Document:

Exhibit 4.3

 

EXECUTION COPY

 

 

MASTER SALE AND
SERVICING AGREEMENT

 

among

 

HOUSEHOLD
AUTOMOTIVE TRUST 2003-2,

as Issuer,

 

HOUSEHOLD AUTO
RECEIVABLES CORPORATION,

as Seller,

 

HOUSEHOLD FINANCE
CORPORATION,

as Master Servicer

 

and

 

WELLS FARGO BANK
MINNESOTA, NATIONAL ASSOCIATION,

as Indenture Trustee

 

Dated as of
November 26, 2003

 

 

 

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

  	
   

  
	
  SECTION 13.16.

  	
  Third-Party Beneficiary

  	
   

  

 

iii

 

	
  EXHIBITS

  
	
   

  
	
  Exhibit A

  	
  -

  	
  Form of Transfer Agreement

  

 

iv

 

MASTER SALE AND SERVICING AGREEMENT dated as of
November 26, 2003, among HOUSEHOLD AUTOMOTIVE TRUST 2003-2, 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”) and WELLS FARGO
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in its
capacity as Indenture Trustee.

 

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.

 

“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.

 

“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.

 

2

 

“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).

 

“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 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.

 

3

 

“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 Indenture Trustee, indorsed to, or registered in the
name of, the Indenture Trustee or its nominee or indorsed in blank;

 

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

 

(iii)                               by the Indenture Trustee
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 Indenture Trustee,
provided that if the certificated security is in registered form, it shall be
indorsed to, or registered in the name of, the Indenture Trustee or indorsed in
blank, and (y) the Indenture Trustee 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 Indenture Trustee, provided that if the
certificated security is in registered form, it shall be indorsed to, or
registered in the name of, the Indenture Trustee or indorsed in blank, or (2)
having acquired possession of such certificated security, acknowledging that it
holds such certificated security for the Indenture Trustee, and, in either such
case, continuously maintaining possession of such certificated security; and

 

by the Indenture Trustee 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

 

4

 

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 Indenture Trustee of the
purchase by the securities intermediary on behalf of the Indenture Trustee 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 Indenture Trustee and continuously indicating that such securities
intermediary holds such book-entry security solely as agent for the Indenture
Trustee or such additional or alternative procedures as are appropriate under
applicable law to effect a complete transfer of ownership of such property to
the Indenture Trustee or its nominee or custodian; or (y) continuous book-entry
registration of such property to a book-entry account maintained by the
Indenture Trustee with a Federal Reserve Bank; and

 

(ii)                                  by
the Indenture Trustee 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 Indenture Trustee 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 Indenture Trustee, or (2)
having become the registered owner of the uncertificated security,
acknowledging that it holds such uncertificated security for the Indenture
Trustee; or

 

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

 

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

 

5

 

(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 Indenture Trustee at such clearing corporation; and

 

(ii)                                  the
Indenture Trustee 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 Indenture Trustee 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 Indenture Trustee’s “securities account” (as defined in Article 8
of the UCC), (B) receiving a financial asset from the Indenture Trustee or
acquiring the underlying financial asset for the Indenture Trustee, and in
either case, accepting it for credit to the Indenture Trustee’s securities
account, or (C) becoming obligated under other law, regulation or rule to
credit the underlying financial asset to the Indenture Trustee’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 Indenture Trustee; and continuously indicating
by book-entry that such securities entitlement is credited to the Indenture
Trustee’s securities account; and

 

(iii) the Indenture Trustee’s continuously indicating
by book-entry that such security entitlement (or all rights and property of the
Indenture Trustee 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 Indenture Trustee free and clear of any adverse claims,
consistent with changes in applicable law or regulations or the interpretation
thereof, and (ii) the Indenture Trustee’s continuously indicating by book entry
that such asset is credited to the related Trust Account.

 

In each case of delivery contemplated herein, the
Indenture Trustee 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.

 

6

 

“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 and the Insurer (for so long as it is the Controlling Party).

 

“Eligible Bank” means, except as otherwise provided in
the Series Supplement, any depository institution (which shall initially be the
Indenture Trustee), 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 and the Insurer
(for so long as it is the Controlling Party), or (ii) if such institution has
issued long-term unsecured debt obligations, a rating acceptable to the Rating
Agency and the Insurer (for so long as it is the Controlling Party) 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 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 Indenture Trustee in
trust for the benefit of the Holders of the Securities, subject to the
exclusive custody and control of the Indenture Trustee

 

7

 

and for which the
Indenture Trustee 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 and the Insurer (for so long as it
is the Controlling Party)); or

 

(h)                                 any
other investment of a type or rating that is acceptable to the Rating Agency
and the Insurer (for so long as it is the Controlling Party).

 

Any of the foregoing Eligible Investments may be
purchased by or through the Indenture Trustee or through any of its Affiliates.

 

8

 

“Eligible Servicer” means Household Finance
Corporation or any other Person reasonably acceptable to the Insurer (for so
long as it is the Controlling Party) 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 or any other Person reasonably acceptable to the Insurer (for so
long as it is the Controlling Party) 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.

 

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

 

9

 

“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.

