EXHIBIT 10.4
EXECUTION COPY
INDEMNIFICATION AGREEMENT (the "AGREEMENT"), dated November 21, 2002
by and among MBIA INSURANCE CORPORATION ("MBIA"), HOUSEHOLD AUTO RECEIVABLES
CORPORATION (the "SELLER"), HOUSEHOLD FINANCE CORPORATION ("HFC"), DEUTSCHE BANK
SECURITIES INC. ("DEUTSCHE BANK"), BANC OF AMERICA SECURITIES LLC ("BANC OF
AMERICA"), BANC ONE CAPITAL MARKETS, INC. ("BANC ONE"), BARCLAYS CAPITAL INC.
("BARCLAYS") and ▇.▇. ▇▇▇▇▇▇ SECURITIES INC. (▇.▇. ▇▇▇▇▇▇") (Deutsche Bank, Banc
of America, Banc One, Barclays and ▇.▇. ▇▇▇▇▇▇ together, the "UNDERWRITERS" and
individually, an "UNDERWRITER").
The Seller will sell to the Household Automotive Trust 2002-3 (the
"TRUST") certain assets (the "ASSETS") consisting of a pool of motor vehicle
retail installment sales contracts (the "CONTRACTS"), under the Master Sale and
Servicing Agreement dated as of November 18, 2002 (the "SALE AND SERVICING
AGREEMENT") among the Trust, the Seller, HFC as Master Servicer and U.S. Bank
National Association, as Indenture Trustee, and the Series Supplement dated as
of November 18, 2002, (the "SERIES SUPPLEMENT") among HFC as Master Servicer,
the Trust, the Seller, the Indenture Trustee and Wilmington Trust Company as the
Owner Trustee.
The Seller has agreed to cause the Trust to sell to the Underwriters
the Class A-1 Notes, Class A-2-A Notes, Class A-2-B Notes, Class A-3-A Notes,
Class A-3-B Notes, Class A-4-A Notes and Class A-4-B Notes (collectively, the
"NOTES").
In connection with the public offering and sale of the Notes, the
Seller, as registrant on behalf of the Trust, has filed with the Securities and
Exchange Commission (the "COMMISSION") a registration statement on Form S-3
Registration No. 333-100512, for the registration under the Securities Act of
1933, as amended (the "ACT"), of the Notes and will file the prospectus
supplement dated November 21, 2002 with the Commission. The registration
statement including all exhibits and amendments thereto in the form in which it
became effective under the Act on November 15, 2002 (the "EFFECTIVE DATE")
including any documents incorporated by reference therein at such time and all
post-effective amendments thereto on the dates they became effective is referred
to herein as the "REGISTRATION STATEMENT". The prospectus dated November 15,
2002 and the prospectus supplement dated November 21, 2002, in the respective
forms in which they were or will be filed with the Commission pursuant to Rule
424(b)(2) under the Act, each including any documents incorporated by reference
therein, are referred to herein as the "CORE PROSPECTUS" and the "PROSPECTUS
SUPPLEMENT", respectively and collectively, the "PROSPECTUS".
MBIA is authorized to transact a financial guaranty insurance business
in the State of New York and has agreed to issue to the Indenture Trustee, for
the benefit of the holders of the Notes, the Note Insurance Policy providing
limited indemnity for, among other things, certain shortfalls in required
distributions on the Notes.
MBIA provided certain information to the Seller for inclusion in the
Prospectus Supplement. Such information is presented or incorporated by
reference into the Prospectus Supplement under the caption "The Note Guaranty
Insurance Policy and the Insurer" in the Prospectus Supplement. Such
information, to the extent included in the Prospectus Supplement or incorporated
by reference therein, is collectively referred to herein as the "MBIA
INFORMATION". MBIA reviewed the Prospectus Supplement and approved the
presentation of the MBIA Information therein.
