<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1998
REGISTRATION NOS. 333-59837 AND 333-59837-01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
<TABLE>
<CAPTION>
I.R.S. EMPLOYER
REGISTRANT STATE OF ORGANIZATION IDENTIFICATION NO.
- ---------------------------------------------------- ------------------------ ----------------------------------------------------
<S> <C> <C>
HOUSEHOLD AUTOMOBILE DELAWARE NOT APPLICABLE
REVOLVING TRUST I
(Registrant Issuer of Notes)
HOUSEHOLD AUTO NEVADA 36-4220459
RECEIVABLES CORPORATION
(Registrant Sponsor of the Issuer)
</TABLE>
--------------------------
1111 Town Center Drive
Las Vegas, Nevada 89134
(Address of principal executive offices of Household Auto Receivables
Corporation)
------------------------------
PATRICK D. SCHWARTZ, ESQ.
Associate General Counsel and Assistant Secretary
HOUSEHOLD INTERNATIONAL, INC.
2700 Sanders Road
Prospect Heights, Illinois 60070
(847) 564-6301
(Name, Address, telephone number, including area code, of agent for service)
------------------------------
CHRISTOPHER J. DI ANGELO, ESQ.
DEWEY BALLANTINE LLP
1301 Avenue of the Americas
New York, New York 10019
(212) 259-8000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)(2)
<S> <C> <C> <C> <C>
Household Automobile Revolving Trust I, Series
1998-1, Class A-1 Notes......................... $1,000,000 100% $1,000,000 $295
Household Automobile Revolving Trust I, Series
1998-1, Class A-2 Notes......................... $1,000,000 100% $1,000,000 $295
Household Automobile Revolving Trust I, Series
1998-1, Class A-3 Notes......................... $1,000,000 100% $1,000,000 $295
Household Automobile Revolving Trust I, Series
1998-1, Class A-4 Notes......................... $1,000,000 100% $1,000,000 $295
Household Automobile Revolving Trust I, Series
1998-1, Class A-5 Notes......................... $1,000,000 100% $1,000,000 $295
Household Automobile Revolving Trust I, Series
1998-1, Class B-1 Notes......................... $1,000,000 100% $1,000,000 $295
</TABLE>
(1) Pursuant to Rule 457(a) the filing fee has been calculated based upon a bona
fide estimate of the maximum offering price for the securities.
(2) On July 23, 1998, $1,475 was sent by wire to the Commission. On September
24, 1998, an additional fee of $295 was wired to the Commission.
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 4, 1998
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
Issuer
SERIES 1998-1
<TABLE>
<S> <C>
$ % Class A-1 Notes $ Floating Rate Class A-4 Notes
$ % Class A-2 Notes $ % Class A-5 Notes
$ % Class A-3 Notes $ % Class B-1 Notes
</TABLE>
HOUSEHOLD AUTO RECEIVABLES CORPORATION
Seller
HOUSEHOLD FINANCE CORPORATION
Servicer
The Household Automobile Revolving Trust I (the "Issuer") was formed pursuant to
a Trust Agreement, dated as of March 1, 1998, as supplemented by a Series
1998-1 Supplement (the "Trust Agreement"), between Household Auto Receivables
Corporation (the "Seller") and Wilmington Trust Company, as owner trustee
(the "Owner Trustee") and will issue eight classes of Series 1998-1 Notes
(collectively, the "Notes") in the respective aggregate principal amounts
set forth herein. The Notes will be issued pursuant to an Indenture,
dated as of September 1, 1998, as supplemented by a Series 1998-1
Supplement (the "Indenture"), between the Issuer, Household Finance
Corporation, as master servicer (the "Servicer") and The Chase
Manhattan Bank, as indenture trustee (the "Indenture Trustee"). The
Issuer will also issue $ aggregate principal amount of
Series 1998-1 Certificates (the "Certificates"). The Notes and the
Certificates are collectively referred to herein as the "Series
1998-1 Securities". Only the Class A and Class B-1 Notes (the
"Offered Notes") are offered by this Prospectus. The Class B-2
and Class C Notes and the Certificates will be sold privately to
qualified institutional buyers or accredited investors (which
may include an affiliate of the Seller), and unless otherwise
registered with the Commission (as defined herein), any resale
of such securities will be made to
qualified institutional buyers or to accredited investors.
The Notes will be secured by a segregated pool of assets held by the Issuer (the
"Trust Assets"). The Trust Assets include non-prime retail installment sales
contracts secured by new and used automobiles, light trucks and vans
(the "Receivables"), including the collections thereon. For a
complete list of the Trust Assets, see "The Trust Assets--General"
on page 22. "Non-prime" means that due to past delinquencies or
defaults on credit obligations, a borrower is considered to
be a higher risk and may not be able to obtain credit
from traditional lenders such as banks, thrifts,
credit unions and captive finance companies. None
of the Receivables is more than 30 days
delinquent as of the Cut-Off Date. The
Receivables were purchased by Household
Automotive Finance Corporation
("HAFC") or by its predecessors or
affiliates, from motor vehicle
dealers.
Capitalized terms used herein are defined terms having specific meanings. An
"Index of Defined Terms" is set forth on
page 69 hereto and indicates the page on which such term is defined.
(COVER CONTINUED ON NEXT PAGE)
For a discussion of certain risks associated with an investment in the Notes,
see "Risk Factors" on page 15 herein.
THE NOTES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF HOUSEHOLD AUTO RECEIVABLES CORPORATION,
HOUSEHOLD FINANCE CORPORATION, HOUSEHOLD AUTOMOTIVE FINANCE CORPORATION,
THE OWNER TRUSTEE, THE INDENTURE TRUSTEE OR ANY AFFILIATE THEREOF,
EXCEPT TO THE EXTENT DESCRIBED HEREIN. NONE OF THE NOTES OR THE
RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC(1) DISCOUNT SELLER(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Class A-1 Note.......................... % % %
Per Class A-2 Note.......................... % % %
Per Class A-3 Note.......................... % % %
Per Class A-4 Note.......................... % % %
Per Class A-5 Note.......................... % % %
Per Class B-1 Note.......................... % % %
Total....................................... $ $ $
</TABLE>
- ------------------------------
(1) Plus accrued interest, if any, from , 1998.
(2) Before deducting expenses, estimated to be $.
The Offered Notes are offered by the Underwriters when, as and if issued by
the Issuer, delivered to and accepted by, the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of such
Notes will be made in book-entry form only through the facilities of The
Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System
on or about , 1998.
<PAGE>
CREDIT SUISSE FIRST BOSTON
The date of this Prospectus is , 1998.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Prior to the issuance of the Notes, the Receivables will have been sold by
HAFC to the Seller and the Seller will have sold the Receivables to the Issuer.
The aggregate principal balance of the pool of Receivables as of the Cut-Off
Date was $640,909,979.40.
Interest will accrue on each of the Class A-1, Class A-2, Class A-3, Class
A-5 and Class B-1 Notes at the respective fixed per annum rates specified above.
Interest will accrue on the Class A-4 Notes at a floating rate equal to LIBOR
(as defined herein) plus % per annum. The Issuer will have the benefit of
an interest rate cap agreement (the "Interest Rate Cap"), pursuant to which
funds will be deposited in the Collection Account by Westdeutsche Landesbank
Girozentrale, New York Branch (the "Interest Rate Cap Provider") in the event
LIBOR exceeds %. Payments received pursuant to the Interest Rate Cap will be
available to make payments on the Notes. See "Description of the Notes--
Payments of Interest", "--Payments of Principal", "--The Interest Rate Cap" and
"--Payment Priorities." Payments of interest and principal on the Notes will be
made on the seventeenth day of each month, or if any such day is not a Business
Day, on the next succeeding Business Day, commencing 17, 1998 (each, a
"Payment Date").
There is currently no secondary market for the Notes. There can be no
assurance that a secondary market for the Notes will develop or, if it does
develop, that it will continue. The Notes will not be listed on any securities
exchange. See "Risk Factors--An Investment in the Notes may be an Illiquid
Investment".
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions, and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934 (the "Exchange Act"). Over-allotment involves syndicate sales in excess
of the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Offered Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Representatives to reclaim a selling concession from a
syndicate member when the Offered Notes originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Offered Notes to be higher than it would
otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
Until , 1999, all dealers effecting transactions in the Offered
Notes, whether or not participating in this distribution, may be required to
deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
The address and telephone number of the Seller, the sponsor of the Issuer,
is 1111 Town Center Drive, Las Vegas, Nevada 89134, (702) 243-1241. The address
and telephone number of the Owner Trustee of the Issuer is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, (302) 651-1000.
AVAILABLE INFORMATION
The Seller, has filed a Registration Statement under the Securities Act of
1933, as amended, with the Securities and Exchange Commission (the "Commission")
with respect to the Notes offered pursuant to this Prospectus. This Prospectus,
which forms a part of the Registration Statement, does not contain all of the
information included in the Registration Statement and the exhibits thereto. For
further information, reference is made to the Registration Statement and
amendments thereof and to exhibits thereto, which are available for inspection
without charge at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission at Seven
World Trade Center, New
2
<PAGE>
York, New York 10048 and at 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of the Registration Statement, the amendments thereof and the
exhibits thereto, may be obtained from the Public Reference Section of the
Commission's Washington Offices, at prescribed rates. The Commission also
maintains an internet Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding issuers who
file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed with the Commission on behalf of the Issuer pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), on or subsequent to the date of this Prospectus and
prior to the termination of the offering of the Notes made hereby shall be
deemed to be incorporated by reference herein and to be a part of this
Prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or replaces such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. The Seller will provide without charge to
each person to whom this Prospectus is delivered, on the request of such person,
a copy of any or all of the documents incorporated herein by reference (other
than exhibits to such documents unless the exhibits are specifically
incorporated by reference in such documents). Requests should be directed in
writing to Household Auto Receivables Corporation, 2700 Sanders Road, Prospect
Heights, Illinois 60070, Attention: Secretary.
FINANCIAL INFORMATION
The Seller has determined that its financial statements are not material to
the offering made hereby.
The Issuer was formed to issue the Notes. Prior to the issuance of the Notes
the Issuer sold a series of notes backed by a portion of the Receivables in a
private placement. The outstanding notes of the Issuer will be retired and the
lien of the indenture for such series of notes will be released simultaneous
with the closing of the sale of the Notes. The proceeds from the sale of the
Notes will be used to obtain the release of such lien and to make the initial
deposit of funds into the Reserve Account. Commencing on , 1998 (the
"Closing Date"), the Issuer will engage in no activities other than those
described herein. Financial statements of the Issuer are contained in Appendix B
hereto.
REPORTS TO THE NOTEHOLDERS
Unless and until Replacement Notes (as defined herein) are issued, the
Issuer will provide to CEDE & Co., as nominee of The Depository Trust Company
("DTC") and registered holder of the Notes and, upon request, to Participants
(as defined herein), monthly and annual reports concerning the Noteholders
pursuant to the Indenture. See "Description of the Securities--Reports to
Noteholders" and "Description of the Issuer--as to Compliance" herein. Such
reports may be made available to the beneficial owners of the Notes (the "Note
Owners") upon request to their Participants. Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Issuer does not intend to provide any financial information to
any holder of the Notes which has been examined and reported upon, with an
opinion expressed, by an independent public accountant. The Servicer will file
with the Commission such periodic reports with respect to the Issuer as are
required by the 1934 Act, and the rules, regulations or orders of the Commission
thereunder.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------------------------------------------------------ ---------
<S> <C>
Available Information................................. 2
Incorporation of Certain Documents by Reference....... 3
Financial Information................................. 3
Reports to Noteholders................................ 3
Prospectus Summary.................................... 5
Risk Factors.......................................... 15
Non-prime contracts are likely to incur higher loss
rates than contracts with borrowers with better
credit or collateral.............................. 15
Non-prime borrowers are consumers with relatively
weak credit who may be unable to (or unwilling) to
repay their loans................................. 15
Non-prime loans may also have less valuable
collateral........................................ 15
An investment in the Notes may be an illiquid
investment which may result in a Note Owner
holding such investment to maturity............... 15
Book-entry registration may reduce the liquidity of
the Notes......................................... 15
Book-entry registration may result in delays in
receipt of Payments............................... 15
Subordination provisions applicable to a class could
have adverse consequences for the subordinate
classes........................................... 16
Geographic concentration of receivables may result
in higher losses if particular regions experience
downturns......................................... 16
Prepayments of the Receivables may adversely affect
the yield to maturity of the Notes................ 16
Ratings are not recommendations to purchase, hold or
sell the Notes.................................... 16
Security interests in both the Receivables and the
underlying vehicles may not be valid under certain
circumstances..................................... 17
Although the transaction has been structured so as
to minimize the risks associated with the
bankruptcy of HAFC or the Seller, such safeguards
may not eliminate all such risks.................. 17
Financial conditions of the Seller or Servicer may
affect an investor's return, even if the intended
bankruptcy characterization is sustained.......... 18
Insurance on vehicles will generally be required at
the time of origination, although no assurance can
be given that such insurance will be maintained... 18
Delinquencies may vary over time, and any increase
in delinquencies may result in unanticipated
losses............................................ 18
State and federal credit protection laws may limit
collection of principal and interest on the
Receivables....................................... 18
Social, legal, economic and other factors may affect
investment........................................ 19
HAFC's underwriting process and subjective credit
standards......................................... 20
Restrictions on recoveries may result in the issuer
receiving substantially less than the face amount
of the related contract........................... 20
HAFC, the Servicer and Seller are not corporately
liable on the Notes, and the only source of
repayment will be the Trust Assets................ 20
The Seller............................................ 20
The Servicer.......................................... 21
The Subservicer....................................... 21
Use of Proceeds....................................... 21
The Issuer............................................ 22
General............................................. 22
The Owner Trustee................................... 22
The Indenture Trustee............................... 22
The Trust Assets...................................... 22
General............................................. 22
Eligibility Criteria................................ 23
Terms of the Receivables............................ 23
Composition of the Receivables...................... 24
The Reserve Account................................. 27
The Preferred Stock................................. 27
Yield and Prepayment Considerations................... 28
The Automobile Financing Business of HAFC............. 32
<CAPTION>
CAPTION PAGE
- ------------------------------------------------------ ---------
<S> <C>
General............................................. 32
Application Processing and Purchasing Criteria...... 32
Funding Package Completion, Verification and
Funding........................................... 33
Post-Funding Quality Reviews........................ 33
Servicing of Contracts.............................. 33
Billing and Collection Process...................... 34
Repossession........................................ 34
Insurance........................................... 35
Delinquency and Loan Loss Information............... 35
Description of the Notes.............................. 38
General............................................. 38
Payments of Interest................................ 38
Payments of Principal............................... 39
The Interest Rate Cap............................... 40
Payment Priorities.................................. 41
Maturity Dates; Optional Redemption................. 46
Reports to Noteholders.............................. 47
Events of Default; Rights Upon Event of Default;
Distributions following Acceleration.............. 47
Certain Covenants................................... 49
Annual Compliance Statement......................... 49
Satisfaction and Discharge of Indenture............. 49
Modification of Indenture........................... 49
Certain Matters Regarding the Indenture Trustee and
the Issuer........................................ 50
Limitation on Liability of the Indenture Trustee.... 50
Resignation of Indenture Trustee.................... 51
Registration of the Notes........................... 51
Description of the Trust Documents.................... 54
Sale and Assignment of Receivables.................. 54
Representation and Warranties; Repurchase
Obligation........................................ 54
Payments on Receivables; Deposits to Collection
Account........................................... 56
Collection and Other Servicing Procedures........... 57
Servicing Compensation and Payment of Expenses...... 58
Evidence as to Compliance........................... 58
Certain Matters Regarding the Servicer and the
Seller............................................ 58
Servicer Termination Event.......................... 59
Rights Upon Servicer Termination Event.............. 59
Amendment........................................... 60
Description of the Receivables Purchase Agreement..... 60
Sale of Receivables................................. 60
Representations and Warranties...................... 61
Amendments.......................................... 61
Certain Legal Aspects of the Receivables.............. 61
Security Interests in Vehicles...................... 61
Repossession........................................ 63
Notice of Sale; Redemption Rights................... 63
Deficiency Judgments and Excess Proceeds............ 63
Consumer Protection Laws............................ 64
Soldiers' and Sailors' Civil Relief Act of 1940..... 66
Other Limitations................................... 66
Material Federal Income Tax Consequences.............. 66
Tax Characterization of the Issuer.................. 66
Tax Consequences to Holders of the Notes............ 67
State and Local Tax Considerations.................... 69
ERISA Considerations.................................. 69
Underwriting.......................................... 70
Legal Matters......................................... 71
Index of Defined Terms................................ 72
Global Clearance, Settlement and Tax Documentation
Procedures.......................................... A-1
Initial Settlement.................................. A-1
Secondary Market Trading............................ A-1
Certain U.S. Federal Income Tax Documentation
Requirements...................................... A-3
Financial Statements of Household Automobile
Revolving Trust I................................. B-1
Report of Independent Public Accountants............ B-2
Statement of Income and Retained Earnings........... B-3
Balance Sheet....................................... B-4
Statement of Cash Flows............................. B-5
Notes to Financial Statements....................... B-6
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN PERTINENT INFORMATION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS. REFERENCE IS MADE TO THE INDEX OF DEFINED TERMS FOR THE LOCATION
HEREIN OF THE DEFINITIONS OF CERTAIN CAPITALIZED TERMS.
<TABLE>
<S> <C>
ISSUER.......................... The Household Automobile Revolving Trust I (the "Issuer"),
a Delaware business trust formed by the Seller and the
Owner Trustee pursuant to the Trust Agreement. Wilmington
Trust Company acts as owner trustee for the Issuer.
SECURITIES ISSUED BY THE
ISSUER........................ The Class A-1 Notes, Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class A-5 Notes (collectively the "Class
A Notes"), Class B-1 Notes, Class B-2 Notes (collectively,
the "Class B Notes"), Class C Notes and the Certificates.
Only the Class A and Class B-1 Notes (collectively, the
"Offered Notes") are offered hereby. The Notes will be
issued pursuant to the Indenture and will be secured by
the Trust Assets (as defined below). Pursuant to the terms
of the Indenture, payments of principal on the Class C
Notes will be subordinate to payments of principal on the
Class A and B Notes to the extent provided herein.
Payments of principal on the Class B-2 Notes will be
subordinate to the Class B-1 Notes and payments of
principal on the Class B-1 Notes will be subordinate to
the Class A Notes to the extent provided herein. Payments
of principal on the Class A-4 Notes will be subordinate to
the Class A-5, A-3, Class A-2 and Class A-1 Notes to the
extent provided herein. Payments of principal on the Class
A-3 Notes will be subordinate to the Class A-5, A-2 and
Class A-1 Notes. Payments of principal on the Class A-5
and A-2 Notes will be subordinate to the Class A-1 Notes
to the extent provided herein. In addition, the
Certificates will be issued by the Issuer pursuant to the
Trust Agreement, and will be subordinate to the Notes
pursuant to the terms of the Indenture.
The Notes represent obligations solely of the Issuer and
do not represent interests in or obligations of the
Seller, the Servicer, HAFC, the Owner Trustee, the
Indenture Trustee or any affiliate thereof, except to the
extent described herein. None of the Notes, the
Receivables or other Trust Assets are insured or
guaranteed by any governmental agency or instrumentality.
Only the Offered Notes are offered hereby.
THE CLASS A-1 NOTES............. $ % Class A-1 Notes (the "Class A-1 Notes").
THE CLASS A-2 NOTES............. $ % Class A-2 Notes (the "Class A-2 Notes").
THE CLASS A-3 NOTES............. $ % Class A-3 Notes (the "Class A-3 Notes").
THE CLASS A-4 NOTES............. $ Floating Rate Class A-4 Notes (the "Class A-4
Notes").
THE CLASS A-5 NOTES............. $ % Class A-5 Notes (the "Class A-5 Notes").
THE CLASS B-1 NOTES............. $ % Class B-1 Notes (the "Class B-1 Notes").
THE CLASS B-2 NOTES............. $ % Class B-2 Notes (the "Class B-2 Notes").
THE CLASS C NOTES............... $ % Class C Notes (the "Class C Notes").
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
THE CERTIFICATES................ Series 1998-1 Certificates (the "Certificates"). The
Certificates will be issued pursuant to the Trust
Agreement and will evidence beneficial ownership interests
in the Issuer.
TRUST ASSETS.................... The "Trust Assets" consist of, as more fully described
herein, (i) the Receivables, (ii) all amounts paid or
payable under the Receivables after the Cut-Off Date,
(iii) security interests in the financed vehicles securing
the Receivables, (iv) the Note Account, the Collection
Account and the Reserve Account, and the proceeds thereof,
(v) the right to receive payments under insurance policies
benefitting the holder of the Receivable, which policies
provide coverage for loss, physical damage, credit life,
credit disability, theft, mechanical breakdown or similar
coverages with respect to a financed vehicle or the
borrower, (vi) as provided in the Sale and Servicing
Agreements, rights to enforce the Dealer Agreements, the
Receivables Purchase Agreement and all supplements
thereto, (vii) all documents related to the Receivables,
(viii) a share of preferred stock of the Seller (the
"Preferred Stock"), (ix) the Interest Rate Cap and all
payments made pursuant thereto and (x) all proceeds of the
foregoing. See "The Trust Assets--General" herein.
SELLER.......................... Household Auto Receivables Corporation is a corporation
organized under the laws of the State of Nevada and is a
wholly-owned special purpose subsidiary of HFC. On or
prior to the Closing Date, the Seller will have purchased
the Receivables from HAFC pursuant to the Master
Receivables Purchase Agreement dated as of March 1, 1998,
between the Seller and HAFC (the "Receivables Purchase
Agreement"). Pursuant to the Master Sale and Servicing
Agreement, dated as of March 1, 1998 (the "Sale and
Servicing Agreement"), among the Issuer, the Seller, the
Servicer and the Indenture Trustee, on or prior to the
Closing Date, the Seller will have sold the Receivables
and all rights with respect thereto to the Issuer. See
"Description of Trust Documents--Sale and Assignment of
Receivables" herein.
SERVICER........................ Household Finance Corporation ("HFC", in its individual
capacity, or the "Servicer" in its capacity as the master
servicer under the Sale and Servicing Agreement), a
subsidiary of Household International, Inc., is the master
servicer of the Receivables pursuant to the Sale and
Servicing Agreement.
SUBSERVICER..................... HAFC, a wholly-owned subsidiary of HFC, will service the
Receivables in accordance with standards and guidelines
established in consultation with the Servicer from time to
time (in such capacity, the "Subservicer"). HAFC is
licensed to purchase and service retail installment sales
contracts secured by vehicles in the states in which the
Receivables were originated. The Receivables were
purchased by HAFC, its predecessors, or affiliates in its
ordinary course of business as described herein. See "The
Automobile Financing Business of HAFC".
THE RECEIVABLES................. The Receivables consist of non-prime retail installment
sales contracts secured by new and used automobiles, light
trucks and vans which were purchased under HAFC's finance
programs.
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HAFC's finance programs target automobile purchasers with
below average credit profiles who are generally unable to
obtain credit from traditional lending sources. The
Receivables had, as of the Cut-Off Date, a weighted
average annual percentage rate ("APR") of approximately
19.83%, a weighted average original term of 61.49 months
and a weighted average remaining term of 56.54 months. The
Receivables had an aggregate Principal Balance of
640,909,979.40 (the "Original Pool Balance") as of
, 1998 (the "Cut-Off Date"). See "The Trust Assets."
Certain Receivables included in the pool as of the Cut-Off
Date may prepay in full, or may be determined not to meet
the eligibility requirements for the final pool, and may
not be included in the final pool. If Receivables are
excluded from the final pool consistent with the
foregoing, the statistical distribution of characteristics
as of the Closing Date for the final Receivables pool may
vary somewhat from the statistical distribution of such
characteristics as of the Cut-Off Date as presented in
this Prospectus, although such variance will not be
material. In no event will the pool of Receivables as of
the Closing Date vary by in excess of 5% of the principal
balance of the Receivables as of the Cut-Off Date.
The Seller has represented and warranted that no
Receivable is more than 30 days delinquent as of the
Cut-Off Date, and that no more than 0.80% of the
Receivables have been extended. See "The Automobile
Financing Business of HAFC--Servicing of Contracts" for a
description of the delinquency and extension policies
applicable to the Receivables.
With respect to any date, the "Pool Balance" will be equal
to the aggregate of the Principal Balances of all
Receivables as of the end of the preceding Business Day.
The "Principal Balance" of a Receivable on any day is
equal to its principal balance on the Cut-Off Date, minus
(i) all collections credited against the Principal Balance
prior to such day, (ii) any Cram Down Loss in respect of
such Receivable, and plus or minus (iii) any correcting
adjustments. Notwithstanding the above, the Principal
Balance of Liquidated Receivables and Purchased
Receivables shall be zero. With respect to any Payment
Date, a "Liquidated Receivable" is a Receivable as to
which (i) 90 days have elapsed since the financed vehicle
was repossessed, (ii) the Servicer has determined in good
faith that all amounts it expects to recover have been
received, (iii) ninety percent or more of a scheduled
payment shall have become 150 or more days delinquent, or
in the case of a borrower who is subject to bankruptcy
proceedings, 210 or more days delinquent or (iv) the
financed vehicle has been sold and the proceeds received.
Any Receivable that is repurchased by HAFC, the Seller or
the Servicer as a result of a breach of a representation
or warranty with respect to such Receivable (a "Purchased
Receivable") on or before the Business day immediately
preceding the related Determination Date shall not be a
Liquidated Receivable.
COLLECTIONS..................... As to any Payment Date other than the first Payment Date,
the
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"Collection Period" is the calendar month preceding the
month of such Payment Date and in the case of the first
Payment Date, the period from the Cut-Off Date through
, 1998.
On the Business Day prior to each Payment Date, the
Servicer will deposit funds collected with respect to the
Receivables during the related Collection Period into an
account (the "Collection Account") established and
maintained by the Issuer under the Sale and Servicing
Agreement. A "Business Day" is a day other than a
Saturday, Sunday or other day on which commercial banks
located in the States of Illinois, California or New York
are authorized or obligated to be closed.
INTEREST........................ Interest on each Class of Notes will be payable monthly on
the seventeenth day of each month or, if such day is not a
Business Day (as defined herein), on the next succeeding
Business Day (each, a "Payment Date"), commencing on
17, 1998, in an amount equal to interest accrued
during the related Interest Period (as defined below) at
the applicable Note Rate on the outstanding principal
balance for the related class of Notes. The per annum rate
of interest accruing on each class of Notes is referred to
as the "Note Rate" for the respective classes of Notes.
The Note Rate for the Class A-1, Class A-2, Class A-3,
Class A-5, Class B-1, Class B-2 and Class C Notes will be
%, %, %, %, %, %, and %,
respectively. The Note Rate for the Class A-4 Notes will
be a floating rate equal to the sum of (a) the London
interbank offered rate for one-month United States dollar
deposits ("LIBOR"), determined as specified herein, as of
the second LIBOR Business Day (as defined herein) prior to
the first day of the Interest Period and (b) % per
annun.
Interest on the Notes in respect of any Payment Date will
accrue from (and including) the preceding Payment Date (or
in the case of the first Payment Date, from the Closing
Date) through (and including) the day preceding such
Payment Date (each such period, an "Interest Period").
Interest on the Class A-1, Class A-2 and Class A-4 Notes
will be calculated on the basis of a 360-day year and the
actual number of days elapsed in an applicable Interest
Period. Interest on the Class A-3, Class A-5, Class B and
Class C Notes will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. See "Description
of the Notes--Payments of Interest". Interest for any
Payment Date due but not paid on such Payment Date shall
bear interest, to the extent permitted by applicable law,
at the related Note Rate until paid. Failure to pay
interest in full on any Payment Date after expiration of
the applicable grace period is an Event of Default under
the Indenture.
On each Payment Date, Available Funds remaining after
making the distributions referred to in items (i) and (ii)
under "Description of the Notes"--Payment Priorities" will
be allocated pro rata to the Class A Interest
Distributable Amount of each of the Class A-1, Class A-2,
Class A-3, Class A-4 and Class A-5 Notes. Interest on the
Class B-1 Notes will not be paid on any Payment Date until
all accrued interest due and payable on the Class A Notes
on such
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Payment Date has been paid in full. Interest on the Class
B-2 Notes will not be paid on any Payment Date until all
accrued interest due and payable on the Class B-1 Notes on
such Payment Date has been paid in full. Interest on the
Class C Notes will not be paid on any Payment Date until
all accrued interest due and payable on the Class A Notes
and the Class B Notes on such Payment Date has been paid
in full. See "Description of the Notes-- Payments of
Interest."
If the Notes are accelerated following the occurrence of
an Event of Default, interest payments will be allocated
to the Notes in the priority described in "Description of
the Notes--Events of Default; Rights Upon Event of
Default; Distributions following Acceleration."
PRINCIPAL....................... On each Payment Date and, in the case of the Class A-1
Notes on the Class A-1 Scheduled Maturity Date, principal
payments will be due and payable on the Notes, in the
aggregate, in an amount equal to the Principal
Distributable Amount for such Payment Date to the extent
of funds available therefor; provided, that (i) no
principal payments will be made with respect to the Class
B-1 Notes on any Payment Date until all amounts payable
with respect to the Class A Notes on such Payment Date
have been paid in full, (ii) no principal payments will be
made with respect to the Class B-2 Notes on any Payment
Date until all amounts payable with respect to the Class
B-1 Notes on such Payment Date have been paid in full, and
(iii) no principal payments will be made with respect to
the Class C Notes on any Payment Date until all amounts
payable with respect to the Class A Notes and the Class B
Notes on such Payment Date have been paid in full.
On each Payment Date before the Payment Date on which the
Class A-1 Notes have been paid in full, 100% of the
Principal Distributable Amount will be payable to the
Class A-1 Notes. On each Payment Date on and after the
Payment Date on which the Class A-1 Notes have been paid
in full, the Class A Principal Distributable Amount (less
any amount thereof applied on such Payment Date to reduce
the principal balance of the Class A-1 Notes to zero) will
be payable to the Class A-2 Notes and the Class A-5 Notes
based upon the Non-Class A-5 Percentage and the Class A-5
Percentage, respectively, until the Class A-2 Notes are
paid in full. On each Payment Date on or after the Payment
Date on which the Class A-2 Notes have been paid in full,
the Class A Principal Distributable Amount will be payable
to the Class A-3 Notes and the Class A-5 Notes based upon
the Non-Class A-5 Percentage and the Class A-5 Percentage,
respectively, until the Class A-3 Notes are paid in full
(less any amount thereof applied on such Payment Date to
reduce the principal balance of the Class A-1 and A-2
Notes to zero). On each Payment Date on or after the
Payment Date on which the Class A-3 Notes have been paid
in full, the Class A Principal Distributable Amount will
be payable to the Class A-4 Notes and the Class A-5 Notes
based upon the Non-Class A-5 Percentage and the Class A-5
Percentage, respectively, until each of the Class A-4 and
Class A-5 Notes are paid in full (less any amount
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thereof applied on such Payment Date to reduce the
principal balance of the Class A-1, Class A-2 and Class
A-3 Notes to zero). The "Class A-5 Percentage" means, for
any Payment Date, %. "Non-Class A-5 Percentage" means,
for any Payment Date, 100.00% minus the Class A-5
Percentage.
The principal of the Class B-1, Class B-2 and Class C
Notes will be payable on each Payment Date on and after
the Payment Date on which the outstanding principal amount
of the Class A-1 Notes has been reduced to zero, until the
Class B-1, Class B-2 and Class C Notes have been paid in
full, in an amount equal to the Class B-1 Principal
Distributable Amount, the Class B-2 Principal
Distributable Amount and the Class C Principal
Distributable Amount, respectively.
If the Notes are accelerated following the occurrence of
an Event of Default, principal payments will be allocated
to the Notes in the priority described in "Description of
the Notes--Events of Default; Rights Upon Event of
Default; Distributions following Acceleration."
PAYMENT PRIORITY................ On each Payment Date, the Servicer will transfer the
Available Funds to an account maintained by the Indenture
Trustee in accordance with the Indenture (the "Note
Account") and the payments will be made in the following
order of priority:
first, to the Servicer, any Supplemental Servicing Fees
for the related Collection Period and if HFC is no longer
acting as the master servicer, the Servicing Fee then due;
second, to the Indenture Trustee, Trust Collateral Agent,
and the Owner Trustee, their fees then due (in each case,
to the extent such fees have not been previously paid by
the Servicer);
third, to the holders of record of the Class A Notes (the
"Class A Noteholders"), the interest then due with respect
to each class of Notes;
fourth, to the holders of record of the Class B-1 Notes
(the "Class B-1 Noteholders"), the interest then due with
respect to the Class B-1 Notes;
fifth, to the holders of record of the Class B-2 Notes
(the "Class B-2 Noteholders"), the interest then due with
respect to the Class B-2 Notes;
sixth, to the holders of record of the Class C Notes (the
"Class C Noteholders"), the interest then due with respect
to the Class C Notes;
seventh, (i) to the Class A-1 Noteholders, the Principal
Distributable Amount, until the outstanding principal
amount of the Class A-1 Notes has been reduced to zero;
and (ii) on and after the Payment Date on which the
outstanding principal amount of the Class A-1 Notes has
been reduced to zero (a) to the Class A-5 Noteholders the
Class A-5 Percentage of the Class A Principal
Distributable Amount and (b) sequentially, to the Class
A-2, Class A-3 and Class A-4 Noteholders, the Non-Class
A-5
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Percentage of the Class A Principal Distributable Amount,
in each case until the respective outstanding principal
amount of the Class A-2, Class A-3 and Class A-4 Notes are
paid in full;
eighth, to the Class B-1 Noteholders, the Class B-1
Principal Distributable Amount;
ninth, to the Class B-2 Noteholders, the Class B-2
Principal Distributable Amount;
tenth, to the Class C Noteholders, the Class C Principal
Distributable Amount;
eleventh, to the Reserve Account, until the Reserve
Account is fully funded;
twelfth, if HFC is acting as the master servicer, the
Servicing Fee then due; and
thirteenth, any remainder to the holders of the
Certificates.
RESERVE ACCOUNT................. An account will be created (the "Reserve Account") with an
initial deposit of $6,409,099.79 (1% of the Original Pool
Balance). The Reserve Account will be increased on each
Payment Date by the deposit in the Reserve Account of
certain amounts remaining after payments to Noteholders
and any fees then payable, pursuant to the priorities set
forth in "Payment Priority" above until the amount on
deposit therein equals the Targeted Reserve Account
Balance.
Amounts in the Reserve Account on any Payment Date (after
giving effect to all payments to be made to the Servicer
and the Noteholders on such Payment Date) in excess of the
Targeted Reserve Account Balance for such Payment Date
will be paid to the holders of the Certificates.
Funds will be withdrawn from the Reserve Account on each
Payment Date to pay any Servicing Fee then payable to a
master servicer other than HFC and to make required
distributions on the Notes to the extent funds are not
otherwise available, as described herein. See "Description
of the Notes--Payment Priorities" and "The Trust
Assets--Reserve Account."
DENOMINATIONS................... Each class of the Notes will be issued in the aggregate
principal amounts set forth on the cover page hereof, in
fully registered denominations of $100,000 and integral
multiples of $1,000 in excess thereof.
REGISTRATION OF NOTES........... Each class of the Offered Notes will initially be issued
in book-entry form. Persons acquiring beneficial ownership
interests in the Offered Notes ("Note Owners") may elect
to hold their Notes through DTC, in the United States, or
Cedel Bank, societe anonyme ("Cedel") or the Euroclear
System ("Euroclear"), in Europe. Transfers within DTC,
Cedel or Euroclear, as the case may be, will be in
accordance with the usual rules and operating procedures
of the relevant system. No person acquiring a beneficial
ownership interest in any Note will be entitled to receive
such Note in fully registered certificated form (a
"Replacement Note") except in the limited circumstances
described herein.
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Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through
Cedel or Euroclear, on the other, will be effected in DTC
through Citibank, N.A. or Morgan Guaranty Trust Company of
New York, the relevant depositaries (collectively, the
"Depositaries") of Cedel or Euroclear, respectively, and
each a participating member of DTC. So long as the Notes
are in book-entry form, such Notes will be evidenced by
one or more Notes registered in the name of CEDE & Co.,
the nominee of DTC. The interests of the Note Owners will
be represented by book-entries on the records of DTC and
participating members thereof. Unless and until
Replacement Notes are issued, it is anticipated that the
only "Noteholder" will be Cede & Co., as nominee of DTC.
All references in this Prospectus to "Holders" or
"Noteholders" shall be deemed, unless the context clearly
requires otherwise, to refer to the Noteholders. See "Risk
Factors" and "Description of the Notes--Registration of
Notes" herein.
RECORD DATE..................... So long as the Notes are in book-entry form, the last day
preceding a Payment Date; if the Notes are no longer in
book-entry form, the last day of a month preceding a
Payment Date.
SERVICING....................... The Servicer will be responsible for servicing and making
collections on the Receivables. Each Receivable will be
subserviced by HAFC on behalf of the Servicer. The
Servicer will cause funds collected with respect to the
Receivables to be deposited into the Collection Account,
except as described herein. On the earlier of the fifth
calendar day or third Business Day prior to any Payment
Date (the "Determination Date"), the Servicer will
calculate, and instruct the Issuer and the Indenture
Trustee regarding the amounts to be paid with respect to
the related Collection Period to the Noteholders. See
"Description of the Trust Documents-- Payments on
Receivables; Deposits to Collection Account."
As long as HFC is the Servicer, on each Payment Date it
will receive, or be entitled to retain on behalf of itself
and HAFC, and after payment of the amounts due on the
Notes, a monthly servicing fee (the "Servicing Fee") in
the amount of 3.00% per annum of the Pool Balance as of
the beginning of the related Collection Period. See
"Description of the Trust Documents-- Servicing
Compensation and Payment of Expenses." In addition, the
Servicer is entitled to retain all administrative fees,
expenses and charges paid by or on behalf of borrowers,
including late fees, prepayment fees and liquidation fees
("Supplemental Servicing Fees"). The Servicer will pay
ongoing expenses associated with the Issuer and the Notes,
and incurred by it in connection with its responsibilities
under the Sale and Servicing Agreement, including, without
limitation, fees of the Indenture Trustee and the Owner
Trustee.
In certain limited circumstances, the Servicer may resign
or be removed under the Sale and Servicing Agreement, in
which event either the Indenture Trustee or, so long as it
meets certain
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eligibility standards as set forth in the Sale and
Servicing Agreement, a third-party servicer selected by
the Indenture Trustee will be appointed as a successor
master servicer. In such event, the Servicing Fee will be
paid to the successor master servicer prior to any
distributions on the Notes. See "Description of the Trust
Documents--Certain Matters Regarding the Servicer and the
Seller."
If the Servicer fails to comply in all material respects
with certain representations, warranties or covenants with
respect to any Receivable and such noncompliance is not
cured within a specified period after the Servicer becomes
aware or receives notice thereof and such noncompliance
has a material adverse effect on the Noteholders, or
certain events of insolvency occur with respect to the
Servicer, the Indenture Trustee may appoint a successor.
See "Description of the Trust Documents--Servicer
Termination Event; Rights upon Servicer Termination
Event."
FINAL PAYMENT OF PRINCIPAL;
OPTIONAL REDEMPTION........... Each class of Notes will mature on the earlier of the date
such class of Notes is paid in full or (the "Final
Scheduled Payment Date"); provided the Class A-1 Notes
will be due and payable on (the "Class A-1 Scheduled
Maturity Date"). The Notes then outstanding will be
redeemed in whole, but not in part, on any Payment Date on
which the Seller or Servicer exercises the option to
purchase the Receivables from the Issuer. Such option may
be exercised after the Aggregate Note Principal Balance is
less than or equal to $64,090,997.94 (10% of the Original
Pool Balance) at a redemption price which is not less than
the Aggregate Note Principal Balance plus accrued and
unpaid interest thereon. See "Description of the
Notes--Maturity" herein.
MANDATORY REPURCHASE OF CERTAIN
RECEIVABLES................... The Seller will make certain representations and
warranties with respect to the Trust Assets and the
Receivables. If the Seller breaches certain of its
representations and warranties with respect to any
Receivable, then depending upon the representation or
warranty breached, if such breach has a material adverse
effect on the interest of the Noteholders and is not cured
within the specified period, such Receivable will be
assigned to the Seller. Such representations include that
each Receivable was originated by a properly licensed
Dealer in its normal course of business, contains
customary and enforceable provisions, was originated and
sold to HAFC without fraud or misrepresentation by the
Dealer or the borrower, was originated in material
compliance with all applicable laws and regulations
relating to the Receivable, and creates a valid, binding
and enforceable first priority security interest in the
financed vehicle in favor of HAFC. For a complete
description of representations and warranties of the
Seller, see "Description of the Trust
Documents--Representations and Warranties; Repurchase
Obligation."
The Servicer (pursuant to the Sale and Servicing
Agreement) will be obligated to repurchase a Receivable if
such Receivable is
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materially adversely affected by a breach of certain of
its servicing obligations under the Sale and Servicing
Agreement (including, but not limited to, its obligation
to ensure that the perfected security interest of HAFC in
the related financed vehicles is maintained), if the
breach has not been cured within the specified period. See
"Description of the Trust Documents--Representations and
Warranties; Repurchase Obligation."
TAX STATUS...................... Dewey Ballantine LLP, special tax counsel to the Seller is
of the opinion that under existing law, the Offered Notes
will be characterized as indebtedness, and the Issuer will
not be characterized as an association (or publicly traded
partnership) taxable as a corporation. The Seller, the
Indenture Trustee and the Owner Trustee will agree to
treat the Offered Notes as indebtedness for all federal,
state and local income and franchise tax purposes. By
acceptance of a Class A or a Class B Note, each Noteholder
will agree to treat the Notes as debt. See "Material
Federal Income Tax Consequences" for additional
information concerning the application of federal income
tax laws.
ERISA CONSIDERATIONS............ As described herein, the Class A and Class B Notes may be
purchased by Benefit Plans (as hereinafter defined) that
are subject to the Employee Retirement Income Security Act
of 1974 ("ERISA") or entities using assets of such Benefit
Plans. Any Benefit Plan should consult its tax and/or
legal advisors in determining whether all required
conditions have been satisfied.
RATING.......................... As a condition to the issuance of the Notes, (i) the Class
A-1 Notes will be rated in the highest short-term debt
rating category ("A-1," or its equivalent), (ii) the Class
A-2, Class A-3, Class A-4 and Class A-5 Notes will be
rated in the highest long-term debt rating category ("AAA"
or its equivalent), (iii) the Class B-1 Notes will be
rated in the second highest long-term debt rating category
("AA," or its equivalent), (iv) the Class B-2 Notes will
be rated in the third highest long-term debt rating
category ("A," or its equivalent), and the Class C Notes
will be rated in the fourth highest long-term debt rating
category ("BBB," or its equivalent), in each case, by at
least two Nationally Recognized Statistical Rating
Organizations ("NRSROs" or "Rating Agencies"). A rating is
not a recommendation to purchase, hold or sell the Notes,
in as much as such rating does not comment as to market
price or suitability for a particular investor.
The ratings of the Notes is based primarily on the value
of the Receivables, the credit quality of HFC and the
terms of the Notes. There is no assurance that the rating
will remain in place for any given period of time or that
the ratings will not be lowered or withdrawn by the Rating
Agencies. See "Risk Factors" herein.
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RISK FACTORS
For a discussion of all material risk factors in connection with the
purchase of the Notes, prospective investors should consider among other things,
the following risk factors.
NON-PRIME CONTRACTS ARE LIKELY TO INCUR HIGHER LOSS RATES THAN CONTRACTS
WITH BORROWERS WITH BETTER CREDIT OR COLLATERAL. HAFC specializes in the
indirect financing of contracts for non-prime borrowers. The non-prime credit
market consists of extending credit to persons who may not be able to obtain
financing from traditional sources of credit, which in the automobile finance
business is comprised of insured-deposit taking institutions such as banks,
thrifts and credit unions, and finance companies which are "captives" (i.e.,
finance subsidiaries) of automobile manufacturers.
A loan may be considered "non-prime" primarily for one, or both, of two
reasons: borrower credit considerations and collateral considerations. Non-prime
loans are likely to experience a higher rate of delinquency and losses than
"prime" loans. It is also possible that the non-prime automobile finance
business is more susceptible to loss than other segments of the non-prime
lending business generally, such as non-prime mortgage lending, due to the
mobility and depreciation of the collateral. The added risk posed by non-prime
contracts has been considered in establishing the subordination supporting each
class of Notes. However, there can be no assurance that such subordination will
be adequate to prevent losses to some or all of the Noteholders.
NON-PRIME BORROWERS ARE CONSUMERS WITH RELATIVELY WEAK CREDIT WHO MAY BE
UNABLE TO (OR UNWILLING) TO REPAY THEIR LOANS. A borrower may be considered a
"non-prime" credit due to limited income, past credit problems (e.g., prior
bankruptcy, history of delinquent payments on other types of installment credit)
or limited or no credit histories.
NON-PRIME LOANS MAY ALSO HAVE LESS VALUABLE COLLATERAL. Collateral
considerations in the non-prime market primarily result from the financing, in
many cases, of used vehicles. Although depreciation also affects new
automobiles, the market value of an automobile which is several years old may be
more difficult to ascertain than for a new vehicle since such value will depend
on mileage and general condition, which may vary substantially for different
vehicles of a similar model year. As a result, upon sale of repossessed
vehicles, proceeds may be less than anticipated, resulting in greater losses.
This factor has been considered in establishing the subordination supporting
each class of Notes. However, there can be no assurance that such subordination
will be adequate to prevent losses to some or all of the Noteholders.
AN INVESTMENT IN THE NOTES MAY BE AN ILLIQUID INVESTMENT WHICH MAY RESULT IN
A NOTE OWNER HOLDING SUCH INVESTMENT TO MATURITY. The Notes will not be listed
on any securities exchange. There is currently no market for the Notes. While
the Underwriters currently intend to make a market in the Notes, they are under
no obligation to do so. There can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide Notes
Owners with liquidity of investment or that it will continue while the Notes
remain outstanding.
Issuance of the Notes in book-entry form may reduce the liquidity of such
Notes in the secondary trading market since investors may be unwilling to
purchase Notes for which they cannot obtain physical certificates. See
"Description of the Notes--Registration of Notes" herein.
BOOK-ENTRY REGISTRATION MAY REDUCE THE LIQUIDITY OF THE NOTES. Since
transactions in the Notes can be effected only through DTC, Cedel, Euroclear,
participating organizations, indirect participants and certain banks, the
ability of a Note Owner to pledge a Note to persons or entities that do not
participate in the DTC, Cedel or Euroclear system, or otherwise to take actions
in respect of such Notes, may be limited due to lack of a physical certificate
representing the Notes. See "Description of the Notes--Registration of Notes"
herein.
BOOK-ENTRY REGISTRATION MAY RESULT IN DELAYS IN RECEIPT OF PAYMENTS. Note
Owners may experience some delay in their receipt of distributions of interest
and principal on the Notes since such distributions
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will be forwarded by the Indenture Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Note Owners either directly or
indirectly through indirect participants. Such delays will decrease the yield to
the Note Owners from the Notes. See "Description of the Notes-- Registration of
Notes" herein.
SUBORDINATION PROVISIONS APPLICABLE TO A CLASS COULD HAVE ADVERSE
CONSEQUENCES FOR THE SUBORDINATE CLASSES. Distributions of interest on each of
the Class B and Class C Notes will be subordinated in priority of payment to
payment of interest due on the Class A Notes as described herein. Distributions
of interest on the Class B-2 and Class C Notes will be subordinated in priority
of payment to payment of interest due on the Class B-1 Notes and distributions
of interest on the Class C Notes will be subordinated in priority of payment to
payment of interest due on the Class B-2 Notes. Consequently, the Class B and
Class C Noteholders will not receive any interest payments with respect to a
Collection Period until the full amount of interest payable on such Payment Date
with respect to each class of Notes with a higher priority has been paid. See
"Description of the Notes--Payment Priorities" and "Events of Default; Rights
upon Event of Default; Distributions following Acceleration" herein.
The Issuer will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables. Noteholders
must rely upon payments on the Receivables for repayment.
GEOGRAPHIC CONCENTRATION OF RECEIVABLES MAY RESULT IN HIGHER LOSSES IF
PARTICULAR REGIONS EXPERIENCE DOWNTURNS. As of the Cut-Off Date (based on
principal balance and mailing address of the borrowers), borrowers with respect
to approximately 12.50% and 16.58% of the Receivables were located in California
and Texas, respectively. Accordingly, adverse economic conditions or other
factors particularly affecting any of these states could adversely affect the
delinquency or loan loss experience of the Issuer with respect to the
Receivables. Such economic conditions or other factors could include wide-scale
property losses, business failures or unemployment resulting from natural
disasters such as hurricanes or earthquakes. The location of the Receivables by
state is identified in the table beginning on page 25 based upon borrower
mailing address. See "The Trust Assets."
PREPAYMENTS OF THE RECEIVABLES MAY ADVERSELY AFFECT THE YIELD TO MATURITY OF
THE NOTES. All of the Receivables may be prepaid in whole or in part at any
time without penalty. However, borrowers must obtain HAFC's consent prior to
transferring their interest in a financed vehicle. Neither the Seller nor HFC is
aware of any publicly generated studies or statistics available on the rate of
prepayment of automobile retail installment contracts. It can be expected that a
number of the Receivables will prepay prior to the maturity of such Receivables.
Actual prepayment experience may be affected by a wide variety of factors,
including general economic conditions, interest rates, the fact that a borrower
generally may not sell or transfer the vehicle securing a Receivable without the
consent of HAFC, and the availability of alternative financing (including from
HFC or any of its affiliates). If the rate of prepayments on the Receivables
varies from that anticipated at the time a Note is purchased, it will impact the
time the Notes remain outstanding and consequently, may impact the anticipated
yield on the Notes. If a Note is purchased at a premium, if the rate of
prepayments exceeds the rate of prepayments anticipated at the time the Note was
purchased, the actual yield to maturity of the Note will be less than the
anticipated yield. If a Note is purchased at a discount, if the rate of
prepayments is less than the rate of prepayments anticipated at the time the
Note was purchased, the actual yield to maturity will be less than the
anticipated yield.
RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, HOLD OR SELL THE NOTES. The
ratings of the Notes will depend primarily on an assessment by the Rating
Agencies of the underlying Receivables, and the subordination of the Class B and
Class C Notes and the Certificates. The ratings assigned by the Rating Agencies
to the Notes are not recommendations to purchase, hold or sell the Notes,
inasmuch as such ratings do not consider the market price or suitability for a
particular investor. There is no assurance that the ratings will remain in place
for any given period of time or that the ratings will not be lowered or
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<PAGE>
withdrawn by the Rating Agencies if in their judgment future circumstances so
warrant, including a change in the credit ratings of HFC.
SECURITY INTERESTS IN BOTH THE RECEIVABLES AND THE UNDERLYING VEHICLES MAY
NOT BE VALID UNDER CERTAIN CIRCUMSTANCES. In connection with the sale and
assignment of the Receivables to the Issuer, security interests in the financed
vehicles which have been assigned first, by HAFC to the Seller, and then by the
Seller to the Issuer, will be assigned by the Issuer to the Indenture Trustee.
In most states, such an assignment is an effective conveyance of a security
interest without amendment of any security interest noted on a vehicle's
certificate of title, and the assignee succeeds thereby to the assignor's rights
as secured party. However, a security interest in a motor vehicle registered in
the states in which a majority of financed vehicles underlying the Receivables
are currently registered, may be perfected only by causing such vehicle's
certificate of title to be amended to note the security interest of the secured
party. Such notation of a secured party's security interest is generally
effected in such states by depositing with the applicable state highway
department, motor vehicle registrar or similar state authority, the vehicle's
certificate of title, an application containing the name and address of the
secured party, and the necessary registration fees.
Because of the administrative burden and expense that would be entailed in
doing so, the certificates of title for the financed vehicles will not identify
the Seller, Issuer, Indenture Trustee or Owner Trustee as the secured party, and
will not be deposited with the state highway department, motor vehicle registrar
or other state authorities in any state. In the absence of such action, the
Indenture Trustee may not have a perfected security interest in the financed
vehicles and, in the event that another person obtains a perfected security
interest in a financed vehicle subsequent to the transfer of the Receivables to
the Issuer, such person might acquire rights in such financed vehicle prior to
the rights of the Indenture Trustee. The Seller agreed in the Sale and Servicing
Agreement to repurchase any Receivable if, on the Closing Date a valid,
subsisting and enforceable first priority security interest has not been
perfected (or is not in the process of perfection) in favor of HAFC (or any
predecessor to HAFC or any subsidiary thereof), which will have been validly
assigned to the Issuer and the Indenture Trustee, in the related financed
vehicle. The Servicer covenanted in the Sale and Servicing Agreement to
repurchase any Receivable if, after the Closing Date, a valid, subsisting and
enforceable first priority security interest in the name of HAFC (or any
predecessor to HAFC or any subsidiary thereof) is not maintained on behalf of
the Indenture Trustee in the related financed vehicle.
ALTHOUGH THE TRANSACTION HAS BEEN STRUCTURED SO AS TO MINIMIZE THE RISKS
ASSOCIATED WITH THE BANKRUPTCY OF HAFC OR THE SELLER, SUCH SAFEGUARDS MAY NOT
ELIMINATE ALL SUCH RISKS. HAFC intends that its transfer of Receivables to the
Seller will constitute a sale rather than a pledge of the Receivables to secure
indebtedness of HAFC. The Seller intends that the transfer of Receivables to the
Issuer will also constitute a sale rather than a pledge of the Receivables to
secure indebtedness for the Seller. However, if HAFC or the Seller were to
become a debtor under the United States Bankruptcy Code or similar applicable
state laws ("Insolvency Laws"), a creditor or trustee in bankruptcy of HAFC or
the Seller, as debtor-in-possession, might argue that such sale of Receivables
by HAFC to the Seller, or by the Seller to the Issuer, was a pledge of
Receivables rather than a sale, and if such position--that the transfer of
Receivables was a pledge rather than a sale or otherwise should be treated as
part of the bankruptcy estate of HAFC or the Seller--were presented to or
accepted by a court, then delays in payments to Noteholders could occur and/ or
reductions in the amounts of such payments could result. It is also possible
that such a recharacterization could result in no additional payments to
Noteholders. In addition if the transfer of any Receivable is recharacterized as
a pledge, then a tax lien, other governmental lien, or other lien created by
operation of law on the property of HAFC or the Seller, as applicable, may have
priority over the Issuer's interest in such Receivable.
HAFC and the Seller have taken steps in structuring the transactions
contemplated hereby that are intended to make it unlikely that the voluntary or
involuntary application for relief by HAFC or the Seller under any Insolvency
Laws will result in the consolidation of the assets and liabilities of the
Issuer with
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<PAGE>
those of HAFC or the Seller. These steps include the creation of the Issuer as a
separate, limited-purpose entity pursuant to its certificate of trust, the
formation of the Seller as limited purpose entity to hold the ownership interest
in the Issuer and incorporating into the Articles of Incorporation of the Seller
certain limitations (including restrictions on the nature of the business of the
Seller) and a restriction on its ability to commence a voluntary case or
proceeding under any Insolvency Law without the unanimous affirmative vote of
the holders of its Preferred Stock, which is the Indenture Trustee. See "The
Trust Assets--The Preferred Stock" herein.
HAFC and the Seller have received the advice of counsel, concluding on the
basis of a reasoned analysis of analogous case law (although acknowledging that
there is no precedent based on directly similar facts) to the effect that,
subject to certain facts, assumptions and qualifications specified therein, a
court would conclude that neither the assets and liabilities of HAFC or the
Seller would be consolidated with the assets and liabilities of the Issuer, in
the event of the application of the federal bankruptcy laws to HAFC or the
Seller. If a court concluded otherwise, or a filing were to be made under any
Insolvency Law by or against HAFC or the Seller, or if an attempt were to be
made to litigate any of the foregoing issues, delays in the distributions on the
Notes (and possible reductions in the amount of such distributions) could occur.
The Issuer is not expected to have any significant assets or sources of funds
other than the Receivables and the proceeds thereof.
FINANCIAL CONDITIONS OF THE SELLER OR SERVICER MAY AFFECT AN INVESTOR'S
RETURN, EVEN IF THE INTENDED BANKRUPTCY CHARACTERIZATION IS SUSTAINED. Neither
HAFC, the Servicer, nor the Seller is generally obligated to make any payments
in respect of any class of Notes or the Receivables. If either of HFC or HAFC
were to cease acting as Servicer or Subservicer respectively, delays in
processing payments on the Receivables and information in respect thereof could
occur and result in delays in payments to the Noteholders.
In certain circumstances, the Seller or the Servicer will be required to
acquire Receivables from the Issuer with respect to which certain
representations and warranties have been breached. In the event that either of
the Seller or the Servicer is incapable of complying with its reacquisition
obligations and no other party is obligated to perform or satisfy such
obligations, Noteholders may be subject to delays in receiving payments and
suffer loss of their investment in the Notes.
INSURANCE ON VEHICLES WILL GENERALLY BE REQUIRED AT THE TIME OF ORIGINATION,
ALTHOUGH NO ASSURANCE CAN BE GIVEN THAT SUCH INSURANCE WILL BE MAINTAINED. HAFC
generally requires that the borrower under a contract insure the related vehicle
with a physical damage policy naming HAFC as loss payee. Although such insurance
on the vehicle is generally required at the time the contract is originated,
there can be no assurance that the borrower will maintain the appropriate
coverage on the vehicle. HAFC does not anticipate force placing insurance (i.e.,
obtaining such insurance coverage without the consent of the related borrower)
on the related vehicles. HAFC has not represented and warranted to the Seller
that each vehicle is in fact covered by a physical damage policy, although HAFC
has represented and warranted that the procedures described above have been
followed with respect to each vehicle. As a consequence of the foregoing, the
vehicles may not be covered by physical damage insurance and losses to
Noteholders may result from such lack of coverage.
DELINQUENCIES MAY VARY OVER TIME, AND ANY INCREASE IN DELINQUENCIES MAY
RESULT IN UNANTICIPATED LOSSES. There can be no assurance that the historical
levels of delinquencies and losses experienced by HAFC on its respective loan
and vehicle portfolio as set forth on pages 36 and 37 will be indicative of the
performance of the contracts comprising the Trust Assets or that such levels
will continue in the future. Delinquencies and losses could increase
significantly for various reasons, including changes in the local, regional or
national economies, the failure to adequately service the Receivables comprising
the Trust Assets, or the transfer or relocation of the servicing from HFC or
HAFC.
STATE AND FEDERAL CREDIT PROTECTION LAWS MAY LIMIT COLLECTION OF PRINCIPAL
AND INTEREST ON THE RECEIVABLES. The Receivables are subject to numerous
federal and state consumer protection laws which impose
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<PAGE>
requirements on the solicitation, making, enforcement and collection of motor
vehicle sales finance contracts. Such laws, as well as any new laws which may be
adopted and court rulings (including, but not limited to, federal or state
interest rate caps on consumer loans), may adversely affect the Servicer's
ability to collect on the Receivables. If this would occur in states in which a
higher concentration of Receivables are located, such as California and Texas, a
shortfall in funds available to make payments on the Notes could occur. In
addition, failure of the Servicer to comply with such requirements could
adversely affect the Servicer's ability to enforce the Receivables.
Pursuant to the Sale and Servicing Agreement, if the interest of the Issuer,
and consequently the Noteholders, in a Receivable is materially adversely
affected by the failure of the related installment sales contract to comply in
all material respects with applicable requirements of law, the affected
Receivable will be reassigned to the Seller. Pursuant to the Sale and Servicing
Agreement, the Seller will make certain other representations and warranties
relating to the validity and enforceability of the installment sales contracts
and the Receivables. However, it is not anticipated that the Issuer or Indenture
Trustee will make any examination of the installment sales contracts or the
records relating thereto for the purpose of establishing the presence or absence
of defects, compliance with such representations and warranties, or for any
other purpose. The sole remedy, if any such representation or warranty is
breached and such breach has a material adverse effect on the interest of
Noteholders in any Receivable and continues beyond the applicable cure period,
is that the Receivables affected thereby will be reassigned to the Seller. In
addition, in the event of the breach of certain representations and warranties,
the Seller may be obligated to accept the reassignment of the entire Pool of
Receivables. See "Description of the Trust Documents-- Representations and
Warranties; Repurchase Obligation".
Applicable state laws generally regulate interest rates and other charges,
require certain disclosures, and may require licensing of HAFC. In addition,
many states have other laws, such as consumer protection laws, unfair and
deceptive practices acts and debt collection practices acts which may apply to
the origination or collection of the Receivables. Depending on the provisions of
the applicable law, violations of these laws may limit the ability of HAFC to
collect all or part of the principal of or interest on the Receivables, may
entitle the borrower to a refund of amounts previously paid and, in addition,
could subject HAFC, the Servicer, the Seller and possibly the Issuer to damages
and administrative enforcement.
The Receivables will also be subject to certain federal laws, which may
include:
(i) the Federal Truth-in-Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding the
terms of the Receivables;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race, color,
sex, religion, marital status, national origin, receipt of public assistance
or the exercise of any right under the Consumer Credit Protection Act, in
the extension of credit;
(iii) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience; and
(iv) the Fair Debt Collection Practices Act, which regulates collection
practices of debt collectors.
Violations of certain provisions of these federal laws may limit the ability
of HAFC, the Servicer and the Issuer to collect all or part of the principal of
or interest on the Receivables and in addition could subject HAFC or the
Servicer (and possibly the Seller or the Issuer) to damages and administrative
enforcement.
SOCIAL, LEGAL, ECONOMIC AND OTHER FACTORS MAY AFFECT INVESTMENT. Changes in
borrowing and payment patterns by borrowers result from a variety of social,
legal and economic factors. Economic factors include the rate of inflation,
unemployment levels, tax law changes and relative interest rates. The Seller,
Servicer
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<PAGE>
and HAFC are unable to determine and have no basis to predict whether or to what
extent tax law changes or other economic or social factors will affect repayment
patterns. See "The Trust Assets."
HAFC'S UNDERWRITING PROCESS AND SUBJECTIVE CREDIT STANDARDS. The
underwriting standards applied by HAFC may not be as stringent as those of the
finance companies of motor vehicle manufacturers or other financial institutions
since HAFC purchases retail automobile installment contracts which may not meet
the credit standards of traditional primary lenders. The HAFC finance program
focuses on the non-prime market including borrowers with below average credit
profiles who may not be able to receive financing from more traditional sources.
The HAFC finance program does set specific limits for the credit amount extended
based upon its evaluation of each borrower's credit profile. See "The Automobile
Financing Business of HAFC--Application Processing and Purchasing Criteria."
RESTRICTIONS ON RECOVERIES MAY RESULT IN THE ISSUER RECEIVING SUBSTANTIALLY
LESS THAN THE FACE AMOUNT OF THE RELATED CONTRACT. The FTC Rule, as described
under "Certain Legal Aspects of the Receivables-- Consumer Protection Laws"
herein, provides borrowers with the right to set-off and defend against
collections. HAFC will warrant that no claims or defenses have been asserted or
threatened with respect to the contracts and that all requirements of applicable
law with respect to the contracts have been satisfied.
In the event that HAFC, the Servicer or the Indenture Trustee must rely on
repossession and disposition of vehicles to recover scheduled payments due on
defaulted contracts, i.e., contracts which are seriously delinquent, or as to
which the related borrower has affirmatively indicated an inability or
unwillingness to make payment, the Issuer may not realize the full amount due on
a contract (or may not realize the full amount on a timely basis). Other factors
that may affect the ability of the Issuer to realize the full amount due on a
contract include whether amendments to certificates of title relating to the
vehicles had been filed, whether financing statements to perfect the security
interest in the vehicles had been filed, depreciation, obsolescence, damage or
loss of any vehicle, and the application of Insolvency Laws. As a result, the
Noteholders may be subject to delays in receiving payments and suffer loss of
their investment in the Notes.
HAFC, THE SERVICER AND SELLER ARE NOT CORPORATELY LIABLE ON THE NOTES, AND
THE ONLY SOURCE OF REPAYMENT WILL BE THE TRUST ASSETS. The Issuer will not
have, nor is it permitted or expected to have, any significant assets or sources
of funds other than the Receivables and the related assets as described herein.
The Notes represent obligations solely of the Issuer or debt secured by the
Trust Assets, and will not represent a recourse obligation to other assets of
the Servicer, Seller or HAFC. No Note will be insured or guaranteed by HAFC, the
Servicer, the Seller, or any other entity. Consequently, holders of the Notes
must rely for repayment primarily upon payments on the Receivables and the
related assets as specified herein.
THE SELLER
The Seller was incorporated under the laws of the State of Nevada on March
25, 1998 and is a wholly-owned special purpose subsidiary of HFC. The Seller was
organized for the limited purposes of engaging in the type of transactions
described herein and other similar transactions and any activities incidental to
and necessary or convenient for the accomplishment of such purposes. Neither
HFC's nor the Seller's board of directors intends to change the business purpose
of the Seller. The Seller's principal executive office is located at 1111 Town
Center Drive, Las Vegas, Nevada 89134. The Seller is not subject to any legal
proceedings.
Each Receivable will be purchased by the Seller at a price equal to its
principal balance as of the date it is acquired, plus the present value of the
anticipated excess spread discounted to account for uncertainty in future
performance of such Receivable. The Seller will immediately sell each Receivable
to the Issuer at a price equal to its principal balance. The Receivables will be
subserviced by HAFC on behalf of HFC as Servicer. The Servicer will be entitled
to the Servicing Fee and any Supplemental Servicing Fees, on behalf of itself
and HAFC.
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THE SERVICER
HFC was incorporated in Delaware in 1925, as successor to an enterprise
which traces its origin through the same ownership to an office established in
1878. HFC will be responsible for acting as the Servicer for the Receivables.
The address of its principal executive office is 2700 Sanders Road, Prospect
Heights, Illinois 60070. HFC is a subsidiary of Household International, Inc.
HFC and its subsidiaries offer a diversified range of financial services.
The principal product of HFC's consumer financial services business is the
making or purchasing of cash loans and sales finance contracts, including home
equity loans secured by first and second mortgages, automotive sales finance
contracts and unsecured credit advances (including revolving and closed-end
personal loans) to middle-income consumers in the United States. Loans are made
through branch lending offices and through direct marketing efforts. HFC,
through banking subsidiaries, also offers both MasterCard* and VISA* credit
cards to residents throughout the United States.
Through its subsidiaries, HFC also purchases and services revolving charge
card accounts originated by merchants. The accounts result from consumer
purchases of goods and services from the originating merchant. Closed-end sales
contracts are also directly originated by an HFC subsidiary.
Where applicable laws permit, HFC offers customers credit life and credit
accident, health and disability insurance. Such insurance is generally written
directly by, or reinsured with, one of HFC's insurance affiliates.
As of June 30, 1998, HFC had approximately $42.4 billion in total assets,
approximately $36.6 billion in total liabilities and approximately $5.8 billion
in shareholder's equity. The Servicer is not subject to any legal proceedings
which are expected to have a material impact on its business or financial
condition, taken as a whole.
THE SUBSERVICER
HAFC is a Delaware corporation and the surviving entity in a merger between
a subsidiary of Household International, Inc. ("Household") and ACC Consumer
Finance Corporation ("ACC"). The merger closed on October 21, 1997 and ACC
changed its name to Household Automotive Finance Corporation shortly thereafter.
ACC was the successor to a California corporation also named ACC Consumer
Finance Corporation which was formerly named American Credit Corporation. The
principal executive offices of HAFC are located at 11452 El Camino Real, Suite
400, San Diego, CA 92130.
HAFC is an automobile finance company specializing in the indirect financing
of automobile sales finance contracts to consumers with non-prime credit.
Through a subsidiary, HAFC also offers loans directly to consumers. The indirect
lending program provides automobile dealers with an alternative source of
financing for those consumers who typically do not qualify for financing under
the dealer's traditional financing sources. Under this program, retail
installment sales contracts are purchased by HAFC from originating automobile
dealers.
HAFC is licensed, where required, to purchase and service retail installment
contracts. HAFC is not subject to any legal proceedings which are expected to
have a material impact on its business or financial condition.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Notes and the
Certificates will be used to fund the initial deposit in the Reserve Account and
to obtain a release of a lien maintained against assets of the Issuer prior to
the Closing Date. Such lien exists as security for issuance of a series of
privately placed notes that will be retired simultaneously with the closing of
the sale of the Notes.
- ------------------------
* Master Card and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.
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THE ISSUER
GENERAL
The Issuer, Household Automobile Revolving Trust I, is a Delaware business
trust formed under the laws of the State of Delaware pursuant to the Trust
Agreement for the purpose of engaging in the transactions described in this
Prospectus. The Issuer will not engage in any activity other than (i) acquiring,
holding and managing the Receivables and the other assets of the Issuer and
proceeds therefrom, (ii) issuing notes in private and public offerings,
including the issuance of the Notes, (iii) making payments on the Notes and (iv)
engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
Financial statements of the Issuer are contained in Appendix B hereto.
The Issuer's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company as Owner Trustee, at the address listed below under
"--The Owner Trustee."
THE OWNER TRUSTEE
Wilmington Trust Company, the Owner Trustee under the Trust Agreement, is a
Delaware banking corporation and its principal offices are located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001. The
Owner Trustee will perform limited administrative functions under the Trust
Agreement. The Owner Trustee's liability in connection with the issuance and
sale of the Notes is limited solely to the express obligations of the Owner
Trustee set forth in the Trust Agreement and the Sale and Servicing Agreement.
THE INDENTURE TRUSTEE
The Chase Manhattan Bank is the Indenture Trustee under the Indenture. The
Chase Manhattan Bank is a New York banking corporation, the principal offices of
which are located at 450 West 33rd Street, 8th Floor, New York, New York 10001.
THE TRUST ASSETS
GENERAL
The Trust Assets consist of the following: (a) the Receivables; (b) all
amounts paid or payable under the Receivables after the Cut-Off Date; (c)
security interests in the financed vehicles granted by the borrowers; (d) an
assignment of HAFC's rights against dealers ("Dealers") under agreements between
HAFC and the Dealers (the "Dealer Agreements"); (e) an assignment of the right
to receive proceeds from claims on loss, physical damage, credit life,
disability, theft, mechanical breakdown, or similar insurance policies covering
the financed vehicles or the borrowers; (f) all funds on deposit from time to
time in the Collection Account, the Note Account and the Reserve Account; (g) an
assignment of all rights and benefits under the Receivables Purchase Agreement
and all supplements thereto; (h) all documents related to the Receivables,
including the original contracts, documents evidencing insurance, original
credit applications and original certificates of title or copies of applications
therefor, (i) a share of the preferred stock of the Seller (the "Preferred
Stock"); (j) the Interest Rate Cap and all payments made pursuant thereto; and
(k) all proceeds of the foregoing.
The Receivables were originated by Dealers in accordance with HAFC's
requirements under agreements with Dealers, have been assigned by the Dealers to
HAFC, and evidence the indirect financing made available to the borrowers by
HAFC. Dealer Agreements may provide for repurchase or recourse against the
Dealer in the event of a breach of a representation or warranty by the Dealer
under a Dealer Agreement.
All of the Receivables were sold by HAFC to the Seller pursuant to the
Receivables Purchase Agreement and by the Seller to the Issuer pursuant to the
Sale and Servicing Agreement. The Receivables
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<PAGE>
were originated by Dealers and purchased by HAFC in the ordinary course of
HAFC's business pursuant to its finance programs and underwriting standards.