 

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

 

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

 

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

 

“Issuer” means Household Automotive Trust 2003-2, 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 Policy” has the meaning assigned to such term in
the Series Supplement.

 

“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 and the Insurer (for so long as it is the Controlling Party).

 

“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 Soldiers’ and Sailors’ Civil Relief Act of 1940,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.2(b) and (c), 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 2003-2 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 and the Owner Trustee, 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 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 and the Indenture Trustee,
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, and (ii) 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.

 

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

 

16

 

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.

 

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

 

17

 

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 the 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,
from time to time, sell, transfer, assign, set over and otherwise convey to the
Issuer,

 

18

 

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

 

19

 

(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:

 

(i)                                     if
the Transfer Date is not also the Closing Date, the Seller shall have provided
the Indenture Trustee, the Owner Trustee and the Insurer 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 and to the Insurer a copy of such 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 Insurer 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 or the Insurer (for so long as it is the Controlling Party), 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 or the Insurer (for so long as it is the Controlling Party), advisable
to obtain and maintain the first priority perfected security interest of the
Indenture Trustee, for the benefit of the Noteholders and the Insurer, in the
Series Trust Estate;

 

21

 

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

 

(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 Indenture Trustee 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 Insurer 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 shall constitute a Grant by the Seller of a
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 Receivable
from the Seller to the Issuer, the parties hereto agree that, other than the
conveyance of the Receivables on the Closing Date, the Seller shall not convey
any Receivables to the Trust pursuant to this Agreement or any Transfer
Agreement without the prior written consent of the Insurer.

 

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

 

22

 

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).

 

(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 and amounts owing to the Insurer under the Insurance
Agreement and the Basic Documents.  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 all amounts owing to the Insurer under the Insurance
Agreement and the Basic Documents 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 amounts owing to the Insurer under the Insurance Agreement and the
Basic Documents 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, the Insurer is deemed to have relied on such representations and
warranties in issuing the Note Policy 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

 

23

 

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, the Insurer, any Trust Officer of the
Indenture Trustee, 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
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, the Insurer (for so long
as it is the Controlling Party) 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 and/or
the Insurer 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 Insurer 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 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.  Neither the Owner Trustee
nor the Indenture Trustee 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

 

24

 

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 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.

 

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, the Noteholders
and the Insurer) 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 Noteholders and the Insurer 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 5% 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 and the
Insurer (for so long as it is the Controlling Party)), 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) and the Insurer (for so
long as it is the Controlling Party) issued by a depository institution or
insurance company 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 and the Insurer (for so
long as it is the Controlling Party)), 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

 

28

 

preceding the related
Distribution Date.  The Master Servicer
shall give written notice to the Indenture Trustee and the Insurer if it is
required to deposit funds in accordance with Section 4.2(d).

 

(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 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 Insurer 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 Insurer
(for so long as it is the Controlling Party) 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 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

 

29

 

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.

 

(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,

 

30

 

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 or
the Insurer (for so long as it is the Controlling Party) 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 Indenture Trustee
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 and on which the Insurer relies in
issuing the Note Policy.

 

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
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, the Insurer or the

 

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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 and the Insurer 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, the Insurer, a Trust
Officer of the Owner Trustee or a Trust Officer of the Indenture Trustee 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 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 or the Insurer 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

 

32

 

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 or the Indenture
Trustee), 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, 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
Insurer, the Indenture Trustee 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
Indenture Trustee 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.

 

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 Insurer, the Indenture Trustee
and the Owner Trustee on or before April

 

33

 

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 Insurer, the Indenture
Trustee 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 Insurer, the Indenture
Trustee, 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 Insurer, the Indenture Trustee 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
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.

 

34

 

(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 Insurer 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 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 in writing to so agree; it being understood and
agreed that the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Master Servicer, and the
Indenture Trustee 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 Insurer (for
so long as it is the Controlling Party), 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.

 

ARTICLE V

 

Trust Accounts; Distributions;

Statements to Certificateholders and Noteholders

 

SECTION 5.1.                       Establishment of Trust
Accounts.  (a)  (i) 
The Indenture Trustee shall establish and maintain the Trust Accounts
required to be established and maintained pursuant to the Series Supplement,
and such Trust Accounts

 

35

 

shall be subject to the
sole dominion and control of the Indenture Trustee for the benefit of the
Noteholders and the Insurer.

 

(ii)          No Trust Account shall
be maintained with an institution other than the Indenture Trustee unless such
institution agrees in writing to the provisions of this Section 5.1 as if
such institution were the Indenture Trustee, except that the Indenture Trustee
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 Indenture
Trustee agrees that (A) such Trust Account Property shall at all times be
credited in the Indenture Trustee’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 Indenture Trustee, and, if the Indenture Trustee is not the
depositary bank with which such deposit account is maintained, the Indenture
Trustee 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 Indenture Trustee, in accordance with the
relevant terms of the definition of “Delivery.”  The Indenture Trustee 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 Indenture Trustee (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 and the Insurer, 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 Eligible Account and a portion of the earnings on such
overnight deposits in accordance with the agreed upon Indenture Trustee Fee
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 Indenture Trustee in the

 

36

 

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 Indenture Trustee 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 Indenture Trustee, to make any such investment,
if necessary, the Master Servicer shall deliver to the Indenture Trustee an
Opinion of Counsel to such effect.