The Underwriters provided the information set forth under the caption
"Underwriting" of the Prospectus Supplement distributed by the Underwriters and
filed as a post-effective amendment to the Registration Statement or the
Prospectus (such information is collectively referred to herein as the
"UNDERWRITER INFORMATION"). The Underwriters have reviewed the Prospectus
Supplement and approved the presentation of the Underwriter Information therein.
Except as otherwise indicated, capitalized terms used herein but not
otherwise defined shall have the meanings assigned thereto in the Underwriting
Agreement dated November 21, 2002 (the "UNDERWRITING AGREEMENT") among HFC, the
Seller, HAFC, HACC and Deutsche Bank, as representative of the Underwriters.
For good and valuable consideration, receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. MBIA AGREEMENTS AND REPRESENTATIONS. MBIA agrees and represents as follows:
(a) MBIA is a New York company which is licensed, under the laws of the
State of New York, to write financial guarantee insurance and is
qualified or licensed to do business in all other jurisdictions in
which such qualification or licensing is necessary.
(b) MBIA has the corporate power and authority to execute and deliver this
Agreement and to perform all its obligations hereunder.
(c) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action (corporate and other).
(d) The MBIA Information in the Prospectus Supplement on the date thereof
did not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(e) The Note Insurance Policy and any amendments thereto will be filed
with the Superintendent of the New York State Insurance Department
within 30 days of their issuance, if not previously so filed.
2. UNDERWRITERS' AGREEMENT. Each Underwriter individually agrees and
represents with respect to the offering of the Notes, that it has not and
will not use any prospectus containing information relating to MBIA (other
than Prospectus Supplement and any further supplement thereto) unless such
information relating to MBIA has been furnished by MBIA for inclusion
therein and has been approved by MBIA in writing, such approval not to be
unreasonably withheld.
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3. SELLER'S AND HFC'S REPRESENTATIONS AND WARRANTIES. Each of the Seller and
HFC, represents and warrants the following:
(a) All authorizations, licenses, permits, certificates, franchises,
consents, approvals and undertakings which are required to be obtained
by it under any applicable law which are material to (i) the conduct
of its business, (ii) the ownership, use, operation or maintenance of
its properties and (iii) the execution, delivery and performance by
HFC and the Seller of its obligations to MBIA under or in connection
with this Agreement have been received to the extent required for the
execution and delivery and performance by it of this Agreement, and
all such authorizations, licenses, permits, certificates, franchises,
consents, approvals and undertakings are in full force and effect.
(b) The execution and delivery of this Agreement by it, as Seller and in
the case of HFC, individually and as Servicer, and the consummation of
the transactions contemplated hereby and by the Underwriting Agreement
were not, and will not be, made (i) in contemplation of its
insolvency, (ii) with the intent to hinder, delay or defraud any of
its creditors, any federal banking agency or any other person or
entity, (iii) after the commission by it of any act of insolvency or
(iv) without fair consideration. It is not possessed of assets or
capital unreasonably small in value in relation to its business, and
its remaining assets or capital will not be unreasonably small in
value in relation to its business after giving effect to its transfer
of the Trust Property to the Trust and the consummation of the other
transactions contemplated by the Sale and Servicing Agreement and the
Series Supplement. It is not insolvent as at the date hereof, and will
not be rendered insolvent by virtue of, this Agreement. By
consummating the transactions contemplated by this Agreement, it does
not intend to, or believe that it will, incur debts beyond its ability
to pay such debts as they become due.
(c) The Registration Statement has been prepared by the Seller in
conformity with the requirements of the Act and the rules and
regulations of the Commission thereunder, has been filed with the
Commission, and has become effective under the Act on the Effective
Date and the Core Prospectus and the Prospectus Supplement have been
filed with the Commission. The Registration Statement, the Core
Prospectus and the Prospectus Supplement conform, and any further
amendments or supplements to the Registration Statement and the Core
Prospectus and the Prospectus Supplement will on the date they are
filed with the Commission, conform with the requirements of the Act
and the rules and regulations of the Commission thereunder.