ELIGIBILITY CRITERIA
The Receivables were selected according to several criteria, including the
following: each Receivable (i) was originated by a Dealer located in the United
States to a borrower who was a resident of the United States with a mailing
address in the United States, (ii) has a contractual APR of not less than 10.5%
or more than 27%, (iii) provides for level monthly payments which provide
interest at the APR and fully amortize the amount financed over an original term
no greater than 72 months, (iv) is not more than 30 days past due as of the
Cut-Off Date, (v) is attributable to the purchase of a new or used automobile,
light duty truck or van, (vi) as of the Cut-Off Date has a remaining term of not
more than 72 months and (vii) had an original principal balance of at least
$3,000 and not more than $27,000. No selection procedures adverse to the
Noteholders were utilized in selecting the Receivables to be conveyed to the
Issuer.
TERMS OF THE RECEIVABLES
Each Receivable provides for the allocation of payments according to (i) the
simple interest method ("Simple Interest Receivables") or (ii) the "sum of
periodic balances" or "sum of monthly payments" method ("Actuarial
Receivables"). Except as otherwise described, the scheduled payment on each
Receivable is a fixed level monthly payment which will amortize the full amount
of the Receivable over its term assuming, in the case of each Simple Interest
Receivable, that the borrower does not pay any installment before or after its
scheduled due date.
Payments on Simple Interest Receivables will be applied first to interest
accrued through the date immediately preceding the date of payment and then to
unpaid principal. Accordingly, if a borrower pays an installment before its due
date, the portion of the payment allocable to interest for the payment period
will be less than if the payment had been made on the due date, the portion of
the payment applied to reduce the principal balance will be correspondingly
greater, and the principal balance will be amortized more rapidly than
scheduled. Conversely, if a borrower pays an installment after its due date, the
portion of the payment allocable to interest for the payment period will be
greater than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly less,
and the principal balance will be amortized more slowly than scheduled, in which
case a larger portion of the principal balance may be due on the final scheduled
payment date.
An Actuarial Receivable provides for the payment by the borrower of a
specified total amount of payments, payable in monthly installments on the
related due date, which total represents the principal amount financed and
finance charges in an amount calculated on the basis of a stated APR for the
term of such Receivable. Notwithstanding the foregoing, the rate at which such
finance charge accrues and, correspondingly, the amount of each scheduled
payment allocated to reduction of the outstanding principal balance of an
Actuarial Receivable is calculated in accordance with the actuarial method and
all payments (other than partial prepayments) received by the Servicer on or in
respect of the Actuarial Receivables will be allocated pursuant to the Sale and
Servicing Agreement on an actuarial basis. Collections on an Actuarial
receivable made during a Collection Period will be applied first, to the
scheduled payment on such Actuarial Receivable, and second, to any late fees
accrued with respect to such Actuarial Receivable.
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COMPOSITION OF THE RECEIVABLES
Set forth below is a description of the material characteristics of the
Receivables as of the Cut-Off Date:
<TABLE>
<CAPTION>
TOTAL POOL OF RECEIVABLES
------------------------------
<S> <C>
Original Pool Balance............................................................. $640,909,979.40
Number of Receivables............................................................. 49,247
Average Principal Balance(1)...................................................... $13,014.19
Range of Principal Balances..................................................... $3,014.96 to $26,234.03
Average Original Amount Financed(2)............................................... $13,631.94
Range of Original Amounts Financed.............................................. $3,317.08 to $27,423.40
Weighted Average APR(3)........................................................... 19.83%
Range of Original APRs.......................................................... 11% to 29%
Weighted Average Original Term(3)................................................. 61.49 months
Range of Original Terms......................................................... 24 months to 72 months
Weighted Average Remaining Term(3)................................................ 56.54 months
Range of Remaining Terms........................................................ 18 months to 72 months
Weighted Average Months of Seasoning(3)........................................... 4.95 months
Range of Months of Seasoning.................................................... 0 months to 35 months
Number of Receivables more than 30 days delinquent................................ None
</TABLE>
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(1) Sum of Original Pool Balance divided by total number of loans.
(2) Sum of aggregate amount financed divided by total number of loans.
(3) Weighted by Principal Balance as of the Cut-Off Date.
COMPOSITION OF RECEIVABLES BY PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PRINCIPAL NUMBER OF % OF PRINCIPAL % OF POOL BY
BALANCE RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- ----------------------------------------------- ----------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C>
$3,000 to 4,000............................... 56 0.11% $ 200,526.87 0.03%
4,001 to 5,000............................... 184 0.37 842,285.67 0.13
5,001 to 6,000............................... 462 0.94 2,566,250.17 0.40
6,001 to 7,000............................... 853 1.73 5,588,583.85 0.87
7,001 to 8,000............................... 1,610 3.27 12,153,687.07 1.90
8,001 to 9,000............................... 2,556 5.19 21,831,874.91 3.41
9,001 to 10,000............................... 3,688 7.49 35,116,416.32 5.48
10,001 to 11,000............................... 4.928 10.01 51,862,598.39 8.09
11,001 to 12,000............................... 5,999 12.18 69,102,164.73 10.78
12,001 to 13,000............................... 6,710 13.63 83,856,661.96 13.08
13,001 to 14,000............................... 5,422 11.01 73,081,570.99 11.40
14,001 to 15,000............................... 3,946 8.01 57,146,895.15 8.92
15,001 to 16,000............................... 3,093 6.28 47,872,877.99 7.47
16,001 to 17,000............................... 2,589 5.26 42,673,401.27 6.66
17,001 to 18,000............................... 2,144 4.35 37,499,428.80 5.85
18,001 to 19,000............................... 1,757 3.57 32,474,462.59 5.07
19,001 to 20,000............................... 2,171 2.58 24,751,273.53 3.86
20,001 to 21,000............................... 889 1.81 18,210,542.04 2.84
21,001 to 22,000............................... 638 1.30 13,684,582.23 2.14
22,001 to 23,000............................... 260 0.53 5,837,623.20 0.91
23,001 to 24,000............................... 143 0.29 3,349,738.44 0.52
24,001 to 25,000............................... 37 0.08 901,132.54 0.14
25,001 to 26,000............................... 11 0.02 279,166.66 0.04
26,001 to 27,000............................... 1 0.00 26,234.03 0.00
----------- ----------- ----------------- ------
Total...................................... 49,247 100.00% $ 640,909,979.40 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
24
<PAGE>
COMPOSITION BY APR OF THE RECEIVABLES
(AS OF CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
APR RANGE RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- -------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
11.00 to 11.99%................................... 4 0.01% $ 50,943.31 0.01%
12.00 to 12.99.................................... 115 0.23 1,919,550.72 0.30
13.00 to 13.99.................................... 38 0.08 597,034.81 0.09
14.00 to 14.99.................................... 88 0.18 1,420,238.00 0.22
15.00 to 15.99.................................... 720 1.46 11,541,485.58 1.80
16.00 to 16.99.................................... 879 1.78 14,963,458.66 2.33
17.00 to 17.99.................................... 10,298 20.91 147,718,161.71 23.05
18.00 to 18.99.................................... 7,241 14.70 101,283,566.09 15.80
19.00 to 19.99.................................... 4,816 9.78 63,156,113.57 9.85
20.00 to 20.99.................................... 12,776 25.94 159,293,145.41 24.85
21.00 to 21.99.................................... 5,396 10.96 63,859,045.47 9.96
22.00 to 22.99.................................... 4,152 8.43 47,686,503.89 7.44
23.00 to 23.99.................................... 1,073 2.18 11,520,173.99 1.80
24.00 to 24.99.................................... 1,496 3.04 14,548,426.71 2.27
25.00 to 25.99.................................... 146 0.30 1,279,885.88 0.20
26.00 to 27.00.................................... 8 0.02 65,908.45 0.01
29................................................ 1 0.00 6,337.15 0.00
----------- ----------- ----------------- ------
Total......................................... 49,247 100.00% $ 640,909,979.40 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
COMPOSITION BY INTEREST ACCRUAL METHOD
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
INTEREST ACCRUAL METHOD RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL OUTSTANDING
- ---------------------------------------------- ----------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Actuarial..................................... 5,355 10.87% $ 64,920,797.58 10.13%
Simple Interest............................... 43,892 89.13 575,989,181.82 89.87
----------- ----------- ----------------- ------
Total..................................... 49,247 100.00% $ 640,909,979.40 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
COMPOSITION BY STATE OF RESIDENCE
(AS OF CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
LOCATION OF MAILING ADDRESS OF BORROWER RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- -------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama........................................... 91 0.18% $ 1,274,631.24 0.20%
Alaska............................................ 7 0.01 91,191.01 0.01
Arizona........................................... 728 1.48 9,155,560.80 1.43
Arkansas.......................................... 142 0.29 1,931,439.45 0.30
California........................................ 6,226 12.64 80,127,918.94 12.50
Colorado.......................................... 465 0.94 5,312,347.65 0.83
Connecticut....................................... 7 0.01 96,247.45 0.02
Delaware.......................................... 364 0.74 4,438,521.40 0.69
District of Columbia.............................. 261 0.53 3,408,104.25 0.53
Florida........................................... 4,793 9.73 62,726,005.82 9.79
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
LOCATION OF MAILING ADDRESS OF BORROWER RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- -------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Georgia........................................... 4,142 8.41 53,445,945.83 8.34
Hawaii............................................ 4 0.01 50,752.39 0.01
Idaho............................................. 26 0.05 257,565.30 0.04
Illinois.......................................... 2,049 4.16 27,129,556.95 4.23
Indiana........................................... 440 0.89 5,672,235.98 0.89
Iowa.............................................. 191 0.39 2,324,684.20 0.36
Kansas............................................ 307 0.62 3,903,285.85 0.61
Kentucky.......................................... 620 1.26 7,825,082.34 1.22
Louisiana......................................... 944 1.92 11,869,827.14 1.85
Maine............................................. 18 0.04 224,448.87 0.04
Maryland.......................................... 1,885 3.83 24,979,616.70 3.90
Massachusetts..................................... 52 0.11 598,386.46 0.09
Michigan.......................................... 1,056 2.14 13,309,231.22 2.08
Minnesota......................................... 59 0.12 801,530.90 0.13
Mississippi....................................... 563 1.14 7,242,718.89 1.13
Missouri.......................................... 826 1.68 10,140,885.75 1.58
Montana........................................... 65 0.13 712,469.74 0.11
Nebraska.......................................... 256 0.52 3,014,651.27 0.47
Nevada............................................ 974 1.98 12,120,619.03 1.89
New Hampshire..................................... 17 0.03 164,317.45 0.03
New Jersey........................................ 1,108 2.25 13,566,984.25 2.12
New Mexico........................................ 129 0.26 1,618,342.14 0.25
New York.......................................... 312 0.63 3,884,322.47 0.61
North Carolina.................................... 2,594 5.27 36,297,405.98 5.66
North Dakota...................................... 4 0.01 64,077.54 0.01
Ohio.............................................. 1,046 2.12 13,482,779.23 2.10
Oklahoma.......................................... 600 1.22 7,199,366.59 1.12
Oregon............................................ 369 0.75 4,353,203.49 0.68
Pennsylvania...................................... 1,886 3.83 24,197,316.98 3.78
Rhode Island...................................... 7 0.01 90,303.99 0.01
South Carolina.................................... 673 1.37 8,781,929.67 1.37
South Dakota...................................... 19 0.04 213,573.80 0.03
Tennessee......................................... 2,385 4.84 31,515,449.05 4.92
Texas............................................. 7,790 15.82 106,292,966.56 16.58
Utah.............................................. 42 0.09 554,170.39 0.09
Vermont........................................... 3 0.01 32,179.88 0.01
Virginia.......................................... 1,381 2.80 17,590,996.96 2.74
Washington........................................ 542 1.10 6,741,126.85 1.05
West Virginia..................................... 695 1.41 9,068,252.14 1.41
Wisconsin......................................... 77 0.16 929,635.35 0.15
Wyoming........................................... 7 0.01 85,815.82 0.01
----------- ----------- ----------------- ------
Total......................................... 49,247 100.00% $ 640,909,979.40 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
26
<PAGE>
COMPOSITION BY REMAINING TERM OF THE RECEIVABLES (AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
REMAINING TERM RANGE (IN MONTHS) RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- -------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
18 to 23.......................................... 136 0.28% $ 746,606.39 0.12%
24 to 29.......................................... 423 0.86 2,776,161.62 0.43
30 to 35.......................................... 959 1.95 7,481,756.71 1.17
36 to 41.......................................... 1,495 3.04 13,359,390.58 2.08
42 to 47.......................................... 3,452 7.01 35,966,789.47 5.61
48 to 53.......................................... 10,881 22.09 131,113,125.53 20.46
54 to 59.......................................... 22,975 46.65 300,419,224.47 46.87
60 to 65.......................................... 1,574 3.20 25,669,689.24 4.01
66 to 71.......................................... 7,312 14.85 122,699,690.49 19.14
72................................................ 40 0.08 677,544.90 0.11
----------- ----------- ----------------- ------
Total......................................... 49,247 100.00% $ 640,909,979.40 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
COMPOSITION OF RECEIVABLES BY TYPE OF FINANCED VEHICLE
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
TYPE OF FINANCING RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL OUTSTANDING
- ---------------------------------------------- ----------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
New........................................... 7,511 9.48% $ 119,232,892.72 18.60%
Used.......................................... 41,736 90.52 521,677,086.68 81.40
----------- ----------- ----------------- ------
Total..................................... 49,247 100.00% $ 640,909,979.40 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
THE RESERVE ACCOUNT
An initial deposit of $6,409,099.79 (1% of the Original Pool Balance) will
be placed in an account (the "Reserve Account"). The Reserve Account will be
increased on each Payment Date by the deposit in the Reserve Account of amounts
remaining after payments to Noteholders and any fees then payable pursuant to
the priorities set forth in "Description of the Notes--Payment Priorities,"
until the amount on deposit therein equals the Targeted Reserve Account Balance.
Amounts in the Reserve Account on any Payment Date (after giving effect to all
payments to be made to the Servicer and the Noteholders on such Payment Date) in
excess of the Targeted Reserve Account Balance for such Payment Date will be
paid to the holders of the Certificates.
Funds will be withdrawn from the Reserve Account each Payment Date to pay
any Servicing Fee then payable to a master servicer other than HFC, and to make
required distributions on the Notes to the extent funds are not otherwise
available, as described herein. See "Description of the Notes--Payment
Priorities".
THE PREFERRED STOCK
The Trust Assets include one share of preferred stock of the Seller (the
"Preferred Stock"). The Preferred Stock has a par value of $1.00 and is
designated the "Class SV Preferred Stock". Issuance of the Preferred Stock to
the Issuer is intended to prevent the Seller from instituting any of the
Seller's Bankruptcy Initiatives described below and will have no impact on the
bankruptcy remoteness of the Issuer. As discussed in "Risk Factors--Although the
transaction has been structured so as to minimize the risks associated with the
bankruptcy of HAFC or the Seller, such safeguards may not eliminate all such
risks", a bankruptcy of the Seller may reduce, delay or prevent payments to
Noteholders. On March 27, 1998, the Preferred Stock was issued directly to the
Issuer. The share of Preferred Stock held by the Issuer
27
<PAGE>
is currently the only issued and outstanding share of the Seller's Preferred
Stock. As the Seller sponsors other trusts to issue notes backed by other pools
of automobile installment contracts, an additional share of Preferred Stock will
be issued to each such trust. Pursuant to the Articles of Incorporation of the
Seller (included as an exhibit to the Registration Statement of which this
Prospectus forms a part), the sole rights of the holders of the Preferred Stock
are to (a) vote in the event the Seller desires to: institute proceedings to be
adjudicated insolvent, consent to the institution of any bankruptcy or
insolvency case or petition, make an assignment for the benefit of creditors, or
admit in writing its inability to pay its debts as they become due
(collectively, the "Seller's Bankruptcy Initiatives"), and (b) receive $1.00
upon liquidation of the Seller. The unanimous affirmative vote of the holders of
the Preferred Stock is required to approve any of the Seller's Bankruptcy
Initiatives. Holders of the Preferred Stock of the Seller have no other rights,
including the right to receive dividends or to vote on any other matter.
Pursuant to the Issuer's pledge of its interest in the Trust Assets, the
Indenture Trustee has the exclusive authority to vote the interest of the Issuer
in the Preferred Stock. In the Indenture, the Indenture Trustee covenants that
it will not consent to any of the Seller's Bankruptcy Initiatives. It is
expected that each trust sponsored by the Seller and series of notes issued by
such trusts will be structured identically with respect to the Preferred Stock,
the voting rights related thereto and the covenants with respect to voting of
such shares. As a result, it is expected that all shares of Preferred Stock will
be voted to prevent the Seller's Bankruptcy Initiatives. However, because
unanimous consent of the holders of the Preferred Stock is required to approve
any of the Seller's Bankruptcy Initiatives, the holders of the Notes will be
able to unilaterally prevent the implementation of the Seller's Bankruptcy
Initiatives.
YIELD AND PREPAYMENT CONSIDERATIONS
All the Receivables are prepayable at any time. If prepayments are received
on the Receivables, the actual weighted average life of the Receivables may be
shorter than the scheduled weighed average life (i.e., the scheduled weighted
average life assumes that payments will be made as scheduled, and that no
prepayments will be made). (For this purpose, the term "prepayments" also
includes liquidations due to default, as well as receipt of proceeds from credit
life, credit disability, and casualty insurance policies.) Weighted average life
means the average amount of time during which each dollar of principal of a
Receivable is outstanding.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social, and other factors, including the fact that a borrower may not
sell or transfer a financed vehicle without the consent of HAFC. HAFC believes
that the actual rate of prepayments will result in a substantially shorter
weighted average life than the scheduled weighted average life of the
Receivables. If a Note is purchased at a premium, if the actual rate of
prepayments exceed the rate of prepayments anticipated at the time the Note was
purchased, the actual yield to maturity of the Note will be less than the yield
anticipated at the time of purchase. Any reinvestment risks (i.e., that a
Noteholder will not be able to reinvest amounts received in payment on the Notes
at interest rates that are greater than or equal to the applicable Note Rate)
resulting from a faster or slower incidence of prepayment of Receivables will be
borne by the Note Owners.
The rate of payment of principal of each class of Notes will depend on the
rate of payment (including prepayments) of the Principal Balance of the
Receivables. As a result, final payment of any class of Notes could occur
significantly earlier than the Final Scheduled Payment Date or the Class A-1
Scheduled Maturity Date, in the case of the Class A-1 Notes. Reinvestment risk
associated with early payment of the Notes will be borne exclusively by the
Noteholders.
Prepayments on automobile receivables can be measured relative to a
prepayment standard or model. The model used in this Prospectus, the Absolute
Prepayment Model ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each
28
<PAGE>
receivable in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of receivables originally containing
10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month.
ABS does not purport to be an historical description of prepayment experience or
a prediction of the anticipated rate of prepayment of any pool of receivables,
including the Receivables.
The table captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" (the "ABS Table") has been prepared on the basis of the
following assumptions: (i) the Trust Assets includes a pool of Receivables with
an aggregate principal balance of $ , a gross APR of %, an original term
to maturity of months, a remaining term to maturity of months, and an
assumed cut-off date of , 1998; (ii) the Receivables prepay in full
at the specified constant percentage of ABS monthly, with no defaults, losses or
repurchases; (iii) each scheduled monthly payment on the Receivables is made on
the last day of each month and each month has 30 days; (iv) the initial
principal amount of each class of Offered Notes are as set forth on the cover
page hereof; (v) interest accrues during each Interest Period at the following
assumed coupon rates: Class A-1 Notes, %; Class A-2 Notes, %; Class A-3
Notes, %; Class A-4 Notes, %; Class A-5 Notes, %; and Class B-1 Notes,
%; (vi) payments on the Notes are made on the 17th day of each month whether
or not a Business Day; (vii) the Notes are purchased on the Closing Date; (viii)
the scheduled monthly payment for each Receivable has been calculated on the
basis of the assumed characteristics set forth in (i) above, such that each
Receivable will amortize in amounts sufficient to repay the Principal Balance of
such Receivable by its indicated remaining term to maturity; (ix) the first due
date for each Receivable is the last day of the month of the assumed cut-off
date (x) the Seller and the Servicer do not exercise the option to purchase the
Receivables; and (xi) the difference between the gross APR and the net APR is
equal to the Servicing Fee.
The ABS Table also assumes that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each such pool having the
following characteristics and that the level of scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, gross APR,
original number of scheduled payments and remaining number of scheduled payments
as of the Cut-Off Date) will be such that each pool will be fully amortized by
the end of its remaining term to maturity.
<TABLE>
<CAPTION>
REMAINING
ORIGINAL TERM TERM
AGGREGATE PRINCIPAL TO MATURITY TO MATURITY
POOL BALANCE GROSS APR ASSUMED CUT-OFF DATE (IN MONTHS) (IN MONTHS)
- --------- ----------------------- ------ ----------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
1
Total
</TABLE>
The ABS Table indicates, based on the assumptions set forth above, the
percentages of the initial principal amount of each class of Notes that would be
outstanding after each of the Payment Dates shown at various percentages of ABS
and the corresponding weighted average lives of such Notes. The actual
characteristics and performance of the Receivables will differ from the
assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables could produce
slower or faster principal distributions than indicated in the ABS Table at the
various constant percentages of ABS specified, even if the original and
remaining terms to maturity of the Receivables are as assumed. Any difference
between such assumptions and the actual characteristics and performance of the
Receivables, including actual prepayment experience or losses, will affect the
percentages of initial balances outstanding over time and the weighted average
lives of each class of Offered Notes.
29
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE
AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------- -------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- --------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/17/98
11/17/98
12/17/98
1/17/99
2/17/99
3/17/99
4/17/99
5/17/99
6/17/99
7/17/99
8/17/99
9/17/99
10/17/99
11/17/99
12/17/99
1/17/00
2/17/00
3/17/00
4/17/00
5/17/00
6/17/00
7/17/00
8/17/00
9/17/00
10/17/00
11/17/00
12/17/00
1/17/01
2/17/01
3/17/01
4/17/01
5/17/01
6/17/01
7/17/01
8/17/01
9/17/01
10/17/01
11/17/01
12/17/01
1/17/02
2/17/02
3/17/02
4/17/02
5/17/02
6/17/02
7/17/02
8/17/02
9/17/02
10/17/02
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
------------------------- -------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- --------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/17/98
11/17/98
12/17/98
1/17/99
2/17/99
3/17/99
4/17/99
5/17/99
6/17/99
7/17/99
8/17/99
9/17/99
10/17/99
11/17/99
12/17/99
1/17/00
2/17/00
3/17/00
4/17/00
5/17/00
6/17/00
7/17/00
8/17/00
9/17/00
10/17/00
11/17/00
12/17/00
1/17/01
2/17/01
3/17/01
4/17/01
5/17/01
6/17/01
7/17/01
8/17/01
9/17/01
10/17/01
11/17/01
12/17/01
1/17/02
2/17/02
3/17/02
4/17/02
5/17/02
6/17/02
7/17/02
8/17/02
9/17/02
10/17/02
<CAPTION>
CLASS A-5 NOTES CLASS B-1 NOTES
------------------------- -------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- --------------------- ----- ----- ----- ----- ----- ----- ----- -----
10/17/98
11/17/98
12/17/98
1/17/99
2/17/99
3/17/99
4/17/99
5/17/99
6/17/99
7/17/99
8/17/99
9/17/99
10/17/99
11/17/99
12/17/99
1/17/00
2/17/00
3/17/00
4/17/00
5/17/00
6/17/00
7/17/00
8/17/00
9/17/00
10/17/00
11/17/00
12/17/00
1/17/01
2/17/01
3/17/01
4/17/01
5/17/01
6/17/01
7/17/01
8/17/01
9/17/01
10/17/01
11/17/01
12/17/01
1/17/02
2/17/02
3/17/02
4/17/02
5/17/02
6/17/02
7/17/02
8/17/02
9/17/02
10/17/02
</TABLE>
(CONTINUED ON NEXT PAGE)
30
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE
AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------- -------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- --------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/17/02
12/17/02
1/17/03
2/17/03
3/17/03
4/17/03
5/17/03
6/17/03
7/17/03
8/17/03
9/17/03
10/17/03
11/17/03
12/17/03
1/17/04
2/17/04
3/17/04
4/17/04
5/17/04
6/17/04
7/17/04
8/17/04
9/17/04
10/17/04
11/17/04
12/17/04
1/17/05
2/17/05
3/17/05
4/17/05
5/17/05
6/17/05
7/17/05
8/17/05
9/17/05
10/17/05
11/17/05
12/17/05
1/17/06
2/17/06
3/17/06
Weighted Average Life
in Years(2)
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
------------------------- -------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- --------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/17/02
12/17/02
1/17/03
2/17/03
3/17/03
4/17/03
5/17/03
6/17/03
7/17/03
8/17/03
9/17/03
10/17/03
11/17/03
12/17/03
1/17/04
2/17/04
3/17/04
4/17/04
5/17/04
6/17/04
7/17/04
8/17/04
9/17/04
10/17/04
11/17/04
12/17/04
1/17/05
2/17/05
3/17/05
4/17/05
5/17/05
6/17/05
7/17/05
8/17/05
9/17/05
10/17/05
11/17/05
12/17/05
1/17/06
2/17/06
3/17/06
Weighted Average Life
in Years(2)
<CAPTION>
CLASS A-5 NOTES CLASS B-1 NOTES
------------------------- -------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- --------------------- ----- ----- ----- ----- ----- ----- ----- -----
11/17/02
12/17/02
1/17/03
2/17/03
3/17/03
4/17/03
5/17/03
6/17/03
7/17/03
8/17/03
9/17/03
10/17/03
11/17/03
12/17/03
1/17/04
2/17/04
3/17/04
4/17/04
5/17/04
6/17/04
7/17/04
8/17/04
9/17/04
10/17/04
11/17/04
12/17/04
1/17/05
2/17/05
3/17/05
4/17/05
5/17/05
6/17/05
7/17/05
8/17/05
9/17/05
10/17/05
11/17/05
12/17/05
1/17/06
2/17/06
3/17/06
Weighted Average Life
in Years(2)
</TABLE>
- ----------------------------------
(1) The percentages in this table have been rounded to nearest whole number.
(2) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment on a Note by the number of years from the
date of the issuance of the Note to the related Payment Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal
amount of the Notes.
31
<PAGE>
THE AUTOMOBILE FINANCING BUSINESS OF HAFC
GENERAL
HAFC purchases retail installment contracts of non-prime borrowers from a
network of automobile Dealers. Through a subsidiary, it also originates
contracts directly with borrowers. No direct originations are included in the
Receivables. Approximately 97% of the Dealers are franchisees of major
automobile manufacturers. The retail sales contracts are secured by new or used
automobiles, light duty trucks and vans. HAFC's customers typically have limited
credit history or past credit problems including bankruptcy, chargeoffs or other
derogatory credit events, and are unable to obtain automobile financing from
more traditional sources. The retail installment contracts typically bear a
higher annual percentage rate than charged by a traditional source.
APPLICATION PROCESSING AND PURCHASING CRITERIA.
HAFC markets it services to Dealers under seven different programs and uses
a tiered pricing structure designed to price loans according to the borrower's
credit characteristics. Programs exist for borrowers with limited credit
histories, such as first time buyers, and for borrowers who have been the
subject of a bankruptcy that was discharged within the last five years. In
addition, multiple programs are offered that provide more favorable rates and
terms to borrowers meeting progressively more stringent credit criteria. The
criteria examined include length of employment, length at current residence,
income, length of credit history, credit bureau score, the ratio of required
monthly debt payments to monthly gross income and the ratio of proposed monthly
payment on the auto contract to monthly gross income.
For new vehicles, HAFC will finance up to 110% of the Dealer's invoice
price, plus taxes, license fees, insurance, any dealer handling or documentation
charges, and the cost of any service contract. For used vehicles, HAFC will
finance up to 115% of the value quoted in industry-accepted used car guides
(such as the Kelly Wholesale Blue Book), plus the same additions as for new
vehicles. In each case, the total amount financed may not exceed 150% of the
invoice or wholesale value as quoted in the used car guide. The maximum amount
financed will not exceed $27,000. Financing is not offered for vehicles that are
more than eight years old or that have been driven more than 90,000 miles.
The amount of the required downpayment varies by program. For qualifying
borrowers with higher credit profiles, no downpayment is required while other
programs require a minimum downpayment of $1,000. The value of a trade-in
vehicle (as determined by reference to industry accepted used car guides) may be
applied to the downpayment; however manufacturer rebates may not be applied
toward the required downpayment.
HAFC's application processing is conducted in six regional credit centers
which focus solely on underwriting customer applications forwarded by Dealers,
typically by facsimile. Upon receipt of an application a credit officer reviews
the application and obtains a credit history from a credit reporting bureau. A
conditional underwriting decision is made by the credit officer after evaluating
the application, credit bureau data, and whether the application meets the
criteria under HAFC's policy guidelines and its proprietary credit scoring
model. Despite certain deficiencies that may exist in a borrower's credit
history, the credit scoring model is predictive of future delinquency and credit
loss based on statistical modelling of HAFC's historical portfolio. Additional
factors considered that may offset past credit deficiencies include the
borrower's residence stability, employment stability, income level relative to
expenses and past performance on automobile-related debt. Upon conditional
approval, the Dealer forwards a funding package to a centralized funding
facility. The funding package includes the application, contract, title
transfer, customer agreement to provide insurance, and other information
necessary to fund the contract.
Among other things, the contract must be fully amortizing, provide for level
payments over the term of the contract, grant a first priority security interest
in the financed vehicle to HAFC, prohibit the sale or transfer of the financed
vehicle without HAFC's consent, and allow for acceleration of maturity of the
32
<PAGE>
contract if the vehicle is sold or transferred without this consent. The
portions of payments on contracts allocable to principal and interest are, for
payoff and deficiency purposes, determined in accordance with the law of the
state in which the contract was originated.
FUNDING PACKAGE COMPLETION, VERIFICATION AND FUNDING
After receiving an approval from one of HAFC's regional credit centers and
compiling a set of documents the Dealers believe to be consistent with HAFC's
documentation requirements, the Dealers send funding packages to HAFC's central
funding group in San Diego, California. HAFC generally requires that funding
packages include verification of the borrower's income, an agreement of the
borrower to obtain insurance and evidence that application has been made to
transfer title.
HAFC's funding department reviews each contract and verifies the application
data and contract documentation. The funding department also confirms or
reconfirms the borrower's employment and the borrower's agreement to obtain
insurance on the vehicle. HAFC believes one of the most important verifications
is a direct telephone interview of the borrower to confirm the terms of the
contract, the source of the down payment and the equipment on the vehicle. HAFC
requires a telephone interview of the borrower prior to funding a contract with
a borrower that is deemed by HAFC to be a higher credit risk. HAFC believes this
process reduces the risk of misrepresentation by Dealers and/or borrowers and
provides a basis for future borrower contact.
A funding package may be returned if it does not comply with the terms of
the initial approval or if HAFC discovers facts that were not disclosed during
the approval process. As an additional quality control check, HAFC's data
processing systems perform an automated review of the contracts and identify any
characteristics not in compliance with HAFC's minimum underwriting standards.
POST-FUNDING QUALITY REVIEWS
HAFC uses its automated systems to continue to monitor contracts after
funding. In addition, on-going quality control reviews of the newly-purchased
contracts are performed at each of HAFC's credit underwriting centers. These
reviews focus on compliance with underwriting standards, the quality of the
credit decision and the completeness of contract documentation. On a quarterly
basis, a report is prepared which summarizes (by credit processor and credit
officer) policy exceptions, processing errors, documentation deficiencies and
credit decisions which HAFC's quality control manager considers overly
aggressive.
SERVICING OF CONTRACTS
HAFC services all of the contracts it purchases or originates. HAFC's
servicing generally consists of payment and pay-off processing, collecting,
insurance tracking, title tracking, responding to borrower inquiries,
investigating delinquencies, repossessing and reselling collateral, collection
reporting and credit performance monitoring. Servicing for all contracts,
whether owned or sold in an asset-backed security, is performed in accordance
with policies and procedures established by HAFC in consultation with HFC, the
Servicer, from time to time. In accordance with these policies and procedures
and reasonable commercial practice, appropriate action may be taken in the
discretion of HAFC, including, but not limited to, extending payment
arrangements, deferment pending a change in circumstances, referral for
repossession and/or legal action and contract restructuring. HAFC's current
policies require that the aggregate of all extensions on a contract may not
exceed six months over the life of the contract and no more than two months in
any contract in a consecutive twelve month period.
A Receivable is considered contractually delinquent if less than 90% of the
required payment due from the borrower has been received by HAFC. Generally,
contracts that are in excess of 31 days delinquent may be extended once during a
six month period after the borrower makes, in one or more payments, at least 90%
of one required payment in either the current or prior month. If partial
payments are aggregated, all such payments must be made within a 30 day period.
When a contract is extended, it is
33
<PAGE>
no longer considered delinquent. Under the HAFC's current policies, a contract
will generally be charged-off upon the earlier of: (i) the elapse of 90 days
since the financed vehicle was repossessed, (ii) a good faith determination that
all amounts expected to be recovered have been received, (iii) if the financed
vehicle has not been repossessed, the date on which at least 10% of a scheduled
payment becomes 150 or more days delinquent, or in the case of a borrower who is
subject to bankruptcy proceedings, 210 or more days delinquent or (iv) the date
on which the financed vehicle has been sold and the proceeds received. See "--
Repossession" below for discussion of how the amount to be charged-off upon
repossession of a financed vehicle is determined.
The delinquency and charge-off policies and collection practices discussed
herein may change over time in accordance with the business judgment of HAFC and
HFC, changes in applicable laws and regulations, and other considerations.
BILLING AND COLLECTION PROCESS
HAFC sends each borrower a monthly bill, rather than using payment coupon
books. All payments are directed to a lock-box account at a bank affiliated with
HAFC. On a daily basis, the lock-box bank retrieves and processes payments
received and then deposits the entire amount into the lock-box account. A
simultaneous electronic data transfer of borrower payment data is made to HAFC
for posting to computerized records.
HAFC's collection process is based on a strategy of closely monitoring
contracts and maintaining frequent contact with borrowers. As part of this
process, HAFC makes early, frequent contact with delinquent borrowers and
attempts to identify the underlying causes of a borrower's delinquency and to
make an early collection risk assessment. HAFC believes that its proactive
collection process, including the early identification of payment problems,
reduces its repossession rates and loss levels.
In support of its collection efforts, HAFC maintains a collection software
package with customized features designed for high-intensity collection
operations, which includes a high-penetration autodialer. With the aid of the
autodialer, HAFC initially attempts to contact any borrower whose account
becomes ten days past due.
Although HAFC emphasizes telephonic contact, HAFC also typically sends past
due notices to borrowers when an account becomes ten days past due. In some
cases, HAFC uses the Western Union Quick Collection Service to collect
borrowers' payments and to reduce the incidence of bad checks.
REPOSSESSION
HAFC repossesses a vehicle when resolution of a delinquency is not likely or
when it believes that the collateral is at risk. HAFC makes these judgments
based upon discussions with borrowers, the ability or inability to locate the
borrowers and/or the vehicles, the receipt of notices of liens and other
information. HAFC uses independent, licensed and bonded repossession agencies to
repossess vehicles as well as the services of an agency that traces skips (where
neither the borrower nor the vehicle can be located) to supplement its own
efforts in locating vehicles. When a vehicle is repossessed, it generally is
sold through a public auction within 60 days of repossession. HAFC generally
uses its own staff to pursue recoveries of deficiency balances, but HAFC may
also use outside collection agencies which share in any recoveries. If HAFC has
reason to believe that a Dealer violated any representations or warranties made
to HAFC on a defaulted contract, HAFC may pursue its remedies against the Dealer
under the Dealer Agreement.
HAFC expects that a charge-off will be incurred whenever a vehicle is
repossessed. Unless a determination is made to charge-off a contract earlier,
upon sale of a repossessed vehicle, HAFC records a net loss equal to the
outstanding principal balance of the contract, less the proceeds from the sale
of the vehicle.
34
<PAGE>
If a contract becomes 150 days delinquent (other than accounts in
bankruptcy) and HAFC has repossessed the vehicle, but not yet received the sale
proceeds, then HAFC reports a loss equal to the outstanding principal balance of
the contract, less the estimated auction value of the vehicle (which is based
upon wholesale used car values published by nationally recognized firms) and any
expected recoveries under any insurance. If a contract becomes 150 days
delinquent (or 210 days delinquent in the case of a bankrupt borrower) and HAFC
has not repossessed the vehicle, then HAFC records a loss equal to the
outstanding principal balance of the contract. Any recoveries received
subsequent to the contract being charged-off, including amounts (i) from the
borrower's insurance policies or service contracts, (ii) from dealers under a
breach of the Dealer Agreements or (iii) from deficiency balances recovered from
borrowers, are treated as loss adjustments in the period when these recoveries
are received.
INSURANCE
HAFC requires that physical damage insurance policies be maintained by the
borrowers naming HAFC (or any predecessor to HAFC or any subsidiary thereof), as
the loss payee.
HAFC maintains fidelity bond coverage insuring against losses through
wrongdoing of its officers, employees and agents.
DELINQUENCY AND LOAN LOSS INFORMATION
Set forth below is certain information concerning HAFC's delinquency and
loss experience with respect to its servicing portfolio of retail installment
sale contracts for new and used automobiles, light duty trucks and vans acquired
pursuant to its finance programs. Delinquency is recognized on a contractual
basis only. Installment payments must equal or exceed 90% of the scheduled
payment due for a contract to be considered current. The information has not
been adjusted to eliminate the effect of the significant growth in the size of
HAFC's portfolio or changes to its underwriting or charge-off policies during
the periods shown. In response to competitive and market conditions, HAFC's
underwriting policies have changed in various respects over the periods
presented. HAFC does not believe these changes had a material impact on the
historical delinquency and loss experience presented below. With respect to
changes to HAFC's charge-off policies, in the fourth quarter of 1997 HAFC began
charging off non-securitized contracts at 150 days delinquency and contracts for
which the financed vehicle has been repossessed but remains unsold 90 days
thereafter. Prior to that change (and continuing for all contracts securitized
prior to 1998), contracts were charged off (a) at 120 days delinquent and (b) 60
days after a vehicle was repossessed if it remained unsold. The impact of these
changes did not have a material impact on the delinquency and loss experience as
reported for year-end 1997 and for the six months ended June 30, 1998. In
footnote 5 below, the amount of the impact on the delinquency ratios for such
periods is reported. It is also not expected that the change in the charge-off
policy will have a material impact on the delinquency or loss rates in the
future.
If adjustments were made for the growth of the portfolio, loss and
delinquency as percentages of Receivables serviced for each period would be
higher than those shown. The tables below present all retail installment sales
contract data for contracts purchased by HAFC, including contracts managed in
states which are not represented in the pool consisting of the Receivables. The
majority of the HAFC portfolio was previously sold in privately placed
asset-backed securities for which servicing is performed by HAFC. Following the
merger in which Household acquired ACC (see "The Subservicer"), HAFC assumed
management and servicing responsibilities for a portfolio of automotive retail
installment sales contracts purchased or acquired by another Household
subsidiary. None of the contracts held by such entity are included in the
Receivables or the performance results presented in the following tables.
35
<PAGE>
HISTORICAL DELINQUENCY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997(5)
------------------------ ------------------------ ---------------------- ---------------------- ---------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS
----------- ----------- ----------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amount
Outstanding
(1)............ 780 100% 42,837 100% 117,539 100% 251,751 100% 607,802
Delinquencies
(2)(4).........
31-60 Days..... 0 0.00% 1,014 2.37% 3,218 2.74% 8,297 3.30% 23,784
61-90 Days..... 14 1.79% 247 0.58% 1,171 1.00% 2,847 1.13% 8,498
Over 90 Days... 0 0.00% 133 0.31% 607 0.52% 1,515 0.60% 3,939
Subtotal..... 14 1.79% 1,394 3.25% 4,996 4.25% 12,659 5.03% 36,221
Repossession on
hand (3)....... 0 0.00% 261 0.61% 861 0.73% 2,241 0.89% 6,495
Total
Delinquencies
and
Repossession on
hand........... 14 1.79% 1,740 4.06% 5,857 4.98% 14,900 5.92% 42,716
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
------------------------
1998(5)
------------------------
PERCENT DOLLARS PERCENT
----------- --------- -------------
<S> <C> <C> <C>
Amount
Outstanding
(1)............ 100% 1,302,070 100%
Delinquencies
(2)(4).........
31-60 Days..... 3.91% 44,264 3.40%
61-90 Days..... 1.40% 16,101 1.24%
Over 90 Days... 0.65% 8,673 0.67%
Subtotal..... 5.96% 69,038 5.30%
Repossession on
hand (3)....... 1.07% 12,954 0.99%
Total
Delinquencies
and
Repossession on
hand........... 7.03% 81,992 6.30%
</TABLE>
- ------------------------
(1) Amount outstanding is the outstanding principal balance.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) Amounts shown represent the remaining balance of contracts for which the
financed vehicles have been repossessed, but not yet liquidated.
(4) Delinquencies include bankruptcies. Bankruptcies represent approximately
0.5% of outstanding principal for each period presented.
(5) In October 1997, HAFC implemented changes to its charge-off policy for owned
receivables. The former policy for owned receivables was to charge-off at
120 days past due. For repossessed vehicles for which the account was not
yet 120 days past due, charge-off occurred at 60 days after the repossession
date. The revised policy for owned receivables is to charge-off at 150 days
past due, or for repossessed vehicles for which the account is not yet 150
days past due, the charge-off occurs at 90 days after the repossession date.
The impact of this change increased the December 31, 1997 and September 30,
1998 delinquency ratios by approximately .01% and .17%, respectively.
36
<PAGE>
HISTORICAL NET LOSS EXPERIENCE
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997(4) 1998(4)
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Amount outstanding (1)........................ $ 780 $ 42,837 $ 117,539 $ 251,751 $ 607,802 $ 1,302,070
Average principal amount outstanding.......... $ 390 $ 19,099 $ 79,304 $ 178,316 $ 411,194 $ 915,401
Number of contracts outstanding............... 71 3,951 10,935 23,145 53,856 108,145
Average number of contracts outstanding....... 36 1,750 7,340 16,515 36,964 78,175
Number of repossessions....................... 0 61 520 1,530 3,686 5,388
Number of repossessions as a percent of
average number of contracts outstanding
(2)......................................... 0.00% 3.48% 7.08% 9.26% 9.97% 9.18%
Net losses (3)................................ $ 0.00 $ 262 $ 3,042 $ 7,918 $ 23,700 $ 33,954
Net losses as a percent of average principal
amount outstanding (2)(3)................... 0.00% 1.37% 3.84% 4.44% 5.76% 4.94%
</TABLE>
- ------------------------
(1) Amount outstanding is the outstanding principal balance.
(2) Annualized.
(3) Net Losses are net of recoveries and include remaining principal balance at
time of charge-off. In the case of repossession, net losses include the
remaining balance at the time of repossession less liquidation proceeds (for
disposed vehicles) or the NADA wholesale value (for vehicles repossessed but
not sold). Net losses do not include repossessions that are less than 150
days delinquent and are not charged off.
(4) In October 1997, HAFC implemented changes to its charge-off policy for owned
receivables. The former policy for owned receivables was to charge-off at
120 days past due. For repossessed vehicles for which the account was not
yet 120 days past due, charge-off occurred at 60 days after the repossession
date. The revised policy for owned receivables is to charge-off at 150 days
past due, or for repossessed vehicles for which the account is not yet 150
days past due, the charge-off occurs at 90 days after the repossession date.
The impact of this change decreased the December 31, 1997 and September 30,
1998 charge-off ratios by approximately .01% and .32%, respectively.
The Seller expects that the delinquency, loss and repossession experience
for the Receivables will be generally consistent with the information provided
in the above tables. However, as the HAFC portfolio matures and the rate of
growth slows (which is likely), it can be expected that the delinquency, loss
and repossession percentages for the portfolio will increase, and may increase
significantly. This is because a higher portion of the portfolio will consist of
contracts proceeding through a typical delinquency pattern. The amount of such
increases cannot be estimated. There is no assurance that delinquency, credit
loss and repossession experience with respect to automobile, light duty truck,
and van installment sale contracts in the future, or the experience of the
Issuer with respect to the Receivables, will be similar to that set forth above.
Losses and delinquencies are affected by, among other things, general and
regional economic conditions and the supply of and demand for automobiles, light
duty trucks and vans.
37
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Offered Notes will be issued pursuant to the terms of the Indenture. The
base indenture and a form of the Series 1998-1 Supplement to such indenture have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part. Such base indenture as supplemented by the Series 1998-1 Supplement is
referred to as the "Indenture". The following summary describes certain terms of
the Notes and the Indenture.
The Notes will be issued only in fully registered form, in denominations of
$100,000 and integral multiples of $1,000 in excess thereof. The Notes will be
secured by the Trust Assets pledged by the Issuer to the Indenture Trustee
pursuant to the Indenture. Replacement Notes, if issued, will be transferable
and exchangeable at the corporate trust office of the Indenture Trustee, which
will initially act as Note Registrar. See "--Registration of Notes" below. No
service charge will be made for any registration, exchange or transfer of Notes,
but the Indenture Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge.
PAYMENTS OF INTEREST
Interest on each class of Notes will be payable monthly on the seventeenth
day of each month or, if such day is not a Business Day, on the next succeeding
Business Day (each, a "Payment Date"), commencing on 17, 1998, in an amount
equal to interest accrued during the related Interest Period (as defined below)
at the applicable Note Rate on the outstanding principal balance for the related
class of Notes. The per annum rate of interest accruing on each class of Notes
is referred to as the "Note Rate" for the respective classes of Notes. The Note
Rate for the Class A-1, Class A-2, Class A-3, Class A-5, Class B-1, Class B-2
and Class C Notes will be %, %, %, %, %, % and %,
respectively. The Note Rate for the Class A-4 Notes will be a floating rate
equal to the sum of (a) the London interbank offered rate for one-month United
States dollar deposit ("LIBOR"), determined as specified herein, as of the
second LIBOR Business Day (as defined herein) prior to the first day of the
Interest Period and (b) % per annum.
Interest on the outstanding principal balance of the Notes of each class in
respect of any Payment Date will accrue from (and including) the preceding
Payment Date (or in the case of the first Payment Date, from the Closing Date)
through (and including) the day preceding such Payment Date (each such period,
an "Interest Period"). Interest on the Class A-1, Class A-2 and Class A-4 Notes
will be calculated on the basis of a 360-day year and the actual number of days
elapsed in an applicable Interest Period. Interest on the Class A-3, Class A-5,
Class B-1, Class B-2 and Class C Notes will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Interest for any Payment Date
due but not paid on such Payment Date shall bear interest, to the extent
permitted by applicable law, at the related Note Rate until paid. Failure to pay
interest in full on any Payment Date after expiration of the applicable grace
period is an Event of Default under the Indenture.
LIBOR shall be established by the Indenture Trustee and as to any Interest
Period, "LIBOR" will equal the rate for United States dollar deposits for one
month which appears on the Telerate Screen Page 3750 as of 11:00 A.M., London
time, on the related LIBOR Determination Date. The "LIBOR Determination Date"
for each Interest Period will be the second LIBOR Business Day prior to the
first day of such Interest Period. "Telerate Screen Page 3750" means the display
designated as page 3750 on the Telerate Service (or such other page as may
replace page 3750 on that service for the purpose of displaying London interbank
offered rates of major banks). If such rate does not appear on such page (or
such other page as may replace that page on that service, or if such service is
no longer offered, such other service for displaying LIBOR or comparable rates
as may be selected by the Indenture Trustee after consultation with the
Servicer), the rate will be the Reference Bank Rate. The "Reference Bank Rate"
will be determined on the basis of the rates at which deposits in U.S. Dollars
are offered by the reference banks (which shall be
38
<PAGE>
three major banks that are engaged in transactions in the London interbank
market, selected by the Indenture Trustee after consultation with the Servicer)
as of 11:00 A.M., London time, on the day that is two LIBOR Business Days prior
to the immediately preceding Payment Date to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the principal
balance of the Class A-4 Notes then outstanding. The Indenture Trustee will
request the principal London office of each of the reference banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
will be the arithmetic mean of the quotations. If on such date fewer than two
quotations are provided as requested, the rate will be the arithmetic mean of
the rates quoted by one or more major banks in New York City, selected by the
Indenture Trustee after consultation with the Servicer, as of 11:00 A.M., New
York City time, on such date for loans in U.S. Dollars to leading European banks
for a period of one month in amounts approximately equal to the principal
balance of the Class A-4 Notes then outstanding. If no such quotations can be
obtained, the rate will be LIBOR for the prior Payment Date. "LIBOR Business
Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which
banking institutions in the States of New York or Illinois or in the City of
London, England are required or authorized by law to be closed.
On each Payment Date, Available Funds remaining after making the
distributions referred to in items (i) and (ii) under "Description of the Notes
- -- Payment Priorities" will be allocated pro rata to the Class A Interest
Distributable Amount of each of the Class A-1, Class A-2, Class A-3, Class A-4
and Class A-5 Notes. Interest on the Class B-1 Notes will not be paid on any
Payment Date until all accrued interest due and payable on the Class A Notes on
such Payment Date has been paid in full. Interest on the Class B-2 Notes will
not be paid on any Payment Date until all accrued interest due and payable on
the Class B-1 Notes on such Payment Date has been paid in full. Interest on the
Class C Notes will not be paid on any Payment Date until all accrued interest
due and payable on the Class A Notes and the Class B Notes has been paid in
full.
If the Notes are accelerated following the occurrence of an Event of
Default, interest payments will be allocated to the Notes in the priority
described in "-- Events of Default; Rights Upon Event of Default; Distributions
following Acceleration."
PAYMENTS OF PRINCIPAL
On each Payment Date and, in the case of the Class A-1 Notes, on the Class
A-1 Scheduled Maturity Date, principal payments will be due and payable on the
Notes in an amount generally equal to the Principal Distributable Amount for
such Payment Date to the extent of funds available therefor; PROVIDED, that (i)
no principal payments will be made with respect to the Class B Notes on any
Payment Date until all amounts payable with respect to the Class A Notes on such
Payment Date have been paid in full, (ii) no principal payments will be made
with respect to the Class B-2 Notes on any Payment Date until all amounts
payable with respect to the Class B-1 Notes on such Payment Date have been paid
in full, and (iii) no principal payments will be made with respect to the Class
C Notes on any Payment Date until all amounts payable with respect to the Class
A Notes and the Class B Notes on such Payment Date have been paid in full.
On each Payment Date before the Payment Date on which the Class A-1 Notes
have been paid in full, 100% of the Principal Distributable Amount will be
payable to the Class A-1 Notes. On each Payment Date on and after the Payment
Date on which the Class A-1 Notes have been paid in full, the Class A Principal
Distributable Amount (less any amount thereof applied on such Payment Date to
reduce the principal balance of the Class A-1 Notes to zero) will be payable to
the Class A-2 Notes and the Class A-5 Notes based upon the Non-Class A-5
Percentage and the Class A-5 Percentage, respectively, until the Class A-2 Notes
have been paid in full. On each Payment Date on or after the Payment Date on
which the Class A-2 Notes have been paid in full, the Class A Principal
Distributable Amount will be payable to the Class A-3 Notes and the Class A-5
Notes based upon the Non-Class A-5 Percentage and the Class A-5 Percentage,
respectively, until the Class A-3 Notes have been paid in full (less any amount
thereof applied
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on such Payment Date to reduce the principal balance of the Class A-1 and A-2
Notes to zero). On each Payment Date on or after the Payment Date on which the
Class A-3 Notes have been paid in full, the Class A Principal Distributable
Amount will be payable to the Class A-4 Notes and the Class A-5 Notes based upon
the Non-Class A-5 Percentage and the Class A-5 Percentage, respectively, until
each of the Class A-4 and Class A-5 Notes have been paid in full (less any
amount thereof applied on such Payment Date to reduce the principal balance of
the Class A-1, Class A-2 and Class A-3 Notes to zero). The "Class A-5
Percentage" means, for any Payment Date, %. "Non-Class A-5 Percentage" means,
for any Payment Date, 100.00% minus the Class A-5 Percentage.
The principal of the Class B-1, Class B-2 and Class C Notes will be payable
on each Payment Date on and after the Payment Date on which the outstanding
principal amount of the Class A-1 Notes has been reduced to zero, until the
Class B-1, Class B-2 and Class C Notes have been paid in full, in an amount
equal to the Class B-1 Principal Distributable Amount, Class B-2 Principal
Distributable Amount and the Class C Principal Distributable Amount,
respectively.
If the Notes are accelerated following the occurrence of an Event of
Default, principal payments will be allocated to the Notes in the priority
described in "-- Events of Default; Rights Upon Event of Default; Distributions
following Acceleration."
THE INTEREST RATE CAP
On the Closing Date, the Issuer will enter into the Interest Rate Cap with
Westdeutsche Landesbank Girozentrale, New York Branch (the "Interest Rate Cap
Provider"). The Interest Rate Cap will be for the benefit of the Noteholders and
payments thereunder will be deposited in the Collection Account for
distribution. The notional amount of the Interest Rate Cap (the "Notional
Amount") will initially be equal to $ (the initial principal amount of the
Class A-4 Notes), and will be reduced as required on each Payment Date so that
the Notional Amount is equal to the then current principal balance of the Class
A-4 Notes. Pursuant to the Interest Rate Cap, on each Payment Date on which
LIBOR (as determined on the related LIBOR Determination Date) exceeds % (the
"Rate Cap"), the Interest Rate Cap Provider will make a deposit into the
Collection Account, in an amount equal to the product of (a) the amount by which
LIBOR exceeds the Rate Cap, (b) the Notional Amount as of the preceding Payment
Date and (c) the actual number of days in the related Interest Period divided by
360.
The Interest Rate Cap will terminate on the earlier of (a) the Final
Scheduled Payment Date, (b) the Payment Date on which the principal balance of
the Class A-4 Notes is reduced to zero, (c) the date on which the Interest Rate
Cap is terminated in accordance with the Indenture for the reasons described in
the following paragraph or in connection with the establishment of a substitute
interest rate risk management arrangement (any such substitute arrangement being
conditioned upon confirmation that such substitution will not result in a
reduction or withdrawal of the ratings on the Notes) and (d) the date designated
by the Indenture Trustee or the Interest Rate Cap Provider, as the case may be
upon an event of default by the other party thereto.
In the event the short-term debt rating of the Interest Rate Cap Provider is
withdrawn or reduced below A-1+ by Standard & Poors's Ratings Services or the
long-term debt rating of the Interest Rate Cap Provider is withdrawn or reduced
below Aa3 by Moody's Investors Service, Inc. or below AA- by Duff & Phelps
Credit Rating Company, the Interest Rate Cap Provider and the Issuer will,
within 30 calendar days after such rating action, use reasonable efforts to (i)
obtain a replacement interest cap agreement upon terms substantially the same as
the Interest Rate Cap or (ii) establish any other arrangement satisfactory to
the Rating Agencies, such that the ratings of the Notes will not be withdrawn or
reduced.
Westdeutsche Landesbank Girozentrale ("WestLB"), which traces its history to
1832, was created by the merger of two central banks, or Landesbanks (German
State Banks), in the State of North Rhine-Westphalia, Germany on January 1,
1969. As a German universal bank, WestLB provides commercial and
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investment banking services regionally, nationally and internationally to
public, corporate and bank customers.
The Interest Rate Cap Provider is licensed and subject to supervision and
regulation by the Superintendent of Banks of the State of New York. The Interest
Rate Cap Provider is examined by the New York State Banking Department and is
subject to banking laws and regulations applicable to a foreign bank that
operates a New York branch.
Upon written request, WestLB will provide without charge to each person to
whom this Prospectus is delivered a copy of its most recent annual report.
Written requests for such annual reports or any additional information
concerning WestLB should be directed to Westdeutsche Landesbank Girozentrale,
New York Branch, 1211 Avenue of the Americas, New York, New York 10036,
Attention: Branch Management.
PAYMENT PRIORITIES
On or prior to each Payment Date, the Servicer will transfer the Available
Funds to the Note Account and will instruct the Indenture Trustee to make the
following distributions in the following order or priority:
(i) From Available Funds, to the Servicer, any Supplemental Servicing
Fees for the related Collection Period and if HFC is no longer acting as
master servicer, the Servicing Fee for the related Collection Period;
(ii) from the Available Funds, to the Indenture Trustee and the Owner
Trustee, any accrued and unpaid trustees' fees and any accrued and unpaid
fees of the Trust Collateral Agent (in each case, to the extent such fees
have not been previously paid by the Servicer);
(iii) from the Available Funds, to the holders of the Class A Notes ("the
Class A Noteholders"), the Class A Interest Distributable Amount;
(iv) from the Available Funds, to the Class B-1 Noteholders, the Class
B-1 Interest Distributable Amount;
(v) from the Available Funds, to the Class B-2 Noteholders, the Class
B-2 Interest Distributable Amount;
(vi) from the Available Funds, to the Class C Noteholders, the Class C
Interest Distributable Amount;
(vii) from the Available Funds, (i) to the Class A-1 Noteholders, 100% of
the Principal Distributable Amount, until the outstanding principal amount
of the Class A-1 Notes has been reduced to zero; and (ii) on and after the
Payment Date on which the outstanding principal amount of the Class A-1
Notes has been reduced to zero (a) to the Class A-5 Noteholders the Class
A-5 Percentage of the Class A Principal Distributable Amount and (b)
sequentially, to the Class A-2, Class A-3 and Class A-4 Noteholders, the
Non-Class A-5 Percentage of the Class A Principal Distributable Amount, in
each case until the respective outstanding principal amount of the Class
A-2, Class A-3 and Class A-4 Notes are paid in full;
(viii) from the Available Funds, to the Class B-1 Noteholders, the Class
B-1 Principal Distributable Amount;
(ix) from the Available Funds, to the Class B-2 Noteholders, the Class
B-2 Principal Distributable Amount;
(x) from the Available Funds, to the Class C Noteholders, the Class C
Principal Distributable Amount;
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(xi) from the Available Funds, to the Reserve Account, the Reserve
Account Deposit Amount, if necessary, required to increase the amount
therein to its then required level;
(xii) from the Available Funds, if HFC is acting as the master servicer,
the Servicing Fee for the related Collection Period; and
(xiii) from the Available Funds, to the holders of the Certificates, any
remainder.
Amounts on deposit in the Reserve Account on any Payment Date (after giving
effect to all distributions made on such Payment Date and the related Payment
Date) in excess of the Targeted Reserve Account Balance for such Payment Date
may be released to the holders of the Certificates without the consent of the
Noteholders.
The terms used in this description of Payment Priorities on the Series
1998-1 Securities are defined as follows:
"AGGREGATE NOTE PRINCIPAL BALANCE" means, as of any date, the aggregate
outstanding principal amount of all the Notes on such date.
"AGGREGATE OPTIMAL NOTE PRINCIPAL BALANCE" means, with respect to any
Payment Date, the excess, if any, of (x) the Pool Balance as of the end of the
prior Collection Period over (y) the Targeted Overcollateralization Amount for
such Payment Date.
"AMOUNT FINANCED" means, with respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the financed vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service, car club and warranty contracts, other items
customarily financed as part of retail automobile installment sale contracts or
promissory notes and related costs.
"AVAILABLE FUNDS" means, with respect to any Collection Period, the sum of
(i) the Collected Funds for such Collection Period, (ii) all Purchase Amounts
deposited in the Collection Account during such Collection Period, (iii) income
on investments held in the Collection Account, (iv) the proceeds of any
liquidation of the assets of the Trust, (v) the lesser of (a) the excess of the
aggregate amount determined under items (i)-(x) of the Payment Priorities set
forth beginning on page 39, over the amount on deposit in the Collection Account
and (b) the Reserve Account Balance.
"CLASS A DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date and
each class of Class A Notes, the sum of (i) the related Class A Interest
Distributable Amount and (ii) the Class A Principal Distributable Amount.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date and each class of Class A Notes, the sum of: (i) excess of (a) the related
Class A Interest Distributable Amount for the preceding Payment Date, over (b)
the amount actually paid as interest to the Class A Noteholders on such
preceding Payment Date, PLUS (ii) interest on such excess, to the extent
permitted by law, at a rate per annum equal to the related Class A Note Rate
from such preceding Payment Date to but excluding the current Payment Date.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date and each class of Class A Notes, an amount equal to the sum of: (i) the
aggregate amount of interest accrued on the Class A Notes at the related Class A
Note Rate from and including the preceding Payment Date (or, in the case of the
initial Payment Date, from and including the Closing Date) to but excluding the
current Payment Date PLUS (ii) the related Class A Interest Carryover Shortfall
for the current Payment Date.
"CLASS A MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, (i) with respect to
any Payment Date, prior to the Payment Date on which the principal balance of
the Class A-1 Notes is reduced to zero, 100% of the Principal Distributable
Amount, (ii) with respect to the Payment Date on which the principal balance of
the Class A-1 Notes is reduced to zero, 100% of the Principal Distributable
Amount with respect to that
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portion of the Principal Distributable Amount required to reduce the principal
balance of the Class A-1 Notes to zero, plus the excess of the amount described
in clause (iii) of this definition for such Payment Date over the amount of the
Principal Distributable Amount applied on such Payment Date to reduce the
principal balance of the Class A-1 Notes to zero, (iii) with respect to any
Payment Date on and after the Payment Date on which the Principal Balance of the
Class A-1 Notes is reduced to zero until the Payment Date on which the Principal
Balance of the Class A Notes is reduced to zero, the excess of (x) aggregate
outstanding principal balance of the Class A Notes over (y) (A) the product of
69.25% and the outstanding Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount for such Payment
Date.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the excess of the Class A Principal Distributable Amount for the preceding
Payment Date over the amount that was actually distributed in respect of
principal of the Class A Notes on such preceding Payment Date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, the sum of: (i) the Class A Monthly Principal Distributable Amount for
such Payment Date and (ii) the Class A Principal Carryover Shortfall for such
Payment Date; PROVIDED HOWEVER, that (x) the sum of clauses (i) and (ii) shall
not exceed the outstanding principal amount of the Class A Notes, and (y) on the
Final Scheduled Payment Date, the Class A Principal Distributable Amount will
include the amount, to the extent of the remaining Available Funds, necessary
(after giving effect to other amounts having a higher payment priority on such
Payment Date) to reduce the outstanding principal amount of the Class A Notes to
zero.
"CLASS B-1 DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date,
the sum of: (i) the Class B-1 Interest Distributable Amount and (ii) the Class
B-1 Principal Distributable Amount.
"CLASS B-1 INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the sum of: (i) the excess of (a) the Class B-1 Interest Distributable
Amount for the preceding Payment Date, over (b) the amount actually paid as
interest to the Class B-1 Noteholders on such preceding Payment Date, PLUS (ii)
interest on such excess, to the extent permitted by law, at the Class B-1 Note
Rate from such preceding Payment Date to but excluding the current Payment Date.
"CLASS B-1 INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, an amount equal to the sum of: (i) the aggregate amount of interest
accrued on the Class B-1 Notes at the Class B-1 Note Rate from and including the
preceding Payment Date (or, in the case of the initial Payment Date, from an
including the Closing Date) to but excluding the current Payment Date PLUS (ii)
the Class B-1 Interest Carryover Shortfall for the current Payment Date.
"CLASS B-1 MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any Payment Date on and after the Payment Date on which the principal balance of
the Class A-1 Notes is reduced to zero, until the Payment Date on which the
outstanding principal amount of the Class B-1 Notes has been reduced to zero, an
amount equal to the excess of: (i) the sum of (x) the outstanding principal
balance of the Class A Notes on such Payment Date (after giving effect to
distribution of the Class A Principal Distributable Amount for such Payment
Date) plus (y) the outstanding principal balance of the Class B-1 Notes prior to
such Payment Date over (ii) (A) the product of 81.25% and the outstanding Pool
Balance as of the end of the related Collection Period minus (B) the Targeted
Overcollateralization Amount.
"CLASS B-1 PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the excess of the Class B-1 Principal Distributable Amount for the
preceding Payment Date over the amount that was actually distributed in respect
of principal of the Class B-1 Notes on such preceding Payment Date.
"CLASS B-1 PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date, the sum of: (i) the Class B-1 Monthly Principal Distributable
Amount for such Payment Date and (ii) the Class B-1 Principal Carryover
Shortfall for such Payment Date; PROVIDED, HOWEVER, that the sum of clauses (i)
and (ii) shall not exceed the outstanding principal amount of the Class B-1
Notes, and on the Final Scheduled Maturity Date, the Class B-1 Principal
Distributable Amount will include the amount, to the extent of the
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remaining Available Funds, necessary (after giving effect to other amounts
having a higher payment priority on such Payment Date) to reduce the outstanding
principal amount of the Class B-1 Notes to zero.
"CLASS B-2 DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date,
the sum of: (i) the Class B-2 Interest Distributable Amount and (ii) the Class
B-2 Principal Distributable Amount.
"CLASS B-2 INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the sum of: (i) the excess of (a) the Class B-2 Interest Distributable
Amount for the preceding Payment Date, over (b) the amount actually paid as
interest to the Class B-2 Noteholders on such preceding Payment Date, PLUS (ii)
interest on such excess, to the extent permitted by law, at the Class B-2 Note
Rate from such preceding Payment Date to but excluding the current Payment Date.
"CLASS B-2 INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, an amount equal to the sum of: (i) the aggregate amount of interest
accrued on the Class B-2 Notes at the Class B-2 Note Rate from and including the
preceding Payment Date (or, in the case of the initial Payment Date, from an
including the Closing Date) to but excluding the current Payment Date PLUS (ii)
the Class B-2 Interest Carryover Shortfall for the current Payment Date.
"CLASS B-2 MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any Payment Date on and after the Payment Date on which the principal balance of
the Class A-1 Notes is reduced to zero, until the Payment Date on which the
outstanding principal amount of the Class B-2 Notes has been reduced to zero, an
amount equal to the excess of: (i) the sum of (x) the outstanding principal
balance of the Class A Notes on such Payment Date (after giving effect to
distribution of the Class A Principal Distributable Amount for such Payment
Date) plus (y) the outstanding principal balance of the Class B-1 Notes (after
giving effect to distribution of the Class B-1 Principal Distributable Amount
for such Payment Date) and (z) the outstanding principal balance of the Class
B-2 Notes immediately prior to such Payment Date over (ii) (A) the product of
92.65% and the outstanding Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount.
"CLASS B-2 PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the excess of the Class B-2 Principal Distributable Amount for the
preceding Payment Date over the amount that was actually distributed in respect
of principal of the Class B-2 Notes on such preceding Payment Date.
"CLASS B-2 PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date, the sum of: (i) the Class B-2 Monthly Principal Distributable
Amount for such Payment Date and (ii) the Class B-2 Principal Carryover
Shortfall for such Payment Date; PROVIDED, HOWEVER, that the sum of clauses (i)
and (ii) shall not exceed the outstanding principal amount of the Class B-2
Notes, and on the Final Scheduled Maturity Date, the Class B-2 Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Payment Date) to reduce the outstanding principal
amount of the Class B-2 Notes to zero.
"CLASS C DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the
sum of: (i) the Class C Interest Distributable Amount and (ii) the Class C
Principal Distributable Amount.
"CLASS C INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the sum of: (i) the excess of (a) the Class C Interest Distributable
Amount for the preceding Payment Date over (b) the amount actually paid as
interest to the Class C Noteholders on such preceding Payment Date, PLUS (ii)
interest on such excess, to the extent permitted by law, at % per annum from
such preceding Payment Date to but excluding the current Payment Date.
"CLASS C INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, an amount equal to the sum of: (i) the aggregate amount of interest
accrued on the Class C Notes at % per annum from and including the preceding
Payment Date (or, in the case of the initial Payment Date, from and including
the Closing Date) to but excluding the current Payment Date (based upon a
360-day year of twelve 30-day months) PLUS (ii) the Class C Interest Carryover
Shortfall for the current Payment Date.
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"CLASS C MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to each
Payment Date on and after the Payment Date on which the outstanding principal
amount of the Class A-1 Notes is reduced to zero, until the Payment Date on
which the outstanding principal amount of the Class C Notes has been reduced to
zero, an amount equal to the excess, if any of: (i) the sum of (x) the
outstanding principal balance of the Class A Notes on such Payment Date (after
giving effect to distribution of the Class A Principal Distribution Amount for
such Payment Date), plus (y) the outstanding principal balance of the Class B
Notes on such Payment Date (after giving effect to distribution of the Class B-1
Principal Distributable Amount and the Class B-2 Principal Distributable Amount
for such Distribution Date), plus (z) the outstanding principal balance of the
Class C Notes immediately prior to such Payment Date and (ii) (A) the product of
100% and the outstanding Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount for such Payment
Date.
"CLASS C PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the excess of the Class C Principal Distributable Amount for the preceding
Payment Date over the amount that was actually distributed in respect of
principal of the Class C Notes on such preceding Payment Date.
"CLASS C PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, the sum of: (i) the Class C Monthly Principal Distributable Amount for
such Payment Date and (ii) the Class C Principal Carryover Shortfall for such
Payment Date; PROVIDED, HOWEVER, that the sum of clauses (i) and (ii) shall not
exceed the outstanding principal amount of the Class C Notes, and on the Final
Scheduled Maturity Date, the Class C Principal Distributable Amount will include
the amount, to the extent of the remaining Available Funds, necessary (after
giving effect to other amounts having a higher payment priority on such Payment
Date) to reduce the outstanding principal amount of the Class C Notes to zero.
"COLLECTED FUNDS" means, with respect to any Collection Period, the amount
of funds in the Collection Account representing collections on the Receivables
during such Collection Period, including all Net Liquidation Proceeds collected
during such Collection Period (but excluding any Purchase Amounts) and any funds
deposited therein by the Interest Rate Cap Provider pursuant to the Interest
Rate Cap.
"CRAM DOWN LOSS" means, with respect to a Receivable if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on such Receivable or otherwise modifying or
restructuring the scheduled payments to be made on such Receivable, an amount
equal to (i) the excess of the Principal Balance of such Receivable immediately
prior to such order over the Principal Balance of such Receivable as so reduced
and/or (ii) if such court shall have issued an order reducing the effective rate
of interest on such Receivable, the excess of the Principal Balance of such
Receivable immediately prior to such order over the net present value (using as
the discount rate the higher of the APR on such Receivable or the rate of
interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"DETERMINATION DATE" means, with respect to any Payment Date, the earlier of
the fifth calendar day or the third Business Day prior to such Payment Date.
"MAXIMUM RESERVE ACCOUNT DEPOSIT AMOUNT" for any Payment Date is equal to
that portion of Collected Funds representing interest collections on the
Receivables for the related Collection Period less the sum of: the Servicing Fee
paid to any master servicer other than HFC, the fees due to the Indenture
Trustee, Trust Collateral Agent and Owner Trustee, to the extent not paid by the
Servicer, the aggregate Noteholders' Interest Distributable Amount, the
aggregate Principal Balances of all Receivables which became Liquidated
Receivables during such Collection Period, plus the aggregate amount of Cram
Down Losses during such Collection Period.
"NET LIQUIDATION PROCEEDS" means, with respect to Liquidated Receivables,
(i) proceeds from the disposition of the underlying financed vehicle securing
the Liquidated Receivables, less the Servicer's reasonable out-of-pocket costs,
including repossession and resale expenses not already deducted from such
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proceeds, and any amounts required by law to be remitted to the borrower, (ii)
any insurance proceeds, or (iii) other monies received from the borrower or
otherwise.
"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date,
the sum of the Class A Distributable Amount, the Class B-1 Distributable Amount,
the Class B-2 Distributable Amount and the Class C Distributable Amount.
"POOL BALANCE" means, as of any date of determination, the aggregate
Principal Balances of the Receivables as of the close of business on the
preceding Business Day.
"PRINCIPAL AMOUNT AVAILABLE" means, with respect to any Payment Date, the
amount remaining in the Note Account after the payment of the amounts listed in
(i) through (vi) of "Payment Priorities", MINUS the Reserve Account Deposit
Amount for such Payment Date.