 

(d)                                 The
Indenture Trustee 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
Indenture Trustee’s negligence or bad faith or its failure to make payments on
such Eligible Investments issued by the Indenture Trustee in its commercial
capacity as principal obligor and not as Indenture Trustee in accordance with
their terms.

 

(e)                                  If
(i) the Master Servicer shall have failed to give investment directions for any
funds on deposit in the Trust Accounts to the Indenture Trustee by 2:00 p.m.
Eastern Time (or such other time as may be agreed by the Issuer and the
Indenture Trustee) on any Business Day; or (ii) an Event of Default shall have
occurred and be continuing, the Indenture Trustee 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
Indenture Trustee 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 Indenture Trustee for the benefit of the Secured Parties.  If, at any time, any Trust Account ceases to
be an Eligible Account, the Indenture Trustee (or the Master Servicer on its
behalf) shall within five Business Days (or such longer period as to which each
Rating Agency and the Insurer (for so long as it is the Controlling Party) 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 Indenture Trustee, the Master Servicer shall notify the
Indenture Trustee and the Insurer 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 as may be necessary in
the opinion of the Indenture Trustee 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 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 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 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, the Insurer 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)                                     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 and shall not amend
such Article THIRD without the prior written consent of the Insurer (for
so long as it is the Controlling Party) which consent shall not be unreasonably
withheld;

 

(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 Insurer, the Owner
Trustee and the Indenture Trustee 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 and except any taxes to which the Owner Trustee or the Indenture
Trustee 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
and the Indenture Trustee 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.

 

(c)                                  The
Seller shall indemnify, defend and hold harmless the Owner Trustee and the
Indenture Trustee and their respective officers, directors, employees and
agents from and against any and all costs, expenses, losses, claims,

 

42

 

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 or the Indenture Trustee 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, provided, however, that the
Insurer (for so long as it is the Controlling Party) shall have consented to
such action and written confirmation shall be received by the Indenture Trustee,
and the Insurer from each Rating Agency rating the Notes that the then current
rating of the Notes will not be withdrawn, downgraded or suspended as a result
of any action described in this Section 8.4.

 

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, (i) 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 and (ii) any Notes or Certificates owned by the Seller or
any Affiliate thereof, during the time such Notes or Certificates are owned by
them, will not be entitled to the benefits of the Note Policy.  The Seller shall notify the Owner Trustee,
the Insurer and the Indenture Trustee 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.

 

44

 

(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 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

 

45

 

such default, Lien
or violation shall not materially and adversely affect the interest of the
Noteholders, the Insurer or the Trust in the Series Trust Estate or affect the
Master Servicer’s ability to perform its obligations under this Agreement.

 

(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
Indenture Trustee, the Owner Trustee, each Support Provider and

 

46

 

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.

 

(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 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.

 

(d)                                 The
Master Servicer (when the Master Servicer is not Household Finance Corporation)
shall indemnify, defend and hold harmless the Trust, 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
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 Owner Trustee or the Indenture Trustee, and the
Insurer (to the extent provided in the Insurance Agreement), 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 Indenture Trustee, the Owner Trustee, the Insurer (to
the extent provided in the Insurance Agreement) and their respective officers,
directors, agents and employees from and against any loss, liability or expense

 

47

 

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.

 

(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, the Insurer 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)  Neither the Master Servicer,
the Indenture Trustee nor 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 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

 

48

 

of law by the Master
Servicer, 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 or the Owner Trustee for costs, taxes, expenses, claims,
liabilities, losses or damages paid by the Indenture Trustee or the Owner
Trustee, in their individual capacities. 
The Master Servicer, 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 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 and the

 

49

 

Insurer (for so long as
it is the Controlling Party) in writing and such proposed successor servicer is
reasonably acceptable to the Indenture Trustee, the Insurer (for so long as it
is the Controlling Party) and the Administrative Agent, where one exists, or
otherwise, the Managing Agents; (b) such 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 and the Insurer 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 reasonably acceptable to the Insurer (for as
long as it is the Controlling Party) 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 and the Insurer.

 

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.  Neither of the Owner
Trustee nor 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
Indenture Trustee 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 Indenture Trustee or the Insurer 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) or the Insurer 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 Indenture Trustee or the Insurer 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 or the Insurer and, within 60 days after written notice thereof shall
have been given to the Master Servicer by the Indenture Trustee or the Insurer
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; or

 

(f)                                    An
Event of Default (as defined in the Insurance Agreement) shall have occurred.

 

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 Indenture Trustee, the Insurer 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 Master
Servicer may, with the consent of the Insurer (for so long as it is the
Controlling Party), and shall, at the written direction of the Controlling
Party, terminate all of the rights and obligations of the Master Servicer 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 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

 

52

 

liability or obligation
with respect to any Master Servicer indemnification obligations of any prior
master servicer including the original master servicer.

 

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
(i) for so long as it is the Controlling Party, the Insurer, or (ii) for so
long as the Insurer is not the Controlling Party, 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 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, 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,
the Insurer (for so long as it is the Controlling Party) and the successor
Master Servicer

 

53

 

reasonable access to the
terminated Master Servicer’s premises at the terminated Master Servicer’s
expense.

