the outstanding Notes, use its best efforts
to reconstruct and reconcile such data as is commercially reasonable to correct
such Errors and Continued Errors and to prevent future Continued Errors.

 

The
successor Master Servicer is authorized and empowered by this Agreement to
execute and deliver, on behalf of the terminated Master Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer
and endorsement of the Owner Trust Estate and related documents to show the
Trust as lienholder or secured party on the related Lien Certificates, or
otherwise.  The terminated Master
Servicer agrees to cooperate with the successor Master Servicer in effecting
the termination of the responsibilities and rights of the terminated Master
Servicer, including in its capacity as custodian, under this Agreement, including,
without limitation, the transfer to the successor Master Servicer for
administration by it of all cash amounts that shall at the time be held by the
terminated Master Servicer for deposit, or have been deposited by the
terminated Master Servicer, in a Trust Account and the delivery to the
successor Master Servicer of all Receivable Files being held by the terminated
Master Servicer in its capacity as custodian, Monthly Records and Collection
Records and a computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Master Servicer to
service the Owner Trust Estate.  If
requested by the Controlling Party, the successor Master Servicer shall direct
the Obligors to make all payments under the Receivables directly to the
successor Master Servicer (in which event the successor Master Servicer shall
process such payments in accordance with Section 4.2(d) or 4.2(e), as
applicable).  The terminated Master
Servicer shall grant the Indenture Trustee and the successor Master Servicer
reasonable access to the terminated Master Servicer’s premises at the
terminated Master Servicer’s expense.

 

SECTION 10.3.                 Appointment of Successor

 

(a)                                  .  (a)  On
and after the time the Master Servicer receives a notice of termination
pursuant to Section 10.2 or upon the

 

53

 

resignation of the Master
Servicer pursuant to Section 9.6, the Master Servicer shall continue to
perform all servicing functions under this Agreement until the date specified
in such termination notice or until such resignation becomes effective or until
a date mutually agreed upon by the Master Servicer and the Indenture
Trustee.  The Indenture Trustee shall as
promptly as possible after such termination or resignation appoint an Eligible
Servicer as a successor servicer (the “Successor Master Servicer”), and such
Successor Master Servicer shall accept its appointment by a written assumption
in a form reasonably acceptable to the Indenture Trustee.  In the event that a Successor Master Servicer
has not been appointed or has not accepted its appointment at the time when the
Master Servicer ceases to act as Master Servicer, the Indenture Trustee without
further action shall automatically be appointed the Successor Master
Servicer.  The Indenture Trustee may
delegate any of its servicing obligations to an Affiliate or agent in
accordance with Section 9.5. 
Notwithstanding the foregoing, the Indenture Trustee shall, if it is
legally unable so to act, petition a court of competent jurisdiction to appoint
any established institution qualifying as an Eligible Servicer as the Successor
Master Servicer hereunder.  The Indenture
Trustee or the Successor Master Servicer, as the case may be, shall be the
successor in all respects to the Master Servicer in its capacity as servicer
under this Agreement and the transactions set forth or provided for in this
Agreement, and shall be subject to all the rights, responsibilities,
restrictions, duties, liabilities and termination provisions relating thereto
placed on the Master Servicer by the terms and provisions of this Agreement,
except as otherwise stated herein.  The
Indenture Trustee  or the Successor Master Servicer,
as the case may be, shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession.  The Successor Master Servicer shall be
subject to termination under Section 10.2 upon the occurrence of any
Master Servicer Termination Event applicable to it as Master Servicer.

 

(b)                                 Subject
to Section 9.6, no provision of this Agreement shall be construed as
relieving the Indenture Trustee  of its
obligation to succeed as successor Master Servicer upon the termination of the
Master Servicer pursuant to Section 10.2 or the resignation of the Master
Servicer pursuant to Section 9.6.

 

(c)                                  Any
Successor Master Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) equal to the compensation
the Master Servicer would have been entitled to under this Agreement if the
Master Servicer had not resigned or been terminated hereunder or such other
amount as may be agreed to by the Successor Master Servicer.  In addition, any Successor Master Servicer
shall be entitled to reasonable transition expenses incurred in acting as
Successor Master Servicer payable by the outgoing Master Servicer, and to the
extent such transition expenses have not been paid by the outgoing Master
Servicer, such Successor Master Servicer shall be entitled to reimbursement for
such reasonable expenses pursuant to the Series Supplement.

 

SECTION 10.4.                 Notification
to Noteholders.  Upon any termination
of, or appointment of a successor to, the Master Servicer the Indenture Trustee
shall give prompt written notice thereof to each Noteholder.

 

54

 

SECTION 10.5.                 Waiver of Past Defaults.  The Controlling Party or, with the consent of
the Controlling Party, a majority of the Noteholders may, on behalf of all
Securityholders, waive any default by the Seller or the Master Servicer in the
performance of their obligations hereunder and its consequences, except the
failure to make any distributions required to be made to Noteholders or to make
any required deposits of any amounts to be so distributed.  Upon any such waiver of a past default, such
default shall cease to exist, and any default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement.  No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly so waived.

 

SECTION 10.6.                 Successor to Master Servicer.  (a) 
The Indenture Trustee, in its capacity as successor to the Master
Servicer, shall perform such duties and only such duties as are specifically
set forth in this Agreement and each Related Document with respect to the
assumption of any servicing duties and no implied covenants or obligations
shall be read into this Agreement against the Indenture Trustee.

 

(b)                                 In
the absence of bad faith or negligence on its part, the Indenture Trustee  and the Administrator may conclusively rely as to the truth
of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to it and conforming to the requirements of
this Agreement and the Series Supplement; but in the case of any such
certificates or opinions, which by any provision hereof are specifically
required to be furnished to the Indenture Trustee and/or the Administrator, the
Indenture Trustee  and/or the Administrator, as the
case may be, shall be under a duty to examine the same and to determine whether
or not they conform to the requirements of this Agreement and the Series
Supplement.

 

(c)                                  The
Indenture Trustee  shall have no liability for any
actions taken or omitted by the terminated Master Servicer.

 

ARTICLE XI

Termination

 

SECTION 11.1.                 Optional Purchase of All
Receivables.  (a)  To the extent and under the circumstances
provided in the Series Supplement, the Master Servicer and HAFC each shall have
the option to effect a “clean-up” redemption or purchase of the Series Trust
Estate.

 

(b)                                 Upon
any sale of the assets included in the Series Trust Estate permitted by the
Series Supplement, the Master Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
(including the expenses of such sale) have been made in the Collection Account.

 

55

 

(c)                                  Notice
of any termination of the Trust shall be given by the Master Servicer to the
Owner Trustee, the Indenture Trustee and the Administrator as soon as
practicable after the Master Servicer has received notice thereof.

 

(d)                                 Following
the satisfaction and discharge of the Indenture, the payment in full of the
principal of and interest on the Notes, the satisfaction of all payment
obligations under the Basic Documents and termination of any Series Support (as
provided therein), the Certificateholders will succeed to the rights of the
Noteholders hereunder and the Owner Trustee will succeed to the rights of, and
assume the obligations of, the Indenture Trustee and the Administrator pursuant
to this Agreement.

 

ARTICLE XII

Administrative Duties of the Master Servicer

 

SECTION 12.1.                 Administrative Duties.

 

(a)                                  Duties
with Respect to the Indenture.  The
Master Servicer shall perform all its duties and the duties of the Issuer under
the Indenture.  In addition, the Master
Servicer shall consult with the Owner Trustee as the Master Servicer deems
appropriate regarding the duties of the Issuer under the Indenture.  The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer’s duties under the Indenture.  The Master Servicer shall prepare for
execution by the Issuer or shall cause the preparation by other appropriate
Persons of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer to prepare, file or deliver
pursuant to the Indenture.  In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Issuer to take pursuant to the Indenture,
including, without limitation, pursuant to Sections 2.7, 3.3, 3.4, 3.5, 3.6,
3.7, 3.9, 3.10, 3.17, 7.3, 8.3, 9.2, 9.3, 11.1 and 11.15 of the Indenture.

 

(b)                                 Duties
with Respect to the Issuer.

 

(i)                                     In
addition to the duties of the Master Servicer set forth in this Agreement or
any of the Related Documents, the Master Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner
Trustee, or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Issuer or the Owner Trustee, to prepare, file or
deliver pursuant to this Agreement or any of the Related Documents or under
state and federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the Issuer to
take pursuant to this Agreement or any of the Basic Documents, including,
without limitation, pursuant to Sections 2.6 and 2.11 of the Trust
Agreement.  In accordance with the
directions of the Issuer or the Owner Trustee,

 

56

 

the Master
Servicer shall administer, perform or supervise the performance of such other
activities in connection with the Owner Trust Estate (including the Related
Documents) as are not covered by any of the foregoing provisions and as are
expressly requested by the Issuer or the Owner Trustee and are reasonably
within the capability of the Master Servicer.

 

(ii)                                  Notwithstanding
anything in this Agreement or any of the Basic Documents to the contrary, the
Master Servicer shall be responsible for promptly notifying the Owner Trustee,
the Indenture Trustee and the Administrator in the event that any withholding
tax is imposed on the Issuer’s payments (or allocations of income) to a Certificateholder
as contemplated by this Agreement.  Any
such notice shall be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee, the Indenture Trustee or the
Administrator pursuant to such provision.

 

(iii)                               Notwithstanding
anything in this Agreement or the Basic Documents to the contrary, the Master
Servicer shall be responsible for performance of the duties of the Issuer and
the Seller set forth in Section 5.1(a), (b), (c) and (d) of the Trust
Agreement with respect to, among other things, accounting and reports to Owners
(as defined in the Trust Agreement); provided,
however, that once prepared by the Master
Servicer, the Depositor shall retain responsibility under Section 5.1(b)
of the Trust Agreement for the distribution of the Schedule K-1s necessary
to enable each Certificateholder to prepare its federal and state income tax
returns.

 

(iv)                              The
Master Servicer shall perform the duties of the Depositor specified in
Section 10.2 of the Trust Agreement required to be performed in connection
with the resignation or removal of the Owner Trustee, and any other duties
expressly required to be performed by the Master Servicer under this Agreement
or any of the Related Documents.

 

(v)                                 The
Master Servicer, on behalf of the Seller, shall direct the Issuer to request
the tender of all or a portion of the Notes in accordance with the Indenture or
the Series Supplement.

 

(vi)                              In
carrying out the foregoing duties or any of its other obligations under this
Agreement, the Master Servicer may enter into transactions with or otherwise
deal with any of its Affiliates; provided, however, that the terms of any such
transactions or dealings shall be in accordance with any directions

 

57

 

received from the
Issuer and shall be, in the Master Servicer’s opinion, no less favorable to the
Issuer in any material respect.

 

(c)                                  Tax
Matters. The Master Servicer shall prepare and file, or cause to be
prepared and filed, on behalf of the Seller, all tax returns, tax elections,
financial statements and such annual or other reports of the Issuer as are
necessary for preparation of tax reports as provided in Article V of the
Trust Agreement, including without limitation forms 1099 and 1066.  All tax returns will be signed by the Seller.

 

(d)                                 Non-Ministerial
Matters.  With respect to matters
that in the reasonable judgment of the Master Servicer are non-ministerial, the
Master Servicer shall not take any action pursuant to this Article XII
unless within a reasonable time before the taking of such action, the Master
Servicer shall have notified the Owner Trustee, the Indenture Trustee and the
Administrator of the proposed action and the Owner Trustee, the Indenture
Trustee or the Administrator shall not have withheld consent or provided an
alternative direction.  For the purpose
of the preceding sentence, “non-ministerial matters” shall include:

 

(A)                              the
initiation of any claim or lawsuit by the Issuer and the compromise of any
action, claim or lawsuit brought by or against the Issuer (other than in
connection with the collection of the Receivables);

 

(B)                                the
appointment of successor Note Registrars, successor Note Paying Agents,
successor Indenture Trustees or successor Administrators pursuant to the Indenture
or the consent to the assignment by the Note Registrar, Note Paying Agent, the
Administrator or Indenture Trustee of its obligations under the Indenture; and

 

(C)                                the
removal of the Indenture Trustee or the Administrator.

 

(e)                                  Exceptions.  Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Basic
Documents, the Master Servicer, in its capacity hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Noteholders or Certificateholders
under the Basic Documents, (2) sell any portion of the Series Trust Estate
pursuant to the Basic Documents, (3) take any other action that the Issuer
directs the Master Servicer not to take on its behalf or (4) in connection with
its duties hereunder assume any indemnification obligation of any other Person.

 

(f)                                    Neither
the Indenture Trustee nor any successor Master Servicer shall be responsible
for any obligations or duties of a predecessor Master Servicer under
Section 12.1.

 

SECTION 12.2.                 Records.  The
Master Servicer shall maintain appropriate books of account and records
relating to services performed under this Agreement, which books of account and
records shall be accessible for inspection by the Issuer and the Indenture
Trustee at any time during normal business hours.

 

58

 

SECTION 12.3.                 Additional Information to be
Furnished to the Issuer. 
The Master Servicer shall furnish to the Issuer and the Indenture
Trustee, from time to time such additional information regarding the Owner
Trust Estate as the Issuer and the Indenture Trustee shall reasonably request.

 

ARTICLE XIII

Miscellaneous Provisions

 

SECTION 13.1.                 Amendments. 
(a)  This Agreement may be amended
by the parties hereto at any time when no Securities are outstanding without
the requirement of any consents or the satisfaction of any conditions set forth
below.

 

(b)                                 Except
as otherwise provided in the Series Supplement, this Agreement may be amended
from time to time by the parties hereto, by a written instrument signed by each
of the parties hereto without the consent of any of the Securityholders,
provided that (i) an Opinion of Counsel for the Seller (which Opinion of
Counsel may, as to factual matters, rely upon Officers’ Certificates of the
Seller or the Master Servicer) is addressed and delivered to the Indenture
Trustee and the Administrator, dated the date of any such amendment, to the
effect that the conditions precedent to any such amendment, including those of
Section 13.2(h) hereof, have been satisfied and (ii) the Seller shall have
delivered to the Indenture Trustee and the Administrator, an Officer’s
Certificate dated the date of any such amendment, stating that the Seller
reasonably believes that such amendment will not have a material adverse effect
on the rights of the Noteholders.

 

(c)                                  Except
as otherwise provided in the Series Supplement, subject to Section 13.2(h)
hereof, this Agreement may also be amended from time to time by the Master
Servicer, the Seller, the Indenture Trustee and the Administrator, with the
prior written consent of the Administrative Agent, where one exists, or
otherwise the Managing Agents, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Securityholders; provided,
however, that no such amendment shall (i) reduce in any manner the
amount of or delay the timing of any distributions to be made to
Securityholders or deposits of amounts to be so distributed or the amount
available under any Series Support without the consent of each affected
Securityholder, (ii) change the definition of or the manner of calculating the
interest of any Securityholder without the consent of each affected
Securityholder, or (iii) reduce the aforesaid percentage of Noteholders
required to consent to any such amendment.

 

Promptly
after the execution of any such amendment or supplement, the Indenture Trustee  shall furnish written notification of the substance of such
amendment or supplement to each Securityholder.

 

It
shall not be necessary for the consent of Certificateholders or Noteholders
pursuant to this Section to approve the particular form of any amendment,
but it shall be sufficient if such consent shall approve the substance
thereof.  The manner

 

59

 

of obtaining such consents (and any other consents of
Noteholders or Certificateholders provided for in this Agreement) and of
evidencing the authorization of any action by Noteholders or Certificateholders
shall be subject to such reasonable requirements as the Indenture Trustee or
the Owner Trustee, as the case may be, may prescribe, including the
establishment of record dates.

 

The
Owner Trustee, the Indenture Trustee and the Administrator may, but shall not
be obligated to, enter into any amendment which affects the Issuer’s, the Owner
Trustee’s, the Indenture Trustee’s or the Administrator’s, as the case may be,
own rights, duties or immunities under this Agreement or otherwise.

 

Prior
to the execution of any amendment to this Agreement, the Indenture Trustee and
the Administrator shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and that all conditions precedent to the execution and
delivery of such amendment have been satisfied.

 

SECTION 13.2.                 Protection of Title to Series
Trust Estate.  (a)  The Seller shall execute and file such
financing statements and cause to be executed and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Issuer in the Owner
Trust Estate and the Indenture Trustee in the Series Trust Estate.

 

(b)                                 Neither
the Seller nor the Master Servicer shall change its name, identity or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Sections 9-503(a), 9-506 and 9-507
of the UCC, unless it shall have given the Owner Trustee and the Indenture
Trustee at least thirty days’ prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.

 

(c)                                  Each
of the Seller and the Master Servicer shall have an obligation to give the
Owner Trustee and the Indenture Trustee prompt notice of any change in its
state of incorporation if, as a result of such change, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment.  The Master Servicer shall at all times
maintain each office from which it shall service Receivables within the United
States of America.