"PRINCIPAL BALANCE" means, with respect to any Receivable, as of any date,
the Amount Financed minus (a) that portion of all amounts received on or prior
to such date and allocable to principal in accordance with the terms of the
Receivable, and (b) any Cram Down Loss in respect of such Receivable.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date the
lesser of (x) the Principal Amount Available and (y) the excess, if any, of (i)
the Aggregate Note Principal Balance immediately prior to such Payment Date over
(ii) the Aggregate Optimal Note Balance for such Payment Date.
"PURCHASE AMOUNT" means, with respect to a Receivable, the Principal Balance
as of the date such Receivable is purchased from the Issuer by the Seller or the
Servicer.
"RESERVE ACCOUNT DEPOSIT AMOUNT" means, with respect to any Payment Date,
the lesser of: (x) the Maximum Reserve Account Deposit Amount for such Payment
Date and (y) the Reserve Account Shortfall Amount for such Payment Date.
"RESERVE ACCOUNT SHORTFALL AMOUNT" means, with respect to any Payment Date,
the excess of: (x) the Targeted Reserve Account Balance for such Payment Date
over (y) the amount on deposit in the Reserve Account as of the beginning of
such Payment Date.
"TARGETED CREDIT ENHANCEMENT AMOUNT" means, with respect to any Payment
Date, 13.75% of the outstanding Pool Balance as of the end of the related
Collection Period.
"TARGETED OVERCOLLATERALIZATION AMOUNT" means, with respect to any Payment
Date, the excess (but not less than zero), if any, of: (i) the Targeted Credit
Enhancement Amount over (ii) the Targeted Reserve Account Balance.
"TARGETED RESERVE ACCOUNT BALANCE" means, with respect to any Payment Date,
the lesser of: (i) the greater of (a) 3.0% of the outstanding Pool Balance as of
the end of the related Collection Period, and (b) 2.0% of the Original Pool
Balance, and (ii) the Aggregate Note Principal Balance.
MATURITY DATES; OPTIONAL REDEMPTION
Each class of Notes will mature on the earlier of the date such class of
Notes is paid in full or (the "Final Scheduled Payment Date") or, in the
case of the Class A-1 Notes, the Class A-1 Scheduled Maturity Date. In the event
there are insufficient funds to retire the Class A-1 Notes on , or,
all outstanding classes of Notes on , subject to a five day grace
period, an Event of Default will occur. See "--Events of Default; Rights Upon
Event of Default" herein. In addition, the Issuer will pay the Notes in full on
the Payment Date following exercise by the Seller or the Servicer of the option
to purchase the Receivables from the Issuer. Such option may be exercised after
the Aggregate Note Principal Balance is reduced to an amount less than or equal
to $64,090,997.94 (10% of the Original Pool Balance). The purchase price will be
equal to the sum of the Aggregate Note Principal Balance and accrued and unpaid
interest thereon through the day preceding the call date.
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REPORTS TO NOTEHOLDERS
Concurrently with each distribution to the Noteholders, the Indenture
Trustee will prepare and forward to each Noteholder a statement setting forth
certain information with respect to the related Payment Date, including the
following:
(i) the amount of the distribution allocable to interest on or with
respect to each class of the Notes;
(ii) the amount of the distribution allocable to principal with respect
to each class of the Notes;
(iii) the aggregate outstanding principal amount for each class of Notes,
in each case, after giving effect to all payments reported under (ii) above
on such date;
(iv) the Class A Interest Carryover Shortfall, the Class B-1 Interest
Carryover Shortfall, the Class B-2 Interest Carryover Shortfall, the Class C
Interest Carryover Shortfall, the Class A Principal Carryover Shortfall, the
Class B-1 Principal Carryover Shortfall, the Class B-2 Principal Carryover
Shortfall, the Class C Principal Carryover Shortfall, if any, and the change
in such amounts from the preceding statement;
(v) the amount of the Servicing Fee paid to the Servicer with respect to
the related Collection Period; and
(vi) the Targeted Reserve Account Balance and the amount on deposit in
the Reserve Account at the end of such Payment Date.
The information furnished pursuant to (i) through (v) above shall be
expressed as a dollar amount per $1,000 in face amount of Notes.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT; DISTRIBUTIONS FOLLOWING
ACCELERATION
With respect to the Notes, an "Event of Default" under the Indenture will
have occurred at any time when any one of the following events occurs: (i) a
default in the payment of any interest on any Note when the same becomes due and
payable, and such default continues for a period of five days; (ii) a default in
the payment of the principal of or any installment of the principal of any Note
when the same becomes due and payable, and such default continues for a period
of five days; (iii) default in the observance or performance of any covenant or
agreement of the Issuer made in the Indenture, or any representation or warranty
of the Issuer made in the Indenture or in any certificate or other writing
delivered pursuant to the Indenture proving to have been incorrect in any
material respect as of the time when made which has a material adverse effect on
Note Owners, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such representation or warranty
was incorrect is not eliminated or otherwise cured, for a period of 60 days
after notice is given to the Issuer by the Indenture Trustee or to the Issuer
and the Indenture Trustee by the Holders of at least 25% in principal amount of
the Notes then outstanding, specifying such default or incorrect representation
or warranty; (iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial part of
the Trust Assets in an involuntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust Assets,
or ordering the winding-up or liquidation of the Issuer's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (v) the commencement by the Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent by
the Issuer to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Issuer or
for any substantial part of the Trust Assets, or the making by the Issuer of any
general assignment for the benefit of creditors,
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or the failure by the Issuer generally to pay its debts as such debts become
due, or the taking of any action by the Issuer in furtherance of any of the
foregoing. The amount of principal required to be paid to Noteholders on any
Payment Date will generally be limited to amounts available to be deposited in
the Collection Account. Therefore, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the Final Scheduled Payment Date for such class of Notes.
If there is an Event of Default due to late payment or nonpayment of
interest or principal on a Note, interest will continue to accrue on such
principal and the overdue interest at the applicable interest rate on such Note
until such overdue principal and interest is paid. If an Event of Default should
occur and be continuing with respect to the Notes, the Indenture Trustee may,
and at the direction of Noteholders representing at least 66 2/3% of the
aggregate outstanding principal amount of the Notes shall, declare the principal
of such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of the Notes then outstanding.
If the Notes are due and payable following an Event of Default with respect
thereto, the Indenture Trustee may institute proceedings to collect amounts due
or foreclose on property comprising Trust Assets or exercise remedies as a
secured party. Unless the Indenture Trustee determines that the Receivables will
not provide sufficient funds for the payment of principal and interest on the
Notes as such payments would become due, any sale, liquidation or other
disposition of the Trust Assets for an amount less than the amounts due on the
Notes will not occur without the consent of all of the Noteholders. If the
Indenture Trustee makes such a determination, it may sell, liquidate or
otherwise dispose of the Trust Assets for less than the amount due on the Notes
provided that the consent of Noteholders of not less than 66 2/3% of the
outstanding principal balance of the Notes is obtained.
If the Notes are accelerated following the occurrence of an Event of
Default, after payment of the amounts specified in items (i) and (ii) under
"Description of the Notes--Payment Priorities," all Available Funds, all amounts
on deposit in the Reserve Account and the proceeds of any sale, liquidation or
other deposition of the Trust Assets will be applied as follows: first, to pay
all amounts due and unpaid on the Class A Notes for interest, ratably without
preference or priority; second, to pay all amounts due and unpaid on the Class A
Notes for principal, ratably without preference or priority; third, to pay all
amounts due and unpaid on the Class B-1 Notes for interest; fourth, to pay all
amounts due and unpaid on the Class B-1 Notes for principal; fifth, to pay all
amounts due on the Class B-2 Notes for interest; sixth, to pay all amounts due
and unpaid on the Class B-2 Notes for principal; seventh, to pay all amounts due
and unpaid on the Class C Notes for interest; eighth, to pay all amounts due and
unpaid on the Class C Notes for principal; and ninth, remaining amounts to the
Certificateholders.
If an Event of Default occurs and is continuing with respect to the Notes,
the Indenture Trustee will be under no obligation to exercise any of the rights
or powers under the Indenture at the request or direction of any of the holders
of the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, the holders
of a majority in principal amount of the outstanding Notes will have the right
to direct the time, method and place of conducting any proceeding or any remedy
available to the Indenture Trustee, and the holders of a majority in principal
amount of the Notes then outstanding may, in certain cases, waive any default
with respect thereto, except a default in the payment of principal or interest
or a default in respect of a covenant or provision of the Indenture that cannot
be modified without the waiver or consent of all the holders of the outstanding
Notes. No holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than 25% of the aggregate principal balance of all
outstanding Notes have made written request to the Indenture Trustee to
institute such proceeding in its own name as Indenture Trustee, (iii) such
holder or holders have offered the Indenture Trustee reasonable indemnity
against costs, expenses and liabilities to be incurred in
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complying with the request, (iv) the Indenture Trustee has for 60 days failed to
institute such proceeding and (v) no direction inconsistent with such written
request has been given to the Indenture Trustee during the 60-day period by the
holders of a majority of the aggregate principal balance of all outstanding
Notes. In addition, the Indenture Trustee and the Note Owners, by accepting a
beneficial interest in the Notes, will covenant that they will not at any time
institute against the Issuer or the Seller, or join in any institution against
the Issuer or the Seller of, any bankruptcy, reorganization or other proceeding
under any federal or state bankruptcy or similar law. With respect to the
Issuer, neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any Holder representing an ownership interest in the Issuer nor
any of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will, in the absence of an express
agreement to the contrary, be personally liable for the payment of the principal
of or interest on the Notes or for the agreements of the Issuer contained in the
Indenture.
CERTAIN COVENANTS
The Indenture provides that the Issuer may not consolidate with or merge
into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes the
Issuer's obligation to make due and punctual payments upon the Notes and the
performance or observance of any agreement and covenant of the Issuer under the
Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Issuer has been advised
that the ratings of the Notes then in effect would not be reduced or withdrawn
by any Rating Agency as a result of such merger or consolidation, (v) any action
that is necessary to maintain the lien and security interest created by the
Indenture is taken and (vi) the Issuer has received an opinion of counsel to the
effect that such consolidation or merger would have no material adverse tax
consequence to the Issuer or to any Noteholder or holders of the Certificates.
The Issuer will not, among other things, (i) except as expressly permitted by
the Indenture, sell, transfer, exchange or otherwise dispose of any of the
assets of the Issuer, (ii) claim any credit on or make any deduction from the
principal and interest payable in respect of the Notes (other than amounts
withheld under the Internal Revenue Code of 1986, as amended (the "Code") or
applicable state law) or assert any claim against any present or former holder
of Notes because of the payment of taxes levied or assessed upon the Issuer,
(iii) permit the validity or effectiveness of the Indenture to be impaired or
permit any person to be released from any covenants or obligations with respect
to the Notes under the Indenture except as may be expressly permitted thereby or
(iv) permit any lien, charge excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
assets of the Issuer or any part thereof, or any interest therein or the
proceeds thereof. The Issuer may not engage in any activity other than as
specified under the Trust Agreement.
ANNUAL COMPLIANCE STATEMENT
The Issuer will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the Indenture.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing the
Notes upon the delivery to the Indenture Trustee for cancellation of all the
Notes or, with certain limitations, upon deposit with the Indenture Trustee of
funds sufficient for the payment in full of all the Notes.
MODIFICATION OF INDENTURE
With the consent of the holders of a majority of outstanding principal
balance of each class of Notes affected thereby and upon confirmation that the
ratings of the Notes then in effect would not be reduced
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or withdrawn by any Rating Agency, the Issuer and the Indenture Trustee may
amend the Indenture to add provisions to, change in any manner or eliminate any
provisions of, the Indenture, or modify (except as provided below) in any manner
the rights of the Noteholders. However, without the consent of the holder of
each outstanding Note affected thereby, however, no amendment will: (i) change
the due date of any installment of principal of or interest on any Note or
reduce the principal amount thereof, the interest rate specified thereon or the
redemption price with respect thereto or change any place of payment where or
the coin or currency in which any Note or any interest thereon is payable; (ii)
impair the right to institute suit for the enforcement of certain provisions of
the Indenture regarding payment; (iii) reduce the percentage of the aggregate
principal balance of the outstanding Notes, which is required to approve any
supplemental indenture, waive compliance with certain provisions of the
Indenture or waive certain defaults thereunder and their consequences as
provided for in the Indenture; (iv) modify or alter the provisions of the
Indenture regarding the voting of Notes held by the Issuer, the Seller or an
affiliate of any of them; (v) decrease the percentage of the aggregate
outstanding principal balance of Notes required to amend the sections of the
Indenture which specify the applicable percentage of aggregate outstanding
principal balance of the Notes necessary to amend the Indenture or certain other
related agreements; (vi) modify any of the provisions of the Indenture in such
manner as to affect the calculation of the amount of any payment of interest or
principal due on any Note (including the calculation of any of the individual
components of such calculation); or (vii) permit the creation of any lien
ranking prior to or, except as otherwise contemplated by the Indenture, on a
parity with the lien of the Indenture with respect to any of the collateral for
the Notes or, except when the full amount required to pay the Notes in full has
been deposited or is held in trust, terminate the lien of the Indenture on any
such collateral or deprive the holder of any Note of the security afforded by
the lien of the Indenture.
The Issuer and the Indenture Trustee may also amend the Indenture without
obtaining the consent of the Noteholders, for the purpose of, among other
things, to cure any ambiguity or to correct or supplement any provision in the
Indenture that may be inconsistent with any other provision therein.
CERTAIN MATTERS REGARDING THE INDENTURE TRUSTEE AND THE ISSUER
Neither the Issuer, the Indenture Trustee nor any director, officer or
employee of the Issuer or the Indenture Trustee will be under any liability to
the Issuer or the related Noteholders for any action taken or for refraining
from the taking of any action in good faith pursuant to the Indenture or for
errors in judgment; provided, however, that none of the Indenture Trustee, the
Issuer and any director, officer or employee thereof will be protected against
any liability which would otherwise be imposed by reason of willful malfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under the Indenture. Subject to certain
limitations set forth in the Indenture, the Indenture Trustee and any director,
officer, employee or agent of the Indenture Trustee shall be indemnified by the
Servicer and held harmless against any loss, liability or expense incurred in
connection with investigating, preparing to defend or defending any legal
action, commenced or threatened, relating to the Indenture other than any loss,
liability or expense incurred by reason of willful malfeasance, bad faith or
negligence in the performance of its duties under such Indenture or by reason of
reckless disregard of its obligations and duties under the Indenture. All
persons into which the Indenture Trustee may be merged or with which it may be
consolidated or any person resulting from such merger or consolidation shall be
the successor of the Indenture Trustee under each Indenture.
LIMITATION ON LIABILITY OF THE INDENTURE TRUSTEE
The Indenture Trustee makes no representations as to the validity or
sufficiency of the Indenture, the Notes or of the Trust Assets or related
documents. If no Event of Default has occurred, the Indenture Trustee is
required to perform only those duties specifically required of it under the
Indenture. Upon receipt of the various certificates, statements, reports or
other instruments required to be furnished to it, the Indenture Trustee is
required to examine them to determine whether they are in the form required by
the Indenture; however, the Indenture Trustee will not be responsible for the
accuracy or content of any such documents furnished by it.
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The Indenture Trustee may be held liable for its own negligent action or
failure to act, or for its own misconduct; provided, however, the Indenture
Trustee will not be personally liable with respect to any action taken, suffered
or omitted to be taken by it in good faith in accordance with the direction of
the required percentage of the Noteholders in an Event of Default. The Indenture
Trustee is not required to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties under the Indenture,
or in the exercise of any of its rights or powers, if it has reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
RESIGNATION OF INDENTURE TRUSTEE
The Indenture Trustee may, upon written notice to the Seller and the Issuer,
resign at any time, in which event the Servicer will be obligated to use its
best efforts to appoint a successor Indenture Trustee. If no successor Indenture
Trustee has been appointed and has accepted the appointment within 60 days after
giving such notice of resignation, the resigning Indenture Trustee or the Issuer
may petition any court of competent jurisdiction for appointment of a successor
Indenture Trustee. The Indenture Trustee may also be removed at any time by the
Servicer. In addition, the Issuer may, and at the request of a majority of the
Noteholders shall remove the Indenture Trustee (i) if the Indenture Trustee
ceases to be eligible to continue as such under the Indenture, (ii) if the
Indenture Trustee becomes insolvent or (iii) the Indenture Trustee's long-term
debt ratings are lower than "BBB" or its equivalent by either Rating Agency).
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee will not become effective until acceptance of the
appointment by the successor Indenture Trustee.
REGISTRATION OF THE NOTES
Notes Owners may hold their Notes through DTC (in the United States) or
Cedel or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems.
The Notes will initially be registered in the name of CEDE & Co., the
nominee of DTC. Cedel and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Cedel's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC. Citibank will act as depositary for Cedel and Morgan
will act as depositary for Euroclear (in such capacities, individually the
"Depositary" and collectively the "Depositaries").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures. No person
acquiring a beneficial ownership interest in any Note will be entitled to
receive such Note in fully registered certificated form (a "Replacement Note")
except in the limited circumstances described herein.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated
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the business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Euroclear or Cedel Participants on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or through
a Cedel Participant or Euroclear Participant to a Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC. For information with respect to tax documentation procedures relating to
the Notes, see "Material Federal Income Tax Consequences" and "Global Clearance,
Settlement and Tax Documentation Procedures" in Appendix A hereto.
Note Owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of Notes may do so only through Participants or
indirect participants (unless and until Replacement Notes, as defined below, are
issued). In addition, Note Owners will receive all distributions of principal
of, and interest on, the Notes from the Indenture Trustee through DTC and
Participants. Note Owners will not receive or be entitled to receive
certificates representing their respective interests in the Notes, except under
the limited circumstances described below.
Unless and until Replacement Notes are issued, it is anticipated that the
only Noteholder of the Notes will be CEDE & Co., as nominee of DTC. Note Owners
will not be Noteholders as that term is used in the Indenture. Note Owners are
only permitted to exercise the rights of Noteholders indirectly through
Participants and DTC.
While the Notes are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Notes and is
required to receive and transmit distributions of principal of, and interest on,
the Notes. Participants and indirect participants with whom Note Owners have
accounts with respect to Notes are similarly required to make book-entry
transfers and receive and transmit such distributions on behalf of their
respective Note Owners. Accordingly, although Note Owners will not possess
certificates, the Rules provide a mechanism by which Note Owners will receive
distributions and will be able to transfer their interests.
Unless and until Replacement Notes are issued, Note Owners who are not
Participants may transfer ownership of Notes only through Participants and
indirect participants by instructing such Participants and indirect participants
to transfer Notes, by book-entry transfer, through DTC for the account of the
purchasers of such Notes, which account is maintained with their respective
Participants. Under the Rules and in accordance with DTC's normal procedures,
transfers of ownership of Notes will be executed through DTC and the accounts of
the respective Participants at DTC will be debited and credited. Similarly, the
Participants and indirect participants will make debits or credits, as the case
may be, on their records on behalf of the selling and purchasing Note Owners.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the 1934 Act.
DTC accepts securities for deposit from its participating organizations
("Participants") and facilitates the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates.
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Transactions may be settled in Cedel in any of 28 currencies, including United
States dollars. Cedel provides to its Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary Institute.
Cedel Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to Cedel
is also available to others, such as banks, brokers dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Material Federal Income Tax Consequences". Cedel or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Noteholder under the Indenture on behalf of a Cedel Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Replacement Notes will be issued in registered form to Note Owners, or their
nominees, rather than to DTC, only if (i) DTC or HFC advises the Indenture
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as nominee and depository with respect to the Notes and HFC
or the Indenture Trustee is unable to locate a qualified successor, (ii) HFC, at
its sole option and with
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the consent of the Trustee, elects to terminate the book-entry system through
DTC or (iii) after the occurrence of a Servicer Termination Event, DTC, at the
direction of Class A and Class B Noteholders evidencing not less than 51% of the
then outstanding principal balance of each such Class, advises the Trustee in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) to the exclusion of any physical certificates being issued to Note
Owners is no longer in the best interests of Note Owners. Upon issuance of
Replacement Notes to Note Owners, such Notes will be transferable directly (and
not exclusively on a book-entry basis) and registered holders will deal directly
with the Indenture Trustee with respect to transfers, notices and distributions.
DTC has advised HFC and the Indenture Trustee that, unless and until
Replacement Notes are issued, DTC will take any action permitted to be taken by
a Noteholder under the Indenture only at the direction of one or more
Participants to whose DTC accounts the Notes are credited. DTC may take actions,
at the direction of the related Participants, with respect to some Notes which
conflict with actions taken with respect to other Notes.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of indirect participants and certain banks, the ability of holders of
beneficial interests in the Notes to pledge such Notes to persons or entities
that do not participate in the DTC system, or otherwise take actions in respect
of such Notes, may be limited due to the lack of a definitive certificate for
such Notes.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes certain terms of the Sale and Servicing
Agreement, the Indenture and the Trust Agreement together, the ("Trust
Documents"). Copies of the Trust Documents are filed as exhibits to the
Registration Statement of which this Prospectus is a part. Copies may be
obtained by the Note Owners upon request in writing to the Servicer, at its
address set forth under "The Servicer".
SALE AND ASSIGNMENT OF RECEIVABLES.
The Seller has entered into a Sale and Servicing Agreement with the Issuer,
the Servicer and the Indenture Trustee pursuant to which the Seller, on or prior
to the Closing Date, will have sold and assigned to the Issuer, without
recourse, its entire interest in and to the Receivables, including its security
interest in the financed vehicles securing the Receivables and its right to
receive all payments on, or proceeds with respect to the Receivables to the
extent paid or payable after the Cut-Off Date. Pursuant to the Sale and
Servicing Agreement, the Seller agreed that, upon the occurrence of a breach of
a representation or warranty under the Trust Documents with respect to any of
the Receivables, the Issuer will be entitled to require the Seller to repurchase
such Receivables from the Issuer. Such rights of the Issuer under the Sale and
Servicing Agreement will constitute part of the property of the Issuer and may
be enforced directly by the Owner Trustee. In addition, the Issuer will pledge
such rights to the Indenture Trustee as collateral for the Notes, and such
rights may be enforced directly by the Indenture Trustee.
Each Receivable transferred by the Seller to the Issuer will be identified
in a schedule appearing as an exhibit to the Sale and Servicing Agreement (the
"Schedule of Receivables").
REPRESENTATION AND WARRANTIES; REPURCHASE OBLIGATION
In connection with the sale of the Receivables, the security interests in
the financed vehicles securing the Receivables have been assigned by HAFC to the
Seller, by the Seller to the Issuer and by the Issuer to the Indenture Trustee.
The Sale and Servicing Agreement provides that if the Seller breaches certain
representations and warranties relating to the Receivables and the financed
vehicles in a manner that materially and adversely affects any Receivable or the
interests of the Noteholders or the interests of the
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Issuer, the Seller shall, unless such breach shall have been cured in all
material respects, repurchase such Receivable from the Issuer. The Seller shall
be obligated to repurchase such Receivable if its breach under the Sale and
Servicing Agreement is not cured by the last day of the second calendar month
following the discovery by or notice to the Seller of the breach.
The representations and warranties made by the Seller under the Sale and
Servicing Agreement state that each Receivable: (a) was originated by a properly
licensed Dealer in the ordinary course of business, purchased by HAFC pursuant
to a Dealer Agreement, sold to the Seller pursuant to the Receivables Purchase
Agreement, assigned to the Issuer pursuant to the Sale and Servicing Agreement
and assigned by the Issuer to the Indenture Trustee pursuant to the Indenture,
(b) assignment was valid and made pursuant to the respective agreements upon
customary and enforceable terms, (c) is fully amortizing with level monthly
payments, (d) was originated and sold to the Seller without fraud or material
misrepresentation on the part of the Dealer or the borrower, (e) was originated
in material compliance with all applicable laws and regulations relating to the
Receivable and all applicable laws and regulations were complied with in writing
any insurance policies with respect thereto, and such Receivable and any such
insurance policies continue to be in compliance with applicable laws and
regulations, (f) was originated in the United States and complied at the time of
purchase with HAFC's then current underwriting and funding policies, (g) is a
valid, legal and binding obligation of the borrower, enforceable in accordance
with its terms subject to certain exceptions related to bankruptcy, insolvency
or the Relief Act, (h) is not due from any governmental body, (i) had an
original maturity of at least 18 months and not more than 72 months, an original
balance between $3,000 and $27,000, an original APR between 10.5% and 27%, was
not more than 30 days past due, as to which no funds have been advanced by any
party to maintain the contract as current and no provision of which has been
waived, altered or modified since origination, (j) as to which the information
on the Schedule of Receivables is true and correct in all material respects, (k)
with respect to which HAFC's and the Servicer's records reflect to successive
assignments or pledge from HAFC to the Seller, from the Seller to the Issuer and
by the Issuer to the Indenture Trustee, (l) will be accurately reflected in any
list of Receivables provided by HAFC, (m) constitutes chattel paper under the
UCC, (n) is documented by only one original executed contract, (o) with respect
to which the related file contains the executed original contract, evidence of
physical damage insurance coverage, the original lien certificate naming HAFC or
any predecessor or affiliate as first lienholder and an original credit
application, (p) has not been satisfied, subordinated or rescinded and the
related financed vehicle has not been released from the lien, (q) was not
originated in, or subject to laws of a jurisdiction, the laws of which make it
unlawful, void or voidable to sell, transfer or assign the Receivable and the
Receivable is not subject to any agreement restricting or conditioning the
assignment thereof, (r) has not been sold, transferred, assigned or pledged
other than as described in this Prospectus and no other person holds any right
to receive any proceeds with respect to such Receivable, any related insurance
policy or related Dealer Agreement, (s) which creates a valid, binding and
enforceable first priority security interest in favor of HAFC in the financed
vehicle, which security interest is prior to all other liens and security
interests (other than those for taxes, labor or material for a vehicle) and as
to which no such prior liens exist, (t) as to which all filings required to give
the Indenture Trustee a first priority perfected lien on, or ownership interest
in, the Receivable and the proceeds thereof have been made, (u) as to which,
HAFC, or any predecessor or affiliate thereof, has not conveyed any interest
thereto to any person that would impair the rights of the Indenture Trustee
thereto, (v) is not assumable, (w) is not subject to recision, set off,
counterclaim or defense and as to which no such right has been asserted or
threatened with respect thereto, (x) as to which no event has occurred
permitting acceleration and no condition exists or event has occurred and is
continuing that would with notice, lapse of time or both would constitute a
default, breach, violation or event permitting acceleration, nor any waiver of a
default, breach, violation or other event permitting acceleration, and with
respect to which the financed vehicle has not been repossessed, (y) at the time
of origination was covered by comprehensive, collision, loss and damage
insurance naming HAFC, its successors and assigns as loss payee, (z) with
respect to which the lien certificate names, or will name, HAFC (or any
predecessor or affiliate thereof) as the original secured party and all required
filings and
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recordings required to name such entity as the original secured party have been
made, (aa) as to which no selection procedures adverse to the Noteholder were
utilized and (bb) as to which 90% or more of a scheduled payment is not 30 or
more days delinquent, no determination has been made that no further payments
are likely to be made with respect thereto, and the borrower is not subject to a
bankruptcy proceeding.
The Sale and Servicing Agreement also provides that if the Servicer breaches
certain of its servicing obligations under the Sale and Servicing Agreement
(including, but not limited to its obligation to ensure that a perfected
security interest is maintained in favor of HAFC (or any predecessor of HAFC or
any subsidiary thereof) in the related financed vehicles) or certain other
covenants with regard to the Servicer, the Servicer shall, unless such breach
shall have been cured in all material respects, purchase such Receivable from
the Issuer. The obligation to purchase the affected Receivables arises only if a
breach materially and adversely affects any Receivable or the interests of the
Noteholders or the interests of the Issuer. The Servicer shall be obligated to
repurchase such Receivable if a breach under the Sale and Servicing Agreement is
not cured by the last day of the second calendar month following the discovery
by or notice to the Servicer of the breach.
In addition to the warranty that it will maintain HAFC's perfected security
interest in the financed vehicles, the Servicer represented and warranted in the
Sale and Servicing Agreement that it (a) will do nothing to impair the rights of
the Issuer or Noteholders in the Receivables, Dealer Agreements, the Receivables
Purchase Agreement, any insurance policies related to a Receivable or any other
Trust Asset, (b) will not create or allow to exist any lien or restriction on
transfer of the Receivables except for the lien in favor of the Indenture
Trustee, or sign or file under the UCC of any jurisdiction any financing
statement or security agreement naming HAFC, the Servicer or any affiliate
thereof as debtor or authorizing any such filing, (c) will not extend or amend
any Receivable other than as specified in the Sale and Servicing Agreement, (d)
will service the Receivables in compliance with the Sale and Servicing Agreement
and in material compliance with its standard and customary procedures for
servicing and (e) will notify the Indenture Trustee of any change in its
principal offices and will maintain the files relating to the Receivables in the
United States.
PAYMENTS ON RECEIVABLES; DEPOSITS TO COLLECTION ACCOUNT
The Indenture Trustee will establish and maintain a separate trust account
(the "Collection Account") for the benefit of the Noteholders and the Issuer.
The Collection Account will be an Eligible Account (as defined herein). Except
as otherwise described herein and subject to the investment provision described
in the following paragraphs, within two Business Days following receipt by the
Servicer or HAFC of amounts in respect of the Receivables excluding amounts
representing administrative charges, annual fees, taxes, assessments, credit
insurance charges, or similar items, the Servicer will cause such amounts to be
deposited in the Collection Account. Amounts deposited in the Collection Account
may be invested in Eligible Investments maturing so that funds will be available
for distribution no later than the close of business on the day prior to the
related Payment Date. On the fifth calendar day prior to each Payment Date, the
Servicer will notify the Indenture Trustee and the Issuer of the amount of such
deposit to be included in the Available Funds for the related Payment Date. On
or prior to each Payment Date, the Servicer will deposit to the Collection
Account amounts which are to be included in the Available Funds for the related
Payment Date. Notwithstanding the foregoing, for as long as HFC remains the
Servicer under the Sale and Servicing Agreement and maintains a commercial paper
rating of at least P-1 from Moody's Investors Service, Inc. and A-1 from
Standard & Poor's Corporation, which is currently the case, the Servicer is not
required to deposit collections into the Collection Account on the day indicated
in the preceding sentence, but may use for its own benefit all such collections
until the related Payment Date. So long as such ratings are maintained, the
Servicer will make such deposits in an amount equal to the net amount of such
deposits and withdrawals which would have been made had the ratings conditions
described in this paragraph not applied.
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"Eligible Investments" shall mean negotiable instruments or securities which
evidence: (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 of depository institutions or trust
companies incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking or depository institution authorities; provided the short-term debt
rating of such depository institution or trust company shall be in the highest
rating category of the Rating Agencies, (c) commercial paper having, at the time
of the Trust's investment or a contractual commitment to invest, a rating in the
highest rating category of the Rating Agencies, (d) demand deposits, time
deposits and certificates of deposit which are fully insured by the FDIC having,
at the time of the Issuer's investment therein, a rating in the highest rating
category of the Rating Agencies, (e) bankers' acceptances issued by any
depository institution or trust company described in (b) above, (f) money market
funds having, at the time of the Issuer's investment therein, a rating in the
highest rating category of the Rating Agencies, (g) time deposits, other than as
referred to in (d) above (having maturities not later than the succeeding
Payment Date), with an entity, the commercial paper of such entity having a
credit rating in the highest rating category of the Rating Agencies, (h) demand
notes of HFC for so long as HFC commercial paper has, at the time of the
Issuer's investment thereof, a rating in the highest rating category of the
Rating Agencies and (i) any other investment acceptable to the Rating Agencies.
At any time that the commercial paper issued by HFC does not satisfy the
rating requirements specified above, HFC may continue to hold collections prior
to distribution as described above so long as HFC causes to be maintained an
irrevocable letter of credit or surety bond or other credit enhancement
instrument in form and substance satisfactory to each Rating Agency (a "Servicer
Credit Facility"), issued by a depository institution or insurance company
having a rating on its (i) short-term obligations of at least P-1 and long-term
obligations of at least A2 by Moody's and (ii) short-term obligations of A-1 and
long-term obligations of A by Standard & Poor's or other ratings if approved by
the Rating Agencies and providing that the Indenture Trustee may draw thereon in
the event that HFC, as Servicer, fails to make any deposit or payment required
under the Sale and Servicing Agreement.
An "Eligible Account" is an account that is either (i) a segregated account
with a depository institution organized under the laws of the United States or
any of the states thereof, which depository at the time of any deposit therein
has a net worth in excess of $50,000,000 and long-term debt rating acceptable to
the Rating Agencies or a short-term deposit obligation rating acceptable to the
Rating Agencies, or (ii) a segregated trust account with the corporate trust
department of a depository organized under the laws of the United States or any
one of the states thereof, and acting as a trustee for funds deposited in such
account, so long as any of the unsecured, unguaranteed senior debt securities of
such depository shall have a long-term debt rating acceptable to the Rating
Agencies.
The Servicer will have the revocable power to withdraw funds from the
Collection Account and to instruct the Indenture Trustee to make withdrawals and
payments from the Collection Account for the purpose of carrying out its duties
under the Sale and Servicing Agreement and the Indenture.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments called for
under the Receivables and will, consistent with the Sale and Servicing
Agreement, follow such collection procedures as it follows from time to time
with respect to motor vehicle retail installment sales contracts in its
servicing portfolio which are comparable to the Receivables. HAFC, as
Subservicer, will follow the Servicer's collection procedures as they may be
revised from time to time. Consistent with the above, HAFC or the Servicer may
in their discretion waive any late payment charge or any assumption or other fee
or charge that may be collected in the ordinary course of servicing the
Receivables.
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HAFC or the Servicer may arrange with a borrower a schedule for the payment
of interest due and unpaid for a period, provided that any such arrangement is
consistent with the Servicer's policies with respect to comparable retail
installment sales contracts held in its portfolio.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
As long as HFC is the master servicer it will receive, or be entitled to
retain a servicing fee on behalf of itself and HAFC, as the Subservicer, after
making payments on the Notes and making required deposits in the Reserve
Account. Such fee will be paid monthly in arrears in the amount of 3.00% per
annum of the Pool Balance as of the beginning of the related Collection Period
(the "Servicing Fee"). If HFC is no longer the master servicer, the Servicing
Fee will be paid the successor master servicer prior to any distributions on the
Notes and making required deposits in the Reserve Account. The Servicer is also
entitled to retain all administrative fees, expenses and charges paid on behalf
of borrowers, including late fees, prepayment fees and liquidation fees
("Supplemental Servicing Fees").
The Servicer will pay certain ongoing expenses associated with the Issuer
and the Notes, and incurred by it in connection with its responsibilities under
the Sale and Servicing Agreement, including, without limitation, payment of the
fees and disbursements of the Indenture Trustee and the Owner Trustee. In
addition, the Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with its servicing duties, such right of
reimbursement being prior to the rights of Noteholders to payments of principal
and interest.
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement provides for delivery on or before April 30
in each year, to the Owner Trustee, the Indenture Trustee and the Rating
Agencies of an annual statement signed by an officer of the Servicer or of HAFC
to the effect that the Servicer or HAFC has fulfilled the material obligations
of the Servicer under the Sale and Servicing Agreement throughout the preceding
calendar year, except as specified in such statement.
On or before April 30 of each year, the Servicer will furnish a report
prepared by a firm of independent certified public accountants to the Owner
Trustee, the Indenture Trustee and the Rating Agencies to the effect that such
accountants have examined certain documents and the records relating to
servicing of the Receivables (including the Sale and Servicing Agreement) and
compared mathematical calculations for monthly servicing reports selected by
such accountants with the Servicer's computer reports, and such examination, has
disclosed no items of noncompliance with the provision of the Sale and Servicing
Agreement or variations in the results of such calculations which, in the
opinion of the firm, are material, except for such items of non-compliance as
shall be referred to in the report.
CERTAIN MATTERS REGARDING THE SERVICER AND THE SELLER
The Sale and Servicing Agreement provides that the Servicer may not resign
from its obligations and duties thereunder, except in connection with a
permitted transfer of servicing, unless (i) such duties and obligations are no
longer permissible under applicable law or are in conflict by reason of
applicable law with any other activities of a type and nature presently carried
on by it or (ii) upon the satisfaction of the following conditions: (a) the
Servicer has delivered an executed assumption agreement in form satisfactory to
the Indenture Trustee, assigning its obligations and duties to an entity as to
which the Rating Agencies have confirmed that such assumption will not result in
a lowering of the then current ratings of the Notes, and (b) the successor meets
the eligibility requirements specified in the Sale and Servicing Agreement. No
such resignation will become effective until the Indenture Trustee or a
successor servicer has assumed the Servicer's obligations and duties under the
Sale and Servicing Agreement.
The Servicer may perform any of its duties and obligations under the Sale
and Servicing Agreement through one or more subservicers or delegates, which may
be affiliates of the Servicer. Notwithstanding
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any such arrangement, the Servicer will remain liable and obligated to the
Issuer, the Indenture Trustee, and the Noteholders for the Servicer's duties and
obligations under the Sale and Servicing Agreement, as if the Servicer itself
were performing such duties and obligations. It is expected that so long as HFC
is the master servicer, HAFC will subservice the Receivables on behalf of HFC.
The Sale and Servicing Agreement will also provide that neither the
Servicer, the Seller, nor any director, officer, employee or agent of the
Servicer or the Seller will be under any liability to the Issuer, the Indenture
Trustee or any Noteholders for any action taken or for refraining from the
taking of any action in good faith pursuant to the Sale and Servicing Agreement,
or for errors in judgment; provided, however, that neither the Servicer, the
Seller nor any such person will be protected 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 thereunder. In addition, the Sale and Servicing Agreement provides
that neither the Servicer nor the Seller will be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
respective duties under the Sale and Servicing Agreement and which in its
opinion may involve it in any expense or liability.
Any corporation into which the Servicer or the Seller may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer or the Seller shall be a party, or any
corporation succeeding to the business of the Servicer or the Seller shall be
the successor of the Servicer or the Seller under the Sale and Servicing
Agreement.
SERVICER TERMINATION EVENT
"Servicer Termination Event" under the Sale and Servicing Agreement will
consist of the occurrence and continuance of any of the following: (i) any
failure by the Servicer to deliver to the Trustee for distribution to the
Noteholders any required payment, which failure continues unremedied for five
days after written notice is received by the Servicer from the Indenture Trustee
or after discovery of such failure by a responsible officer of the Servicer;
(ii) any failure by the Servicer duly to observe or perform in any material
respect certain material covenants and agreements set forth in the Sale and
Servicing Agreement which failure continues unremedied for 60 days after written
notice of such failure is given; (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings with respect to the Servicer or certain actions by the Servicer
indicating its insolvency, inability to pay its obligations or initiating a
reorganization under bankruptcy laws; and (iv) the material breach of certain of
the Servicer's representations or warranties and the Servicer's failure to cure
such breach within 60 days after notice thereof.
Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (i) above, for five Business Days and (ii) above, for a period
of 60 days, shall not constitute a Servicer Termination Event if such delay or
failure could not be prevented by the exercise of reasonable diligence by the
Servicer and such delay or failure was caused by an act of God or other similar
occurrence. Upon the occurrence of any such event the Servicer shall not be
relieved from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of the Sale and Servicing Agreement and the
Servicer shall provide the Seller prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
RIGHTS UPON SERVICER TERMINATION EVENT
If a Servicer Termination Event under the Sale and Servicing Agreement
remains unremedied, the Indenture Trustee may terminate all the rights and
obligations of the Servicer under such Agreement, whereupon the Indenture
Trustee or such other successor servicer as shall have been appointed by the
Indenture Trustee will succeed to all the responsibilities, duties, and
liabilities of the Servicer under such Agreement. Any such successor master
servicer will succeed to all the responsibilities, duties, and liabilities of
the Servicer under the Sale and Servicing Agreement and will be entitled to
similar compensation
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arrangements. There is no assurance that the succession of a successor servicer
will not result in a material disruption in the performance of the duties of the
master servicer.
AMENDMENT
The Sale and Servicing Agreement may be amended by the Seller, the Servicer,
the Owner Trustee and the Indenture Trustee, but without the consent of the
Noteholders, provided that such action shall not adversely affect in any
material respect the interests of any Noteholder. The Seller, the Servicer and
the Indenture Trustee may also amend the Sale and Servicing Agreement with the
consent of Noteholders holding a majority of the principal amount of the Notes
outstanding to add, change or eliminate any provisions of such Agreement;
provided that such action will not (i) reduce in any manner the amount of, or
delay the timing of, collections on Receivables or payments that are required to
be made for the benefit of the Noteholders without the consent of holders of all
the outstanding Notes; (ii) change the manner of calculating the interest of any
Noteholder without the consent of holders of all the outstanding Notes; (iii)
adversely affect any rating of the Notes by the Rating Agencies without the
consent of not less than a majority of the outstanding principal balance of the
Notes; or (iv) reduce the aforesaid percentage of the Noteholders required to
consent to any such amendment without the consent of the holders of all Notes
outstanding.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The Receivables transferred to the Issuer by the Seller were acquired by the
Seller from HAFC pursuant to the Master Receivables Purchase Agreement, dated as
of March 1, 1998 entered into by and between the Seller, as purchaser of the
Receivables, and HAFC, as seller of the Receivables (the "Receivables Purchase
Agreement"). The Receivables Purchase Agreement" is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Pursuant to the Sale
and Servicing Agreement, the Receivables were transferred by the Seller to the
Issuer, and the Seller assigned its rights in, to and under the Receivables
Purchase Agreement with respect to such balances to the Issuer. The following
summary describes the material terms of the Receivables Purchase Agreement.
SALE OF RECEIVABLES
Pursuant to the Receivables Purchase Agreement, HAFC sold to the Seller all
its right, title and interest in and to all of the Receivables. The purchase
price of the Receivables was not less than the principal amount thereof as of
the time of sale, plus the present value of the anticipated excess spread
discounted to account for uncertainty in future performance of the Receivables.
In connection with such sale of the Receivables to the Seller, HAFC has
indicated in its computer files that the Receivables have been sold to the
Seller and that such Receivables have been further sold or transferred by the
Seller to the Issuer. In addition, HAFC has provided to the Seller a computer
file or a microfiche list containing a true and complete list showing each
Receivable, identified by account number and by total outstanding balance on the
date the Receivable was sold to the Seller. In its capacity as Subservicer, HAFC
has retained possession of the records and agreements relating to the
Receivables. Such records and agreements are not segregated by HAFC from other
documents and agreements relating to other receivables and are not stamped or
marked to reflect the sale or transfer of the Receivables to the Seller.
However, the computer records of HAFC are or will be marked to evidence such
sale or transfer. HAFC has filed a UCC financing statement meeting the
requirements of applicable state law and in each of the jurisdictions in which
such filings are required in order to maintain the lien priority with respect to
the Receivables. See "Risk Factors--Security interests in both the Receivables
and the underlying vehicles may not be valid under certain circumstances" and
"Certain Legal Aspects of the Receivables".
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REPRESENTATIONS AND WARRANTIES
In the Receivables Purchase Agreement, HAFC represented and warranted to the
Seller to the effect, among other things, that (a) the Receivables Purchase
Agreement constitutes a legal, valid and binding obligation of HAFC, (b) each
Receivable satisfied certain eligibility criteria, (c) the assignment pursuant
to the Receivables Purchase Agreement constitutes a valid sale to the Seller of
all right, title and interest of HAFC in and to the Receivables, the security
interests in the financed vehicles, and in the proceeds thereof or, if held not
to constitute a sale, constitutes a grant of a security interest in the
Receivables, (d) the assignment pursuant to the Receivables Purchase Agreement
constitutes a valid sale to the Seller of all right, title and interest in and
to any related service contracts on financed vehicles and rights against Dealers
pursuant to Dealer Agreements, and (e) the assignment pursuant to the
Receivables Purchase Agreement constitutes a valid sale to the Seller of all
right, title and interest in and to any physical damage, credit life or
disability insurance policies covering financed vehicles or borrowers. If the
breach of any of the representations and warranties described in this paragraph
results in the obligation of the Seller under the Sale and Servicing Agreement
to accept retransfer of the Receivables, either the Seller, or at the Seller's
election, HAFC, will repurchase the affected Receivables for an amount equal to
the unpaid principal balance thereof, plus accrued and unpaid finance charges
from the last date billed through the end of the current Collection Period.
AMENDMENTS
The Receivables Purchase Agreement may be amended by the Seller and HAFC
without the consent of the Noteholders. However, as certified by the Seller, no
such amendment may adversely affect in any material respect the interests of any
Noteholder.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTERESTS IN VEHICLES
In all the states in which the Receivables have been originated, retail
installment sale contracts such as the Receivables evidence the credit sale of
automobiles, light duty trucks and vans by Dealers to borrowers. The Receivables
also constitute personal property security agreements and include grants of
security interests in the financed vehicles under the Uniform Commercial Code
(the "UCC").
Perfection of security interests in the financed vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In the states in which a majority of the Receivables have
been originated, a security interest in a vehicle generally may be perfected
only by causing such vehicle's certificate of title to be amended to note the
security interest of the secured party. Such notation of a secured party's
security interest is generally effected in such states by depositing with the
applicable state highway department, motor vehicles registrar, or similar
authority along with any necessary registration fees, the vehicle's certificate
of title and an application containing the name and address of the secured
party.
Pursuant to the Receivables Purchase Agreement, HAFC will assign its
security interest in the financed vehicles securing the receivables to the
Seller. Pursuant to the Sale and Servicing Agreement, the Seller will then
assign such security interests to the Issuer. However, because of the
administrative burden and expense, HAFC, the Servicer, the Seller, the Indenture
Trustee and the Owner Trustee will not amend any certificate of title to
identify the Issuer as the new secured party on the certificates of title
relating to the financed vehicles. Also, HAFC, as agent for the Servicer, may
continue to hold any certificates of title relating to the financed vehicles in
its possession. See "Description of the Trust Documents--Sale and Assignment of
Receivables."
In most states, assignments such as those under the Receivables Purchase
Agreement and the Sale and Servicing Agreement are an effective conveyance of a
security interest without amendment of any lien
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noted on a vehicle's certificate of title, and the assignee succeeds thereby to
the assignor's rights as secured party. In the absence of fraud or forgery by
the vehicle owner, HAFC, or the Servicer, or administrative error by state or
local agencies, the notation of HAFC's (or any predecessor of HAFC's or any
subsidiary's) lien on the certificates of title and, if applicable, HAFC's or
the Servicer's possession of the certificate of title will be sufficient to
protect the Issuer against the rights of subsequent purchasers of a financed
vehicle or subsequent lenders who take a security interest in a financed
vehicle. If there are any financed vehicles as to which a perfected security
interest is not obtained, the Issuer's security interest will be subordinate to,
among others, subsequent purchasers of the financed vehicles and holders of
perfected security interests. Such a failure, however, would constitute a breach
of the Seller's warranties under the Sale and Servicing Agreement and would
create an obligation of the Seller to purchase the related Receivable unless the
breach is cured. See "Description of the Trust Documents--Sale and Assignment of
Receivables." By not identifying the Issuer as the secured party on the
certificate of title, the security interest of the Issuer in the financed
vehicle could be defeated through fraud or negligence.
Under Texas law, unless the borrower has notice of the assignment of its
retail installment sales contract, or any outstanding balance thereunder,
payment by the borrower to the holder last known to such borrower will be
binding upon all subsequent holders or assignees of the retail installment sales
contract. By not notifying the borrower of the assignment of the retail
installment sales contract to the Issuer, the Issuer would not have a cause of
action against the borrower for any payments made by the borrower to the holder
or assignee last known to such borrower.
Under the laws of most states, the perfected security interest in a vehicle
continues for four months after a vehicle is moved to a state other than the
state in which it is initially registered and thereafter until the vehicle owner
re-registers the vehicle in the new state. A majority of states generally
require a surrender of a certificate of title to re-register a vehicle;
accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a security interest on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In other states
that do not require a certificate of title for registration of a motor vehicle
or in cases of fraud on the part of the borrower, re-registration could defeat
perfection. In the ordinary course of servicing receivables, HAFC takes steps to
effect re-perfection upon receipt of notice of re-registration or information
from the borrower as to relocation. Similarly, when a borrower sells a vehicle,
HAFC must surrender possession of the certificate of title or will receive
notice as a result of its security interest noted thereon and accordingly will
have an opportunity to require satisfaction of the related Receivable before
release of the security interest. Under the Sale and Servicing Agreement, the
Servicer is obligated to take appropriate steps, at the Servicer's expense, to
maintain perfection of security interests in the financed vehicles.
Under the laws of most states, liens for repairs performed on, and for
storage of, a motor vehicle and liens for certain unpaid taxes take priority
over even a perfected security interest in a financed vehicle. The Code also
grants priority to certain federal tax liens over the lien of a secured party.
The laws of certain states, and federal law permit the confiscation of motor
vehicles under certain circumstances if used in unlawful activities, which may
result in the loss of a secured party's perfected security interest in the
confiscated motor vehicle. The Seller will represent to the Issuer in the Sale
and Servicing Agreement that each security interest in a financed vehicle is or
will be prior to all other present liens (other than tax liens and liens that
arise by operation of law) upon, and security interests in, such financed
vehicle. However, liens for repairs or taxes, or the confiscation of a financed
vehicle, could arise or occur at any time during the term of a Receivable. No
notice will be given to the Indenture Trustee in the event such a lien arises or
confiscation occurs.
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REPOSSESSION
In the event of a default by vehicle purchasers, the holder of the retail
installment sale contract has all the remedies of a secured party under the UCC
of the state in which enforcement is to take place, except where specifically
limited by other laws. In states other than Louisiana and Wisconsin, (i) the UCC
remedies of a secured party include the right to repossession by self-help
means, unless such means would constitute a breach of the peace; (ii) unless a
vehicle is voluntarily surrendered, self-help repossession is the method that
will be employed by HAFC in the majority of instances in which a default occurs
and is accomplished by retaking possession of the financed vehicle; and (iii) in
cases where the borrower objects or raises a defense to repossession, or if
otherwise required by applicable state law, a court order must be obtained from
the appropriate state court, and the vehicle must then be repossessed in
accordance with that order. In Louisiana and Wisconsin, unless the vehicle is
voluntarily surrendered or abandoned, judicial means must be employed in order
to seize the vehicle. In certain states under certain circumstances after the
vehicle has been repossessed, the borrower may reinstate the contract by paying
the delinquent installments on the contract and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the borrower, some jurisdictions require that the
borrower be notified of the default and be given a time period within which the
borrower may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The UCC and other state laws require the secured party to provide the
borrower with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
some states the borrower has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the collateral
for disposition and arranging for sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some other states, by payment of delinquent installments
or the unpaid balance. Repossessed vehicles are generally resold by HAFC through
automobile auctions which are attended principally by automotive dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be applied
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness of the borrower on the Receivable. While some states impose
prohibitions or limitations on deficiency judgments, if the net proceeds from
resale do not cover the full amount of the indebtedness a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
Additionally, under Texas law, in order for a creditor in a secured transaction
to sue for a deficiency, the lender must first comply with those provisions of
the UCC which govern disposition of collateral and then dispose of the
collateral in a commercially reasonable manner. Any deficiency judgment would be
a personal judgment against the borrower for the shortfall, and a defaulting
borrower can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any other holder of any subordinate lien with
respect to the vehicle who has notified the lender within the specified time
period or, if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the borrower.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle
retail installment sales acts, retail installment sales acts and other similar
laws. Also, state laws may impose finance charge ceilings and other restrictions
on consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements may impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect an assignee's (such as the Issuer's) ability
to enforce retail installment sales contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, state statutes or the common law in certain
states, has the effect of subjecting a seller (and certain related lenders and
their assignees, such as the Issuer) in a consumer credit transaction and any
assignee of the seller to all claims and defenses which the borrower in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the borrower under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the borrower. The Receivables will be subject to the
requirements of the FTC Rule. Accordingly, the Indenture Trustee, as holder of
the Receivables, will be subject to any claims or defense that the purchaser of
the financed vehicle may assert against the seller of the financed vehicle. Such
claims are limited to a maximum liability equal to the amounts theretofore paid
by the borrower on the Receivable.
Under most state motor vehicle dealer licensing laws, sellers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale.
Furthermore, the Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new and
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if an
odometer disclosure statement was not provided to the purchaser of the related
financed vehicle, the borrower may be able to assert a defense against the
seller of the vehicle.
Courts have imposed general equitable principles on secured parties pursuing
repossession of collateral or litigation involving deficiency balances. These
equitable principles may have the effect of relieving a borrower from some or
all of the legal consequences of a default.
In several cases, borrowers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
The Seller will warrant under the Sale and Servicing Agreement, that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if a borrower has a claim against the Issuer for violation of any
law and such claim materially and adversely affects the Issuer's interest in a
Receivable, such violation would constitute a breach of warranty under the Sale
and Servicing Agreement and would create an obligation of the Seller to
repurchase the Receivable unless the breach is cured. See "Description of the
Trust Documents--Sale and Assignment of the Receivables."
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SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940. Under the terms of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"),
a borrower who enters military service after the origination of such borrower's
Receivable (including a borrower who was in reserve status and is called to
active duty after origination of the Receivable), may not be charged interest
(including fees and charges) above an annual rate of 6% during the period of
such borrower's active duty status, unless a court orders otherwise upon
application of the lender. The Relief Act applies to borrowers who are members
of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard,
and officers of the U.S. Public Health Service assigned to duty with the
military. Because the Relief Act applies to borrowers who enter military service
(including reservists who are called to active duty) after origination of the
related Receivable, no information can be provided as to the number of
Receivables that may be effected by the Relief Act. Application of the Relief
Act would adversely affect, for an indeterminate period of time, the ability of
the Servicer to collect full amounts of interest on certain of the Receivables.
Any shortfall in interest collections resulting from the application of the
Relief Act or similar legislation or regulations, which would not be recoverable
from the related Receivables, would result in a reduction of the amounts
distributable to the holders of the Notes. In addition, the Relief Act imposes
limitations that would impair the ability of the Servicer to foreclose on an
affected Receivable during the borrower's period of active duty status, and,
under certain circumstances, during an additional three month period thereafter.
Thus, in the event that the Relief Act or similar legislation or regulations
applies to any Receivable which goes into default, there may be delays in
payment and losses on the Notes in connection therewith. Any other interest
shortfalls, deferrals or forgiveness of payments on the Receivables resulting
from similar legislation or regulations may result in delays in payments or
losses to Noteholders.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Insolvency Laws, may interfere
with or affect the ability of a lender to realize upon collateral or enforce a
deficiency judgment. For example, in a Chapter 13 proceeding under the federal
bankruptcy law, a court may prevent a lender from repossessing a motor vehicle,
and, as part of the rehabilitation plan, reduce the amount of the secured
indebtedness to the market value of the motor vehicle at the time of bankruptcy
(as determined by the court), leaving the party providing financing as a general
unsecured creditor for the remainder of the indebtedness. A bankruptcy court may
also reduce the monthly payments due under a contract or change the rate of
interest and time of repayment of the indebtedness.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
considerations to investors of the purchase, ownership and disposition of the
securities offered hereby. The discussion is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to change. The
discussion below does not purport to deal with all federal tax considerations
applicable to all categories of investors. Certain holders, including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
taxpayers subject to the alternative minimum tax, and holders that will hold the
Securities as other than capital assets, may be subject to special rules that
are not discussed below. It is recommended that Investors consult their own tax
advisors in determining the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of the securities.
TAX CHARACTERIZATION OF THE ISSUER
Dewey Ballantine LLP is of the opinion that, assuming the parties will
comply with the terms of the Trust Agreement and related documents, the Issuer
will not be an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes.
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If the Issuer were taxable as a corporation for federal income tax purposes,
the Issuer would be subject to corporate income tax on its taxable income. The
Issuer's taxable income would include all its income on the Receivables,
possibly reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce cash available to make payments on the Notes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE OFFERED NOTES AS INDEBTEDNESS. The Seller agrees, and the
Noteholders will agree by their purchase of Offered Notes, to treat the Offered
Notes as debt for all federal, state and local income tax purposes. There are no
regulations, published rulings or judicial decisions involving the
characterization for federal income tax purposes of securities with terms
substantially the same as the Offered Notes. In general, whether instruments
such as the Offered Notes constitute indebtedness for federal income tax
purposes is a question of fact, the resolution of which is based primarily upon
the economic substance of the instruments and the transaction pursuant to which
they are issued rather than merely upon the form of the transaction or the
manner in which the instruments are labeled. The Internal Revenue Service
("IRS") and the courts have set forth various factors to be taken into account
in determining, for federal income tax purposes, whether or not an instrument
constitutes indebtedness and whether a transfer of property is a sale because
the transferor has relinquished substantial incidents of ownership in the
property or whether such transfer is a borrowing secured by the property. On the
basis of its analysis of such factors as applied to the facts and its analysis
of the economic substance of the contemplated transaction, counsel is expected
to conclude that, for federal income tax purposes, the Offered Notes will be
treated as indebtedness of the Issuer, and not as an ownership interest in the
Receivables, or an equity interest in the Issuer or in a separate association
taxable as a corporation or other taxable entity.
If the Offered Notes are characterized as indebtedness, interest paid or
accrued on an Offered Note will be treated as ordinary income to the Noteholders
and principal payments on an Offered Note will be treated as a return of capital
to the extent of the Noteholder's basis in the Offered Note allocable thereto.
An accrual method taxpayer will be required to include in income interest on the
Offered Notes when earned, even if not paid, unless it is determined to be
uncollectible. The Issuer will report to Noteholders of record and the IRS in
respect of the interest paid and original issue discount, if any, accrued on the
Offered Notes to the extent required by law.
Although, as described above, it is the opinion of Dewey Ballantine LLP
that, for federal income tax purposes, the Offered Notes will be characterized
as debt, such opinion is not binding on the IRS and thus no assurance can be
given that such a characterization will prevail. If the IRS successfully
asserted that one or more of the Offered Notes did not represent debt for
federal income tax purposes, the Noteholders would likely be treated as owning
an interest in a partnership and not an interest in an association (or publicly
traded partnership) taxable as a corporation. If the Noteholders were treated as
owning an equitable interest in a partnership, the partnership itself would not
be subject to federal income tax; rather each partner would be taxed
individually on their respective distributive share of the partnership's income,
gain, loss, deductions and credits. The amount, timing and characterization of
types of income and deductions for a Noteholder would differ if the Offered
Notes were held to constitute partnership interests, rather than indebtedness.
Since the Issuer will treat the Offered Notes as indebtedness for federal income
tax purposes, the Servicer will not attempt to satisfy the tax reporting
requirements that would apply under this alternative characterization of the
Offered Notes. Investors that are foreign persons should consult their own tax
advisors in determining the federal, state, local and other tax consequences to
them of the purchase, ownership and disposition of the Offered Notes.
ORIGINAL ISSUE DISCOUNT. It is anticipated that the Offered Notes will not
have any original issue discount ("OID") other than possibly OID within a DE
MINIMIS exception and that accordingly the provisions of sections 1271 through
1273 and 1275 of the Internal Revenue Code of 1986, as amended (the "Code"),
generally will not apply to the Notes. OID will be considered DE MINIMIS if it
is less than 0.25% of the principal amount of an Offered Note multiplied by its
expected weighted average life.
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MARKET DISCOUNT. A subsequent purchaser who buys an Offered Note for less
than its principal amount may be subject to the "market discount" rules of
section 1276 through 1278 of the Code. If a subsequent purchaser of an Offered
Note disposes of such Offered Note (including certain nontaxable dispositions
such as a gift), or receives a principal payment, any gain upon such sale or
other disposition will be recognized, or the amount of such principal payment
will be treated, as ordinary income to the extent of any "market discount"
accrued for the period that such purchaser holds the Offered Note. Such holder
may instead elect to include market discount in income as it accrues with
respect to all debt instruments acquired in the year of acquisition of the
Offered Notes and thereafter. Market discount generally will equal the excess,
if any, of the then current unpaid principal balance of the Offered Note over
the purchaser's basis in the Note offered immediately after such purchaser
acquired the Offered Note. In general, market discount on an Offered Note will
be treated as accruing over the term of such Offered Note in the ratio of
interest for the current period over the sum of such current interest and the
expected amount of all remaining interest payments, or at the election of the
holder, under a constant yield method. At the request of a holder of an Offered
Note, information will be made available that will allow the holder to compute
the accrual of market discount under the first method described in the preceding
sentence.
The market discount rules also provide that a holder who incurs or continues
indebtedness to acquire an Offered Note at a market discount may be required to
defer the deduction of all or a portion of the interest on such indebtedness
until the corresponding amount of market discount is included in income.
Notwithstanding the above rules, market discount on an Offered Note will be
considered to be zero if it is less than a DE MINIMIS amount, which is 0.25% of
the remaining principal balance of the Note multiplied by its expected weighted
average remaining life. If OID or market discount is DE MINIMIS, the actual
amount of discount must be allocated to the remaining principal distributions on
the Offered Notes and, when each such distribution is received, capital gain
equal to the discount allocated to such distribution will be recognized.
MARKET PREMIUM. A subsequent purchaser who buys an Offered Note for more
than its principal amount generally will be considered to have purchased the
Note at a premium. Such holder may amortize such premium, using a constant yield
method, over the remaining term of the Offered Note and, except as future
regulations may otherwise provide, may apply such amortized amounts to reduce
the amount of interest reportable with respect to such Note over the period from
the purchase date to the date of maturity of the Offered Note. The amortization
of such premium on an obligation that provides for partial principal payments
prior to maturity should be governed by the methods for accrual of market
discount on such an obligation (described above). A holder that elects to
amortize premium must reduce his tax basis in the related obligation by the
amount of the aggregate deductions (or interest offsets) allowable for
amortization of premium. If a debt instrument purchased at a premium is redeemed
in full prior to its maturity, a purchaser who has elected to amortize premium
should be entitled to a deduction for any remaining unamortized premium in the
taxable year of redemption.
SALE OR REDEMPTION OF OFFERED NOTES. If an Offered Note is sold or retired,
the seller will recognize gain or loss equal to the difference between the
amount realized on the sale and such Holder's adjusted basis in the Note. Such
adjusted basis generally will equal the cost of the Note to the seller,
increased by any original issue discount included in the seller's gross income
in respect of the Note (and by any market discount which the taxpayer elected to
include in income or was required to include in income), and reduced by payments
other than payments of qualified stated interest in respect of the Note received
by the seller and by any amortized premium. Similarly, a holder who receives a
payment other than a payment of qualified stated interest in respect of an
Offered Note, either on the date on which such payment is scheduled to be made
or as a prepayment, will recognize gain equal to the excess, if any, of the
amount of the payment over his adjusted basis in the Note allocable thereto. A
Noteholder who receives a final payment which is less than his adjusted basis in
the Offered Note will generally recognize a loss in the amount of the shortfall
on the last day of his taxable year. Generally, any such gain or loss realized
by an
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investor who holds a Note as a "capital asset" within the meaning of Code
Section 1221 should be capital gain or loss, except as described above in
respect of market discount and except that a loss attributable to accrued but
unpaid interest may be an ordinary loss.
TAXATION OF CERTAIN FOREIGN INVESTORS. Interest payments (including OID, if
any) on the Offered Notes made to a Noteholder who is a nonresident alien
individual, foreign corporation or other non-United States person (a "foreign
person") generally will be "portfolio interest" which is not subject to United
States tax if such payments are not effectively connected with the conduct of a
trade or business in the United States by such foreign person and if the Trust
(or other person who would otherwise be required to withhold tax from such
payments) is provided with an appropriate statement that the beneficial owner of
the Offered Note identified on the statement is a foreign person.
BACKUP WITHHOLDING. Distributions of interest and principal as well as
distributions of proceeds from the sale of the Offered Notes, may be subject to
the "backup withholding tax" under Section 3406 of the Code at a rate of 31% if
recipients of such distributions fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed by
the IRS on a recipient of distributions that is required to supply information
but that does not do so in the proper manner.
STATE AND LOCAL TAX CONSIDERATIONS
Potential Noteholders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the Offered Notes.
State and local income tax laws may differ substantially from the corresponding
federal law, and this discussion does not purport to describe any aspect of the
income tax laws of any state or locality. Therefore, potential Noteholders
should consult their own tax advisors with respect to the various state and
local tax consequences of an investment in the Offered Notes.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing, or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to the plan. ERISA also
imposes certain duties on persons who are fiduciaries of plans subject to ERISA
and prohibits certain transactions between a plan and parties in interest with
respect to such plans. Under ERISA, any person who exercises any authority or
control respecting the management or disposition of the assets of a plan is
considered to be a fiduciary of such plan (subject to certain exceptions not
here relevant). A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
In addition to the matters described below, purchasers of Notes that are
insurance companies should consult with their counsel with respect to the United
States Supreme Court case interpreting the fiduciary responsibility rules of
ERISA, JOHN HANCOCK MUTUAL LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK,
114 S. Ct. 517 (1993). In JOHN HANCOCK, the Supreme Court ruled that assets held
in an insurance company's general account may be deemed to be "plan assets" for
ERISA purposes under certain circumstances. Prospective purchasers should
determine whether the decision affects their ability to make purchases of the
Notes.
Certain transactions involving the Issuer might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Issuer were
deemed to be "plan assets" of an employee benefit plan subject to ERISA or the
Code, or an individual retirement account (an "IRA"), or any entity whose
underlying assets are deemed to be assets of an employee benefit plan or an IRA
by reason of such employee benefit plan's or such IRA's investment in such
entity (each a "Benefit Plan"). Under a
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regulation issued by the United States Department of Labor (the "Plan Assets
Regulation"), the assets of the Issuer would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquires an "equity interest" in the Issuer and none of the exceptions contained
in the Plan Assets Regulation is applicable. An equity interest is defined under
the Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. The Seller believes that the Class A and Class B Notes should
be treated as indebtedness without substantial equity features for purposes of
the Plan Assets Regulation. This determination is based in part upon the
traditional debt features of the Class A and Class B Notes, including the
reasonable expectation of purchasers of such Notes that the Notes will be repaid
when due, as well as the absence of conversion rights, warrants and other
typical equity features. The debt treatment of the Class A or Class B Notes for
ERISA purposes could change if the Issuer incurred losses. However, without
regard to whether the Class A or Class B Notes are treated as an equity interest
for such purposes, the acquisition or holding of Class A or Class B Notes by or
on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if certain parties to the transaction are or become, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a Class A or
Class B Note. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 95-60, regarding investments by insurance company
general accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 96-23, regarding transactions by in-house asset managers;
and PTCE 84-14, regarding transactions by "qualified professional asset
managers." Each investor using the assets of a Benefit Plan which acquires the
Class A or Class B Notes, or to whom the Class A or Class B Notes are
transferred, will be deemed to have represented that the acquisition and
continued holding of the Class A or Class B Notes, whichever applies, will be
covered by a Department of Labor class exemption.
Employee plans that are government plans (as defined in Section 3(32) or
ERISA) and certain church plans (as defined in Section 3(53) of ERISA) are not
subject to ERISA; however, such plans may be subject to comparable state law
restrictions.
Any Benefit Plan fiduciary considering the purchase of a Class A or Class B
Note should consult with its counsel with respect to the potential applicability
of ERISA and the Code to such investment. Moreover, each Benefit Plan fiduciary
should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the Class A or Class B Notes is
appropriate for the Benefit Plan, taking into account the overall investment
policy of the Benefit Plan and the composition of the Benefit Plan's investment
portfolio.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated , 1998 (the "Underwriting Agreement") among the Seller, HFC and the
Underwriters named below (the "Underwriters"), the Seller has agreed to sell to
the Underwriters and each of the Underwriters has agreed to purchase, the
principal amount of the Offered Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
- -------------------------------------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston........................
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
CLASS A-5 CLASS B-1
UNDERWRITERS NOTES NOTES
- -------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Credit Suisse First Boston........................
</TABLE>
The Underwriters propose to offer the Class A and Class B Notes in part
directly to purchasers at the initial public offering prices set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
prices less concessions not to exceed %, %, %, %, % and % of
the respective Security Balance of the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5 and Class B-1
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Notes. The Underwriters may allow, and such dealers may reallow, concessions not
to exceed %, %, %, %, %, and % of the respective Security
Balance of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, and Class
B-1 Notes to certain brokers and dealers.
The Seller and HFC have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Seller by John W. Blenke, Vice President-Corporate Law and Assistant Secretary
of Household International, Inc., the parent company of HFC, HAFC and the
Seller, and by Dewey Ballantine LLP, New York, New York, special counsel to the
Seller. Certain legal matters will also be passed upon for the Underwriters by
Dewey Ballantine LLP. As of the date of this Prospectus, Mr. Blenke is a
full-time employee and an officer of Household International, Inc. and
beneficially owns, and holds options to purchase, shares of Common Stock of
Household International, Inc.