 

SECTION 10.3.                 Appointment of Successor.  (a) 
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 10.2 or upon the 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, the Indenture Trustee and
the Insurer (for as long as it is the Controlling Party).  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”) reasonably acceptable to
the Insurer (for so long as it is the Controlling Party), and such Successor
Master Servicer shall accept its appointment by a written assumption in a form
reasonably acceptable to the Indenture Trustee and the Insurer (for so long as
it is the Controlling Party).  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, with the consent
of the Insurer (for so long as it is the Controlling Party), 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 and the Insurer
(for so long as it is the Controlling Party). 
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

 

54

 

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 and
Certificateholders.  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.

 

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  may
conclusively rely as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Indenture Trustee  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, the Indenture Trustee  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

 

55

 

therefrom (including the
expenses of such sale) have been made in the Collection Account.

 

(c)                                  Notice
of any termination of the Trust shall be given by the Master Servicer to the
Owner Trustee, the Indenture Trustee and the Insurer 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 the Insurance Agreement 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 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

 

56

 

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, 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
and the Indenture Trustee 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 or the Indenture Trustee 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

 

57

 

Affiliates; provided,
however, that the terms of any such transactions or dealings shall be in
accordance with any directions 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 Insurer and the Indenture
Trustee of the proposed action and the Owner Trustee, the Insurer (for so long
as it is the Controlling Party) or the Indenture Trustee 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 and
successor Indenture Trustees pursuant to the Indenture or the consent to the
assignment by the Note Registrar, Note Paying Agent or Indenture Trustee of its
obligations under the Indenture; and

 

(C)                                the
removal of the Indenture Trustee.

 

(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, the Indenture Trustee and the Insurer
(for so long as it is the Controlling Party), from time to time such additional
information regarding the Owner Trust Estate as the Issuer, the Indenture
Trustee and the Insurer (for so long as it is the Controlling Party) 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 and all amounts payable to the Insurer pursuant to
the Insurance Agreement have been paid in full 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, with the prior written consent of the Insurer (for so
long as it is the Controlling Party) but 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 Insurer, 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 Insurer, 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 or the Insurer; provided, however, that
no such amendment shall materially and adversely affect the Insurer without the
prior written consent of the Insurer.

 

(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 and the Indenture Trustee, with the prior written consent
of the Insurer and 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.

 

59

 

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 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 applicable, may prescribe, including the establishment of
record dates.

 

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

 

Prior to the execution of any amendment to this
Agreement, the Indenture Trustee 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 Insurer, 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
Insurer, 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

 

60

 

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.

 

(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
Insurer, 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 Insurer, 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

 

61

 

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 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 Insurer, the Master Servicer, the Owner Trustee, 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, the Insurer 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 without the prior written
consent of the Insurer, the Owner Trustee, 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 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

 

62

 

such Support Provider shall have occurred and be continuing; 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 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 Person acting as the Indenture Trustee not in its individual
capacity but solely as Indenture Trustee 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 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.

 

SECTION 13.16.           Third-Party Beneficiary.  The parties hereto agree that the Insurer is
a third-party beneficiary hereof.

 

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 2003-2

  
	
   

  	
   

  
	
   

  	
  By:

  	
  U.S. Bank Trust National Association,

  not in its individual capacity but solely as

  Owner Trustee on behalf of the Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Patricia
  M. Child

  	
   

  
	
   

  	
  Name: 
  Patricia M. Child

  
	
   

  	
  Title:  Vice
  President

  
	
   

  	
   

  
	
   

  	
  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/ B. B.
  Moss, Jr.

  	
   

  
	
   

  	
  Name:  B. B.
  Moss Jr.

  
	
   

  	
  Title:  Vice
  President and Treasurer

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION,

  
	
   

  	
  not in its individual capacity but solely as

  Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Joe
  Nardi

  	
   

  
	
   

  	
  Name: Joe Nardi

  
	
   

  	
  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
November 26, 2003 (the “Sale and Servicing Agreement”), among HOUSEHOLD
AUTOMOTIVE TRUST 2003-2, 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”), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association in its capacity as Indenture Trustee (the “Indenture
Trustee”).

 

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 and the Indenture Trustee 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 November 16, 2003.

 

“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

 

 

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 2003-2

  
	
   

  	
   

  
	
   

  	
  By:

  	
  U.S. Bank Trust National Association,

  
	
   

  	
  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:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged and Accepted:

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION,

  	
   

  
	
  not in its individual capacity but solely as

  	
   

  
	
  Indenture Trustee

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
								

 

A-5Exhibit
4.4

 

[MBIA Logo]

 

MBIA INSURANCE CORPORATION

 

FINANCIAL GUARANTEE INSURANCE POLICY

November 26, 2003

 

POLICY NUMBER:  42851

 

	
  Re:

  	
   

  	
  Household
  Automotive Trust 2003-2 (the “Trust”)  $159,000,000
  1.14% Asset Backed Notes, Class A-1 (“Class A-1 Notes”); $205,000,000
  1.56% Asset Backed Notes, Class A-2 (“Class A-2 Notes”); $190,000,000
  2.31% Asset Backed Notes, Class A-3 (“Class A-3 Notes”); and
  $196,000,000 3.02% Asset Backed Notes, Class A-4 (“Class A-4 Notes”
  and together with the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, the
  “Notes”).