 

(d)                                 The
Master Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.

 

60

 

(e)                                  The
Master Servicer shall maintain or cause to be maintained, a computer system so
that, from and after the time of sale under this Agreement and each Transfer
Agreement of the Receivables to the Issuer, such master computer records
(including any backup archives) that refer to a Receivable shall indicate
clearly the interest of the Trust in such Receivable and that such Receivable
is owned by the Trust and such Receivable has been pledged pursuant to the
Indenture.  Indication of the Trust’s and
the Indenture Trustee’s interest in a Receivable shall be deleted from or modified
on such computer systems when, and only when, the related Receivable shall have
been paid in full, repurchased by HAFC, any Affiliate of HAFC that is the
seller under a Master Receivables Purchase Agreement, Household Finance
Corporation or the Seller or otherwise disposed of by the Issuer in accordance
with the terms of this Agreement.

 

(f)                                    If
at any time the Seller, HAFC or any Affiliate of HAFC that is the seller under
a Master Receivables Purchase Agreement shall propose to sell, grant a security
interest in or otherwise transfer any interest in motor vehicle receivables to
any prospective purchaser, lender or other transferee, the Master Servicer
shall give to such prospective purchaser, lender or other transferee computer
tapes, records or printouts (including any restored from backup archives) that,
if they shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Trust unless
such Receivable has been paid in full, been repurchased by HAFC, any Affiliate
of HAFC that is the seller under a Master Receivables Purchase Agreement,
Household Finance Corporation or the Seller or has otherwise been disposed of
by the Issuer in accordance with the terms of this Agreement.

 

(g)                                 Upon
request, the Master Servicer shall furnish or cause to be furnished to the
Owner Trustee or the Indenture Trustee, within five Business Days, a list of
all Receivables (by contract number) then held as part of the Series Trust
Estate, together with a reconciliation of such list to the related
Schedule of Receivables and to any Master Servicer’s Certificates
furnished before such request indicating removal of Receivables from the Series
Trust Estate.  The Indenture Trustee
shall hold any such list and Schedule of Receivables for examination by
interested parties during normal business hours at the Corporate Trust Office
upon reasonable notice by such Persons of their desire to conduct an
examination.

 

(h)                                 The
Master Servicer shall deliver to the Owner Trustee and the Indenture Trustee:

 

(1)                                  simultaneously
with the execution and delivery of the Agreement and, if required pursuant to
Section 13.1, of each amendment, an Opinion of Counsel stating that, in
the opinion of such Counsel, in form and substance reasonably satisfactory to
the addressees of such Opinion, either (A) all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Trust and the Indenture Trustee in
the Receivables then held as part of the Series Trust Estate, or (B) no such
action shall be necessary to preserve and protect such interest or (C) any

 

61

 

action which is necessary to preserve and protect such
interest during the following 12-month period; and

 

(2)                                  within
90 days after the beginning of each calendar year beginning with the first
calendar year following the Closing Date dated as of a date during such 90-day
period, stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trust and the
Indenture Trustee in the Series Trust Estate or (B) no such action shall be
necessary to preserve and protect such interest.

 

Each
Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.

 

SECTION 13.3.                 Notices.  All
demands, notices and communications upon or to the Seller, the Master Servicer,
the Owner Trustee, the Administrator, the Indenture Trustee or any other Person
entitled to receive a notice, shall be in writing, personally delivered, or
mailed by certified mail, sent by confirmed telecopier transmission, or at the
consent of the receiving party by electronic mail, and shall be deemed to have
been duly given upon receipt at the address specified in the Series Supplement.  Any notice required or permitted to be mailed
to a Noteholder or Certificateholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Certificate
Register or Note Register, as applicable. 
Any notice so mailed within the time prescribed in the Agreement shall
be conclusively presumed to have been duly given, whether or not the
Certificateholder or Noteholder shall receive such notice.

 

SECTION 13.4.                 Assignment. 
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.  Notwithstanding anything to the contrary
contained herein, except as provided in Sections 8.4 and 9.3 and as provided in
the provisions of this Agreement concerning the resignation of the Master
Servicer, this Agreement may not be assigned by the Seller or the Master
Servicer, the Owner Trustee, the Administrator, the Indenture Trustee and the
Administrative Agent, where one exists, or otherwise, the Managing Agents.  In the event that a successor Issuer is formed
as permitted by the Series Supplement, such Issuer shall succeed to all of the
rights and obligations of the predecessor Issuer hereunder; and all references
to the Issuer hereunder shall thereafter be deemed to be references to such
successor Issuer.

 

SECTION 13.5.                 Limitations on Rights of Others.  The provisions of this Agreement are solely
for the benefit of the parties hereto and for the benefit of the
Certificateholders (including the Seller), the Indenture Trustee, the
Administrator, the Owner Trustee, any Support Provider and the Secured Parties,
as third-party beneficiaries.  Each
Support Provider shall be entitled to rely upon and directly enforce such
provisions of this Agreement, the Series Supplement and the Indenture so long
as no default with respect to such Support Provider shall have occurred and be
continuing;

 

62

 

provided that
nothing herein shall affect or limit the Support Provider’s rights as subrogee
to the Noteholders.  Nothing in this
Agreement or in the Series Supplement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

 

SECTION 13.6.                 Severability. 
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

SECTION 13.7.                 Separate Counterparts.  This Agreement and each Transfer Agreement
may be executed by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.

 

SECTION 13.8.                 Headings. 
The headings of the various Articles and Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

 

SECTION 13.9.                 Governing Law. 
THIS AGREEMENT AND EACH TRANSFER AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAWS PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

SECTION 13.10.           Assignment to Indenture Trustee.  The Seller hereby acknowledges and consents
to any mortgage, pledge, assignment and grant of a security interest by the
Issuer to the Indenture Trustee pursuant to the Indenture, as supplemented by
the Series Supplement for the benefit of the Secured Parties of all right,
title and interest of the Issuer in, to and under the Series Trust Estate.

 

SECTION 13.11.           Nonpetition Covenants.  (a) 
Notwithstanding any prior termination of this Agreement or the Series
Supplement, none of the Master Servicer, the Seller, the Administrative Agent,
any Managing Agent or any Secured Party shall, prior to the date which is one
year and one day after the termination of this Agreement and the payment in
full of all obligations of the Issuer under the Basic Documents, acquiesce,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a
case against the Issuer under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Issuer.

 

63

 

(b)                                 Notwithstanding
any prior termination of this Agreement or the Series Supplement, none of the
Master Servicer, any Managing Agent, the Administrative Agent or any Secured
Party shall, prior to the date that is one year and one day after the
termination of this Agreement, acquiesce to, petition or otherwise invoke or
cause the Seller to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Seller under any
federal or state bankruptcy, insolvency or similar law, appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator, or other similar
official of the Seller or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Seller.

 

SECTION 13.12.           Limitation of Liability of the
Owner Trustee, the Administrator and the Indenture Trustee.  (a) 
Notwithstanding anything contained herein to the contrary, this
Agreement and the Series Supplement have been countersigned by the Owner
Trustee not in its individual capacity but solely in its capacity as Owner
Trustee of the Issuer and in no event shall the Owner Trustee in its individual
capacity or, except as expressly provided in the Trust Agreement, as Owner
Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.  For all purposes of this Agreement and the
Series Supplement, in the performance of its duties or obligations hereunder or
in the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Articles VI, VII and VIII of the Trust Agreement.

 

(b)                                 Notwithstanding
anything contained herein to the contrary, this Agreement has been executed and
delivered by the Persons acting as the Indenture Trustee and the Administrator
not in their individual capacity but solely as Indenture Trustee or
Administrator, as applicable, and in no event shall such Person have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.

 

SECTION 13.13.           Limitation of Liability of Issuer.  The Issuer shall have no liability to the
Master Servicer except for payment of the Servicing Fee and reimbursement of
repossession and liquidation expenses. 
The Issuer shall have no obligation to indemnify the Master Servicer for
costs or expenses, except with respect to the preceding sentence.

 

SECTION 13.14.           Independence of the Master Servicer.  For all purposes of this Agreement, the
Master Servicer shall be an independent contractor and shall not be subject to
the supervision of the Issuer, the Indenture Trustee, the Administrator or the
Owner Trustee with respect to the manner in which it accomplishes the performance
of its obligations hereunder.  Unless
expressly authorized by this Agreement or the Series Supplement, the Master
Servicer shall have no authority to act for or represent the Issuer or the
Owner Trustee in any way and shall not otherwise be deemed an agent of the
Issuer or the Owner Trustee.

 

64

 

SECTION 13.15.           No Joint Venture.  Nothing contained in this Agreement or the
Series Supplement (i) shall constitute the Master Servicer and either of the
Issuer or the Owner Trustee as members of any partnership, joint venture,
association, syndicate, unincorporated business or other separate entity, (ii)
shall be construed to impose any liability as such on any of them or (iii)
shall be deemed to confer on any of them any express, implied or apparent
authority to incur any obligation or liability on behalf of the others.

 

65

 

IN
WITNESS WHEREOF, the parties hereto have caused this Master Sale and Servicing
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and the year first above written.

 

	
   

  	
  HOUSEHOLD
  AUTOMOTIVE TRUST 2004-1

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington Trust
  Company,

  
	
   

  	
   

  	
  not in its
  individual capacity but solely as

  Owner Trustee on behalf of the Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rachel L. Simpson

  	
   

  
	
   

  	
   

  	
  Name: Rachel L.
  Simpson

  
	
   

  	
   

  	
  Title: Financial
  Services Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD
  AUTO RECEIVABLES

  CORPORATION,

  as Seller

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven H. Smith

  	
   

  
	
   

  	
   

  	
  Name: Steven H.
  Smith

  
	
   

  	
   

  	
  Title: Vice
  President and Assistant Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD
  FINANCE CORPORATION,

  
	
   

  	
  as Master
  Servicer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William H. Kesler

  	
   

  
	
   

  	
   

  	
  Name: William H.
  Kesler

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  not in its individual capacity but solely as

  Indenture Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia M. Child

  	
   

  
	
   

  	
   

  	
  Name: Patricia
  M. Child

  
	
   

  	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HSBC BANK USA,
  NATIONAL ASSOCIATION,

  
	
   

  	
  as Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Wu

  	
   

  
	
   

  	
   

  	
  Name: Richard Wu

  
	
   

  	
   

  	
  Title: Vice
  President

  
					

 

 

EXHIBIT A

 

FORM OF TRANSFER
AGREEMENT

 

TRANSFER
No.
                          
of Receivables dated as of
                          
pursuant to the Master Sale and Servicing Agreement dated as of
July      , 2004 (the “Sale and Servicing
Agreement”), among HOUSEHOLD AUTOMOTIVE TRUST 2004-1, a Delaware statutory
trust (the “Issuer” or the “Trust”), HOUSEHOLD AUTO RECEIVABLES CORPORATION, a
Nevada corporation (the “Seller”), HOUSEHOLD FINANCE CORPORATION, a Delaware
corporation (the “Master Servicer”), U.S. BANK NATIONAL ASSOCIATION, a national
banking association in its capacity as Indenture Trustee (the “Indenture
Trustee”) and HSBC BANK USA, NATIONAL ASSOCIATION, a national banking
association in its capacity as Administrator (the “Administrator”).

 

W I T N E S S E T
H:

 

WHEREAS
pursuant to the Sale and Servicing Agreement, the Seller wishes to convey the
Receivable to the Issuer; and

 

WHEREAS,
the Issuer is willing to accept such conveyance subject to the terms and
conditions hereof.

 

NOW,
THEREFORE, the Issuer, the Seller, the Master Servicer, the Indenture Trustee
and the Administrator hereby agree as follows:

 

1.                                       Defined
Terms.  Capitalized terms used herein
shall have the meanings ascribed to them in the Sale and Servicing Agreement
unless otherwise defined herein.

 

“Cutoff
Date” shall mean, with respect to the Receivables conveyed hereby, the close of
business on
                ,
20   .

 

“Transfer
Date” shall mean. with respect to the Receivables conveyed hereby,
                 ,
       .

 

2.                                       List
of Receivables.  Annexed hereto is
Schedule A listing the Receivables that constitute the Receivables to be
conveyed pursuant to the Sale and Servicing Agreement and this Agreement on the
Transfer Date.

 

3.                                       Conveyance
of Receivables.  The Seller does
hereby sell, transfer, assign, set over and otherwise convey to the Issuer,
without recourse (except as expressly provided
in the Sale and Servicing Agreement), all right, title and interest of the
Seller in and to:

 

(a)                                  each
and every Receivable listed on Schedule A and all monies paid or payable
thereon or in respect thereof after the related Cutoff Date (including amounts
due on or before the related Cutoff Date but received by

 

A-1

 

HAFC (or any predecessor or Affiliate of HAFC, as applicable)
or Seller on or after such date);

 

(b)                                 the
security interests in the related Financed Vehicles granted by Obligors
pursuant to such Receivables and any other interest of the Seller in such
Financed Vehicles;

 

(c)                                  all
rights of the Seller against Dealers pursuant to Dealer Agreements or Dealer
Assignments related to such Receivables;

 

(d)                                 any
proceeds and the right to receive proceeds with respect to such Receivables
repurchased by a Dealer pursuant to a Dealer Agreement;

 

(e)                                  all
rights of the Seller under any Service Contracts on the related Financed
Vehicles;

 

(f)                                    any
proceeds and the right to receive proceeds with respect to such Receivables
from claims on any physical damage, credit life or disability insurance
policies covering the related Financed Vehicles or Obligors, including rebates
of insurance premiums relating to such Receivables;

 

(g)                                 all
items contained in the Receivables Files with respect to such Receivables and
any and all other documents that HAFC, any Affiliate of HAFC that is the seller
under a Master Receivables Purchase Agreement, the Seller or the Master
Servicer, as applicable, keeps on file in accordance with its customary
procedures relating to the related Receivables, the related Financed Vehicles
or Obligors;

 

(h)                                 all
funds on deposit from time to time in the Trust Accounts (including all
investments and proceeds thereof);

 

(i)                                     all
property (including the right to receive future Net Liquidation Proceeds) that
secures each related Receivable and that has been acquired by or on behalf of
the Seller or the Trust pursuant to liquidation of such Receivable;

 

(j)                                     all
of Seller’s right, title and interest in its rights and benefits, but none of
its obligations or burdens, under each of the Master Receivables Purchase
Agreements and the Receivables Purchase Agreement Supplements, including the
delivery requirements, representations and warranties and the cure and
repurchase obligations of HAFC, any Affiliate of HAFC that is the seller under
a Master Receivables Purchase Agreement or Household Finance Corporation, as
applicable, under each of the Master Receivables Purchase Agreements and
related Receivables Purchase Agreement Supplements, on or after the related
Cutoff Date;

 

(k)                                  on
the initial Transfer Date only, one share of Class SV Preferred Stock of the
Seller together with the exclusive right to vote such share; and

 

A-2

 

(l)                                     all
present and future claims, demands, causes and chooses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing.

 

4.                                       Representations
and Warranties of the Seller.  The
Seller hereby represents and warrants to the Issuer as of the Transfer Date
that:

 

(a)                                  Each
of its representations set forth in Sections 3.1 and 8.1 of the Sale and
Servicing Agreement are true and correct as if made on the Transfer Date,
except if specified to be true as of an earlier date, in which case, such
representations and warranties are true as of such earlier date.

 

(b)                                 The
aggregate of the Principal Balances of the Receivables listed on
Schedule A annexed hereto and conveyed to the Issuer pursuant to this
Agreement as of the Cutoff Date is
$                 .

 

5.                                       Conditions
Precedent.  The obligation of the
Issuer to acquire the Receivables hereunder is subject to the satisfaction, on
or prior to the Transfer Date, of the following conditions precedent:

 

Representations
and Warranties.  Each
of the representations and warranties made by the Seller in Section 4 of
this Agreement shall be true and correct as of the Transfer Date.

 

Sale
and Servicing Agreement Conditions.  Each of the conditions set forth in
Section 2.1(b) to the Sale and Servicing Agreement shall have been
satisfied.

 

Additional
Information.  The
Seller shall have delivered to the Issuer such information as was reasonably
requested by the Issuer to satisfy itself as to the accuracy of the
representations and warranties set forth in Section 4 of this Agreement.

 

6.                                       Ratification
of Agreement.  As supplemented by
this Agreement, the Sale and Servicing Agreement is in all respects ratified
and confirmed and the Sale and Servicing Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.

 

7.                                       Counterparts.  This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the
same instrument.

 

A-3

 

8.                                       GOVERNING
LAW.  THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

A-4

 

IN
WITNESS WHEREOF, the Issuer, the Seller and the Master Servicer have caused
this Agreement to be duly executed and delivered by their respective duly
authorized officers as of day and the year first above written.