(d) Except for the MBIA Information and the Underwriter Information (as
defined herein), (i) the Registration Statement on the Effective Date
neither contained any untrue statement of a material fact nor omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (ii) neither the Core
Prospectus nor the Prospectus Supplement on the respective dates
thereof contained any untrue statement of a material fact or omitted
to state
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a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
4. INDEMNIFICATION AND CONTRIBUTION.
(a) MBIA agrees to indemnify and hold harmless the Seller and each of the
Underwriters against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become
subject under the Act, the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), any other Federal or state statutory law or
regulation, at common law or otherwise, as incurred, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the MBIA Information
included in the Prospectus Supplement, or, to the extent approved by
MBIA in writing, in any amendment or supplement to the Prospectus
Supplement, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such
indemnified party, for any legal or other expenses reasonably incurred
by it, as incurred, in connection with investigating or defending of
any such loss, claim, damage, liability or action. This
indemnification agreement will be in addition to any liability which
MBIA may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless MBIA against any and all losses, claims, damages or
liabilities, joint or several, to which it may become subject under
the Act, the Exchange Act, any other Federal or state statutory law or
regulation, at common law or otherwise, as incurred, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Underwriter Information
included in the Prospectus Supplement or arise out of or are based
upon the omission or alleged omission to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and agrees
to reimburse MBIA for any legal or other expenses reasonably incurred
by it, as incurred, in connection with investigating or defending of
any such loss, claim, damage, liability or action. This
indemnification agreement will be in addition to any liability which
any Underwriter may otherwise have.
(c) HFC agrees to indemnify and hold harmless MBIA against any and all
losses, claims, damages or liabilities, joint or several, to which
MBIA may become subject under the Act, the Exchange Act, any other
Federal or state statutory law or regulation, at common law or
otherwise, as incurred, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement on the date the most
recent amendment thereof was declared effective, or arise out of or
are based upon the omission or
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alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, not misleading,
or arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Core Prospectus
or the Prospectus Supplement, or in any further supplement thereto or
in the Term Sheets dated November 18, 2002 or November 21, 2002 or
arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and agrees to reimburse MBIA for any legal or other
expenses reasonably incurred by it, as incurred, in connection with
investigating or defending of any such loss, claim, damage, liability
or action; PROVIDED, HOWEVER, that HFC will not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of the
Registration Statement, the Core Prospectus or the Prospectus
Supplement in reliance on and in conformity with the MBIA Information
or the Underwriter Information. This indemnification agreement will be
in addition to any liability which HFC may otherwise have.
(d) Promptly after receipt by an indemnified party under this Section 4 of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying
party under this Section 4, notify the indemnifying party in writing
of the commencement thereof; but the failure so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party except to the extent the indemnifying
party is prejudiced thereby. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled,
at its own expense, to participate therein and, to the extent that it
may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party) and after
notice from the indemnifying party to such indemnified party to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 4 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense of any such action other than reasonable costs of
investigation unless, (i) the defendants in any such action include
both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be
legal defenses available to it that are different from or additional
to those available to the indemnifying party, or one or more
indemnified parties, in which event the indemnified party shall have
the right to select separate counsel (in addition to any local
counsel) to assert such legal defenses and to otherwise participate in
the defense of such action on behalf and under the control of the
indemnified party, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the
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indemnifying party; then, in any such event, the indemnifying party
shall be liable to such indemnified party under this Section 4 for any
reasonable legal and other expenses subsequently incurred by such
indemnified party in connection with the defense of any such action
including, without limitation, the reasonable costs of investigation.
No indemnifying party shall, without the prior written consent of each
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that
are the subject matter of such proceeding or threatened proceeding.