  
	
   

  	
   

  	
   

  
	
  Insured
  Obligation:

  	
   

  	
  Obligation
  to pay servicing and trustee fees, timely interest, any Insured Principal
  Balance Shortfalls (as defined in the Series Supplement) and ultimate
  principal on the Notes.

  
	
   

  	
   

  	
   

  
	
  Beneficiary:

  	
   

  	
  Wells
  Fargo Bank Minnesota, National Association, as indenture trustee (the “Indenture
  Trustee”) under the Indenture dated as of November 26, 2003 (the “Indenture”)
  between the Trust and the Indenture Trustee (together with any successor
  indenture trustee duly appointed and qualified under the Indenture) for the
  benefit of the Owners (as defined below).

  

 

MBIA
INSURANCE CORPORATION (“MBIA”), for consideration received,
hereby unconditionally and irrevocably guarantees to the Beneficiary, subject only
to the terms of this Financial Guarantee Insurance Policy (the “Policy”),
payment of the Insured Obligation.  MBIA
agrees to pay to the Indenture Trustee, in respect of each Distribution Date,
an amount equal to the amount by which (A) the sum of the following amounts,
each as of or with respect to such Distribution Date, (i) the Servicing Fee (if
HFC is no longer acting as the Master Servicer), including any unpaid Servicing
Fees (if HFC is no longer acting as the Master Servicer), (ii) any accrued and
unpaid fees and any unreimbursed costs and expenses of the Indenture trustee
and the Owner Trustee, in each case to the extent such fees have not been paid
by the Master Servicer, (iii) the Class A Interest Distributable Amount, (iv)
the Insured Principal Balance Shortfall, if any, if such Distribution Date is
not the Scheduled Maturity Date with respect to any Class of Notes, and (v) if
such Distribution Date is a Scheduled Maturity Date with respect to any Class
of Notes, the outstanding principal amount of such Class of Notes on such
Distribution Date, exceeds (B) the sum of (i) the amount of Available Funds
available to make such payments with respect to such Distribution Date and (ii)
the amount on deposit in the Reserve Account as of such Distribution Date (the
“Deficiency Amount”).  MBIA also
agrees to pay an amount equal to any Avoided Payment (as defined below).  This Policy does not cover shortfalls, if
any,

 

 

attributable to
the liability of the Trust for withholding taxes, if any (including interest
and penalties in respect of such liability). 
Payments hereunder shall be made only at the time set forth in this
Policy.  This Policy will not guarantee
payment of any Class A Additional Principal Distributable Amount or amounts
that become due on an accelerated basis as a result of (a) a default by the
Trust, (b) the occurrence of an Event of Default under the Indenture, or (c)
any other cause.  MBIA may elect, in its
sole discretion, to pay in whole or in part such principal due upon
acceleration.

 

Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in
the Master Sale and Servicing Agreement dated as of November 26, 2003
amount Household Auto Receivables Corporation, as seller (the “Seller”),
Household Finance Corporation, as Master Servicer (the “Master Servicer”),
the Indenture Trustee and the Trust (as amended, supplemented or otherwise
modified, the “Master Sale and Servicing Agreement”).

 

As used herein the term “Owner”
means each Noteholder who on the applicable Distribution Date is entitled under
the terms of the related Note to receive payments thereunder.

 

Payment of amounts
hereunder shall be made in immediately available funds no later than the later
of (a) 12:00 noon, New York City time, on the related Distribution Date and (b)
12:00 noon, New York City time, on the second Business Day following
presentation to State Street Bank and Trust Company, N.A., as Fiscal Agent for
MBIA or any successor fiscal agent appointed by MBIA (the “Fiscal Agent”)
(as hereinafter provided) and MBIA of a notice for payment in the form of Exhibit
A hereto (“Notice for Payment”), appropriately completed and
executed by the Indenture Trustee.  A
Notice for Payment under this Policy may be presented to the Fiscal Agent and
MBIA on any Business Day following the Determination Date in respect of which
the Notice for Payment is being presented, by (a) delivery of the original
Notice for Payment to the Fiscal Agent and MBIA at its respective address set
forth below, or (b) facsimile transmission of the original Notice for Payment
to the Fiscal Agent and MBIA  at its
respective facsimile number set forth below. 
If presentation is made by facsimile transmission, the Indenture Trustee
shall (i) simultaneously confirm transmission by telephone to the Fiscal Agent
and MBIA at its respective telephone number set forth below, and (ii) as soon
as reasonably practicable, deliver the original Notice for Payment to the
Fiscal Agent and MBIA at its respective address set forth below.  Any Notice for Payment received by the
Fiscal Agent or MBIA after 12:00 noon, New York City time, on a Business Day,
or on any day that is not a Business Day, will be deemed to be received by the
Fiscal Agent and MBIA on the next succeeding Business Day.