 

	
   

  	
  HOUSEHOLD
  AUTOMOTIVE TRUST 2004-1

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Wilmington Trust
  Company,

  
	
   

  	
   

  	
  not in its
  individual capacity but solely as

  Owner Trustee on behalf of the Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD AUTO
  RECEIVABLES

  CORPORATION,

  as Seller

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD
  FINANCE CORPORATION,

  
	
   

  	
  as Master
  Servicer

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

A-5

 

	
  Acknowledged and
  Accepted:

  	
   

  
	
   

  	
   

  
	
  U.S. BANK
  NATIONAL ASSOCIATION,

  	
   

  
	
  not in its individual capacity but solely as

  	
   

  
	
  Indenture Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HSBC BANK USA,
  NATIONAL ASSOCIATION,

  	
   

  
	
  as Administrator

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

A-6Exhibit
4.4

Execution
Copy

 

 

 

HOUSEHOLD FINANCE
CORPORATION,

as Master
Servicer,

 

HOUSEHOLD
AUTOMOTIVE TRUST 2004-1,

as Issuer,

 

HOUSEHOLD AUTO
RECEIVABLES CORPORATION,

as Seller,

 

U.S. BANK NATIONAL
ASSOCIATION,

as Indenture
Trustee,

 

WILMINGTON TRUST
COMPANY,

as Owner Trustee,

 

HSBC BANK USA, NATIONAL ASSOCIATION,

as Administrator

 

 

SERIES SUPPLEMENT

 

Dated as of
July 28, 2004

to the

 

INDENTURE

 

Dated as of
July 28, 2004

 

MASTER SALE AND
SERVICING AGREEMENT

 

Dated as of
July 28, 2004

 

and to the

 

AMENDED AND
RESTATED TRUST AGREEMENT

 

Dated as of
July 28, 2004

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I CREATION OF
  THE NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01.

  	
  DESIGNATION.

  	
   

  
	
  SECTION 1.02.

  	
  PLEDGE OF SERIES TRUST
  ESTATE.

  	
   

  
	
  SECTION 1.03.

  	
  PAYMENTS AND COMPUTATIONS.

  	
   

  
	
  SECTION 1.04.

  	
  DENOMINATIONS.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01.

  	
  DEFINITIONS.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  DISTRIBUTIONS AND STATEMENTS TO NOTEHOLDERS; SERIES SPECIFIC COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01.

  	
  TRUST ACCOUNTS.

  	
   

  
	
  SECTION 3.02.

  	
  RESERVE ACCOUNT.

  	
   

  
	
  SECTION 3.03.

  	
  DISTRIBUTIONS.

  	
   

  
	
  SECTION 3.04.

  	
  STATEMENTS TO NOTEHOLDERS.

  	
   

  
	
  SECTION 3.05.

  	
  REPORTING REQUIREMENTS.

  	
   

  
	
  SECTION 3.06.

  	
  COMPLIANCE
  WITH WITHHOLDING REQUIREMENTS.

  	
   

  
	
  SECTION 3.07.

  	
  SPECIAL
  COVENANTS AND ACKNOWLEDGEMENTS.

  	
   

  
	
  SECTION 3.08.

  	
  TAX CHARACTERIZATION.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV EVENTS OF
  DEFAULT; REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01.

  	
  EVENTS OF DEFAULT.

  	
   

  
	
  SECTION 4.02.

  	
  RIGHTS UPON EVENT OF DEFAULT.

  	
   

  
	
  SECTION 4.03.

  	
  REMEDIES.

  	
   

  
	
  SECTION 4.04.

  	
  PRIORITIES.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V PREPAYMENT,
  REDEMPTION AND SUBSTITUTION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01.

  	
  OPTIONAL “CLEAN-UP”
  REDEMPTION.

  	
   

  
	
  SECTION 5.02.

  	
  OPTIONAL SUBSTITUTION.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01.

  	
  RATIFICATION OF BASIC
  DOCUMENTS.

  	
   

  
	
  SECTION 6.02.

  	
  COUNTERPARTS.

  	
   

  
	
  SECTION 6.03.

  	
  GOVERNING LAW.

  	
   

  
	
  SECTION 6.04.

  	
  AMENDMENTS
  WITHOUT CONSENT OF NOTEHOLDERS.

  	
   

  
	
  SECTION 6.05.

  	
  AMENDMENTS
  WITH CONSENT OF THE NOTEHOLDERS.

  	
   

  
	
  SECTION 6.06.

  	
  AUTHORITY
  TO REGISTER NOTES AND FILE REPORTS.

  	
   

  
	
  SECTION 6.07.

  	
  AUTHORITY TO
  PERFORM DUTIES OF THE ISSUER.

  	
   

  
	
  SECTION 6.08.

  	
  NOTICES.

  	
   

  

 

	
  Schedule I

  	
   

  	
  Eligibility Criteria

  
	
  Schedule II

  	
   

  	
  Schedule of Receivables

  
	
  Exhibit A

  	
   

  	
  Form of Master Servicer’s Certificate

  
	
  Exhibit B

  	
   

  	
  Forms of Notes

  

 

 

This
Series Supplement, dated as of July 28, 2004, is by and among Household
Finance Corporation, a Delaware corporation, as Master Servicer (the “Master
Servicer”), Household Automotive Trust 2004-1, a Delaware statutory trust,
as Issuer (the “Issuer” or the “Trust”), Household Auto
Receivables Corporation, a Nevada corporation, as Seller (the “Seller”),
U.S. Bank National Association, a national banking association, as trustee for
the Noteholders (the “Indenture Trustee”), Wilmington Trust Company, a
Delaware banking corporation, as owner trustee for the Certificateholders (the
“Owner Trustee”), and HSBC Bank USA, National Association, a national
banking association, as administrator (the “Administrator”).

 

RECITALS

 

This
Series Supplement is executed and delivered by the parties hereto pursuant to
Section 9.3 of the Indenture (the “Indenture”) dated as of
July 28, 2004 among the Issuer, the Indenture Trustee and the
Administrator and pursuant to Section 3.2 of the Amended and Restated
Trust Agreement  (the “Trust Agreement”)
dated as of July 28, 2004 between the Seller and the Owner Trustee.  In the event that any term or provision
contained herein shall conflict with or be inconsistent with any term or
provision contained in the Indenture or the Trust Agreement, the terms and
provisions of this Series Supplement shall govern.

 

ARTICLE I

CREATION OF THE NOTES

 

SECTION 1.01.                 Designation.

 

(a)                                  There
is hereby created a series of Notes, substantially in the form of Exhibit B
hereto, to be issued pursuant to the Indenture and this Series Supplement to be
known as “Household Automotive Trust 2004-1, Series 2004-1 Notes” (as used
herein, the “Notes”).  The Notes
shall be issued in four classes (each, a “Class”):  Class A-1 Notes in an aggregate initial
principal amount of $225,000,000 (the “Class A-1 Notes”), Class A-2
Notes in an aggregate initial principal amount of $179,000,000 (the “Class
A-2 Notes”), Class A-3 Notes in an aggregate initial principal amount of
$190,000,000 (the “Class A-3 Notes”), and Class A-4 Notes in an
aggregate initial principal amount of $156,000,000 (the “Class A-4 Notes”
and, together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes, the “Class A Notes”).

 

(b)                                 There
is hereby created a series of Certificates to be issued pursuant to the Trust
Agreement and this Series Supplement to be known as the “Household Automotive
Trust 2004-1, Series 2004-1 Certificates” (as used herein, the “Certificates”).

 

SECTION 1.02.                 Pledge of Series Trust Estate.

 

The
Issuer hereby Grants to the Indenture Trustee, for the benefit of the Secured
Parties, all of the Issuer’s right, title and interest (but none of its obligations)
in and to all personal property, whether now owned or hereafter acquired and
whether general intangibles, accounts, chattel paper, claims and causes of
action, deposit accounts, documents, goods, instruments, investment property,
letter-of-credit rights, letters of credit, money, minerals before extraction
or constituting other personal property of any nature whatsoever, including,
without

 

 

limitation:  (a)
each and every Receivable listed as a Receivable on the Schedule of
Receivables attached hereto as Schedule II and all monies paid or payable
thereon or in respect thereof after the applicable Cutoff Date (including
amounts due on or before the applicable Cutoff Date but received by HAFC or any
Affiliate of HAFC that is the seller under a Master Receivables Purchase
Agreement, HFC, the Seller, the Master Servicer or the Issuer after the
applicable Cutoff Date); (b) all security interests in the related Financed
Vehicles granted by Obligors pursuant to such Receivables and any other
interest of the Issuer in the related Financed Vehicles; (c) all rights of HAFC
or any Affiliate of HAFC that is the seller under a Master Receivables Purchase
Agreement against Dealers pursuant to Dealer Agreements or Dealer Assignments
related to such Receivables; (d) any proceeds and the right to receive proceeds
with respect to such Receivables repurchased by a Dealer pursuant to a Dealer
Agreement; (e) all rights under any Service Contracts on the related Financed
Vehicles; (f) any proceeds and the right to receive proceeds with respect to
such Receivables from claims under any physical damage, loss, credit life or
disability insurance policies covering the related Financed Vehicles or
Obligors, including rebates of insurance premiums relating to such Receivables;
(g) all funds on deposit from time to time in the Trust Accounts (including all
investments and proceeds thereof); (h) all rights of the Seller in and to the
Master Receivables Purchase Agreements and related Receivables Purchase
Agreement Supplements, including all delivery requirements and representations
and warranties and the cure and repurchase obligations of HAFC or any Affiliate
of HAFC that is the seller under a Master Receivables Purchase Agreement or
HFC, as applicable, under the Master Receivables Purchase Agreements and such
Receivables Purchase Agreement Supplements; (i) all property (including the
right to receive future Net Liquidation Proceeds) that secures such Receivables
and that has been, or at any time is, acquired by or on behalf of the Issuer
pursuant to liquidation of such Receivables; (j) all items contained in the
Receivable Files with respect to such Receivables and any and all other
documents that the Master Servicer, the Seller, HAFC or any Affiliate of HAFC
that is the seller under a Master Receivables Purchase Agreement keeps on file
in accordance with its customary procedures relating to such Receivables, the
related Financed Vehicles or Obligors; (k) all rights of the Issuer in and to
the Master Sale and Servicing Agreement and the Transfer Agreement or Transfer
Agreements (including all rights of the Seller under the Master Receivables
Purchase Agreements and related Receivables Purchase Agreement Supplements
assigned to the Issuer pursuant to the Master Sale and Servicing Agreement and
the related Transfer Agreement or Transfer Agreements); (l) one share of the
Class SV Preferred Stock of the Seller together with the exclusive right to
vote such share; and (m) all present and future (i) claims, demands, causes and
choses in action in respect of any or all of the foregoing, and (ii) payments
on or under, and all proceeds of every kind and nature whatsoever in respect
of, any or all of the foregoing, including all proceeds of the conversion
thereof, whether voluntary or involuntary, into cash or other liquid property,
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, investment property, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the “Series Trust Estate”).

 

The
foregoing Grant is made in trust to the Indenture Trustee for the benefit of
the Secured Parties.  The Indenture
Trustee hereby acknowledges such Grant, accepts the trust under the Indenture
and this Series Supplement in accordance with the provisions of the Indenture
and this Series Supplement and agrees to perform its duties required in the
Indenture and in this

 

2

 

Series Supplement in accordance with the provisions
hereof and of the Indenture to the best of its ability to the end that the
interests of such parties, recognizing the priorities of their respective
interests, may be adequately and effectively protected.

 

SECTION 1.03.                 Payments and Computations.

 

All
amounts to be paid or deposited by any Person hereunder shall be paid or
deposited in accordance with the terms hereof no later than 12:00 noon (New
York City time) on the day when due in immediately available funds.  Notwithstanding the foregoing, any amounts
required to be paid by the Indenture Trustee or the Administrator hereunder
shall be paid in accordance with the terms hereof no later than 3:00 p.m. (New
York City time) on the day when due, in immediately available funds.

 

SECTION 1.04.                 Denominations.

 

The
Notes of each Class shall be issued in denominations of $100,000 and integral
multiples of $1,000 in excess thereof, except that one Note of each Class may
be issued in a denomination other than an integral multiple of $1,000.

 

ARTICLE II

DEFINITIONS

 

SECTION 2.01.                 Definitions.

 

(a)                                  Whenever
used in this Series Supplement and when used in the Related Documents, the
following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms.  Unless otherwise
defined in this Series Supplement, terms defined in the Basic Documents are
used herein as therein defined.  References
to sections, unless otherwise indicated, are to sections of this Series Supplement.  References to any Basic Document, or to any
other agreement, document or other record defined herein, shall mean such Basic
Document or other record as from time to time amended or supplemented.

 

“Aggregate
Note Principal Balance” means, (i) with respect to all of the Notes, as of any
date, the aggregate outstanding principal amount of all of the Notes on such
date and (ii) with respect to any Class of the Notes, as of any date, the
aggregate outstanding principal amount of all of the Notes of such Class on
such date.

 

“Aggregate
Optimal Note Principal Balance” means, with respect to any Distribution Date,
the product of (x) 53% and (y) the Pool Balance as of the close of
business on the last day of the prior Collection Period.

 

“Available
Funds” means, 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 Trust.

 

3

 

“Basic
Documents” means this Series Supplement, the Master Sale and Servicing
Agreement, the Certificate of Trust, the Trust Agreement, the Indenture, the
Control Agreement, the Master Receivables Purchase Agreements, each Transfer
Agreement related to the Owner Trust Estate and all other documents and
certificates delivered therewith or pursuant thereto in connection with the
Notes or the Certificates.

 

“Business
Day” means 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.

 

“Certificate
of Trust” shall mean the Certificate of Trust filed for the Trust.

 

“Certificateholders”
means the holders of the Certificates.

 

“Class
A Interest Carryover Shortfall” means, 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), 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” means, 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 initial 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 Noteholders” means the Holders of the Class A Notes.

 

“Class
A Additional Principal Distributable Amount” means, with respect to a
Distribution Date, the positive excess, if any, of (i) the Aggregate Note Principal
Balance after giving effect to distribution of the Class A Minimum Principal
Distributable Amount on such Distribution Date pursuant to
Section 3.03(a)(iv) over (ii) the Aggregate Optimal Note Principal Balance
for such Distribution Date.

 

“Class
A Minimum Principal Distributable Amount” means, 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.

 

4

 

“Class
A-1 Noteholders” means the Holders of the Class A-1 Notes.

 

“Class
A-1 Scheduled Maturity Date” means July 18, 2005.

 

“Class
A-2 Noteholders” means the Holders of the Class A-2 Notes.

 

“Class
A-2 Scheduled Maturity Date” means December 17, 2007.

 

“Class
A-3 Noteholders” means the Holders of the Class A-3 Notes.

 

“Class
A-3 Scheduled Maturity Date” means May 18, 2009.

 

“Class
A-4 Noteholders” means the Holders of the Class A-4 Notes.

 

“Class
A-4 Scheduled Maturity Date” means July 18, 2011.

 

“Closing
Date” means July 28, 2004.

 

“Collection
Account” means the Eligible Account created pursuant to Section 3.01,
which shall be account no. 10-878656, reference Household Auto 2004-1
Collection Account at the Administrator, ABA No. 021001088.

 

“Collected
Funds” has the meaning assigned to such term in the Master Sale and Servicing
Agreement.

 

“Control
Agreement” means the deposit account control agreement dated as of
July 28, 2004 among the Issuer, the Indenture Trustee, HSBC Bank USA,
National Association and the Administrator.

 

“Controlling
Party” means the Indenture Trustee for the benefit of and acting solely at the
direction of the Holders of a majority of the Outstanding Amount of the Notes.

 

“Corporate
Trust Office” means, (i) with respect to the Owner Trustee, the principal
corporate trust office of the Owner Trustee, which at the time of execution of
this Series Supplement is Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attention: Corporate Capital Markets, (ii) with
respect to the Indenture Trustee, the corporate trust office of the Indenture
Trustee, which at the time of execution of this Series Supplement is 209 South
LaSalle Street, Suite 300, Chicago, Illinois 60604 and (iii) with respect to
the Administrator, the corporate trust office of the Administrator, which at
the time of execution of this Series Supplement is 452 Fifth Avenue, New York,
New York 10018.

 

“Cutoff
Date” means, with respect to the Receivables transferred and assigned to the
Issuer on the Closing Date, the close of business on July 18, 2004.

 

“Definitive
Notes” means the Notes that have been certificated and fully registered in
accordance with Section 2.12 of the Indenture.

 

“Determination
Date” has the meaning assigned to such term in the Master Sale and Servicing
Agreement.

 

5

 

“Distribution
Date” means, with respect to each Collection Period, the seventeenth 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 in August 2004.

 

“Eligibility
Criteria” means the criteria for eligibility for Eligible Receivables set forth
on Schedule I hereto.