70
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
1934 Act.......................................................................... 3
ACC............................................................................... 21
Actuarial Receivables............................................................. 23
ABS............................................................................... 28
ABS Table......................................................................... 29
Aggregate Note Principal Balance.................................................. 42
Aggregate Optimal Note Principal Balance.......................................... 42
Amount Financed................................................................... 42
APR............................................................................... 7
Available Funds................................................................... 42
Benefit Plan...................................................................... 69
Business Day...................................................................... 8
Cedel............................................................................. 11
Cedel Participants................................................................ 52
Certificates...................................................................... 1, 6
Class A Noteholders............................................................... 10
Class A Notes..................................................................... 5
Class A Distributable Amount...................................................... 42
Class A Interest Carryover Shortfall.............................................. 42
Class A Interest Distributable Amount............................................. 42
Class A Monthly Principal Distributable Amount.................................... 42
Class A Principal Carryover Shortfall............................................. 43
Class A Principal Distributable Amount............................................ 43
Class A-1 Notes................................................................... 5
Class A-1 Scheduled Maturity Date................................................. 13
Class A-2 Notes................................................................... 5
Class A-3 Notes................................................................... 5
Class A-4 Notes................................................................... 5
Class A-5 Notes................................................................... 5
Class A-5 Percentage.............................................................. 10, 40
Class B-1 Noteholders............................................................. 10
Class B-2 Noteholders............................................................. 10
Class B Notes..................................................................... 5
Class B-1 Distributable Amount.................................................... 43
Class B-1 Interest Carryover Shortfall............................................ 43
Class B-1 Interest Distributable Amount........................................... 43
Class B-1 Monthly Principal Distributable Amount.................................. 43
Class B-1 Principal Carryover Shortfall........................................... 43
Class B-1 Principal Distributable Amount.......................................... 43
Class B-2 Distributable Amount.................................................... 44
Class B-2 Interest Carryover Shortfall............................................ 44
Class B-2 Interest Distributable Amount........................................... 44
Class B-2 Monthly Principal Distributable Amount.................................. 44
Class B-2 Principal Carryover Shortfall........................................... 44
Class B-2 Principal Distributable Amount.......................................... 44
Class C Noteholders............................................................... 10
Class C Notes..................................................................... 5
Class C Distributable Amount...................................................... 44
Class C Interest Carryover Shortfall.............................................. 44
Class C Interest Distributable Amount............................................. 44
</TABLE>
71
<PAGE>
<TABLE>
<S> <C>
Class C Monthly Principal Distributable Amount.................................... 45
Class C Principal Carryover Shortfall............................................. 45
Class C Principal Distributable Amount............................................ 45
Closing Date...................................................................... 3
Code.............................................................................. 49, 67
Collected Funds................................................................... 45
Collection Account................................................................ 8, 56
Collection Period................................................................. 7
Commission........................................................................ 2
Cooperative....................................................................... 53
Cram Down Loss.................................................................... 45
Cut-Off Date...................................................................... 7
Dealer Agreements................................................................. 22
Dealers........................................................................... 22
Depositaries...................................................................... 12, 51
Depositary........................................................................ 51
Determination Date................................................................ 12, 45
DTC............................................................................... 3, A-1
Eligible Account.................................................................. 57
Eligible Investments.............................................................. 57
ERISA............................................................................. 14
Euroclear......................................................................... 11
Euroclear Operator................................................................ 53
Euroclear Participants............................................................ 53
Event of Default.................................................................. 47
Exchange Act...................................................................... 2
Final Scheduled Payment Date...................................................... 13, 46
FTC Rule.......................................................................... 64
Global Securities................................................................. A-1
HAFC.............................................................................. 1
HFC............................................................................... 6
Holders........................................................................... 12
Household......................................................................... 21
Indenture......................................................................... 1, 38
Indenture Trustee................................................................. 1
Indirect Participants............................................................. 52
Insolvency Laws................................................................... 17
Interest Period................................................................... 8, 38
Interest Rate Cap................................................................. 2,
Interest Rate Cap Provider........................................................ 2, 40
IRA............................................................................... 69
IRS............................................................................... 66
Issuer............................................................................ 1, 5
LIBOR............................................................................. 8, 38
LIBOR Business Day................................................................ 39
LIBOR Determination Date.......................................................... 38
Liquidated Receivable............................................................. 7
Maximum Reserve Account Deposit Amount............................................ 45
Net Liquidation Proceeds.......................................................... 45
Non Class A-5 Percentage.......................................................... 10, 40
Note Account...................................................................... 10
Noteholders....................................................................... 12
Noteholders' Distributable Amount................................................. 46
</TABLE>
72
<PAGE>
<TABLE>
<S> <C>
Note Owners....................................................................... 3, 11
Note Rate......................................................................... 8, 38
Notes............................................................................. 1
NRSRO............................................................................. 14
Offered Notes..................................................................... 1, 5
OID............................................................................... 67
Original Pool Balance............................................................. 7
Owner Trustee..................................................................... 1
Participants...................................................................... 52
Payment Date...................................................................... 2, 8, 38
Plan Asset Regulation............................................................. 69
Pool Balance...................................................................... 7, 46
Preferred Stock................................................................... 6, 22, 27
Principal Amount Available........................................................ 46
Principal Balance................................................................. 7, 46
Principal Distributable Amount.................................................... 46
Purchase Amount................................................................... 46
Purchased Receivable.............................................................. 7
PTCE.............................................................................. 69
Rate Cap.......................................................................... 40
Rating Agencies................................................................... 14
Receivables....................................................................... 1
Receivables Purchase Agreement.................................................... 6, 60
Reference Bank Rate............................................................... 38
Relief Act........................................................................ 65
Replacement Note.................................................................. 13, 51
Reserve Account................................................................... 11, 27
Reserve Account Deposit Amount.................................................... 46
Reserve Account Shortfall Amount.................................................. 46
Rules............................................................................. 52
Sale and Servicing Agreement...................................................... 6
Schedule of Receivables........................................................... 54
Seller............................................................................ 1
Seller's Bankruptcy Initiatives................................................... 28
Series 1998-1 Securities.......................................................... 1
Servicer.......................................................................... 1, 6
Servicer Credit Facility.......................................................... 57
Servicer Termination Event........................................................ 59
Servicing Fee..................................................................... 12, 58
Simple Interest Receivables....................................................... 23
Subservicer....................................................................... 6
Supplemental Servicing Fees....................................................... 12, 58
Targeted Credit Enhancement Amount................................................ 46
Targeted Overcollateralization Amount............................................. 46
Targeted Reserve Account Balance.................................................. 46
Terms and Conditions.............................................................. 53
Trust Agreement................................................................... 1
Trust Assets...................................................................... 1, 5, 22
Trust Documents................................................................... 54
UCC............................................................................... 61
Underwriters...................................................................... 70
Underwriting Agreement............................................................ 70
West LB........................................................................... 40
</TABLE>
73
<PAGE>
APPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Series 1998-1 Notes will be
available only in book-entry form (the "Global Securities"). Investors in the
Global Securities may hold such Global Securities through any of The Depository
Trust Company ("DTC"), Cedel or Euroclear. The Global Securities will be
tradeable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations and prior asset backed issues.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
CEDE & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior asset backed issues. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
asset-backed securities issues in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last Payment Date to and excluding the
settlement date, on the basis of (i) the actual number of days in such accrual
period and a year assumed to consist of 360 days. For transactions settling on
the 31st of the month, payment will include interest accrued to and excluding
the first day of the following month. Payment will then be made by the
respective Depositary of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
Payment Date to and excluding the settlement date on the basis of (i) the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be backed-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a
A-2
<PAGE>
line of credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are Note Owners residing in a country that
has a tax treaty with the United States can obtain an exemption or reduced tax
rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption
or Reduced Rate Certificate). If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by the Note Owners or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
A-3
<PAGE>
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Note Owner of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate the income of
which is includible in gross income for United States tax purposes, regardless
of its source or (iv) a trust other than a "foreign trust" as defined in Section
7701(a)(31) of the Internal Revenue Code of 1986 as amended. The term "Non-U.S.
Person" means any person who is not a U.S. Person. The Prospectus does not deal
with all aspects of U.S. federal income tax withholding that may be relevant to
foreign holders of the Securities or with the application of recently issued
Treasury Regulations relating to tax documentation requirements that are
generally effective with respect to payments made after December 31, 1999. This
summary does not deal with all aspects of U.S. Federal income tax withholding
that may be relevant to foreign holders of the Global Securities. Investors are
advised to consult their own tax advisors for specific tax advice concerning
their holding and disposing of the Global Securities.
A-4
<PAGE>
APPENDIX B
FINANCIAL STATEMENTS OF
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
B-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Household Automobile Revolving Trust I
We have audited the accompanying balance sheet of Household Automobile
Revolving Trust I as of September 30, 1998, and the related statements of
operations and retained deficit and cash flows for the period from March 30,
1998 (inception) to September 30, 1998. These financial statements are the
responsibility of the Issuer's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Household Automobile
Revolving Trust I as of September 30, 1998, and the results of its operations
and its cash flows for the period from March 30, 1998 (inception) to September
30, 1998 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
October 29, 1998
B-2
<PAGE>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
STATEMENT OF OPERATIONS AND RETAINED DEFICIT
FOR THE PERIOD FROM MARCH 30, 1998 (INCEPTION) TO SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Finance income..................................................... $ 47,372
<S> <C>
Other interest income.............................................. 229
Interest expense................................................... 5,976
---------
Net interest margin................................................ 41,625
Provision for credit losses........................................ 24,618
Net interest margin after provision for credit losses.............. 17,007
---------
Fee income......................................................... 447
Servicing fee expense.............................................. 6,106
---------
Income before income taxes and yield to certificateholder.......... 11,348
Income taxes....................................................... --
---------
Yield to certificateholder......................................... 21,301
Net loss........................................................... (9,953)
Retained deficit at March 30, 1998................................. --
---------
Retained deficit at September 30, 1998............................. $ (9,953)
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-3
<PAGE>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
BALANCE SHEET
AT SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Receivables, net.................................................. $ 800,007
Receivable from servicer.......................................... 25,645
Series 1998-A reserve account..................................... 11,281
---------
TOTAL ASSETS.................................................... $ 836,933
---------
---------
LIABILITIES AND SHAREHOLDER'S EQUITY
Series 1998 -- A notes............................................ $ 649,272
Series 1998 -- A certificate...................................... 178,935
Interest payable.................................................. 1,693
Servicing fee payable............................................. 2,164
Reserve deposit................................................... 14,822
---------
TOTAL LIABILITIES............................................... 846,886
SHAREHOLDER'S EQUITY
Retained deficit................................................ (9,953)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY...................... $ 836,933
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-4
<PAGE>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 30, 1998 (INCEPTION) TO SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
CASH PROVIDED BY OPERATIONS
<S> <C>
Net loss......................................................... $ (9,953)
Adjustments to reconcile net loss to cash used by operations:
Provision for credit losses.................................... 24,618
Collections by serivcer not yet remitted to Trust.............. (25,645)
Increase in Series 1998-A reserve account...................... (11,281)
Interest payable and undistributed yield on certificates....... 2,075
Servicing fee payable.......................................... 2,164
---------
Cash used by operations.......................................... (18,022)
---------
INVESTMENTS IN OPERATIONS
Receivables:
Purchased...................................................... (849,812)
Collected, net................................................. 25,187
---------
Cash increase from investments in operations..................... (824,625)
FINANCING AND CAPITAL TRANSACTIONS
Issuance of Series 1998-A notes.................................. 687,000
Payment of Series 1998-A notes................................... (37,728)
Issuance of Series 1998-A certificate............................ 162,769
Additional contributions to Series 1998-A certificate............ 15,784
Establishment of reserve account................................. 14,822
---------
Cash increase from financing and capital transactions............ 842,647
---------
Increase in cash................................................. --
Cash at March 30, 1998 (trust formation)......................... --
Cash at September 30, 1998....................................... $ --
---------
---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest and yield paid.......................................... $ 6,323
</TABLE>
The accompanying notes are an integral part of these financial statements.
B-5
<PAGE>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
NOTES TO FINANCIAL STATEMENTS
Household Automobile Revolving Trust I (the "Issuer" or the "Trust") is a
Delaware business trust formed under the laws of the State of Delaware on March
30, 1998 for the sole purpose of engaging in the transactions of (i) acquiring,
holding and managing the receivables and the other assets, (ii) issuing notes in
private and public offerings, (iii) making payments on the notes and the
certificate and (iv) engaging in other limited activities. The Trust was
initially capitalized by a nominal capital contribution by the Seller. The
Issuer's operations are governed by a trust agreement, dated as of March 1,
1998, as supplemented by a Series 1998-A Supplement (the "Trust Agreement"),
between Household Auto Receivables Corporation (the "Seller") and Wilmington
Trust Company, as owner trustee. The Seller is a wholly-owned special purpose
subsidiary of Household Automotive Finance Corporation ("HAFC"), which is a
wholly-owned subsidiary of Household Finance Corporation ("HFC").
Under the terms of the Master Receivables Purchase Agreement, the Seller
shall from time to time purchase receivables from HAFC for a price equal to 100%
of the principal balance of the receivables plus the present value of the
anticipated excess interest spread on such receivables as defined. The Seller
will then from time to time convey all its right and title to, and interest in,
the receivables to the Trust.
The purchase of receivables is funded by the issuance of variable rate notes
to third-party investors ("Series 1998-A notes") and by the issuance of a trust
certificate (the "Series 1998-A certificate") which is held by the Seller. The
Series 1998-A certificate carries a stated yield and entitles the holder to
periodic payments plus residual cash flow generated by the receivables after
payments have been made to the noteholders and servicer. Residual cash flow is
reduced by the principal amount of defaulted receivables which is defined as
receivables becoming 60 days past due during a distribution period. Noteholders
receive a principal distribution for the amount of any defaulted receivables
during a period which is accounted for as a deemed capital contribution by the
certificateholder. Defaulted receivables for the period March 30, 1998 to
September 30, 1998 were $15.8 million.
To provide additional credit protection to the noteholders, the Seller was
required to fund an initial deposit of $14.8 million into a reserve account held
by the Issuer. The required reserve account level at any particular time is
based on the amount of receivables outstanding as well as various measures of
receivable pool performance. Any required increases are funded with monthly
excess cash flows from the receivables. The amounts on deposit in the reserve
account are available to cover any monthly noteholder distribution shortfall.
Upon amortization of the receivables, any excess reserve account amount will be
included in certificateholder distributions.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECEIVABLES. Receivables are carried at amortized cost. Interest is credited
to income as earned. Interest income is suspended when payments are more than
two months contractually past due.
PROVISION AND CREDIT LOSS RESERVES. Provision for credit losses is made in
an amount sufficient to maintain credit loss reserves at a level considered
adequate to cover probable losses of principal and interest on the existing
portfolio. Probable losses are estimated based on contractual delinquency status
and historical loss experience. Loss reserve estimates are reviewed periodically
and adjustments are reported in earnings when they become known. As these
estimates are influenced by factors outside the Trust's control, there is
uncertainty inherent in these estimates, making it reasonably possible that they
could change. Receivables are written off at the earlier of a) 60 days after a
vehicle has been repossessed,
B-6
<PAGE>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
b) if the financed vehicle has not been repossessed, the date on which at least
10% of a scheduled payment becomes 150 days contractually delinquent or c) upon
disposition of the vehicle. Repossessed vehicles are written down to net
realizable value at the time of repossession.
REPOSSESSED COLLATERAL. Vehicles acquired for nonpayment of indebtedness are
recorded at the lower of the estimated fair market value or the outstanding
receivable balance and generally are sold within 60 days of repossession. Any
difference between the sales price, net of expenses, and the carrying value is
charged to the reserve for credit losses as incurred.
INCOME TAXES. The Seller is the sole equity holder of the Issuer and has
elected, under the "check the box rules", to treat the Issuer as a division.
Accordingly, all income and expense related to the Issuer is recognized and
reported by the Seller, and the Issuer is not subject to federal or state income
tax. Thus, no provision for federal or state income taxes has been accrued in
the financial statements of the Trust.
2. RECEIVABLES (IN THOUSANDS)
The consumer receivables balance included the following at September 30,
1998:
<TABLE>
<CAPTION>
Receivables....................................................................... $ 812,575
<S> <C>
Credit loss reserves.............................................................. (22,671)
Accrued interest.................................................................. 10,103
---------
Total receivables, net.......................................................... $ 800,007
---------
---------
</TABLE>
As of September 30, 1998, the amount of nonearning receivables in the Trust
for which interest accrual has been suspended totaled $11.2 million.
An analysis of credit loss reserves for the period from March 30, 1998
(inception) to September 30, 1998 was as follows:
<TABLE>
<CAPTION>
Credit loss reserves at beginning of period....................................... --
<S> <C>
Provision for credit losses....................................................... $ 24,618
Chargeoffs........................................................................ (4,414)
Recoveries........................................................................ 2,467
---------
Credit loss reserves at September 30, 1998........................................ $ 22,671
---------
---------
</TABLE>
The range of contractual interest rates of the trust receivables is between
8.0% and 29.0%. At September 30, 1998, contractual maturities of finance
receivables were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Automobile Finance $ 38,295 $ 131,035 $ 157,966 $ 184,655 $ 179,459 $ 121,165 $ 812,575
</TABLE>
These contractual maturities do not take into account the impact of
prepayments. The above tabulation, therefore, is not to be regarded as a
forecast of future cash collections.
3. TRUST DEBT (IN THOUSANDS)
AT SEPTEMBER 30, 1998
Series 1998-A notes, variable rate; due September 2005 $649,272
Series 1998-A certificate, 10% stated yield; due September 2005 178,935
B-7
<PAGE>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST DEBT (IN THOUSANDS) (CONTINUED)
The weighted average coupon interest rate on the notes during the period
ended September 30, 1998 was 5.86%. At September 30, 1998, the rate on the notes
was 5.80%. The weighted average rate on the notes and yield on the certificate
during the period ended September 30, 1998 was 6.68%.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Issuer has estimated the fair value of its financial instruments in
accordance with the Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments" ("FAS No. 107"). Fair
value estimates, methods and assumptions set forth below for the Issuer's
financial instruments are made solely to comply with the requirements of FAS No.
107 and should be read in conjunction with the financial statements and notes in
these financial statements.
The carrying values of the receivable from servicer, reserve account cash,
interest payable, servicing fee payable and reserve deposit payable are
considered to be reasonable estimates of their fair values due to the relative
short-term nature of those items.
The fair value of the receivables and the Series 1998 certificate was
calculated by discounting estimated future cash flows, at estimated market
rates. Based upon this calculation, the estimated fair value of the receivables
and certificates approximate book value.
The fair value of the Series 1998-A notes was determined to approximate
carrying value because interest rates adjust with changes in market rates.
5. THE SERVICER
Under the terms of the Sale and Servicing Agreement, HFC, HAFC's parent, has
been appointed master servicer of the receivables held by the Issuer. As
compensation for its services, the servicer is entitled to receive a base
servicing fee, which is equal to one-twelfth of 3% times the pool balance as of
the first day of the respective collection period and a supplemental servicing
fee, which is equal to all administrative fees, expenses and charges paid by or
on behalf of obligors, including late fees, prepayment fees and liquidation fees
collected on the receivables during the respective collection period plus any
investment earnings with respect to any funds on deposit in the collection
account. HFC has appointed HAFC to subservice the receivables.
6. CONCENTRATION OF CREDIT RISK
A concentration of credit risk is defined as a significant credit exposure
with an individual group engaged in similar activities or affected similarly by
economic conditions.
Because the Trust contains only consumer receivables, there were no
receivables from any industry group at September 30, 1998. Of total receivables,
16.5% and 12.5% were located in the states of Texas and California. No other
states have concentrations greater than 10%.
B-8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE SELLER, THE TRUST, HFC, HAFC OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER, SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE SELLER, HFC, HAFC OR THE TRUST SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 3
Incorporation of Certain Documents by
Reference..................................... 4
Financial Information........................... 4
Reports to the Noteholders...................... 4
Prospectus Summary.............................. 6
Risk Factors.................................... 16
The Seller...................................... 21
The Servicer.................................... 22
The Subservicer................................. 22
Use of Proceeds................................. 22
The Issuer...................................... 23
The Trust Assets................................ 23
Yield and Prepayment Considerations............. 29
The Automobile Financing Business of HAFC....... 33
Description of the Notes........................ 39
Description of the Trust Documents.............. 56
Description of the Receivables Purchase
Agreement..................................... 62
Certain Legal Aspects of the Receivables........ 63
Material Federal Income Tax Consequences........ 67
State and Local Tax Considerations.............. 70
ERISA Considerations............................ 70
Underwriting.................................... 71
Legal Matters................................... 71
Index of Defined Terms.......................... 72
Global Clearance, Settlement and Tax
Documentation Procedures...................... A-1
</TABLE>
UNTIL , 1999 ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$
Class A-1 Notes
$
Class A-2 Notes
$
Class A-3 Notes
$
Class A-4 Notes
$
Class A-5 Notes
$
Class B-1 Notes
HOUSEHOLD AUTOMOBILE
REVOLVING TRUST I
SERIES 1998-1
HOUSEHOLD
FINANCE
CORPORATION
Servicer
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred by Household Auto
Receivables Corporation in connection with the issuance and distribution of the
Notes.
<TABLE>
<S> <C>
SEC Filing Fee.................................................... $ 1,770*
Trustee's Fees and Expenses....................................... 10,000
Legal Fees and Expenses........................................... 50,000
Accounting Fees and Expenses...................................... 60,000
Printing and Engraving Expenses................................... 65,000
Blue Sky Qualification and Legal Investment Fees and Expenses..... 10,000
Rating Agency Fees................................................ 300,000
Miscellaneous..................................................... 3,230
---------
Total....................................................... $ 500,000
---------
---------
</TABLE>
- ------------------------
* Actual to date. The final offering amount to be determined and the filing
fee amount will be revised by amendment.
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<S> <C> <C>
1 -- Form of Underwriting Agreement.
3.1+ -- Certificate of Incorporation of Seller.
3.2+ -- By-Laws of Seller.
4.1 -- Trust Agreement between the Owner Trustee and the Seller.
4.2 -- Form of Indenture between the Issuer, the Servicer and the Indenture Trustee.
4.3 -- Form of Series 1998-1 Supplement to the Indenture and the Trust Agreement.
4.4 -- Sale and Servicing Agreement among the Seller, the Servicer, the Issuer, and the
Indenture Trustee, including exhibits thereto.
4.5 -- Receivables Purchase Agreement between HAFC and the Seller
5 -- Opinion of John W. Blenke, Esq., Vice President-Corporate Law and Assistant
Secretary of Household International, Inc.
8 -- Opinion of Dewey Ballantine LLP with respect to tax matters.
23.1 -- Consents of John W. Blenke and Dewey Ballantine LLP are included in opinions
filed as Exhibits 5 and 8 hereto, respectively.
23.2 -- Consent of Arthur Andersen LLP.
24+ -- Powers of Attorney.
25.1 -- Statement of eligibility and qualification of the Indenture Trustee.
</TABLE>
- ------------------------
+ Filed previously.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Household Auto
Receivables Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Prospect Heights, State of
Illinois, on the 4th day of November, 1998.
<TABLE>
<S> <C> <C>
HOUSEHOLD AUTO RECEIVABLES CORPORATION
By: *
-----------------------------------------
Rellen M. Stewart
PRESIDENT
</TABLE>
The Registrant reasonably believes that the security ratings to be assigned
to the securities registered hereunder will make the securities "investment
grade securities" pursuant to Transaction Requirement B.2 of Form S-3, prior to
the sale of such securities.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities indicated on the 4th day of November, 1998.
SIGNATURE TITLE
- ------------------------------ ---------------------------
* President (Principal
- ------------------------------ Executive Officer) and
(Rellen M. Stewart) Director)
Senior Vice President,
* Treasurer and Director
- ------------------------------ (Principal Financial
(Edgar Ancona) Officer)
* Vice President, Secretary
- ------------------------------ and Director
(John W. Blenke)
* Vice President, Assistant
- ------------------------------ Treasurer and Director
(Steven H. Smith)
* Vice President and
- ------------------------------ Controller (Principal
(Steven L. McDonald) Accounting Officer)
<TABLE>
<S> <C> <C> <C>
*By: /s/ PATRICK D. SCHWARTZ
-------------------------
Patrick D. Schwartz
ATTORNEY-IN-FACT
</TABLE>
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Household Auto
Receivables Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Prospect Heights, State of
Illinois, on the 4th day of November, 1998.
<TABLE>
<S> <C> <C>
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I,
Issuer
By: HOUSEHOLD AUTO RECEIVABLES
CORPORATION, as originator and sole equity
owner of the Issuer
By: *
-----------------------------------------
Rellen M. Stewart
PRESIDENT
</TABLE>
The Registrant reasonably believes that the security ratings to be assigned
to the securities registered hereunder will make the securities "investment
grade securities" pursuant to Transaction Requirement B.2 of Form S-3, prior to
the sale of such securities.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities indicated on the 4th day of November, 1998.
SIGNATURE TITLE
- ------------------------------ ---------------------------
* President (Principal
- ------------------------------ Executive Officer) and
(Rellen M. Stewart) Director)
Senior Vice President,
* Treasurer and Director
- ------------------------------ (Principal Financial
(Edgar Ancona) Officer)
* Vice President, Secretary
- ------------------------------ and Director
(John W. Blenke)
* Vice President, Assistant
- ------------------------------ Treasurer and Director
(Steven H. Smith)
* Vice President and
- ------------------------------ Controller (Principal
(Steven L. McDonald) Accounting Officer)
<TABLE>
<S> <C> <C> <C>
*By: /s/ PATRICK D. SCHWARTZ
-------------------------
Patrick D. Schwartz
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
Exhibit 1
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
SERIES 1998-1
$______ ___% Class A-1 Notes
$______ ___% Class A-2 Notes
$______ ___% Class A-3 Notes
$______ ___% Class A-4 Notes
$______ ___% Class B-1 Notes
$______ ___% Class B-2 Notes
UNDERWRITING AGREEMENT
CREDIT SUISSE FIRST BOSTON CORPORATION
As Representative of the Underwriters
Eleven Madison Avenue
New York, New York 10010 October __, 1998
Dear Sirs:
Household Finance Corporation, a corporation organized and existing
under the laws of Delaware, individually ("HFC") and as Master Servicer (the
"Master Servicer"), Household Auto Receivables Corporation, a corporation
organized and existing under the laws of Nevada and a wholly owned subsidiary of
HFC, individually ("HARC") and as Seller (the "Seller"), and Household
Automotive Finance Corporation, a corporation organized and existing under the
laws of Delaware and wholly owned subsidiary of HFC ("HAFC"), agree with you as
follows:
Section 1. Issuance and Sale of Series 1998-1 Notes. The Seller has
authorized the issuance and sale of $______ ___% Class A-1 Notes, $______
___% Class A-2 Notes, $______ ___% Class A-3 Notes, $______ ___% Class A-4
Notes, $______ ___% Class B-1 Notes and $______ ___% Class B-2 Notes
(collectively, the "Series 1998-1 Notes"). The Series 1998-1 Notes are to be
issued by Household Automobile Revolving Trust I (the "Trust") pursuant to an
Indenture, dated as of October 1, 1998, as supplemented by a Series 1998-1
Supplement (the "Indenture") by and among HFC, the Master Servicer, the Trust
and The Chase Manhattan Bank, a New York Banking Corporation, as indenture
trustee (the "Indenture Trustee"). In addition to the Series 1998-1 Notes,
the Trust will also issue the $______ ___% Class C Notes (the "Class C
Notes") pursuant to the Indenture and Series 1998-1 Certificates (the "Series
1998-1 Certificates") (the Series 1998-1 Notes, the Class C Notes and the
Series 1998-1 Certificates, collectively, the "Series 1998-1 Securities")
pursuant to a Trust Agreement, dated as of March 1, 1998, between the Seller
and the Owner Trustee as supplemented by a Series 1998-1 Supplement (the
"Trust Agreement"). The assets of the Trust will include a pool of non-prime
retail installment sales contracts secured by new or
<PAGE>
used automobiles, light duty trucks and vans (the "Receivables") and certain
monies due thereunder on or after _________, 1998 (the "Cut-Off Date").
As used herein, the term "Seller Agreements" means the Master Sale and
Servicing Agreement dated as of March 1, 1998 among the Trust, the Seller, the
Master Servicer and Norwest Bank Minnesota, National Association, as trustee
(the "Master Sale and Servicing Agreement"), the Master Receivables Purchase
Agreement dated as of March 1, 1998 between the Seller and HAFC (the "Master
Receivables Purchase Agreement"), the Trust Agreement and this Underwriting
Agreement (this "Agreement"); the term "HAFC Agreements" means the Master
Receivables Purchase Agreement and this Agreement; the term "HFC Agreements"
means the Master Sale and Servicing Agreement, the Indenture and this Agreement.
HFC, the Seller and HAFC are direct or indirect subsidiaries of
Household International, Inc. ("Household"). HFC, the Seller and HAFC are
collectively referred to herein as the "Household Entities").
The Series 1998-1 Notes are being purchased by the Underwriters named
in Schedule 1 hereto, and the Underwriters are purchasing, severally, only the
Series 1998-1 Notes set forth opposite their names in Schedule 1, except that
the amounts purchased by the Underwriters may change in accordance with Section
10 of this Agreement. Credit Suisse First Boston Corporation is acting as
representative of the Underwriters and in such capacity, is hereinafter referred
to as the "Representative."
The offering of the Series 1998-1 Notes will be made by the
Underwriters and the Household Entities understand that the Underwriters propose
to make a public offering of the Series 1998-1 Notes for settlement on
___________, 1998, as the Underwriters deem advisable.
Neither the Class C Notes nor the Series 1998-1 Certificates are being
purchased by the Underwriters hereby.
Defined terms used herein and not otherwise defined shall have their
respective meanings as set forth in Section 2.01 of the Series 1998-1 Supplement
dated as of September 1, 1998 among the Master Servicer, the Trust, the Seller,
the Indenture Trustee and Wilmington Trust Company, as Owner Trustee (the
"Series 1998-1 Supplement").
Section 2. Representations and Warranties.
A. HAFC and the Seller, individually, represent and warrant to, and
agree with, the Underwriters as set forth in this Section 2(A). Certain terms
used in this Section 2(A) are defined in the second paragraph of subsection
2(A)(i) below.
(i) The Seller meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act"), and has filed with
the United States Securities and Exchange Commission (the
"Commission") a registration statement (Registration No. 333-59837),
relating to the Series 1998-1 Notes, on such Form S-3 for the
registration under the Act of the Series 1998-1 Notes. The Seller may
have filed one or more amendments thereto, each of which has
previously been
2
<PAGE>
furnished to you. The Seller will next file with the Commission
either, (A) prior to the effectiveness of such registration statement,
a further amendment thereto (including the form of final prospectus)
or, (B) after effectiveness of such registration statement, a final
prospectus in accordance with Rules 430A and 424(b)(1) or (4). In the
case of clause (B), the Seller has included in such registration
statement, as amended at the Effective Date, all information (other
than Rule 430A Information) required by the Act and the rules
thereunder to be included in the prospectuses with respect to the
Series 1998-1 Notes and the offering thereof. As filed, such amendment
and form of final prospectus, or such final prospectus, shall include
all Rule 430A Information and, except to the extent the Underwriters
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or,
to the extent not completed at the Execution Time, shall contain only
such specific additional information and other changes as the Seller
has advised you, prior to the Execution Time, will be included or made
therein.
The terms which follow, when used in this Agreement, shall have the meanings
indicated. The term "Effective Date" shall mean each date that the Registration
Statement and any post-effective amendment or amendments thereto became or
become effective under the Act. "Execution Time" shall mean the date and time
that this Agreement is executed and delivered by the parties hereto.
"Prospectus" shall mean the prospectus relating to the Series 1998-1 Notes that
is first filed with the Commission pursuant to Rule 424(b) and any prospectuses
subsequently filed pursuant to Rule 424 or, if no filing pursuant to Rule 424(b)
is required, shall mean the form of final prospectus included in the
Registration Statement at the Effective Date. "Registration Statement" shall
mean the registration statement referred to in the preceding paragraph and any
registration statement required to be filed under the Act or rules thereunder,
including amendments, all documents incorporated or deemed to be incorporated by
reference therein, exhibits and financial statements, in the form in which it
has or shall become effective and, in the event that any post-effective
amendment thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as amended or supplemented
pursuant to the Act or rules thereunder or the Exchange Act or rules thereunder.
Such term shall include Rule 430A Information deemed to be included therein at
the Effective Date as provided by Rule 430A. "Rule 424" and "Rule 430A" refer to
such rules under the Act. "Rule 430A Information" means information with respect
to the Series 1998-1 Notes and the offering thereof permitted to be omitted from
the Registration Statement when it becomes effective pursuant to Rule 430A. The
"Rules and Regulations" shall mean the rules and regulations of the commission.
All references in this Agreement to financial statements and schedules and other
information which is "contained," included" or "stated" in the Registration
Statement or the Prospectus (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration Statement or
the Prospectus shall be deemed to mean and include the filing of any document
under the Exchange Act which is or is deemed to be incorporated by reference in
the Registration Statement or the Prospectus, as the case may be.
(ii) On the Effective Date, the Registration Statement did or
will comply in all material respects with
3
<PAGE>
the applicable requirements of the Act and the Rules and Regulations
thereunder; assuming compliance by each Underwriter with Sections
3(a), 3(b) and 3(c) hereof on the Effective Date and when the
Prospectus is first filed (if required) in accordance with Rule 424(b)
and on the Closing Date, the Prospectus will comply in all material
respects with the applicable requirements of the Act and the Rules and
Regulations; on the Effective Date, the Registration Statement did not
or will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the
Effective Date, the Prospectus, if not filed pursuant to Rule 424(b),
did not or will not, and on the date of any filing pursuant to Rule
424(b) and on the Closing Date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the Statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that HAFC and
the Seller make no representations or warranties as to the information
contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with information
furnished in writing to HAFC or the Seller by the Representative
specifically for use in connection with the preparation of the
Registration Statement or the Prospectus. The documents incorporated
or deemed to be incorporated by reference in the Prospectus, at the
time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the
Exchange Act and the Rules and Regulations of the Commission under the
Exchange Act, and, when read together with the other information in
the Prospectus, at the time the Registration Statement and any
amendments thereto become effective and at the Closing Date, will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(iii) Each of HAFC and the Seller is a corporation duly organized
and validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of HAFC and the Seller has all
requisite power and authority to own its properties and conduct its
business as presently conducted and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction which requires such qualification, except where failure
to have such requisite power and authority or to be so qualified would
not have a material adverse effect on the business or consolidated
financial condition of HAFC or the Seller.
(iv) Neither HAFC nor the Seller is in violation of its
certificate of incorporation or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or
by which it may be bound, or to which any of the property or assets of
the Seller or HAFC, as the case may be, is subject, except where any
such violation or default would not have a material adverse effect on
the transactions contemplated by this Agreement.
(v) The execution, delivery and performance by the Seller of each
Seller Agreement, the issuance of the Series 1998-1 Securities and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action or
proceedings and will not conflict with or constitute a breach of, or
default under, or, other than as contemplated in the Registration
Statement, result in the creation or imposition of any lien, charge or
encumbrance
4
<PAGE>
upon any property or assets of the Seller pursuant to, any contract,
indenture, mortgage, loan agreement, note, lease or other instrument
to which the Seller is a party or by which it may be bound, or to
which any of the property or assets of the Seller is subject, nor will
such action result in any violation of the provisions of the
certificate of incorporation or by-laws of the Seller or any
applicable law, administrative regulation or administrative or court
decree, except where any such conflict, breach, default, encumbrance
or violation would not have a material adverse effect on the
transactions contemplated by this Agreement.
(vi) The execution, delivery and performance by HAFC of each HAFC
Agreement, the issuance of the Series 1998-1 Securities and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action or
proceedings and will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or, other than as contemplated
by the Registration Statement, assets of HAFC pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which HAFC is a party or by which it may be bound, or to
which any of the property or assets of HAFC is subject, nor will such
action result in any violation of the provisions of the charter or
by-laws of HAFC or any applicable law, administrative regulation or
administrative or court decree, except where any such conflict,
breach, default, encumbrance or violation would not have a material
adverse effect on the transactions contemplated by this Agreement.
(vii) Each Seller Agreement has been, or when executed and
delivered, will have been, duly executed and delivered by the Seller;
and each Seller Agreement constitutes, or, when executed and
delivered, will constitute, legal, valid and binding instruments
enforceable against the Seller in accordance with their respective
terms, subject as to enforceability (A) to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally, (B) to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law) and (C) with respect to rights of indemnity under this
Agreement, to limitations of public policy under applicable securities
laws.
(viii) Each HAFC Agreement has been, or, when executed and
delivered, will have been duly executed and delivered by HAFC; and
each Seller Agreement constitutes, or, when executed and delivered,
will constitute, legal, valid and binding instruments enforceable
against HAFC in accordance with their respective terms, subject as to
the enforceability (A) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors'
rights generally, (B) to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law) and
(C) with respect to rights of indemnity under this Agreement, to
limitations of public policy under applicable securities law.
(ix) HAFC has authorized the conveyance of the Receivables to the
Seller; the Seller has authorized the conveyance of the Receivables to
the Trust; and the Seller has directed the Trust to issue and sell the
Series 1998-1 Securities.
(x) Each of HAFC and the Seller is solvent and will not become
insolvent after giving effect to the transactions contemplated by this
Agreement and the other
5
<PAGE>
Series 1998-1 Related Documents. The Seller has no indebtedness to any
Person other than pursuant to this Agreement, the other Series 1998-1
Related Documents, the Series 1998-A Related Documents and, in the
case of the Seller, the Revolving Credit Agreement. Each of the
Issuer, HAFC and the Seller, after giving effect to the transactions
contemplated by this Agreement and the other Series 1998-1 Related
Documents, will have an adequate amount of capital to conduct its
business in the foreseeable future.
(xi) Any taxes, fees and other governmental charges in connection
with the execution, delivery and performance of any Seller Agreement,
the Indenture and the Securities shall have been paid or will be paid
by the Seller at or prior to the Closing Date.
(xii) The Series 1998-1 Notes have been duly and validly
authorized, and, when validly executed, authenticated, issued and
delivered in accordance with the Indenture and as provided herein will
conform in all material respects to the description thereof contained
in the Prospectus and will be validly issued and outstanding and
entitled to the benefits of the Indenture.
(xiii) There are no legal or governmental proceedings pending, or
to the knowledge of HAFC or the Seller threatened, to which HAFC or
the Seller is a party or of which any property of any of them is the
subject, other than proceedings which are not reasonably expected,
individually or in the aggregate, to have a material adverse effect on
the shareholder's equity or consolidated financial position of such
person and its subsidiaries taken as a whole, or which would have a
material adverse effect upon the consummation of this Agreement.
(xiv) Arthur Andersen LLP is an independent public accountant
with respect to HAFC and Seller as required by the Act and the Rules
and Regulations.
(xv) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or
governmental agency or body of the United States is required for the
issue and sale of the Series 1998-1 Notes, or the consummation by HAFC
or the Seller of the other transactions contemplated by this
Agreement, the Master Receivables Purchase Agreement, the Master Sale
and Servicing Agreement, the Trust Agreement or the Indenture, except
for (A) the registration under the Act of the Series 1998-1 Notes, (B)
such consents, approvals, authorizations, orders, registrations,
qualifications, licenses or permits as have been obtained or as may be
required under State securities or Blue Sky laws in connection with
the purchase of the Series 1998-1 Notes and the subsequent
distribution of the Series 1998-1 Notes by the Underwriters or (C)
where the failure to obtain such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses or permits
would not have a material adverse effect on the business or
consolidated financial condition of HAFC and its subsidiaries taken as
a whole or the Seller or the transactions contemplated by such
agreements.
(xvi) (a) HAFC has the power and authority to sell the
Receivables to the Trust, and (b) following the conveyance of the
Receivables to the Trust pursuant to the Master Sale and Servicing
Agreement, the Trust will own the Receivables free and clear of any
lien, mortgage, pledge, charge, encumbrance, adverse claim or other
security interest (collectively, "Liens") other than Liens created by
the Master Sale and Servicing Agreement.
(xvii) As of the Cut-Off Date, each of the Receivables will meet
the eligibility criteria described in the
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Prospectus.
(xviii) Neither HAFC nor the Seller will conduct their operations
while any of the Securities are outstanding in a manner that would
require the Seller or the Trust to be registered as an "investment
company" under the Investment Company Act of 1940, as amended (the
"1940 Act") as in effect on the date hereof.
(xix) Each of the Seller and HAFC possesses all material
licenses, certificates, authorities or permits issued by the
appropriate state, Federal or foreign regulatory agencies or bodies
necessary to conduct the business now conducted by it and as described
on The Prospectus and neither the Seller nor HAFC has received notice
of any proceedings relating to the revocation or modification of such
license, certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, is likely to materially and adversely affect the conduct of
its business, operations, financial condition or income.
(xx) At the Closing Date, each of the representations and
warranties of HAFC set forth in the HAFC Agreements or of the Seller
set forth in the Seller Agreements will be true and correct in all
material respects.
(xxi) Since the respective dates as of which information is given
in the Prospectus, (x) there has not been any material adverse change
in or affecting the general affairs, business, management, financial
condition, stockholder's equity, results of operations, regulatory
situation or business prospects of HAFC and (y) HAFC has not entered
into any transaction or agreement (whether or not in the ordinary
course of business) material to HAFC that, in either case, would
reasonably be expected to materially adversely affect the interests of
the holders of the Series 1998-1 Notes, otherwise than as set forth or
contemplated in the Prospectus.
B. HFC represents, warrants and agrees with the Underwriters, that:
(i) HFC is a corporation duly organized and validly existing and
in good standing under the laws of its jurisdiction of incorporation.
HFC has all requisite power and authority to own its properties and
conduct its business as presently conducted and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction which requires such qualification, except where the
failure to have such power and authority or to be so qualified would
not have a material adverse effect on the business or consolidated
financial condition of HFC and its subsidiaries taken as a whole.
(ii) HFC is not in violation of its certificate of incorporation
or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which HFC is a party or by which it may be bound, or to
which any of the property or assets of HFC is subject except where any
such violation or default would not have a material adverse effect on
the transactions contemplated by this Agreement.
(iii) The execution, delivery and performance by HFC of the HFC
Agreements, and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
necessary action or proceedings and will not conflict with or
constitute a breach of, or default under, or result in
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the creation or imposition of any lien, charge or encumbrance upon any
property or assets of HFC pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which HFC
is a party or by which it may be bound, or to which any of the
property or assets of HFC is subject, nor will such action result in
any violation of the provisions of the certificate of incorporation or
by-laws of HFC or any applicable law, administrative regulation or
administrative or court decree, except where any such conflict,
breach, default, encumbrance or violation would not have a material
adverse effect on the transactions contemplated by this Agreement.
(iv) Each HFC Agreement has been, or, when executed and
delivered, will have been, duly executed and delivered by HFC; and
each HFC Agreement constitutes, or, when executed and delivered, will
constitute, legal, valid and binding instruments enforceable against
HFC in accordance with their respective terms, subject as to
enforceability (A) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors'
rights generally, (B) to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law) and
(C) with respect to rights of indemnity under this Agreement to
limitations of public policy under applicable securities laws.
(v) HFC will, upon request by any Underwriter, provide to such
Underwriter complete and correct copies of all reports filed by it
with the Commission pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), during 1996, 1997 and 1998. Except as
set forth in or contemplated in such reports, there has been no
material adverse change in the consolidated financial condition of HFC
and its subsidiaries taken as a whole.
(vi) There are no legal or governmental proceedings pending, or
to the knowledge of HFC threatened, to which HFC is a party or of
which any of its property is the subject, other than proceedings which
are not reasonably expected, individually or in the aggregate, to have
a material adverse effect on the shareholder's equity or consolidated
financial position of HFC and its subsidiaries taken as a whole or
which would have a material adverse effect upon the consummation of
this Agreement.
(vii) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or
governmental agency or body of the United States is required for the
consummation by HFC of the transactions contemplated by the HFC
Agreements, except for (A) the registration under the Act of the
Series 1998-1 Notes, (B) such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses or permits as
have been obtained or as may be required under State securities or
Blue Sky laws in connection with the purchase of the Series 1998-1
Notes and the subsequent distribution of the Series 1998-1 Notes by
the Underwriters or (C) where the failure to obtain such consents,
approvals, authorizations, orders, registrations, filings,
qualifications, licenses or permits would not have a material adverse
effect on the business or consolidated financial condition of HFC and
its subsidiaries taken as a whole or the transactions contemplated by
such agreements.
(viii) Arthur Andersen LLP is an independent public accountant
with respect to HFC as required by the Act and the Rules and
Regulations.
Section 3. Representations and Warranties of the Underwriters. Each
Underwriter severally, and not
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jointly, represents and warrants to, and agrees with the other Underwriters,
HAFC, the Seller and HFC that:
(a) Prior to the Effective Date, such Underwriter has not furnished
and will not furnish, in writing or by electronic transmission, any Derived
Information relating to the Series 1998-1 Notes to any prospective investor.
(b) Such Underwriter shall provide the Seller no later than one
Business Day after any Collateral Term Sheet is delivered to a prospective
investor, or in the case of any Structural Term Sheets and Computational
Materials no later than one Business Day before the date on which the Prospectus
is required to be filed pursuant to Rule 424, all such Derived Information
delivered to a prospective investor by it during the period commencing on the
Effective Date and ending on the date the Prospectus is filed with the
Commission. Such Underwriter shall deliver to the Seller a hard copy and, in a
mutually agreed upon format, a disk or electronic transmission of such Derived
Information.
(c) Assuming the accuracy of the Seller-Provider Information used in
the preparation of Derived Information, the Derived Information, delivered by
such Underwriter, as of the date thereof, is accurate in all material respects,
taking into account the assumptions set forth in such Derived Information, but
without making any representations as to the appropriateness of such
assumptions.
(d) Each Underwriter acknowledges that none of HAFC, the Seller or HFC
will be deemed to have breached any representation and warranty or to have
failed to satisfy any other agreement contained herein, to the extent any such
breach or failure on the part of such party resulted solely from an
Underwriter's breach of the representation and warranty set forth in subsection
(a), (b) or (c) above, provided, however, that the rights and obligations
otherwise available to an Underwriter pursuant to Section 10 and 11 hereof are
not limited solely as a result of an Underwriter's breach of the representation
and warranty set forth in subsection (a) above.
(e) For purposes of this Agreement, "Derived Information" means 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). The terms "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, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the Commission staff's response
thereto, were publicly available February 17, 1995), and with respect to
"Collateral Term Sheet" 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 "Kidder Letter" and together with the PSA Letter, the "No-Action
Letters") of Brown & Wood on behalf of Kidder, Peabody & Co., Inc. (which
letter, and the Commission staff's response thereto, were publicly available May
20, 1994). "Seller-Provided Information" means the information contained on any
computer tape furnished to the Underwriters by the Seller concerning the assets
comprising the Issuer.
Section 4. Purchase and Sale. The Underwriters' commitment to purchase
the Series 1998-1 Notes
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pursuant to this Agreement shall be deemed to have been made on the basis of the
representations and warranties of the Household Entities herein contained and
shall be subject to the terms and conditions herein set forth. The Seller agrees
to instruct the Trust to issue the Series 1998-1 Notes to the Underwriters, and
the Underwriters agree to purchase the Series 1998-1 Notes on the date of
issuance thereof. The purchase prices for the Series 1998-1 Notes shall be as
set forth on Schedule 1 hereto.
Section 5. Delivery and Payment. Payment of the purchase price for,
and delivery of, any Series 1998-1 Notes to be purchased by the Underwriters
shall be made at the office of Dewey Ballantine LLP, 1301 Avenue of the
Americas, New York, New York, or at such other place as shall be agreed upon by
the Representative and the Household Entities, at 10:00 a.m. New York City time
on ___________, 1998 (the "Closing Date"), or at such other time or date as
shall be agreed upon in writing by the Representative and the Household
Entities. Payment shall be made by wire transfer of same day funds payable to
the account designated by HAFC. Each of the Series 1998-1 Notes so to be
delivered shall be represented by one or more global Series 1998-1 Notes
registered in the name of Cede & Co., as nominee for The Depository Trust
Company.
The Household Entities agree to have the Series 1998-1 Notes available
for inspection, checking and packaging by the Representative in New York, New
York, not later than 12:00 P.M. New York City time on the business day prior to
the Closing Date.
Section 6. Offering by Underwriters.
(a) It is understood that the Underwriters propose to offer the Series
1998-1 Notes for sale to the public as set forth in the Prospectus.
(b) Each Underwriter represents and agrees that (i) it has not offered
or sold and, prior to the expiry of six months from the Closing Date, will not
offer or sell any Series 1998-1 Notes to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Series 1998-1 Notes in, from
or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on, and will only issue or pass on, in the United Kingdom any document
received by it in connection with the issue of the Series 1998-1 Notes, to a
person who is of a kind described in the Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or to a person to
whom such document may otherwise lawfully be issued, distributed or passed on.
Section 7. Covenants of the Household Entities. The Household
Entities, covenant with the Underwriters as follows:
A. The Seller will use its best efforts to cause the Registration
Statement and any amendment thereto, if not effective at the Execution Time, to
become effective. If the Registration Statement
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has become or becomes effective pursuant to Rule 430A, or filing of the
Prospectus is otherwise required under Rule 424(b), the Seller will file the
Prospectus properly completed, pursuant to Rule 424(b) within the time period
prescribed and will promptly evidence satisfactory to the Underwriters of such
timely filing. The Seller will promptly advise the Underwriters (i) when the
Registration Statement shall have become effective, (ii) when any amendment
thereof shall have become effective, (iii) of any request by the Commission for
any amendment or supplement of the Registration Statement or the Prospectus or
for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose, and (v) of the
receipt by the Seller of any modification with respect to the suspension of the
qualification of the Series 1998-1 Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The Seller will
not file any amendment of the Registration Statement or supplement to the
Prospectus to which the Underwriters reasonably object. The Seller will use its
best efforts to prevent the issuance of any such stop order and if issued, to
obtain as soon as possible the withdrawal thereof.
B. If, at any time when a Prospectus relating to the Series 1998-1
Notes is required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to supplement such Prospectus to
comply with the Act or the rules thereunder, the Seller shall be required to
notify the Underwriters and upon the Underwriters' request to prepare and
furnish without charge to the Underwriters as many copies as the Underwriters
may from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which shall correct such statement or omission or
effect such compliance.
C. As soon as practicable, but in any event within 120 days of the
close of the period covered thereby, the Seller will make generally available to
Noteholders and to the Underwriters an earnings statement or statements of the
Trust which will satisfy the provisions of Section 11(a) of the Act and Rule 158
under the Act.
D. The Seller will furnish to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by the
Underwriters or dealer may be required by the Act, as many copies of the
Prospectus and any supplement thereto as the Underwriters may reasonably
request.
E. The Household Entities, jointly and severally, agree to pay all
expenses incidental to the performance of their obligations under this
Agreement, including without limitation (i) expenses of preparing, printing and
reproducing the Registration Statement, the Prospectus, and any document
incorporated by reference in the Prospectus (including exhibits thereto), (ii)
any fees charged by any rating agency for the rating of the Series 1998-1 Notes,
(iii) any expenses (including reasonable fees and disbursements of counsel not
to exceed $10,000) incurred by the Underwriters in connection with qualification
of the Series 1998-1 Notes for sale under the laws of such jurisdictions as the
Underwriters designate, (iv) the fees and expenses of (A) Dewey
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Ballantine LLP as special counsel for the Household Entities and (B) Arthur
Andersen LLP, (v) the fees and expenses of the Indenture Trustee and any agent
of the Indenture Trustee and the fees and disbursements of counsel for the
Indenture Trustee in connection with the Indenture, the Trust Agreement and the
Series 1998-1 Notes, (vi) the fees and expenses of the Owner Trustee and any
agent of the Owner Trustee and the fees and disbursements of counsel for the
Owner Trustee in connection with the Indenture, the Trust Agreement and the
Series 1998-1 Notes, and (vii) the cost of delivering the Series 1998-1 Notes to
the offices of the Underwriters, insured to the satisfaction of the Underwriters
(it being understood that, except as provided in this paragraph (E) and in
Sections 9 and 10 hereof, each Underwriter will pay its own expenses, including
the expense of preparing, printing and reproducing this Agreement, the fees and
expenses of counsel for the Underwriters, any transfer taxes on resale of any of
the Series 1998-1 Notes by it and advertising expenses connected with any offers
that the Underwriters may make).
F. The Seller will take all reasonable actions requested by the
Underwriters to arrange for the qualification of the Series 1998-1 Notes for
sale under the laws of such jurisdictions within the United States or as
necessary to qualify for the Euroclear System or Cedel Bank, societe anonyme and
as the Underwriters may designate, will maintain such qualifications in effect
so long as required for the distribution of the Series 1998-1 Notes and will
arrange for the determination of the legality of the Series 1998-1 Notes for
purchase by institutional investors.
G. For so long as the Series 1998-1 Notes are outstanding, the
Household Entities will furnish to the Underwriters (i) as soon as practicable
after the end of each fiscal year of the Trust, all documents required to be
distributed to Noteholders under the Master Sale and Servicing Agreement or the
Indenture and (ii) as soon as practicable after filing, any other information
concerning the Household Entities filed with any government or regulatory
authority which is otherwise publicly available, as the Underwriters may
reasonably request.
H. To apply the net proceeds from the sale of the Series 1998-1 Notes
in the manner set forth in the Prospectus.
I. If, between the date hereof or, if earlier, the dates as of which
information is given in the Prospectus and the Closing Date, to the knowledge of
the Seller, there shall have been any material change, or any development
involving a prospective material change in or affecting the general affairs,
management, financial position, shareholders' equity or results of operations of
any of the Household Entities, the Seller will give prompt written notice
thereof to the Underwriters.
J. The Seller, during the period when the Prospectus is required to be
delivered under the Act or the Exchange Act, will file all documents required to
be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange
Act within the time periods required by the Act and the Rules and Regulations
thereunder.
K. To the extent, if any, that the ratings provided with respect to
the Series 1998-1 Notes by the Rating Agency that initially rate the Series
1998-1 Notes are conditional upon the furnishing of documents or the taking of
any other actions by the Seller or HAFC, the Seller shall use its best efforts
to furnish or cause to be furnished such documents and take any such other
actions.
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L. Neither HAFC nor the Seller will, with the prior written consent of
the Representative, contract to sell any automobile receivable-backed
certificates or notes or other similar securities either directly or indirectly
for a period of five (15) business days after the later of the termination of
the underwriting syndicate or the Closing Date.
M. So long as any of the Series 1998-1 Notes are outstanding, the
Household Entities shall furnish to the Underwriters as soon as such statements
are furnished to the Trustee: (i) the annual statement as to compliance of the
Master Servicer delivered to the Trustee pursuant to Section 4.10(a) of the
Master Sale and Servicing Agreement, and (ii) the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to Section
4.11(a) of the Master Sale and Servicing Agreement with respect to the Master
Servicer.
Section 8. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Series 1998-1 Notes on the
Closing Date pursuant to this Agreement are subject to (i) the material accuracy
of the representations and warranties on the part of the Household Entities
herein contained as of the Execution Time, (ii) the material accuracy of the
statements of officers of the Household Entities made pursuant hereto, (iii) the
performance by the Household Entities of all of their respective obligations
hereunder, and the performance by the Household Entities of all of their
respective obligations under the Seller Agreements, HAFC Agreements and the HFC
Agreements and (iv) the following conditions as of the Closing Date:
A. If the Registration Statement has not become effective prior to the
Execution Time, unless the Underwriters agree in writing to a later time, the
Registration Statement shall have become effective not later than 12:00 Noon New
York City time on the business day following the day on which the public
offering price was determined; if filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Prospectus shall have been
filed in the manner and within the time period required by Rule 424(b); and no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
threatened.
B. Each of the Household Entities shall have delivered a certificate,
dated the Closing Date signed by its President or any Vice President and its
principal financial or principal accounting officer or its Treasurer or any
Assistant Treasurer or its Secretary or any Assistant Secretary to the effect
that the signers of such certificate, on behalf of the named Household Entity,
have carefully examined Series 1998-1 Related Documents, the Prospectus (and any
supplements thereto) and the Registration Statement, stating that:
(i) the representations and warranties of such Household Entity
in this Agreement are true and correct in all material respects at and
as of the date of such certificate as if made on and as of such date
(except to the extent they expressly relate to an earlier date);
(ii) such Household Entity has complied, in all material
respects, with all the agreements and satisfied, in all material
respects, all the conditions on its part to be performed or satisfied
at or prior to the date of such certificate;
(iii) nothing has come to the attention of such Household Entity
that would lead it to believe that the Registration Statement contains
any untrue statement of a material fact or omits to state any
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material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and
(iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted. or, to the knowledge of the signor,
threatened.
C. John Blenke, Vice President - Corporate Law and Assistant Secretary
of Household International, Inc., shall have delivered a favorable opinion with
respect to clauses (i) through (x) of this paragraph (C), and Dewey Ballantine
LLP, special counsel to the Household Entities, shall have delivered a favorable
opinion with respect to clauses (xi) through (xiii) of this paragraph (C) each
opinion shall be dated the Closing Date and shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters, to the effect
that:
(i) each of HFC, HAFC and the Seller is duly incorporated and
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation with corporate power and authority
to own its properties and to conduct its business, except where
failure to have such power and authority do not have a material
adverse effect, as applicable, on the business or consolidated
financial condition of HFC and its subsidiaries, taken as a whole, or
HFC, HAFC, or the Seller, to enter into and perform its obligation
under the HFC Agreements, the HAFC Agreements or the Seller
Agreements, as applicable, and to consummate the transactions
contemplated hereby and thereby;
(ii) each of the HFC Agreements, the HAFC Agreements or the
Seller Agreements has been duly authorized, executed and delivered by
HFC, HAFC or the Seller, as applicable, and constitute the legal,
valid and binding agreement of HFC, HAFC or the Seller, as applicable,
enforceable in accordance with its terms subject, as to enforceability
(A) to applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws affecting creditors' rights generally and the
rights, (B) to general principles of equity (regardless of whether
enforcement is sought in a proceedings in equity or at law) and (C)
with respect to rights of indemnity to limitations of public policy
under applicable securities laws;
(iii) the issuance and sale of the Series 1998-1 Notes have been
duly authorized and, when executed and authenticated in accordance
with the terms of the Indenture and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be validly issued and
outstanding, entitled to the benefits of the Indenture, enforceable in
accordance with their terms subject, as to enforceability (A) to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws affecting creditors' rights generally and the rights and
remedies of creditors of thrifts, savings institutions or national
banking associations and (B) to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law);
(iv) neither the execution nor the delivery of the Underwriting
Agreement, the Master Receivables Purchase Agreement, the Trust
Agreement, the Indenture, the Master Sale and Servicing Agreement or
the Series 1998-1 Supplement nor the issuance or delivery of the
Series 1998-1 Notes, nor the consummation of any of the transactions
contemplated herein or therein, nor the fulfillment of the terms of
the Series 1998-1 Notes, the Underwriting Agreement, the Master
Receivables Purchase Agreement, the Trust Agreement, the Indenture,
the Master Sale and Servicing
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Agreement or the Series 1998-1 Supplement will conflict with or
violate any term or provision of the charter or by-laws of the
Household Entities, or result in a breach or violation of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any of the Household
Entities pursuant to, any material statute currently applicable to any
of them or the Trust or any order or regulation known to such counsel
to be currently applicable to any of them or the Trust of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Household Entities or the Trust, as the case may
be, or the terms of any indenture or other agreement or instrument
known to such counsel to which the Household Entities or the Trust is
a party or by which any of them or any of their properties are bound,
except where any such conflict, breach, violation, default or
encumbrance would not have a material adverse effect on the
transactions contemplated by this Agreement.
(v) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator with respect to the
Underwriting Agreement, the Trust, the Series 1998-1 Notes, the Master
Receivables Purchase Agreement, the Trust Agreement, the Indenture,
the Master Sale and Servicing Agreement or the Series 1998-1
Supplement or any of the transactions contemplated herein or therein
or with respect to the Household Entities which, in the case of any
such action, suit or proceeding with respect to any of them, would
have a material adverse effect on the Noteholders or the Trust or upon
the ability of any of the Household Entities to perform their
obligations under any of such agreements, and there is no material
contract, franchise or document relating to the Trust or property
conveyed to the Trust which is not disclosed in the Registration
Statement or Prospectus; and the statements included in the
Registration Statement and Prospectus describing statutes (other than
those relating to tax and ERISA matters), legal proceedings, contracts
and other documents fairly summarize the matters therein described;
(vi) the Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplement thereto
pursuant to Rule 424 has been made in the manner and within the time
period required by Rule 424; to the best knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement
his been issued, no proceedings for that purpose have been instituted
or threatened; the Registration Statement and the Prospectus (and any
supplements thereto) (other than financial and statistical information
contained therein as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder;
(vii) such counsel has no reason to believe that at the Effective
Date the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus, as of its date, includes any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (other than
financial and statistical information contained therein as to which
such counsel need express no opinion);
(viii) to the best knowledge of such counsel, no consent,
approval, authorization, order, registration,
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filing, qualification, license or permit of or with any court or
governmental agency or regulatory body under the federal law of the
United States or the laws of the State of New York is required in
connection with the consummation of the transactions contemplated in
the Underwriting Agreement, the Trust Agreement, the Indenture, the
Master Receivables Purchase Agreement, the Master Sale and Servicing
Agreement or the Series 1998-1 Supplement, except (A) such consents,
approvals, authorizations, orders, registrations, filings,
qualifications, licenses or permits as have been made or obtained or
as may be required under the State securities or blue sky laws of any
jurisdiction in connection. with the purchase of the Series 1998-1
Notes by the Underwriters and the subsequent distribution of the
Series 1998-1 Notes by the Underwriters or (B) where the failure to
have such consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses or permits would not have a material
adverse effect on the Trust's interests in the Receivables or the
transactions contemplated by such agreements;
(ix) the Series 1998-1 Notes, the Underwriting Agreement, the
Master Receivables Purchase Agreement, the Trust Agreement, the Master
Sale and Servicing Agreement and the Indenture conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus;
(x) the Indenture has been duly qualified under the Trust
Indenture Act of 1939 and the Issuer is not required to be registered
under the Investment Company Act of 1940;
(xi) the statements in the Prospectus under the captions "Summary
of Terms -- Tax Status," "Summary of Terms -- ERISA Considerations,"
"ERISA Considerations" and "Material Federal Income Tax Consequences,"
"Certain Legal Aspects of the Receivables" to the extent that they
constitute matters of law or legal conclusions with respect thereto,
have been reviewed by counsel and represent a fair and accurate
summary of the matters addressed therein, under existing law and the
assumptions stated therein.
(xii) no other filings or other actions, with respect to the
Indenture Trustee's interest in the Receivables, are necessary to
perfect the interest of the Indenture Trustee in the Receivables, and
proceeds thereof, against third parties, except that appropriate
continuation statements must be filed in accordance with the
applicable state's requirements, which is presently at least every
five years; and
(xiii) the conditions to the use of a registration statement on
Form S-3 under the Act, as set forth in the General Instructions to
Form S-3, have been satisfied with respect to the Registration
Statement and the Prospectus. There are no contracts or documents
which are required to be filed as exhibits to the Registration
Statement pursuant to the Act or the Rules and Regulations thereunder
which have not been filed.
In rendering such opinion, counsel may rely (A) as to matters
involving the application of the law of any jurisdiction other than, in the case
of John W. Blenke, the laws of the State of Illinois, and in the case of Dewey
Ballantine L.L.P., the laws of the State of New York, the corporate law of the
State of Delaware and the United States Federal laws, to the extent deemed
proper and stated in such opinion, upon the opinion of other counsel of good
standing believed by such counsel to be reliable and acceptable to you and your
counsel, and (B) as to
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matters of fact, to the extent deemed proper and as stated therein, on the
certificates of responsible officers of the Trust, Household Entities and public
officials. References to the Prospectus in this paragraph C include any
supplements thereto.
D. Dewey Ballantine LLP, counsel for the Underwriters, shall have
delivered a favorable opinion dated the Closing Date with respect to the
validity of the Series 1998-1 Notes, the Underwriting Agreement, the Series
1998-1 Supplement, the Registration Statement, the Prospectus and such other
related matters as the Underwriters may reasonably require and the Household
Entities shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass on such matters. In giving
their opinion, Dewey Ballantine LLP may rely (i) as to matters of California,
Illinois, Nevada and Delaware law (other than Delaware corporation law) upon the
opinions of counsel delivered pursuant to subsection (C) above, (ii) as to
matters involving the application of laws of any jurisdiction other than the
State of New York, the United States Federal laws or the corporation law of the
State of Delaware, to the extent deemed proper and specified in such opinion,
upon the opinion of other counsel of good standing believed to be reliable, and
(iii) as to matters of fact, to the extent deemed proper and as stated therein
on certificates of responsible officers of the Trust. Household Entities and
public officials.
E. Counsel to the Indenture Trustee shall have delivered a favorable
opinion, dated the Closing Date, and satisfactory in form and substance to the
Underwriters and counsel for the Underwriters, the Household Entities and their
counsel, to the effect that:
(i) The Indenture Trustee has been duly incorporated and is
validly existing as a banking corporation in good standing under the
laws of the United States of America.
(ii) The Indenture Trustee has full corporate trust power and
authority to enter into and perform its obligations under the
Indenture, including, but not limited to, its obligation to serve in
the capacity of the Indenture Trustee and to execute, issue,
countersign and deliver the Series 1998-1 Notes.
(iii) The Indenture has been duly authorized, executed and
delivered by the Indenture Trustee and constitutes a legal, valid and
binding obligation of the Indenture Trustee enforceable against the
Indenture Trustee, in accordance with its terms, except that as to
enforceability such enforcement may (A) be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and (B) be limited by
general principles of equity (whether considered in a proceeding at
law or in equity).
(iv) The Series 1998-1 Notes have been duly authorized, executed
and authenticated by the Indenture Trustee on the date hereof on
behalf of the Trust in accordance with the Indenture.
(v) The execution, delivery and performance of the Indenture and
the Series 1998-1 Notes by the Indenture Trustee will not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the property or assets of
the Indenture Trustee pursuant to the terms of the articles of
association or the by-laws of the Indenture Trustee or any statute,
rule, regulation
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or order of any governmental agency or body, or any court having
jurisdiction over the Indenture Trustee or its property or assets or
any agreement or instrument known to such counsel, to which the
Indenture Trustee is a party or by which the Indenture Trustee or any
of its respective property or assets is bound.
(vi) No authorization, approval, consent or order of, or filing
with, any state or federal court or governmental agency or authority
is necessary in connection with the execution, delivery and
performance by the Indenture Trustee of the Indenture and the Series
1998-1 Notes.
F. Counsel to the Owner Trustee shall have delivered a favorable
opinion, dated the Closing Date and satisfactory in form and substance to the
Underwriters and counsel for the Underwriters, the Household Entities and their
counsel, to the effect that:
(i) The Owner Trustee has been duly incorporated and is validly
existing as a banking corporation in good standing under the laws of
the United States of America.
(ii) The Owner Trustee has full corporate trust power and
authority to enter into and perform its obligations under the Trust
Agreement, as the case may be, including, but not limited to, its
obligation to serve in the capacity of Owner Trustee and to execute,
issue, countersign and deliver the Note.
(iii) The Trust Agreement has been duly authorized, executed and
delivered by the Owner Trustee and constitutes a legal, valid and
binding obligation of the Owner Trustee enforceable against the Owner
Trustee, in accordance with its terms, except that as to
enforceability such enforcement may (A) be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and (B) be limited by
general principles of equity (whether considered in a proceeding at
law or in equity).
(iv) The execution, delivery and performance of the Trust
Agreement by the Owner Trustee will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Owner Trustee
pursuant to the terms of the articles of association or the by-laws of
the Owner Trustee or any statute, rule, regulation or order of any
governmental agency or body, or any court having jurisdiction over the
Owner Trustee or its property or assets or any agreement or instrument
known to such counsel, to which the Owner Trustee is a party or by
which the Owner Trustee or any of its respective property or assets is
bound.
(v) No authorization, approval, consent or order of, or filing
with, any state or federal court or governmental agency or authority
is necessary in connection with the execution, delivery and
performance by the Owner Trustee of the Trust Agreement and the Note,
as applicable.
G. Wilmington Trust Company ("WLT") shall have furnished to the
Underwriters and the Household Entities a certificate of WLT, signed by one or
more duly authorized officers of WLT, dated the Closing Date, as to the due
authorization, execution and delivery of the Trust Agreement by WLT and the
acceptance by the Owner Trustee of the trusts created thereby and the due
execution and such other matters as the Underwriters and the Household Entities
shall reasonably request.
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H. The Chase Manhattan Bank ("Chase") shall have furnished to the
Underwriters and the Household Entities a certificate of Chase, signed by one or
more duly authorized officers of Chase, dated the Closing Date, as to the due
authorization, execution and delivery of the Indenture and the Master Sale and
Servicing Agreement by Chase and the acceptance by the Indenture Trustee of the
trusts created thereby and the due execution and delivery of the Series 1998-1
Notes by the Indenture Trustee under the Indenture and such other matters as the
Underwriters shall reasonably request.
I. The Class A-1 Notes shall have been rated "A-1" or its equivalent,
and the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes shall have been
rated "AAA" or its equivalent, in each case, by at least two nationally
recognized Ratings Agencies, the Class B-1 Notes have been rated "AA" or its
equivalent by at least two nationally recognized Ratings Agencies and the Class
B-2 Notes shall have been rated "A" or its equivalent by at least two nationally
recognized Rating Agencies.
J. The Underwriters shall have received copies of letters dated as of
the Closing Date, from the Ratings Agencies stating the current ratings of the
Series 1998-1 Notes as set forth in Section I above.
K. The Underwriters shall have received from Dewey Ballantine LLP,
counsel to the Household Entities, a favorable opinion, dated the Closing Date
and satisfactory in form and substance to the Underwriters and counsel for the
Underwriters, as to true sale matters relating to the transaction, and the
Underwriters shall be addressees of any opinions of counsel supplied to the
rating organizations relating to the Series 1998-1 Notes.
L. All proceedings in connection with the transactions contemplated by
this Agreement, and all documents incident hereto, shall be reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters, and the Underwriters and counsel for the Underwriters shall have
received such other information, opinions, certificates and documents as they
may reasonably request in writing.
M. The Prospectus and any supplements thereto shall have been filed
(if required) with the Commission in accordance with the rules and regulations
under the Act and Section 2 hereof, and prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be contemplated by the Commission or by any authority administering any state
securities or Blue Sky law.
N. At the Execution Time and at the Closing Date, Arthur Andersen LLP
shall have furnished to the Underwriters a letter or letters, dated respectively
as of the date of this Agreement and the date of the Closing Date, in form and
substance satisfactory to the Underwriters and counsel for the Underwriters.
If any condition specified in this Section 8 shall not have been
fulfilled when and as required to be fulfilled, (i) this Agreement may be
terminated by the Representative by notice to both of the Household Entities at
any time at or prior to the Closing Date, and such termination shall be without
liability of any party to any other party except as provided in
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Section 9 and (ii) the provisions of Section 9, the indemnity set forth in
Section 10, the contribution provisions set forth in Section 10 and the
provisions of Sections 13 and 16 shall remain in effect.
Section 9. Reimbursement of Expenses. If the sale of the Series 1998-1
Notes provided for herein is not consummated because any condition to the
Underwriter's obligations set forth in Section 8 hereof is not satisfied,
because of any termination pursuant to Section 12 hereof or because of any
refusal, inability or failure on the part of the Indenture Trustee or the
Household Entities to perform any agreement herein or comply with any provision
hereof other than by reason of a default by the Underwriters, the Household
Entities, jointly and severally, will reimburse the Underwriters upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by it in connection with the proposed
purchase and Sale of the Series 1998-1 Notes.
Section 10. Indemnification.
A. The Household Entities jointly and severally agree to indemnify and
hold harmless the Underwriters and each person, if any, who controls the
Underwriters within the meaning of the Act or the Exchange Act, from and against
any and all loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of the Series 1998-1 Notes),
to which the Underwriters or any such controlling person may become subject,
under the Act or the Exchange Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or (iii) the omission or alleged
omission to state therein a material fact required to be stated or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless (a) such untrue statement or omission or
alleged untrue statement or omission was made in reliance upon and in conformity
with written information furnished to the Seller, or information, if any,
electronically transmitted to the Seller by the Underwriters expressly for use
in the Registration Statement (or any amendment thereof) or (b) such loss,
liability, claim, damage or expense is incurred by an Underwriter solely as a
result of the dissemination by it of Derived Information in violation of Section
3(a) hereof; and shall reimburse the Underwriters and each such controlling
person promptly upon demand for any documented legal or documented other
expenses reasonably incurred by the Underwriters or such controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the foregoing indemnity with respect to any untrue
statement contained in or omission from the Prospectus shall not inure to the
benefit of the Underwriters if a Household Entity shall sustain the burden of
proving that the person asserting against the Underwriters the loss, liability,
claim, damage or expense purchased any of the Series 1998-1 Notes which are the
subject thereof and was not sent or given a copy of the appropriate Prospectus
(or the appropriate Prospectus as amended or supplemented) (the term Prospectus
as used in this clause shall not include documents incorporated by reference
thereto), if required by law, at or prior to the
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written confirmation of the sale of such Series 1998-1 Notes (unless such
Prospectus is amended or supplemented after the Prospectus has been delivered
pursuant to Rule 424(b)) to such person and the untrue statement contained in or
omission from such preliminary prospectus was corrected in the appropriate
Prospectus (or the appropriate Prospectus as amended or supplemented).
The foregoing indemnity agreement is in addition to any liability
which a Household Entity may otherwise have to the Underwriters or any
controlling person of any of the Underwriters.
B. Each of the Underwriters agrees to severally and not jointly
indemnify and hold harmless the Household Entities, the directors and the
officers of the Household Entities who signed the Registration Statement, and
each person, if any, who controls any Household Entity within the meaning of the
Act or the Exchange Act against any and all loss, claim, damage or liability, or
any action in respect thereof, to which a Household Entity or any such director,
officer or controlling person thereof may become subject, under the Act or the
Exchange Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Underwriter Information (as
defined below) or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse the applicable Household Entity, promptly on
demand, and any such director, officer or controlling person for any documented
legal or other documented expenses reasonably incurred by such Household Entity,
or any director, officer or controlling person in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred. Underwriter Information means
the information set forth under the caption "Underwriting" in the Prospectus.
