EXHIBIT 10.5
EXECUTION COPY
HOUSEHOLD 2002-2
INDEMNIFICATION AGREEMENT
among
AMBAC ASSURANCE CORPORATION,
as Insurer,
and
DEUTSCHE BANK SECURITIES INC.,
as Underwriter
Dated as of August 21, 2002
TABLE OF CONTENTS
Page
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Section 1. Definitions.................................................................1
Section 2. Representations and Warranties of Ambac.....................................2
Section 3. Representations, Warranties and Agreements of the Underwriter..............3
Section 4. Indemnification.............................................................4
Section 5. Indemnification Procedures..................................................5
Section 6. Contribution................................................................5
Section 7. Miscellaneous...............................................................6
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INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (as may be amended, modified or supplemented from
time to time, this "AGREEMENT") dated as of August 21, 2002 by and among
AMBAC ASSURANCE CORPORATION, as Insurer ("AMBAC") and DEUTSCHE BANK
SECURITIES INC., as Underwriter (the "UNDERWRITER").
Section 1. DEFINITIONS. Capitalized terms used but not otherwise
defined herein shall have the meanings specified in the Underwriting
Agreement or, if not defined therein, in the Indenture. For purposes of this
Agreement, the following terms shall have the meanings provided below:
"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.
"AMBAC INFORMATION" has the meaning provided in Section 2(g)
hereof.
"AMBAC PARTY" means any of Ambac, its subsidiaries and
Affiliates, and any shareholder, director, officer, employee, agent or
"controlling person," within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, of any of the
foregoing.
"CLASS A NOTES" means, collectively, $255,000,000 principal
amount of Class A-1 1.77 % Asset-Backed Notes, $345,000,000 principal
amount of Class A-2 2.15 % Asset-Backed Notes, $313,000,000 principal
amount of Class A-3 2.85 % Asset-Backed Notes and $287,000,000
principal amount of Class A-4 LIBOR + 0.30 % Asset-Backed Notes, issued
by the Issuer pursuant to the Indenture on the Date of Issuance.
"CLOSING DATE" means August 28, 2002.
"DATE OF ISSUANCE" means the date on which the Policy is issued
as specified therein.
"DERIVED INFORMATION" means such portion, if any, of the
information delivered to the Master Servicer or the Seller pursuant to
Section 7(N) of the Underwriting Agreement for filing with the
Securities and Exchange Commission on Form 8-K as (a) is not contained
in the Offering Document without taking into account information
incorporated therein by reference; (b) does not constitute
Seller-Provided Information; and (c) is of the type of information
defined as Collateral Term Sheets, Structural Term Sheets or
Computational Materials (as such terms are interpreted in the No-Action
Letters). For purposes of this definition, "Seller-Provided
Information" means (i) the information contained on any computer tape
furnished to the Underwriter by the Seller concerning the assets
comprising the Issuer. For purposes of this definition, "Collateral
Term Sheet" and "Structural Term Sheet" shall have the respective
meanings assigned to them in the February 13, 1995 letter (the "PSA
Letter") of Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ on behalf of the Public
Securities Association (which letter, and the Securities and Exchange
Commission staff's response thereto, were publicly available February
17, 1995). The term "Collateral Term Sheet" as used herein includes any
subsequent Collateral Term Sheet that reflects a substantive change in
the information presented. The term "Computational Materials" has the
meaning assigned to it in the May 17, 1994 letter (the "▇▇▇▇▇▇ letter"
and together with the PSA Letter, the "No-Action Letters") of ▇▇▇▇▇ &
Wood on behalf of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co., Inc. (which letter, and the
Securities and Exchange Commission staff's response thereto, were
publicly available May 20, 1994).
"FEDERAL SECURITIES LAWS" means the Securities Act, the Exchange
Act, the U.S. Trust Indenture Act of 1939, the U.S. Investment Company
Act of 1940, the U.S. Investment Advisers Act of 1940 and the U.S.
Public Utility Holding Company Act of 1935, each as amended from time
to time, and the rules and regulations in effect from time to time
under such Acts.
"INDEMNIFIED PARTY" means any party entitled to any
indemnification pursuant to Section 4 hereof.
"INDEMNIFYING PARTY" means any party required to provide
indemnification pursuant to Section 4 hereof.
"INDENTURE" means the Indenture dated as of August 8, 2002 by and
among the Issuer and the Trustee, as supplemented by the Series
Supplement.
"ISSUER" means Household Automotive Trust 2002-2, a Delaware
business trust.