 

“Eligible
Investments” means, with respect to funds in the Collection Account and Reserve
Account, “Eligible Investments” as defined in the Master Sale and Servicing
Agreement, except that (i) all references in such definition to “rating
satisfactory to the Rating Agency” or words of similar import shall mean
ratings of not less than “A-1+” or “AAA” by Standard & Poor’s, “P-1” or “Aaa”
by Moody’s Investors Service, “F1” or “AAA” by Fitch, Inc., or the equivalent
such ratings by another Rating Agency (whichever is applicable), and (ii)
unless otherwise agreed in writing by the Rating Agencies, all such investments
shall have maturities at the time of the acquisition thereof occurring no later
than the Business Day immediately preceding the Distribution Date following
such date of acquisition.

 

“Eligible
Receivable” means a Receivable that satisfies the Eligibility Criteria.

 

“Eligible
Substitute Receivable” means a Receivable substituted by the Master Servicer or
HAFC pursuant to Section 5.02, which on the date of such substitution
must:

 

(i)
have a Principal Balance not substantially greater or less than the Principal
Balance of such elected substituted Receivable;

 

(ii)
have a current Annual Percentage Rate of not less than the Annual Percentage
Rate of such elected substituted Receivable and not substantially greater than
the Annual Percentage Rate of such elected substituted Receivable;

 

(iii)
have a (A) remaining term to maturity not more than six months earlier or later
than the remaining term to maturity of such elected substituted Receivable and
(B) maturity date not later than the last day of the Collection Period
immediately preceding the month in which the Final Scheduled Distribution Date
occurs;

 

(iv)
satisfy the Eligibility Criteria, to the extent such criteria do not pertain
exclusively to the Receivables transferred on the Closing Date; and

 

(v) be
the obligation of an Obligor whose credit profile is substantially similar to
that of the Obligor under the elected substituted Receivable;

 

provided, however, that with respect to (i) through (v) above, an
auto loan may qualify as an Eligible Substitute Receivable if each of the Rating
Agencies confirms such substitution.

 

“Event
of Default” shall have the meaning assigned to such term in Section 4.01.

 

“Final
Scheduled Distribution Date” means July 18, 2011.

 

6

 

“HACC”
means Household Automotive Credit Corporation, a Delaware corporation.  For the avoidance of doubt, HACC is an
Affiliate of HAFC.

 

“HAFC”
means Household Automotive Finance Corporation, a Delaware corporation.

 

“HFC”
means Household Finance Corporation.

 

“Indenture”
means the indenture dated as of July 28, 2004 among the Issuer, the
Indenture Trustee and the Administrator, as supplemented by this Series
Supplement.

 

“Initial
Reserve Account Deposit” means 1% of the Pool Balance as of the Cutoff Date.

 

“Interest
Period” means, 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.

 

“Master
Receivables Purchase Agreements” means, collectively, (i) the Master
Receivables Purchase Agreement dated as of December 18, 2001, between HAFC
and the Seller, as such agreement may be amended or supplemented from time to
time, and (ii) the Master Receivables Purchase Agreement dated as of
June 24, 2002, between HACC and the Seller, as such agreement may be
amended or supplemented from time to time.

 

“Master
Sale and Servicing Agreement” means the Master Sale and Servicing Agreement
dated as of July 28, 2004, among the Issuer, the Seller, the Master
Servicer, the Indenture Trustee and the Administrator, as such agreement may be
amended or supplemented from time to time.

 

“Master
Servicer’s Certificate” means, with respect to the Notes and Certificates, a
report in substantially the form of Exhibit A hereto (appropriately
completed), furnished by the Master Servicer to the Administrator, the
Indenture Trustee and the Owner Trustee pursuant to the Master Sale and
Servicing Agreement.

 

“Note
Rate” means the per annum rate of interest due with respect to each Class of
Notes as set forth below for the respective Class of Notes:

 

Class A-1 Notes:  1.6932%

Class A-2 Notes:  2.52%

Class A-3 Notes:  3.30%

Class A-4 Notes:  3.93%

 

Interest on the Class A-1 Notes will be calculated on
the basis of a 360-day year and the actual number of days elapsed in an
applicable Interest Period.  Interest on
the Class A-2, Class A-3 and Class A-4 Notes will be calculated on the basis of
a 360-day year consisting of twelve 30-day months.

 

7

 

“Notes”
or “Class A Notes” means, collectively, the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes.

 

“Optimal
Principal Distributable Amount” means, 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.

 

“Original
Pool Balance” means the aggregate of the Principal Balances of the Receivables
as of the Cutoff Date.

 

“Owner
Trust Estate” has the meaning assigned to such term in the Trust Agreement.

 

“Owner
Trustee” means Wilmington Trust Company, not in its individual capacity but
solely as trustee under the Trust Agreement, its successors-in-interest or any
successor Owner Trustee under the Trust Agreement.

 

“Pledge”
means the Grant by the Issuer hereunder to the Indenture Trustee for the
benefit of the Secured Parties in accordance with Section 1.02 in and to
the Series Trust Estate.

 

“Pool
Balance” means, as of any date of determination, the aggregate of the
outstanding Principal Balances of the Receivables, unless otherwise specified,
as of the close of business on the preceding Business Day.

 

“Principal
Balance Shortfall” means, (i) with respect to a Distribution Date, the positive
excess, if any, of the Aggregate Note Principal Balance (after giving effect to
the distribution pursuant to Section 3.03(a)(iv) on such Distribution Date
and prior to making any distribution pursuant to Section 3.03(b) on such
Distribution Date) over the Pool Balance as of the close of business on the
last day of the preceding Collection Period and (ii) with respect to the
Scheduled Maturity Date for any Class of the Notes, the outstanding principal
balance of such Class of the Notes (after giving effect to the distribution
pursuant to Section 3.03(a)(iv)).

 

“Rating
Agencies” means Standard & Poor’s, Moody’s Investors Service and Fitch,
Inc.  If any such organization or a
successor does not maintain a rating on the Notes, “Rating Agency” shall be a
nationally recognized statistical rating organization or other comparable
Person designated by the Seller, notice of which designation shall be given to
the Administrator, the Indenture Trustee, the Owner Trustee and the Master
Servicer.

 

“Rating
Agency Condition” means, with respect to any action, written confirmation from
each Rating Agency rating the Notes that such action will not result in a
reduction or withdrawal of its then current rating of the Notes.

 

“Receivables”
means each receivable listed on the Schedule of Receivables, which (a) has
not been released from the Series Trust Estate as provided herein or in the
Indenture and (b) is not a Liquidated Receivable.

 

“Redemption
Price” has the meaning specified in Section 5.01.

 

8

 

“Related
Documents” means the Basic Documents and the Revolving Credit Agreement.

 

“Reserve
Account” means the Reserve Account, which shall be an Eligible Account created
pursuant to Section 3.01 and which shall be account no. 10-878657,
reference Household Auto 2004-1 Reserve Account at the Administrator, ABA No.
021001088.

 

“Reserve
Account Balance” means, with respect to a Distribution Date, the amount on
deposit in the Reserve Account as of the close of business on the Business Day
immediately preceding such Distribution Date; provided, however,
that such determination shall be made immediately after the deposit to the
Collection Account effected pursuant to Section 5.1(c) of the Master Sale
and Servicing Agreement.

 

“Reserve
Account Shortfall Amount” means, with respect to any Distribution Date, the
excess of:  (x) the Targeted Reserve
Account Balance for such Distribution Date over (y) the Reserve Account Balance
for such Distribution Date.

 

“Revolving
Credit Agreement” means the Revolving Credit Agreement, dated as of
March 1, 1998, between Household Finance Corporation and the Seller.

 

“Scheduled
Maturity Date” means, with respect to the Class A-1 Notes, the Class A-1
Scheduled Maturity Date, with respect to the Class A-2 Notes, the Class A-2
Scheduled Maturity Date, with respect to the Class A-3 Notes, the Class A-3
Scheduled Maturity Date and, with respect to the Class A-4 Notes, the Class A-4
Scheduled Maturity Date.

 

“Schedule of
Receivables” means, as to any date, the schedule of all retail installment
sales contracts held as part of the Series Trust Estate on such date.  The initial Schedule of Receivables is
attached hereto as Schedule II.  The
Schedule of Receivables will be amended from time to time to reflect the
removal of Receivables and the addition of any Eligible Substitute Receivables
to the Series Trust Estate.

 

“Secured
Parties” means, collectively, the Holders from time to time of the Notes.

 

“Securities”
means the Notes and the Certificates.

 

“Series
Supplement” means this Series Supplement to the Indenture, Master Sale and
Servicing Agreement and the Trust Agreement.

 

“Series
Support” means, with respect to the Notes, the Certificates and the Reserve
Account.

 

“Series
Trust Estate” means the property Granted to the Indenture Trustee pursuant to
Section 1.02.

 

“Servicing
Fee” means, (i) with respect to the initial Collection Period, the fee payable to the Master Servicer for servicing rendered
during such Collection Period, which shall be equal to $936,184.41, and (ii)
with respect to any other Collection Period, the fee payable to the Master
Servicer for services rendered during such Collection Period, which shall be
equal to

 

9

 

one-twelfth of the
Servicing Fee Rate multiplied by the Aggregate Principal Balances of the
Receivables determined as of the Accounting Date immediately preceding such
Collection Period.  For the avoidance of
doubt, the Servicing Fee does not include any administrative fees, expenses or
charges paid by or on behalf of Obligors during any Collection Period.

 

“Servicing
Fee Rate” means 2.25% per annum.

 

“Substitution Adjustment Amount” means, as to any Receivable
for which the Master Servicer elects to substitute pursuant to
Section 5.02(a) and the date on which a substitution thereof occurs
pursuant to Section 5.02, the sum of:

 

(i)
the excess, if any, of (a) the Principal Balance of such elected Receivable plus any amounts charged off by the Master Servicer with
respect to such elected Receivable as of the end of the related Collection
Period preceding the date of substitution (after the application of any
principal payments received on such elected Receivable on or before the date of
the substitution of the applicable Eligible Substitute Receivable or
Receivables) over (b) the aggregate Principal Balance of the applicable
Eligible Substitute Receivable or Receivables, plus

 

(ii) accrued and unpaid interest to the end of such
Collection Period computed on a daily basis at the Annual Percentage Rate on
the Principal Balance of such elected Receivable outstanding from time to time.

 

“Targeted
Reserve Account Balance” means, with respect to any Distribution Date, the
lesser of: (i) the greater of (a) 3% of the outstanding Pool Balance as of the
end of the related Collection Period, and (b) $23,812,690.52 (2% of the Pool
Balance as of the Cutoff Date) and (ii) the Aggregate Note Principal Balance.

 

“Trust
Accounts” means the Collection Account and the Reserve Account.

 

“Trust
Agreement” means the Trust Agreement, dated as of July 13, 2004, between
the Seller and the Owner Trustee, as amended and restated as of July 28,
2004 and as supplemented by this Series Supplement.

 

“Underwriter”
means J.P. Morgan Securities Inc., as representative of the underwriters named
in the Underwriting Agreement.

 

ARTICLE III

DISTRIBUTIONS AND STATEMENTS TO

NOTEHOLDERS; SERIES SPECIFIC COVENANTS

 

SECTION 3.01.                 Trust Accounts.

 

(a)                                  The
Administrator, for the benefit of the Secured Parties, shall establish and
maintain an account (the “Collection Account”) as a segregated trust
account in the Administrator’s corporate trust department, identified as the
“Collection Account for Household Automotive Trust 2004-1, in trust for the
Secured Parties.”  The Administrator
shall make or permit withdrawals from the Collection Account only as provided
in this Series Supplement.

 

10

 

(b)                                 The
Administrator, for the benefit of the Secured Parties, shall establish and
maintain an account (the “Reserve Account”) as a segregated trust
account in the Administrator ‘s corporate trust department, identified as the
“Reserve Account for Household Automotive Trust 2004-1, in trust for the
Secured Parties.”  The Administrator
shall make or permit withdrawals from the Reserve Account only as provided in
this Series Supplement.  On the Closing
Date, the Reserve Account will be funded with the Initial Reserve Account Deposit.

 

(c)                                  In
the event that any Trust Account ceases to be an Eligible Account, the
Administrator, as applicable, within five Business Days, shall establish such
Trust Account as a new account which is an Eligible Account.  No withdrawals may be made of funds in any
Trust Account except as provided in this Series Supplement.  Except as specifically provided in this
Series Supplement, funds in the Trust Accounts shall not be commingled with any
other moneys.  All moneys deposited from
time to time in each of the Trust Accounts shall be invested and reinvested by
the Administrator in Eligible Investments selected in writing by the Master
Servicer (pursuant to standing instructions or otherwise) which, absent any
instruction, shall be investments of the type specified in clause (d) of the
definition of Eligible Investments.  The
provisions of Section 5.1 of the Master Sale and Servicing Agreement shall
apply to the investment of funds in the Trust Accounts to the same extent as
they apply to the Collection Account.

 

SECTION 3.02.                 Reserve Account.

 

On the
earlier of (x) the maturity date of the Notes (whether by acceleration or
otherwise), and (y) the Final Scheduled Distribution Date, the amount on
deposit in the Reserve Account shall be withdrawn from the Reserve Account and
distributed in accordance with Section 4.04.

 

SECTION 3.03.                 Distributions.

 

(a)                                  On
each Distribution Date, the Administrator shall (based solely on the
information contained in the Master Servicer’s Certificate delivered with
respect to such Distribution Date) distribute the following amounts from and,
to the extent of, Available Funds with respect to the Collection Period
immediately preceding such Distribution Date, in the following order of
priority:

 

(i)                                     to
the Master Servicer, if HFC is no longer acting as Master Servicer, the
Servicing Fee for the related Collection Period;

 

(ii)                                  to
the Administrator, the Indenture Trustee and the Owner Trustee, any accrued and
unpaid fees and any unreimbursed costs and expenses (including to any successor
Master Servicer, reasonable transition expenses in an amount not to exceed
$100,000 per servicing transfer) (in each case, to the extent such fees have
not been previously paid by the Master Servicer);

 

(iii)                               to
the Class A Noteholders, the Class A Interest Distributable Amount;

 

11

 

(iv)                              to
the Class A Noteholders, the Class A Minimum Principal Distributable Amount;

 

(v)                                 to
the Reserve Account, the Reserve Account Shortfall Amount, if any;

 

(vi)                              to
the Class A Noteholders, the Class A Additional Principal Distributable Amount;

 

(vii)                           if
HFC is acting as the Master Servicer, the Servicing Fee for the related
Collection Period (unless the Master Servicer has retained such amount in
accordance with Section 4.8 of the Master Sale and Servicing Agreement) or
if a successor Master Servicer has been appointed, reasonable transition
expenses in excess of the amounts paid in priority (i) above; and

 

(viii)                        to
the holders of the Certificates, any remaining Available Funds.

 

Amounts to be
distributed in reduction of the outstanding principal balance of the Class A
Notes pursuant to Section 3.03(a)(iv) or (vi) or Section 3.03(b)
shall be distributed in reduction of the outstanding principal balance of the
Class A-1 Notes until the principal balance of the Class A-1 Notes is
reduced to zero; thereafter such amount shall be distributed in reduction of
the outstanding principal balance of the Class A-2 Notes until the
principal balance of the Class A-2 Notes is reduced to zero; thereafter
such amount shall be distributed in reduction of the outstanding principal
balance of the Class A-3 Notes until the principal balance of the
Class A-3 Notes is reduced to zero; and thereafter such amount shall be
distributed in reduction of the outstanding principal balance of the
Class A-4 Notes until the principal balance of the Class A-4 Notes is
reduced to zero.

 

(b)                                 If
on a Determination Date, the Master Servicer’s Certificate delivered with
respect to the related Distribution Date indicates that (i) the amount of
Available Funds with respect to such Distribution Date is not sufficient, when
distributed in accordance with Section 3.03(a), to cause the amounts
specified in Section 3.03(a)(i), (ii) and (iii) with respect to such
Distribution Date to be paid in full; or (ii) if after giving effect to the
distribution of Available Funds pursuant to Section 3.03(a)(iv) on a
Distribution Date there exists a Principal Balance Shortfall, the Administrator
shall withdraw from the Reserve Account and distribute as follows an amount up
to the amount which when distributed, first in
accordance with Section 3.03(a)(i), (ii) and (iii); and second, in reduction of the outstanding principal balance of
the Class A Notes, but only to the extent necessary to eliminate the Principal
Balance Shortfall, shall cause the amounts specified in
Section 3.03(a)(i), (ii) and (iii) to be paid in full and such Principal
Balance Shortfall to be eliminated.

 

(c)                                  Each
Certificateholder, by its acceptance of its Certificate will be deemed to have
consented to the provisions of paragraph (a) above relating to the priority of
distributions, and will be further deemed to have acknowledged that no property
rights in any amount or the proceeds of any such amount shall vest in such
Certificateholder until such amounts have been distributed to such
Certificateholder in accordance with the terms of the Trust Agreement and this
Series Supplement; provided, that the foregoing shall not
restrict the right of

 

12

 

any Certificateholder,
upon compliance with the provisions hereof, from seeking to compel the
performance of the provisions hereof by the parties hereto.  Each Certificateholder, by acceptance of its
Certificate, further specifically acknowledges that it has no right to or
interest in any monies at any time held in the Reserve Account, such monies
being held in trust for the benefit of the Secured Parties.