 

Subject to the foregoing,
if the payment of any amount previously distributed to an Owner in respect of
the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy with respect to the Trust, the Seller or
the Originator pursuant to the United States Bankruptcy Code (11 U.S.C.), as
amended from time to time, in accordance with a nonappealable order of a court
having competent jurisdiction is voided (“Avoided Payment”), MBIA will
make such Avoided Payment on behalf of the Owner to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order (as
defined below) and not to any Owner directly, unless such Owner has previously
paid such Avoided Payment to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy, in which case MBIA will make such Avoided Payment to
such Owner upon receipt by the Fiscal Agent and MBIA from the Indenture Trustee
on behalf of such Owner of (i) a certified copy of a final, nonappealable order
of a court having competent jurisdiction to the effect that the Owner is
required to return

 

 

any such payment
or portion thereof prior to the Termination Date of this Policy because such
payment was voided under applicable law (the “Final Order”) together
with an opinion of counsel satisfactory to MBIA that such Final Order is final
and not subject to appeal, (ii) an assignment, substantially in the form
attached hereto as Exhibit B, properly completed and executed by such
Owner irrevocably assigning to MBIA all rights and claims of such Owner
relating to or arising under such Avoided Payment, (iii) a Notice for Payment
in the form of Exhibit A hereto appropriately completed and executed by
the Indenture Trustee and (iv) appropriate instruments to effect the
appointment of MBIA as agent for such Owner in any legal proceeding relating to
such Avoided Payment.

 

MBIA shall make payments
due in respect of Avoided Payments no later than 12:00 noon, New York City time
on the Business Date following the Fiscal Agent’s and MBIA’s receipt of the
documents required under clauses (i) through (iv) of the preceding
paragraph.  Any such documents received
by the Fiscal Agent or MBIA after 12:00 noon, New York City time, on any
Business Day or on any day that is not a Business Day shall be deemed to have
been received by the Fiscal Agent and MBIA prior to 12:00 noon on the next
succeeding Business Day.  All payments
made by MBIA hereunder on account of any Avoided Payment shall be made to the
receiver or the trustee in bankruptcy named in the Final Order on behalf of
Owner and not to any owner directly unless such Owner has returned such Avoided
Payment to such receiver or trustee in bankruptcy, in which case such payment
will be disbursed to such Owner.

 

If any Notice for Payment
received by the Fiscal Agent and MBIA is not in proper form or is otherwise
insufficient for the purpose of making a claim hereunder, it shall be deemed no
to have been received by the Fiscal Agent and MBIA, and the Fiscal Agent or
MBIA shall promptly so advise the Indenture Trustee, and the Indenture Trustee
may submit an amended Notice for Payment.

 

Payments due hereunder
unless otherwise stated herein will be disbursed by the Fiscal Agent to the
Indenture Trustee on behalf of the Owners by wire transfer of immediately
available funds in the amount of such payment, less, in respect of Avoided
Payments, any amounts held by the Indenture Trustee for the payment of such
Avoided Payment and legally available therefor.

 

The Fiscal Agent is agent
of MBIA only, and the Fiscal Agent shall in no event be liable to Owners for
any acts of the Fiscal Agent or any failure of MBIA to deposit or cause to be
deposited sufficient funds to make payments due under this Policy.

 

MBIA shall be subrogated
to the rights of each Owner to receive payments under the Notes to the extent
of any payment by MBIA hereunder.

 

MBIA hereby waives and
agrees not to assert any and all rights to require the Indenture Trustee to
make demand on or to proceed against any person, party or security prior to the
Indenture Trustee demanding payment under this Policy.

 

No defenses, set-offs and
counterclaims of any kind available to MBIA so as to deny payment of any amount
due in respect of this Policy will be valid and MBIA hereby waives and agrees
not to assert any and all such defenses (including, without limitation, fraud
in the inducement or fact, or any other circumstances that would have the
effect of discharging a surety at law or in equity), set-offs and
counterclaims, including, without limitation, any such rights acquired by
subrogation, assignment or otherwise. 
Any rights of subrogation acquired by MBIA as a result of any payment
made under this Policy shall, in all respects, be subordinate and junior

 

 

in right of
payment to the prior indefeasible payment in full of all amounts due to the
Indenture Trustee on account of payments due under the Notes.

 

MBIA’s obligations under
this Policy shall be discharged to the extent funds to pay the Insured
Obligation are deposited by the Master Servicer into the Collection Account in
accordance with the Master Sale and Servicing Agreement or disbursed by MBIA as
provided in this Policy, whether or not such funds are properly applied by the
Indenture Trustee.

 

This Policy is neither
transferable nor assignable, in whole or in part, except to a successor to the
Indenture Trustee pursuant to the Indenture. 
All notices, presentations, transmissions, deliveries and communications
made by the Indenture Trustee to MBIA with respect to this Policy shall
specifically refer to the number of this Policy and shall be made to MBIA at:

 

	
  MBIA Insurance Corporation

  
	
  113 King Street

  
	
  Armonk, New York 
  10504

  
	
  Attention: Insured Portfolio Management, Structured
  Finance

  
	
  Telephone:

  	
  (914) 273-4545

  
	
  Facsimile:

  	
  (914) 765-3810

  

 

or such other address, telephone number or facsimile
number as MBIA may designate to the Indenture Trustee in writing from time to
time.  Each such notice, presentation,
transmission, delivery and communication shall be effective only upon actual
receipt by MBIA.