"LOSSES" means (a) any actual out-of-pocket damages incurred by
the party entitled to indemnification or contribution hereunder, (b)
any actual out-of-pocket costs or expenses incurred by such party,
including reasonable fees or expenses of its counsel and other expenses
incurred in connection with investigating or defending any claim,
action or other proceeding which may entitle such party to be
indemnified hereunder, to the extent not paid, satisfied or reimbursed
from funds provided by any other Person other than an Affiliate of such
party (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person), plus (c)
interest on the amount paid by the party entitled to indemnification or
contribution from the date of such payment to the date of payment by
the party who is obligated to indemnify or contribute hereunder at the
statutory rate applicable to judgments for breach of contract.
"MASTER SERVICER" means Household Finance Corporation, as Master
Servicer under the Master Sale and Servicing Agreement.
"OFFERING DOCUMENT" means, taken together, the Prospectus
Supplement dated August 21, 2002 (the "PROSPECTUS SUPPLEMENT") and the
Prospectus dated May 22, 2002 (the "PROSPECTUS") of the Issuer,
relating (INTER ALIA) to the Class A Notes.
"POLICY" means the Note Guaranty Insurance Policy No. AB0583BE,
dated August 28, 2002, including any endorsements thereto, issued by
Ambac with respect to the Class A Notes.
"SELLER" means
Household Auto Receivables Corporation, a Nevada
corporation, as Seller under the Master Sale and Servicing Agreement,
and its successors in interest to the extent permitted under the Master
Sale and Servicing Agreement.
"TRUSTEE" means JPMorgan Chase Bank, or any successor Trustee
under the Indenture.
"UNDERWRITER" means Deutsche Bank Securities Inc. as Underwriter.
"UNDERWRITER INFORMATION" consists of the information included in
the Prospectus Supplement under the heading "Underwriting".
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated
August 21, 2002, among the Underwriter, Barclays Capital Inc., Banc of
America Securities LLC, ▇.▇. ▇▇▇▇▇▇ Securities Inc., Merrill, Lynch,
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, Household Finance Corporation, a
corporation organized and existing under the laws of Delaware,
individually and
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as Master Servicer,
Household Auto Receivables Corporation, a
corporation organized and existing under the laws of Nevada and a
wholly owned subsidiary of Household Finance Corporation, individually
and as Seller, Household Automotive Finance Corporation, a corporation
organized and existing under the laws of Delaware and a wholly owned
subsidiary of Household Finance Corporation, Household Automotive
Credit Corporation, a corporation organized and existing under the laws
of Delaware and a wholly owned subsidiary of Household Automotive
Finance Corporation, and Household Bank F.S.B., a federal savings bank,
with respect to the offer and sale of the Class A Notes, as amended,
modified or supplemented from time to time.
"UNDERWRITING PARTY" means, with respect to the Underwriter, any
of the following: the Underwriter, its parent, subsidiaries and
Affiliates and any shareholder, director, officer, employee, agent or
"controlling person," within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, of any of the
foregoing.
Section 2. REPRESENTATIONS AND WARRANTIES OF AMBAC. Ambac represents,
warrants and agrees as follows as of the Closing Date:
(a) ORGANIZATION AND LICENSING. Ambac is a stock insurance corporation
duly organized, validly existing and in good standing under the laws of the
State of Wisconsin.
(b) CORPORATE POWER. Ambac has the corporate power and authority to
issue the Policy and execute and deliver this Agreement and to perform all of
its obligations hereunder and thereunder.
(c) AUTHORIZATION; APPROVALS. All proceedings legally required for the
execution, delivery and performance of the Policy and this Agreement have
been taken and all licenses, orders, consents or other authorizations or
approvals of Ambac's Board of Directors or stockholders or any governmental
boards or bodies legally required for the enforceability of the Policy and
this Agreement have been obtained or are not material to the enforceability
of the Policy and this Agreement.
(d) ENFORCEABILITY. The Policy, when issued, will constitute, and this
Agreement constitutes, legal, valid and binding obligations of Ambac,
enforceable in accordance with their respective terms, subject to insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity and subject
to principles of public policy limiting the right to enforce the
indemnification provisions contained therein and herein, insofar as such
provisions relate to indemnification for liabilities arising under Federal
Securities Laws.