 

(d)                                 Amounts
on deposit in the Reserve Account on any Distribution Date (after giving effect
to all distributions made on such Distribution Date) in excess of the Targeted
Reserve Account Balance for such Distribution Date shall be released first, to
the Master Servicer for any Servicing Fees then due and unpaid pursuant to Section 3.03(a)(vii),
and any remainder shall be paid to the holders of the Certificates.

 

(e)                                  In
the event that the Reserve Account is maintained with an institution other than
the Administrator, the Master Servicer shall instruct and cause such
institution to transfer the amounts to be distributed therefrom in accordance
with Section 3.03(b) to the Administrator for distribution pursuant to
Section 3.03(a) one Business Day prior to the related Distribution Date.

 

(f)                                    Unless
Definitive Notes are issued pursuant to Section 2.12 of the Indenture,
with respect to Notes registered on the related Record Date in the name of a
nominee of the Clearing Agency, payment will be made by wire transfer to an
account designated by such nominee, without presentation or surrender of the
Notes or the making of any notation thereon.

 

(g)                                 If
not theretofore paid in full, all amounts outstanding with respect to the Class
A-1 Notes shall be due and payable on the Class A-1 Scheduled Maturity Date; if
not theretofore paid in full, all amounts outstanding with respect to the Class
A-2 Notes shall be due and payable on the Class A-2 Scheduled Maturity Date; if
not theretofore paid in full, all amounts outstanding with respect to the Class
A-3 Notes shall be due and payable on the Class A-3 Scheduled Maturity Date;
and if not theretofore paid in full, all amounts outstanding with respect to
the Class A-4 Notes shall be due and payable on the Class A-4 Scheduled
Maturity Date.

 

SECTION 3.04.                 Statements to Noteholders.

 

(a)                                  On
or prior to each Determination Date, the Master Servicer shall deliver, and
cause to be delivered via access to its or its Affiliate’s web-site address, to
the Indenture Trustee and the Administrator (with a copy to the Rating
Agencies) for the Administrator to forward to each Noteholder of record, and to
each Certificateholder of record, a statement setting forth at least the
following information as to the Notes to the extent applicable:

 

(i)                                     the
amount of such distribution allocable to principal of each Class of Notes;

 

(ii)                                  the
amount of such distribution allocable to interest on or with respect to each
Class of Notes;

 

13

 

(iii)                               the
aggregate outstanding principal amount of each Class of the Notes after giving
effect to payments allocated to principal reported under (i) above;

 

(iv)                              the
Class A Interest Carryover Shortfall, if any, and the change in such amount
from the preceding statement;

 

(v)                                 the
positive excess, if any, of the Aggregate Note Principal Balance over the Pool
Balance after giving effect to payments allocated to principal reported under
(i) above and the change in such amount from the preceding statement;

 

(vi)                              the
amount of the Servicing Fee paid to the Master Servicer with respect to such
Collection Period; and

 

(vii)                           the
Targeted Reserve Account Balance and the amount on deposit in the Reserve
Account at the end of such Distribution Date.

 

Each amount set
forth pursuant to paragraphs (i), (ii) and (iv) above shall be expressed as a
dollar amount per $1,000 of the initial principal balance of the applicable
Class of Notes.

 

(b)                                 The
Administrator may, but is not obligated to, make available to the parties
hereto and to each of the Noteholders, via the Administrator’s internet
website, all information referred to in this Section 3.04 available each
month and, with the consent or at the direction of the Seller, such other
information regarding the Notes and/or the Receivables as the Administrator may
have in its possession, but only with the use of a password provided by the
Administrator.

 

The
Administrator’s internet website, if applicable, shall be specified by the
Administrator from time to time in writing to the parties hereto and the
Noteholders.  In connection with
providing access to the Administrator’s internet website, the Administrator may
require registration and the acceptance of a disclaimer.  The Administrator shall not be liable for the
dissemination of information in accordance with this Series Supplement.

 

SECTION 3.05.                 Reporting Requirements.

 

(a)                                  The
Master Servicer’s Certificate shall be in the form attached as Exhibit A
hereto.

 

(b)                                 By
January 31 of each calendar year, commencing January 31, 2005, the
Master Servicer on behalf of the Issuer shall prepare and distribute to the
Administrator and the Indenture Trustee a statement containing such information
as is required to be provided by an issuer of indebtedness under the Code and
such other customary information as is necessary to enable the Noteholders to
prepare their tax returns.

 

(c)                                  If
an Event of Default occurs and is continuing and if it is either known by, or
written notice of the existence thereof has been delivered to, a Responsible
Officer of the Administrator or the Indenture Trustee, the Administrator or the
Indenture Trustee, as the case

 

14

 

may be, shall mail to
each Noteholder notice of the Default within 30 days after such knowledge or
notice occurs.

 

SECTION 3.06.                 Compliance With Withholding
Requirements.

 

Notwithstanding
any other provisions of this Series Supplement or the Indenture to the
contrary, the Administrator and the Indenture Trustee shall comply with all
Federal withholding requirements respecting payments (or advances thereof) to
the Noteholders as may be applicable to instruments constituting indebtedness
for Federal income tax purposes.  Any
amounts so withheld shall be treated as having been paid to the applicable
Noteholders for all purposes of the Indenture. 
In no event shall the consent of any Noteholder be required for any such
withholding.

 

SECTION 3.07.                 Special Covenants and
Acknowledgements.

 

With
respect to the Notes, the Issuer hereby represents and warrants, as of the
Closing Date:

 

(i)                                     Valid
Pledge.  It is the intention of the
Issuer that the Pledge herein contemplated hereby constitutes the Grant of a
perfected, first priority security interest in the Series Trust Estate to the
Indenture Trustee for the benefit of the Secured Parties.

 

(ii)                                  Governmental
Authorization.  Other than the filing
of the financing statements required hereunder, no authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Issuer of this Series Supplement, the Indenture, and each Related Document
to which it is a party.

 

SECTION 3.08.                 Tax Characterization.

 

It is
the intent of the parties hereto that, for all Federal, state, local and
foreign taxes, the Notes will be evidence of indebtedness.  To the extent permitted by law, the parties
hereto, and each owner of a beneficial interest in the Notes by acceptance of
such interest, agrees to treat the Notes for purposes of all Federal, state,
local and foreign taxes as indebtedness secured by the Series Trust Estate.

 

ARTICLE IV

EVENTS OF DEFAULT; REMEDIES

 

SECTION 4.01.                 Events of Default.

 

“Event
of Default”, wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

 

15

 

(i)                                     default
in the payment of any interest on any Note when the same becomes due and
payable, and such default shall continue for a period of five calendar days; or

 

(ii)                                  default
in the payment of the outstanding principal balance of any Class of Notes on
the related Scheduled Maturity Date, which default shall continue for a period
of five calendar days; or

 

(iii)                               the
Aggregate Note Principal Balance on any Distribution Date exceeds the Pool
Balance as of the last day of the prior Collection Period after the application
of all Available Funds and after making any distribution pursuant to
Section 3.03(b); or

 

(iv)                              default
in the observance or performance of any covenant or agreement of the Issuer
made in the Related Documents (other than a covenant or agreement, a default in
the observance or performance of which is elsewhere in this
Section specifically dealt with), or any representation or warranty of the
Issuer made in the Related Documents or in any certificate or other writing or
record delivered pursuant thereto or in connection therewith proving to have
been incorrect in any material respect as of the time when the same shall have
been made and has a material adverse effect on the Noteholders, and such
default shall continue or not be cured, or the circumstance or condition in
respect of which such misrepresentation or warranty was incorrect shall not
have been eliminated or otherwise cured, for a period of 60 days after there
shall have been given, by registered or certified mail, to the Issuer by the
Indenture Trustee or the Administrator or to the Issuer and the Indenture
Trustee by the Holders of at least 25% of the Outstanding Amount of the Notes,
a written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice is a
“Notice of Default” hereunder; or

 

(v)                                 the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of the Issuer or any substantial part of the Series Trust
Estate in an involuntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Series Trust Estate,
or ordering the winding-up or liquidation of the Issuer’s affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or

 

(vi)                              the
commencement by the Issuer of a voluntary case under any applicable Federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for any
substantial part of the Series Trust Estate, or the making by the Issuer of any
general assignment for

 

16

 

the benefit of
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of action by the Issuer in furtherance of any
of the foregoing.

 

SECTION 4.02.                 Rights Upon Event of Default.

 

(a)                                  If
an Event of Default shall have occurred and be continuing, the Indenture
Trustee in its discretion may, or if so requested in writing by Holders holding
Notes representing at least 66-2/3% of the Outstanding Amount of the Notes
shall, declare by written notice to the Issuer that the Notes have become due
and payable, whereupon they shall become, immediately due and payable at 100%
of the outstanding principal balance of the Notes and accrued interest thereon
(together with interest accrued at the relevant Note Rate on such overdue
interest).

 

(b)                                 At
any time after such declaration of acceleration of maturity has been made and
before a judgment or decree for payment of the money due has been obtained by
the Indenture Trustee, the Controlling Party, by written notice to the Issuer
and the Master Servicer, may rescind and annul such declaration and its
consequences if:

 

(i)                                     the
Issuer has paid or deposited with the Indenture Trustee a sum sufficient to
pay:

 

(A)                              all
payments of principal and interest on all Notes and all other amounts that
would then be due hereunder or upon such Notes if the Event of Default giving
rise to such acceleration had not occurred; and

 

(B)                                all
sums paid or advanced by the Indenture Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel; and

 

(ii)                                  all
Events of Default, other than the nonpayment of the principal of the Notes that
has become due solely by such acceleration, have been cured or waived as
provided in Section 5.9 of the Indenture.

 

No such rescission
shall affect any subsequent default or impair any right consequent thereto.

 

SECTION 4.03.                 Remedies.

 

If an
Event of Default shall have occurred and be continuing, the Indenture Trustee,
subject to Section 11.17 of the Indenture, may exercise any of the
remedies specified in Article V of the Indenture and, in addition, may do
one or more of the following:

 

(i)                                     institute
Proceedings in its own name and as trustee of an express trust for the
collection of all amounts then payable on the Notes or under the Indenture with
respect thereto, whether by declaration or otherwise, enforce any judgment
obtained, and collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;

 

17

 

(ii)                                  institute
Proceedings from time to time for the complete or partial foreclosure of the
Indenture with respect to the Series Trust Estate;

 

(iii)                               exercise
any remedies of a secured party under the UCC and take any other appropriate
action to protect and enforce the rights and remedies of the Indenture Trustee
and the Holders of the Notes; and

 

(iv)                              sell
the Series Trust Estate or any portion thereof or rights or interest therein,
at one or more public or private sales called and conducted in any manner
permitted by law; provided, however, that the Indenture Trustee
may not sell or otherwise liquidate the Series Trust Estate following an Event
of Default unless:

 

(x)                                   the
proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal and interest, or

 

(y)                                 the
Indenture Trustee determines that the Series Trust Estate will not continue to
provide sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of the Holders of
66-2/3% of the Outstanding Amount of the Notes, or

 

(z)                                   if
the provisions of neither subparagraph (x) nor subparagraph (y) are satisfied,
if the Indenture Trustee obtains the consent of the Holders of 100% of the
Outstanding Amount of the Notes.

 

In determining
such sufficiency or insufficiency with respect to clause (y), the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Series
Trust Estate for such purpose.  Any
reasonable costs and expenses incurred by the Indenture Trustee in obtaining
such opinion shall be costs and expenses of the Indenture Trustee pursuant to
Section 3.03(a)(ii) of this Series Supplement.

 

SECTION 4.04.                 Priorities.

 

(a)                                  On
and after the maturity date of the Notes (by acceleration or otherwise),
including, without limitation, on and after the Final Scheduled Distribution
Date, all Available Funds, all amounts on deposit in the Reserve Account withdrawn
in accordance with Section 3.02 and any proceeds of the liquidation of all
or any portion of the Series Trust Estate pursuant to Section 4.03(iv)
(which proceeds the Indenture Trustee shall remit to the Administrator), shall
be applied by the Administrator on the date of distribution in the following
order of priority:

 

FIRST:           amounts
due and owing and required to be distributed to the Master Servicer, if HFC is
no longer acting as Master Servicer, the Administrator, the Owner Trustee and
the Indenture Trustee, respectively, pursuant to priorities

 

18

 

(i) and (ii) of
Section 3.03(a) and not previously distributed, in the order of such
priorities and without preference or priority of any kind within such
priorities;

 

SECOND:                                            to
Class A Noteholders for amounts due and unpaid on the Class A Notes for
interest, pro  rata, in accordance with the amounts due and
payable on the Class A Notes on the date of distribution for interest without
preference or priority of any kind;

 

THIRD:       to
the Class A Noteholders for amounts due and unpaid on the Class A Notes for
principal, pro  rata, in accordance with the respective aggregate
outstanding principal balance of each Class of Class A Notes without preference
or priority of any kind;

 

FOURTH:                                           to
the Master Servicer, if HFC is acting as Master Servicer, for any Servicing
Fees then due and unpaid; and

 

FIFTH:          to
the Certificateholders, any remaining Available Funds.

 

(b)                                 The
Administrator may fix a record date and distribution date for any payment to
Noteholders pursuant to this Section 4.04. 
At least 15 days before such record date, the Administrator shall mail
to the Noteholders a notice that states the record date, the distribution date
and the amount to be paid.

 

ARTICLE V

PREPAYMENT, REDEMPTION AND SUBSTITUTION

 

SECTION 5.01.                 Optional “Clean-Up” Redemption.

 

On any
Distribution Date occurring on or after the date upon which the Pool Balance
shall have been reduced to an amount which is less than or equal to 10% of the
Original Pool Balance, the Master Servicer and HAFC on behalf of the Issuer,
shall each have the option to redeem the outstanding Notes at a redemption
price (the “Redemption Price”) which is not less than the then Aggregate
Note Principal Balance, plus all accrued and unpaid interest thereon and all
fees and other amounts owing to the Administrator, the Indenture Trustee, the
Owner Trustee and the Master Servicer (if other than HFC) under the Related
Documents.  The Master Servicer and HAFC,
on behalf of the Issuer, shall give the Master Servicer (if other than HFC),
the Administrator, the Indenture Trustee, and the Owner Trustee at least 10
days irrevocable prior written notice of the date on which the Master Servicer
or HAFC, as applicable, intends to exercise such option to purchase.  Not later than 12:00 P.M., New York City
time, on the day prior to such Distribution Date, the Master Servicer or HAFC,
as applicable, shall deposit such amount in the Collection Account in
immediately available funds for distribution pursuant to Section 3.03
against the presentment of the Notes for cancellation.  Such purchase option is subject to payment in
full of the Redemption Price.

 

SECTION 5.02.                 Optional Substitution.

 

(a)                                  At
any time the Master Servicer and HAFC shall each have the right, in their
respective sole discretion, but not the obligation, to elect (by written notice
sent to the

 

19

 

Indenture Trustee and the
Owner Trustee) to substitute in the place of any Receivable an Eligible
Substitute Receivable or Receivables; provided that the aggregate Principal
Balance of all Eligible Substitute Receivables substituted pursuant to this
Section shall not exceed 2% of the Pool Balance as of the initial Cutoff Date;
provided further that prior to any such substitution the Master Servicer shall
give written notice to each Rating Agency of any such substitution.

 

(b)                                 For
any Collection Period during which the Master Servicer or HAFC substitutes one
or more Eligible Substitute Receivables, the Master Servicer shall determine
the Substitution Adjustment Amount.  The
Master Servicer or HAFC, as applicable, shall deposit the Substitution
Adjustment Amount in the Collection Account no later than the Business Day
immediately preceding the Distribution Date in the month following the end of
the Collection Period in which such substitution occurs.  The Master Servicer shall amend the
Schedule of Receivables to reflect the removal of any Receivable for which
the Master Servicer or HAFC has made a substitution election pursuant to
Section 5.02(a) from the terms of this Agreement and the substitution of
the Eligible Substitute Receivable or Receivables.  Upon such substitution, the Eligible
Substitute Receivable or Receivables shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have represented
that each such Eligible Substitute Receivable or Receivables, as of the date of
substitution, satisfies the Eligibility Criteria, to the extent such criteria
do not pertain exclusively to the Receivables transferred on the Closing
Date.  The Indenture Trustee shall upon
satisfaction of the conditions in this Section 5.02(b) take any action
requested by the Master Servicer or HAFC, as the case may be, to effect the
reconveyance of such Receivable for which the Master Servicer or HAFC, as the
case may be, has made a substitution election so removed from the Series Trust
Estate to the Master Servicer or HAFC, as the case may be.  The procedures applied by the Master Servicer
or HAFC in selecting each Eligible Substitute Receivable shall not be adverse
to the interests of the Noteholders and shall be comparable to the selection
procedures applicable to the Receivables originally conveyed hereunder.