The foregoing indemnity agreement is in addition to any liability
which the Underwriters may otherwise have to any Household Entity or any such
director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this Section
10 of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 10, promptly notify the indemnifying party
in writing of the claim or the commencement of that action; provided, however,
that the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent it has
been materially prejudiced by such failure; and provided, further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
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party, unless such indemnified party reasonably objects to such assumption on
the ground that there may be legal defenses available to it which are different
from or in addition to those available to such indemnifying party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, except to the extent provided in the next
following paragraph, the indemnifying party shall not be liable to the
indemnified party under this Section 10 for any fees and expenses of counsel
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions 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 (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Representative, if the indemnified
parties under this Section 9 consist of the Underwriters or any of their
controlling persons, or by the Household Entities, if the indemnified parties
under this Section 9 consist of any of the Household Entities or any of the
Household Entities' directors, officers or controlling persons, but in either
case reasonably satisfactory to the indemnified party.
Each indemnified party, as a condition of the indemnity agreements
contained in Sections 10A and B, shall use its best efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without prior written consent of the indemnified party, effect any settlement of
any pending or threatened action in respect of which such 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 any claims that are the subject
matter of such action.
Notwithstanding the foregoing, if (x) the indemnified party has made a
proper
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request to the indemnifying party for the payment of the indemnified party's
legal fees and expenses, as permitted hereby, and (y) such request for payment
has not been honored within thirty days, then, for so long as such request
thereafter remains unhonored, the indemnifying party shall be liable for any
settlement entered into by the indemnified party whether or not the indemnifying
party consents thereto.
D. If the indemnification provided for in this Section 10 shall for
any reason be unavailable to hold harmless an indemnified party under Section
10A or B in respect of any loss, claim, damage or liability, or any action in
respect thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Household Entities
on the one hand and the Underwriters on the other from the offering 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 Household Entities on the one hand and the Underwriters on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations.
The relative benefits of the Underwriters and the Household Entities
shall be deemed to be in such proportion so that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the public
offering price appearing on the cover page of the Prospectus.
The relative fault of the Underwriters and the Household Entities
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Household Entities or by one of the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission and
other equitable considerations.
The Household Entities and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this Section 10D were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 10D shall be deemed to include, for purposes of this Section 10D, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Each person, if any, who controls each Underwriter within the meaning
of the Act or the Exchange Act shall have the same rights to contribution as
each of the Underwriters and each director of a Household Entity, each officer
of a Household Entity who signed the Registration Statement, and each person, if
any, who controls a Household Entity within the
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meaning of the Act or the Exchange Act shall have the same rights to
contribution as the applicable Household Entity.
Except in the case of any loss, claim, damage, liability or expense
resulting solely from a breach of the Underwriter's representation and warranty
set forth in Section 3(a), (b) or (c) hereof, in no case shall any Underwriter
be responsible for any amount in excess of the underwriting discount applicable
to the Series 1998-1 Notes purchased by such Underwriter hereunder. 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.
E. The Underwriters severally confirm that the information set forth
(i) in the Prospectus relating to market making and (ii) under the caption
"Underwriting" in the Prospectus is correct and constitutes the only information
furnished in writing to a Household Entity by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement and the Prospectus.
Section 11. Default by One or More of the Underwriters. If one or more
of the Underwriters participating in the public offering of the Series 1998-1
Notes shall fail at the Closing Date to purchase the Series 1998-1 Notes which
it is obligated to purchase hereunder (the "Defaulted Securities"), then the
non-defaulting Underwriter shall have the right, within 24 hours thereafter, to
make arrangements to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Underwriter have not completed such arrangements within
such 24-hour period, then:
(i) if the aggregate principal amount of Defaulted Securities
does not exceed 10% of the aggregate principal amount of the Series
1998-1 Notes to be purchased pursuant to this Agreement, the
non-defaulting Underwriter shall be obligated to purchase the full
amount thereof, or
(ii) if the aggregate principal amount of Defaulted Securities
exceeds 10% of the aggregate principal amount of the Series 1998-1
Notes to be purchased pursuant to this Agreement, this Agreement shall
terminate, without any liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section shall relieve the defaulting
Underwriter from the liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by an Underwriter as set forth in this
Section, each of the Underwriters and the Seller shall have the right to
postpone the Closing Date for a period not exceeding five Business Days in order
that any required changes in the Registration Statement or Prospectus or in any
other documents or arrangements may be effected.
Section 12. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representative, by notice given to
the Seller and HAFC prior to delivery of and payment for the Series 1998-1 Notes
if prior to such time (i) trading in securities generally on the New York Stock
Exchange or the National Association of Securities Dealers National Market
System shall have been suspended or limited, or minimum prices shall have been
established on such
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exchange or market system; a banking moratorium shall have been declared by
either Federal, New York State authorities or the State of California; or (ii)
there shall have occurred any outbreak or material escalation of hostilities
involving the United States of America where armed conflict or the declaration
of war appears imminent, if, the effect of such event makes it, in the
reasonable judgment of the Representative, impractical or inadvisable to proceed
with the completion of the sale and payment for the Series 1998-1 Notes. Upon
such notice being given, the parties to this Agreement shall (except for any
liability arising before or in relation to such termination) be released and
discharged from their respective obligations under this Agreement.
Section 13. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Household Entities
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Representative or
controlling person of the Representative, or by or on behalf of the Household
Entities or any officers, directors or controlling persons and shall survive
delivery of any certificates to the Representative or any controlling person.
Section 14. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication to the Underwriters at
Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, New
York 10010, attention: Asset Finance Department, Fax: (212) 325-6677; if sent to
any Household Entity to 2700 Sanders Road, Prospect Heights, Illinois 60070,
attention of General Counsel, Fax: (847) 564-6366.
Section 15. Parties. This Agreement shall inure to the benefit of and
be binding upon the Representative and the Household Entities, and their
respective successors or assigns. Nothing expressed or mentioned in this
Agreement is intended nor shall it be construed to give any person, firm or
corporation, other than the parties hereto or thereto and their respective
successors and the controlling persons and officers and directors referred to in
Section 9 and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the parties and their
respective successors and said controlling persons and officers and directors
and their heirs and legal representatives (to the extent of their rights as
specified herein and therein) and except as provided above for the benefit of no
other person, firm or corporation. No purchaser of Series 1998-1 Notes from the
Representative shall be deemed to be a successor by reason merely of such
purchase.
SECTION 16. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH
SUCH LAWS WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 17. Counterparts. This Agreement may be executed in
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counterparts, each of which shall be deemed to be an original, but together they
shall constitute but one instrument.
Section 18. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of or affect the meaning or
interpretation of, this Agreement.
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If the foregoing is in accordance with the Representative's
understanding of our agreement, please sign and return to us a counterpart
hereof, whereupon this instrument along with all counterparts will become a
binding agreement between the Representative, the Seller, HAFC and HFC in
accordance with its terms.
Very truly yours,
HOUSEHOLD FINANCE CORPORATION
By:
-------------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION
By:
-------------------------------------
Name:
Title:
HOUSEHOLD AUTOMOTIVE FINANCE
CORPORATION
By:
------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED, as of
the date first above written:
CREDIT SUISSE FIRST BOSTON CORPORATION
Acting on its own behalf and as Representative of the
Underwriters referred to in the foregoing Agreement
By:
---------------------------------------
Name:
Title: Authorized Signatory
27
<PAGE>
[Underwriting Agreement]
28
<PAGE>
Schedule 1
<PAGE>
Exhibit 4.1
TRUST AGREEMENT
between
HOUSEHOLD AUTO RECEIVABLES CORPORATION
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of March 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
ARTICLE I Definitions ............................................. 5
-----------
Section 1.1. Capitalized Terms........................................ 5
Section 1.2. Other Definitional Provisions............................ 7
Section 1.3. Action by or Consent of Noteholders and
Certificate-holders .................................... 7
Section 1.4. Material Adverse Effect.................................. 8
ARTICLE II Organization............................................. 8
------------
Section 2.1. Name..................................................... 8
Section 2.2. Office................................................... 8
Section 2.3. Purposes and Powers...................................... 8
Section 2.4. Appointment of Owner Trustee............................. 9
Section 2.5. Initial Capital Contribution of Trust Estate............. 9
Section 2.6. Declaration of Trust..................................... 9
Section 2.7. Liability................................................ 9
Section 2.8. Title to Trust Property.................................. 10
Section 2.9. Situs of Trust........................................... 10
Section 2.10. Representations and Warranties of the Depositor.......... 10
Section 2.11. Federal Income Tax Allocations........................... 12
Section 2.12. Covenants of the Depositor............................... 12
Section 2.13. Covenants of the Certificateholders...................... 13
ARTICLE III Certificates and Transfer of Interests................... 14
--------------------------------------
Section 3.1. Initial Ownership........................................ 14
Section 3.2. The Certificates; Issuable in Series..................... 14
Section 3.3. Authentication of Certificates........................... 15
Section 3.4. Registration of Transfer and Exchange of Certificates.... 15
Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates........ 17
Section 3.6. Persons Deemed Certificateholders........................ 17
Section 3.7. Access to List of Certificateholders' Names and
Addresses............................................... 18
Section 3.8. Maintenance of Office or Agency.......................... 18
Section 3.9. ERISA Restrictions....................................... 18
Section 3.10. Securities Matters....................................... 18
Section 3.11. Payments on Owner Trust Certificates..................... 19
Section 3.12. Paying Agent............................................. 19
ARTICLE IV Voting Rights and Other Actions.......................... 19
-------------------------------
Section 4.1. Prior Notice to Holders with Respect to Certain
Matters ................................................ 19
Section 4.2. Action by Certificateholders with Respect to
` Certain Matters ........................................ 20
Section 4.3. Action by Certificateholders with Respect to
Bankruptcy ............................................. 20
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
Section 4.4. Restrictions on Certificateholders' Power................ 20
Section 4.5. Majority Control......................................... 21
ARTICLE V Certain Duties........................................... 21
--------------
Section 5.1. Accounting and Records to the Noteholders,
Certificate-holders, the Internal Revenue Service
and Others ............................................. 21
Section 5.2. Signature on Returns; Tax Matters Partner................ 22
Section 5.3. Note Purchase Agreements................................. 22
ARTICLE VI Authority and Duties of Owner Trustee.................... 22
-------------------------------------
Section 6.1. General Authority........................................ 22
Section 6.2. General Duties........................................... 22
Section 6.3. Action upon Instruction.................................. 23
Section 6.4. No Duties Except as Specified in this Agreement or
in Instructions ........................................ 24
Section 6.5. No Action Except under Specified Documents or
Instructions ........................................... 24
Section 6.6. Restrictions............................................. 24
ARTICLE VII Concerning the Owner Trustee............................. 25
----------------------------
Section 7.1. Acceptance of Trusts and Duties.......................... 25
Section 7.2. Furnishing of Documents.................................. 26
Section 7.3. Representations and Warranties........................... 26
Section 7.4. Reliance; Advice of Counsel.............................. 27
Section 7.5. Not Acting in Individual Capacity........................ 27
Section 7.6. Owner Trustee Not Liable for Certificates or
Receivables ............................................ 28
Section 7.7. Owner Trustee May Own Certificates and Notes............. 28
Section 7.8. Payments from Owner Trust Estate......................... 28
Section 7.9. Doing Business in Other Jurisdictions.................... 29
ARTICLE VIII Compensation of Owner Trustee............................ 29
-----------------------------
Section 8.1. Owner Trustee's Fees and Expenses........................ 29
Section 8.2. Indemnification.......................................... 29
Section 8.3. Payments to the Owner Trustee............................ 30
Section 8.4. Non-recourse Obligations................................. 30
ARTICLE IX Termination of Trust Agreement........................... 30
------------------------------
Section 9.1. Termination of Trust Agreement........................... 30
ARTICLE X Successor Owner Trustees and Additional Owner Trustees... 32
------------------------------------------------------
Section 10.1. Eligibility Requirements for Owner Trustee............... 32
Section 10.2. Resignation or Removal of Owner Trustee.................. 32
Section 10.3. Successor Owner Trustee.................................. 33
Section 10.4. Merger or Consolidation of Owner Trustee................. 34
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
Section 10.5. Appointment of Co-Trustee or Separate Trustee............ 34
ARTICLE XI Miscellaneous............................................ 35
-------------
Section 11.1. Supplements and Amendments............................... 35
Section 11.2. No Legal Title to Owner Trust Estate in
Certificateholders ..................................... 36
Section 11.3. Limitations on Rights of Others.......................... 36
Section 11.4. Notices.................................................. 37
Section 11.5. Severability............................................. 37
Section 11.6. Separate Counterparts.................................... 37
Section 11.7. Assignments; Series Support Provider..................... 37
Section 11.8. Covenants of the Depositor............................... 38
Section 11.9. No Petition.............................................. 38
Section 11.10. No Recourse.............................................. 38
Section 11.11. Headings................................................. 38
Section 11.12. GOVERNING LAW............................................ 38
Section 11.13. Master Servicer.......................................... 38
EXHIBITS
Exhibit A-1 Form of Owner Trust Certificate
Exhibit A-2 Form of Series Trust Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Purchaser Representation Letter
Exhibit D Form of Transferee Representation Letter
</TABLE>
4
<PAGE>
Exhibit 4.1
TRUST AGREEMENT dated as of March 1, 1998 between HOUSEHOLD AUTO
RECEIVABLES CORPORATION, a Nevada corporation (the "Depositor"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the "Owner
Trustee").
ARTICLE I
Definitions
-----------
Capitalized Terms. For all purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Benefit Plan" shall have the meaning assigned to such term in Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq. as the same may be amended from time to
time.
"Certificate" means either an Owner Trust Certificate or a Series Trust
Certificate.
"Certificate Majority" means Certificateholders representing more than
fifty percent of the principal amount of the Certificates. For the purpose of
this definition the principal amount of the Owner Trust Certificates shall equal
the Principal Balance of the Receivables included in the Unpledged Trust Estate.
"Certificate Paying Agent" means Norwest Bank Minnesota, National
Association.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, or at such other address as the Owner Trustee
may designate by notice to the Certificateholders and the Depositor, or the
principal corporate trust office of any successor Owner Trustee (the address of
which the successor owner trustee will notify the Certificateholders and the
Depositor).
5
<PAGE>
"Definitive Certificates" shall mean Certificates issued in certificated,
fully registered form.
"Depositor" shall mean Household Auto Receivables Corporation in its
capacity as Depositor hereunder.
"ERISA" shall have the meaning assigned to such term in Section 3.9.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose name a
Certificate is registered on the Certificate Register.
"Household" shall mean Household Finance Corporation.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.2.
"Owner Trust Certificate" means a trust certificate evidencing the
beneficial ownership interest of a Certificateholder in the entire Unpledged
Trust Estate, substantially in the form of Exhibit A-1 attached hereto.
"Owner Trust Estate" shall mean all right, title and interest of the Trust
in and to the property and rights assigned to the Trust pursuant to Article II
of the Master Sale and Servicing Agreement, all funds on deposit from time to
time in the Trust Accounts and all other property of the Trust from time to
time, including any rights of the Owner Trustee and the Trust pursuant to the
Master Sale and Servicing Agreement, each Basic Document and each Series Related
Document.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities Act" shall have the meaning assigned to such term in Section
3.4.
"Series Certificate Distribution Account" shall mean each account for each
Series of Certificates designated as such and established and maintained
pursuant to the relevant Series Supplement.
"Series Trust Certificate" means a trust certificate evidencing the
beneficial ownership interest of a Certificateholder in a Series Trust Estate,
substantially in the form of Exhibit A-2 attached hereto.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
6
<PAGE>
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Unpledged Trust Estate" means all of the Owner Trust Estate which is not
pledged with respect to a Series.
Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Master Sale and Servicing Agreement or, if not
defined therein, in the Indenture, provided that, as used herein, Series means
only those Series of Notes and Series of Certificates with respect to which the
Trust is the Issuer and only such Series Trust Estates included in the Owner
Trust Estate.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any Certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement 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 certificate or other document, and accounting terms
partly defined in this Agreement or in any such 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 certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Agreement or in any such
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 certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
Action by or Consent of Noteholders and Certificate-holders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders or Certificateholders, such provision shall be deemed to refer to
the Certificateholder or Noteholder, as the case may be, of record as of the
Record Date immediately preceding the date on which such action is to be taken,
or consent given, by Noteholders or Certificateholders. Solely for the purposes
of any action to be taken, or consented to, by Noteholders, any Note registered
in the name of the Depositor or any Affiliate thereof shall be deemed not to be
outstanding; provided, however, that, solely
7
<PAGE>
for the purpose of determining whether the Trustee or the Trust Collateral
Agent, if any, is entitled to rely upon any such action or consent, only Notes
which the Owner Trustee, the Trustee or the Trust Collateral Agent, if any,
respectively, knows to be so owned shall be so disregarded.
Material Adverse Effect . Whenever a determination is to be made under this
Agreement as to whether a given event, action, course of conduct or set of facts
or circumstances could or would have a material adverse effect on the
Noteholders or Certificateholders (or any similar or analogous determination),
such determination shall be made without taking into account the funds available
from claims under any policy or other Series Support.
ARTICLE II
Organization
------------
Name. There is hereby formed a trust to be known as "Household Automobile
Revolving Trust I", in which name the Owner Trustee may conduct the business of
the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued.
Office. The office of the Trust shall be in care of the Owner Trustee at
the Corporate Trust Office or at such other address as the Owner Trustee may
designate by written notice to the Certificateholders and the Depositor.
Purposes and Powers. (a) The purpose of the Trust is, and the Trust shall
have the power and authority, to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and each Series
Supplement and the Certificates pursuant to this Agreement and each Series
Supplement, and to sell the Notes;
(ii) with the proceeds of the sale of the Notes, to fund the expense
of obtaining any Series Support and to pay the organizational, start-up and
transactional expenses of the Trust and to pay the balance to the Depositor
pursuant to the Master Sale and Servicing Agreement;
(iii) with respect to each Series Trust Estate, to assign, grant,
transfer, pledge, mortgage and convey each Series Trust Estate to the
Trustee or Trust Collateral Agent, as the case may be, pursuant to the
Indenture and the related Series Supplement for the benefit of the Series
Secured Parties;
(iv) to enter into and perform its obligations under the Basic
Documents and the Series Related Documents with respect to each Series, in
each case, to which it is a party;
8
<PAGE>
(v) to acquire, hold and manage the Owner Trust Estate;
(vi) to make distributions on the Certificates in accordance with
their respective terms;
(vii) to own Class SV Preferred Stock of the Depositor;
(viii) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(ix) subject to compliance with the Basic Documents and the Series
Related Documents with respect to each Series, to engage in such other
activities as may be required in connection with conservation of the Owner
Trust Estate and the making of distributions to the Certificateholders and
the Noteholders.
(b) The Trust is hereby authorized to engage in the foregoing activities.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement, the Basic Documents or any Series Related Documents.
Appointment of Owner Trustee . The Depositor hereby appoints the Owner
Trustee as trustee of the Trust effective as of the date hereof, to have all the
rights, powers and duties set forth herein.
Initial Capital Contribution of Trust Estate . The Depositor hereby sells,
assigns, transfers, conveys and sets over to the Owner Trustee, as of the date
hereof, the sum of $1 and one share of Class SV Preferred Stock of the
Depositor. The Owner Trustee hereby acknowledges receipt in trust from the
Depositor, as of the date hereof, of the foregoing contribution, which shall
constitute the initial Owner Trust Estate. The Depositor shall pay
organizational expenses of the Trust as they may arise.
Declaration of Trust . The Owner Trustee hereby declares that it will hold
the Owner Trust Estate in trust upon and subject to the conditions set forth
herein for the use and benefit of the Certificateholders, subject to the
obligations of the Trust under the Basic Documents and the Series Related
Documents with respect to each Series. It is the intention of the parties hereto
that the Trust constitute a business trust under the Business Trust Statute and
that this Agreement constitute the governing instrument of such business trust.
It is the intention of the parties hereto that, solely for income tax purposes,
the Trust shall be treated as a branch; provided, however, that in the event
Certificates are owned by more than one Certificateholder, it is the intention
of the parties hereto that, solely for income and franchise tax purposes, the
Trust shall then be treated as a partnership and that, unless otherwise required
by appropriate tax authorities, only after such time the Trust will file or
cause to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such tax
purposes. Effective as
9
<PAGE>
of the date hereof, the Owner Trustee shall have all rights, powers and duties
set forth herein and to the extent not inconsistent herewith, in the Business
Trust Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
Liability. (a) The Depositor shall pay organizational expenses of the
Trust as they may arise or shall, upon the request of the Owner Trustee,
promptly reimburse the Owner Trustee for any such expenses paid by the Owner
Trustee.
(b) No Holder, other than to the extent set forth in clause (a), shall have
any personal liability for any liability or obligation of the Trust.
Title to Trust Property . (a) Legal title to all the Owner Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee and/or a separate
trustee, as the case may be.
(b) The holders of the Series Trust Certificates shall not have legal title
to any part of the related Series Trust Estate. The Holders of the Series Trust
Certificates shall be entitled to receive distributions with respect to their
undivided ownership interest therein in accordance with the terms hereof and the
related Series Supplement. No transfer, by operation of law or otherwise, of any
right, title or interest by any Certificateholder of its ownership interest in
the Owner Trust Estate shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of any Series Trust Estate.
Situs of Trust . The Trust will be located and administered in the State of
Delaware. All bank accounts maintained by the Owner Trustee on behalf of the
Trust shall be located in the State of Minnesota. Payments will be received by
the Trust in Minnesota and payments will be made by the Trust from Minnesota.
The Trust shall not have any employees in any state other than Delaware;
provided, however, that nothing herein shall restrict or prohibit the Owner
Trustee, the Master Servicer or any agent of the Trust from having employees
within or without the State of Delaware. The only office of the Trust will be at
the Corporate Trust Office in Delaware.
Representations and Warranties of the Depositor . The Depositor makes the
following representations and warranties on which the Owner Trustee relies in
accepting the Owner Trust Estate in trust and issuing the Certificates and Notes
and upon which any Series Support Provider relies in providing any Series
Support. Each of the following representations and warranties shall be deemed to
be
10
<PAGE>
made on each date on which a Series Trust Estate is pledged under the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a Nevada corporation with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted and is proposed to be conducted
pursuant to this Agreement and the Basic Documents.
(b) Due Qualification. It 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 its property,
the conduct of its business and the performance of its obligations under this
Agreement and the Basic Documents requires such qualification and in which the
failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or otherwise) of the Depositor.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Trust; the Depositor has duly
authorized such sale, assignment and deposit to the Trust by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) Binding Obligations. This Agreement, when duly executed and delivered,
shall constitute legal, valid and binding obligations of the Depositor
enforceable against the Depositor in accordance with its 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.
(e) No Consent Required. To the best knowledge of the Depositor, no
consent, license, approval or authorization or registration or declaration with,
any Person or with any governmental authority, bureau or agency is required in
connection with the execution, delivery or performance of this Agreement, the
Basic Documents and the applicable Series Related Documents, except for such as
have been obtained, effected or made or as to which a failure to obtain, effect
or make would not have a material adverse effect on the business, properties,
assets or condition (financial or other) of the Depositor.
(f) No Violation. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not 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 by-laws of the Depositor, or any material indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound; nor result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents or any applicable Series Related Documents); nor
violate any law or, to the best of the Depositor's knowledge, any order, rule or
regulation
11
<PAGE>
applicable to the Depositor of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(g) No Proceedings. To the best of the Depositor's knowledge, there are no
proceedings or investigations pending or, to its knowledge threatened against it
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over it or its properties (A)
asserting the invalidity of this Agreement or any of the Basic Documents, (B)
seeking to prevent the issuance of the Certificates or the Notes or the
consummation of any of the transactions contemplated by this Agreement or any of
the Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect its performance of its obligations under, or the
validity or enforceability of, this Agreement, any of the Basic Documents or any
Series Related Documents, or (D) seeking to adversely affect the federal income
tax or other federal, state or local tax attributes of any of the Notes or
Certificates.
Federal Income Tax Allocations . In the event that the Trust is treated as
a partnership for Federal income tax purposes, net income of the Trust for any
month as determined for Federal income tax purposes (and each item of income,
gain, loss, credit and deduction entering into the computation thereof) shall be
allocated:
(a) with respect to each Series, to the extent of available net income with
respect to the related Series Trust Estate, among the Certificateholders of such
Series as of the first Record Date following the end of such month, in
proportion to their ownership of principal amount of Certificates of such Series
on such date, an amount of net income up to the sum of (i) the
Certificateholders' Monthly Interest Distributable Amount for such month with
respect to such Series, (ii) Certificateholders' Interest Carryover Shortfall
for such month with respect to such Series, and (iii) the portion of the market
discount on the related Receivables accrued during such month that is allocable
to the excess of the initial aggregate principal amount of the Certificates of
such Series over their initial aggregate issue price;
with respect to the Owner Trust Certificates, available net income with
respect to the Unpledged Trust estate among the Holders of the Owner Trust
Certificates as of the first Record Date following the end of such month; and
(b) to the Depositor, to the extent of any remaining net income.
If the net income of the Trust with respect to any Series for any month is
insufficient for the allocations described in clause (a) above, subsequent net
income shall first be allocated to make up such shortfall before being allocated
as provided in clause (c). Net losses of the Trust with respect to any Series
(or with respect to the Unpledged Trust Estate), if any, for any month as
determined for Federal income tax purposes (and each item of income, gain, loss,
credit and deduction entering into the computation thereof) shall be allocated
among the Certificateholders of such Series, or the Holders of the
12
<PAGE>
Owner Trust Certificates, as the case may be, as of the Record Date in
proportion to their ownership of principal amount of Certificates of such Series
on such Record Date until the principal balance of the Certificates is reduced
to zero. The Depositor is authorized to modify the allocations in this paragraph
if necessary or appropriate, in its sole discretion, for the allocations to
fairly reflect the economic income, gain or loss to the Certificateholders of
such Series, or as otherwise required by the Code.
Covenants of the Depositor. The Depositor agrees and covenants for the
benefit of each Series Secured Party and the Owner Trustee and the Trustee for
the benefit of the Noteholders, during the term of this Agreement, and to the
fullest extent permitted by applicable law, that:
(a) it shall not create, incur or suffer to exist any indebtedness or
engage in any business, except, in each case, as permitted by its certificate of
incorporation, the Basic Documents and the Series Related Documents;
(b) it shall not, for any reason, institute proceedings for the Trust to be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Trust, or file a petition seeking or
consenting to reorganization or relief under any applicable federal or state law
relating to the bankruptcy of the Trust, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trust or a substantial part of the property of the Trust or
cause or permit the Trust to make any assignment for the benefit of creditors,
or admit in writing the inability of the Trust to pay its debts generally as
they become due, or declare or effect a moratorium on the debt of the Trust or
take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Basic Document to which
it or the Trust is a party and each other agreement entered into on or after the
date hereof to which it or the Trust is a party, an agreement by each such
counterparty that prior to the occurrence of the event specified in Section
9.1(e) such counterparty shall not institute against, or join any other Person
in instituting against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and
(d) it shall not, for any reason, withdraw or attempt to withdraw from this
Agreement, dissolve, institute proceedings for it to be adjudicated a bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of it or a substantial part of
its property, or make any assignment for the benefit of creditors, or admit in
writing its inability to pay its debts generally as they become due, or declare
or effect a moratorium on its debt or take any action in furtherance of any such
action.
Covenants of the Certificateholders. Each Certificateholder agrees:
13
<PAGE>
(a) to be bound by the terms and conditions of the related
Certificates, of this Agreement and, with respect to the holders of Series
Trust Certificates, of the related Series Supplement, including any
supplements or amendments hereto and to perform the obligations of a
Certificateholder as set forth therein or herein, in all respects as if it
were a signatory hereto. This undertaking is made for the benefit of the
Trust, the Owner Trustee and any related Series Secured Parties;
(b) to hereby appoint the Depositor as such Certificateholder's agent
and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust, if any, and agree that, if requested by the
Trust, it will sign such federal income tax information return in its
capacity as holder of an interest in the Trust. Each Certificateholder also
hereby agrees that in its tax returns it will not take any position
inconsistent with those taken in any tax returns that may be filed by the
Trust;
(c) if such Certificateholder is other than an individual or other
entity holding its Certificate through a broker who reports securities
sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of
a Certificate in a taxable sale or exchange, within 30 days of the date of
the transfer;
(d) until the completion of the events specified in Section 9.1(e),
not to, for any reason, institute proceedings for the Trust or the
Depositor to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Trust or a substantial part of its property,
or cause or permit the Trust to make any assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as
they become due, or declare or effect a moratorium on its debt or take any
action in furtherance of any such action; and
(e) that there shall not be more than 98 other holders of
Certificates.
ARTICLE III
Certificates and Transfer of Interests
--------------------------------------
Initial Ownership. Upon the formation of the Trust by the contribution by
the Depositor pursuant to Section 2.5, the Trust shall issue an Owner Trust
Certificate to the Depositor having an initial principal amount of $1, and
thereafter shall have a principal amount equal to the Principal Balance of the
Receivables included in the Unpledged Trust Estate.
The Certificates; Issuable in Series. (a) The Series Certificates shall be
issued in denominations of $100,000 and integral multiples of $1,000 in excess
thereof. The Owner Trust Certificates shall have no restrictions as to
denomination. The Certificates shall be executed on behalf of the Trust
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by manual or facsimile signature of an authorized officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefit of this
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of authentication and
delivery of such Certificates. A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder, upon due registration of such
Certificate in such transferee's name pursuant to Section 3.4.
(b) No Series Trust Certificates shall be issued under this Agreement
unless such Certificates have been authorized pursuant to a Series Supplement
and all conditions precedent to the issuance thereof, as specified in the
related Series Supplement shall have been satisfied. All Series Trust
Certificates of each Series issued under this Agreement shall be in all respects
entitled to the benefits hereof and of the related Series Trust Estate. All
Owner Trust Certificates issued under this Agreement shall be in all respects
entitled to the benefits hereof and of the Unpledged Trust Estate.
Authentication of Certificates. Concurrently with each initial pledge of
Receivables under the Indenture and a related Series Supplement, the Trust shall
issue Certificates of the related Series, in an aggregate principal amount equal
to the initial Certificate Balance of such Series. The Owner Trustee shall cause
the related Certificates to be executed on behalf of the Trust, authenticated
and delivered to or upon the written order of the Depositor, signed by its
chairman of the board, its president or any vice president, its treasurer or any
assistant treasurer without further corporate action by the Depositor, in
authorized denominations. No Certificate shall entitle its holder to any benefit
under this Agreement or, with respect to a Series, the related Series
Supplement, or shall be valid for any purpose, unless there shall appear on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit A, executed by the Owner Trustee or its authenticating agent, by
manual signature; such authentication shall constitute conclusive evidence that
such Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Registration of Transfer and Exchange of Certificates. The Certificate
Registrar shall keep or cause to be kept, at the office or agency maintained
pursuant to Section 3.8, a Certificate Register in which, subject to such
reasonable regulations as it may prescribe, the Owner Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Owner Trustee shall be the initial Certificate
Registrar.
The Certificates have not been registered under the Securities Act of 1933, as
amended (the "Securities Act") or any state securities law. The Certificate
Registrar shall not register the transfer of any Certificate unless such resale
or transfer is pursuant to an effective registration statement under the
Securities Act or is to the Depositor or unless it
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shall have received (i) a representation letter substantially in the form of
Exhibit D hereto or (ii) such other representations (or an Opinion of Counsel)
satisfactory to the Owner Trustee to the effect that such resale or transfer is
made (A) in a transaction exempt from the registration requirements of the
Securities Act and applicable state securities laws, or (B) to a person who the
transferor of the Certificate reasonably believes is a qualified institutional
buyer (within the meaning of Rule 144A under the Securities Act) that is aware
that such resale or other transfer is being made in reliance upon Rule 144A.
Until the earlier of (i) such time as the Certificates shall be registered
pursuant to a registration statement filed under the Securities Act and (ii) the
date three years from the later of the date of the original authentication and
delivery of the Certificates and the date any Certificate was acquired from the
Seller or any affiliate of the Seller, the Certificates shall bear a legend as
follows:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE IN RELIANCE UPON
EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS
CERTIFICATE MAY BE MADE UNLESS SUCH RESALE OR TRANSFER (A)
IS MADE IN ACCORDANCE WITH SECTION 3.4 OF THE OWNER TRUST
AGREEMENT PERTAINING TO THE HOUSEHOLD AUTO RECEIVABLES TRUST
I (THE "AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, (iii) TO THE SELLER OR (iv) TO A PERSON WHO
THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER
THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND (C) UPON
THE SATISFACTION OF CERTAIN OTHER REQUIREMENTS SPECIFIED IN
THE AGREEMENT. NEITHER THE SELLER, THE MASTER SERVICER, THE
TRUST NOR THE OWNER TRUSTEE IS OBLIGATED TO REGISTER THE
CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAWS.
The Certificate Registrar shall not register the initial placement of the
Certificates unless it shall have received a Purchaser Representation Letter in
the form of
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Exhibit C.
The Certificate Registrar shall provide the Trustee Collateral Agent with a
list of the names and addresses of the Certificateholders on each Series Closing
Date in the form which such information is provided to the Certificate Registrar
by the Depositor. Upon any transfers of Certificates, the Certificate Registrar
shall notify the Trust Collateral Agent of the name and address of the
transferee in writing, by facsimile, on the day of such transfer.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of the same Series in authorized
denominations and aggregate principal amount, dated the date of authentication
by the Owner Trustee or any authenticating agent. At the option of a Holder,
Certificates may be exchanged for other Certificates of the same Series in
authorized denominations of a like aggregate principal amount upon surrender of
the Certificates of the same Series, to be exchanged at the office or agency
maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the Certificateholder or his attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Certificate Registrar, which requirements include membership
or participation in the Securities Transfer Agent's Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Certificate Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act. Each Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Owner Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
Notwithstanding the preceding provisions of this Section, the Owner Trustee
shall not be required to make, and the Certificate Registrar shall not be
required to register, transfers and exchanges of Certificates for a period of 15
days preceding the due date for any payment with respect to the Certificate.
Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated
Certificate shall be surrendered to the Certificate Registrar, or if the
Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee, such security or indemnity
as may be
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required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or
its authenticating agent shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Series principal balance. In connection with the issuance of
any new Certificate under this Section, the Owner Trustee or the Certificate
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this section shall constitute conclusive evidence
of an ownership interest in the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time.
Persons Deemed Certificateholders. Every Person by virtue of becoming a
Certificateholder in accordance with this Agreement and the rules and
regulations of the Certificate Registrar shall be deemed to be bound by the
terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee, the Certificate Registrar and any
agent of the Owner Trustee and the Certificate Registrar may treat the Person in
whose name any Certificate shall be registered in the Certificate Register as
the owner of such Certificate for the purpose of receiving distributions
pursuant hereto, the Indenture or any Series Supplement (in the case of a Series
Trust Certificate) and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar, nor any agent of the Owner Trustee or the
Certificate Registrar shall be bound by any notice to the contrary.
Access to List of Certificateholders' Names and Addresses. The Owner
Trustee or the Certificate Registrar shall furnish or cause to be furnished to
the Master Servicer, the Depositor or Owner Trustee within 15 days after receipt
by the Owner Trustee or the Certificate Registrar of a request therefor from
such Person in writing, a list, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more Holders
of Certificates or one or more Holders of Certificates evidencing not less than
25% of the Certificate Balance apply in writing to the Owner Trustee or the
Certificate Registrar, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement, under the Certificates of such Series or under the related
Series Supplement and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
or the Certificate Registrar shall, within five Business Days after the receipt
of such application, afford such applicants access during normal business hours
to the current list of Certificateholders of such Series. Each Holder, by
receiving and holding a Certificate, shall be deemed to have agreed not to hold
any of the Depositor, the Master Servicer, the Owner Trustee or any agent
thereof accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
Maintenance of Office or Agency.
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The Owner Trustee or the Certificate Registrar shall maintain in Wilmington,
Delaware, an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Certificates and the
Basic Documents may be served. The Owner Trustee initially designates its
Corporate Trust Office for such purposes. The Owner Trustee shall give prompt
written notice to the Depositor, the Certificateholders and (unless a Support
Default shall have occurred and be continuing) any Series Support Provider of
any change in the location of the Certificate Register or any such office or
agency.
ERISA Restrictions. The Certificates may not be acquired by or for the
account of (i) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is
subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Internal Revenue Code of 1985, as amended, or (iii) any entity
whose underlying assets include plan assets by reason of a plan's investment in
the entity (each, a "Benefit Plan"). By accepting and holding its beneficial
ownership interest in its Certificate, the Holder thereof shall be deemed to
have represented and warranted that it is not a Benefit Plan.
Securities Matters. Notwithstanding anything contained herein to the
contrary, the Owner Trustee shall not be responsible for ascertaining whether
any transfer complies with the registration provisions or exemptions from the
Securities Act, the Exchange Act, applicable state securities law or the
Investment Company Act; provided, however, that if a certificate is specifically
required to be delivered to the Owner Trustee by a purchaser or transferee of a
Certificate, the Owner Trustee shall be under a duty to examine the same to
determine whether it conforms to the requirements of this Trust Agreement and
shall promptly notify the party delivering the same if such certificate does not
so conform.
Payments on Owner Trust Certificates. On each Distribution Date the
Certificate Paying Agent shall distribute pro rata to the Holders of the Owner
Trust Certificates amounts received pursuant to Section 5.5 of the Master Sale
and Servicing Agreement representing Collected Funds with respect to the
Unpledged Trust Estate.
Paying Agent. Distributions to be made in respect of the Certificates
pursuant to this Agreement, or any Series Supplement shall be made by the
Certificate Paying Agent, by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of the Certificate or the making of any notation thereon, except as
provided in Section 9.1(c) with respect to the final distribution on a Series
Trust
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Certificates or the Owner Trust Certificates.
ARTICLE IV
Voting Rights and Other Actions
-------------------------------
Prior Notice to Holders with Respect to Certain Matters. With respect to
the following matters, the Owner Trustee shall not take action unless at least
30 days before the taking of such action, the Owner Trustee shall have notified
the Certificateholders in writing of the proposed action and the Certificate
Majority shall not have notified the Owner Trustee in writing prior to the 30th
day after such notice is given that such Certificateholders have withheld
consent or provided alternative direction
(a) the election by the Trust to file an amendment to the Certificate of
Trust, which amendment shall have satisfied the Rating Agency Condition (unless
such amendment is required to be filed under the Business Trust Statute or
unless such amendment would not materially and adversely affect the interests of
the Holders);
(b) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Certificateholders;
or
(d) except pursuant to Section 13.1(b) of the Master Sale and Servicing
Agreement, the amendment, change or modification of the Master Sale and
Servicing Agreement, except to cure any ambiguity or defect or to amend or
supplement any provision in a manner that would not materially adversely affect
the interests of the Certificateholders.
(e) the Depositor shall not, without the unanimous consent of the holders
of the Class SV Preferred Stock of the Depositor, institute proceedings to be
adjudicated insolvent, or consent to the institution of any bankruptcy or
insolvency case or proceedings against it, or file or consent to a petition
under any applicable federal or state law relating to bankruptcy, seeking the
Depositor's liquidation or reorganization or any other relief for the
Corporation as debtor, or consent to the appointment of a receiver, liquidator,
assignee, trustee, custodian or sequestrator (or other similar official) of the
Corporation or a substantial part of its property, or make any assignment for
the benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due, or take any corporate action in furtherance of
such action.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, Trust Collateral Agent or Certificate
Registrar within five Business Days thereof.
Action by Certificateholders with Respect to Certain Matters. The Owner
Trustee shall not have the power (a) to remove the Master Servicer under
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the Master Sale and Servicing Agreement or (b) except as expressly provided in
the Indenture and the related Series Supplement and at the direction of the
Certificateholders, sell the Receivables after the termination of the Indenture.
The Owner Trustee shall take the actions referred to in the preceding sentence
only upon written instructions signed by the Certificateholders and the
furnishing of indemnification satisfactory to the Owner Trustee by the
Certificateholders.
Action by Certificateholders with Respect to Bankruptcy. Until one year and
one day following the date of payment in full of the Notes of each Series have
been paid in full, the Owner Trustee shall not have the power to, and shall not,
commence any proceeding or other actions contemplated by Section 2.13(d) hereof
relating to the Trust without the prior written consent of all the Series
Secured Parties and of all the Certificateholders and the delivery to the Owner
Trustee by each such Certificateholder of a certificate certifying that such
Certificateholder reasonably believes that the Trust is insolvent.
Restrictions on Certificateholders' Power. (a) The Certificateholders shall
not direct the Owner Trustee to take or refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement, any of the Basic Documents or any Series Related
Documents or would be contrary to Section 2.3 or otherwise contrary to law nor
shall the Owner Trustee be obligated to follow any such direction, if given.
(b) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this
Agreement or any Basic Document, unless there are no outstanding notes of any
Series and unless the Certificate Majority previously shall have given to the
Owner Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement, and also unless the Certificate Majority shall
have made written request upon the Owner Trustee to institute such action,
suit or proceeding in its own name as Owner Trustee under this Agreement and
shall have offered to the Owner Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Owner Trustee, for 30 days after its receipt of such notice,
request, and offer of indemnity, shall have neglected or refused to institute
any such action, suit, or proceeding, and during such 30-day period no
request or waiver inconsistent with such written request has been given to
the Owner Trustee pursuant to and in compliance with this section or Section
6.3; it being understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Owner Trustee,
that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb, or prejudice the rights of
the Holders of any other of the Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner provided in this Agreement and for
the equal, ratable, and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section 4.4, each and
every
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Certificateholder and the Owner Trustee shall be entitled to such relief as can
be given either at law or in equity.
Majority Control. No Certificateholder shall have any right to vote or in
any manner otherwise control the operation and management of the Trust except as
expressly provided in this Agreement. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Certificate Majority. Except as expressly provided herein, any
written notice of the Certificateholders delivered pursuant to this Agreement
shall be effective if signed by the Certificate Majority at the time of the
delivery of such notice.
ARTICLE V
Certain Duties
--------------
Accounting and Records to the Noteholders, Certificate-holders, the
Internal Revenue Service and Others. Subject to Sections 12.1(b)(iii) and
12.1(c) of the Master Sale and Servicing Agreement, the Holder of the Owner
Trust Certificate shall (a) maintain (or cause to be maintained) the books of
the Trust on a calendar year basis on the accrual method of accounting,
including, without limitation, the allocations of net income under Section 2.11,
(b) deliver (or cause to be delivered) to each Certificateholder, as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1, if applicable) to enable each
Certificateholder to prepare its Federal and state income tax returns, (c) file
or cause to be filed, if necessary, such tax returns relating to the Trust
(including a partnership information return, Form 1065), and direct the Owner
Trustee or the Master Servicer, as the case may be, to make such elections as
may from time to time be required or appropriate under any applicable state or
Federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a branch, or if applicable, as a partnership, for Federal
income tax purposes and (d) collect or cause to be collected any withholding tax
as described in and in accordance with the Master Sale and Serving Agreement or
any Series Supplement with respect to income or distributions to
Certificateholders and the appropriate forms relating thereto. The Owner Trustee
or the Master Servicer, as the case may be, shall make all elections pursuant to
this Section 5.1 as directed in writing by the Depositor. The Owner Trustee
shall sign all tax information returns, if any, filed pursuant to this Section
5.1 and any other returns as may be required by law, and in doing so shall rely
entirely upon, and shall have no liability for information provided by, or
calculations provided by, the Depositor or the Master Servicer. The Owner
Trustee shall elect under Section 1278 of the Code to include in income
currently any market discount that accrues with respect to the Receivables. The
Owner Trustee shall not make the election provided under Section 754 of the
Code.
Signature on Returns; Tax Matters Partner.
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(a) Notwithstanding the provisions of Section 5.1 and in the event that the
Trust is characterized as a partnership, the Owner Trustee shall sign on behalf
of the Trust the tax returns of the Trust, unless applicable law requires a
Certificateholder to sign such documents, in which case such documents shall be
signed by the Depositor.
(b) In the event that the Trust is characterized as a partnership, the
Depositor shall be the "tax matters partner" of the Trust pursuant to the Code.
Note Purchase Agreements. The Master Servicer is hereby authorized to
execute and deliver on behalf of the Trust one or more Note Purchase Agreements
with respect to the Notes.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
General Authority. The Owner Trustee is authorized and directed to execute
and deliver the Basic Documents and each Series Supplement and the related
Series Related Documents to which the Trust is named as a party and each
certificate or other document attached as an exhibit to or contemplated by the
Basic Documents and each Series Supplement and the related Series Related
Documents to which the Trust is named as a party and any amendment thereto, in
each case, in such form as the Holder of the Owner Trust Certificate shall
approve as evidenced conclusively by the Owner Trustee's execution thereof, and
on behalf of the Trust, to direct the Trustee to authenticate and deliver each
Series of Notes (or Class of such Series). In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust pursuant to the Basic Documents and each Series Supplement
and the related Series Related Documents. The Owner Trustee is further
authorized from time to time to take such action as the Certificate Majority
recommends with respect to the Basic Documents and each Series Supplement and
the related Series Related Documents so long as such activities are consistent
with the terms of the Basic Documents and each Series Supplement and the related
Series Related Documents.
General Duties. It shall be the duty of the Owner Trustee to discharge (or
cause to be discharged) all of its responsibilities pursuant to the terms of
this Agreement and to administer the Trust in accordance with the provisions of
this Agreement and in the interest of the Holders, subject to the Basic
Documents and, with respect to Series Trust Certificates, each Series Supplement
and the related Series Related Documents. Notwithstanding the foregoing, the
Owner Trustee shall be deemed to have discharged its duties and responsibilities
hereunder and under the Basic Documents and, with respect to Series Trust
Certificates, each Series Supplement and the related Series Related Documents to
the extent the Master Servicer has agreed in the Master Sale and Servicing
Agreement to perform any act or to discharge any duty of the Trust or the Owner
Trustee hereunder or under any
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Basic Document and, with respect to Series Trust Certificates, each Series
Supplement and the related Series Related Documents, and the Owner Trustee shall
not be liable for the default or failure of the Master Servicer to carry out its
obligations under the Master Sale and Servicing Agreement.
Action upon Instruction. (a) Subject to Article IV, the Certificate
Majority shall have the exclusive right to direct the actions of the Owner
Trustee in the management of the Trust, so long as such instructions are not
inconsistent with the express terms set forth herein, in any Basic Document or,
with respect to Series Trust Certificates, in any Series Supplement or in any
Series Related Document. The Certificate Majority shall not instruct the Owner
Trustee in a manner inconsistent with this Agreement or the Basic Documents or,
with respect to Series Trust Certificates, any Series Supplement or any Series
Related Document.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document or, with respect to Series Trust Certificates, any
Series Supplement or any Series Related Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any Basic Document or, with respect to Series Trust
Certificates, any Series Supplement or any Series Related Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Basic Document or, with respect to Series Trust Certificates, any Series
Supplement or any Series Related Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Certificate Majority requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificate Majority, the Owner Trustee
shall not be liable on account of such action to any Person. If the Owner
Trustee shall not have received appropriate instruction within ten days of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action, not inconsistent with
this Agreement or the Basic Documents or, with respect to Series Trust
Certificates, any Series Supplement or any Series Related Document, as it shall
deem to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or, with respect to Series
Trust Certificates, any Series Supplement or any Series Related Document or any
such provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Certificate
Majority requesting
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instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action, not inconsistent with this Agreement, the Basic Documents or
any Series Related Document, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
No Duties Except as Specified in this Agreement or in Instructions. The
Owner Trustee shall not have any duty or obligation to manage, make any payment
with respect to, register, record, sell, dispose of, or otherwise deal with the
Owner Trust Estate, or to otherwise take or refrain from taking any action
under, or in connection with, any document contemplated hereby to which the
Owner Trustee is a party, except as expressly provided by the terms of this
Agreement or in any document or written instruction received by the Owner
Trustee pursuant to Section 6.3; and no implied duties or obligations shall be
read into this Agreement or any Basic Document or, with respect to Series Trust
Certificates, any Series Supplement or any Series Related Document against the
Owner Trustee. The Owner Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Commission filing for the
Trust or to record this Agreement or any Basic Document or, with respect to
Series Trust Certificates, any Series Supplement or any Series Related Document.
The Owner Trustee nevertheless agrees that it will, at its own cost and expense,
promptly take all action as may be necessary to discharge any Liens on any part
of the Owner Trust Estate that result from actions by, or claims against, the
Owner Trustee (solely in its individual capacity) and that are not related to
the ownership or the administration of the Owner Trust Estate.
No Action Except under Specified Documents or Instructions. The Owner
Trustee shall not manage, control, use, sell, dispose of or otherwise deal with
any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents or any Series Related
Document and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 6.3.
Restrictions. The Owner Trustee shall not take any action (a) that is
inconsistent with the purposes of the Trust set forth in Section 2.3 or (b)
that, to the actual knowledge of the Owner Trustee, would result in the Trust's
becoming taxable as a corporation or a publicly traded partnership for Federal
income tax purposes. The Certificateholders shall not direct the Owner Trustee
to take action that would violate the provisions of this Section.
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ARTICLE VII
Concerning the Owner Trustee
----------------------------
Acceptance of Trusts and Duties. The Owner Trustee accepts the trusts
hereby created and agrees to perform its duties hereunder with respect to such
trusts but only upon the terms of this Agreement. The Owner Trustee and the
Certificate Paying Agent also agree to disburse all monies actually received by
it constituting part of the Owner Trust Estate upon the terms of this Agreement
or the Basic Documents or, with respect to Series Trust Certificates, any Series
Supplement or any Series Related Document. The Owner Trustee shall not be
answerable or accountable hereunder or under any Basic Document or, with respect
to Series Trust Certificates, any Series Supplement or any Series Related
Document under any circumstances, except (i) for its own willful misconduct, bad
faith or negligence, (ii) in the case of the inaccuracy of any representation or
warranty contained in Section 7.3 expressly made by the Owner Trustee in its
individual capacity, (iii) for liabilities arising from the failure of the Owner
Trustee to perform obligations expressly undertaken by it in the last sentence
of Section 6.4 hereof, (iv) for any investments issued by the Owner Trustee or
any branch or affiliate thereof in its commercial capacity or (v) for taxes,
fees or other charges on, based on or measured by, any fees, commissions or
compensation received by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of
the Certificate Majority, the Depositor, the Master Servicer or any
Certificateholder;
(c) no provision of this Agreement or any Basic Document or, with
respect to Series Trust Certificates, any Series Supplement or any Series
Related Document shall require the Owner Trustee to expend or risk funds or
otherwise incur any financial liability in the performance of any of its
rights or powers hereunder or under any Basic Document or, with respect to
Series Trust Certificates, any Series Supplement or any Series Related
Document if the Owner Trustee shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents or,
with respect to Series Trust Certificates, any Series Supplement or any
Series Related Document, including the principal of and interest on the
Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or
in
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respect of the validity or sufficiency of the Basic Documents or, with
respect to Series Trust Certificates, any Series Supplement or any Series
Related Document, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty or obligation to the Depositor, any Series Support
Provider, Trustee, Trust Collateral Agent, the Collateral Agent, any
Noteholder or to any Certificateholder, other than as expressly provided
for herein, in the Basic Documents or, with respect to Series Trust
Certificates, any Series Supplement or any Series Related Document;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Depositor, any Series Support Provider, the Trustee, the
Trust Collateral Agent or the Master Servicer under any of the Basic
Documents or otherwise and the Owner Trustee shall have no obligation or
liability to perform the obligations under this Agreement, the Basic
Documents or, with respect to Series Trust Certificates, any Series
Supplement or any Series Related Document that are required to be performed
by the Depositor under this Agreement, by the Trustee under the Indenture,
any Series Supplement or any Series Related Document or the Trust
Collateral Agent or the Master Servicer under the Master Sale and Servicing
Agreement or any Series Supplement or any Series Related Document; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation to this Agreement or any Basic Document or, with respect to Series
Trust Certificates, any Series Supplement or any Series Related Document,
at the request, order or direction of the Certificate Majority or any of
the Certificateholders, unless such Certificate Majority or
Certificateholders have offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in
any Basic Document shall not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its negligence, bad faith or willful
misconduct in the performance of any such act.
Furnishing of Documents. The Owner Trustee shall furnish to the
Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents or, with respect to Series Trust Certificates, any
Series Supplement or any Series Related Document.
Representations and Warranties. The Owner Trustee hereby represents and
warrants, in its individual capacity, to the Depositor, the Holders and any
Series Support Provider (which shall have relied on such representations and
warranties in issuing any policy relating to Series Support), that:
(a) It is a Delaware banking corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware. It has
all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
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(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware state law, governmental rule or regulation
governing the banking or trust powers of the Owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.
Reliance; Advice of Counsel. (a) The Owner Trustee shall incur no liability
to anyone in acting upon any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper
believed by it to be genuine and believed by it to be signed by the proper party
or parties. The Owner Trustee may accept a certified copy of a resolution of the
board of directors or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body and that the
same is in full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Owner Trustee
may for all purposes hereof rely on a certificate, signed by the president or
any vice president or by the treasurer, secretary or other authorized officers
of the relevant party, as to such fact or matter, and such certificate shall
constitute full protection to the Owner Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and according to such opinion not
contrary to this Agreement or any Basic Document or, with respect to Series
Trust Certificates, any Series Supplement or any Series Related Document.
Not Acting in Individual Capacity. Except as provided in this Article VII,
in accepting the trusts hereby created Wilmington Trust Company acts solely as
Owner Trustee hereunder and not in its individual capacity and all Persons
having any claim against the Owner Trustee by reason of the transactions
contemplated by this Agreement or any Basic Document or, with respect to Series
Trust Certificates, any Series Supplement or any Series Related Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
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Owner Trustee Not Liable for Certificates or Receivables. The recitals
contained herein and in the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, of any Basic Document or of the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates) or the Notes, or of any Receivable or related documents.
The Owner Trustee shall at no time have any responsibility or liability for or
with respect to the legality, validity and enforceability of any Receivable, or
the perfection and priority of any security interest created by any Receivable
in any Financed Vehicle or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Owner Trust Estate or its
ability to generate the payments to be distributed to Certificateholders under
this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence and
contents of any Receivable on any computer or other record thereof; the validity
of the assignment of any Receivable to the Trust or of any intervening
assignment; the completeness of any Receivable; the performance or enforcement
of any Receivable; the compliance by the Depositor, the Master Servicer or any
other Person with any warranty or representation made under any Basic Document
or in any related document or the accuracy of any such warranty or
representation or any action of the Trustee or the Master Servicer or any
subservicer taken in the name of the Owner Trustee.
Owner Trustee May Own Certificates and Notes. The Owner Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
or Notes and may deal with the Depositor, the Trustee and the Master Servicer in
banking transactions with the same rights as it would have if it were not Owner
Trustee.
Payments from Owner Trust Estate All payments to be made by the Owner
Trustee or the Trust Collateral Agent under this Agreement or any of the Basic
Documents or, with respect to Series Trust Certificates, any Series Supplement
or any Series Related Document to which the Trust or the Owner Trustee is a
party shall be made only from the income and proceeds of the Owner Trust Estate
and only to the extent that the Owner Trust shall have received income or
proceeds from the Owner Trust Estate to make such payments in accordance with
the terms hereof. Wilmington Trust Company, or any successor thereto, in its
individual capacity, shall not be liable for any amounts payable under this
Agreement or any of the Basic Documents or, with respect to Series Trust
Certificates, any Series Supplement or any Series Related Document to which the
Trust or the Owner Trustee is a party.
Doing Business in Other Jurisdictions.
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Notwithstanding anything contained to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware; (ii) result in any fee, tax or other governmental charge under the
laws of the State of Delaware becoming payable by Wilmington Trust Company (or
any successor thereto); or (iii) subject Wilmington Trust Company (or any
successor thereto) to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company (or any successor
thereto) or the Owner Trustee, as the case may be, contemplated hereby.
ARTICLE VIII
Compensation of Owner Trustee
-----------------------------
Owner Trustee's Fees and Expenses. The Owner Trustee shall receive as
compensation for its services hereunder such fees as have been separately agreed
upon before the date hereof between Household and the Owner Trustee, and the
Owner Trustee shall be entitled to be reimbursed by the Depositor for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder or under the Basic Documents or, with respect to
Series Trust Certificates, under any Series Supplement or under any Series
Related Documents.
Indemnification. The Depositor shall be liable as primary obligor for, and
shall indemnify the Owner Trustee (in its individual and trust capacities) and
its officers, directors, successors, assigns, agents and servants (collectively,
the "Indemnified Parties") from and against, any and all liabilities,
obligations, losses, damages, taxes, claims, actions and suits, and any and all
reasonable costs, expenses and disbursements (including reasonable legal fees
and expenses) of any kind and nature whatsoever (collectively, "Expenses") which
may (in its trust or individual capacities) at any time be imposed on, incurred
by, or asserted against the Owner Trustee or any Indemnified Party in any way
relating to or arising out of this Agreement or the Basic Documents or, with
respect to Series Trust Certificates, any Series Supplement, any series Related
Documents, the Owner Trust Estate, the administration of the Owner Trust Estate
or the action or inaction of the Owner Trustee hereunder, except only that the
Depositor shall not be liable for or required to indemnify the Owner Trustee
from and against Expenses arising or resulting from any of the matters described
in the third sentence of Section 7.1. The indemnities contained in this Section
8.2 and the
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rights under Section 8.1 shall survive the resignation or termination of the
Owner Trustee or the termination of this Agreement. In any event of any claim,
action or proceeding for which indemnity will be sought pursuant to this
Section, the Owner Trustee's choice of legal counsel shall be subject to the
approval of the Depositor which approval shall not be unreasonably withheld.
Payments to the Owner Trustee. Any amounts paid to the Owner Trustee in its
Trust Capacity pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment and any amounts so paid to
the Owner Trustee, in its individual capacity shall not be so paid out of the
Owner Trust Estate but shall be the property of the Owner Trustee in its
individual capacity.
Non-recourse Obligations. Notwithstanding anything in this Agreement or any
Basic Document or, with respect to Series Trust Certificates, any Series
Supplement or any Series Related Document, the Owner Trustee agrees in its
individual capacity and in its capacity as Owner Trustee for the Trust that all
obligations of the Trust to the Owner Trustee individually or as Owner Trustee
for the Trust shall be recourse to the Owner Trust Estate only and specifically
shall not be recourse to the assets of any Certificateholder.
ARTICLE IX
Termination of Trust Agreement
------------------------------
Termination of Trust Agreement. (a) This Agreement and the Trust shall
terminate and be of no further force or effect upon the latest of (i) the
maturity or other liquidation of the last Receivable (including the purchase
by the Master Servicer at its option of the corpus of the Trust as described
in Section 11.1 of the Master Sale and Servicing Agreement) and the
subsequent distribution of amounts in respect of such Receivables as provided
in the Basic Documents or, with respect to Series Trust Certificates, any
Series Supplement or any Series Related Document or (ii) the payment to
Noteholders and Certificateholders of each Series of all amounts required to
be paid to them pursuant to the Indenture and this Agreement and the payment
to any Series Support Provider of all amounts payable or reimbursable to it
pursuant to the related Series Supplement; provided, however, that the rights
to indemnification under Section 8.2 and the rights under Section 8.1 shall
survive the termination of the Trust. The Master Servicer shall promptly
notify the Owner Trustee of any prospective termination pursuant to this
Section 9.1. The bankruptcy, liquidation, dissolution, death or incapacity of
any Certificateholder shall not (x) operate to terminate this Agreement or
the Trust, nor (y) entitle such Certificateholder's legal representatives or
heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of all or any part of the Trust or Owner Trust
Estate nor (z) otherwise affect the rights, obligations and liabilities of
the parties hereto.
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(b) Except as provided in clause (a), neither the Depositor nor any other
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of a Series Trust Estate, specifying the
Distribution Date upon which the Certificateholders of such Series shall
surrender their Series Trust Certificates to the Certificate Paying Agent for
payment of the final distribution and cancellation, shall be given by the Owner
Trustee by letter to Certificateholders of such Series mailed within five
Business Days of receipt of notice of such termination given pursuant to Section
9.1(a) hereof, stating (i) the Distribution Date upon or with respect to which
final payment of the Series Trust Certificates of such Series shall be made upon
presentation and surrender of the Series Trust Certificates of such Series at
the office of the Certificate Paying Agent therein designated, (ii) the amount
of any such final payment, (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates of such Series at the office of
the Certificate Paying Agent therein specified and (iv) interest will cease to
accrue on the Certificates of such Series. The Owner Trustee shall give such
notice to the Certificate Registrar (if other than the Owner Trustee) and the
Certificate Paying Agent at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Certificates of such Series, the
Certificate Paying Agent shall cause to be distributed to Certificateholders of
such Series amounts distributable pursuant to the related Series Supplement.
(d) In the event that all of the Certificateholders of such Series shall
not surrender their Series Trust Certificates for cancellation within six months
after the date specified in the above-mentioned written notice, the Certificate
Paying Agent shall give a second written notice to the remaining
Certificateholders of such Series to surrender their Series Trust Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice all the Certificates of such Series
shall not have been surrendered for cancellation, the Certificate Paying Agent
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Series
Trust Certificates, and the cost thereof shall be paid out of the funds and
other Series Trust Estate assets that shall remain subject to this Agreement.
Any funds remaining in the Trust after exhaustion of such remedies shall be
distributed, subject to applicable escheat laws, by the Certificate Paying Agent
to the Depositor and Holders shall look solely to the Depositor for payment.
Notice of termination of the Owner Trust Certificates, specifying the
Distribution Date upon which the Certificateholders of such Owner Trust
Certificates shall surrender their Owner Trust Certificates to the Certificate
Paying Agent for payment of the final distribution and cancellation, shall be
given by the Certificate Paying Agent by letter to such Certificateholders
mailed within five Business Days of receipt of notice of such termination from
the Master Servicer given pursuant to Section 11.1(c) of the Master Sale and
Servicing Agreement. Upon presentation and surrender of the Owner Trust
Certificates, the Certificate Paying Agent shall cause to be distributed to such
Certificateholders amounts representing the final Collected Funds or other
proceeds of the Unpledged Trust Estate.
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In the event that all of the holders of the Owner Trust Certificates shall
not surrender their Owner Certificates for cancellation within six months after
the date specified in the above-mentioned written notice, the Certificate Paying
Agent shall give a second written notice to the remaining holders of the Owner
Trust Certificates to surrender their Owner Trust Certificates for cancellation
and receive the final distribution with respect thereto. If within one year
after the second notice all the Owner Trust Certificates shall not have been
surrendered for cancellation, the Certificate Paying Agent may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining holders of the Owner Trust Certificates concerning surrender of their
Owner Trust Certificates, and the cost thereof shall be paid out of the funds
and other assets that shall remain subject to this Agreement. Any funds
remaining in the Trust after exhaustion of such remedies shall be distributed,
subject to applicable escheat laws, by the Certificate Paying Agent to the
Depositor and Holders shall look solely to the Depositor for payment.
(e) Any funds remaining in the Trust after funds for final distribution
have been distributed or set aside for distribution shall be distributed by the
Certificate Paying Agent to the Depositor.
(f) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
Eligibility Requirements for Owner Trustee. The Owner Trustee shall at all
times be a corporation (i) satisfying the provisions of Section 3807(a) of the
Business Trust Statute; (ii) authorized to exercise corporate trust powers;
(iii) having a combined capital and surplus of at least $50,000,000 and subject
to supervision or examination by Federal or State authorities; (iv) having (or
having a parent which has) a rating of at least Baa3 by Moody's or A-1 by
Standard & Poors; and (v) acceptable to the Certificateholders. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2.
Resignation or Removal of Owner Trustee. The Owner Trustee may at any time
resign and be discharged from the trusts hereby created by giving written notice
thereof to the Depositor (or in the event that the
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Depositor is not the sole Certificateholder, the Holders of Certificates
evidencing not less than a majority of the Certificate Balance), any Series
Support Provider and the Master Servicer. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor Owner Trustee,
meeting the qualifications set forth in Section 10.1 herein, by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Owner Trustee and one copy to the successor Owner Trustee, provided
that the Depositor shall have received written confirmation from each of the
Rating Agencies that the proposed appointment will not result in an increased
capital charge to any Series Support Provider by either of the Rating Agencies.
If no successor Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or any Series Support Provider may petition any court of
competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Owner Trustee. If the Depositor shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Owner Trustee, meeting the qualifications set
forth in Section 10.1 herein, by written instrument, in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed,
one copy to any Series Support Provider and one copy to the successor Owner
Trustee and payment of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
Successor Owner Trustee. Any successor Owner Trustee appointed pursuant to
Section 10.2 shall execute, acknowledge and deliver to the Depositor, the Master
Servicer, each Series Support Provider and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor and the predecessor
Owner
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Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Master Servicer shall mail notice of the successor of such
Owner Trustee to all Certificateholders, the Trustee, the Noteholders and the
Rating Agencies. If the Master Servicer shall fail to mail such notice within 10
days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Master Servicer.
Any successor Owner Trustee appointed pursuant to this Section 10.3 shall
promptly file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of Delaware.
Merger or Consolidation of Owner Trustee. Any corporation into which the
Owner Trustee may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Owner Trustee shall be a party, or any corporation succeeding to all
or substantially all of the corporate trust business of the Owner Trustee, shall
be the successor of the Owner Trustee hereunder, provided such corporation shall
be eligible pursuant to Section 10.1, without the execution or filing of any
instrument or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided further that the Owner Trustee
shall mail notice of such merger or consolidation to the Rating Agencies.
Appointment of Co-Trustee or Separate Trustee . Notwithstanding any other
provisions of this Agreement, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Owner Trust Estate or
any Financed Vehicle may at the time be located, the Master Servicer and the
Owner Trustee acting jointly shall have the power and shall execute and deliver
all instruments to appoint one or more Persons approved by the Owner Trustee and
any Series Support Provider to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Owner Trustee may consider necessary or desirable. If the
Master Servicer shall not have joined in such appointment within 15 days after
the receipt by it of a request so to do, the Owner Trustee, subject to the
approval of the Certificate Majority (which approval shall not be unreasonably
withheld), shall have the power to
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make such appointment. No co-trustee or separate trustee under this Agreement
shall be required to meet the terms of eligibility as a successor trustee
pursuant to Section 10.1 and no notice of the appointment of any co-trustee or
separate trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized
to act separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed, the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Master Servicer and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Master Servicer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
Miscellaneous
-------------
36
<PAGE>
Supplements and Amendments. (a) This Agreement may be amended from time to
time by the parties hereto, by a written instrument signed by each of them,
without the consent of any of the Securityholders; provided that an Opinion of
Counsel for the Depositor (which Opinion of Counsel may, as to factual matters,
rely upon Officer's Certificates of the Depositor) is addressed and delivered to
the Owner Trustee, dated the date of any such amendment, to the effect that the
conditions precedent to any such amendment have been satisfied and the Depositor
shall have delivered to the Owner Trustee an Officer's Certificate dated the
date of any such Amendment, stating that the Depositor reasonably believes that
such Amendment will not have a material adverse effect on the Securityholders.
(b) This Agreement may also be amended from time to time with the consent
of the Holders of the Certificates and Notes evidencing not less than 50% of the
aggregate unpaid principal amount of the Security Balance of all affected
Securityholders for which the Seller has not delivered an Officer's Certificate
stating that there is no material adverse effect, 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, payments received that are required to be
distributed on any Security without the consent of the related Securityholder,
or (ii) reduce the aforesaid percentage of Securities the Holder of which are
required to consent to any such amendment, without the consent of the Holders of
all such Certificates then outstanding or cause any material adverse tax
consequences to any Certificateholders or Noteholders.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe. Promptly after the execution of
any amendment to the Certificate of Trust, the Owner Trustee shall cause the
filing of such amendment with the Secretary of State.
(c) The Owner Trustee shall not be required to enter into any amendment to
this Agreement which affects its own rights, duties or immunities under this
Agreement.
No Legal Title to Owner Trust Estate in Certificateholders. The
Certificateholders shall not have legal title to any part of the related Series
Trust Estate. The Certificateholders shall be entitled to receive distributions
with respect to their undivided ownership interest therein only in accordance
with Articles V and IX. No
37
<PAGE>
transfer, by operation of law or otherwise, of any right, title or interest of
the Certificateholders to and in their ownership interest in the related Series
Trust Estate shall operate to terminate this Agreement or the trusts hereunder
or entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the related Series Trust Estate.
Limitations on Rights of Others. Except for Section 2.7, the provisions of
this Agreement are solely for the benefit of the Owner Trustee, the Depositor,
the Certificateholders, the Master Servicer and, to the extent expressly
provided herein, any Series Support Provider, the Trustee and the Noteholders,
and nothing in this Agreement, 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.
Notices. (a) Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing and shall be deemed given upon receipt
personally delivered, delivered by overnight courier or mailed first class mail
or certified mail, in each case return receipt requested, and shall be deemed to
have been duly given upon receipt, if to the Owner Trustee, addressed to the
Corporate Trust Office; if to the Depositor, addressed to Household Auto
Receivables Corporation, 1111 Town Center Drive, Las Vegas, Nevada 89134, with a
copy to Household Finance Corporation, 2700 Sanders Road, Prospect Heights,
Illinois 60070, Attn: Treasurer; if to any Series Support Provider, at the
address of such Series Support Provider as set forth in the related Series
Supplement; or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
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.
Separate Counterparts. This 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
38
<PAGE>
together constitute but one and the same instrument.
Assignments; Series Support Provider. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement shall also inure to the benefit
of any Series Support Provider for so long as a Support Default shall not have
occurred and be continuing. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement which confer rights upon any
Series Support Provider shall be for the benefit of and run directly to any
Series Support Provider, and any Series Support Provider shall be entitled to
rely on and enforce such covenants, subject, however, to the limitations on such
rights provided in this Agreement and the Basic Documents. The Series Support
Provider, if any, may disclaim any of its rights and powers under this Agreement
(but not its duties and obligations under any Series Support Provider) upon
delivery of a written notice to the Owner Trustee.
Covenants of the Depositor. The Depositor will not at any time institute
against the Trust any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, this Agreement or any of the Basic Documents.
No Petition. The Owner Trustee (not in its individual capacity but solely
as Owner Trustee), by entering into this Agreement, each Certificateholder, by
accepting a Certificate, and the Trustee and each Noteholder by accepting the
benefits of this Agreement, hereby covenants and agrees that they will not at
any time institute against the Depositor, or join in any institution against the
Depositor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, this Agreement, any of the Basic Documents, any
Series Supplement or any Series Related Documents.
No Recourse. Each Certificateholder by accepting a Certificate acknowledges
that such Certificateholder's Certificates represent beneficial interests in the
related Series Trust Estate only and do not represent interests in or
obligations of the Master Servicer, the Depositor, the Owner Trustee, the
Trustee, any Series Support Provider or any Affiliate thereof and no recourse
may be had against such parties or their assets, except as may be expressly set
forth or contemplated in this Agreement, the Certificates, the Basic Documents,
any Series Supplement or any Series Related Documents.
Headings. The headings of the various Articles and Sections herein are for
convenience of
39
<PAGE>
reference only and shall not define or limit any of the terms or provisions
hereof.
GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, 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.
Master Servicer. The Master Servicer is authorized to prepare, or cause to
be prepared, execute and deliver on behalf of the Trust all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Trust or Owner Trustee to prepare, file or deliver pursuant to the Basic
Documents, any Series Supplement or any Series Related Documents. Upon written
request, the Owner Trustee shall execute and deliver to the Master Servicer a
limited power of attorney appointing the Master Servicer the Trust's agent and
attorney-in-fact to prepare, or cause to be prepared, execute and deliver all
such documents, reports, filings, instruments, certificates and opinions.
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized as of the
day and year first above written.