(e) NO CONFLICT. The execution by Ambac of the Policy and this
Indemnification Agreement will not, and the performance of the provisions
thereof and hereof will not, conflict with or result in a breach of any of
the terms, conditions or provisions of the Restated Articles of Incorporation
or By-Laws of Ambac, or any restriction contained in any contract, agreement
or instrument to which Ambac is a party or by which it is bound; constitute a
default under any of the foregoing which would materially and adversely
affect its ability to perform its obligations under the Policy or this
Agreement, or violate any requirements of law, rules or regulations which
would materially and adversely affect its ability to perform its obligations
under the Policy or this
Indemnification Agreement.
(f) EXEMPT FROM REGISTRATION. The Policy, when issued, will be exempt
from registration under the Securities Act.
(g) AMBAC INFORMATION. The Ambac Information does not contain an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading. As used herein "Ambac Information" means the
information included in the Prospectus Supplement under the caption "The Note
Guaranty Insurance Policy and the Insurer."
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(h) OPINION OF COUNSEL. Ambac will furnish to the Underwriter on the
Closing Date an opinion of one of its legal officers.
Section 3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE
UNDERWRITER. The Underwriter represents, warrants and agrees as follows:
(a) It will make offers and sales of the Class A Notes in compliance
with all legal requirements and only as described in the Offering Document
and the Underwriting Agreement.
(b) It will not use, or distribute to any Person for use, or permit the
use of, any Offering Document in connection with the offer and sale of the
Class A Notes unless such Offering Document includes or incorporates by
reference such information as has been furnished by Ambac for inclusion
therein and the information therein or incorporated by reference therein
concerning Ambac has been approved by Ambac in writing. It will not include
any information relating to Ambac except as furnished by Ambac. Ambac hereby
consents to inclusion of the Ambac Information in the Offering Document.
Section 4. INDEMNIFICATION.
(a) Ambac hereby agrees, upon the terms and subject to the conditions
provided herein, to pay and protect, indemnify, defend and hold harmless each
of the Underwriter Parties against any and all Losses of any nature arising
out of or by reason of (i) any untrue statement of a material fact contained
in the Ambac Information, (ii) any omission or alleged omission to state a
material fact required to be stated, or necessary to make the statements, in
light of the circumstances under which they were made, not misleading, in the
Ambac Information or (iii) a breach of any of the representations, warranties
or agreements of Ambac contained in Section 2 hereof.
(b) The Underwriter hereby agrees, upon the terms and subject to the
conditions provided herein, to pay and protect, indemnify, defend and hold
harmless each Ambac Party against any and all Losses of any nature arising
out of or by reason of (i) any untrue statement of a material fact contained
in the Underwriter Information or the Derived Information, (ii) any omission
or alleged omission to state a material fact required to be stated, or
necessary to make the statements, in light of the circumstances under which
they were made, not misleading, in the Underwriter Information or the Derived
Information or (iii) any breach of any of the representations, warranties or
agreements of the Underwriter contained in Section 3 hereof.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
(d) The indemnity agreements contained in this Section 4 shall be in
addition to any liability which any Indemnifying Party may otherwise have to
an Indemnified Party.
Section 5. INDEMNIFICATION PROCEDURES. In the event that any action or
regulatory proceeding shall be commenced or claim asserted which may entitle
an Indemnified Party to be indemnified under this Agreement, such party shall
give the Indemnifying Party written or telegraphic notice of such action or
claim reasonably promptly after receipt of written notice thereof; PROVIDED,
HOWEVER, that the failure to notify the Indemnifying Party shall not relieve
it from any liability it may have to an Indemnified Party. If any such action
or claim shall be brought against an Indemnified Party, and it shall notify
the Indemnifying Party thereof, the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and shall pay the fees
and disbursements of such counsel related to such proceeding. The Indemnified
Party will have the right to employ its own counsel in any such action in
addition to the counsel retained by the Indemnifying Party for the benefit of
the Indemnified Party, but the fees and expenses of such counsel will be at
the expense of such Indemnified Party, unless (a) the employment of counsel
by the Indemnified Party at the Indemnifying Party's expense has been
authorized in writing by
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the Indemnifying Party, (b) the Indemnifying Party has not in fact employed
counsel reasonably satisfactory to the Indemnified Party within a reasonable
time after receiving notice of the commencement of the action, or (c) the
named parties to any such action or proceeding (including any impleaded
parties) include both the Indemnifying Party and one or more Indemnified
Parties, and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them (it
being understood, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all Underwriter Parties and one such firm for all
Ambac Parties, as the case may be, in addition to local counsel (if
necessary), which firm shall be designated in writing by the relevant
Underwriter in respect of the Underwriter Parties and by Ambac in respect of
the Ambac Parties), in each of which cases the fees and expenses of counsel
will be at the expense of the Indemnifying Party and all such fees and
expenses will be reimbursed promptly as they are incurred. The Indemnifying
Party shall not be liable for any settlement of any such claim or action
unless the Indemnifying Party shall have consented thereto or be in default
in its obligations hereunder. Any failure by an Indemnified Party to comply
with the provisions of this Section shall relieve the Indemnifying Party of
liability only if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such prejudice.