 

(c)                                  In
the case of a substitution pursuant to this Section, upon receipt by the
Indenture Trustee of (i) a Master Servicer’s Certificate to the effect that the
Substitution Adjustment Amount, if any, has been so deposited in the Collection
Account and (ii) an Officer’s Certificate reciting the transfer and assignment
of the Eligible Substitute Receivable(s) to the Indenture Trustee, the
Indenture Trustee shall execute and deliver such instrument of transfer or
assignment presented to it by the Master Servicer, in each case without
recourse, as shall be necessary to vest in the Master Servicer or HAFC, as
applicable, legal and beneficial ownership of such Receivable for which the
Master Servicer has made a substitution election (including any property
acquired in respect thereof or proceeds of any insurance policy with respect
thereto).

 

ARTICLE VI

MISCELLANEOUS

 

SECTION 6.01.                 Ratification of Basic Documents.

 

Each
of the Basic Documents (to the extent appropriate, as supplemented by this
Series Supplement) is in all respects ratified and confirmed and each of the
Basic Documents, as so supplemented by this Series Supplement shall be read,
taken and construed as one and the same instrument.

 

20

 

SECTION 6.02.                 Counterparts.

 

This
Series Supplement may be executed in one or more counterparts, each of which so
executed shall be deemed to be an original, but all of which shall together
constitute but one and the same instrument.

 

SECTION 6.03.                 GOVERNING LAW.

 

THIS
SERIES SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

SECTION 6.04.                 Amendments Without Consent of
Noteholders.

 

(a)                                  Without
the consent of the Noteholders and with prior written notice to the Rating
Agencies, as evidenced to the Administrator, the Indenture Trustee and the
Issuer, when authorized by an Issuer Order, at any time and from time to time,
the parties hereto may enter into one or more amendments hereto, in form
satisfactory to the Administrator, the Indenture Trustee and the Owner Trustee,
for any of the following purposes:

 

(i)                                     to
correct or amplify the description of any property at any time subject to the
lien of the Indenture as supplemented by this Series Supplement, or better to
assure, convey and confirm unto the Indenture Trustee, if any, any property
subject or required to be subjected to the lien of the Indenture as
supplemented by this Series Supplement, or subject to the lien of the Indenture
as supplemented by this Series Supplement additional property;

 

(ii)                                  to
evidence the succession, in compliance with the applicable provisions hereof,
of another person to the Issuer, and the assumption by any such successor of
the covenants of the Issuer herein and in the Notes contained;

 

(iii)                               to
add to the covenants of the Issuer, for the benefit of the Noteholders, or to
surrender any right or power herein conferred upon the Issuer;

 

(iv)                              to
convey, transfer, assign, mortgage or pledge any property to or with the
Indenture Trustee, if any;

 

(v)                                 to
cure any ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under the Indenture, the Trust
Agreement or in this Series Supplement; provided that such action shall
not adversely affect the interests of the Noteholders;

 

(vi)                              to
evidence and provide for the acceptance of the appointment hereunder and under
the Indenture by a successor indenture trustee with respect to

 

21

 

the Notes and to
add to or change any of the provisions of the Indenture or of this Series
Supplement as shall be necessary to facilitate the administration of the trusts
hereunder by more than one indenture trustee, pursuant to the requirements of
Article V of the Indenture; or

 

(vii)                           to
modify, eliminate or add to the provisions of the Indenture or of this Series
Supplement to such extent as shall be necessary to effect the qualification of
the Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to the Indenture such other provisions as may be expressly
required by the TIA.

 

Each
of the Administrator, the Indenture Trustee and the Owner Trustee is hereby
authorized to join in the execution of any amendment and to make any further
appropriate agreements and stipulations that may be therein contained.

 

(b)                                 Except
as otherwise provided herein, the Issuer, the Indenture Trustee and the
Administrator, when authorized by an Issuer Order, may, also without the
consent of any of the Noteholders and with prior written notice to the Rating
Agencies by the Issuer, as evidenced to the Indenture Trustee and the
Administrator, enter into an amendment hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, the Indenture or of this Series Supplement of modifying in any manner the
rights of the Noteholders under the Indenture or under this Series Supplement; provided,
however, that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder.

 

SECTION 6.05.                 Amendments With Consent of the
Noteholders.

 

Except
as otherwise provided herein, the Issuer, the Indenture Trustee and the
Administrator, when authorized by an Issuer Order provided by the Master
Servicer, also may, with prior written notice to the Rating Agencies and with
the consent of the Holders of not less than a majority of the Outstanding
Amount of each Class of affected Notes, by Act of such Holders delivered to the
Issuer, the Indenture Trustee and the Administrator, enter into an amendment
hereto for the purpose of adding any provisions to, or changing in any manner
or eliminating any of the provisions of, this Series Supplement or of modifying
in any manner the rights of the Noteholders under the Indenture or under this
Series Supplement; provided, however, that no such amendment
shall, without the consent of the Holder of each Outstanding Note affected thereby:

 

(i)                                     change
the date of payment of any installment of principal of or interest on any Note,
or reduce the principal amount thereof, the interest rate thereon, change the
provision of the Indenture relating to the application of collections on, or
the proceeds of the sale of, all or any portion of any Series Trust Estate to
payment of principal of or interest on the Notes, or change any place of
payment where, or the coin or currency in which, any Note or the interest
thereon is payable;

 

22

 

(ii)                                  impair
the right to institute suit for the enforcement of the provisions of the
Indenture requiring the application of funds available therefor, as provided in
Article V of the Indenture, to the payment of any such amount due on the
Notes on or after the respective due dates thereof;

 

(iii)                               reduce
the percentage of the Outstanding Amount of the Notes, the consent of the
Holders of which is required for this Series Supplement, or the consent of the
Holders of which is required for any waiver of compliance with certain
provisions of the Indenture or certain defaults hereunder and their
consequences provided for in the Indenture;

 

(iv)                              modify
or alter the provisions of the proviso to the definition of the term “Outstanding”;

 

(v)                                 reduce
the percentage of the Outstanding Amount of the Notes required to direct the
Indenture Trustee to direct the Issuer to sell or liquidate the Series Trust
Estate pursuant to the Indenture;

 

(vi)                              modify
any provision of this Section except to increase any percentage specified
herein or to provide that certain additional provisions of the Indenture or the
Basic Documents cannot be modified or waived without the consent of the Holder
of each Outstanding Note affected thereby;

 

(vii)                           modify
any of the provisions of the Indenture in such manner as to affect the
calculation of the amount of any payment of interest or principal due on any
Note on any Distribution Date (including the calculation of any of the
individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or

 

(viii)                        permit
the creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any part of the Series Trust Estate or, except as
otherwise permitted or contemplated herein or the Related Documents, terminate
the lien of the Indenture on any property at any time subject hereto or deprive
the Holder of any Note of the security provided by the lien of the Indenture.

 

It
shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of an amendment to this Series Supplement, but it
shall be sufficient if such Act shall approve the substance thereof.

 

Promptly
after the execution by the Issuer, the Indenture Trustee and the Administrator
of an amendment to this Series Supplement, the Administrator shall mail to the
Noteholders a notice setting forth in general terms the substance hereof.  Any failure of the Administrator to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any amendment to this Series Supplement.

 

23

 

Prior
to the execution of any amendment to this Series Supplement, the Indenture
Trustee and the Administrator shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Series Supplement. 
The Indenture Trustee and the Administrator may, but shall not be
obligated to, enter into any such amendment which affects the Indenture
Trustee’s or the Administrator’s, as the case may be, own rights, duties or
immunities under this Series Supplement.

 

By its
acceptance of its interest in the Notes, each owner of a beneficial interest in
a Note shall be deemed to have agreed that prior to the date which is one year
and one day after the termination of the Indenture, such Person shall not
acquiesce, petition or otherwise invoke or cause the Issuer or the Seller to
invoke the process of any governmental authority for the purpose of commencing
or sustaining a case against the Seller or Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of or for
the Issuer or the Seller or any substantial part of its property or ordering
the winding-up or liquidation of the affairs of the Issuer or the Seller.

 

SECTION 6.06.                 Authority to Register Notes and
File Reports.

 

The
Issuer hereby authorizes the Seller to prepare and execute on behalf of the
Issuer, filings with the Securities and Exchange Commission and any applicable
state agencies of documents required to register or qualify the Notes for
public distribution and to file, on a periodic basis or as otherwise may be
required, such documents or records as may be required by rules and regulations
prescribed by such authorities.

 

SECTION 6.07.                 Authority to Perform Duties of
the Issuer.

 

(a)                                  The
Issuer hereby designates the Master Servicer its agent and attorney-in-fact to
execute or otherwise authenticate any financing statement, continuation
statement or other instrument or record required by the Indenture Trustee
pursuant to Section 3.5 of the Indenture; provided that such
designation shall not be deemed to create a duty in the Indenture Trustee to
monitor the compliance of the Master Servicer with respect to its duties under
Section 3.5 of the Indenture or the adequacy of any financing statement,
continuation statement or other instrument or record prepared by the Master
Servicer.

 

(b)                                 The
Issuer hereby appoints the Master Servicer to assist the Issuer in performing
its duties under the Related Documents, including, but not limited to,
Sections 2.13 and 3.9 of the Indenture, and the Master Servicer hereby
accepts such appointment.

 

SECTION 6.08.                 Notices.

 

All
demands, notices and communications upon or to the Seller, the Master Servicer,
the Owner Trustee, the Indenture Trustee or the Administrator shall be in
writing, personally delivered, or mailed by certified mail, or sent by
confirmed telecopier transmission and shall be deemed to have been duly given
upon receipt (a) in the case of the Seller, to Household Auto Receivables
Corporation, 1111 Town Center Drive, Las Vegas, Nevada 89134, with a copy to
Household Finance Corporation, 2700 Sanders Road, Prospect Heights, Illinois,
60070, Attention:  Treasurer, Telecopier
# (847) 205-7538, (b) in the case of the Master Servicer,

 

24

 

if Household Finance Corporation is the Master
Servicer, to Household Finance Corporation, 2700 Sanders Road, Prospect
Heights, Illinois 60070,  Attention:
Treasurer, Telecopier # (847) 205-7538, (c) in the case of the Issuer or the
Owner Trustee, at the Corporate Trust Office of the Owner Trustee, Telecopier #
(302) 636-4140, (d) in the case of the Indenture Trustee, at the Corporate
Trust Office of the Indenture Trustee, Attention: Asset Backed Administration,
Telecopier # (312) 325-8905 and (e) in the case of the Administrator, at the
Corporate Trust Office of the Administrator, Attention: Corporate Trust/ABS
Group, Telecopier # (212) 525-1300.  Any
notice required or permitted to be mailed to a Noteholder or Certificateholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register or Note Register, as
applicable.  Any notice so mailed within
the time prescribed in the Agreement shall be conclusively presumed to have
been duly given, whether or not the Certificateholder or Noteholder shall
receive such notice.

 

25

 

IN
WITNESS WHEREOF, the parties hereto have caused this Series Supplement to be
fully executed by their respective officers as of the day and year first above
written.

 

	
   

  	
  HOUSEHOLD
  FINANCE CORPORATION,

  
	
   

  	
  as Master Servicer

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William H. Kesler

  	
   

  
	
   

  	
   

  	
  Name:  William H. Kesler

  
	
   

  	
   

  	
  Title:  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD
  AUTOMOTIVE TRUST 2004-1,

  
	
   

  	
  as Issuer

  
	
   

  	
  by Wilmington Trust Company, not in its

  
	
   

  	
  individual capacity but solely as Owner Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rachel L. Simpson

  	
   

  
	
   

  	
   

  	
   Name: Rachel L. Simpson

  
	
   

  	
   

  	
   Title: Financial Services Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOUSEHOLD
  AUTO RECEIVABLES CORPORATION,

  
	
   

  	
  as Seller

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven H. Smith

  	
   

  
	
   

  	
   

  	
  Name:  Steven H. Smith

  
	
   

  	
   

  	
  Title:  Vice President and Assistant Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia M. Child

  	
   

  
	
   

  	
   

  	
  Name:
  Patricia M. Child

  
	
   

  	
   

  	
  Title:  Vice President

  

 

 

	
   

  	
  WILMINGTON
  TRUST COMPANY,

  
	
   

  	
  as Owner Trustee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rachel L. Simpson

  	
   

  
	
   

  	
   

  	
  Name:
  Rachel L. Simpson

  
	
   

  	
   

  	
  Title:
  Financial Services Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL ASSOCIATION,

  
	
   

  	
  as Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Wu

  	
   

  
	
   

  	
   

  	
  Name:
  Richard Wu

  
	
   

  	
   

  	
  Title:
  Vice President

  

 

[Signature Page
for Series Supplement]

 

 

Schedule I

 

Eligibility Criteria

 

“Eligible
Receivable” means a Receivable with respect to which each of the following
is true as of the Closing Date:

 

(a)                                  that
(i) was originated directly by HAFC (or any predecessor or Affiliate of HAFC,
as applicable) with the consumer or was originated by a Dealer for the retail
sale of a Financed Vehicle in the ordinary course of such Dealer’s business and
(A) in the case of a receivable originated by HAFC (or any predecessor or
Affiliate of HAFC, as applicable), such entity had all necessary licenses and
permits to originate receivables in the state where such entity was located,
and, (B) in the case of a Dealer originated receivable, such Dealer had all
necessary licenses and permits to originate receivables in the state where such
Dealer was located, and such receivable was purchased by HAFC (or any
predecessor or Affiliate of HAFC, as applicable) from such Dealer under an
existing Dealer Agreement with HAFC (or any predecessor or Affiliate of HAFC,
as applicable), and (C) in the case of a Dealer originated receivable or a
receivable originated by HAFC (or any predecessor or Affiliate of HAFC, as
applicable) such receivable was purchased (x) by HARC pursuant to the
terms of the Master Receivables Purchase Agreements, (y) by the Issuer
pursuant to the Master Sale and Servicing Agreement; and each Receivable was
validly assigned (1) if Dealer originated, by such Dealer to HAFC (or any
predecessor or Affiliate of HAFC, as applicable), (2) by HAFC (or any
predecessor or Affiliate of HAFC, as applicable) to HARC pursuant to the terms
of the Master Receivables Purchase Agreements, (3) by
HARC to the Issuer pursuant to the Master Sale and Servicing Agreement and
(4) by the Issuer to the Indenture Trustee pursuant to the Indenture,
(ii) was fully and properly executed by the parties thereto,
(iii) contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for realization against the
collateral security, and (iv) is fully amortizing and provides for level
monthly payments (provided that the payment in the first Collection Period
and the final Collection Period of the term of the Receivable may be minimally
different from the level payment) which, if made when due, shall fully amortize
the Amount Financed over the original term;

 

(b)                                 that
was originated without any fraud or material misrepresentation on the part of a
Dealer, the Obligor, HAFC or HACC, as applicable;

 

(c)                                  with
respect to which all requirements of applicable federal, state and local laws,
and regulations thereunder (including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board’s Regulations “B” and “Z”, the Servicemembers Civil
Relief Act, as amended, and state adaptations of the National Consumer Act and
of the Uniform Consumer Credit Code and other consumer credit laws and equal
credit opportunity and disclosure laws) in respect of all of the Receivables,
each and every sale of Financed Vehicles and the sale of any physical damage,
loss, credit life and credit accident and health insurance and any extended
service contracts, have been complied with in all material respects, and each
Receivable and the sale of the Financed Vehicle evidenced by each

 

SCH-I-1

 

Receivable and the sale of any physical damage, loss,
credit life and credit accident and health insurance and any extended service
contracts complied at the time it was originated or made and now complies in
all material respects with all applicable legal requirements;

 

(d)                                 that
was originated in, and the related Obligor is a resident of, the United States
of America and, at the time of origination materially conformed to all
underwriting and funding guidelines of HAFC (or of any predecessor or Affiliate
of HAFC, as applicable) applicable thereto and that has been serviced in
material conformity with procedures applicable to receivables that are serviced
by the Master Servicer for its own account;

 

(e)                                  which
represents the genuine, legal, valid and binding payment obligation of the
Obligor thereon, enforceable by the holder thereof in accordance with its
terms, except (A) as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors’ rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law and (B) as such Receivable may be modified by
the application of the Servicemembers Civil Relief Act, as amended; and all
parties thereto had full legal capacity to execute and deliver such Receivable and
all other documents related thereto and to grant the security interest
purported to be granted thereby;

 

(f)                                    which
is not due from the United States of America or any state or from any agency,
department, subdivision or instrumentality thereof;

 