WILMINGTON TRUST COMPANY
Owner Trustee
By:_________________________________
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION
Depositor
By:_________________________________
Name:
Title:
Acknowledged and Agreed:
HOUSEHOLD FINANCE CORPORATION
Master Servicer
By:____________________________
Name:
Title:
NORWEST BANK MINNESOTA,
National Association
not in its individual capacity
but solely as Certificate Paying Agent
By:____________________________
Name:
Title:
[Signature Page for Trust Agreement]
<PAGE>
Exhibit 4.1
EXHIBIT A-1
[FORM OF OWNER TRUST CERTIFICATE]
NUMBER
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
OWNER TRUST CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS OWNER TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 3.4 OF THE
TRUST AGREEMENT PERTAINING TO THE HOUSEHOLD AUTO REVOLVING TRUST I (THE
"AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii)
TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN OTHER
REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER THE DEPOSITOR, THE MASTER
SERVICER, THE TRUST NOR THE OWNER TRUSTEE IS OBLIGATED TO REGISTER THE OWNER
TRUST CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES
LAWS.
---------------------------------
OWNER TRUST CERTIFICATE
evidencing a beneficial ownership interest in the assets of the Trust relating
to the Unpledged Trust Estate, which includes a pool of motor vehicle retail
installment sale contracts sold from time to time to the Trust by Household Auto
Receivables Corporation.
(This Owner Trust Certificate does not represent an interest in or obligation of
Household Auto Receivables Corporation or any of its Affiliates, except to the
extent described below.)
A-1
<PAGE>
THIS CERTIFIES THAT Household Auto Receivables Corporation is the
registered owner of a nonassessable, fully-paid, beneficial ownership interest
in the assets of Household Automobile Revolving Trust I (the "Trust") formed by
Household Auto Receivables Corporation, a Nevada corporation (the "Depositor")
and the Unpledged Trust Estate.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY
not in its individual
capacity but solely as
Owner Trustee
by Authenticating Agent
--------------------------------------------------------
by
-----------------------------------------------------------------------------
Household Automobile Revolving Trust I (the "Trust"), was created pursuant
to a Trust Agreement dated as of March 1, 1998 (the "Trust Agreement"), between
the Depositor and Wilmington Trust Company, as owner trustee (the "Owner
Trustee"). A summary of certain of the pertinent provisions of the Trust
Agreement is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the Trust
Agreement and the Master Sale and Servicing Agreement dated as of March 1, 1998
among the Trust, the Depositor, Household Finance Corporation, as master
servicer and Norwest Bank National Association, as trustee and trust collateral
agent.
This certificate is one of the duly authorized certificates of Trust of
Household Automobile Revolving Trust I designated as Owner Trust Certificates.
This Owner Trust Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
holder of this Owner Trust Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust consists of
(i) the Series Trust Estates and (ii) the Unpledged Trust Estate, which includes
a pool of motor vehicle retail installment sale contracts (the "Receivables"),
all monies due thereunder on or after specified Cutoff Dates, security interests
in the vehicles financed thereby, certain bank accounts and the proceeds
thereof, proceeds from claims on certain insurance policies and certain other
rights under the Trust Agreement and the Master Sale and Servicing Agreement and
each related Transfer Agreement, all right, to and interest of, the Depositor in
and to the Master Receivables Purchase Agreement dated as of March 1, 1998
between Household Automotive Finance Corporation and the Depositor and each
Receivables Purchase Agreement Supplement and all proceeds of the foregoing that
have not been pledged with respect to a Series.
Pursuant to Section 3.11 of the Trust Agreement, there will be distributed
A-2
<PAGE>
on the 17th day of each month or, if such 17th day is not a Business Day, the
next Business Day (the "Distribution Date"), commencing on April 17, 1998, to
the Person in whose name this Owner Trust Certificate is registered at the close
of business on the Business Day preceding such Distribution Date (the "Record
Date") such Owner Trust Certificateholder's fractional undivided interest in
amounts, if any, representing collections with respect to the Unpledged Trust
Estate to be distributed on such Distribution Date.
It is the intent of the Depositor, the Master Servicer, and the Owner Trust
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a branch. In the event that the Certificates are held by more than
one Holder, it is the intent of the Depositor, the Master Servicer, and the
Owner Trust Certificateholders that, for purposes of Federal income taxes, the
Trust will be treated as a partnership and the Certificateholders will be
treated as partners in that partnership. The Depositor and any other Owner Trust
Certificateholders, by acceptance of an Owner Trust Certificate, agree to treat,
and to take no action inconsistent with the treatment of, the Owner Trust
Certificates for such tax purposes as partnership interests in the Trust. Each
Owner Trust Certificateholder, by its acceptance of an Owner Trust Certificate,
covenants and agrees that such Owner Trust Certificateholder will not at any
time institute against the Trust or the Depositor, or join in any institution
against the Trust or the Depositor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Owner Trust Certificates, the Trust Agreement or
any of the Basic Documents.
Distributions on this Owner Trust Certificate will be made as provided in
the Trust Agreement by the Trustee or Trust Collateral Agent, if any, by wire
transfer or check mailed to the Owner Trust Certificateholder of record in the
Certificate Register without the presentation or surrender of this Certificate
or the making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this Owner
Trust Certificate will be made after due notice by the Owner Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Owner Trust Certificate at the office or agency maintained for the purpose by
the Owner Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this Owner Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Owner
Trust Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Master Sale and Servicing Agreement or be valid for any
purpose.
THIS OWNER TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
A-3
<PAGE>
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-4
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Owner Trust Certificate to be duly
executed.
HOUSEHOLD AUTOMOBILE
REVOLVING TRUST I
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner Trustee
Dated: By:______________________________
By: ____________________________
Name:
Title:
A-5
<PAGE>
(Reverse of Certificate)
The Owner Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Master Servicer, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein or in
the Trust Agreement, the Indenture, the Basic Documents. In addition, this Owner
Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Receivables, as more specifically set forth herein and in the
Master Sale and Servicing Agreement. A copy of each of the Master Sale and
Servicing Agreement and the Trust Agreement may be examined during normal
business hours at the principal office of the Depositor, and at such other
places, if any, designated by the Depositor, by any Owner Trust
Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Owner Trust Certificateholders under the Trust
Agreement at any time by the Depositor and the Owner Trustee and with the
consent of the holders of the Owner Trust Certificates evidencing not less than
a majority of the outstanding Owner Trust Certificates. Any such consent by the
holder of this Owner Trust Certificate shall be conclusive and binding on such
holder and on all future holders of this Owner Trust Certificate and of any
certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Owner Trust
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the holders of any of the Owner
Trust Certificates (other than the Depositor).
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Owner Trust Certificate is registrable
in the Certificate Register upon surrender of this Owner Trust Certificate for
registration of transfer at the offices or agencies of the Certificate Registrar
maintained by the Owner Trustee in the Corporate Trust Office, accompanied by a
written instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Owner Trust
Certificates in authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is Wilmington Trust
Company.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, Owner Trust Certificates are exchangeable for new Owner Trust
Certificates in authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
A-6
<PAGE>
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Owner Trust Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar nor any such agent shall be
affected by any notice to the contrary.
The Owner Trust Certificates may not be acquired by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e) (1) of the Code or (c)
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Owner Trust Certificate, the Holder hereof shall be deemed to have represented
and warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of the
Depositor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Owner Trust
Certificate or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Owner Trust Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Master Sale and Servicing Agreement or be valid
for any purpose.
A-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
____________________ Attorney to transfer said Certificate on the books of the
Certificate Registrar, with full power of substitution in the premises.
Dated:
*
--------------------------------------------------
Signature Guaranteed:
*
--------------------------------------------------
* NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Certificate Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may be
determined by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
A-8
<PAGE>
Exhibit 4.1
EXHIBIT A-2
[FORM OF SERIES 1998-A TRUST CERTIFICATE]
NUMBER
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
SERIES 1998-A CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS SERIES 1998-A CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 3.4 OF THE
TRUST AGREEMENT PERTAINING TO THE HOUSEHOLD AUTO REVOLVING TRUST I (THE
"AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii)
TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN OTHER
REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER THE DEPOSITOR, THE MASTER
SERVICER, THE TRUST NOR THE OWNER TRUSTEE IS OBLIGATED TO REGISTER THE SERIES
1998-A CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES
LAWS.
THE PRINCIPAL OF THIS SERIES 1998-A CERTIFICATE IS DISTRIBUTABLE IN
INSTALLMENTS AS SET FORTH IN THE TRUST AGREEMENT AND THE SERIES 1998-A
SUPPLEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS SERIES 1998-A
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
SERIES 1998-A CERTIFICATE
evidencing a beneficial ownership interest in the assets of the Trust relating
to the Series
A-1
<PAGE>
1998-A Trust Estate, which includes a pool of motor vehicle retail installment
sale contracts sold to the Trust by Household Auto Receivables Corporation.
(This Series 1998-A Certificate does not represent an interest in or obligation
of Household Auto Receivables Corporation or any of its Affiliates, except to
the extent described below.)
THIS CERTIFIES THAT Household Auto Receivables Corporation is the
registered owner of a $_____________ nonassessable, fully-paid, beneficial
ownership interest in the assets of Household Automobile Revolving Trust I (the
"Trust") formed by Household Auto Receivables Corporation, a Nevada corporation
(the "Depositor") and the Series 1998-A Trust Estate. The Certificates shall
bear interest at the Series 1998-A Certificate Interest Rate.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY
not in its individual
capacity but solely as
Owner Trustee
by Authenticating Agent
--------------------------------------------------------
by
-----------------------------------------------------------------------------
Household Automobile Revolving Trust I (the "Trust"), was created pursuant
to a Trust Agreement dated as of March 1, 1998 (the "Trust Agreement"), between
the Depositor and Wilmington Trust Company, as owner trustee (the "Owner
Trustee") as supplemented by a Series 1998-A Supplement dated as of March 1,
1998 (the "Series 1998-A Supplement"). A summary of certain of the pertinent
provisions of the Trust Agreement and Series 1998-A Supplement is set forth
below. To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement and the Series
1998-A Supplement.
This certificate is one of the duly authorized certificates of Trust of
Household Automobile Revolving Trust I designated as Series 1998-A Certificates.
This Series 1998-A Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement and the Series 1998-A
Supplement, to which Trust Agreement the holder of this Series 1998-A
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust consists of the Series 1998-A Trust Estate
which includes a pool of motor vehicle retail installment sale contracts (the
"Receivables"), all monies due thereunder on or after specified Cutoff Dates,
security interests in the vehicles financed thereby, certain bank accounts and
the proceeds thereof, proceeds from claims on certain insurance policies and
certain other rights under the Trust Agreement and the Master Sale and Servicing
A-2
<PAGE>
Agreement and each related Transfer Agreement, all right, to and interest of,
the Depositor in and to the Master Receivables Purchase Agreement dated as of
March 1, 1998 between Household Automotive Finance Corporation and the Depositor
and each Receivables Purchase Agreement Supplement and all proceeds of the
foregoing.
Series 1998-A Notes have been issued pursuant to an Indenture dated as of
March 1, 1998 (the "Indenture"), among the Trust, Household Finance Corporation,
as master servicer and Norwest Bank Minnesota, National Association, as trustee
and trust collateral agent and the Series 1998-A Supplement.
The Certificate Balance hereof shall consist from time to time of .18 times
the principal balance of Receivables transferred to the Trust pursuant to
Section 1.03(a) of the Series 1998-A Supplement and 100 per cent of the
principal balance of receivables transferred to the Trust pursuant to Section
1.03(b) of the Series 1998-A Supplement, less distributions in reduction of the
Certificate Balance pursuant to Section 3.03(a) of the Series 1998-A Supplement.
The Trust will pay interest on this Series 1998-A Certificate on the daily
average of the Certificate Balance calculated over the related Interest Period
in the Series 1998-A Certificate Interest Rate on each Distribution Date until
the principal of this Series 1998-A Certificate is paid or made available for
payment. The holder of this Certificate is entitled to additional interest in
respect of interest on the Certificate's pursuant to Section 3.03(a)(viii) of
the Series 1998-A Supplement.
Under the Series 1998-A Supplement, there will be distributed on the 17th
day of each month or, if such 17th day is not a Business Day, the next Business
Day (the "Distribution Date"), commencing on April 17, 1998, to the Person in
whose name this Series 1998-A Certificate is registered at the close of business
on the Business Day preceding such Distribution Date (the "Record Date") such
Series 1998-A Certificateholder's fractional undivided interest in any amount to
be distributed to Series 1998-A Certificateholders on such Distribution Date.
The holder of this Series 1998-A Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Series 1998-A Certificate
are subordinated to the rights of the Series 1998-A Noteholders as described in
the Master Sale and Servicing Agreement, the Indenture, the Trust Agreement and
the Series 1998-A Supplement, as applicable.
It is the intent of the Depositor, the Master Servicer, and the Series
1998-A Certificateholders that, for purposes of Federal income taxes, the Trust
will be treated as a branch. In the event that the Series 1998-A Certificates
are held by more than one Holder, it is the intent of the Depositor, the Master
Servicer, and the Series 1998-A Certificateholders that, for purposes of Federal
income taxes, the Trust will be treated as a partnership and the
Certificateholders will be treated as partners in that partnership. The
Depositor and any other Series 1998-A Certificateholders, by acceptance of a
Series 1998-A Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Series 1998-A Certificates for such tax purposes as
partnership interests in the Trust. Each Series 1998-A Certificateholder, by its
acceptance of a Series 1998-A Certificate, covenants and agrees that such Series
1998-A Certificateholder will not at any time
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institute against the Trust or the Depositor, or join in any institution against
the Trust or the Depositor of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Series 1998-A Certificates, the Series 1998-A Notes,
the Trust Agreement, any of the Basic Documents or any Series Related Documents.
Distributions on this Series 1998-A Certificate will be made as provided in
Section 3.03(a) of the Series 1998-A Supplement by the Trust Collateral Agent by
wire transfer or check mailed to the Series 1998-A Certificateholder of record
in the Certificate Register without the presentation or surrender of this
Certificate or the making of any notation hereon. Except as otherwise provided
in the Trust Agreement and notwithstanding the above, the final distribution on
this Series 1998-A Certificate will be made after due notice by the Owner
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Series 1998-A Certificate at the office or agency maintained
for the purpose by the Owner Trustee in the Corporate Trust Office.
Reference is hereby made to the further provisions of this Series 1998-A
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Series
1998-A Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Master Sale and Servicing Agreement or be valid for any
purpose.
THIS SERIES 1998-A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, 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.
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IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Series 1998-A Certificate to be duly
executed.
HOUSEHOLD AUTOMOBILE
REVOLVING TRUST I
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner Trustee
Dated: By:______________________________
By: ____________________________
Name:
Title:
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<PAGE>
(Reverse of Certificate)
The Series 1998-A Certificates do not represent an obligation of, or an
interest in, the Depositor, the Master Servicer, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein or in
the Trust Agreement, the Indenture, the Basic Documents or any Series Related
Documents. In addition, this Series 1998-A Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections with respect to the Receivables, as more specifically set
forth herein and in the Master Sale and Servicing Agreement. A copy of each of
the Master Sale and Servicing Agreement, the Trust Agreement and the Series
1998-A Supplement may be examined during normal business hours at the principal
office of the Depositor, and at such other places, if any, designated by the
Depositor, by any Series 1998-A Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Series 1998-A Certificateholders under the Trust
Agreement at any time by the Depositor and the Owner Trustee and with the
consent of the holders of the Series 1998-A Notes and the Series 1998-A
Certificates evidencing not less than a majority of the outstanding Series
1998-A Notes and the Certificate Balance. Any such consent by the holder of this
Series 1998-A Certificate shall be conclusive and binding on such holder and on
all future holders of this Series 1998-A Certificate and of any certificate
issued upon the transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent is made upon this Series 1998-A Certificate. The
Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the holders of any of the Series 1998-A
Certificates (other than the Depositor).
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Series 1998-A Certificate is registrable
in the Certificate Register upon surrender of this Series 1998-A Certificate for
registration of transfer at the offices or agencies of the Certificate Registrar
maintained by the Owner Trustee in the Corporate Trust Office, accompanied by a
written instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Series 1998-A
Certificates in authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is Wilmington Trust
Company.
Except for Certificates issued to the Depositor, the Certificates are
issuable only as registered Certificates without coupons in denominations of
$100,000 or integral multiples of $1,000 in excess thereof. As provided in the
Trust Agreement and subject to certain limitations therein set forth, Series
1998-A Certificates are exchangeable for new Series 1998-A Certificates in
authorized denominations evidencing the same aggregate denomination, as
requested by the holder surrendering the same. No service charge will
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be made for any such registration of transfer or exchange, but the Owner Trustee
or the Certificate Registrar may require payment of a sum sufficient to cover
any tax or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Series 1998-A Certificate is registered as the owner hereof for all purposes,
and none of the Owner Trustee, the Certificate Registrar nor any such agent
shall be affected by any notice to the contrary.
The Series 1998-A Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e) (1) of
the Code or (c) any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding this Series 1998-A Certificate, the Holder hereof shall be deemed to
have represented and warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of the
Depositor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Series 1998-A
Certificate or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual or facsimile signature,
this Series 1998-A Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Master Sale and Servicing Agreement or
be valid for any purpose.
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
____________________ Attorney to transfer said Certificate on the books of the
Certificate Registrar, with full power of substitution in the premises.
Dated:
*
--------------------------------------------------
Signature Guaranteed:
*
--------------------------------------------------
* NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Certificate Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may be
determined by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
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<PAGE>
Exhibit 4.2
------------------------------------------------------------------------
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
Issuer
INDENTURE
Dated as of October __, 1998
HOUSEHOLD FINANCE CORPORATION
Master Servicer
THE CHASE MANHATTAN BANK
Trustee and Trust Collateral Agent
------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. Definitions and Incorporation by Reference..............................................1
SECTION 1.1 Definitions...................................................................1
SECTION 1.2 Incorporation by Reference of the Trust Indenture Act.........................7
SECTION 1.3 Rules of Construction.........................................................7
SECTION 1.4 Action by or Consent of Noteholders and Certificateholders....................8
SECTION 1.5 Material Adverse Effect.......................................................8
SECTION 1.6 Conflict with TIA.............................................................8
SECTION 1.7 Certain References............................................................8
ARTICLE II. The Notes..............................................................................9
SECTION 2.1 Form; Amount Limited; Issuable in Series......................................9
SECTION 2.2 Execution, Authentication and Delivery........................................9
SECTION 2.3 Temporary Notes..............................................................10
SECTION 2.4 Registration; Registration of Transfer and Exchange..........................11
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes...................................13
SECTION 2.6 Persons Deemed Owner.........................................................14
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest........................14
SECTION 2.8 Cancellation.................................................................15
SECTION 2.9 Release of Collateral........................................................15
SECTION 2.10 Book-Entry Notes.............................................................16
SECTION 2.11 Notices to Clearing Agency...................................................17
SECTION 2.12 Definitive Notes.............................................................17
SECTION 2.13 Final Distribution...........................................................17
ARTICLE III. Covenants............................................................................18
SECTION 3.1 Payment of Principal and Interest............................................18
SECTION 3.2 Maintenance of Office or Agency..............................................19
SECTION 3.3 Money for Payments to be Held in Trust.......................................19
SECTION 3.4 Existence....................................................................20
SECTION 3.5 Protection of Trust Property.................................................21
SECTION 3.6 Opinions as to Trust Property................................................22
SECTION 3.7 Performance of Obligations; Servicing of Receivables.........................22
SECTION 3.8 Negative Covenants...........................................................23
SECTION 3.9 Annual Statement as to Compliance............................................24
SECTION 3.10 Issuer May Consolidate, Etc. Only on Certain Terms...........................25
SECTION 3.11 Successor or Transferee......................................................26
SECTION 3.12 No Other Business............................................................27
SECTION 3.13 No Borrowing.................................................................27
SECTION 3.14 Master Servicer's Obligations................................................27
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities............................27
SECTION 3.16 Capital Expenditures.........................................................27
SECTION 3.17 Compliance with Laws.........................................................27
SECTION 3.18 Restricted Payments..........................................................28
</TABLE>
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<TABLE>
<S> <C>
SECTION 3.19 Notice of Events of Default..................................................28
SECTION 3.20 Further Instruments and Acts.................................................28
SECTION 3.21 Amendments of Master Sale and Servicing Agreement and Trust Agreement........28
SECTION 3.22 Income Tax Characterization..................................................28
SECTION 3.23 No Borrowing.................................................................29
SECTION 3.24 Guarantees, Loans, Advances and Other Liabilities............................29
SECTION 3.25 Capital Expenditures.........................................................29
SECTION 3.26 Restricted Payments..........................................................29
ARTICLE IV. Satisfaction and Discharge............................................................29
SECTION 4.1 Satisfaction and Discharge of Indenture......................................29
SECTION 4.2 Application of Trust Money...................................................30
SECTION 4.3 Repayment of Monies Held by Note Paying Agent................................31
ARTICLE V. Remedies...............................................................................31
SECTION 5.1 Events of Default............................................................31
SECTION 5.2 Collection of Indebtedness and Suits for Enforcement by Trustee..............31
SECTION 5.3 Limitation of Suits..........................................................33
SECTION 5.4 Unconditional Rights of Noteholders To Receive Principal and Interest........34
SECTION 5.5 Restoration of Rights and Remedies...........................................34
SECTION 5.6 Rights and Remedies Cumulative...............................................35
SECTION 5.7 Delay or Omission Not a Waiver...............................................35
SECTION 5.8 Control by Noteholders.......................................................35
SECTION 5.9 Waiver of Past Defaults......................................................35
SECTION 5.10 Undertaking for Costs........................................................36
SECTION 5.11 Waiver of Stay or Extension Laws.............................................36
SECTION 5.12 Action on Notes..............................................................36
SECTION 5.13 Performance and Enforcement of Certain Obligations...........................37
ARTICLE VI. The Trustee and the Trust Collateral Agent............................................37
SECTION 6.1 Duties of Trustee............................................................37
SECTION 6.2 Rights of Trustee and the Trust Collateral Agent.............................40
SECTION 6.3 Individual Rights of Trustee.................................................41
SECTION 6.4 Trustee's Disclaimer.........................................................41
SECTION 6.5 Notice of Defaults...........................................................41
SECTION 6.6 Reports by Trustee to Holders................................................42
SECTION 6.7 Compensation and Indemnity...................................................42
SECTION 6.8 Replacement of Trustee.......................................................43
SECTION 6.9 Successor Trustee by Merger..................................................44
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee................................45
SECTION 6.11 Eligibility: Disqualification................................................46
SECTION 6.12 Preferential Collection of Claims Against Issuer.............................46
SECTION 6.13 Appointment and Powers.......................................................46
SECTION 6.14 Performance of Duties........................................................47
</TABLE>
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<TABLE>
<S> <C>
SECTION 6.15 Limitation on Liability......................................................47
SECTION 6.16 Reliance Upon Documents......................................................48
SECTION 6.17 Successor Trust Collateral Agent.............................................48
SECTION 6.18 Compensation.................................................................50
SECTION 6.19 Representations and Warranties of the Trustee and the Trust
Collateral Agent..........................................................50
SECTION 6.20 Waiver of Setoffs............................................................50
ARTICLE VII. Noteholders' Lists and Reports.......................................................51
SECTION 7.1 Issuer To Furnish To Trustee Names and Addresses of Noteholders..............51
SECTION 7.2 Preservation of Information; Communications to Noteholders...................51
SECTION 7.3 Reports by Issuer............................................................51
SECTION 7.4 Reports by Trustee...........................................................52
ARTICLE VIII. Accounts, Disbursements and Releases................................................52
SECTION 8.1 Collection of Money..........................................................52
SECTION 8.2 Release of Trust Property....................................................53
SECTION 8.3 Opinion of Counsel...........................................................53
ARTICLE IX. Amendments; Series Supplements........................................................54
SECTION 9.1 Amendments Without Consent of Noteholders....................................54
SECTION 9.2 Amendments With Consent of Noteholders.......................................55
SECTION 9.3 Supplements Authorizing a Series of Notes....................................56
SECTION 9.4 Execution of Series Supplements..............................................57
SECTION 9.5 Effect of Series Supplement..................................................57
SECTION 9.6 Conformity With Trust Indenture Act..........................................57
SECTION 9.7 Reference in Notes to Series Supplements.....................................57
ARTICLE X. Reserved...............................................................................58
ARTICLE XI. Miscellaneous.........................................................................58
SECTION 11.1 Compliance Certificates and Opinions, etc....................................58
SECTION 11.2 Form of Documents Delivered to Trustee.......................................60
SECTION 11.3 Acts of Noteholders..........................................................61
SECTION 11.4 Notices, etc., to Trustee, Issuer and Rating Agencies........................61
SECTION 11.5 Notices to Noteholders; Waiver...............................................62
SECTION 11.6 Alternate Payment and Notice Provisions......................................62
SECTION 11.7 Conflict with Trust Indenture Act............................................63
SECTION 11.8 Effect of Headings and Table of Contents.....................................63
SECTION 11.9 Successors and Assigns.......................................................63
SECTION 11.10 Separability.................................................................63
SECTION 11.11 Benefits of Indenture........................................................63
SECTION 11.12 Legal Holidays...............................................................64
SECTION 11.13 GOVERNING LAW................................................................64
SECTION 11.14 Counterparts.................................................................64
SECTION 11.15 Recording of Indenture.......................................................64
</TABLE>
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<TABLE>
<S> <C>
SECTION 11.16 Trust Obligation.............................................................64
SECTION 11.17 No Petition..................................................................65
SECTION 11.18 Inspection...................................................................65
SECTION 11.19 Limitation of Liability......................................................65
</TABLE>
EXHIBIT 1 Form of Investment Letter
5
<PAGE>
INDENTURE dated as of October 1, 1998, between HOUSEHOLD AUTOMOBILE
REVOLVING TRUST I, a Delaware business trust (the "Issuer"), HOUSEHOLD FINANCE
CORPORATION, a Delaware corporation (the "Master Servicer") and THE CHASE
MANHATTAN BANK, a national banking association, as trustee (the "Trustee") and
Trust Collateral Agent (as defined below).
In consideration of the mutual agreements contained herein, and of
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
GRANTING CLAUSE
In order to secure the due and punctual payment of the principal of
and interest on the Notes of the related Series and all other Series Secured
Obligations of the related Series when and as the same shall become due and
payable, whether as scheduled, by declaration of acceleration, prepayment or
otherwise, according to the terms of this Indenture, the related Series
Supplement and the related Notes, the Issuer, pursuant to the related Series
Supplement, shall pledge the related Series Trust Estate to the Trustee, all for
the benefit of the Trustee for the benefit of the Holders of the related Series
and the other Series Secured Parties.
ARTICLE I.
Definitions and Incorporation by Reference
Definitions. Except as otherwise specified herein, the following
terms have the respective meanings set forth below for all purposes of this
Indenture.
"Act" has the meaning specified in Section 11.3(a).
"Authorized Officer" means, with respect to the Issuer and the Master
Servicer, any officer or agent acting pursuant to a power of attorney of the
Owner Trustee or the Master Servicer, as applicable, who is authorized to act
for the Owner Trustee or the Master Servicer, as applicable, in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by each of the Owner Trustee and the Master Servicer to the Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"Book Entry Notes" means any beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
6
<PAGE>
"Class" means, with respect to any Series, all the Notes of such
Series having the same specified payment terms and priority of payment.
"Class SV Preferred Stock" means the preferred stock of the Seller.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at date of the execution of this Agreement is located at
_________________ __________________ _________, Attention:
______________________________ or at such other address as the Trustee may
designate from time to time by notice to the Noteholders, the Master Servicer
and the Issuer, or the principal corporate trust office of any successor Trustee
(the address of which the successor Trustee will notify the Noteholders and the
Issuer).
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of a Series Trust Estate or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of a Series Trust Estate and all
other monies payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring proceedings
7
<PAGE>
in the name of the Granting party or otherwise and generally to do and receive
anything that the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Independent" means, when used with respect to any specified Person,
that the person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Trust Collateral Agent, if any, and the Trustee under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.1, prepared by an Independent appraiser or other
expert appointed pursuant to an Issuer Order and approved by the Trustee or the
Trust Collateral Agent, if any, in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.
"Master Sale and Servicing Agreement" means the Master Sale and
8
<PAGE>
Servicing Agreement dated as of March 1, 1998, among the Issuer, the Seller, the
Master Servicer, the Trustee and the Trust Collateral Agent, as the same may be
amended or supplemented from time to time.
"Note" means any Note authenticated and delivered under this
Indenture.
"Note Owner" means, with respect to a Book-Entry Note, the person who
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Paying Agent" means the Trustee or any other Person that meets
the eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make payments to and distributions from the Master
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.4.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1 and TIA ss. 314, and
delivered to the Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer. Each certificate with respect to
compliance with a condition or covenant provided for in this Agreement shall
include (1) a statement that the Authorized Officer signing the certificate has
read such covenant or condition; (2) a brief statement as to the nature and
scope of the examination or investigation upon which the statements contained in
such certificate are based; (3) a statement that in the opinion of such person,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or
any Note Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given
9
<PAGE>
pursuant to a Series Supplement or provision therefor, satisfactory to
the Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the related
Series Support shall continue to remain Outstanding for purposes of this
Indenture until the related Series Support Provider has been paid as subrogee
hereunder or reimbursed pursuant to any agreement relating to Series Support as
evidenced by a written notice from the related Series Support Provider delivered
to the Trustee, and the related Series Support Provider shall be deemed to be
the Holder thereof to the extent of any payments thereon made by the related
Series Support Provider; provided, further, that in determining whether the
Holders of the requisite Outstanding Amount of the Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any Basic Document, Notes owned by the Issuer, any other obligor upon the Notes,
the Seller or any Affiliate of any of the foregoing Persons shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Trustee either actually knows to be so owned or has
received written notice thereof shall be so disregarded. Notes so owned that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Issuer, any other
obligor upon the Notes, the Seller or any Affiliate of any of the foregoing
Persons.
"Outstanding Amount" means the aggregate principal amount of all
Notes, or Class of Notes, as applicable, Outstanding at the date of
determination.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Record Date" means, with respect to a Distribution Date, the close of
business on the Business Day immediately preceding such Distribution Date.
"Registration Statement" has the meaning specified therefor in the
Securities Act.
"Responsible Officer" means, with respect to the Trustee or the Owner
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Trustee (as defined in the Trust Agreement), any officer within the Corporate
Trust Office of the Trustee or the Owner Trustee, as the case may be, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary, Financial Services Officer or any other officer of the Trustee or the
Owner Trustee, as the case may be, customarily performing functions similar to
those performed by any of the above designated officers, and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"Securities Act" means the Securities Act of 1933, as amended.
"Series Secured Obligations" with respect to a Series, has the meaning
specified therefor in the related Series Supplement.
"Series Secured Parties" with respect to a Series, has the meaning
ascribed in the related Series Supplement.
"Series Termination Date" with respect to a Series, has the meaning
ascribed in the related Series Supplement.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Support Default" with respect to a Series, shall have the meaning
assigned to such term and the related Series Supplement.
"Tranche" means all of the Notes of a Series (or a Class within a
Series) having the same date of authentication.
"Trust Collateral Agent" means, initially, The Chase Manhattan Bank,
but only if and to the extent that it is appointed as collateral agent on behalf
of the Noteholders of a Series and a related Series Support Provider, including
its successors-in-interest, until and unless a successor Person shall have
become the Trust Collateral Agent pursuant to Section 6.17 hereof, and
thereafter "Trust Collateral Agent" shall mean such successor Person.
"Trust Property" means all money, instruments, rights and other
property that are subject or intended to be subject to the lien and security
interest of this Indenture for the benefit of the Noteholders (including all
property and interests Granted to the Trustee or the Trust Collateral Agent, if
any), including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended and as in force on the date hereof, unless otherwise specifically
provided.
"Trustee" means The Chase Manhattan Bank, a national banking
association, not in its individual capacity but as trustee under this Indenture,
or any
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successor trustee under this Indenture.
"Trustee Fee" means the fees due to the Trustee and the Trust
Collateral Agent, if any, as may be set forth in that certain fee letter, dated
as of the date hereof between the Master Servicer and The Chase Manhattan Bank.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"Unregistered Note" means a Note which is not being offered for sale
hereunder pursuant to a Registration Statement.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Master Sale and Servicing Agreement or
the Trust Agreement.
Incorporation by Reference of the Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by the
TIA, or defined by Commission rule have the meaning assigned to them by such
definitions.
Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
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(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
Action by or Consent of Noteholders and Certificateholders.
Whenever any provision of this Agreement refers to action to be taken, or
consented to, by Noteholders or Certificateholders, such provision shall be
deemed to refer to the Certificateholder or Noteholder, as the case may be,
of record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders or
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Noteholders or Certificateholders, any Note or Certificate
registered in the name of Seller or any Affiliate thereof shall be deemed not
to be outstanding (except in the event that no Notes are outstanding and the
Seller or an Affiliate thereof then owns all outstanding Certificates and
there is no Series Support Provider); provided, however, that, solely for the
purpose of determining whether the Trustee or the Trust Collateral Agent, if
any, is entitled to rely upon any such action or consent, only Notes or
Certificates which the Owner Trustee or the Trustee, respectively, knows to
be so owned shall be so disregarded.
Material Adverse Effect. Whenever a determination is to be made
under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse
effect on the Securityholders (or any similar or analogous determination),
such determination shall be made without taking into account the funds
available from the related Series Support Provider.
Conflict with TIA. If this Indenture is qualified under the TIA,
and if any provision hereof limits, qualifies or conflicts with a provision
of the TIA that is required under the TIA to be part of and govern this
Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the TIA that may be so
modified or excluded, the latter provisions shall be deemed to apply to this
Indenture as so modified or to be excluded, as the case may be.
Certain References. In the event that no Trust Collateral Agent is
appointed to act as agent on behalf of a Series of Noteholders and a related
Series Support Provider, then all references hereunder to Trust Collateral
Agent shall refer to the Trustee (or if duplicative with respect to the
Trustee, shall be deleted), as agent of the Series Secured Parties of each
Series.
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ARTICLE II.
The Notes
Form; Amount Limited; Issuable in Series.
(a) Notes of each Series, together with the Trustee's certificate of
authentication, shall be in substantially the form set forth in the related
Series Supplement, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture or the
related Series Supplement and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in the related Series Supplement are part of the terms of
this Indenture.
(b) The aggregate principal amount of Notes which may be authenticated
and delivered and Outstanding at any time under this Indenture is not limited;
provided that any Series Supplement may so limit the aggregate principal amount
of Notes of the related Series. The Notes shall be issued in one or more Series,
and may be issued in Classes and/or Tranches within a Series (and Tranches
within a Class).
No Series of Notes shall be issued under this Indenture unless such
Notes have been authorized pursuant to a Series Supplement, and all conditions
precedent to the issuance thereof, as specified in the related Series
Supplement, shall have been satisfied.
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All Notes of each Series issued under this Indenture shall be in all
respects equally and ratably entitled to the benefits hereof and secured by the
related Series Trust Estate without preference, priority or distinction on
account of the actual time or times of authentication and delivery, all in
accordance with the terms and provisions hereof and the related Series
Supplement.
Execution, Authentication and Delivery. The Notes shall be executed
on behalf of the Issuer by any of its Authorized Officers. The signature of
any such Authorized Officer on the Notes may be original or facsimile.
Notes bearing the original or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture and the related Series Supplement, and upon satisfaction of all
the conditions set forth in the related Series Supplement, the Trustee shall,
upon receipt of an Issuer Order and an Officer's Certificate prepared and
delivered by the Master Servicer that all conditions precedent for such issuance
have been satisfied, deliver Notes of the related Series (including Notes of any
Class or Tranche within such Series.)
The Notes of a Series shall be issuable in the denominations specified
in the related Series Supplement.
No Note shall be entitled to any benefit under this Indenture or any
Series Supplement or be valid or obligatory for any purpose, unless there
appears attached to such Note a certificate of authentication substantially in
the form provided for herein executed by the Trustee by the manual signature of
one of its authorized signatories, and such certificate attached to any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
Temporary Notes. Pending the preparation of Definitive Notes of any
Series (or of any Class or Tranche within a Series), the Issuer may execute,
and upon receipt of an Issuer Order prepared and delivered by the Master
Servicer the Trustee shall authenticate and deliver, temporary Notes which
are printed, lithographed, typewritten, mimeographed or otherwise produced,
of the tenor of the Definitive Notes in lieu of which they are issued and
with such variations not inconsistent with the terms of this Indenture as the
officers executing such Notes may determine, as evidenced by their execution
of such Notes.
If temporary Notes of any Series (or of any Class or Tranche within a
Series) are issued, the Issuer will cause Definitive Notes of such Series (or
Class or Tranche) to be prepared without unreasonable delay. After the
preparation of Definitive Notes of such Series (or Class or Tranche), the
temporary Notes shall be exchangeable for Definitive Notes of such Series (or
Class or Tranche) upon surrender of the temporary Notes at the office or agency
of the Issuer to be maintained as provided in Section 3.2, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Issuer shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of such Series (or Class or
Tranche) of authorized denominations. Until so exchanged, the temporary Notes of
any Series (or Class or Tranche) shall in all respects be entitled to the same
benefits under this Indenture and the related Series Supplement as Definitive
Notes of such Series (or Class or Tranche).
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Registration; Registration of Transfer and Exchange. The Issuer
shall cause to be kept a register (the "Note Register") in which, subject to
such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not
to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof. The
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Authorized Officer thereof as to the names and
addresses of the Holders of the Notes and the principal amounts and number of
such Notes.
Upon surrender for registration or transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.2, and if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute
and cause the Trustee to authenticate one or more new Notes, in any authorized
denominations, of the same class and a like aggregate principal amount. A
Noteholder may also obtain from the Trustee, in the name of the designated
transferee or transferees one or more new Notes, in any authorized
denominations, of the same Class and Tranche, as applicable, and a like
aggregate principal amount. Such requirements shall not be deemed to create a
duty in the Trustee to monitor the compliance by the Issuer with Section 8-401
of the UCC.
At the option of the Holder, Notes of a Series (or Class or Tranche)
may be exchanged for other Notes of such Series (or Class or Tranche) in any
authorized denominations, of the same Class (and Tranche, if applicable) and a
like aggregate principal amount, upon surrender of the Notes to be exchanged at
such office or agency. Whenever any Notes are so surrendered for exchange, and
if the requirements of Section 8-401(1) of the UCC are met, the Issuer shall
execute and upon its request the Trustee shall authenticate the Notes which the
Noteholder making the exchange is entitled to receive. Such requirements shall
not be deemed to create a duty in the Trustee to monitor the compliance by the
Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture and the related Series
Supplement, as the Notes surrendered upon such registration of transfer or
exchange.
Unless specified in a Series Supplement, every Note presented or
surrendered for registration of transfer or exchange shall, unless specified in
a Series
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Supplement, be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in the form attached as an Exhibit to the related Series
Supplement duly executed by the Holder thereof or such Holder's attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar which requirements
include membership or participation in Securities Transfer Agents Medallion
Program ("Stamp") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, Stamp,
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Note Registrar may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
Notwithstanding, the preceding provisions of this section, the Issuer
shall not be required to make, and the Note Registrar shall not register,
transfers or exchanges of Notes selected for redemption for a period of 15 days
preceding the Distribution Date.
Any Noteholder using the assets of (i) an employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) that is subject to the provisions of Title I of ERISA,
(ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code of
1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
(a) No Holder of an Unregistered Note shall transfer its Note, unless
(i) such transfer is made in accordance with Rule 144A under the Securities Act
and the transferee of such Note executes the Investment Letter, attached as
Exhibit 1 hereto or in the Series Related Documents with respect thereto or (ii)
pursuant to an exemption from registration provided by Rule 144 under the
Securities Act (if available) and the registration and qualification
requirements under applicable state securities laws.
Each Unregistered Note issued hereunder will contain the following
legend limiting sales to "Qualified Institutional Buyers" within the meaning of
Rule 144A under the Securities Act:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD
PRIVATELY.
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THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE "RESTRICTED
SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND
AGREES FOR THE BENEFIT OF THE OBLIGORS AND ITS AFFILIATES THAT THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (B) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION.
Mutilated, Destroyed, Lost or Stolen Notes. If (i) any mutilated
Note is surrendered to the Trustee, or the Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Note, and (ii) there is
delivered to each of the Issuer and the Trustee such security or indemnity as
may be required by it to hold the Issuer and the Trustee harmless, then, in
the absence of notice to the Issuer, the Note Registrar or the Trustee that
such Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Issuer shall execute
and upon its request the Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note of the same Series (or Class or Tranche) (such requirement
shall not be deemed to create a duty in the Trustee to monitor the compliance
by the Issuer with Section 8-405); provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become
or within seven days shall be due and payable, or shall have been called for
redemption pursuant to the terms of the related Series Supplement, the Issuer
may, instead of issuing a replacement Note, direct the Trustee, in writing,
to pay such destroyed, lost or stolen Note when so due or payable or upon the
redemption date without surrender thereof. If, after the delivery of such
replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment
such original Note, the Issuer and the Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer
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may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Trustee)
connected therewith.
Every replacement Note of any Series issued pursuant to this Section
in replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture and the
related Series Supplement equally and proportionately with any and all other
Notes of the same Series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Persons Deemed Owner. Prior to due presentment for registration of
transfer of any Note, the Issuer, the Trustee and any agent of Issuer or the
Trustee may treat the Person in whose name any Note is registered (as of the
Record Date) as the owner of such Note for the purpose of receiving payments
of principal of and interest, if any on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Trustee nor any agent of the Issuer or the Trustee shall be affected by
notice to the contrary.
Payment of Principal and Interest; Defaulted Interest. (a) The
Notes shall accrue interest as provided in the form of Note set forth in the
related Series Supplement or in such Series Supplement and such interest
shall be due and payable on each Distribution Date as specified therein. Any
installment of interest or principal, if any, payable on any Note which is
punctually or duly provided for by the Issuer on the applicable Distribution
Date shall be paid, as provided in the related Series Supplement, or if not
so provided to the Person in whose name such Note (or one or more Predecessor
Notes) is registered on the Record Date, by check mailed first-class, postage
prepaid, to such Person's address as it appears on the Note Register on such
Record Date, except that, if the Notes of a Series are Book Entry Notes,
unless Definitive Notes have been issued for such Series pursuant to Section
2.12, with respect to Notes of such Series registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payment will be made by wire transfer in immediately available
funds to the account designated by such nominee and except for the final
installment of principal payable with respect to such Note on a Distribution
Date or on the Final Scheduled Distribution Date with respect to a Series as
set forth in the relevant Series Supplement which shall be payable as
provided below. The funds
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represented by any such checks returned undelivered shall be held in accordance
with Section 3.3.
(b) The principal of each Note shall be payable in installments on
each Distribution Date as provided in the form of Note set forth in the related
Series Supplement or in such Series Supplement. Notwithstanding the foregoing,
the entire unpaid principal amount of the Notes shall be due and payable, if not
previously paid, on the date on which an Event of Default shall have occurred
and be continuing, if the Notes are declared to be immediately due and payable
in the manner provided in the related Series Supplement. Upon written notice
from the Master Servicer on behalf of the Issuer, the Trustee shall notify the
Person in whose name a Note is registered at the close of business on the Record
Date preceding the Distribution Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such notice
may be mailed or transmitted by facsimile prior to such final Distribution Date
and may specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place where such
Note may be presented and surrendered for payment of such installment.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate to the extent lawful. Unless
otherwise provided in the related Series Supplements, the Issuer may pay such
defaulted interest to the Persons who are Noteholders on a subsequent special
record date, which date shall be at least five Business Days prior to the
payment date. The Issuer shall fix or cause to be fixed any such special record
date and payment date, and, at least 15 days before any such special record
date, the Issuer shall mail to each Noteholder and the Trustee a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid.
(d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, upon written notice from the Master Servicer of the
amounts, if any, that the related Series Support Provider has paid in respect of
the Notes under the related Series Support or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the related Series Support
Provider to the extent not previously cancelled or destroyed.
Cancellation. Subject to Section 2.7(d), all Notes surrendered for
payment, registration of transfer, exchange or redemption shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee in accordance with its
customary procedures. Subject to Section 2.7(d), the Issuer may at any time
deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly canceled by the
Trustee in accordance with its customary procedures. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
this Section, except as expressly permitted by this
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Indenture. Subject to Section 2.7(d), all canceled Notes may be held or disposed
of by the Trustee in accordance with its standard retention or disposal policy
as in effect at the time.
Release of Collateral. The Trustee or the Trust Collateral Agent,
if any, shall, on or after a Series Termination Date, release any remaining
portion of the related Series Trust Estate from the lien created by this
Indenture and deposit in the applicable Series Collection Account any funds
then on deposit in any other Trust Account. The Trustee, or the Trust
Collateral Agent, if any, shall release property from the lien created by
this Indenture pursuant to this Section 2.9 only upon receipt of an Issuer
Request by it and the Trustee accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.1.
Book-Entry Notes. The Notes, upon original issuance, may be issued
in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Issuer. Such Notes may initially be registered on the
Note Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no Note Owner will receive a Definitive Note representing such
Note Owner's interest in such Note, except as provided in Section 2.12.
Unless and until definitive, fully registered Notes (the "Definitive Notes")
have been issued to Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to deal
with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving
of instructions or directions hereunder) as the sole Holder of the
Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants. Unless and until Definitive Notes
are issued pursuant to Section 2.12, the initial Clearing Agency will
make book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on the
Notes to such Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding
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Amount of the Notes, the Clearing Agency shall be deemed to represent
such percentage only to the extent that it has received instructions
to such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Notes or in the Notes of a Class, as the
case maybe, and has delivered such instructions to the Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Trustee at the Corporate Trust Office.
Notices to Clearing Agency. With respect to each Series of Notes
which are Book Entry Notes, whenever a notice or other communication to the
Noteholders of such Series is required under this Indenture, unless and until
Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Note Owners.
Definitive Notes. If the Notes of a Series are Book-Entry Notes and
if (i) the Master Servicer advises the Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Notes of such Series, and the Master
Servicer is unable to locate a qualified successor, (ii) the Master Servicer
at its option advises the Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence
of an Event of Default with respect to such Series, Note Owners representing
beneficial interests aggregating at least a majority of the Outstanding
Amount of the Notes advise the Trustee through the Clearing Agency in writing
that the continuation of a book entry system through the Clearing Agency is
no longer in the best interests of the Note Owners, then the Clearing Agency
shall notify all Note Owners and the Trustee of the occurrence of any such
event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall
be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Notes, the Trustee shall recognize the Holders of the
Definitive Notes as Noteholders.
Final Distribution.
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(a) The Master Servicer shall give the Trustee at least 15 days prior
notice of the Distribution Date on which the Noteholders of any Series or Class
may surrender their Notes for payment of the final distribution on and
cancellation of such Notes. Not later than the fifth day of the month in which
the final distribution in respect of such Series or Class is payable to
Noteholders, the Trustee shall provide notice to the Noteholders of such Series
or Class specifying (i) the date upon which final payment of such Series or
Class will be made upon presentation and surrender of Notes (if required) of
such Series or Class at the office or offices therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such payment date is not applicable, payments being made only upon
presentation and surrender of such Notes at the office or offices therein
specified. The Trustee shall give such notice to the Registrar and the Note
Paying Agent at the time such notice is given to Noteholders.
(b) Notwithstanding a final distribution to the Noteholders of any
Series or Class, except as otherwise provided in this paragraph, all funds then
on deposit in the Master Collection Account and any Series Trust Account
allocated to such Noteholders shall continue to be held in trust for the benefit
of such Noteholders, and the Note Paying Agent or the Trustee shall pay such
funds to such Noteholders upon surrender of their Notes. In the event that all
such Noteholders shall not surrender their Notes for cancellation within six
months after the date specified in the notice from the Trustee described in
paragraph (a), the Trustee shall give a second notice to the remaining such
Noteholders to surrender their Notes for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all such Notes shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining such Noteholders concerning surrender of their Notes, and
the cost thereof shall be paid out of the funds in the account held for the
benefit of such Noteholders. The Trustee and the Note Paying Agent shall upon
written request pay to the related Issuer any moneys held by them for the
payment of principal or interest that remains unclaimed for two years. After
payment to the related Issuers, Noteholders entitled to the money must look to
the for payment as general unsecured creditors unless an applicable abandoned
property law designates another Person and all liability of the Trustee or such
Note Paying Agent with respect to such trust money shall thereupon cease.
(c) Any notice required or permitted to be given to a Holder of
Registered Notes shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Note Register.
ARTICLE III.
Covenants
Payment of Principal and Interest. The Issuer will duly and
punctually pay or cause to be paid the principal of and interest on the Notes
in accordance with the terms of the Notes, this Indenture and
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the related Series Supplement. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
Maintenance of Office or Agency. The Issuer will maintain in New
York an office or agency where Notes may be surrendered for registration,
transfer or exchange of the Notes, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The
Issuer hereby initially appoints the Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Trustee
of the location, and of any change in the location, of any such office or
agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Trustee as its agent to receive
all such surrenders, notices and demands.
Money for Payments to be Held in Trust. On or before each
Distribution Date, the Issuer shall deposit or cause to be distributed from
the related Series Collection Account to the related Noteholders or to any
Person designated by such Noteholders to receive payments on their behalf an
aggregate sum sufficient to pay the amounts then becoming due under the
Notes, such sum to be held in trust for the benefit of the Persons entitled
thereto and (unless the Note Paying Agent is the Trustee) shall promptly
notify the Trustee of its action or failure so to act.
The Issuer will cause each Note Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Note Paying Agent
shall agree with the Trustee (and if the Trustee acts as Note Paying Agent with
respect to clauses (i) and (v), it hereby so agrees), subject to the provisions
of this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Trustee written notice of any default by the Issuer
of which it has actual knowledge (or any other obligor upon the Notes)
in the making of any payment required to be made with respect to the
Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and forthwith pay
to the Trustee all sums held by it in
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trust for the payment of Notes if at any time it ceases to meet the
standards required to be met by a Note Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture and any Series Supplement or for
any other purpose, by Issuer Order direct any Note Paying Agent to pay to the
Trustee all sums held in trust by such Note Paying Agent, such sums to be held
by the Trustee upon the same trusts as those upon which the sums were held by
such Note Paying Agent; and upon such a payment by any Note Paying Agent to the
Trustee, such Note Paying Agent shall be released from all further liability
with respect to such money.
The Trust hereby appoints The Chase Manhattan Bank as Certificate
Paying Agent to make payments to Certificateholders on behalf of the Issuer in
accordance with the provisions of the Certificates, this Agreement and the Trust
Agreement, and The Chase Manhattan Bank hereby accepts such appointment (subject
to removal in the event it not longer serves as Trustee pursuant to Section 6.8)
and further agrees that it will be bound by the provisions of the Trust
Agreement relating to the Certificate Paying Agent and will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Certificates in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and as provided in the Trust
Agreement and pay such sums to such Persons as herein and therein
provided;
(vi) give the Owner Trustee notice of any default by the Issuer
of which it has actual knowledge in the making of any payment required
to be made with respect to the Certificates;
(vii) at any time during the continuance of any such default,
upon the written request of the Owner Trustee forthwith pay to the
Owner Trustee on behalf of the Issuer all sums so held in Trust by
such Certificate Paying Agent;
(viii) immediately resign as a Certificate Paying Agent and
forthwith pay to the Owner Trustee on behalf of the Issuer all sums
held by it in trust for the payment of Certificates if at any time it
ceases to meet the standards required to be met by a Note Paying Agent
at the time of its appointment; and
(ix) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Certificates of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
Existence.
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Except as otherwise permitted by the provisions of Section 3.10, the
Issuer will keep in full effect its existence, rights and franchises as a
business trust under the laws of the State of Delaware (unless it becomes, or
any successor Issuer hereunder is or becomes, organized under the laws of any
other state or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction) 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 Indenture, each
Series Supplement, the Notes and each other instrument or agreement included in
the related Series Trust Estate.
Protection of Trust Property. The Issuer intends the security
interest Granted pursuant to this Indenture and the related Series Supplement
in favor of the related Series Secured Parties to be prior to all other liens
in respect of the related Series Trust Estate, and the Issuer shall take all
actions necessary to obtain and maintain, in favor of the Trustee or the
Trust Collateral Agent, if any, for the benefit of the related Series Secured
Parties, a first lien on and a first priority, perfected security interest in
the related Series Trust Estate. The Issuer will from time to time prepare
(or shall cause to be prepared), execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and will take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the related
Series Trust Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Trustee or the Trust Collateral
Agent, if any, for the benefit of the Series Secured Parties created
by this Indenture and the related Series Supplement or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture and the related Series
Supplement ;
(iv) enforce any of the related Series Trust Estate;
(v) preserve and defend title to the related Series Trust Estate
and the rights of the Trustee or the Trust Collateral Agent, if any,
in such Trust Property against the claims of all persons and parties;
and
(vi) pay all taxes or assessments levied or assessed upon the
related Series Trust Estate when due.
The Issuer hereby designates the Master Servicer its agent and attorney-in-fact
to execute any financing statement, continuation statement or other instrument
required by the Trustee or the Trust Collateral Agent, if any, pursuant to this
Section; provided that, such designation shall not be deemed to create a duty in
the Trustee to monitor the compliance of the Master Servicer with respect to its
duties under this Section 3.5 or the adequacy of
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any financing statement, continuation statement or other instrument prepared by
the Master Servicer.
Opinions as to Trust Property.
(a) On the Closing Date, the Issuer shall furnish to the Trustee and
the Trust Collateral Agent, if any, an Opinion of Counsel either stating that,
in the opinion of such counsel, such action has been taken with respect to the
recording and filing of this Indenture, Series Supplement, and any other
requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, as are necessary to perfect
and make effective the first priority lien and security interest in favor of the
Trustee or the Trust Collateral Agent, if any, for the benefit of the related
Series Secured Parties, created by this Indenture and the related Series
Supplement and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) Within 90 days after the beginning of each calendar year,
beginning with 2000, the Master Servicer on behalf of the Issuer shall furnish
to the Trustee and the Trust Collateral Agent, if any, an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, re-recording and refiling of this
Indenture, any Series Supplement and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as are necessary to maintain the lien and security interest created
by this Indenture and the related Series Supplement and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture and the related Series
Supplement until December 31 of the following calendar year.
Performance of Obligations; Servicing of Receivables.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any of such Person's material covenants or obligations under any instrument
or agreement included in the related Series Trust Estate or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as ordered by any bankruptcy or other court or as expressly provided in
this Indenture, the Basic Documents and the related Series Related Documents or
such other instrument or agreement.
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(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Master Servicer to assist the Issuer in performing its
duties under this Indenture and each Series Supplement. The Master Servicer
hereby agrees to service the Receivables in each Series Trust Estate in the
manner set forth in the Master Sale and Servicing Agreement, this Indenture and
each Series Supplement and to perform its duties as may be set forth in the
Master Sale and Servicing Agreement, this Indenture and in each Series
Supplement.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents, all
Series Related Documents and in the instruments and agreements included in the
related Series Trust Estate, including, but not limited, to preparing (or
causing to be prepared) and filing (or causing to be filed) all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture, the related Series Supplement and the Master Sale and Servicing
Agreement in accordance with and within the time periods provided for herein and
therein. Except as otherwise expressly provided therein, the Issuer shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the consent of the Trustee.
(d) If a Responsible Officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Master Servicer Termination Event under the
Master Sale and Servicing Agreement, the Issuer shall promptly notify the
Trustee, the Trust Collateral Agent, if any, and the Rating Agencies thereof in
accordance with Section 11.4, and shall specify in such notice the action, if
any, the Issuer is taking in respect of such default. If a Master Servicer
Termination Event shall arise from the failure of the Master Servicer to perform
any of its duties or obligations under the Master Sale and Servicing Agreement
with respect to the Receivables, the Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Master Servicer or the Seller of their respective duties under
the Basic Documents without the prior written consent of the related Series
Secured Parties under any Series Related Documents if the effect thereof would
adversely affect the Holders of the Notes of the related Series.
Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Basic
Documents or the related Series Related Documents, sell, transfer,
exchange or otherwise dispose of any of the properties or assets of
the Issuer, including those included in the related Series Trust
Estate, unless directed to do so by the related Series Secured
Parties;
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(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes of a Series
(other than amounts properly withheld from such payments under the
Code) or assert any claim against any present or former Noteholder by
reason of the payment of the taxes levied or assessed upon any part of
the related Series Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
or any Series Supplement to be impaired, or permit the lien in favor
of the Trustee or the Trust Collateral Agent, as the case may be,
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this
Indenture or any Series Supplement except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture and the related Series Supplement) to be created on or
extend to or otherwise arise upon or burden the related Series Trust
Estate or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on a Financed Vehicle and
arising solely as a result of an action or omission of the related
Obligor), (C) permit the lien of this Indenture and the related Series
Supplement not to constitute a valid first priority (other than with
respect to any such tax, mechanics' or other lien) security interest
in the related Series Trust Estate, (D) except as expressly permitted
therein, amend, modify or fail to comply with the provisions of the
Basic Documents without the prior written consent of the Series
Secured Parties or (E) except as expressly permitted therein, amend,
modify or fail to comply with the provisions of the Series Related
Documents without the prior written consent of the related Series
Secured Parties.
Annual Statement as to Compliance. The Master Servicer on behalf of
the Issuer will deliver to the Trustee, within 90 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year ended December 31,
1999), and otherwise in compliance with the requirements of TIA Section
314(a)(4) an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture and each Series Supplement throughout such year,
or, if there has been a default in the compliance of any such
condition or covenant, specifying each such default known to such
Authorized Officer and the nature and status thereof.
Issuer May Consolidate, Etc. Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless
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(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due
and punctual payment of the principal of and interest on all Notes and
the performance or observance of every agreement and covenant of this
Indenture and each Series Supplement on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing
under any Series Supplement;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee and the Owner
Trustee) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture and each Series Supplement shall
have been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation or merger comply with this Article III and that all
conditions precedent herein provided for relating to such transaction
have been complied with (including any filing required by the Exchange
Act); and
(b) The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in each Series Trust
Estate, to any Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any state, (B) expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture, each
Supplement, each of the Basic Documents and each of the Series Related
Documents on the part of the Issuer to be performed or observed, all
as provided herein, (C) expressly agree by means of such Indenture
Supplement that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of Holders
of the Notes, (D) unless otherwise provided in such Indenture
Supplement, expressly agree to indemnify, defend and hold harmless the
Issuer against and from any loss, liability or expense arising under
or related to this Indenture, each Series Supplement and the Notes and
(E) expressly agree by means of such Indenture Supplement that such
Person (or if a group of persons, then one specified Person) shall
prepare (or cause to be prepared) and make all filings with the
Commission (and any other appropriate Person) required by the Exchange
Act in
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connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing
under any Series Supplement;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee) to the effect that
such transaction will not have any material adverse tax consequence to
the Trust, any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture and each Series Supplement shall
have been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such Indenture Supplement complies with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture and each
Series Supplement with the same effect as if such Person had been named as each
Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10 (b), Household Automobile Revolving Trust I
will be released from every covenant and agreement of this Indenture and each
Series Supplement to be observed or performed on the part of the Issuer with
respect to the Notes immediately upon the delivery of written notice to the
Trustee stating that Household Automobile Revolving Trust I is to be so
released.
No Other Business. The Issuer shall not engage in any business
other than financing, purchasing, owning, selling and managing the
Receivables and owning the Class SV Preferred Stock of the Seller in the
manner contemplated by this Indenture, the Basic Documents and each Series
Supplement and all Series Related Documents and activities incidental thereto.
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No Borrowing. The Issuer shall not issue, incur, assume, guarantee
or otherwise become liable, directly or indirectly, for any Indebtedness
except for (i) the Notes, (ii) obligations owing from time to time to a
related Series Support Provider under the related agreement regarding Series
Support, if any and (iii) any other Indebtedness permitted by or arising
under the Basic Documents and each Series Supplement. The proceeds of the
Notes and the Certificates of a Series shall be used exclusively to fund the
Issuer's purchase of the Receivables of such Series and the related Other
Conveyed Property, to fund any spread account and to pay the Issuer's
organizational, transactional and start-up expenses.
Master Servicer's Obligations. The Issuer shall enforce the
provisions of Sections 4.9, 4.10 and 4.11 of the Master Sale and Servicing
Agreement with respect to the duties of Master Service thereunder.
Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Master Sale and Servicing Agreement or this Indenture or
any Series Supplement, the Issuer shall not make any loan or advance or
credit to, or guarantee (directly or indirectly or by an instrument having
the effect of assuring another's payment or performance on any obligation or
capability of so doing or otherwise), endorse or otherwise become continently
liable, directly or indirectly, in connection with the obligations, stocks or
dividends of, or own, purchase, repurchase or acquire (or agree continently
to do so) any stock, obligations, assets or securities of, or any other
interest in, or make any capital contribution to, any other Person.
Capital Expenditures. The Issuer shall not make any expenditure (by
long-term or operating lease or otherwise) for capital assets (either realty
or personally).
Compliance with Laws. The Issuer shall comply with the requirements
of all applicable laws, the non-compliance with which would, individually or
in the aggregate, materially and adversely affect the ability of the Issuer
to perform its obligations under the Notes, this Indenture, or any Basic
Document, any Series Supplement or any Series Related Document.
Restricted Payments. The Issuer shall not, directly or indirectly,
(i) pay any dividend or make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof,
to the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or
of the Issuer or to the Seller, (ii) redeem, purchase, retire or otherwise
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acquire for value any such ownership or equity interest or security or (iii) set
aside or otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made, distributions to the
Seller, Master Servicer, the Owner Trustee, the Trustee, the Trust Collateral
Agent, if any, and the Certificateholders as permitted by, and to the extent
funds are available for such purpose under, the Master Sale and Servicing
Agreement or Trust Agreement. The Issuer will not, directly or indirectly, make
payments to or distributions from the Master Collection Account except in
accordance with this Indenture, the Basic Documents, any Series Supplement or
any Series Related Document.
Notice of Events of Default. Upon a Responsible Officer of the
Owner Trustee having actual knowledge thereof, the Issuer agrees to give the
Trustee and the Rating Agencies prompt written notice of each Event of
Default under any Series Supplement and each default on the part of the
Master Servicer or the Seller of its obligations under the Master Sale and
Servicing Agreement.
Further Instruments and Acts. Upon request of the Trustee, the
Issuer will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively
the purpose of this Indenture.
Amendments of Master Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 13.1 of the
Master Sale and Servicing Agreement or Section 13.1 of the Trust Agreement to
eliminate the requirements thereunder that the Trustee or the Holders of the
Notes consent to amendments thereto as provided therein.
Income Tax Characterization. For purposes of federal income, state
and local income and franchise and any other income taxes, the Issuer, the
Noteholders, the Certificateholders and the Trustee will treat the Notes as
indebtedness and hereby instructs the Trustee to treat the Notes as
indebtedness for federal and state tax reporting purposes.
No Borrowing. The Issuer shall not issue, incur, assume, guarantee
or otherwise become liable, directly or indirectly, for any Indebtedness
except for (i) the Notes and (ii) any other Indebtedness permitted by or
arising under the Basic Documents.
Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Master Sale and Servicing Agreement or
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this Indenture, the Issuer shall not make any loan or advance or credit to, or
guarantee (directly or indirectly or by an instrument having the effect of
assuring another's payment or performance on any obligation or capability of so
doing or otherwise), endorse or otherwise become contingently liable, directly
or indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
Capital Expenditures. The Issuer shall not make any expenditure (by
long-term or operating lease or otherwise) for capital assets (either realty
or personalty).
Restricted Payments. The Issuer shall not, directly or indirectly,
(i) pay any dividend or make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof.
to the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or
of the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii)
set aside or otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made, distributions to the
Servicer, the Owner Trustee, the Trustee and the Certificateholders as
permitted by, and to the extent funds are available for such purpose under
the Master Sale and Servicing Agreement or Trust Agreement.
ARTICLE IV.
Satisfaction and Discharge
Satisfaction and Discharge of Indenture. This Indenture shall cease
to be of further effect with respect to the Notes except as to (i) rights of
registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive
payments of principal thereof and interest thereon, (iv) Sections 3.3, 3.4,
3.5, 3.8, 3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights and
immunities of the Trustee hereunder (including the rights of the Trustee
under Section 6.7 and the obligations of the Trustee under Section 4.2) and
(vi) the rights of Noteholders as beneficiaries hereof with respect to the
related Series Trust Estate so deposited with the Trustee payable to all or
any of them, and the Trustee, on demand of and at the expense of the Issuer,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to the Notes, when
(A) either
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(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.5 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3) have been
delivered to the Trustee for cancellation and the related Series
Support, if any, has been returned to the related Series Support
Provider; or
(2) all Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at their respective Final
Scheduled Distribution Dates within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee or the Trust Collateral Agent, if any, cash or direct
obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are
payable), in trust for such purpose, in an amount sufficient to pay
and discharge the entire indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation when due on the Final
Scheduled Distribution Date or tender date (if Notes shall have been
called for redemption or tender pursuant to the related Series
Supplement, as the case may be; and
(B) the Issuer has paid or caused to be paid all other amounts
owing to all Series Secured Parties.
Application of Trust Money. All monies deposited with the Trustee
pursuant to Section 4.1 hereof shall be held in trust and applied by it, in
accordance with the provisions of the Notes, this Indenture and the related
Series Supplement, to the payment, either directly or through any Note Paying
Agent, as the Trustee may determine, to the Holders of the particular Notes
for the payment or redemption of which such monies have been deposited with
the Trustee, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to
the extent required herein or in the Master Sale and Servicing Agreement or
required by law.
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Repayment of Monies Held by Note Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any Note Paying Agent other than the Trustee under
the provisions of this Indenture with respect to such Notes shall, upon
demand of the Issuer, be paid to the Trustee to be held and applied according
to Section 3.3 and thereupon such Note Paying Agent shall be released from
all further liability with respect to such monies.
ARTICLE V.
Remedies
Events of Default. The definition of "Event of Default" with
respect to a Series, together with certain rights and remedies consequent
thereto, shall be set forth in the related Series Supplement.
Collection of Indebtedness and Suits for Enforcement by Trustee.
(a) Subject to the terms of the related Series Supplement, the Issuer
covenants that if (i) default is made in the payment of any interest on any Note
when the same becomes due and payable, and such default continues for a period
of five days, or (ii) default is made in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and payable,
and such default continues for a period of five days, the Issuer will, upon
demand of the Trustee, pay to it, for the benefit of the Holders of the Notes,
the whole amount then due and payable on such Notes for principal and interest,
with interest upon the overdue principal, and, to the extent payment at such
rate of interest shall be legally enforceable, upon overdue installments of
interest, at the applicable Interest Rate and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee and its agents and outside counsel.
(b) Each Series Secured Party hereby irrevocably and unconditionally
appoints the Trustee as the true and lawful attorney-in-fact of such Series
Secured Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument in the
name, place and stead of such Series Secured Party such acts, things and deeds
for or on behalf of and in the name of such Series Secured Party under this
Indenture and the related Series Supplement and under the Basic Documents and
the Series Related Documents which such Series Secured Party could or might do
or which may be necessary, desirable or convenient to effect the purposes
contemplated hereunder, under the related Series Supplement, the Series Related
Documents and under the Basic Documents and, without limitation, following the
occurrence of an Event of Default, exercise full right, power and authority to
take, or defer from taking, any and all acts with respect to the administration,
maintenance or disposition of the related Series
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Trust Estate.
(c) If an Event of Default occurs and is continuing with respect to a
Series, the Trustee may in its discretion and at the direction of the related
Series Secured Parties shall proceed to protect and enforce the rights of the
Noteholders of each Series by such appropriate Proceedings as the Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or the
related Series Supplement or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy or legal or equitable right vested in the
Trustee by this Indenture, the related Series Supplement or by law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the related Series Trust Estate, proceedings under Title 11 of the
United States Code or any other applicable Federal or state bankruptcy,
insolvency or other similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Issuer or its property or
such other obligor or Person, or in case of any other comparable judicial
proceedings relative to the Issuer or other obligor upon the Notes of such
Series, or to the creditors or property of the Issuer or such other obligor, the
Trustee, irrespective of whether the principal of any Notes of such Series shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention in
such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of such Notes and
to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee against the
related Series Trust Estate (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and outside counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as
a result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes of such Series in any election of a
trustee, a standby trustee or person performing similar functions in
any such proceedings;
(iii) to collect and receive any monies or other property payable
or deliverable on any such claims and received with respect to the
related Series Trust Estate and to distribute all amounts received
with respect to the claims of the Noteholders and of the Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Notes of such Series, in each case against
the related Series Trust Estate allowed in any judicial proceedings
relative to
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the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(e) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
(f) All rights of action and of asserting claims under this Indenture,
the related Series Supplement or under any of the Notes, may be enforced by the
Trustee without the possession of any of the Notes or the production thereof in
any trial or other proceedings relative thereto, and any such action or
proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
the related Series Supplement), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such proceedings.
Limitation of Suits. No Holder of any Note shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture or the related Series Supplement, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Notes of
the related Series;
(ii) the Holders of not less than 25% of the Outstanding Amount
of the Notes of the related Series have made written request to the
Trustee to institute such proceeding in respect of such Event of
Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to it
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against the costs, expenses and liabilities to be incurred in
complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
Proceedings;
(v) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes of such Series; and
(vi) if any Series Support secures such Series, a Support Default
shall have occurred and be continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture or the related Series Supplement (or, in the case of redemption or
tender pursuant to any Series Supplement, on or after the related redemption
or tender date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
Restoration of Rights and Remedies. If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture or the related Series Supplement and such Proceeding has been
discontinued or abandoned for any reason, then and in every such case the
Issuer, the Trustee, and the related Noteholders shall, subject to any
determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Trustee, and the related Noteholders shall continue as though no such
proceeding had been instituted.
Rights and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to the related Noteholders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
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Delay or Omission Not a Waiver. No delay or omission of the Trustee
or any Holder of any related Note to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by
law to the Trustee, the Trustee or to the related Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the related Noteholders, as the case may be.
Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes with respect to such Series shall have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee with respect to the Notes of such Series
or exercising any trust or power conferred on the Trustee; provided that
(i) such direction shall not be in conflict with any rule of law
or with this Indenture or with the related Series Supplement; and
(ii) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Waiver of Past Defaults. Unless otherwise provided in the related
Series Related Documents, a majority of the Noteholders of a Series may waive
any past Default or Event of Default relating to such Series and its
consequences except a Default relating to such Series (a) in payment of
principal of or interest on any of the Notes of the related Series or (b) in
respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note of the related Series. In the
case of any such waiver, the Issuer, the Trustee and the Holders of the Notes
of the related Series shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture and the related Series Supplement; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereto.
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Undertaking for Costs. All parties to this Indenture and the
related Series Supplement agree, and each Holder of any Note by such Holder's
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy
under this Indenture and the related Series Supplement, or in any suit
against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to (a) any suit instituted by the Trustee, (b) any
suit instituted by any Noteholder, or group of Noteholders, in each case
holding in the aggregate more than 10% of the Outstanding Amount of the Notes
of the related Series or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture
and the related Series Supplement.
Waiver of Stay or Extension Laws. The Issuer covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit of, any stay
or extension law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture and the
related Series Supplement; and the Issuer (to the extent that it may lawfully
do so) hereby expressly waives all benefit of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Action on Notes. The Trustee's right to seek and recover judgment
on the Notes or under this Indenture or any Series Supplement shall not be
affected by the seeking, obtaining or application of any other relief under
or with respect to this Indenture or the related Series Supplement. Neither
the lien of this Indenture or the related Series Supplement nor any rights or
remedies of the Trustee or the Noteholders shall be impaired by the recovery
of any judgment by the Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the related Series Trust
Estate or upon any of the assets of the Issuer.
Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Trustee to do so and at the
Master Servicer's expense, the Issuer agrees to take all such lawful action as
the Trustee may request to
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compel or secure the performance and observance by the Seller and the Master
Servicer, as applicable, of each of their obligations to the Issuer under or in
connection with the Master Sale and Servicing Agreement in accordance with the
terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Master Sale and Servicing Agreement to the extent and in the manner directed by
the Trustee, including the transmission of notices of default on the part of the
Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Master Servicer of each of their obligations under the Master Sale
and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing with respect
to a Series, the Trustee may, and, at the written direction of the Holders of
66-2/3% of the Outstanding Amount of the Notes of such Series shall, exercise
all rights, remedies, powers, privileges and claims of the Issuer against the
Seller or the Master Servicer under or in connection with the Master Sale and
Servicing Agreement, including the right or power to take any action to compel
or secure performance or observance by the Seller or the Master Servicer of each
of their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Master Sale and
Servicing Agreement, and any right of the Issuer to take such action shall be
suspended.
ARTICLE VI.
The Trustee and the Trust Collateral Agent
Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
or the Trust Collateral Agent, if any, shall exercise the rights and powers
vested in it by this Indenture and the Basic Documents and use the same degree
of care and skill in its exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default with respect
to a Series:
(i) each of the Trustee and the Trust Collateral Agent, if any,
undertakes to perform with respect to such Series such duties and only
such duties as are specifically set forth in this Indenture and the
related Series Supplement and no implied covenants or obligations
shall be read into this Indenture or the related Series Supplement
against the Trustee and the Trust Collateral Agent, if any,
respectively; and
(ii) in the absence of bad faith on its part, each of the Trustee
and the Trust Collateral Agent, if any, 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
Trustee or the
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Trust Collateral Agent, if any, as the case may be and conforming
to the requirements of this Indenture and the related Series
Supplement; however, the Trustee and the Trust Collateral Agent, if
any, shall examine the certificates and opinions to determine whether
or not they conform on their face to the requirements of this
Indenture or the related Series Supplement.
(c) Each of the Trustee and the Trust Collateral Agent, if
any, may not be relieved from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) each of the Trustee and the Trust Collateral Agent, if any,
shall not be liable for any error of judgment made in good faith by a
Responsible Officer unless it is proved that the Trustee or the Trust
Collateral Agent, if any, was negligent in ascertaining the pertinent
facts; and
(iii) each of the Trustee and the Trust Collateral Agent, if any,
shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction or received by it
pursuant to Section 5.8.
(d) The Trustee and the Trust Collateral Agent, if any, shall not be
liable for interest on any money received by it except as such Person may agree
in writing with the Issuer.
(e) Money held in trust by the Trustee or the Trust Collateral Agent,
if any, need not be segregated from other funds except to the extent required by
law or the terms of this Indenture, the related Series Supplement or the Master
Sale and Servicing Agreement.
(f) No provision of this Indenture or the related Series Supplement
shall require the Trustee or the Trust Collateral Agent, if any, 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 it shall have reasonable grounds to believe that repayment of such funds or
indemnity reasonably satisfactory to it against such risk or liability is not
reasonably assured to it.
(g) Every provision of this Indenture and the related Series
Supplement relating to the conduct or affecting the liability of or affording
protection to the Trustee or the Trust Collateral Agent, if any, shall be
subject to the provisions of this Section and to the provisions of the TIA.
(h) The Trustee or the Trust Collateral Agent, if any, shall, upon
reasonable prior written notice to the Trustee or the Trust Collateral Agent, if
any, as the case may be, permit any representative of the related Series Secured
Parties, during the Trustee's or such Trust Collateral Agent, if any, as the
case may be, normal business hours, to examine all books of account, records,
reports and other papers of the Trustee or the Trust Collateral Agent, if any,
as the case may be, required to be maintained pursuant to this Indenture and the
Master Sale and Servicing Agreement, relating to the Notes or any Series Trust
Estate, to make copies and extracts therefrom and to discuss the Trustee's or
such Trust Collateral Agent's affairs and actions, as such affairs and actions
relate to the Trustee's or such Trust Collateral
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Agent's duties with respect to the Notes or any Series Trust Estate, with the
Trustee's or such Trust Collateral Agent's officers and employees responsible
for carrying out the Trustee's or such Trust Collateral Agent's duties with
respect to the Notes.
(i) Each of the Trustee and the Trust Collateral Agent, if any, shall,
and hereby agrees that it will, perform all of the obligations and duties
required of it under the Master Sale and Servicing Agreement.
(j) The Trustee shall, and hereby agrees that it will, hold the
related Series Support in trust, and will hold any proceeds of any claim on the
related Series Support in trust solely for the use and benefit of the
Noteholders.
(k) Without limiting the generality of this Section 6.1, the Trustee
shall have no duty (i) to see to any recording, filing or depositing of this
Indenture, any Series Supplement or any agreement referred to herein or any
financing statement evidencing a security interest in the Financed Vehicles, or
to see to the maintenance of any such recording or filing or depositing or to
any recording, refiling or redepositing of any thereof, (ii) to see to any
insurance of the Financed Vehicles or Obligors or to effect or maintain any such
insurance, (iii) to see to the payment or discharge of any tax, assessment or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust, (iv) to confirm or
verify the contents of any reports or certificates delivered to the Trustee
pursuant to this Indenture, any Series Supplement or the Master Sale and
Servicing Agreement believed by the Trustee to be genuine and to have been
signed or presented by the proper party or parties, or (v) to inspect the
Financed Vehicles at any time or ascertain or inquire as to the performance of
observance of any of the Issuer's, the Seller's or the Master Servicer's
representations, warranties or covenants or the Master Servicer's duties and
obligations as Master Servicer and as custodian of the Receivable Files under
the Master Sale and Servicing Agreement.
(l) In no event shall The Chase Manhattan Bank, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.
Rights of Trustee and the Trust Collateral Agent.
(a) The Trustee and the Trust Collateral Agent, if any, may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee and the Trust Collateral Agent, if any, need
not investigate any fact or matter stated in the document.
(b) Before the Trustee or the Trust Collateral Agent, if any, acts or
refrains from acting, it may require an Officer's Certificate or an Opinion of
Counsel. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on the Officer's Certificate
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or Opinion of Counsel.
(c) The Trustee or the Trust Collateral Agent, if any, may execute any
of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian or nominee, and the
Trustee or the Trust Collateral Agent, if any, shall not be responsible for any
misconduct or negligence on the part of, or for the supervision of the Master
Servicer or any other agent, attorney, custodian or nominee appointed with due
care by it hereunder.
(d) The Trustee or the Trust Collateral Agent, if any, shall not be
liable for any action it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers; provided, however, that the
Trustee's or the Trust Collateral Agent's conduct does not constitute willful
misconduct, negligence or bad faith.
(e) The Trustee and the Trust Collateral Agent, if any, may consult
with counsel, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture, the Basic Documents, any Series Supplement, any
Series Related Documents and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) The Trustee and the Trust Collateral Agent, if any, shall be under
no obligation to institute, conduct or defend any litigation under this
Indenture or any Series Supplement or in relation to this Indenture or any
Series Supplement, at the request, order or direction of any of the Holders of
Notes, pursuant to the provisions of this Indenture or any Series Supplement,
unless such Holders of Notes shall have offered to the Trustee and the Trust
Collateral Agent reasonable security or indemnity against the costs, expenses
and liabilities that may be incurred therein or thereby; provided, however, that
the Trustee and the Trust Collateral Agent, if any, shall, upon the occurrence
of an Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture and any Series Supplement with reasonable care
and skill customary for the care and skill exercised by trustees under similar
circumstances.
(g) The Trustee and the Trust Collateral Agent, if any, shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the related Series Support Provider; provided,
however, that if the payment within a reasonable time to the Trustee and the
Trust Collateral Agent, if any, of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee or the Trust Collateral Agent, if any, not reasonably assured to the
Trustee or the Trust Collateral Agent by the security afforded to it by the
terms of this Indenture, any Series Supplement or the Master Sale and Servicing
Agreement, the Trustee or the Trust Collateral Agent, if any, may require
indemnity reasonably satisfactory to it against such cost, expense or liability
as a condition to so proceeding; the reasonable expense of every such
examination shall be paid by the Person making such request, or, if paid by the
Trustee or
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the Trust Collateral Agent, if any, shall be reimbursed by the Person
making such request upon demand.
Individual Rights of Trustee. The Trustee in its individual or any
other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its Affiliates with the same rights it would have if
it were not Trustee. Any Note Paying Agent, Note Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 6.11 and 6.12.
Trustee's Disclaimer. Each of the Trustee and the Trust Collateral
Agent, if any, shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, any Series Supplement, the
related Series Trust Estate or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuer in the Indenture, in any Series Supplement or
in any document issued in connection with the sale of the Notes or in the
Notes other than the Trustee's certificate of authentication.
Notice of Defaults. If an Event of Default occurs and is continuing
and if it is either known by, or written notice of the existence thereof has
been delivered to, a Responsible Officer of the Trustee, the Trustee shall
mail to each Noteholder notice of the Default within 90 days after such
knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
Reports by Trustee to Holders. Upon written request, the Note
Paying Agent or the Master Servicer shall on behalf of the Issuer deliver to
each Noteholder such information as may be reasonably required to enable such
Holder to prepare its Federal and state income tax returns required by law.
Compensation and Indemnity.
(a) As payable in each Series Supplement, the Issuer shall, or shall
cause the Master Servicer to, pay to the Trustee and the Trust Collateral Agent,
if any, from time to time the Trustee Fee as compensation for its services. The
Trustee's and such Trust Collateral Agent's compensation shall not be limited by
any law on compensation of a trustee of an express
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trust. The Issuer shall or shall cause the Master Servicer to reimburse the
Trustee and the Trust Collateral Agent, if any, for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's and such
Trust Collateral Agent's agents, outside counsel, accountants and experts. The
Issuer shall or shall cause the Master Servicer to indemnify the Trustee, the
Trust Collateral Agent, if any, and their respective officers, directors,
employees and agents against any and all loss, liability or expense (including
attorneys' fees and expenses) incurred by each of them in connection with the
acceptance or the administration of this trust and the performance of its duties
hereunder. The Trustee or the Trust Collateral Agent, if any, shall notify the
Issuer and the Master Servicer promptly of any claim for which it may seek
indemnity. Failure by the Trustee or the Trust Collateral Agent, if any, to so
notify the Issuer and the Master Servicer shall not relieve the Issuer of its
obligations hereunder or the Master Servicer of its obligations under Article
XII of the Master Sale and Servicing Agreement. The Issuer shall defend or shall
cause the Master Servicer to defend any claim for indemnity that may arise
against the Trustee and the Trust Collateral Agent, if any, or the Trustee or
the Trust Collateral Agent, if any, may have separate counsel and the Issuer
shall or shall cause the Master Servicer to pay the fees and expenses of such
counsel. Neither the Issuer nor the Master Servicer need reimburse any expense
or indemnify against any loss, liability or expense incurred by the Trustee or
the Trust Collateral Agent, if any, through such Person's own willful
misconduct, negligence or bad faith.
(b) The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of an Insolvency Event with respect to the Issuer,
the expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law. Notwithstanding anything else set forth
in this Indenture, the Basic Documents, any Series Supplement or any Series
Related Documents, the Trustee agrees that the obligations of the Issuer (but
not the Master Servicer) to the Trustee hereunder and under any Series
Supplement or any Series Related Documents, shall be recourse to the related
Series Trust Estate only and specifically shall not be recourse to the assets of
the Issuer or any Securityholder. In addition, the Trustee agrees that its
recourse to the Issuer, the related Series Trust Estate, the Seller and amounts
held pursuant to the related Series Support shall be limited to the right to
receive the distributions as provided for in the payment priority provisions of
the related Series Supplement.
Replacement of Trustee. The Trustee may, and in the circumstances
specified in subparagraph (i) shall, resign at any time upon 60 days' prior
written notice by so notifying the Issuer. Holders of a majority of
Outstanding Amount of the Notes and the Master Servicer may remove the
Trustee by so notifying the Trustee upon 60 days' written notice. The Issuer
may and, at the request of the Noteholders shall, remove the Trustee, if:
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(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trustee or for
any substantial part of the Trustee's property, or ordering the
winding-up or liquidation of the Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Trustee and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or consents to the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee, conservator,
sequestrator (or other similar official) for the Trustee or for any
substantial part of the Trustee's property, or makes any assignment
for the benefit of creditors or fails generally to pay its debts as
such debts become due or takes any corporate action in furtherance of
any of the foregoing;
(v) the Trustee otherwise becomes incapable of acting; or
(vi) the rating assigned to the long-term unsecured debt
obligations of the Trustee by the Rating Agencies shall be lowered
below the rating of "BBB", "Baa3" or equivalent rating or be withdrawn
by either of the Rating Agencies.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly deliver a notice of
such removal, resignation or vacancy to the Series Secured Parties and the
Master Servicer may appoint a successor Trustee. If the Master Servicer fails to
appoint such a successor Trustee, the Issuer may appoint a successor Trustee. If
the Trustee resigns or is removed, the Trustee shall also resign or be removed,
as the case may be, as Trust Collateral Agent and Certificate Paying Agent.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee, the Series Secured Parties and to the
Issuer. Thereupon the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers
and duties of the retiring Trustee under this Indenture and each Series
Supplement subject to satisfaction of the Rating Agency Condition. The successor
Trustee shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Issuer may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to Section 6.8.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's and the Master Servicer's obligations under Section 6.7
shall continue for the benefit of the retiring Trustee.
Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee entity without any further act shall be
the successor Trustee; provided that such corporation or banking association
shall otherwise be eligible under Section 6.11 hereof. The Trustee shall
provide the Rating Agencies with written notice of any such transaction as
soon as practical thereafter and the Series Secured Parties.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust may at the time be located, the Trustee shall have
the power and may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the related Series Trust Estate, and to vest in
such Person or Persons, in such capacity and for the benefit of the
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Noteholders, such title to the related Series Trust Estate, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder, including acts or
omissions of predecessor or successor trustees; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, dissolve, become insolvent, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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Eligibility: Disqualification. The Trustee shall at all times:
satisfy TIA Section 310(a), have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition, and have a long-term debt rating of at least "BBB", "Baa3" or
equivalent rating from each of the Rating Agencies. The Trustee shall provide
copies of such reports of condition to the related Series Secured Parties
upon request. The Trustee shall comply with TIA Section 310(b), including the
optional provision permitted by the second sentence of TIA Section 310(b)(9);
provided, however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth
in TIA Section 310(b)(1) are met.
Preferential Collection of Claims Against Issuer. The Trustee shall
comply with TIA Section 311(a), excluding any creditor relationship listed in
TIA Section 311(b). A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated.
Appointment and Powers. Subject to the terms and conditions hereof,
to the extent provided in a Series Supplement, each of the Series Secured
Parties under such Series Supplement appoints The Chase Manhattan Bank as the
Trustee or Trust Collateral Agent, as the case may be, with respect to the
Collateral specifically pledged to such Series, and The Chase Manhattan Bank
accepts such appointment and agrees to act as Trustee or Trust Collateral
Agent, as the case may be, with respect to each Series Trust Estate for such
Series Secured Parties, to maintain custody and possession of each Series
Trust Estate (except as otherwise provided hereunder) and to perform the
other duties of the Trustee or Trust Collateral Agent, as the case may be, in
accordance with the provisions of this Indenture, the other Basic Documents
any Series Supplement and any Series Related Documents. The Trustee or Trust
Collateral Agent, as the case may be, is authorized to take such action on
its behalf, and to exercise such rights, remedies, powers and privileges with
respect to each such Series Trust Estate, as the Series Secured Parties may
direct and as are specifically authorized to be exercised by the Trustee or
Trust Collateral Agent, as the case may be, by the terms hereof, together
with such actions, rights, remedies, powers and privileges as are reasonably
incidental thereto. The Trustee or Trust Collateral Agent, as applicable,
shall act upon and in compliance with the written instructions of the Series
Secured Parties delivered pursuant to this Indenture or the related Series
Supplement promptly following receipt of such written instructions; provided
that the Trustee or Trust Collateral Agent, as applicable, shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Indenture or the related Series
Supplement or (ii) for which the Trustee or Trust Collateral Agent, as
applicable, has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Trustee or Trust
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ateral Agent, as applicable, of its express duties hereunder, except where
this Indenture or the related Series Supplement provides that the Trustee or
Trust Collateral Agent, as applicable, is permitted to act only following and in
accordance with such instructions.
Performance of Duties. The Trust Collateral Agent, if any, shall
have no duties or responsibilities except those expressly set forth in this
Indenture, the other Basic Documents, any Series Supplement and any Series
Related Documents to which the Trust Collateral Agent, if any, is a party or
as directed by the Noteholders in accordance with this Indenture or the
related Series Supplement. The Trust Collateral Agent, if any, shall not be
required to take any discretionary actions hereunder except at the written
direction and with the indemnification of the Noteholders. The Trust
Collateral Agent, if any, shall, and hereby agrees that it will, perform all
of the duties and obligations required of it under the Master Sale and
Servicing Agreement.
Limitation on Liability. Neither the Trust Collateral Agent, if
any, nor any of its directors, officers, employees and agents shall be liable
for any action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Trust Collateral Agent, if any, shall be
liable for its negligence, bad faith or willful misconduct; nor shall the
Trust Collateral Agent, if any, be responsible for the validity,
effectiveness, value, sufficiency or enforceability against the Issuer of
this Indenture, any Series Supplement or any Series Trust Estate (or any part
thereof). Notwithstanding any term or provision of this Indenture, or any
Series Supplement, the Trust Collateral Agent, if any, shall incur no
liability to the Issuer or the Series Secured Parties for any action taken or
omitted by the Trust Collateral Agent, if any, in connection with any Series
Trust Estate, except for the negligence, bad faith or willful misconduct on
the part of the Trust Collateral Agent, if any, and, further, shall incur no
liability to the related Series Secured Parties except for negligence, bad
faith or willful misconduct in carrying out its duties to the related Series
Secured Parties. Subject to Section 6.16, the Trust Collateral Agent, if any,
shall be protected and shall incur no liability to any such party in
conclusively relying upon the accuracy, acting in reliance upon the contents,
and assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document reasonably believed by the Trust Collateral
Agent, if any, to be genuine and to have been duly executed by the
appropriate signatory, and (absent actual knowledge to the contrary) the
Trust Collateral Agent, if any, shall not be required to make any independent
investigation with respect thereto. The Trust Collateral Agent, if any, shall
at all times be free independently to establish to its reasonable
satisfaction, but shall have no duty to independently verify, the existence
or nonexistence of facts that are a condition to the exercise or enforcement
of any right or remedy hereunder, or under any of the Basic Documents under
any Series Supplement or any Series Related Documents. The Trust Collateral
Agent, if any, may consult with counsel, and shall not be liable for any
action taken or omitted to be taken by
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it hereunder in good faith and in accordance with the advice of such
counsel. The Trust Collateral Agent, if any, shall not be under any obligation
to exercise any of the remedial rights or powers vested in it by this Indenture
and any Series Supplement or to follow any direction from Noteholders unless it
shall have received security or indemnity satisfactory to the Trust Collateral
Agent, if any, against the costs, expenses and liabilities which might be
incurred by it.
Reliance Upon Documents. In the absence of negligence, bad faith or
willful misconduct on its part, the Trust Collateral Agent, if any, shall be
entitled to rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed
or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such
document or instrument.
Successor Trust Collateral Agent.
(a) Merger. Any Person into which the Trust Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Trust Collateral Agent is a party, shall (provided
it is otherwise qualified to serve as the Trust Collateral Agent hereunder) be
and become a successor Trust Collateral Agent hereunder and be vested with all
of the title to and interest in each Series Trust Estate and all of the trusts,
powers, discretions, immunities, privileges and other matters as was its
predecessor without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except to the extent, if any, that any
such action is necessary to perfect, or continue the perfection of, the security
interest of the related Series Secured Parties in the related Series Trust
Estate; provided that any such successor shall also be the successor Trustee
under Section 6.9.
(b) Resignation. The Trust Collateral Agent, if any, and any successor
Trust Collateral Agent may resign under this Indenture at any time upon 60 days'
prior written notice with the prior written consent of the Issuer; provided that
the Trust Collateral Agent shall not so resign unless it shall also resign as
Trustee hereunder; provided, however, that such resignation shall not be
effective until a Successor Trust Collateral Agent shall have accepted
appointment as Successor Trust Collateral Agent.
(c) Removal. The Trust Collateral Agent, if any, may be removed by the
Master Servicer at any time (and should be removed at any time that the Trustee
has been removed), with or without cause, by an instrument or concurrent
instruments in writing delivered to the Trust Collateral Agent, if any, each
Series Secured Party, the Issuer or the Master Servicer, as applicable. A
temporary successor may be removed at any time to allow a
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successor Trust Collateral Agent to be appointed pursuant to subsection (d)
below. Any removal pursuant to the provisions of this subsection (c) shall take
effect only upon the date which is the latest of (i) the effective date of the
appointment of a successor Trust Collateral Agent and the acceptance in writing
by such successor Trust Collateral Agent of such appointment and of its
obligation to perform its duties hereunder in accordance with the provisions
hereof, and (ii) receipt of an Opinion of Counsel to the effect described in
Section 3.6.
(d) Acceptance by Successor. The Master Servicer shall have the sole
right to appoint each successor Trust Collateral Agent. Every temporary or
permanent successor Trust Collateral Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Trustee, each Series
Secured Party, Master Servicer and the Issuer an instrument in writing accepting
such appointment hereunder and the relevant predecessor shall execute,
acknowledge and deliver such other documents and instruments as will effectuate
the delivery of each Series Trust Estate to the successor Trust Collateral
Agent, whereupon such successor, without any further act, deed or conveyance,
shall become fully vested with all the estates, properties, rights, powers,
duties and obligations of its predecessor. Such predecessor shall, nevertheless,
on the written request of the Series Secured Parties or the Issuer, execute and
deliver an instrument transferring to such successor all the related estates,
properties, rights and powers of such predecessor hereunder. In the event that
any instrument in writing from the Issuer or the Series Secured Parties is
reasonably required by a successor Trust Collateral Agent to more fully and
certainly vest in such successor the related estates, properties, rights,
powers, duties and obligations vested or intended to be vested hereunder in the
Trust Collateral Agent, any and all such written instruments shall, at the
request of the temporary or permanent successor Trust Collateral Agent, be
forthwith executed, acknowledged and delivered by the Trustee or the Issuer, as
the case may be. The designation of any successor Trust Collateral Agent and the
instrument or instruments removing any Trust Collateral Agent and appointing a
successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to each Series Trust Estate and,
to the extent required by applicable law, filed or recorded by the successor
Trust Collateral Agent in each place where such filing or recording is necessary
to effect the transfer of each Series Trust Estate to the successor Trust
Collateral Agent or to protect or continue the perfection of the security
interests granted hereunder.
Compensation. The Trust Collateral Agent, if any, shall not be
entitled to any compensation for the performance of its duties hereunder
other than the Trustee Fee it is entitled to receive in its capacity as
Trustee.
Representations and Warranties of the Trustee and the Trust
Collateral Agent. Each of the Trust Collateral Agent, if any, and the Trustee
represents and
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warrants to the Issuer and to each Series Secured Party as follows:
(a) Due Organization. The Trustee and the Trust Collateral Agent, if
any, is a national banking association, duly organized, validly existing and in
good standing under the laws of the United States and is duly authorized and
licensed under applicable law to conduct its business as presently conducted.
(b) Corporate Power. The Trustee and the Trust Collateral Agent, if
any, has all requisite right, power and authority to execute and deliver this
Indenture and each Series Supplement and to perform all of its duties as the
Trustee or Trust Collateral Agent, as the case may be, hereunder.
(c) Due Authorization. The execution and delivery by the Trust
Collateral Agent, if any, and the Trustee of this Indenture, each Series
Supplement and the other Series Related Transaction Documents to which it is a
party, and the performance by the Trust Collateral Agent and the Trustee of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings which are required for the valid execution and delivery by
the Trust Collateral Agent, if any, or the Trustee, or the performance by the
Trust Collateral Agent, if any, or the Trustee, of this Indenture, each Series
Supplement and such other Series Related Documents.
(d) Valid and Binding Indenture. Each of the Trustee and the Trust
Collateral Agent, if any, has duly executed and delivered this Indenture, each
Series Supplement, each other Basic Document and each Series Related Document to
which it is a party, and each of this Indenture, any Series Supplement, each
other Basic Document and each other Series Related Document constitutes the
legal, valid and binding obligation of the Trustee and the Trust Collateral
Agent, if any, enforceable against the Trustee and the Trust Collateral Agent,
if any, in accordance with its terms, except as (i) such enforceability may be
limited by bankruptcy, insolvency, reorganization and similar laws relating to
or affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Waiver of Setoffs. The Trustee and the Trust Collateral Agent, if
any, hereby expressly waives any and all rights of setoff that the Trustee or
the Trust Collateral Agent, if any, may otherwise at any time have under
applicable law with respect to any Trust Account and Series Trust Account and
agrees that amounts in the Trust Accounts and Series Trust Accounts shall at
all times be held and applied solely in accordance with the provisions hereof.
ARTICLE VII.
Noteholders' Lists and Reports
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Issuer To Furnish To Trustee Names and Addresses of Noteholders.
The Issuer will furnish or cause to be furnished to the Trustee with respect
to each Series of Notes (a) not more than five days after the earlier of (i)
each Record Date with respect to such Series and (ii) three months after the
last Record Date, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders with respect to such Series as of
such Record Date, (b) at such other times as the Trustee may request in
writing, within 30 days after receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 10 days prior to
the time such list is furnished; provided, however, that so long as the
Trustee is the Note Registrar, no such list shall be required to be
furnished. The Trustee or, if the Trustee is not the Note Registrar, the
Issuer shall furnish to the related Series Support Provider in writing upon
their written request and at such other times as the related Series Support
Provider may request a copy of the list with respect to the related Series.
Preservation of Information; Communications to Noteholders. The
Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of the Holders contained in the most recent list
furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in
such Section 7.1 upon receipt of a new list so furnished.
(a) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(b) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
Reports by Issuer.
If this Indenture is qualified under the TIA, the Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and copies of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) which the Issuer
may be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA Section 313(c)) such
summaries of any information, documents and reports required to be
filed by the Issuer pursuant to clauses (i) and (ii) of this
Section 7.3(a) as may be required by rules and
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regulations prescribed from time to time by the Commission.
(a) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
(a) The Trustee shall not have any duty or obligation with respect to
any reports or other information delivered to it pursuant to this Section 7.3.
Reports by Trustee. If required by TIA Section 313(a), within 60
days after each March 31 beginning with March 31, 1999 the Trustee shall mail
to each Noteholder as required by TIA Section 313(c) a brief report dated as
of such date that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders
shall be filed by the Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Trustee if
and when the Notes are listed on any stock exchange.
ARTICLE VIII.
Accounts, Disbursements and Releases
Collection of Money. Except as otherwise expressly provided herein,
the Trustee may demand payment or delivery of, and shall receive and collect,
directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the
Trustee or the Trust Collateral Agent, if any, pursuant to this Indenture and
the Master Sale and Servicing Agreement. The Trustee shall apply all such
money received by it, or cause the Trust Collateral Agent, if any, to apply
all money received by it as provided in this Indenture and the respective
Series Supplements. Except as otherwise expressly provided in this Indenture
or in the Master Sale and Servicing Agreement, if any default occurs in the
making of any payment or performance under any agreement or instrument that
is part of the related Series Trust Estate, the Trustee may take such action
as may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate proceedings. Any such action shall
be without prejudice to any right to claim a Default or Event of Default
under this Indenture and any right to proceed thereafter as provided in
Article V.
Release of Trust Property.
(a) Subject to the payment of its fees and expenses pursuant to
Section 6.7, the Trustee or the
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Trust Collateral Agent, if any, may, and when required by the Issuer and the
provisions of this Indenture shall, execute instruments to release property from
the lien of this Indenture, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee or the Trust Collateral Agent, if any, as
provided in this Article VIII shall be bound to ascertain the Trustee's or such
Trust Collateral Agent's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any monies.
(b) The Trustee or the Trust Collateral Agent, if any, shall, at
such time as there are no Notes outstanding and all sums due the Trustee
pursuant to Section 6.7 have been paid, release any remaining portion of the
related Series Trust Estate that secured the Notes from the lien of this
Indenture and release to the Issuer or any other Person entitled thereto any
funds then on deposit in the Trust Accounts. The Trustee shall release
property from the lien of this Indenture pursuant to this Section 8.2(b) only
upon receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.1.
Opinion of Counsel. The Trustee or the Trust Collateral Agent, if
any, shall receive at least seven days' notice when requested by the Issuer
to take any action pursuant to Section 8.2(a), accompanied by copies of any
instruments involved, and the Trustee shall also require as a condition to
such action, an Opinion of Counsel, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding
that all conditions precedent to the taking of such action have been complied
with and such action will not materially and adversely impair the security
for the Notes or the rights of the Noteholders in contravention of the
provisions of this Indenture; provided, however, that such Opinion of Counsel
shall not be required to express an opinion as to the fair value of the
related Series Trust Estate. Counsel rendering any such opinion may rely,
without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Trustee in connection with
any such action.
ARTICLE IX.
Amendments; Series Supplements
Amendments Without Consent of Noteholders.
(a) Except as otherwise provided in the Series Supplement, without the
consent of the Holders of any Notes but with prior written notice to the Rating
Agencies, as evidenced to the Trustee and the Issuer, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
Amendments hereto, in form satisfactory to the Trustee, for any of the following
purposes:
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(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee or the Trust Collateral Agent, if
any, any property subject or required to be subjected to the lien of
this Indenture, or to subject to the lien of this Indenture additional
property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee or the Trust Collateral Agent, if any;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any Series Supplement which may be inconsistent with any
other provision herein or in any Series Supplement or to make any
other provisions with respect to matters or questions arising under
this Indenture or in any Series Supplement; provided that such action
shall not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any
amendment and to make any further appropriate agreements and stipulations that
may be therein contained.
(b) Except as otherwise provided in the Series Supplement, the Issuer
and the Trustee, when authorized by an Issuer Order, may, also without the
consent of any of the Holders of the Notes but with prior notice to the Rating
Agencies by the Issuer, as evidenced to the Trustee, enter into an amendment
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Noteholder.
Amendments With Consent of Noteholders. Except as otherwise
provided in a Series Supplement, the Issuer and the
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Trustee, when authorized by an Issuer Order provided by the Master Servicer,
also may, upon satisfaction of the Rating Agency Condition and with the consent
of the Holders of not less than a majority of the Outstanding Amount of the
Notes, by Act of such Holders delivered to the Issuer and the Trustee, enter
into an amendment hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such amendment shall, without the consent
of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon, change the provision of this Indenture relating
to the application of collections on, or the proceeds of the sale of,
any Series Trust Estate to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency
in which, any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof;
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
Series Supplement, or the consent of the Holders of which is required
for any waiver of compliance with certain provisions of this Indenture
or certain defaults hereunder and their consequences provided for in
this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Trustee to direct the Issuer to sell or
liquidate any Series Trust Estate pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained in the related Series Supplement; or
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(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
a Series Trust Estate or, except as otherwise permitted or
contemplated herein or in the related Series Supplement or the related
Series related Documents, terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Note
of the security provided by the lien of this Indenture.
Except as otherwise provided in a Series Supplement, the Trustee may
determine whether or not any Notes would be adversely affected by any amendment
upon receipt of an Opinion of Counsel to that effect and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Trustee shall not be
liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed Series Supplement, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
Series Supplement pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such Series Supplement relates a notice setting
forth in general terms the substance of such Series Supplement. Any failure of
the Trustee to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such Series Supplement.
Supplements Authorizing a Series of Notes.
(a) Each Series of Notes issued hereunder shall be issued pursuant to
a Series Supplement, which shall set forth the terms and provisions of such
Series.
(b) Amendments to Series Supplements shall be governed by the
provisions of the relevant Series Supplement. The Trustee may conclusively rely
on an Opinion of Counsel as to which Series Supplements relate to which Series,
or to this Indenture (and thus all Series) as a whole.
Execution of Series Supplements. In executing, or permitting the
additional trusts created by, any Series Supplement permitted by this Article
IX or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and subject to Sections 6.1 and 6.2,
shall be fully protected in relying upon, an Opinion of Counsel (and, if
requested, an Officer's Certificate) stating that the execution of such
Series Supplement is authorized or permitted by this Indenture. The Trustee
may, but shall not be obligated to, enter into any such Series Supplement
that affects the Trustee's own rights, duties, liabilities or
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immunities under this Indenture or otherwise.
Effect of Series Supplement. Upon the execution of any Series
Supplement or Amendment pursuant to the provisions of such Series Supplement
or hereof, this Indenture shall be and be deemed to be modified and amended
in accordance therewith with respect to the Notes affected thereby, and the
respective rights, limitations of rights, obligations, duties, liabilities
and immunities under this Indenture of the Trustee, the Issuer and the
Holders of the Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and
all the terms and conditions of any such Series Supplement or Amendment shall
be and be deemed to be part of the terms and conditions of this Indenture for
any and all purposes.
Conformity With Trust Indenture Act. Every amendment of this
Indenture and every Series Supplement executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in
effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Reference in Notes to Series Supplements. Notes authenticated and
delivered after the execution of any Series Supplement pursuant to this
Article IX may, and if required by the Issuer shall, bear a notation as to
any matter provided for in such Series Supplement. If the Issuer shall so
determine, new Notes so modified as to conform, in the opinion of the Issuer,
to any such Series Supplement may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
ARTICLE X.
Reserved
ARTICLE XI.
Miscellaneous
Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the Trustee or
the Trust Collateral Agent, if any, to take any action under any provision of
this Indenture or any Series Supplement, the Issuer shall furnish to the Trustee
or the Trust Collateral Agent, if any, as the case
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may be, (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture or any Series Supplement relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture or any Series Supplement, no additional certificate or opinion
need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture or any Series Supplement
shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
(b) Prior to the deposit of any property or securities with the
Trustee and the Trust Collateral Agent, if any, that is to be made the basis for
the release of any property or securities subject to the lien of this Indenture
and the related Series Supplement, the Issuer shall, in addition to any
obligation imposed in Section 11.1(a) or elsewhere in this Indenture or the
related Series Supplement, furnish to the Trustee or the Trust Collateral Agent,
if any, an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
deposit) to the Issuer of the property or securities to be so deposited.
(i) Whenever the Issuer is required to furnish to the Trustee or
the Trust Collateral Agent, if any, an Officer's Certificate
certifying or stating the opinion of any signer thereof as to the
matters described in clause (i) above, the Issuer shall also deliver
to the Trustee or the Trust Collateral Agent, if any, an Independent
Certificate as to the same matters, if the fair value to the Issuer of
the securities to be so deposited and of all other such securities
made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and
this clause (ii), is 10% or more of the Outstanding Amount of the
Notes; provided, that such a certificate need not be furnished with
respect to any securities so
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deposited, if the fair value thereof to the Issuer as set forth in the
related Officer's Certificate is less than $25,000 or less than 1%
percent of the Outstanding Amount of the Notes.
(ii) Other than with respect to the release of any Repurchased
Receivables or Liquidated Receivables (as such terms are defined in
the Master Sale and Servicing Agreement), whenever any property or
securities are to be released from the lien of this Indenture and the
related Series Supplement, the Issuer shall also furnish to the
Trustee or the Trust Collateral Agent, if any, an Officer's
Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release)
of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the
security under this Indenture and the related Series Supplement in
contravention of the provisions hereof.
(iii) Whenever the Issuer is required to furnish to the Trustee
an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the
Issuer shall also furnish to the Trustee or the Trust Collateral
Agent, if any, an Independent Certificate as to the same matters if
the fair value of the property or securities and of all other property
other than Repurchased Receivables and Defaulted Receivables (as such
terms are defined in the Master Sale and Servicing Agreement), or
securities released from the lien of this Indenture since the
commencement of the then current calendar year, as set forth in the
certificates required by clause (ii) above and this clause (iii),
equals 10% or more of the Outstanding Amount of the Notes; provided,
that such certificate need not be furnished in the case of any release
of property or securities if the fair value thereof as set forth in
the related Officer's Certificate is less than $25,000 or less than 1
percent of the then Outstanding Amount of the Notes.
(iv) Notwithstanding Section 2.9 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise
dispose of Receivables as and to the extent permitted or required by
the Basic Documents and (B) make cash payments out of the Trust
Accounts as and to the extent permitted or required by the Basic
Documents.
Form of Documents Delivered to Trustee. In any case where several
matters are required to be certified by, or covered by an opinion of, any
specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the
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matters upon which his or her certificate or opinion is based are erroneous. Any
such certificate of an Authorized Officer or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Master Servicer, the Seller or
the Issuer, stating that the information with respect to such factual matters is
in the possession of the Master Servicer, the Seller or the Issuer, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture or any Series Supplement, in connection
with any application or certificate or report to the Trustee, it is provided
that the Issuer shall deliver any document as a condition of the granting of
such application, or as evidence of the Issuer's compliance with any term
hereof, it is intended that the truth and accuracy, at the time of the granting
of such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Trustee's right to
conclusively rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any customary manner of the Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
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(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Notices, etc., to Trustee, Issuer and Rating Agencies. Any request,
demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture or any
Series Supplement to be made upon, given or furnished to or filed with:
(a) The Trustee by any Noteholder or by the Issuer shall be sufficient
for every purpose hereunder if personally delivered, delivered by overnight
courier or mailed first-class and shall be deemed to have been duly given upon
receipt to the Trustee at its Corporate Trust Office, or
(b) The Issuer by the Trustee or by any Noteholder shall be sufficient
for every purpose hereunder if personally delivered, delivered by facsimile or
overnight courier or mailed first class, and shall deemed to have been duly
given upon receipt to the Issuer addressed to: Household Automobile Revolving
Trust I, in care of Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, DE 19890-0001 Attention: Corporate Trust
Administration, or at any other address previously furnished in writing to the
Trustee by Issuer. The Issuer shall promptly transmit any notice received by it
from the Noteholders to the Trustee.
(c) The related Series Support Provider by the Issuer or the Trustee
shall be sufficient for any purpose hereunder if in writing and mailed by
first-class mail personally delivered or telexed or telecopied to the recipient
as follows:
Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or the Owner Trustee shall be in writing, personally delivered,
delivered by overnight courier or first class or via facsimile to (i) in the
case of Moody's (in the event Moody's is rating such Series), at the following
address: Moody's Investors Service, Inc., 99 Church Street, New York, New York
10004, Fax No: (212) 553-0355 and (ii) in the case of S&P, at the following
address: Standard & Poor's Ratings Group (in the event Standard & Poor's is
rating such Series), 26 Broadway (15th Floor), New York, New York 10004,
Attention: Asset Backed Surveillance Department, Fax No: (212) 412-0224; or as
to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
Notices to Noteholders; Waiver. Where this Indenture or any Series
Supplement provides for notice to Noteholders of any event, such notice shall
be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class, postage prepaid to each
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Noteholder affected by such event, at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture or any Series Supplement provides for notice in
any manner, such notice may be waived in writing by any Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Noteholders shall be filed
with the Trustee but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture or any Series Supplement provides for notice to
the Rating Agencies, failure to give such notice shall not affect any other
rights or obligations created hereunder, and shall not under any circumstance
constitute a Default or Event of Default.
Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture, any Series Supplement or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Trustee or any Note
Paying Agent to such Holder, that is different from the methods provided for
in this Indenture or the related Series Supplement for such payments or
notices, provided that such methods are reasonable and consented to by the
Trustee (which consent shall not be unreasonably withheld). The Issuer will
furnish to the Trustee a copy of each such agreement and the Trustee will
cause payments to be made and notices to be given in accordance with such
agreements.
Conflict with Trust Indenture Act. If this Indenture is qualified
under the Trust Indenture Act and if any provision hereof limits, qualifies
or conflicts with another provision hereof that is required to be included in
this indenture by any of the provisions of the Trust Indenture Act, such
required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties
on any
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person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Effect of Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall
not affect the construction hereof.
Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture,
any Series Supplement shall bind its successors. All agreements of the Trust
Collateral Agent, if any, in this Indenture or any Series Supplement shall
bind its successors. All agreements of the Master Servicer in this Indenture
or any Series Supplement shall bind its successors and assigns.
Separability. In case any provision in this Indenture or in the
Notes shall be invalid, illegal or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Benefits of Indenture. To the extent specified in the related
Series Supplement, the related Series Support Provider and its successors and
assigns shall be a third-party beneficiary to the provisions of this
Indenture and the related Series Supplement, and shall be entitled to rely
upon and directly to enforce such provisions of this Indenture so long as no
Support Default shall have occurred and be continuing. Nothing in this
Indenture or any Series Supplement or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and
any other person with an ownership interest in any part of the related Series
Trust Estate, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Legal Holidays. In any case where the date on which any payment is
due shall not be a Business Day, then (notwithstanding any other provision of
the Notes, this Indenture or any Series Supplement) payment need not be made
on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the date an which nominally due, and no
interest shall accrue for the period from and after any such nominal date.
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GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Counterparts. This Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Recording of Indenture. If this Indenture or any Series Supplement
is subject to recording in any appropriate public recording offices, such
recording is to be effected by the Issuer and at its expense accompanied by
an Opinion of Counsel (which may be counsel to the Trust or any other counsel
reasonably acceptable to the Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other person
secured hereunder or for the enforcement of any right or remedy granted to
the Trustee or the Trust Collateral Agent, if any, under this Indenture or
any Series Supplement.
Trust Obligation. No recourse may be taken, directly or indirectly,
with respect to the obligations of the Issuer, the Seller, the Master
Servicer, the Owner Trustee, the Trust Collateral Agent, if any, or the
Trustee on the Notes or under this Indenture or any Series Supplement or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Seller, the Master Servicer, the Trust Collateral Agent, if
any, the Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Seller, the
Master Servicer, the Trust Collateral Agent, if any, the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in
the Issuer, the Seller, the Trust Collateral Agent, if any, the Master
Servicer, the Owner Trustee or the Trustee or of any successor or assign of
the Seller, the Master Servicer, the Trust Collateral Agent, if any, the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Trustee, the
Trust Collateral Agent, if any, and the Owner Trustee have no such
obligations in their individual capacity) and except that any such owner or
beneficiary shall be fully liable, to the extent provided by applicable law,
for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes
of this Indenture, 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
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Trust Agreement.
No Petition. The Trustee and the Trust Collateral Agent, if any, by
entering into this Indenture, and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time institute against
the Seller, or the Issuer, or join in any institution against the Seller, or
the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal
or state bankruptcy or similar law in connection with any obligations
relating to the Notes, this Indenture or any of the Basic Documents or any of
the Series Related Documents.
Inspection. The Issuer agrees that, on reasonable prior notice, it
will permit any representative of the Trustee or of the related Series
Support Provider, during the Issuer's normal business hours, to examine all
the books of account, records, reports, and other papers of the Issuer, to
make copies and extracts therefrom, to cause such books to be audited by
independent certified public accountants, and to discuss the Issuer's
affairs, finances and accounts with the Issuer's officers, employees, and
independent certified public accountants, all at such reasonable times and as
often as may be reasonably requested. The Trustee shall and shall cause its
representatives to hold in confidence all such information except to the
extent disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Trustee may reasonably determine that such disclosure is consistent with its
Obligations hereunder.
Limitation of Liability. It is expressly understood and agreed by
the parties hereto that (a) this Agreement is executed and delivered by
Wilmington Trust Company, not individually or personally but solely as Owner
Trustee of the Issuer under the Trust Agreement, in the exercise of the
powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties to
this Agreement and by any person claiming by, through or under them and (d)
under no circumstances shall Wilmington Trust Company be personally liable
for the payment of any indebtedness or expenses of the Issuer or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaking by the Issuer under this Agreement or any
related documents.
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[Signature Page Follows]
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IN WITNESS WHEREOF, the Issuer, the Master Servicer, the Trustee and
the Trust Collateral Agent have caused this Indenture to be duly executed by
their respective officers, hereunto duly authorized, all as of the day and year
first above written.
HOUSEHOLD AUTOMOBILE
REVOLVING TRUST I
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as
Owner Trustee
By:
------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION.
as Master Servicer
By:
------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Trustee and
Trust Collateral Agent
By:
------------------------------
Name:
Title:
[Signature Page for the Indenture]
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Exhibit 4.3
HOUSEHOLD FINANCE CORPORATION,
as the Master Servicer,
together with
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I,
as Issuer,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Seller,
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee and Trust Collateral Agent
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
SERIES 1998-1 SUPPLEMENT
Dated as of October 1, 1998
to the
INDENTURE
Dated as of October 1, 1998
and to the
TRUST AGREEMENT
Dated as of March 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I CREATION OF THE SERIES 1998-1 NOTES.....................................................................1
SECTION 1.01. DESIGNATION.....................................................................................1
SECTION 1.02. PLEDGE OF SERIES 1998-1 TRUST ESTATE............................................................1
SECTION 1.03. PAYMENTS AND COMPUTATIONS.......................................................................3
SECTION 1.04. DENOMINATIONS...................................................................................3
ARTICLE II DEFINITIONS............................................................................................3
SECTION 2.01. DEFINITIONS.....................................................................................3
ARTICLE III DISTRIBUTIONS AND STATEMENTS TO SERIES 1998-1 NOTEHOLDERS; SERIES SPECIFIC COVENANTS.................13
SECTION 3.01. SERIES 1998-1 TRUST ACCOUNTS...................................................................13
SECTION 3.02. RESERVE ACCOUNT................................................................................14
SECTION 3.03. DISTRIBUTIONS..................................................................................14
SECTION 3.04. STATEMENTS TO NOTEHOLDERS......................................................................16
SECTION 3.05. REPORTING REQUIREMENTS.........................................................................17
SECTION 3.06. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.......................................................17
SECTION 3.07. SPECIAL COVENANTS AND ACKNOWLEDGEMENTS.........................................................17
SECTION 3.08. TAX CHARACTERIZATION...........................................................................18
ARTICLE IV EVENTS OF DEFAULT; REMEDIES...........................................................................18
SECTION 4.01. EVENTS OF DEFAULT..............................................................................18
SECTION 4.02. RIGHTS UPON EVENT OF DEFAULT...................................................................19
SECTION 4.03. REMEDIES.......................................................................................20
SECTION 4.04. PRIORITIES.....................................................................................21
ARTICLE V PREPAYMENT AND REDEMPTION..............................................................................22
SECTION 5.01. OPTIONAL "CLEAN-UP" REDEMPTION.................................................................22
ARTICLE VI MISCELLANEOUS.........................................................................................22
SECTION 6.01. RATIFICATION OF BASIC DOCUMENTS................................................................22
SECTION 6.02. COUNTERPARTS...................................................................................23
SECTION 6.03. GOVERNING LAW..................................................................................23
SECTION 6.04. AMENDMENTS WITHOUT CONSENT OF NOTEHOLDERS......................................................23
SECTION 6.05. AMENDMENTS WITH CONSENT OF THE SERIES 1998-1 NOTEHOLDERS.......................................24
SECTION 6.06. NON-PETITION CLAUSES...........................................................................26
</TABLE>
Schedule I Schedule of Eligibility Criteria
Exhibit A-1 Form of Series 1998-1 Class A-1 Note
Exhibit A-2 Form of Series 1998-1 Class A-2 Note
Exhibit A-3 Form of Series 1998-1 Class A-3 Note
Exhibit A-4 Form of Series 1998-1 Class A-4 Note
Exhibit B-1 Form of Series 1998-1 Class B-1 Note
Exhibit B-2 Form of Series 1998-1 Class B-2 Note
Exhibit C Form of Series 1989-1 Class C Note
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Exhibit D Form of Series 1998-1 Certificate
Exhibit E Form of Master Servicer's Certificate
3
<PAGE>
This Series 1998-1 Supplement, dated as of October 1, 1998, is by and
among Household Finance Corporation, a Delaware corporation, as master servicer
(the "Master Servicer"), Household Automobile Revolving Trust I, a Delaware
business trust, as Issuer (the "Issuer"), Household Auto Receivables
Corporation, a Nevada corporation, as Seller ("Seller"), The Chase Manhattan
Bank, a New York banking corporation ("Chase"), as trustee for the Noteholders
(the "Indenture Trustee") and as Trust Collateral Agent, and Wilmington Trust
Company, a Delaware banking corporation, as owner trustee (the "Owner Trustee")
for the Certificateholders.
RECITALS
This Series 1998-1 Supplement, is executed and delivered by the
parties hereto pursuant to Section 9.3 of the Indenture dated as of October 1,
1998 (the "Indenture") among the Issuer, the Master Servicer, the Indenture
Trustee and the Trust Collateral Agent and pursuant to Section 3.2 of the Trust
Agreement (the "Trust Agreement") dated as of March 1, 1998 between the Seller
and the Owner Trustee. In the event that any term or provision contained herein
shall conflict with or be inconsistent with any term or provision contained in
the Indenture or the Trust Agreement, the terms and provisions of this Series
1998-1 Supplement shall govern with respect to Series 1998-1.
Article I
CREATION OF THE SERIES 1998-1 NOTES
SECTION I.01. Designation.
(a) There is hereby created a Series of Notes to be issued pursuant to
the Indenture and this Series 1998-1 Supplement to be known as "Household
Automobile Revolving Trust I, Series 1998-1 Notes." The Series 1998-1 Notes
shall be issued in seven classes (each, a "Class"). The Class A-1 Notes in an
aggregate initial principal amount of $________ (the "Class A-1 Notes"), the
Class A-2 Notes in an aggregate initial principal amount of $________ (the
"Class A-2 Notes"), the Class A-3 Notes in an aggregate initial principal amount
of $________ (the "Class A-3 Notes"), the Class A-4 Notes in an aggregate
initial principal amount of $________ (the "Class A-4 Notes", and together with
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the "Class A
Notes"), the Class B-1 Notes in an aggregate initial principal amount of
$________ (the "Class B-1 Notes"), the Class B-2 Notes in an aggregate initial
principal amount of $________ (the "Class B-2 Notes", and together with the
Class B-1 Notes, the "Class B Notes") and the Class C Notes in an aggregate
initial principal amount of $________ (the "Class C Notes").
(b) There is hereby created a Series of Series Trust Certificates to
be issued pursuant to the Trust Agreement and this Series 1998-1 Supplement to
be known as the "Household Automobile Revolving Trust I, Series 1998-1
Certificates."
SECTION I.02. Pledge of Series 1998-1 Trust Estate.
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The Issuer hereby Grants to the Indenture Trustee, for the benefit of
the Holders of the Notes all of the Issuer's right, title and interest (but none
of its obligations) in and to (a) each and every Receivable listed as a Series
1998-1 Receivable on the Schedule of Receivables attached hereto as Schedule I
and all monies paid or payable thereon or in respect thereof after the Cutoff
Date (including amounts due on or before the Cutoff Date but received by HAFC,
the Seller, the Master Servicer or the Issuer after the Cutoff Date); (b) an
assignment of the security interests in the related Financed Vehicles granted by
Obligors pursuant to such Series 1998-1 Receivables and any other interest of
the Issuer in the related Financed Vehicles; (c) all rights of HAFC against
Dealers pursuant to Dealer Agreements or Dealer Assignments related to such
Series 1998-1 Receivables; (d) any proceeds and the right to receive proceeds
with respect to such Series 1998-1 Receivables repurchased by a Dealer, pursuant
to a Dealer Agreement as a result of a breach of representation or warranty in
the related Dealer Agreement; [(e) all rights under any Service Contracts on the
related Financed Vehicles;] (f) any proceeds and the right to receive proceeds
with respect to such Series 1998-1 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 Series 1998-1 Receivables; (g) all funds on deposit from time to time in
the Series 1998-1 Trust Accounts (including all investments and proceeds thereof
from time to time allocable to the Series 1998-1 Reserve Account, but excluding
all investments and proceeds thereof allocable to the other Series 1998-1 Trust
Accounts or allocable to the Master Collection Account); (h) all rights of the
Seller in and to the Purchase Agreement and the Purchase Agreement Supplement or
Purchase Agreement Supplements related to Series 1998-1, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of HAFC under the Purchase Agreement and such Purchase Agreement
Supplement, or Purchase Agreement Supplements, (i) all property (including the
right to receive future Net Liquidation Proceeds) that secures such Series
1998-1 Receivables and that has been acquired by or on behalf of the Issuer
pursuant to liquidation of such Series 1998-1 Receivables; (j) all items
contained in the Receivable Files with respect such Series 1998-1 Receivables
and any and all other documents that the Master Servicer or HAFC keeps on file
in accordance with its customary procedures relating to such Series 1998-1
Receivables, or the related Financed Vehicles or Obligors, (k) the Master Sale
and Servicing Agreement and the Transfer Agreement or Transfer Agreements
related to Series 1998-1 (including all rights of the Seller under the Purchase
Agreement and the related Purchase Agreement Supplement or Purchase Agreement
Supplements, assigned to the Issuer pursuant to the Master Sale and Servicing
Agreement and the related Transfer Agreement or Transfer Agreements); (l) one
share of the Preferred Stock of the Seller and (m) 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
(collectively, the "Series 1998-1 Trust Estate").
The foregoing Grant is made in trust to the Indenture Trustee for the
benefit of the
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<PAGE>
Holders of the Notes. The Indenture Trustee hereby acknowledges such Grant,
accepts the trusts under the Indenture and this Series 1998-1 Supplement in
accordance with the provisions of the Indenture and this Series 1998-1
Supplement and agrees to perform its duties required in the Indenture and in
this Series 1998-1 Supplement in accordance with the provisions hereof and of
the Indenture to the best of its ability to the end that the interests of such
parties, recognizing the priorities of their respective interests may be
adequately and effectively protected.
SECTION I.03. Payments and Computations.
All amounts to be paid or deposited by any Person hereunder shall be
paid or deposited in accordance with the terms hereof no later than 12:00 noon
(New York City time) on the day when due in immediately available funds, or by
prior-day ACH debit.
SECTION I.04. Denominations.
The Notes of each Class will be issued in denominations of $100,000
and integral multiples of $1,000 in excess thereof, except for one Note of each
Class which may be issued in a denomination other than an integral multiple of
$1,000.
Article II
DEFINITIONS
SECTION II.01. Definitions.
(a) Whenever used in this Series 1998-1 Supplement and when used in
the Series 1998-1 Related Documents with respect to the Series 1998-1 Notes or
the Series 1998-1 Certificates, the following words and phrases shall have the
following meanings, and the definitions of such terms are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms. Unless otherwise defined in
this Series 1998-1 Supplement, terms defined in the Basic Documents are used
herein as therein defined. A term used herein preceded by the designation
"Series 1998-1" but not defined herein, shall have the meaning specified for
such term in the Basic Documents as such term relates to Series 1998-1.
"Aggregate Note Principal Balance" means, as of any date, the
aggregate outstanding principal amount of all the Notes on such date.
"Aggregate Optimal Note Principal Balance" means, with respect to any
Distribution Date, the excess, if any, of (x) the Pool Balance as of the last
day of the prior Collection Period over (y) the Targeted Overcollateralization
Amount for such Distribution Date.
"Available Funds" means, with respect to any Collection Period, and
the related Distribution Date, the sum of (i) the Collected Funds for such
Collection Period, (ii) investment earnings realized during the related
Collection Period, (iii) all Repurchase Amounts deposited in the Collection
Account during such Collection Period, (iv) any Insolvency Proceeds or proceeds
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<PAGE>
of any liquidation, in whole or in part, of the assets of the Trust and (v) the
lesser of (a) the excess, if any, of the aggregate amount distributable pursuant
to Section 3.03(a)(i) - (x) on such Distribution Date, over the aggregate of the
amounts specified in clauses (i), (ii) and (iii) with respect to such Collection
Period and (b) the Reserve Account Balance.
"Base Servicing Fee" means, with respect to any Collection Period, the
fee payable to the Master Servicer for services rendered during such Collection
Period, which shall be equal to one-twelfth of the Servicing Fee Rate multiplied
by the Aggregate Principal Balances of the Series 1998-1 Receivables, as of the
Accounting Date immediately preceding such Collection Period.
"Basic Documents" means the Master Sale and Servicing Agreement, the
Indenture, the Trust Agreement, the Purchase Agreement, and other documents and
certificates delivered therewith or pursuant thereto in connection with Series
1998-1.
"Book Entry Notes" means any beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 of the Indenture.
"Certificateholders" means the holders of Series 1998-1 Certificates.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the amount payable pursuant to Section 3.03 (a)(xiii) hereof.
"Class A Distributable Amount" means, with respect to any Distribution
Date and each class of Class A Notes, the sum of (i) the Class A Interest
Distributable Amount for such Distribution Date and (ii) the Class A Principal
Distributable Amount for such Distribution Date.
"Class A Interest Carryover Shortfall" means, with respect to any
Distribution Date and each Class of Class A Notes, the sum of: (i) excess of (a)
the related Class A Interest Distributable Amount for the preceding Distribution
Date, over (b) the amount actually paid as interest to the Class A Noteholders
on such preceding Distribution Date, plus (ii) interest on such excess, to the
extent permitted by law, at a rate per annum equal to the related Class A Note
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
"Class A Interest Distributable Amount" means, with respect to any
Distribution Date and each class of Class A Notes, an amount equal to the sum
of: (i) the aggregate amount of interest accrued on the Class A Notes at the
related Class A Note Rate from and including the preceding Distribution Date
(or, in the case of the initial Distribution Date, from and including the
Closing Date) to but excluding the current Distribution Date plus (ii) the
related Class A Interest Carryover Shortfall for the current Distribution Date.
"Class A Monthly Principal Distributable Amount" means (i) with
respect to any Distribution Date, prior to the Distribution Date on which the
principal balance of the Class A-1 Notes is reduced to zero, 100% of the
Principal Distributable Amount, (ii) with respect to the Distribution Date on
which the principal balance of the Class A-1 Notes is reduced to zero, 100%
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<PAGE>
of the Principal Distributable Amount with respect to that portion of the
Principal Distributable Amount required to reduce the principal balance of the
Class A-1 Notes to zero, plus the excess of the amount described in clause (iii)
of this definition for such Distribution Date over the amount of the Principal
Distributable Amount applied on such Distribution Date to reduce the principal
balance of the Class A-1 Notes to zero, (iii) with respect to any Distribution
Date on and after the Distribution Date on which the Principal Balance of the
Class A-1 Notes is reduced to zero until the Distribution Date on which the
Principal Balance of the Class A Notes is reduced to zero, the excess of (x)
aggregate outstanding principal balance of the Class A Notes over (y) (A) the
product of 69.25% and the Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount for such Distribution
Date.
"Class A Noteholders" means the Holders of the Class A Notes.
"Class A Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class A Monthly Principal Distributable
Amount for the preceding Distribution Date over the amount that was actually
distributed in respect of principal of the Class A Notes on such preceding
Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class A Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class A Principal Carryover
Shortfall for such Distribution Date; provided, however, that (x) the sum of
clauses (i) and (ii) shall not exceed the outstanding principal amount of the
Class A Notes, and (y) on the Final Scheduled Distribution Date, the Class A
Principal Distributable Amount will include the amount, to the extent of the
remaining Available Funds, necessary (after giving effect to other amounts
having a higher payment priority on such Distribution Date) to reduce the
outstanding principal amount of the Class A Notes to zero.
"Class A-1 Noteholders" means the Holders of the Class A-1 Notes.
"Class A-1 Scheduled Maturity Date" means with respect to the Class
A-1 Notes, _______________.
"Class A-2 Noteholders" means the Holders of the Class A-2 Notes.
"Class A-3 Noteholders" means the Holders of the Class A-3 Notes.
"Class A-4 Noteholders" means the Holders of the Class A-4 Notes.
"Class B-1 Distributable Amount" means, with respect to any
Distribution Date, the sum of (i) the Class B-1 Interest Distributable Amount
for such Distribution Date and (ii) the Class B-1 Principal Distributable Amount
for such Distribution Date.
"Class B-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the sum of: (i) the excess of (a) the Class B-1 Interest
Distributable Amount for the preceding Distribution Date, over (b) the amount
actually paid as interest to the Class B-1 Noteholders on such preceding
Distribution Date, plus (ii) interest on such excess, to the extent
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permitted by law, at a rate per annum equal to the Class B-1 Note Rate from such
preceding Distribution Date to but excluding the current Distribution Date.
"Class B-1 Interest Distributable Amount" means, with respect to any
Distribution Date, an amount equal to the sum of: (i) the aggregate amount of
interest accrued on the Class B-1 Notes at the Class B-1 Note Rate from and
including the preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date) to but excluding the
current Distribution Date plus (ii) the Class B-1 Interest Carryover Shortfall
for the current Distribution Date.
"Class B-1 Monthly Principal Distributable Amount" means, with respect
to each Distribution Date on and after the Distribution Date on which the
principal balance of the Class A-1 Notes is reduced to zero, until the
Distribution Date on which the outstanding principal amount of the Class B-1
Notes has been reduced to zero, an amount equal to the excess of: (i) the sum of
(x) the outstanding principal balance of the Class A Notes on such Distribution
Date (after giving effect to distribution of the Class A Principal Distributable
Amount for such Distribution Date) plus (y) the outstanding principal balance of
the Class B-1 Notes prior to such Distribution Date over (ii) (A) the product of
81.25% and the outstanding Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount.
"Class B-1 Noteholders" means the Holders of the Class B-1 Notes."
"Class B-1 Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class B-1 Principal Distributable Amount
for the preceding Distribution Date over the amount that was actually
distributed in respect of principal of the Class B-1 Notes on such Preceding
Distribution Date.
"Class B-1 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class B-1 Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class B-1 Principal Carryover
Shortfall for such Distribution Date; provided, however, that the sum of clauses
(i) and (ii) shall not exceed the outstanding principal amount of the Class B-1
Notes, and on the Final Scheduled Distribution Date, the Class B-1 Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Distribution Date) to reduce the outstanding principal
amount of the Class B-1 Notes to zero.
"Class B-2 Distributable Amount" means, with respect to any
Distribution Date, the sum of (i) the Class B-2 Interest Distributable Amount
for such Distribution Date and (ii) the Class B-2 Principal Distributable Amount
for such Distribution Date.
"Class B-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the sum of: (i) the excess of (a) the Class B-2 Interest
Distributable Amount for the preceding Distribution Date, over (b) the amount
actually paid as interest to the Class B-2 Noteholders on such preceding
Distribution Date, plus (ii) interest on such excess, to the extent permitted by
law, at a rate per annum equal to the Class B-2 Note Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
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"Class B-2 Interest Distributable Amount" means, with respect to any
Distribution Date, an amount equal to the sum of: (i) the aggregate amount of
interest accrued on the Class B-2 Notes at the Class B-2 Note Rate from and
including the preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date) to but excluding the
current Distribution Date plus (ii) the Class B-2 Interest Carryover Shortfall
for the current Distribution Date.
"Class B-2 Monthly Principal Distributable Amount" means, with respect
to each Distribution Date on and after the Distribution Date on which the
principal balance of the Class A-1 Notes is reduced to zero, until the
Distribution Date on which the outstanding principal amount of the Class B-2
Notes has been reduced to zero, an amount equal to the excess of: (i) the sum of
(x) the outstanding principal balance of the Class A Notes on such Distribution
Date (after giving effect to distribution of the Class A Principal Distributable
Amount for such Distribution Date) plus (y) the outstanding principal balance of
the Class B-1 Notes (after giving effect to distribution of the Class B-1
Principal Distributable Amount for such Distribution Date) and (z) the
outstanding principal balance of the Class B-2 Notes (after giving effect to
distribution of the Class B-2 Principal Distributable Amount for such
Distribution Date) over (ii) (A) the product of 92.65% and the outstanding Pool
Balance as of the end of the related Collection Period minus (B) the Targeted
Overcollateralization Amount.
"Class B-2 Noteholders" means the Holders of the Class B-2 Notes."
"Class B-2 Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class B-2 Principal Distributable Amount
for the preceding Distribution Date over the amount that was actually
distributed in respect of principal of the Class B-2 Notes on such Preceding
Distribution Date.
"Class B-2 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class B-2 Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class B-2 Principal Carryover
Shortfall for such Distribution Date; provided, however, that the sum of clauses
(i) and (ii) shall not exceed the outstanding principal amount of the Class B-2
Notes, and on the Final Scheduled Distribution Date, the Class B-2 Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Distribution Date) to reduce the outstanding principal
amount of the Class B-2 Notes to zero.
"Class C Distributable Amount" means, with respect to any Distribution
Date, the sum of (i) the Class C Interest Distributable Amount and (ii) the
Class C Principal Distributable Amount.
"Class C Interest Carryover Shortfall" means, with respect to any
Distribution Date the sum of: (i) excess of (a) the Class C Interest
Distributable Amount for the preceding Distribution Date, over (b) the amount
actually paid as interest to the Class C Noteholders on such preceding
Distribution Date, plus (ii) interest on such excess, to the extent permitted by
law, at a rate per annum equal to the Class C Note Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
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"Class C Interest Distributable Amount" means, with respect to any
Distribution Date an amount equal to the sum of: (i) the aggregate amount of
interest accrued on the Class C Notes at the related Class C Note Rate from and
including the preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date) to but excluding the
current Distribution Date plus (ii) the Class C Interest Carryover Shortfall for
the current Distribution Date.
"Class C Monthly Principal Distributable Amount" means, with respect
to each Distribution Date on and after the Distribution Date on which the
outstanding principal amount of the Class A-1 Notes is reduced to zero, until
the Distribution Date on which the outstanding principal amount of the Class C
Notes has been reduced to zero, an amount equal to the excess, if any of: (i)
the sum of (x) the outstanding principal balance of the Class A Notes on such
Distribution Date (after giving effect to distribution of the Class A Principal
Distribution Amount for such Distribution Date), plus (y) the outstanding
principal balance of the Class B Notes on such Distribution Date (after giving
effect to distribution of the Class B-1 Principal Distributable Amount and the
Class B-2 Principal Distributable Amount for such Distribution Date), plus (z)
the outstanding principal balance of the Class C Notes immediately prior to such
Distribution Date and (ii) (A) the product of 100% and the outstanding Pool
Balance as of the end of the related Collection Period minus (B) the Targeted
Overcollateralization Amount for such Distribution Date.
"Class C Noteholders" means the Holders of the Class C Notes.
"Class C Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class C Principal Distributable Amount for
the preceding Distribution Date over the amount that was actually distributed in
respect of principal of the Class C Notes on such Preceding Distribution Date.
"Class C Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class C Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class C Principal Carryover
Shortfall for such Distribution Date; provided, however, that the sum of clauses
(i) and (ii) shall not exceed the outstanding principal amount of the Class C
Notes, and on the Final Scheduled Distribution Date, the Class C Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Distribution Date) to reduce the outstanding principal
amount of the Class C Notes to zero.
"Cutoff Date" means ________________.
"Definitive Notes" means the Notes that have been certificated and
fully registered in accordance with Section 2.12 of the Indenture.
"Distribution Date" means, with respect to each Collection Period, the
seventeenth day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing on _____ __,
1998.
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"Eligibility Criteria" means the criteria for eligibility for Eligible
Receivables set forth on Schedule I hereto.
"Eligible Receivable" or "Series 1998-1 Eligible Receivable" means a
Series 1998-1 Receivable that satisfies the Eligibility Criteria set forth in
Schedule I hereto.
"Event of Default" shall have the meaning assigned to such term in
Section 4.01.
"Final Scheduled Distribution Date" means ____________.
"HAFC " means Household Automotive Finance Corporation.
"HFC " means Household Finance Corporation.
"Indenture" means the indenture dated as of October 1, 1998 among the
Issuer, the Master Servicer and The Chase Manhattan Bank, as indenture trustee,
as supplemented by the Series 1998-1 Supplement.
"Initial Reserve Account Deposit" means 1% of the Pool Balance as of
the Cutoff Date.
"Interest Period" means, with respect to any Distribution Date, the
period from and including the prior Distribution Date (or, in the case of the
first Distribution Date, from and including the Series 1998-1 Closing Date)
through (and including) the day preceding such Distribution Date.
"Master Servicer's Certificate" means, with respect to Series 1998-1,
a report in substantially the form of Exhibit E hereto (appropriately
completed), furnished by the Master Servicer to the Indenture Trustee and the
Owner Trustee pursuant to the Master Sale and Servicing Agreement.
"Maximum Reserve Account Deposit Amount" for any Distribution Date is
equal to that portion of Collected Funds representing interest collections on
the Receivables (including amounts representing Net Liquidation Proceeds for
such Collection Period) for the related Collection Period less the sum of: the
Base Servicing Fee paid to any third party Master Servicer, the fees due to the
Indenture Trustee, Trust Collateral Agent and Owner Trustee, to the extent not
paid by the Servicer, plus, the aggregate Noteholders' Interest Distributable
Amount for such Distribution Date, plus the aggregate Principal Balances of all
Receivables which became Liquidated Receivables during the related Collection
Period, plus the aggregate amount of Cram Down Losses during such Collection
Period.
"Note Account" means the Note Account.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A Distributable Amount, the Class B-1
Distributable Amount, the Class B-2 Distributable Amount and the Class C
Distributable Amount.
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"Noteholders' Interest Distributable Amount" means with respect to any
Distribution Date, the sum of the Class A Interest Distributable Amount, the
Class B-1 Interest Distributable Amount, the Class B-2 Interest Distributable
Amount, and the Class C Interest Distributable Amount.
"Note Rate" means the per annum rate of interest due with respect to
each Class of Notes as set forth below for the respective Class of Note:
Class A-1 Notes: ___%
Class A-2 Notes: ___%
Class A-3 Notes: ___%
Class A-4 Notes: ___%
Class B-1 Notes: ___%
Class B-2 Notes: ___%
Class C Notes: ___%
Interest (including interest calculated with respect to Interest
Carryover Shortfalls) on the Class A-1 and Class A-2 Notes will be calculated on
the basis of a 360-day year and the actual number of days elapsed in an
applicable Interest Period. Interest (including interest calculated with respect
to Interest Carryover Shortfalls) on the Class A-3, Class A-4, Class B-1, Class
B-2 and Class C Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
"Notes" means the Class A Notes, the Class B-1 Notes, the Class B-2
and the Class C Notes, collectively.
"Original Pool Balance" means the aggregate of the Principal Balance
of the Receivables as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity.
"Pledge" means the Grant by the Issuer hereunder to the Indenture
Trustee for the benefit of the Holders of Notes in accordance with Section 1.02
hereof in and to specified Pledged Property related thereto.
"Pledged Property" means, with respect to the Series 1998-1 Trust
Estate, each Series 1998-1 Receivable, together with all associated property and
rights with respect thereto described in the definition of Series 1998-1 Trust
Estate.
"Pool Balance" means, as of any date of determination, the aggregate
of the outstanding Principal Balances of the Receivables as of the close of
business on such Business Day.
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"Principal Amount Available" means, with respect to any Distribution
Date, the amount remaining in the Note Account on such Distribution Date after
the payment of the amounts required to be paid pursuant to clause (i) through
(vi) of Section 3.03(a) on such Distribution Date minus the Reserve Account
Deposit Amount for such Distribution Date.
"Principal Distributable Amount" means, with respect to any
Distribution Date, the lesser of (x) the Principal Amount Available for such
Distribution Date and (y) the excess, if any, of (i) the Aggregate Note
Principal Balance immediately prior to such Distribution Date over (ii) the
Aggregate Optimal Note Balance for such Distribution Date.
"Rating Agencies" means Standard & Poor's and Moody's. If such
organization or a successor does not maintain a rating on the Notes, "Rating
Agency" shall be a nationally recognized statistical rating organization or
other comparable Person designated by Seller, notice of which designation shall
be given to the Indenture Trustee, the Owner Trustee and the Master Servicer.