(e) If the indemnification provided for in this Section 4 is unavailable
or insufficient to hold harmless an indemnified party under
subsections (a), (b) or (c) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as
a result of the losses, claims, damages or liabilities referred to in
subsection (a), (b) or (c) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Seller
(in the case of HFC as indemnifying party), MBIA and the Underwriters
from the offering and sale of the Notes 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
benefits referred to in clause (i) above but also the relative fault
of the Seller (in the case of HFC as indemnifying party), MBIA and the
Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities, or actions in
respect thereof as well as any other relevant equitable
considerations. The relative benefits received by the Seller (in the
case of HFC as indemnifying party), MBIA and the Underwriters shall be
deemed to be in the same proportion as (i) the total public offering
price (net of total underwriting discounts and before deducting
expenses) received by the Seller (in the case of HFC as indemnifying
party) bears to (ii) the total premiums received by MBIA, and (iii)
the total underwriting discounts and commissions (as specified on the
cover page of the Prospectus Supplement) received by the Underwriters
in connection with the offering and sale of the Notes, as the case may
be. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact
relates to information supplied by the Seller (in the case of HFC as
indemnifying party), MBIA or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages, or
liabilities referred to in the first sentence of this subsection (e)
shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any action or claim which is the subject of this subsection
(e). Notwithstanding the provisions of this subsection (e), no
Underwriter shall be required to contribute to MBIA hereunder any
amount in excess of the underwriting discounts and commissions
applicable to the Notes purchased by such Underwriter under the
Underwriting Agreement. The Seller (in the case of
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HFC as indemnifying party), MBIA and each Underwriter agree that it
would not be just and equitable if contribution pursuant to this
subsection (e) were determined by pro-rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (e). No person
guilty of fraudulent misrepresentation (within the meaning of Section
ll(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(f) The obligations of HFC under this Section 4 shall extend, upon the
same terms and conditions, to each parent, subsidiary or affiliate of
MBIA and any shareholder, employee, agent, director or officer of MBIA
and any person, if any, who controls any of the foregoing within the
meaning of Section 15 of the Act; and the obligations of the
Underwriters under this Section shall be several and not joint and
shall extend, upon the same terms and conditions, to each parent,
subsidiary or affiliate of MBIA and any shareholder, employee, agent,
director or officer of MBIA and any person, if any, who controls any
of the foregoing within the meaning of Section 15 of the Act; and the
obligations of MBIA under this Section shall extend, upon the same
terms and conditions, to each parent, subsidiary or affiliate of the
Seller and any shareholder, employee, agent, director or officer of
the Seller and any person, if any, who controls any of the foregoing
within the meaning of Section 15 of the Act and each parent,
subsidiary or affiliate of each Underwriter and any shareholder,
employee, agent, director or officer of each Underwriter and any
person, if any, who controls any of the foregoing within the meaning
of Section 15 of the Act.
5. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The agreements,
representations, warranties, indemnities, and other statements of the
parties hereto in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any other parties hereto or any of
the officers, directors or controlling persons referred to in Section 4
hereof, and will survive delivery of and payment for the Notes. The
provisions of Section 4 hereof shall survive the termination or
cancellation of this Agreement.
6. NOTICES. All communications hereunder shall be in writing and,
IF TO THE SELLER:
Household Auto Receivables Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Household International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO HFC:
Household Finance Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO AN UNDERWRITER:
Deutsche Bank Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO MBIA
MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Insured Portfolio Management,
Structured Finance
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & Bird LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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7. MISCELLANEOUS. This Agreement is to be governed by, and construed in
accordance with, the laws of the State of New York; it may be executed in two or
more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns and the officers and
directors and controlling persons referred to in Section 4 hereof, and no other
person shall have any right or obligation hereunder. This Agreement supersedes
all prior agreements and understandings relating to the subject matter hereof.
Neither this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement, all as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Assistant Secretary
HOUSEHOLD AUTO RECEIVABLES CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President & Assistant
Treasurer
HOUSEHOLD FINANCE CORPORATION
By: /s/ ▇. ▇. ▇▇▇▇, ▇▇.
----------------------------------
Name: ▇. ▇. ▇▇▇▇, ▇▇.
Title: Vice President & Treasurer
DEUTSCHE BANK SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL INC.
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.
By: DEUTSCHE BANK SECURITIES INC., as
representative of the Underwriters
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Director
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