 

All notices,
presentations, transmissions, deliveries and communications made by the
Indenture Trustee to the Fiscal Agent of MBIA shall specifically refer to the
number of this Policy and shall be made at the address listed below for the
Fiscal Agent of MBIA or such other address, telephone number or facsimile
number as MBIA or the Fiscal Agent shall specify in writing to the Indenture
Trustee.

 

The notice address of the
Fiscal Agent is 61 Broadway, 15th Floor, New York, New York 10006
Attention:  Municipal Registrar and
Paying Agency, Telephone: 212-612-3458, Facsimile: 212-612-3203, or such other
address as the Fiscal Agent shall specify to the Indenture Trustee in writing.

 

The obligations of MBIA
under this Policy are irrevocable, primary, absolute and unconditional (except
as expressly provided herein) and neither the failure of the Trust, the
Indenture Trustee, the Owner Trustee, the Originator, HACC, the Subservicer,
the Seller, the Master Servicer or any other person to perform any covenant or
obligation in favor of MBIA (or otherwise), nor the failure or omission to make
a demand permitted hereunder, not the commencement of any bankruptcy, debtor or
other insolvency proceeding by or against the Trust, the Indenture Trustee, the
Originator, HACC, the Subservicer, , the Owner Trustee, the Seller, the Master
Servicer or any other person shall in any way affect or limit MBIA’s
obligations under this Policy.  If a
successful action or proceeding to enforce this Policy is brought by the
Indenture Trustee, the Indenture Trustee shall be entitled to recover from MBIA
costs and expenses reasonably incurred, including without limitation reasonable
fees and expenses of counsel.

 

This Policy and the
obligations of MBIA hereunder shall terminate on the date (the “Termination
Date”)that is one year and one day following the earlier of (a) the Final
Scheduled

 

 

Distribution Date
and (b) the date on which all amounts required to be paid to the Owners have
been paid in full, provided, that, if any Insolvency Proceeding
is existing by or against the Originator, the Trust, the Seller or the Bank
during such one year and one day period, then this Policy and MBIA’s
obligations hereunder shall terminate on the date of the conclusion or
dismissal of such Insolvency Proceeding without continuing jurisdiction by the
court in such Insolvency Proceeding, provided, further that, and
notwithstanding anything herein to the contrary, this Policy shall not
terminate prior to the date on which MBIA has made all payments required to be
made under the terms of this Policy in respect of Avoided Payments.

 

All payments made
hereunder by MBIA shall be made with MBIA’s own funds.  The payment by MBIA to the Indenture Trustee
of any amount guaranteed by the first paragraph of this Policy, and the payment
by MBIA of any Avoided Payment shall constitute “payments” for all
purposes under this Policy.  In no event
shall any payment be made under this Policy on account of (a) the failure of
the Indenture Trustee to deliver the proceeds of any such payment to any Owner
or (b) the failure of any such Owner to claim any such proceeds from the
Indenture Trustee.

 

This Policy is not covered by the
property/casualty insurance fund specified in Article Seventy-Six of the
New York State insurance law.

 

This Policy sets forth in
full the undertaking of MBIA, and shall not, except with the prior written
consent of the Indenture Trustee or otherwise in accordance with the express
terms hereof, be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto and may not be
canceled or revoked by MBIA prior to the Termination Date.  The Premium on this Policy is not refundable
for any reason.

 

This Policy shall be
returned to MBIA by the Indenture Trustee on the Termination Date.

 

THIS POLICY SHALL BE
CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OR THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION.

 

 

IN WITNESS WHEREOF, MBIA
has caused this Policy to be executed on the date first written above.

 

 

	
   

  	
  MBIA INSURANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary C. Dunton

  	
   

  
	
   

  	
  Name:  Gary
  C. Dunton

  
	
   

  	
  Title: 
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adam M. Carta

  	
   

  
	
   

  	
  Name: Adam M. Carta

  
	
   

  	
  Title: 
  Assistant Secretary

  

 

 

Exhibit
A to Financial Guarantee Insurance Policy, Number 42851

 

	
  MBIA Insurance Corporation

  
	
  113 King Street

  
	
  Armonk, NY 
  10504

  
	
  Attention: 
  Insured Portfolio Management,

  
	
   

  	
  Structured Finance

  

 

NOTICE FOR PAYMENT

UNDER FINANCIAL GUARANTEE INSURANCE POLICY NUMBER 42851

 

Wells Fargo Bank Minnesota, National Association, as
indenture trustee (the “Indenture Trustee”), hereby certifies to MBIA
Insurance Corporation (“MBIA”) with reference to that certain Financial
Guarantee Insurance Policy, Number 42851, dated November 26, 2003 (the “Policy”),
issued by MBIA in favor of the Indenture Trustee under the Indenture, dated as
of November 26, 2003 between Household Automotive Trust 2003-2 and the
Indenture Trustee as follows:

 

1.               The Indenture
Trustee is the Indenture Trustee under the Indenture and the Beneficiary under
the Policy.

 

2.               The Indenture
Trustee is entitled to make a demand under the Policy pursuant to
Section 3.03(c) of the Series Supplement [in connection with an Avoided
Payment as defined in the Policy].