(g)                                 which,
as of the Cutoff Date, (i) had an original term of not more than 72 months,
(ii) has a remaining term of not more than 72 months, (iii) had a remaining
Amount Financed of at least $3,000 and not more than $40,000, (iv) had an
Annual Percentage Rate of at least 10.50% and not more than 24.95%, (v) was not
more than 30 days contractually delinquent, (vi) no funds have been advanced by
the Issuer, the Master Servicer, HAFC, any predecessor or Affiliate of HAFC,
any Dealer, or anyone acting on behalf of any of them in order to cause such
Receivable to qualify under subclause (iv) of this clause (g) and
(vii) had no provision thereof waived, altered or modified in any respect since
its origination;

 

(h)                                 with
respect to which the information pertaining to such Receivable set forth in
each Schedule of Receivables is true and correct in all material respects;

 

(i)                                     with
respect to which HAFC (or any predecessor or Affiliate of HAFC, as applicable)
will have caused the portions of HAFC’s (or any HAFC predecessor’s or HAFC
Affiliate’s, as applicable) and the Master Servicer’s servicing records
relating to such Receivable to be clearly and unambiguously marked to show that
such Receivable has been transferred by HAFC (or any predecessor or Affiliate
of HAFC, as applicable) to HARC in accordance with the terms of the Master
Receivables Purchase Agreements and by HARC to the Issuer pursuant to the
Master Sale and Servicing Agreement, and by the Issuer to the Indenture Trustee
pursuant to the Indenture;

 

(j)                                     with
respect to which the computer tape or listing to be made available by HAFC (or
any predecessor or Affiliate of HAFC, as applicable) to HARC, the Master
Servicer or

 

SCH-I-2

 

the Indenture Trustee is complete and accurate and
includes a description of the same Receivables that are, or will be, described
in the related Schedule of Receivables;

 

(k)                                  which
constitutes tangible chattel paper within the meaning of the UCC;

 

(l)                                     of
which there is only one original executed copy;

 

(m)                               with
respect to which there exists a Receivable File and such Receivable File
contains, without limitation, (a) a fully executed original of such Receivable,
(b) a certificate of insurance, application form for insurance signed by the
Obligor, or a signed representation letter from the relevant Obligor named
pursuant to which the Obligor has agreed to obtain physical damage insurance
for the related Financed Vehicle, (c) the original Lien Certificate or
application therefor showing HAFC (or any predecessor or Affiliate of HAFC, as
applicable) as first lienholder and (d) an original credit application signed
by the Obligor; and (x) each of the documents relating thereto which is
required to be signed by the Obligor has been signed by the Obligor in the
appropriate spaces and (y) all blanks on any form relating thereto to be
completed have been properly filled in and each form has otherwise been
correctly prepared; and, notwithstanding the above, with respect to which, a
copy of the complete Receivable File for such Receivable, which fulfills the
documentation requirements of HAFC (or any predecessor or Affiliate of HAFC, as
applicable) as in effect at the time of purchase is in the possession of the
Master Servicer or Subservicer;

 

(n)                                 which
has not been satisfied, subordinated or rescinded, and the Financed Vehicle
securing such Receivable has not been released from the lien of such Receivable
in whole or in part;

 

(o)                                 which
was not originated in, and is not subject to the laws of, any jurisdiction the
laws of which would make unlawful, void or voidable the sale, transfer and
assignment of such Receivable and with respect to which there is no agreement
with any account debtor that prohibits, restricts or conditions the assignment
of any portion of such Receivable;

 

(p)                                 which
has not been sold, transferred, assigned or pledged to any Person other than to
(i) HAFC (or any predecessor or Affiliate of HAFC, as applicable) by a
Dealer, (ii) HARC by HAFC (or any predecessor or Affiliate of HAFC, as
applicable) pursuant to the terms of the Master Receivables Purchase
Agreements, (iii) the Issuer by HARC pursuant to the terms of the Master
Sale and Servicing Agreement and (iv) the Indenture Trustee by the Issuer
pursuant to the terms of the Indenture. 
No Dealer has a participation in, or other right to receive, proceeds of
any Receivable.  Neither HAFC (nor any
predecessor or Affiliate of HAFC, as applicable), HARC nor the Issuer has taken
any action to convey any right to any Person that would result in such Person
having a right to payments received under the related Insurance Policy or the
related Dealer Agreement or Dealer Assignment or to payments due under such
Receivable;

 

(q)                                 which
creates a valid, binding and enforceable first priority security interest in
favor of HAFC (or any predecessor or Affiliate of HAFC, as applicable) in the
Financed Vehicle;

 

SCH-I-3

 

(r)                                    which
is secured by an enforceable and perfected first priority security interest in
the Financed Vehicle in favor of HAFC (or any predecessor or Affiliate of HAFC,
as applicable), as secured party, which security interest is prior to all other
Liens upon and security interests in such Financed Vehicle which now exist or
may hereafter arise or be created (except, as to priority, for any Lien for
taxes, labor or materials affecting a Financed Vehicle); and, with respect to
which there are no Liens or claims for taxes, work, labor or materials
affecting the related Financed Vehicle which are or may be Liens prior or equal
to the lien of such Receivable;

 

(s)                                  as
to which the Seller has not authorized the filing of, and is not aware of any
financing statements against the Seller that include a description of the
collateral covering such Receivable, other than any financing statements (i)
relating to the sale of such Receivable by HARC to the Issuer pursuant to the
terms of the Master Sale and Servicing Agreement, or (ii) that have been
terminated;

 

(t)                                    as
to which all filings (including, without limitation, UCC filings) required to
be made by any Person and actions required to be taken or performed by any
Person in any jurisdiction to give the Indenture Trustee a first priority
perfected lien on, or ownership interest in, the Receivables and the proceeds thereof
have been made, taken or performed;

 

(u)                                 as
to which, immediately prior to the transfer and assignment of such Receivable
by the Seller pursuant to the Sale and Servicing Agreement, the Seller has good
and marketable title thereto, free and clear of any and all liens, claims or
encumbrances of any person;

 

(v)                                 as
to which HAFC (or any predecessor or Affiliate of HAFC, as applicable), HARC or
the Issuer has not done anything to convey any right to any Person that would
result in such Person having a right to payments due under such Receivable or
otherwise to impair the rights of the Indenture Trustee, the Noteholders or the
Certificateholders in such Receivable or the proceeds thereof;

 

(w)                               which
is not assumable by another Person in a manner which would release the Obligor
thereof from such Obligor’s obligations with respect to such Receivable;

 

(x)                                   which
is not subject to any right of rescission, setoff, counterclaim or defense and
no such right has been asserted or threatened with respect thereto;

 

(y)                                 as
to which there has been no default, breach, violation or event permitting
acceleration under the terms of such Receivable (other than payment
delinquencies permitted by clause (g)(iv) above) and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or
both would constitute a default, breach, violation or event permitting
acceleration under the terms of such Receivable, and there has been no waiver
of any of the foregoing, and with respect to which the related Financed Vehicle
had not been repossessed;

 

(z)                                   at
the time of the origination of which, the related Financed Vehicle was covered
by a comprehensive and collision insurance policy (i) in an amount at
least equal to the lesser of (a) its maximum insurable value and
(b) the principal amount due from the Obligor thereunder, (ii) naming
HAFC (or any predecessor or Affiliate of HAFC, as applicable) and its
successors and assigns as loss payee and (iii) insuring against loss and
damage due to fire, theft,

 

SCH-I-4

 

transportation, collision and other risks generally
covered by comprehensive and collision coverage and with respect to which the
Obligor is required to maintain physical loss and damage insurance, naming HAFC
(or any predecessor or Affiliate of HAFC, as applicable) and its successors and
assigns as additional insured parties, and such Receivable permits the holder
thereof to obtain physical loss and damage insurance at the expense of the
Obligor if the Obligor fails to do so;

 

(aa)                            with
respect to which the following is true:

 

The
Lien Certificate for the related Financed Vehicle shows, or if a new or
replacement Lien Certificate is being applied for with respect to such Financed
Vehicle the Lien Certificate will be received within 180 days of the Closing
Date and will show, HAFC (or any predecessor or Affiliate of HAFC, as
applicable) named as the original secured party under such Receivable and,
accordingly, HAFC (or any predecessor or Affiliate of HAFC, as applicable) will
be the holder of a first priority security interest in such Financed
Vehicle.  With respect to each Receivable
for which the Lien Certificate has not yet been returned from the Registrar of
Titles, HAFC has either applied for or received written evidence from the
related Dealer or the Obligor that such Lien Certificate showing HAFC (or any
predecessor or Affiliate of HAFC, as applicable) as first lienholder has been
applied for.  If the Receivable was
originated in a state in which a filing or recording is required of the secured
party to perfect a security interest in motor vehicles, such filings or
recordings have been duly made to show HAFC (or any predecessor or Affiliate of
HAFC, as applicable) named as the original secured party under the related
Receivable;

 

(bb)                          with
respect to which the related Contract contains no mark or notation indicating
that such Contract has been sold or pledged by the Seller to any person other
than the Issuer;

 

(cc)                            as to
which no selection procedures adverse to the Noteholders or the
Certificateholder have been utilized in selecting such Receivable from all
other similar Receivables purchased by HAFC or any predecessor or Affiliate of
HAFC;

 

(dd)                          as to
which, as of the Cutoff Date, no Obligor had been identified on the records of
HAFC (or any predecessor or Affiliate of HAFC, as applicable) as being the
subject of a current bankruptcy proceeding; and

 

(ee)                            as to which all funds have been fully advanced to or
on behalf of the related Obligor in accordance with its terms.

 

SCH-I-5

 

Schedule II

 

Schedule of
Receivables on File in Electronic Form

at Dewey Ballantine LLP

 

 

Exhibit
A

 

Form of Master
Servicer’s Certificate

 

MASTER SERVICER’S CERTIFICATE

(Delivered pursuant to Section 4.9

of the Master Sale and Servicing Agreement)

 

HOUSEHOLD FINANCE CORPORATION,

Master Servicer

HOUSEHOLD AUTO RECEIVABLES CORPORATION

 

HOUSEHOLD AUTOMOTIVE TRUST 2004-1

Class A Notes

 

1.               This Certificate relates to the Distribution
Date occurring on

 

2.               Series 2004-1 Information

 

(a)                      The amount of Collected Funds with respect to the Collection Period was
equal to

 

(b)                     The amount of Available Funds with respect to the Collection Period was
equal to

 

(c)                      The Liquidated Receivables for the Collection Period was equal to

 

(d)                     Net Liquidation Proceeds for the Collection Period was equal to

 

(e)                      The Pool Balance at the beginning of the Collection Period was equal to

 

(f)                        The Pool Balance on the last day of the Collection Period was equal to

 

(g)                     The aggregate outstanding 
balance of the Receivables which were one payment delinquent as of the
close of business on the last day of the Collection Period with respect to such
Distribution Date was equal to

 

(h)                     The aggregate outstanding 
balance of the Receivables which were two payments delinquent as of the
close of business on the last day of the Collection Period with respect to such
Distribution Date was equal to

 

(i)                         The aggregate outstanding 
balance of the Receivables which were three or more payments delinquent
as of the close of business on the last day of the Collection Period with
respect to such Distribution Date was equal to

 

(j)                         The Servicing Fee paid on the Distribution Date was equal to

 

(k)                      The Aggregate Note Principal Balance immediately prior to the
Distribution Date was equal to

 

(l)                         The Aggregate Optimal Note Principal Balance for the Distribution Date
was equal to

 

(m)                   The Optimal Principal Distributable Amount for the Distribution Date
was equal to

 

(n)                     The Class A Minimum Principal Distributable Amount for the Distribution
Date was equal to

 

 

(o)                     The Class A Additional Principal Distributable Amount for the
Distribution Date was equal to

 

(p)                     The Aggregate Note Principal Balance as of the Distribution Date was
equal to

 

(q)                     The Reserve Account Balance for the Distribution Date

 

(r)                        The Targeted Reserve Account Balance was equal to

 

(s)                      The Reserve Account Shortfall Amount for the Distribution Date

 

(t)                        The amount on deposit in the Reserve Account after distributions was
equal to

 

(u)                     The amount on deposit in the Reserve Account as a percentage of the
Pool Balance on the Distribution Date was equal to

 

(v)       The
ending Certificate Balance was equal to

 

(w)                   The ending Certificate balance as a percentage of the Pool Balance on
the Distribution Date was equal to

 

(x)                       The weighted average coupon (WAC) was equal to

 

(y)                     The weighted average remaining maturity (WARM) was equal to

 

3.               Noteholder Information

 

(a) Class A-1

 

A.           Information regarding distributions

 

1.   Total
distribution per $1,000

 

2.   Principal
distribution per $1,000

 

3.   Interest
distribution per $1,000

 

B.             Calculation of class A-1 interest due

 

1.   Class A-1 related Note Rate

 

2.   Class A-1 note balance - beginning of period

 

3.   Accrual convention

 

4.   Days in Interest Period

 

5.   Class A-1 interest due - current period

 

6.   Class A Interest Carryover Shortfall with
respect to Class A-1

 

7.   Class A-1 interest paid

 

8.   Class A-1 interest paid by Insurer

 

9.   Class A-1 unpaid interest with respect to
the Distribution Date

 

C.             Calculation of Class A-1 principal balance

 

1.  Class A-1 note balance - beginning of period

 

2.  Class A-1 minimum principal distributable
amount - due

 

A-2

 

3.  Class A-1 additional principal distributable
amount - due

 

4.  Class A-1 minimum principal distributable
amount - paid

 

5.  Class A-1 additional principal distributable
amount - paid

 

6.  Class A-1 note balance - end of period

 

7.  Class A-1 notes as a percentage of the total
Notes outstanding on the Distribution Date

 

8.  Class A-1 notes as a percentage of the Pool
Balance on the Distribution Date

 

(b) Class A-2

 

A.           Information Regarding Distributions

 

1.   Total distribution per $1,000

 

2.   Principal distribution per $1,000

 

3.   Interest distribution per $1,000

 

B.             Calculation of Class A-2 interest due

 

1.   Class A-2 related Note Rate

 

2.   Class A-2 note balance - beginning of period

 

3.   Accrual convention

 

4.   Days

 

5.   Class A-2 interest due - current period

 

6.   Class A Interest Carryover Shortfall with
respect to Class A-2

 

7.   Class A-2 interest paid

 

8.   Class A-2 interest paid by Insurer

 

9.   Class A-2 unpaid interest with respect to
the Distribution Date

 

C.             Calculation of Class A-2 principal balance

 

1.  Class A-2 note balance - beginning of period

 

2.  Class A-2 minimum principal distributable
amount - due

 

3.  Class A-2 additional principal distributable
amount - due

 

4.  Class A-2 minimum principal distributable
amount - paid

 

5.  Class A-2 additional principal distributable
amount - paid

 

6.  Class A-2 note balance - end of period

 

7.  Class A-2 notes as a percentage of the total
Notes outstanding on the Distribution Date

 

8.  Class A-2 notes as a percentage of the Pool
Balance on the Distribution Date

 

9.
 Class A-1 and A-2 notes as a percentage
of the Pool Balance on the Distribution Date

 

A-3

 

(c) Class A-3

 

A.           Information Regarding Distributions

 

1.   Total distribution per $1,000

 

2.   Principal distribution per $1,000

 

3.   Interest distribution per $1,000

 

B.             Calculation of Class A-3 interest Due

 

1.   Class A-3 related Note Rate

 

2.   Class A-3 note balance - beginning of period

 

3.   Accrual convention

 

4.   Days

 

5.   Class A-3 interest due - current period

 

6.   Class A Interest Carryover Shortfall with
respect to Class A-3

 

7.   Class A-3 interest paid

 

8.   Class A-3 interest paid by Insurer

 

9.   Class A-3 unpaid interest with respect to
the Distribution Date

 

C.             Calculation of Class A-3 principal balance

 

1.  Class A-3 note balance - beginning of period

 

2.  Class A-3 minimum principal distributable
amount - due

 

3.  Class A-3 additional principal distributable
amount - due

 

4.  Class A-3 minimum principal distributable
amount - paid

 

5.  Class A-3 additional principal distributable
amount - paid

 

6.  Class A-3 note balance - end of period

 

7.  Class A-3 notes as a percentage of the total
Notes outstanding on the Distribution Date

 

8.  Class A-3 notes as a percentage of the Pool
Balance on the Distribution Date

 

9.  Class A-1, A-2, and A-3 notes as a percentage
of the Pool Balance on the Distribution Date

 

(d) Class A-4

 

A.           Information Regarding Distributions

 

1.   Total distribution per $1,000

 

2.   Principal distribution per $1,000

 

3.   Interest distribution per $1,000

 

B.             Calculation of Class A-4 Interest Due

 

1.   Class A-4 related Note Rate

 

A-4

 

2.   Class A-4 principal balance - beginning of
period

 

3.   Accrual convention

 

4.   Days in Interest Period

 

5.   Class A-4 interest due - current period

 

6.   Class A Interest Carryover Shortfall with
respect to Class A-4

 

7.   Class A-4 interest paid

 

8.   Class A-4 interest paid by Insurer

 

9.   Class A-4 unpaid interest with respect to
the Distribution Date

 

C.             Calculation of Class A-4 principal balance

 

1.  Class A-4 note balance - beginning of period

 

2.  Class A-4 minimum principal distributable
amount - due

 

3.  Class A-4 additional principal distributable
amount - due

 

4.  Class A-4 minimum principal distributable
amount - paid

 

5.  Class A-4 additional principal distributable
amount - paid

 

6.  Class A-4 note balance - end of period

 

7.  Class A-4. notes as a percentage of the total
Notes outstanding on the Distribution Date

 

8.  Class A-4 Notes as a percentage of the Pool
Balance on the Distribution Date

 

9.  Class A-1, A-2, A-3, and A-4 notes as a
percentage of the Pool Balance on the Distribution  Date

 

A-5

 

Exhibit B

 

Forms of Notes

 

	
  REGISTERED

  	
  $                 

  
	
  No.
         