Section 6. CONTRIBUTION.
(a) To provide for just and equitable contribution if the
indemnification provided by an Indemnifying Party is determined to be
unavailable or insufficient to hold harmless any Indemnified Party in respect
of any Losses referred to in Section 4, such Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses (i) in such proportion as shall be appropriate to
reflect the relative fault of the Indemnifying Party, on the one hand, and
the Indemnified Party, on the other hand, with respect to the matter that
resulted in such Losses or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative fault referred to in clause (i)
above but also the relative benefits received by each of such parties from
the offering of the Class A Notes, as well as any other relevant equitable
considerations; provided, however, that an Indemnifying Party shall in no
event be required to contribute to all Indemnified Parties an aggregate
amount in excess of the Losses incurred by such Indemnified Parties resulting
from the breach of representations, warranties or agreements contained in
this Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other, shall be determined by reference to,
among other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement relates
to information supplied by, or action within the control of, the Indemnifying
Party or the Indemnified Party and the parties' relative intent, knowledge
access to information and opportunity to correct or prevent such breach. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 6 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein.
(c) The parties agree that Ambac shall be solely responsible for the
Ambac Information, that the Underwriter shall be solely responsible for the
Underwriter Information and that the balance of the Offering Document shall
be the responsibility of the Master Servicer.
(d) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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(e) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
Section 7. MISCELLANEOUS.
(a) NOTICES. All notices and other communications provided for under
this Agreement shall be delivered to the address set forth below or to such
other address as shall be designated by the recipient in a written notice to
the other party or parties hereto.
If to Ambac: Ambac Assurance Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Structured Finance Department-ABS
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to the attention of: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Underwriter:
Deutsche Bank Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: [_______________]
Telecopy No.: [____________]
(b) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PROVISIONS.
(c) ASSIGNMENTS. This Agreement may not be assigned by any party
without the express written consent of each other party. Any assignment made
in violation of this Agreement shall be null and void.
(d) AMENDMENTS. Amendments of this Agreement shall be in writing signed
by each party hereto.
(e) SURVIVAL, ETC. The indemnity and contribution agreements contained
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Class A Notes or (iii) any termination of
this Agreement or the Policy.
(f) HEADINGS. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) COUNTERPARTS. This Agreement may be executed in counterparts by the
parties hereto, and all such counterparts shall constitute one and the same
instrument.
(h) NO BANKRUPTCY PETITION. Each of Ambac and the Underwriter covenants
and agrees that, prior to the date which is one year and one day or, if
longer, the applicable preference period then in effect, after the payment in
full of all securities issued by the Issuer, it will not institute against,
or join any other Person in instituting against, the Issuer or the Seller any
bankruptcy, reorganization,
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arrangement, insolvency or liquidation proceedings or other proceedings under
any bankruptcy, insolvency, reorganization or similar law.
(i) CONSENT TO JURISDICTION.
THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND ANY COURT IN THE STATE OF
NEW YORK LOCATED IN THE CITY AND
COUNTY OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH
NEW YORK STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT
A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE
VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE RELATED
DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH
COURTS.
To the extent permitted by applicable law, the parties hereto shall not
seek and hereby waive the right to any review of the judgment of any such
court by any court of any other nation or jurisdiction which may be called
upon to grant an enforcement of such judgment.
Nothing contained in this Agreement shall limit or affect each party's
right to serve process in any other manner permitted by law or to start legal
proceedings relating to this Agreement against any other party or its
property in the courts of any jurisdiction.
(i) NO RIGHT OF SET OFF. None of the parties shall be entitled to
exercise any right of set off with respect to any amounts owing by such party
under this Agreement against any amounts owing to such party under any other
agreement or obligation.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification
Agreement to be duly executed and delivered as of the date first above
written.
AMBAC ASSURANCE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
DEUTSCHE BANK SECURITIES INC.,
as representative of the several Underwriters
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Director