 

[For a Notice for Payment
in respect of a Distribution Date use the following paragraphs 3, 4 and 5.]

 

3.               This notice relates
to the [insert date] Distribution Date. The amount claimed under the Policy, as
specified to the Indenture Trustee by the Master Servicer, for such
Distribution Date is
$               .
The amount demanded by this notice does not exceed amounts permitted to be
drawn under the Policy.

 

4.               The Indenture
Trustee demands payment of
$               
which is an amount equal to the Deficiency Amount for such Distribution Date.

 

5.               The amount demanded
is to be paid in immediately available funds to the Collection Account at
               ,
account number
               .

 

[For a Notice for Payment
in respect of an Avoided Payment use the following paragraphs 3 and 4.]

 

3.               The Indenture
Trustee hereby represents and warrants, based upon information available to it,
that (i) the amount entitled to be drawn under the Policy on the date hereof in
respect of Avoided Payments is the amount paid or to be paid simultaneously
with such draw on the Policy, by all Noteholders [$                                                   ]
(the “Avoided Payment Amount”), (ii) each Noteholder with respect to
which the drawing is being made under the Policy has paid or simultaneously
with such draw on the Policy will pay such Avoided Payment, and (iii) the
documents required by the Policy

 

 

to be delivered in
connection with such Avoided Payment and Avoided Payment Amount have previously
been presented to MBIA or are attached hereto.

 

4.               The amount demanded
is to be paid in immediately available funds by wire transfer to
[                                    ].

 

[For a Notice for Payment
relating to both an Avoided Payment and a Distribution Date, use the following
paragraphs 3, 4, 5 and 6.]

 

3.               This notice relates
to the [insert date] Distribution Date. The amount claimed under the Policy, as
specified to the Indenture Trustee by the Master Servicer, for such
Distribution Date is
$               .
The amount demanded by this notice does not exceed amounts permitted to be
drawn under the Policy.

 

4.               The Indenture
Trustee demands payment of
$               
which is an amount equal to the Deficiency Amount for such Distribution Date.

 

5.               The Indenture
Trustee hereby represents and warrants, based upon information available to it,
that (i) the amount entitled to be drawn under the Policy on the date hereof in
respect of Avoided Payments is the amount paid or to be paid simultaneously
with such draw on the Policy, by all Noteholders
[$               ]
(the “Avoided Payment Amount”), and (ii) the documents required by the
Policy to be delivered in connection with such Avoided Payment and Avoided
Payment Amount have previously been presented to MBIA or are attached hereto.

 

6.               The amount demanded
is to be paid in immediately available funds by wire transfer to
[                   ].

 

Capitalized term used
herein and not otherwise defined herein shall have the meaning assigned to them
in the Policy.

 

Any Person Who Knowingly And With
Intent To Defraud Any Insurance Company Or Other Person Files An Application
For Insurance Or Statement Of Claim Containing Any Materially False
Information, Or Conceals For The Purpose Of Misleading Information Concerning
Any Fact Material Thereof, Commits A Fraudulent Insurance Act, Which Is A
Crime, And Shall Be Subject To A Civil Penalty Not To Exceed Five Thousand
Dollars And The Stated Value Of The Claim For Each Such Violation.

 

 

IN WITNESS WHEREOF, this
notice has been executed this         
day of
                ,
      .

 

	
   

  	
  Wells Fargo Bank Minnesota, National Association

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  

 

 

Exhibit
B to Financial Guarantee Insurance Policy, Number 42851

 

Form of
Assignment

 

Reference is made
to the Financial Guarantee Insurance Policy No. 42851, dated November 26,
2003, (the “Policy”) issued by MBIA Insurance Corporation (“MBIA”)
relating to the $750,000,000 Household Automotive Trust 2003-2 1.14% Asset
Backed Notes, Class A-1, 1.56% Asset Backed Notes, Class A-2, 2.31% Asset
Backed Notes, Class A-3, and 3.02% Asset Backed Notes, Class A-4.  Unless otherwise defined herein, capitalized
terms used in this Assignment shall have the meanings assigned thereto in the
Policy as incorporated by reference therein. 
In connection with the Avoided Payment of
[$         ] paid by the
undersigned (the “Holder”) on
[               ]
and the payment by MBIA in respect of such Avoided Payment pursuant to the
Policy, the Holder hereby irrevocably and unconditionally, without recourse,
representation or warranty (except as provided below), sells, assigns,
transfers, conveys and delivers all of such Holder’s rights, title and interest
in and to any rights or claims, whether accrued, contingent or otherwise, which
the Holder now has or may hereafter acquire, against any person relating to,
arising out of or in connection with such Avoided Payment.  The Holder represents and warrants that such
claims and rights are free and clear of any lien or encumbrance created or
incurred by such Holder.

 

	
   

  	
   

  	
   

  
	
   

  	
  Holder(1)

  

 

 

(1)     In the event that the terms
of this form of assignment are reasonably determined to be insufficient solely
as a result of a change of law or applicable rules after the date of the Policy
to fully vest all of the Holder’s right, title and interest in such rights and
claims, the Holder and MBIA shall agree on such other form as is reasonably
necessary to effect such assignment, which assignment shall be without recourse,
representation or warranty except as provided above.

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