  	
   

  

 

SEE REVERSE FOR
CERTAIN DEFINITIONS

 

CUSIP NO.
                 

 

Unless
this Note is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested
by an authorized representative of DTC (and any payment is made to Cede &
Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.

 

THE
PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

 

HOUSEHOLD
AUTOMOTIVE TRUST 2004-1

 

CLASS [A-1]
        % NOTE

 

Household
Automotive Trust 2004-1, a statutory trust organized and existing under the
laws of the State of Delaware (herein referred to as the “Issuer”), for value
received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of                                                                   
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is
$                    
and the denominator of which is
$                    
by (ii) the aggregate amount, if any, payable from Available Funds in respect
of principal on the Class        Notes pursuant
to the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on
                              
(the “Class        Scheduled Maturity
Date”).  The Issuer will pay interest on
this Note at the rate per annum shown above on each Distribution Date until the
principal of this Note is paid or made available for payment.  Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from July 28, 2004. 
Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed in an applicable Interest Period.  Such principal of and interest on this Note
shall be paid in the manner specified on the reverse hereof.

 

B-1

 

The principal
of and interest on this Note are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.  All payments
made by the Issuer with respect to this Note shall be applied first to interest
due and payable on this Note as provided above and then to the unpaid principal
of this Note.

 

Reference
is made to the further provisions of this Note set forth on the reverse hereof,
which shall have the same effect as though fully set forth on the face of this
Note.

 

Unless
the certificate of authentication hereon has been executed by the Administrator
whose name appears below by manual signature, this Note shall not be entitled
to any benefit under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.

 

B-2

 

IN
WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually
or in facsimile, by its Authorized Officer as of the date set forth below.

 

	
  Date:  July 28, 2004

  	
  HOUSEHOLD AUTOMOTIVE
  TRUST 2004-1

  
	
   

  	
   

  
	
   

  	
   

  	
  By:     WILMINGTON
  TRUST COMPANY , not in

  its individual capacity but solely as Owner Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-3

 

ADMINISTRATOR’S
CERTIFICATE OF AUTHENTICATION

 

This
is one of the Notes designated above and referred to in the within-mentioned
Indenture.

 

	
  Date: 
  July 28, 2004

  	
  U.S. BANK NATIONAL ASSOCIATION, not in its

  individual capacity but solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  

 

B-4

 

[REVERSE OF NOTE]

 

This
Note is one of a duly authorized issue of Notes of the Issuer, designated as
its Class           
        % Notes (herein called the
“Class        Notes”), all issued under an
Indenture dated as of July     , 2004 (such indenture,
as supplemented or amended, is herein called the “Indenture”), among the
Issuer, U.S. Bank National Association, as indenture trustee (the “Indenture
Trustee”, which term includes any successor Indenture Trustee under the
Indenture) and HSBC Bank USA, National Association, as administrator (the
“Administrator”, which term includes any successor Administrator under the
Indenture) to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee, the Administrator and the
Holders of the Notes.  The Notes are
subject to all terms of the Indenture. 
All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or
pursuant to the Indenture, as so supplemented or amended.

 

The
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes (together, the “Notes”) are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.

 

Principal
of the Class        Notes will be payable on each
Distribution Date in an amount described on the face hereof. “Distribution
Date” means the seventeenth day of each month, or, if any such date is not a
Business Day, the next succeeding Business Day, commencing on August 17,
2004.  The term “Distribution Date” shall
be deemed to include the Class        Scheduled
Maturity Date.

 

As
described above, the entire unpaid principal amount of this Note shall be due
and payable on the Class        Scheduled
Maturity Date.  This Note is also subject
to redemption when the Pool Balance is reduced to an amount that is less than
or equal to 10% of the original Pool Balance. Notwithstanding the foregoing,
the entire unpaid principal amount of the Notes shall be due and payable on any
date on or after which an Event of Default shall have occurred and be
continuing if the Indenture Trustee in its discretion or if requested by
Holders of the Notes representing at least 66 2/3% of the Outstanding Amount of
the Notes have declared the Notes to be immediately due and payable in the
manner provided in the Indenture.  All
principal payments on the Class        Notes
shall be made pro rata to the Class       
Noteholders entitled thereto.

 

Payments
of interest on this Note due and payable on each Distribution Date, together
with the installment of principal, if any, to the extent not in full payment of
this Note, shall be made by check mailed to the Person whose name appears as
the Holder of this Note (or one or more Predecessor Notes) on the Note Register
as of the close of business on each Record Date, except that with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co.), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee.  Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment.  Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) effected by any payments made on any Distribution Date shall be binding
upon all future Holders of this Note and of any Note issued upon the
registration of

 

B-5

 

transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon.  If
funds are expected to be available, as provided in the Indenture, for payment
in full of the then remaining unpaid principal amount of this Note on a
Distribution Date, then the Administrator, in the name of and on behalf of the
Issuer, will notify the Person who was the Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed prior to such Distribution
Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Administrator’s principal
Corporate Trust Office or at the office of the Administrator’s agent appointed
for such purposes located in New York, New York.

 

The
Issuer shall pay interest on overdue installments of interest at the Class
       Note Rate to the extent lawful.

 

As
provided in the Indenture and subject to certain limitations set forth therein,
the transfer of this Note may be registered on the Note Register upon surrender
of this Note for registration of transfer at the office or agency designated by
the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Indenture Trustee
duly executed by, the Holder hereof or his attorney duly authorized in writing,
with such signature guaranteed by an “eligible guarantor institution” meeting
the requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program (“Stamp”) or such
other “signature guarantee program” as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Indenture
Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No
service charge will be charged for any registration of transfer or exchange of
this Note, but the transferor may be required to pay a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.

 

Each
Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note
Owner, a beneficial interest in a Note covenants and agrees that no recourse
may be taken, directly or indirectly, with respect to the obligations of the
Issuer, the Owner Trustee, the Administrator or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee, the Administrator or the Owner Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Issuer or (iii) any partner,
owner, beneficiary, agent, officer, director or employee of the Seller, the
Servicer, the Indenture Trustee, the Administrator or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Seller, the Servicer, the Owner Trustee, the Administrator or the Indenture
Trustee or of any successor or assign of the Seller, the Servicer, the Indenture
Trustee, the Administrator or the Owner Trustee in its individual capacity,
except as any such Person may have expressly agreed (it being understood that
the Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.

 

Prior
to the due presentment for registration of transfer of this Note, the Issuer,
the Indenture Trustee and the Administrator and any agent of the Issuer, the
Indenture Trustee or the

 

B-6

 

Administrator may treat the Person in whose name this
Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and none of the Issuer, the Indenture
Trustee, the Administrator nor any such agent shall be affected by notice to
the contrary.

 

The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Issuer and
the rights of the Holders of the Notes under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time Outstanding.

 

The
term “Issuer” as used in this Note includes any successor to the Issuer under
the Indenture.

 

The
Issuer is permitted by the Indenture, under certain circumstances, to merge or
consolidate, subject to the rights of the Indenture Trustee and the Noteholders
under the Indenture.

 

The
Notes are issuable only in registered form in denominations as provided in the
Indenture, subject to certain limitations therein set forth.

 

This
Note and the Indenture shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.

 

No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
times, place, and rate, and in the coin or currency herein prescribed.

 

Anything
herein to the contrary notwithstanding, except as expressly provided in the
Indenture or the Basic Documents, neither U.S. Bank Trust National Association
in its individual capacity, any owner of a beneficial interest in the Issuer,
nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purposes of
binding the interests of the Owner Trustee in the assets of the Issuer.  The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein
shall be taken to prevent recourse to, and enforcement against, the assets of
the Issuer for any and all liabilities, obligations and undertakings contained
in the Indenture or in this Note.

 

B-7

 

ASSIGNMENT

 

Social Security or
taxpayer I.D. or other identifying number of assignee

 

FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                                              
(name and address of assignee)

 

the within Note and all rights thereunder, and hereby
irrevocably constitutes and appoints, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.

 

	
  Dated

  	
   

  	
   (1)

  	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

 

(1)                                  NOTE:
The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

 

B-8

 

	
  REGISTERED

  	
  $              

  
	
  No.           

  	
   

  

 

SEE REVERSE FOR
CERTAIN DEFINITIONS

 

CUSIP NO.
                          

 

Unless
this Note is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to the Issuer or its agent for
registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested
by an authorized representative of DTC (and any payment is made to Cede &
Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.,
has an interest herein.

 

THE
PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

 

HOUSEHOLD
AUTOMOTIVE TRUST 2004-1

 

CLASS [A-2] [A-3]
[A-4]           % NOTE

 

Household
Automotive Trust 2004-1, a statutory trust organized and existing under the
laws of the State of Delaware (herein referred to as the “Issuer”), for value
received, hereby promises to pay to CEDE & CO., or registered assigns, the
principal sum of
                                                                  
payable on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is
$                    
and the denominator of which is $                    
by (ii) the aggregate amount, if any, payable from Available Funds in respect
of principal on the Class        Notes pursuant
to the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on
                              
(the “Class        Scheduled Maturity
Date”).  The Issuer will pay interest on
this Note at the rate per annum shown above on each Distribution Date until the
principal of this Note is paid or made available for payment.  Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from July 28, 2004. 
Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months.

 

The
principal of and interest on this Note are payable in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.  All
payments made by the Issuer with respect to this Note shall be applied first to
interest due and payable on this Note as provided above and then to the unpaid
principal of this Note.

 

B-9

 

Reference
is made to the further provisions of this Note set forth on the reverse hereof,
which shall have the same effect as though fully set forth on the face of this
Note.

 

Unless
the certificate of authentication hereon has been executed by the Administrator
whose name appears below by manual signature, this Note shall not be entitled
to any benefit under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.

 

B-10

 

IN
WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually
or in facsimile, by its Authorized Officer as of the date set forth below.

 

	
  Date:  July 28, 2004

  	
  HOUSEHOLD AUTOMOTIVE
  TRUST 2004-1

  
	
   

  	
   

  
	
   

  	
   

  	
  By:     WILMINGTON
  TRUST COMPANY, not

  in its individual capacity but solely as Owner Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-11

 

ADMINISTRATOR’S
CERTIFICATE OF AUTHENTICATION

 

This
is one of the Notes designated above and referred to in the within-mentioned
Indenture.

 

	
  Date: 
  July 28, 2004

  	
  U.S.BANK NATIONAL ASSOCIATION, not in its

  individual capacity but solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  

 

B-12

 

[REVERSE OF NOTE]

 

This
Note is one of a duly authorized issue of Notes of the Issuer, designated as
its Class           
        % Notes (herein called the
“Class        Notes”), all issued under an
Indenture dated as of July     , 2004 (such indenture,
as supplemented or amended, is herein called the “Indenture”), among the
Issuer, U.S. Bank National Association, as indenture trustee (the “Indenture
Trustee”, which term includes any successor Indenture Trustee under the
Indenture) and HSBC Bank USA, National Association, as administrator (the
“Administrator”, which term includes any successor Administrator under the
Indenture) to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee, the Administrator and the
Holders of the Notes.  The Notes are
subject to all terms of the Indenture. 
All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or
pursuant to the Indenture, as so supplemented or amended.

 

The
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes (together, the “Notes”) are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.

 

Principal
of the Class        Notes will be payable on each
Distribution Date in an amount described on the face hereof. “Distribution
Date” means the seventeenth day of each month, or, if any such date is not a
Business Day, the next succeeding Business Day, commencing on August 17,
2004.  The term “Distribution Date” shall
be deemed to include the Class        Scheduled
Maturity Date.

 

As
described above, the entire unpaid principal amount of this Note shall be due
and payable on the Class        Scheduled
Maturity Date.  This Note is also subject
to redemption when the Pool Balance is reduced to an amount that is less than
or equal to 10% of the original Pool Balance. Notwithstanding the foregoing,
the entire unpaid principal amount of the Notes shall be due and payable on any
date on or after which an Event of Default shall have occurred and be
continuing if the Indenture Trustee in its discretion or if requested by
Holders of the Notes representing at least 66 2/3% of the Outstanding Amount of
the Notes have declared the Notes to be immediately due and payable in the
manner provided in the Indenture.  All
principal payments on the Class        Notes
shall be made pro rata to the Class       
Noteholders entitled thereto.

 

Payments
of interest on this Note due and payable on each Distribution Date, together
with the installment of principal, if any, to the extent not in full payment of
this Note, shall be made by check mailed to the Person whose name appears as
the Holder of this Note (or one or more Predecessor Notes) on the Note Register
as of the close of business on each Record Date, except that with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co.), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee.  Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment.  Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) effected by any payments made on any Distribution Date shall

 

B-13

 

be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. 
If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Distribution Date, then the Administrator, in the name of and on behalf of the
Issuer, will notify the Person who was the Holder hereof as of the Record Date
preceding such Distribution Date by notice mailed prior to such Distribution
Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Administrator’s principal
Corporate Trust Office or at the office of the Administrator ‘s agent appointed
for such purposes located in New York, New York.

 

The
Issuer shall pay interest on overdue installments of interest at the Class
       Note Rate to the extent lawful.

 

As
provided in the Indenture and subject to certain limitations set forth therein,
the transfer of this Note may be registered on the Note Register upon surrender
of this Note for registration of transfer at the office or agency designated by
the Issuer pursuant to the Indenture, (i) duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Indenture Trustee
duly executed by, the Holder hereof or his attorney duly authorized in writing,
with such signature guaranteed by an “eligible guarantor institution” meeting
the requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program (“Stamp”) or such
other “signature guarantee program” as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Indenture
Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees.  No
service charge will be charged for any registration of transfer or exchange of
this Note, but the transferor may be required to pay a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.

 

Each
Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note
Owner, a beneficial interest in a Note covenants and agrees that no recourse
may be taken, directly or indirectly, with respect to the obligations of the
Issuer, the Owner Trustee, the Administrator or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Seller, the Servicer, the Indenture
Trustee, the Administrator or the Owner Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Issuer or (iii) any partner,
owner, beneficiary, agent, officer, director or employee of the Seller, the
Servicer, the Indenture Trustee, the Administrator or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Seller, the Servicer, the Owner Trustee, the Administrator or the Indenture
Trustee, the Administrator or of any successor or assign of the Seller, the
Servicer, the Indenture Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.

 

B-14

 

Prior
to the due presentment for registration of transfer of this Note, the Issuer,
the Indenture Trustee and the Administrator and any agent of the Issuer, the
Indenture Trustee or the Administrator may treat the Person in whose name this
Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and none of the Issuer, the Indenture
Trustee, the Administrator nor any such agent shall be affected by notice to
the contrary.

 

The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Issuer and
the rights of the Holders of the Notes under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time Outstanding.

 

The
term “Issuer” as used in this Note includes any successor to the Issuer under
the Indenture.

 

The
Issuer is permitted by the Indenture, under certain circumstances, to merge or
consolidate, subject to the rights of the Indenture Trustee and the Noteholders
under the Indenture.

 

The
Notes are issuable only in registered form in denominations as provided in the
Indenture, subject to certain limitations therein set forth.

 

This
Note and the Indenture shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.

 

No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
times, place, and rate, and in the coin or currency herein prescribed.

 

Anything
herein to the contrary notwithstanding, except as expressly provided in the
Indenture or the Basic Documents, neither U.S. Bank Trust National Association
in its individual capacity, any owner of a beneficial interest in the Issuer,
nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and
indemnifications have been made by the Owner Trustee for the sole purposes of
binding the interests of the Owner Trustee in the assets of the Issuer.  The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein
shall be taken to prevent recourse to, and enforcement

 

B-15

 

against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.

 

B-16

 

ASSIGNMENT

 

Social Security or
taxpayer I.D. or other identifying number of assignee

 

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto
                                                        
(name and address of assignee)

 

the within Note and all rights thereunder, and hereby
irrevocably constitutes and appoints, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.

 

	
  Dated

  	
   

  	
   (1)

  	
   

  	
   

  
	
   

  	
  Signature Guaranteed:

  

 

 

(1)                                  NOTE:
The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.

 

B-17

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