"Redemption Price" has the meaning specified in Section 5.01 hereof.
"Reserve Account" means the Series 1998-1 Reserve Account which shall
be an Eligible Deposit Account created pursuant to Section 3.01 hereof, which
initially shall be account no. ________, reference Household Automobile
Revolving Trust I, Series 1998-1, at the Indenture Trustee, ABA No. _________.
"Reserve Account Balance" means, with respect to a Distribution Date,
the amount on deposit in the Reserve Account as of the opening of business on
such Distribution Date.
"Reserve Account Deposit Amount" means, with respect to any
Distribution Date, the lesser of: (x) the Maximum Reserve Account Deposit Amount
for such Distribution Date and (y) the Reserve Account Shortfall Amount for such
Distribution Date.
"Reserve Account Shortfall Amount" means, with respect to any
Distribution Date, the excess of: (x) the Targeted Reserve Account Balance for
such Distribution Date over (y) the Reserve Account Balance for such
Distribution Date less amounts, if any, included in the definition of Available
Funds for such Distribution Date.
"Schedule of Receivables" means the schedule of all retail installment
sales contracts and promissory notes held as part of the Series 1998-1 Trust
Estate.
"Series 1998-1 Certificate" means the Series Trust Certificate (as
defined in the Trust Agreement) designated as the "Series 1998-1 Certificate".
"Series 1998-1 Closing Date" means _______________, 1998.
"Series 1998-1 Collected Funds" means, with respect to a date of
determination, the amount of Collected Funds with respect to the Collection
Period immediately preceding such
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date of determination, including all Net Liquidation Proceeds collected during
the related Collection Period (but excluding any Purchase Amounts).
"Series 1998-1 Collection Account" means the Eligible Deposit Account
created pursuant to Section 3.01 hereof which initially shall be account no.
__________, reference Household Automobile Revolving Trust I, Series 1998-1, at
the Indenture Trustee, ABA No. _______________.
"Series 1998-1 Eligible Investments" means, with respect to funds in
the Series 1998-1 Collection Account and Reserve Account, "Eligible Investments"
as defined in the Master Sale and Servicing Agreement, except that (i) all
references in such definition to "rating satisfactory to the Rating Agency" or
words of similar import shall mean ratings of not less than "A-1" by Standard &
Poor's and "P-1" by Moody's (whichever is applicable), and (ii) all such
investments shall have maturities at the time of the acquisition thereof
occurring no later than the Business Day immediately preceding the Distribution
Date following such date of acquisition.
"Series 1998-1 Note Account" means the Eligible Deposit Account
created pursuant to Section 3.01 hereof, which initially shall be account no.
___, reference Household Automobile Revolving Trust I, Series 1998-1 at the
Indenture Trustee, ATSA No. ______________.
"Series 1998-1 Receivables" means each Receivable listed on the
Schedule of Receivables, which (a) has not been released from the Series 1998-1
Trust Estate as provided herein or in the Indenture and (b) is not a Liquidated
Receivable.
"Series 1998-1 Related Documents" means the Basic Documents, this
Series 1998-1 Supplement, each Purchase Agreement Supplement related to the
Series 1998-1 Trust Estate, each Transfer Agreement related to the Series 1998-1
Trust Estate, the Series 1998-1 Notes, the Series 1998-1 Certificates and other
documents and certificates delivered in connection therewith.
"Series 1998-1 Reserve Account" means the Reserve Account.
"Series 1998-1 Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to the Agent and the Purchasers (including
the principal of, and interest on, the Series 1998-1 Notes) and all other
amounts owing at any time to the Agent and each Purchaser under this Series
1998-1 Supplement or any other Series 1998-1 Related Documents.
"Series 1998-1 Securities" means the Series 1998-1 Notes and the
Series 1998-1 Certificates.
"Series 1998-1 Supplement" means this Series 1998-1 Supplement to the
Indenture and the Trust Agreement.
"Series 1998-1 Support" means, with respect to the Series 1998-1
Notes, the
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Series 1998-1 Certificates.
"Series 1998-1 Support Provider" means none.
"Series 1998-1 Trust Accounts" means the Series 1998-1 Collection
Account, the Series 1998-1 Reserve Account, and the Series 1998-1 Note Account.
"Series 1998-1 Trust Estate" shall have the meaning set forth in
Section 1.02 hereof.
"Servicing Fee Rate" means 3% per annum.
"Supplemental Servicing Fee" means, with respect to any Collection
Period, (i) all administrative fees, expenses and charges actually paid by or on
behalf of Obligors, including late fees, prepayment fees and liquidation fees
collected on the Series 1998-1 Receivables during such Collection Period, and
(ii) the net realized investment earnings of funds on deposit in the Series
1998-1 Collection Account or on deposit in the Master Collection Account and
allocable to the investment of Available Funds with respect to Series 1998-1.
"Targeted Credit Enhancement Amount" means, with respect to any
Distribution Date, 13.75% of the Pool Balance as of the of last day of the
related Collection Period.
"Targeted Overcollateralization Amount" means, with respect to any
Distribution Date, the excess (but not less than zero), if any, of: (i) the
Targeted Credit Enhancement Amount over (ii) the Targeted Reserve Account
Balance.
"Targeted Reserve Account Balance" means, with respect to any
Distribution Date, the lesser of: (i) the greater of (a) 3.0% of the outstanding
Pool Balance as of the end of the related Collection Period, and (b) 2.0% of the
Original Pool Balance, and (ii) the Aggregate Note Principal Balance.
"Trust" means the Issuer.
"Trust Agreement" means the Trust Agreement dated as of March 1, 1998
between the Seller and the Owner Trustee, as supplemented by the Series 1998-1
Supplement.
Article III
DISTRIBUTIONS AND STATEMENTS TO
SERIES 1998-1 NOTEHOLDERS; SERIES SPECIFIC COVENANTS
SECTION III.01. Series 1998-1 Trust Accounts.
(a) The Trust Collateral Agent, for the benefit of the Holders of the
Series 1998-1 Securities, shall establish and maintain an account (the "Series
1998-1 Collection Account") as a segregated trust account in the Trust
Collateral Agent's corporate trust department, identified as the "Collection
Account for Household Automobile Revolving Trust I, in trust for the registered
Holders of the
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Series 1998-1 Securities." The Trust Collateral Agent shall make or
permit withdrawals from the Series 1998-1 Collection Account only as provided in
this Series 1998-1 Supplement.
(b) On each Distribution Date, the Indenture Trustee pursuant to
Section 5.5(a) of the Master Sale and Servicing Agreement shall transfer amounts
with respect to Series 1998-1 and such Distribution Date from the Master
Collection Account to the Series 1998-1 Collection Account.
(c) The Indenture Trustee for the benefit of the Holders of the Series
1998-1 Notes shall establish and maintain an account (the "Series 1998-1 Reserve
Account") as a segregated trust account in the Indenture Trustee's corporate
trust department, identified as the "Series 1998-1 Reserve Account for Household
Automobile Revolving Trust I, in trust for the registered Holders of the Series
1998-1 Notes." The Indenture Trustee shall make or permit withdrawals from the
Reserve Account only as provided in this Series 1998-1 Supplement. On the Series
1998-1 Closing Date, the Series 1998-1 Reserve Account will be funded with the
Initial Reserve Account Deposit.
(d) The Indenture Trustee, for the benefit of the Holders of Series
1998-1 Notes, shall establish and maintain an account (the "Series 1998-1 Note
Account") as a segregated trust account in the Indenture Trustee's corporate
trust department, identified as the "Note Account for Household Automobile
Revolving Trust I, in trust for the registered Holders of the Series 1998-1
Notes." The Indenture Trustee shall make or permit withdrawals from the Series
1998-1 Note Account only as provided in this Series 1998-1 Supplement.
(e) On each Distribution Date, the Indenture Trustee shall transfer
Available Funds for such Distribution Date from the Series 1998-1 Collection
Account and from the Series 1998-1 Reserve Account, if applicable, to the Series
1998-1 Note Account.
(f) In the event that any Series 1998-1 Trust Account ceases to be an
Eligible Deposit Account, the Trust Collateral Agent or the Indenture Trustee,
as applicable, within five Business Days, shall establish a new Eligible Deposit
Account. No withdrawals may be made of funds in any Series 1998-1 Trust Account
except as provided in this Series 1998-1 Supplement. Except as specifically
provided in this Series 1998-1 Supplement, funds in the Series 1998-1 Trust
Accounts shall not be commingled with any other moneys. All moneys deposited
from time to time in each of the Series 1998-1 Trust Accounts shall be invested
and reinvested by the Owner Trustee or the Indenture Trustee, as applicable, in
Series 1998-1 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
Investment. The provisions of Section 5.1 of the Master Sale and Servicing
Agreement shall apply to investment of funds in the Series 1998-1 Trust Accounts
to the same extent as they apply to the Master Collection Account.
SECTION III.02. Reserve Account.
On the earlier of (x) the maturity date of the Series 1998-1 Notes
(whether by acceleration or otherwise) or (y) the Final Scheduled Distribution
Date, the amount on deposit in the Reserve Account shall be withdrawn from the
Reserve Account and distributed in accordance with Section 4.04.
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SECTION III.03. Distributions.
(a) On each Distribution Date, the Indenture Trustee shall (based
solely on the information contained in the Master Servicer's Certificate
delivered with respect to such Distribution Date) distribute the following
amounts from Available Funds with respect to such Distribution Date, and in the
following order of priority:
(i) to the Master Servicer, any Supplemental Servicing Fees for
the related Collection Period and, if HFC is no longer acting as
Master Servicer, the Base Servicing Fee for the related Collection
Period;
(ii) to the Indenture Trustee and the Owner Trustee, any accrued
and unpaid trustees' fees and any accrued and unpaid fees of the Trust
Collateral Agent (in each case, to the extent such fees have not been
previously paid by the Master Servicer);
(iii) to the Class A Noteholders, the Class A Interest
Distributable Amount;
(iv) to the Class B-1 Noteholders, the Class B-1 Interest
Distributable Amount;
(v) to the Class B-2 Noteholders, the Class B-2 Interest
Distributable Amount;
(vi) to the Class C Noteholders, the Class C Interest
Distributable Amount;
(vii) (i) to the Class A Noteholders, the Class A Principal
Distributable Amount, for such Distribution Date, such amount to be
applied in reduction of the principal balance of the Class A-1 Notes
until such principal balance is reduced to zero, and thereafter such
amount to be applied in reduction of the principal balance of the
Class A-2 Notes until such principal balance is reduced to zero, and
thereafter such amount to be applied in reduction of the principal
balance of the Class A-3 Notes until such principal balance is reduced
to zero, and thereafter such amount to be applied in reduction of the
principal balance of the Class A-4 Notes until such principal balance
is reduced to zero.
(viii) to the Class B-1 Noteholders, the Class B-1 Principal
Distributable Amount;
(ix) to the Class B-2 Noteholders, the Class B-2 Principal
Distributable Amount;
(x) to the Class C Noteholders, the Class C Principal
Distributable Amount;
(xi) to the Reserve Account, the Reserve Account Deposit Amount,
if any, required to increase the amount therein to the Targeted
Reserve Account Balance;
(xii) if HFC is acting as the Master Servicer, the Base Servicing
Fee for the related Collection period; and
(xiii) to the holders of the Series 1998-1 Certificates, any
remaining Available Funds;
provided, however, that, in the event that the Series 1998-1 Notes are
accelerated following the occurrence of an Event of Default, distributions to
the Series 1998-1 Securityholders shall be made pursuant to Section 4.04 hereof.
Neither the Indenture Trustee nor the Trust Collateral
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Agent shall have any duty to recalculate or verify the information set forth in
the Master Servicer's Certificate.
(b) If on a Distribution Date, the Master Servicer's Certificate
delivered with respect to such Distribution Date indicates that the amount
specified in clauses (i) through (iv) of the definition of Available Funds with
respect to such Distribution Date is less than the sum of the amounts required
to be distributed pursuant to clauses (i) through (x) of subsection (a) on such
Distribution Date, the Indenture Trustee shall withdraw from the Series 1998-1
Reserve Account an amount up to the amount of such deficiency and distribute
such amount as a component of Available Funds.
(c) Each Series 1998-1 Certificateholder by its acceptance of its
Certificate will be deemed to have consented to the provisions of paragraph (a)
above relating to the priority of distributions, and will be further deemed to
have acknowledged that no property rights in any amount of or the proceeds of
any such amount shall vest in such Certificateholder until such amounts have
been distributed to such Certificateholder pursuant to such provisions;
provided, that the foregoing shall not restrict the right of any
Certificateholder, upon compliance with the provisions hereof, from seeking to
compel the performance of the provisions hereof by the parties hereto. Each
Series 1998-1 Certificateholder, by acceptance of its Certificate, further
specifically acknowledges that it has no right to or interest in any monies at
any time held in the Series 1998-1 Reserve Account, such monies being held in
trust for the benefit of the Series 1998-1 Noteholders.
(d) In the event that the Series 1998-1 Collection Account is
maintained with an institution other than the Indenture Trustee, the Master
Servicer shall instruct and cause such institution to transfer the amounts to be
withdrawn therefrom in accordance with Section 3.03(a) or 3.03(b) to the
Indenture Trustee for distribution pursuant to Section 3.03(a) or Section
3.03(b), as the case may be, on the related Distribution Date.
(e) Unless Definitive Notes are issued pursuant to Section 2.12 of the
Indenture, with respect to Notes registered on the related Record Date in name
of a nominee of the Clearing Agency, payment will be made by wire transfer to an
account designated by such nominee, without presentation or surrender of the
Series 1998-1 Notes or the making of any notation thereon, except that the final
distribution with respect to the Series 1998-1 Notes shall be made against
tender thereof.
(f) If not theretofore paid in full, all amounts outstanding with
respect to the Class A-1 Notes shall be due and payable on the Class A-1
Scheduled Maturity Date, and if not theretofore paid in full, all amounts
outstanding with respect to the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class B-1 Notes, the Class B-2 Notes and the Class C Notes shall
be due and payable on the Final Scheduled Distribution Date.
SECTION III.04. Statements to Noteholders.
On or prior to each Determination Date, the Master Servicer shall
provide to the Trust Collateral Agent (with a copy to the Rating Agencies) for
the Trust Collateral Agent to forward to each Noteholder of record, and to each
Certificateholder of record, a statement setting forth at least the following
information as to the Notes to the extent applicable:
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(i) the amount of such distribution allocable to principal of
each Class of Notes;
(ii) the amount of such distribution allocable to interest on or
with respect to each Class of Notes;
(iii) the aggregate outstanding principal amount of each Class of
the Notes after giving effect to payments allocated to principal
reported under (i) above;
(iv) the Class A Interest Carryover Shortfall, the Class B-1
Interest Carryover Shortfall, the Class B-2 Interest Carryover
Shortfall, the Class C Interest Carryover Shortfall, the Class A
Principal Carryover Shortfall, the Class B-1 Principal Carryover
Shortfall, the Class B-2 Principal Carryover Shortfall, the Class C
Principal Carryover Shortfall, if any, and the change in such amounts
from the preceding statement.
(v) the amount of the Base Servicing Fee paid to the Master
Servicer with respect to such Collection Period;
(vi) the Targeted Reserve Account Balance and the amount on
deposit in the Reserve Account at the end of such Distribution Date.
Each amount set forth pursuant to paragraph (i)through (v) above shall be
expressed as a dollar amount per $1,000 of the initial principal balance of the
applicable Class of Notes.
SECTION III.05. Reporting Requirements.
(a) The Master Servicer's Certificate shall be in the form attached
hereto as Exhibit E hereto.
(b) By January 31 of each calendar year, commencing January 31, 1999,
the Master Servicer on behalf of the Issuer shall prepare and distribute to the
Indenture Trustee a statement containing such information as is required to be
provided by an issuer of indebtedness under the Code and such other customary
information as is necessary to enable the Noteholders to prepare their tax
returns.
(c) If an Event of Default occurs and is continuing and if it is
either known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail to each Noteholder notice of the Default within [30] days after such
knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION III.06. Compliance With Withholding Requirements.
Notwithstanding any other provisions of this Series 1998-1 Supplement
or the Indenture to the contrary, the Indenture Trustee, shall comply with all
federal withholding requirements respecting payments (or advances thereof) to
the Noteholders as may be applicable to instruments constituting indebtedness
for federal income tax purposes. Any amounts so withheld shall be treated as
having been paid to the applicable Noteholders for all purposes of the
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Indenture. In no event shall the consent of any Noteholder be required for
any such withholding.
SECTION III.07. Special Covenants and Acknowledgements.
With respect to the Series 1998-1 Notes, the Issuer hereby represents
and warrants, as of the Series 1998-1 Closing Date:
(i) Valid Pledge. It is the intention of the Issuer that each
pledge herein contemplated constitutes the Grant of a perfected, first
priority security interest in all Pledged Property to the Indenture
Trustee for the benefit of the Series 1998-1 Noteholders.
(ii) Governmental Authorization. Other than the filing of the
financing statements required hereunder, no authorization or approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by the Issuer of this Series 1998-1
Supplement, the Indenture, and each Series 1998-1 Related Document to
which it is a party.
SECTION III.08. Tax Characterization.
It is the intent of the parties hereto that, for all Federal, state,
local and foreign taxes, the Series 1998-1 Notes will be evidence of
indebtedness. To the extent permitted by law, the parties hereto, and each owner
of a beneficial interest in the Series 1998-1 Notes by acceptance of such
interest, agrees to treat the Series 1998-1 Notes for purposes of all Federal,
state, local and foreign taxes as indebtedness secured by the Series 1998-1
Trust Estate.
Article IV
EVENTS OF DEFAULT; REMEDIES
SECTION IV.01. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five calendar days; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable, and such default shall continue for a period of five calendar
days; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in the Series 1998-1 Related Documents
(other than a covenant or agreement, a default in the observance or
performance of which is elsewhere in this Section specifically dealt
with), or any representation or warranty of the Issuer made in the
Series 1998-1 Related Documents or in any certificate or other writing
delivered pursuant thereto or in connection therewith proving to have
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been incorrect in any material respect as of the time when the
same shall have been made and has a material adverse effect on the
Noteholders, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation
or warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 60 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee
or to the Issuer and the Indenture Trustee by the Holders of at least
25% of the Outstanding Amount of the Notes, a written notice
specifying such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Assets in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Property, or ordering
the winding-up or liquidation of the Issuer's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such
law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Assets, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
SECTION IV.02. Rights Upon Event of Default.
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee in its discretion may, or if so requested in writing by
Holders holding Notes representing at least 66 2/3% of the Outstanding Amount of
the Notes, declare by written notice to the Issuer that the Notes have become
due and payable, whereupon they shall become, immediately due and payable at
100% of the outstanding principal balance of the Notes, and accrued interest
thereon (together with interest accrued at the relevant Note Rate on such
overdue interest).
(b) At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee, the Holders of Notes representing a majority
of the Outstanding Amount of the Notes, by written notice to the Issuer and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not
occurred; and
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(B) all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.9 of
the Indenture.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION IV.03. Remedies.
If an Event of Default shall have occurred and be continuing, the
Indenture Trustee, subject to Section 11.17 of the Indenture, may exercise any
of the remedies specified in Article V of the Indenture and, in addition, may do
one or more of the following.
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under the Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of the Indenture with respect to the Trust Assets;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee and the Holders of the Notes;
and
(iv) direct the Trust Collateral Agent to sell the Trust Assets
or any portion thereof or rights or interest therein, at one or more
public or private sales called and conducted in any manner permitted
by law; provided, however, that the Indenture Trustee may not sell or
otherwise liquidate the Trust Assets following an Event of Default
unless
(x) the Holders of 100% of the Outstanding Amount of the
Notes consent thereto,
(y) the proceeds of such sale or liquidation distributable
to the Noteholders are sufficient to discharge in full all
amounts then due and unpaid upon such Notes for principal and
interest, or
(z) the Indenture Trustee determines that the Trust Assets
will not continue to provide sufficient funds for the payment
of principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and payable,
and the Indenture Trustee obtains the consent of Holders of
66-2/3% of the Outstanding Amount of the Notes.
In determining such sufficiency or insufficiency with respect to
clause (y) and (z), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent
23
<PAGE>
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Assets for such purpose.
SECTION IV.04. Priorities.
(a) On and after the maturity date of the Series 1998-1 Notes (by
acceleration or otherwise) all Available Funds, all amounts on deposit in the
Reserve Account withdrawn in accordance with Section 3.02 and any proceeds of
the liquidation of all or any portion of the Series 1998-1 Trust Estate pursuant
to Section 4.03(iv), shall be applied by the Indenture Trustee on the related
Distribution Date in the following order of priority:
First: amounts due and owing and required to be distributed to
the Master Servicer, the Owner Trustee and the Indenture Trustee,
respectively, pursuant to priorities (i) and (ii) of Section 3.03
hereof and not previously distributed, in the order of such priorities
and without preference or priority of any kind within such priorities;
Second: to Class A Noteholders for amounts due and unpaid on the
Class A Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A
Notes for interest;
Third: to the Class A Noteholders for amounts due and unpaid on
the Class A Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class A Notes for principal.
Fourth: to the Class B-1 Noteholders for amounts due and unpaid
on the Class B-1 Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-1 Notes for interest.
Fifth: to the Class B-1 Noteholders for amounts due and unpaid on
the Class B-1 Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-1 Notes for principal.
Sixth: to the Class B-2 Noteholders for amounts due and unpaid on
the Class B-2 Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-2 Notes for interest.
Seventh: to the Class B-2 Noteholders for amounts due and unpaid
on the Class B-2 Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-2 Notes for principal.
Eighth: to the Class C Noteholders for amounts due and unpaid on
the Class C Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class C Notes for interest.
Ninth: to the Class C Noteholders for amounts due and unpaid on
the Class C Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on
24
<PAGE>
the Class C Notes for principal.
Tenth: to the Series 1998-1 Certificateholders, any remaining
Available Funds.
(b) The Indenture Trustee may fix a record date and Distribution Date
for any payment to Series 1998-1 Noteholders pursuant to this Section 4.04. At
least 15 days before such record date, the Indenture Trustee shall mail to the
Noteholders a notice that states the record date, the Distribution Date and the
amount to be paid.
Article V
PREPAYMENT AND REDEMPTION
SECTION V.01. Optional "Clean-Up" Redemption.
On any Distribution Date occurring on or after the date upon which the
Series 1998-1 Aggregate Note Principal Balance shall have been reduced to an
amount which is less than or equal to 10% of the Aggregate Note Principal
Balance of the Series 1998-1 Notes as of the Series 1998-1 Closing Date, the
Master Servicer and the Seller on behalf of the Issuer, shall each have the
option to redeem the outstanding Series 1998-1 Notes at a redemption price (the
"Redemption Price") which is not less than the then Aggregate Note Principal
Balance, plus all accrued and unpaid interest thereon and all fees and other
amounts owing to the Indenture Trustee, the Owner Trustee, the Trust Collateral
Agent and the Master Servicer (if other than HFC) under the Series 1998-1
Related Documents. The Master Servicer and the Seller, on behalf of the Issuer,
shall give the Master Servicer (if other than HFC), the Indenture Trustee, and
the Owner Trustee at least 10 days' irrevocable prior written notice of the date
on which the Master Servicer or the Seller, as applicable intends to exercise
such option to purchase. Not later than 12:00 P.M., New York City time, on such
Distribution Date, the Master Servicer or the Seller, as applicable, shall
deposit such amount in the Collection Account in immediately available funds for
distribution pursuant to Section 3.03 against the presentment of the Notes for
cancellation. Such purchase option is subject to payment in full of the
Redemption Price.
Article VI
MISCELLANEOUS
SECTION VI.01. Ratification of Basic Documents.
Each of the Basic Documents, and to the extent appropriate, as
supplemented by this Series 1998-1 Supplement, is in all respects ratified and
confirmed and each of the Basic Documents, as so supplemented by this Series
1998-1 Supplement shall be read, taken and construed as one and the same
instrument.
SECTION VI.02. Counterparts.
This Series 1998-1 Supplement may be executed in one or more
counterparts, each of which so executed shall be deemed to be an original, but
all of which shall together
25
<PAGE>
constitute but one and the same instrument.
SECTION VI.03. GOVERNING LAW.
THIS SERIES 1998-1 SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION VI.04. Amendments Without Consent of Noteholders.
(a) Without the consent of the Noteholders but with prior written
notice to the Rating Agencies, as evidenced to the Indenture Trustee and the
Issuer, when authorized by an Issuer Order, at any time and from time to time,
the parties hereto may enter into one or more amendments hereto, in form
satisfactory to the Indenture Trustee and the Owner Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of the Indenture as supplemented by this
Series 1998-1 Supplement, or better to assure, convey and confirm unto
the Indenture Trustee, if any, any property subject or required to be
subjected to the lien of the Indenture as supplemented by this Series
1998-1 Supplement, or to subject to the lien of the Indenture as
supplemented by this Series 1998-1 Supplement additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Noteholders, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee, if any;
(v) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to
make any other provisions with respect to matters or questions arising
under the Indenture, the Trust Agreement or in this Series
1998-1Supplement; provided that such action shall not adversely affect
the interests of the Series 1998-1 Noteholders;
(vi) to evidence and provide for the acceptance of the
appointment hereunder and under the Indenture by a successor indenture
trustee with respect to the Notes and to add to or change any of the
provisions of the Indenture or of this Series 1998-1 Supplement as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one indenture trustee, pursuant to the
requirements of Article VI of the Indenture; or
(vii) to modify, eliminate or add to the provisions of the
Indenture or of this Series 1998-1 Supplement to such extent as shall
be necessary to effect the qualification of the Indenture under the
TIA or under any similar federal statute hereafter enacted and to add
to the Indenture such other provisions as may
26
<PAGE>
be expressly required by the TIA.
Each of the Indenture Trustee and the Owner Trustee is hereby
authorized to join in the execution of any amendment and to make any further
appropriate agreements and stipulations that may be therein contained.
(b) Except as otherwise provided herein, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order, may, also without the consent of
any of the Series 1998-1 Noteholders but with prior notice to the Rating
Agencies by the Issuer, as evidenced to the Indenture Trustee, enter into an
amendment hereto for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, the Indenture or of this Series
1998-1 Supplement of modifying in any manner the rights of the Series 1998-1
Noteholders under the Indenture or under this Series 1998-1 Supplement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any Series
1998-1 Noteholder.
SECTION VI.05. Amendments With Consent of the Series 1998-1
Noteholders.
Except as otherwise provided herein, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order provided by the Master Servicer,
also may, upon satisfaction of the Rating Agency Condition and with the consent
of the Holders of not less than a majority of the Outstanding Amount of each
Class of affected Series 1998-1 Notes, by Act of such Holders delivered to the
Issuer and the Indenture Trustee, enter into an amendment hereto for the purpose
of adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Series 1998-1 Supplement or of modifying in any manner the
rights of the Series 1998-1 Noteholders under the Indenture or under this Series
1998-1 Supplement; provided, however, that no such amendment shall, without the
consent of the Holder of each Outstanding Series 1998-1 Note affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Series 1998-1 Note, or reduce the principal amount
thereof, the interest rate thereon, change the provision of the
Indenture relating to the application of collections on, or the
proceeds of the sale of, all or any portion of any Series 1998-1 Trust
Estate to payment of principal of or interest on the Series 1998-1
Notes, or change any place of payment where, or the coin or currency
in which, any Series 1998-1 Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of the Indenture requiring the application of funds
available therefor, as provided in Article V of the Indenture, to the
payment of any such amount due on the Series 1998-1 Notes on or after
the respective due dates thereof;
(iii) reduce the percentage of the Outstanding Amount of the
Series 1998-1 Notes, the consent of the Holders of which is required
for this Series 1998-1 Supplement, or the consent of the Holders of
which is required for any waiver of compliance with certain provisions
of the Indenture or certain defaults hereunder and their consequences
provided for in the Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
27
<PAGE>
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Trustee to direct the Issuer to sell or
liquidate the Series 1998-1 Trust Estate pursuant to Section 5.4 of
the Indenture;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of the Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Series
1998-1 Note affected thereby;
(vii) modify any of the provisions of the Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Series 1998-1 Note on any
Distribution Date (including the calculation of any of the individual
components of such calculation) or to affect the rights of the Holders
of Series 1998-1 Notes to the benefit of any provisions for the
mandatory redemption of the Series 1998-1 Notes contained herein; or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any part of the
a Series 1998-1 Trust Estate or, except as otherwise permitted or
contemplated herein or the Series 1998-1 Related Documents, terminate
the lien of the Indenture on any property at any time subject hereto
or deprive the Holder of any Series 1998-1 Note of the security
provided by the lien of the Indenture.
Except as otherwise provided herein, the Indenture Trustee may
determine whether or not any Series 1998-1 Notes would be adversely affected by
any amendment upon receipt of an Opinion of Counsel to that effect and any such
determination shall be conclusive upon the Holders of all Series 1998-1 Notes,
whether theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of this Series 1998-1 Supplement, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee
of this Series 1998-1 Supplement, the Indenture Trustee shall mail to the Series
1998-1 Noteholders a notice setting forth in general terms the substance hereof.
Any failure of the Indenture Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of the Series
1998-1 Supplement.
SECTION VI.06. Non-petition Clauses.
By its acceptance of its interest in the Series 1998-1 Notes, each
owner of a beneficial interest in a Note shall be deemed to have agreed that
prior to the date which is one year and one day after the termination of the
Indenture, such Person shall not acquiesce, petition or otherwise invoke or
cause the Issuer or the Seller to invoke the process of any governmental
authority for the purpose of commencing or sustaining a case against the Seller
or Issuer under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of or for the Issuer or the Seller or any substantial
part of its property or ordering the winding-up or liquidation of the affairs of
28
<PAGE>
the Issuer or the Seller.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Series 1998-1
Supplement to be fully executed by their respective officers as of the day and
year first above written.
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By
--------------------------------
Name:
Title:
HOUSEHOLD AUTOMOBILE REVOLVING
TRUST I,
as Issuer
By WILMINGTON TRUST COMPANY
Not in its individual capacity but solely as
Owner Trustee
By
--------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION,
By
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By
--------------------------------
Name:
30
<PAGE>
Title:
WILMINGTON TRUST COMPANY,
as Owner Trustee
By
--------------------------------
Name:
Title:
31
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Page
<S> <C>
Aggregate Note Principal Balance..................................................................................3
Aggregate Optimal Note Principal Balance..........................................................................3
Available Funds...................................................................................................3
Base Servicing Fee................................................................................................4
Book Entry Notes..................................................................................................4
Certificateholders................................................................................................4
Certificateholders' Distributable Amount..........................................................................4
Chase.............................................................................................................1
Class A Distributable Amount......................................................................................4
Class A Interest Carryover Shortfall..............................................................................4
Class A Interest Distributable Amount.............................................................................4
Class A Monthly Principal Distributable Amount....................................................................5
Class A Noteholders...............................................................................................5
Class A Principal Carryover Shortfall.............................................................................5
Class A Principal Distributable Amount............................................................................5
Class A-1 Noteholders.............................................................................................5
Class A-1 Scheduled Maturity Date.................................................................................5
Class A-2 Noteholders.............................................................................................5
Class A-3 Noteholders.............................................................................................5
Class A-4 Noteholders.............................................................................................6
Class B Distributable Amount......................................................................................6
Class B Interest Distributable Amount.............................................................................7
Class B-1 Interest Carryover Shortfall............................................................................6
Class B-1 Interest Distributable Amount...........................................................................6
Class B-1 Monthly Principal Distributable Amount..................................................................6
Class B-1 Noteholders.............................................................................................6
Class B-1 Principal Carryover Shortfall...........................................................................6
Class B-1 Principal Distributable Amount..........................................................................6
Class B-2 Distributable Amount....................................................................................7
Class B-2 Interest Carryover Shortfall............................................................................7
Class B-2 Monthly Principal Distributable Amount..................................................................7
Class B-2 Noteholders.............................................................................................7
Class B-2 Principal Carryover Shortfall...........................................................................7
Class B-2 Principal Distributable Amount..........................................................................8
Class C Distributable Amount......................................................................................8
Class C Interest Carryover Shortfall..............................................................................8
Class C Interest Distributable Amount.............................................................................8
Class C Monthly Principal Distributable Amount....................................................................8
Class C Noteholders...............................................................................................8
Class C Principal Carryover Shortfall.............................................................................8
Class C Principal Distributable Amount............................................................................9
Collected Funds..................................................................................................12
Cutoff Date.......................................................................................................9
Definitive Notes..................................................................................................9
Distribution Date.................................................................................................9
Eligibility Criteria..............................................................................................9
Eligible Receivable...............................................................................................9
Event of Default..................................................................................................9
Final Scheduled Distribution Date.................................................................................9
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
HAFC..............................................................................................................9
HFC...............................................................................................................9
Indenture.........................................................................................................1
Indenture Trustee.................................................................................................1
Initial Reserve Account Deposit...................................................................................9
Interest Period...................................................................................................9
Issuer............................................................................................................1
Master Servicer...................................................................................................1
Master Servicer's Certificate....................................................................................10
Maximum Reserve Account Deposit Amount...........................................................................10
Note Account.....................................................................................................10
Note Rate........................................................................................................10
Noteholders' Interest Distributable Amount.......................................................................10
Notes............................................................................................................11
Original Pool Balance............................................................................................11
Owner Trust Estate...............................................................................................11
Owner Trustee.....................................................................................................1
Pledge...........................................................................................................11
Pledged Property.................................................................................................11
Pool Balance.....................................................................................................11
Principal Amount Available.......................................................................................11
Principal Distributable Amount...................................................................................11
Rating Agencies..................................................................................................11
Redemption Price.................................................................................................11
Reserve Account..................................................................................................11
Reserve Account Balance..........................................................................................12
Reserve Account Deposit Amount...................................................................................12
Reserve Account Shortfall Amount.................................................................................12
Schedule of Receivables..........................................................................................12
Seller............................................................................................................1
Series 1998-1 Certificate........................................................................................12
Series 1998-1 Closing Date.......................................................................................12
Series 1998-1 Collection Account.................................................................................12
Series 1998-1 Eligible Investments...............................................................................12
Series 1998-1 Eligible Receivable.................................................................................9
Series 1998-1 Note Account.......................................................................................13
Series 1998-1 Receivables........................................................................................13
Series 1998-1 Related Documents..................................................................................13
Series 1998-1 Secured Obligations................................................................................13
Series 1998-1 Securities.........................................................................................13
Series 1998-1 Spread Account.....................................................................................13
Series 1998-1 Supplement.........................................................................................13
Series 1998-1 Support............................................................................................13
Series 1998-1 Support Provider...................................................................................13
Series 1998-1 Trust Accounts.....................................................................................13
Series 1998-1 Trust Estate.......................................................................................13
Servicing Fee Rate...............................................................................................13
Supplemental Servicing Fee.......................................................................................13
Targeted Credit Enhancement Amount...............................................................................14
Targeted Overcollateralization Amount............................................................................14
Targeted Reserve Account Balance.................................................................................14
Trust............................................................................................................14
Trust Agreement...................................................................................................1
</TABLE>
33
<PAGE>
Exhibit 4.4
- -------------------------------------------------------------------------------
MASTER SALE AND SERVICING AGREEMENT
among
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I, Issuer,
together with the Respective Additional Issuers Referred to
Herein,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
HOUSEHOLD FINANCE CORPORATION,
Master Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee and Trust Collateral Agent
Dated as of March 1, 1998
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
Definitions
<S> <C> <C>
SECTION 1.1. Definitions......................................................................1
SECTION 1.2. Other Interpretive Provisions...................................................19
SECTION 1.3. Usage of Terms..................................................................20
SECTION 1.4. Certain References..............................................................21
SECTION 1.5. No Recourse.....................................................................21
SECTION 1.6. Action by or Consent of Noteholders.............................................21
SECTION 1.7. Material Adverse Effect.........................................................21
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
Conveyance of Receivables
<S> <C> <C>
SECTION 2.1. Conveyance of Receivables.......................................................21
SECTION 2.2. Further Encumbrance of Series Trust Estate......................................24
</TABLE>
<TABLE>
<CAPTION>
ARTICLE III
The Receivables
<S> <C> <C>
SECTION 3.1. Representations and Warranties of Seller........................................25
SECTION 3.2. Repurchase upon Breach..........................................................26
SECTION 3.3. Custody of Receivables Files....................................................26
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IV
Administration and Servicing of Receivables
<S> <C> <C>
SECTION 4.1. Duties of the Master Servicer...................................................27
SECTION 4.2. Collection of Receivable Payments; Modifications of Receivables.................28
SECTION 4.3. Realization Upon Receivables....................................................30
SECTION 4.4. Insurance.......................................................................31
SECTION 4.5. Maintenance of Security Interests in Vehicles...................................32
SECTION 4.6. Covenants, Representations, and Warranties of Master Servicer...................32
SECTION 4.7. Repurchase of Receivables Upon Breach of Covenant...............................33
SECTION 4.8. Total Servicing Fee; Payment of Certain Expenses by Master Servicer.............34
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.9. Master Servicer's Certificate...................................................34
SECTION 4.10. Annual Statement as to Compliance, Notice of Master Servicer Termination
Event...........................................................................35
SECTION 4.11. Annual Independent Accountants' Report..........................................35
SECTION 4.12. Access to Certain Documentation and Information Regarding Receivables...........36
SECTION 4.13. Fidelity Bond and Errors and Omissions Policy...................................36
SECTION 4.14. Year 2000 Compliance............................................................37
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
Trust Accounts; Distributions;
Statements to Certificateholders and Noteholders
<S> <C> <C>
SECTION 5.1. Establishment of Trust Accounts.................................................37
SECTION 5.2. Certain Reimbursements to the Master Servicer...................................39
SECTION 5.3. Application of Collections......................................................39
SECTION 5.4. Additional Deposits.............................................................39
SECTION 5.5. Distributions...................................................................40
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
RESERVED
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
<S> <C> <C>
SECTION 8.1. Representations of Seller.......................................................40
SECTION 8.2. Corporate Existence.............................................................42
SECTION 8.3. Liability of Seller; Indemnities................................................43+
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations of, Seller.........44
SECTION 8.5. Limitation on Liability of Seller and Others....................................44
SECTION 8.6. Seller May Own Certificates or Notes............................................45
</TABLE>
ARTICLE IX
The Master Servicer
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.1. Representations of Master Servicer..............................................45
SECTION 9.2. Liability of Master Servicer; Indemnities.......................................47
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations of the
Master Servicer or the Trust Collateral Agent...................................49
SECTION 9.4. Limitation on Liability of Master Servicer, Trust Collateral Agent and
Others..........................................................................49
SECTION 9.5. Delegation of Duties............................................................50
SECTION 9.6. Master Servicer Not to Resign...................................................51
SECTION 9.7. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers..............51
SECTION 9.8. Successor Sub-Servicers.........................................................52
</TABLE>
<TABLE>
<CAPTION>
ARTICLE X
Default
<S> <C> <C>
SECTION 10.1. Master Servicer Termination Event...............................................52
SECTION 10.2. Consequences of a Master Servicer Termination Event.............................54
SECTION 10.3. Appointment of Successor........................................................54
SECTION 10.4. Notification to Noteholders and Certificateholders..............................55
SECTION 10.5. Waiver of Past Defaults.........................................................56
SECTION 10.6. Successor to Master Servicer....................................................56
</TABLE>
<TABLE>
<CAPTION>
ARTICLE XI
Termination
<S> <C> <C>
SECTION 11.1. Optional Purchase of All Receivables............................................56
</TABLE>
<TABLE>
<CAPTION>
ARTICLE XII
Administrative Duties of the Master Servicer
<S> <C> <C>
SECTION 12.1. Administrative Duties...........................................................57
SECTION 12.2. Records.........................................................................59
SECTION 12.3. Additional Information to be Furnished to the Issuer............................59
</TABLE>
<TABLE>
<CAPTION>
ARTICLE XIII
Miscellaneous Provisions
<S> <C> <C>
SECTION 13.1. Master Agreement Supplements....................................................60
SECTION 13.2. Protection of Title to Trust....................................................61
SECTION 13.3. Notices.........................................................................63
SECTION 13.4. Assignment......................................................................63
SECTION 13.5. Limitations on Rights of Others.................................................64
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 13.6. Severability....................................................................64
SECTION 13.7. Separate Counterparts...........................................................64
SECTION 13.8. Headings........................................................................64
SECTION 13.9. Governing Law...................................................................64
SECTION 13.10. Assignment to Trustee...........................................................64
SECTION 13.11. Nonpetition Covenants...........................................................64
SECTION 13.12. Limitation of Liability of Owner Trustee and the Trust Collateral Agent.........65
SECTION 13.13. Independence of the Master Servicer.............................................65
SECTION 13.14. No Joint Venture................................................................66
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Servicer's Certificate
Exhibit B Form of Transfer Agreement
Exhibit C Form of Request for Release and Receipt of Documents
Exhibit D Form of Trustee's Acknowledgement
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MASTER SALE AND SERVICING AGREEMENT dated as of March 1, 1998, among
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I, a Delaware business trust (the
"Issuer"), together with the respective additional issuers referred to herein,
HOUSEHOLD AUTO RECEIVABLES CORPORATION, a Nevada corporation (the "Seller"),
HOUSEHOLD FINANCE CORPORATION, a Delaware corporation (the "Master Servicer")
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, in its capacity as Trustee and Trust Collateral Agent.
WHEREAS the Issuer desires to purchase from time to time Receivables
arising in connection with motor vehicle retail installment sale contracts
acquired by Household Automotive Finance Corporation or any of its subsidiaries;
WHEREAS the Seller will purchase from time to time Receivables from
Household Automotive Finance Corporation 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
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
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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, the related Series Trust Estate, if any, and the approximate
principal amount of Receivables to be transferred on such Transfer Date.
"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 automobile installment sale contracts or promissory
notes, 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.
"Base Servicing Fee" means, with respect to each Series Trust Estate and
with respect to any Collection Period, the fee payable to the Master Servicer
for services rendered during such Collection Period, which, unless otherwise
specified in the related Series Supplement, shall be equal to one-twelfth of the
Servicing Fee Rate multiplied by the daily average Pool Balance for such Series
Trust Estate determined with respect to the preceding Collection Period.
"Basic Documents" means this Agreement, the Certificate of Trust, the Trust
Agreement, the Indenture, the Purchase Agreement and other documents and
certificates delivered in connection therewith.
"Business Day" means a day other than a Saturday, a Sunday or other day on
which commercial banks located in the states of Illinois, Minnesota, California
or New York are authorized or obligated to be closed.
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"Certificate" has the meaning assigned to such term in the Trust Agreement
and, with respect to a Series, the meaning specified in the relevant Series
Supplement.
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Class" means a class of Notes or Certificates, as the context requires.
"Closing Date" means March 31, 1998.
"Collected Funds" means, with respect to any Distribution Date, the amount
of funds in the Master Collection Account representing collections on
Receivables during the related Collection Period, including all Net Liquidation
Proceeds collected during the related Collection Period (but excluding any
Repurchase Amounts).
"Collection Period" means, for each Series, with respect to the first
Distribution Date in such Series, the period beginning on the opening of
business on the related Cutoff Date and ending on the close of business on the
last day of the calendar month preceding such Distribution Date. 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.
"Computer Tape" means the computer tapes or other electronic media
furnished by the Seller to the Issuer and its assigns describing certain
characteristics of the Receivables.
"Contract" means a motor vehicle retail installment sale contract.
"Corporate Trust Office" means (i) with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee, which at the time of
execution of this agreement is Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, and
(ii) with respect to the Trustee and the Trust Collateral Agent, if any, the
principal corporate trust office of Norwest Bank Minnesota, National
Association, which at the time of execution of this agreement is Sixth Street
and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate
Trust Services-Asset Backed Administration.
"Covenant Receivable" means, with respect to any Collection Period, a
Receivable which the Master Servicer is required to purchase pursuant to Section
4.7.
"Cram Down Loss" means, with respect to a Receivable, if a court of
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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 (i) the excess of the principal balance of such Receivable immediately prior
to such order over the principal balance of such Receivable as so reduced and/or
(ii) if such court shall have issued an order reducing the effective rate of
interest on such Receivable, the excess of the principal balance of such
Receivable immediately prior to such order over the net present value (using as
the discount rate the higher of the APR on such Receivable or the rate of
interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Cutoff Date" means, with respect to a Receivable and the Transfer Date as
of which such Receivable is transferred to the Trust, (i) the Accounting Date
immediately preceding such Transfer Date or (ii) if such Receivable is
originated in the month of the related Transfer Date, the date of origination.
"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 subsidiaries or an Unaffiliated Originator under a Dealer Agreement or
pursuant to a Dealer Assignment.
"Dealer Agreement" means any agreement between an Unaffiliated Originator
and a Dealer relating to the acquisition of Receivables from a Dealer by an
Unaffiliated Originator.
"Dealer Assignment" means, with respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to an Unaffiliated
Originator.
"Dealer Underwriting Guide" means either, (i) the underwriting guidelines
used by or on behalf of HAFC or one of its subsidiaries in the origination and
purchase of Receivables as amended from time to time or (ii) the underwriting
guidelines used in the origination of Receivables as reviewed by HAFC or one of
its subsidiaries prior to the purchase of Receivables by HAFC.
"Defaulted Receivable" means, unless otherwise provided in a Series
Supplement, with respect to any Distribution Date, a Receivable with respect to
which: (i) 90% or more of a Scheduled Payment is 60 or more days delinquent,
(ii) the Servicer has repossessed the related Financed Vehicle (and any
applicable redemption period has expired), (iii) such Receivable is delinquent
and the Master Servicer has determined in good faith that payments thereunder
are not likely to be resumed or (iv) the Obligor has been identified on the
records of the Master Servicer as being the subject of a current bankruptcy
proceeding.
"Delivery" means with respect to the Trust Account Property:
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(1) the perfection and priority of a security interest in which is governed
by the law of a jurisdiction which has adopted the 1978 Revision to Article
Eight of the UCC:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC (other than
certificated securities) and are susceptible of physical delivery, transfer
thereof to the Trustee by physical delivery to the Trustee, endorsed to, or
registered in the name of, the Trustee or its nominee or endorsed in blank
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Collateral to the Trustee free and clear of any adverse claims, consistent
with changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to a "certificated security" (as defined in Section
8-102(1)(a) of the UCC), transfer thereof:
(i) by physical delivery of such certificated security to the
Trustee, provided that if the certificated security is in registered
form, it shall be endorsed to, or registered in the name of, the
Trustee or endorsed in blank;
(ii) by physical delivery of such certificated security to a
"financial intermediary" (as defined in Section 8-313(4) of the UCC)
of the Trustee specially endorsed to or issued in the name of the
Trustee;
(iii) by the sending by a financial intermediary, not a "clearing
corporation" (as defined in Section 8-102(3) of the UCC), of a
confirmation of the purchase and the making by such financial
intermediary of entries on its books and records identifying as
belonging to the Trustee of (A) a specific certificated security in
the financial intermediary's possession, (B) a quantity of securities
that constitute or are part of a fungible bulk of certificated
securities in the financial intermediary's possession, or (C) a
quantity of securities that constitute or are part of a fungible bulk
of securities shown on the account of the financial intermediary on
the books of another financial intermediary; or
(iv) by the making by a clearing corporation of appropriate
entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of
the Trustee or a Person designated by the Trustee by the amount of
such certificated security, provided that in each case: (A) the
clearing corporation identifies such certificated security for the
sole and exclusive account of the Trustee or the Person designated by
the Trustee, (B) such certificated security shall be subject to the
clearing corporation's exclusive control, (C) such certificated
security is in bearer form or endorsed in blank or registered in
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the name of the clearing corporation or custodian bank or a nominee of
either of them, (D) custody of such certificated security shall be
maintained by such clearing corporation or a "custodian bank" (as
defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the control of the clearing corporation and (E) such
certificated security is shown on the account of the transferor
thereof on the books of the clearing corporation prior to the making
of such entries; and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of
ownership of any such Collateral to the Trustee free and clear of any
adverse claims, consistent with changes in applicable law or
regulations or the interpretation thereof;
(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book entry regulations, the following
procedures, all in accordance with applicable law, including applicable
Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a financial intermediary which is
also a "depositary" pursuant to applicable Federal regulations and issuance
by such financial intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Trustee of the purchase
by the financial intermediary on behalf of the Trustee of such book-entry
security; the making by such financial 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 Trustee and indicating that such financial intermediary holds such
book-entry security solely an agent for the Trustee; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Collateral to the Trustee free
of any adverse claims, consistent with changes in applicable law or
regulations or the interpretation thereof;
(d) with respect to any Trust Account Property that is an
"uncertificated security" (as defined in Section 8-102(1)(b) of the UCC)
and that is not governed by clause (c) above, transfer thereof:
(i) by registration of the transfer thereof to the Trustee, on
the books and records of the issuer thereof;
(ii) by the sending of a confirmation by a financial intermediary
of the purchase, and the making by such financial intermediary of
entries on its books and records identifying as belonging to the
Trustee (A) a quantity of securities which constitute or are part of a
fungible bulk of uncertificated securities registered in the name of
the financial intermediary or (B) a quantity of securities which
constitute or
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are part of a fungible bulk of securities shown on the account of the
financial intermediary on the books of another financial intermediary;
or
(iii) by the making by a clearing corporation of appropriate
entries on its books reducing the appropriate account of the
transferor and increasing the account of the Trustee or a person
designated by the Trustee by the amount of such uncertificated
security, provided that in each case: (A) the clearing corporation
identifies such uncertificated security for the sole and exclusive use
of the Trustee or the Person designated by the Trustee, (B) such
uncertificated security is registered in the name of the clearing
corporation or a custodian bank or a nominee of either, and (C) such
uncertificated security is shown on the account of the transferor on
the books of the clearing corporation prior to the making of such
entries; and
(e) in each case of delivery contemplated herein, the Trustee shall
make appropriate notations on its records, and shall cause same to be made
of the records of its nominees, indicating that such securities are held in
trust pursuant to and as provided in this Agreement.
(2) the perfection and priority of a security interest in which is governed
by the law of a jurisdiction which has adopted the 1994 Revision to Article 8 of
the UCC:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC (other than
certificated securities) and are susceptible of physical delivery, transfer
thereof to the Trustee by physical delivery to the Trustee, endorsed to, or
registered in the name of, the Trustee or its nominee or endorsed in blank
and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Collateral to the Trustee free and clear of any adverse claims, consistent
with changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to a "certificated security" (as defined in Section
8-102(a)(4) of the UCC), transfer thereof:
(i) by physical delivery of such certificated security to the
Trustee, provided that if the certificated security is in registered
form, it shall be endorsed to, or registered in the name of, the
Trustee or endorsed in blank;
(ii) by physical delivery of such certificated security in
registered form to a "securities intermediary" (as defined in Section
8-102(a)(14) of the UCC) acting on behalf of the Trustee if the
certificated security has been specially endorsed to the Trustee by an
effective endorsement.
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(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a securities intermediary which
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 Trustee of the
purchase by the securities intermediary on behalf of the 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 Trustee and indicating that such securities intermediary
holds such book-entry security solely as agent for the Trustee; and such
additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Collateral to the Trustee
free of any adverse claims, consistent with changes in applicable law or
regulations or the interpretation thereof;
(d) with respect to any Trust Account Property that is an
"uncertificated security" (as defined in Section 8-102(a)(18) of the UCC)
and that is not governed by clause (c) above, transfer thereof:
(i) (A) by registration to the Trustee as the registered owner
thereof, on the books and records of the issuer thereof.
(B) by another Person (not a securities intermediary) either
becomes the registered owner of the uncertificated security on behalf
of the Trustee, or having become the registered owner acknowledges
that it holds for the Trustee.
(ii) the issuer thereof has agreed that it will comply with
instructions originated by the Trustee without further consent of the
registered owner thereof.
(e) in each case of delivery contemplated herein, the Trustee shall
make appropriate notations on its records, and shall cause same to be made
of the records of its nominees, indicating that securities are held in
trust pursuant to and as provided in this Agreement.
(f) with respect to a "security entitlement" (as defined in Section
8-102(a)(17) of the UCC)
(i) if a securities intermediary (A) indicates by book entry that a
"financial asset" (as defined in Section 8-102(a)(9) of the UCC) has been
credited to be
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the Trustee's "securities account" (as defined in Section 8-501(a) of the UCC),
(B) receives a financial asset (as so defined) from the Trustee or acquires a
financial asset for the Trustee, and in either case, accepts it for credit to
the Trustee's securities account (as so defined), (C) becomes obligated under
other law, regulation or rule to credit a financial asset to the Trustee's
securities account, or (D) has agreed that it will comply with "entitlement
orders" (as defined in Section 8-102(a)(8) of the UCC) originated by the Trustee
without further consent by the "entitlement holder" (as defined in Section
8-102(a)(7) of the UCC), of a confirmation of the purchase and the making by
such securities intermediary of entries on its books and records identifying as
belonging to the Trustee or (I) specific certificated security in the securities
intermediary's possession, (II) a quantity of securities that constitute or are
part of a fungible bulk of certificated securities in the securities
intermediary's possession, or (III) a quantity of securities that constitute or
are part of a fungible bulk of securities shown on the account of the securities
intermediary on the books of another securities intermediary.
If there is a Trust Collateral Agent with respect to a Series, references
to the Trustee in the definition of Delivery shall be deemed to be to the Trust
Collateral Agent with respect to Trust Account Property which is Collateral only
with respect to such Series.
"Depositor" shall mean the Seller in its capacity as Depositor under the
Trust Agreement.
"Determination Date" means, unless otherwise provided in a 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" means, unless otherwise provided in a Series
Supplement, with respect to each Collection Period, the seventeenth day of the
following calendar month, or if such day is not a Business Day, the immediately
following Business Day.
"Electronic Ledger" means the electronic master record of the retail
installment sales contracts or installment loans serviced by the Master
Servicer.
"Eligibility Criteria" means with respect to a Series, the criteria set
forth in the related Schedule of Eligibility Criteria.
"Eligible Bank" means, except as otherwise provided in a Series Supplement,
any depository institution (which shall initially be the Trustee or the Trust
Collateral Agent, as the case may be, 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) has either (i) a
rating of P-1 from Moody's and A-1 from Standard &
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Poor's with respect to short-term deposit obligations, or such other lower
ratings acceptable to the Rating Agency, or (ii) if such institution has issued
long-term unsecured debt obligations, a rating acceptable to the Rating Agency
with respect to long-term unsecured debt obligations.
"Eligible Deposit Account" means, except as otherwise provided in a 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 and a rating
of BBB- or higher from Standard & Poor's with respect to long-term deposit
obligations, or such other lower ratings acceptable to the Rating Agency.
"Eligible Investments" shall mean, except as otherwise provided in a Series
Supplement, negotiable instruments or securities represented by instruments in
bearer or registered form, or, in the case of deposits described below, deposit
accounts held in the name of the Trust Collateral Agent in trust for the benefit
of the Holders of the Securities of the relevant Series, subject to the
exclusive custody and control of the Trust Collateral Agent and for which the
Trust Collateral Agent has sole signature authority, which evidence:
(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;
(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 acceptable 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;
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(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 provided;
such notes will constitute Eligible Investments only if the commercial paper of
Household has, at the time of the Trust's investment in such notes, a rating
satisfactory to the Rating Agency; or
(h) any other investment of a type or rating that is acceptable to the
Rating Agency.
Any of the foregoing Eligible Investments may be purchased on or through
the Trustee or the Trust Collateral Agent, if any, or through any Affiliate of
either of them.
"Eligible Servicer" means Household Finance Corporation or any Person which
at the time of its appointment as 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 Sub-Servicer" means Household Automotive Finance Corporation or
any wholly owned subsidiary of Household or any Person which at the time of its
appointment as Sub-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, 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.
"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 the premises in respect of such Person
or any substantial part of its
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property in an involuntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator,
or similar official for such Person or for any substantial part of its property,
or ordering the winding-up or liquidation of such Person's affairs, and such
petition, decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by such Person to the entry of an
order for relief in an involuntary case under any such law, or the consent by
such Person to the appointment of or taking possession by, a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due, or the taking
of action by such Person in furtherance of any of the foregoing.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4 hereof)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Interest Period" for any Class or Series of Notes or Certificates, the
meaning set forth in the related Series Supplement.
"Interest Rate" for any Class or Series of Notes or Certificates, the
meaning set forth in the related Series Supplement.
"Investment Earnings" means, with respect to any Distribution Date and
Trust Account, the investment earnings (net of investment losses and expenses)
on amounts on deposit in such Trust Account on such Distribution Date.
"Issuer" means Household Automobile Revolving Trust I, together with each
other Trust designated as an Issuer hereunder pursuant to a Series Supplement,
in each case so long as such Trust has not been terminated in accordance with
the terms of the related Trust Agreements.
"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, any assignment permitted
by Section 2.1 hereof and 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 on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction
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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, a
Receivable as to which (i) such Receivable has been liquidated by the Master
Servicer through the sale of the Financed Vehicle, (ii) 60 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) 90% 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, 90% or more of a Scheduled Payment shall have
become 210 or more days delinquent), except in the case of a repossessed
Financed Vehicle. Any Receivable that becomes a Repurchased Receivable on or
before the related Accounting Date shall not be a Liquidated Receivable.
"Master Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"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(d).
"Master Servicer Credit Facility Issuer" means a depository institution or
insurance company that qualifies pursuant to Section 4.2(d).
"Master Servicer Termination Event" means an event specified in Section
10.1.
"Master Servicer's Certificate" means an Officers' Certificate of the
Master Servicer delivered pursuant to Section 4.9, substantially in the form of
Exhibit A hereto.
"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; 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.
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"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 from any Series Support) net of (i) reasonable expenses, which
expenses shall not include any deficiency balances or post-disposition
recoveries collected, 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 Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero, provided,
further, that, so long as amounts cannot be 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 each Series Trust Estate.
"Noteholder" means the Person in whose name a Note is registered on the
Note Register.
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" has the meaning assigned to
such term in the related Series Supplement.
"Noteholders' Principal Distributable Amount" has the meaning assigned to
such term in the related 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.
"Opinion of Counsel" means an opinion of counsel who may be counsel to the
Master Servicer or the Seller, acceptable to the Trustee.
""Other Conveyed Property" means all property conveyed by the Seller to the
Trust pursuant to Section 2.1(a)(ii) through (x) of this Agreement.
"Outstanding" has the meaning assigned to such term in the Indenture.
"Outstanding Amount" means, with respect to any Series, the aggregate
principal amount of all Notes of such Series which are Outstanding at the date
of
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determination after giving effect to all distributions of principal on such date
of determination.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as 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(d) hereof.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"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.
"Purchase Agreement" means the Master Receivables Purchase Agreement
between the Seller and HAFC, dated as of March 1, 1998, pursuant to which the
Seller acquired the Receivables, as such agreement may be amended or
supplemented from time to time.
"Purchase Agreement Supplement" means any Receivables Purchase Agreement
Supplement to the Purchase Agreement.
"Rating Agency" means, with respect to any outstanding Series or Class,
each Rating Agency specified in the Series Supplement. If with respect to a
Series the consent of the Rating Agency is required, and at the time the Notes
of the Series have not been rated by such Rating Agency, "Rating Agency" shall
mean the related Series Secured Parties for the purpose of the giving of such
consent
"Rating Agency Condition" means, with respect to any action with respect to
a Series, that each Rating Agency shall have received prior notice thereof and
that each Rating Agency shall have notified the Master Servicer in writing (who
shall then immediately notify the Seller, the Owner Trustee, the Trustee and the
Trust Collateral
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Agent, if any, in writing) that such action will not result in a reduction or
withdrawal of the then current rating of any Class of Notes. If with respect to
a Series a Rating Agency Condition is required to be satisfied with respect to
an event or criteria, and at the time the Notes of the Series have not been
rated by such Rating Agency, "Rating Agency Condition" shall mean the consent or
approval of the related Series Secured Parties to such event or criteria.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A to a
Transfer Agreement (which Schedule may be in an acceptable electronic format),
except Liquidated Receivables and Receivables released from the Owner Trust
Estate.
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" with respect to each Distribution Date means the Business Day
immediately preceding such Distribution Date, unless otherwise specified in the
applicable Series Supplement.
"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.
"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 purchase, 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 Seller or HAFC pursuant to Section 11.1(a).
"Schedule of Eligibility Criteria" means the Schedule of Eligibility
Criteria attached as Schedule 1 to a Series Supplement.
"Schedule of Receivables" means, with respect to each Series Trust Estate,
the schedule of all retail installment sales contracts and promissory notes
originally held as part of the Trust which is attached as Schedule A to the
Transfer Agreement relating to such Series Trust Estate.
"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
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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.
"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, with respect to any Notes, Notes issued pursuant to the
same Series Supplement and with respect to any Certificates, Certificates issued
pursuant to the same Series Supplement, or the Notes and Certificates issued
pursuant to the same Series Supplement, as the context may require.
"Series Closing Date" means, with respect to any Series, the date
designated in the related Series Supplement as the closing date for such Series.
"Series Collection Account" means, with respect to any Series, the
collection account designated in the related Series Supplement.
"Series of Certificates" means the Certificates issued in connection with a
Series of Notes.
"Series Related Documents" with respect to a Series, has the meaning
specified therefor in the related Series Supplement.
"Series Secured Obligations" has the meaning specified therefor in the
related Series Supplement.
"Series Secured Parties" has the meaning specified therefor in the related
Series Supplement.
"Series Supplement" means, with respect to any Series, a Series Supplement
to the Indenture and the Trust Agreement, executed and delivered in connection
with the original issuance of the Notes and Certificates of such Series, and all
amendments thereof and supplements thereto.
"Series Support" means the rights and benefits provided to the
Trustee or the Noteholders of any Series or Class pursuant to any letter of
credit, surety bond, cash collateral account, spread account, guaranteed rate
agreement, maturity liquidity facility, interest rate swap agreement, tax
protection agreement or other similar arrangement. The
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subordination of any Series or Class to another Series or Class shall be deemed
to be a Series Support. Notwithstanding that such Series Support may be held by
or in favor of the Trustee for the benefit of any Series or Class, only those
Series or Classes to which such Series Support relates shall have any rights
with respect thereto and all payments thereunder received by the Trustee shall
be distributed exclusively as prescribed in the Series Supplement relating to
such Series or Class.
"Series Support Provider" means the Person, if any, designated in the
related Series Supplement, as providing any Series Support, other than Household
or any of its Affiliates or the Noteholders of any Series or Class which is
subordinated to another Class or Series.
"Series Trust Accounts" has the meaning with respect to each Series
specified in the related Series Supplement.
"Series Termination Date" has the meaning with respect to each Series
specified in the related Series Supplement.
"Series Trust Estate" has the meaning with respect to each Series specified
in the related 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 Rate" means 3% per annum unless otherwise specified in a
Series Supplement with respect to the related Series Trust Estate.
"Simple Interest Method" means the method of allocating a fixed level
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
the fixed rate of interest on such obligation multiplied by the period of time
(expressed as a fraction of a year, based on the actual number of days in the
calendar month and 365 days in the calendar year) elapsed since the preceding
payment under the obligation was made.
"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 Ratings Services, or its
successor.
"Sub-Servicer" means any Eligible Sub-Servicer with whom the Master
Servicer has entered into an agreement relating to subservicing the Receivables.
Initially, the Sub-Servicer will be HAFC.
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"Supplemental Servicing Fee" means, with respect to any Collection Period,
(i) all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, prepayment fees and liquidation fees collected on
the Receivables during such Collection Period, and (ii) the net realized
Investment Earnings of funds on deposit in the Master Collection Account.
"Support Default" shall mean a default relating to the Insolvency or
performance of a Series Support Provider.
"Transfer Agreement" means the agreement among the Issuer, the Seller and
the Master Servicer, substantially in the form of Exhibit B.
"Transfer Date" means, with respect to Receivables, any date on which
Receivables are to be transferred to a Trust pursuant to this Agreement and a
related Transfer Agreement.
"Trust" means the respective Issuers, individually.
"Trust Account Property" means the Trust Accounts and each Series Trust
Account, all amounts and investments held from time to time in any Trust Account
and each Series Trust Account (whether in the form of deposit accounts, Physical
Property, book-entry securities, uncertificated securities or otherwise), and
all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of March 1, 1998,
between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.
"Trust Collateral Agent" means the Person, if any, acting as Trust
Collateral Agent hereunder as agent of the Noteholders of a Series and a related
Series Support Provider, its successors in interest and any successor Trust
Collateral Agent hereunder.
"Trust Officer" means, (i) in the case of the Trust Collateral Agent, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, assistant vice-president or managing director,
the secretary, any assistant secretary or any other officer of the Trust
Collateral Agent customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject, 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
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Series Related Documents on behalf of the Owner Trustee.
"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
"Trustee Fee" means the fees due to the Trustee and the Trust Collateral
Agent, if any, as may be set forth in that certain fee agreement dated as of the
date hereof between the Master Servicer and Norwest Bank Minnesota, National
Association.
"Unaffiliated Originator" means a third-party originator or owner of
Receivables not affiliated with the Seller or HAFC.
"Unaffiliated Originator Receivables Purchase Agreements" means,
collectively, the agreements pursuant to which HAFC acquired certain of the
Receivables, directly or indirectly, from Unaffiliated Originators, as any of
such agreements may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
"Warranty Receivable" With respect to any Collection Period, a Receivable
which the Seller has become obligated to repurchase pursuant to Section 3.2.
Other Interpretive Provisions
(a) . (a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture, or, if not defined therein, in
the Trust Agreement. Cross referenced definitions may include a Series
designation.
(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.
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(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 a Series
Supplement, shall have the meaning with respect to such Series specified
therefor in such Series Supplement, whether or not the definition in this
Agreement includes a phrase to the effect that such term may be otherwise
defined in a Series Supplement.
(f) In the event that with respect to a Series there is no Series Support
Provider, any references herein or in any other of the Basic Documents to the
consent of, or acceptability to, the Series Support Provider shall be deemed to
be deleted.
(g) In the event that no Trust Collateral Agent is appointed to act as
agent on behalf of a Series of Noteholders and a related Series Support
Provider, then all references hereunder to the Trust Collateral Agent shall
refer to the Trustee, as agent of the Series Secured Parties of each Series, or
if duplicative with respect to the Trustee, shall be deemed to be deleted.
(h) Any provision hereof that refers to the consent of, or acceptability
to, the Trustee or Trust Collateral Agent, as the case may be, unless otherwise
specified herein, or in the related Series Supplement, shall be deemed to mean
such consent of, or acceptability to, at the direction of, or with the consent
of, the related Series Secured Parties.
Usage of Terms. With respect to all terms used in this Agreement, the
singular includes the plural and the plural includes the singular; words
importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words
in a visible form; references to agreements and other contractual instruments
include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; the
terms "include" or "including" mean "include without limitation" or
"including without limitation;" the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole and not
to any particular Article, Section or other subdivision, and Article,
Section, Schedule and Exhibit references, unless otherwise specified, refer
to Articles and Sections of Schedules and Exhibits to this Agreement.
Certain References. All references to the Principal Balance of a Receivable
as of any date of determination
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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.
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.
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
Trustee is entitled to rely upon any such action or consent, only Notes which
the Trust Officer of the Trustee actually knows to be so owned shall be so
disregarded.
Material Adverse Effect. Whenever a determination is to be made under this
Agreement as to whether a given event, action, course of conduct or set of
facts or circumstances could or would have a material adverse effect on the
Noteholders (or any similar or analogous determination), such determination
shall be made without taking into account any Series Support.
ARTICLE II
Conveyance of Receivables
Conveyance of Receivables(a) (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 of the net proceeds from the sale of a
Series of Notes and 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 related Series Supplement, the Seller
shall, from time to time, sell, transfer, assign, set over and otherwise
convey to the Issuer, without recourse (subject to the obligations set forth
herein), all right, title and interest of the Seller in and to:
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(i) each and every Receivables listed on Schedule A to the
related Transfer Agreement and all monies paid or payable thereon or
in respect thereof after the related Transfer Date (including amounts
due on or before the Cutoff Date but received by HAFC, the Seller or
the Issuer on or after the 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 the Seller against the Dealers pursuant to
Dealer Agreements; or Unaffiliated Originator Receivables Purchase
Agreements (as may be limited with respect to a Series in the
applicable Series Related Documents);
(iv) any proceeds and the right to receive proceeds with respect
to such Receivables repurchased by either (i) a Dealer, pursuant to a
Dealer Agreement, or (ii) an Unaffiliated Originator, pursuant to an
Unaffiliated Originator Receivables Purchase Agreement as a result of
a breach of representation or warranty in the related Dealer Agreement
or Unaffiliated Originator Receivables Purchase Agreement, as
applicable;
(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
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) 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 Trust pursuant to liquidation of such
Receivable;
(x) all of the Seller's right, title and interest in its rights
and benefits, but none of its obligations or burdens, under each of
the Purchase Agreements and Purchase Agreement Supplements, including
the delivery requirements, representations and warranties and the cure
and repurchase obligations of HAFC under each of the Purchase
Agreements and Purchase Agreement Supplements, on or after the related
Cutoff Date; and
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(xi) 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.
(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) the Seller shall have provided the Trustee, the Trust
Collateral Agent, if any, and the Owner Trustee with an Addition
Notice not later than five days prior to such Transfer Date (which
Addition Notice will designate the Series Trust Estate which the
Receivables will be a part of, if any) 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, the
Trustee and the Trust Collateral Agent, if any, a duly executed
Transfer Agreement which shall include supplements to Schedule A
(which may be in electronic format), listing the Receivables to be
transferred;
(iii) the Seller shall, to the extent required by Section 4.2,
have deposited in the Master Collection Account all collections
received after the related Cutoff Date in respect of the Receivables
to be transferred;
(iv) 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;
(v) 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;
(vi) the Seller shall, at its own expense, on or prior to the
Transfer Date indicate in its computer files that the Receivables
identified in
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the Transfer Agreement have been sold to the Trust pursuant to this Agreement;
(vii) the Seller shall have taken any action necessary or, if
required by the Trustee, advisable to maintain the first priority
perfected ownership interest of the Trust in the Owner Trust Estate
and the first perfected security interest of the Trust Collateral
Agent in the Series Trust Estate;
(viii) no selection procedures adverse to the interests of the
related Series shall have been utilized in selecting the related
Receivables;
(ix) the addition of any such Receivables shall not result in a
material adverse tax consequence to the Trust or the Noteholders;
(x) if required by any of the related Series Related Documents,
the Seller shall simultaneously transfer to the Trustee or to the
Trust Collateral Agent, if any, any amounts required to be deposited
in the related Trust Accounts with respect to the Receivables
transferred on such Transfer Date; and
(xi) the Seller shall have delivered to the related Series
Secured Parties and the Trust Collateral Agent 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 4.7.
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 Series Trust Estate from the Seller to the
Issuer and the beneficial interest in and title to the related Series Trust
Estate 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 of a
security interest in the property referred to in this Section 2.1 for the
benefit of the Noteholders and the related Series Secured Parties.
Further Encumbrance of Series Trust Estate(a) . (a) Immediately upon the
conveyance to the Trust by the Seller of any item of the related Series Trust
Estate pursuant to Section 2.1, all right, title and interest of the Seller
in and to such Series Trust Estate shall terminate, and all such right, title
and interest shall vest in the Issuer, in accordance with the Trust Agreement
and Sections 3802 and 3805 of the Business Trust Statute (as defined in the
Trust
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Agreement).
(b) Immediately upon the vesting of the related Series Trust Estate in the
Trust, the Trust shall have the sole right to pledge or otherwise encumber, such
related Series Trust Estate. Pursuant to the Indenture and a Series Supplement,
the Trust will grant a security interest in the Series Trust Estate to secure
the repayment of a related Series of Notes. The related Series of Certificates
shall represent the beneficial ownership interest in the related Series Trust
Estate, and the related Series of Certificateholders shall be entitled to
receive distributions with respect thereto as set forth in the related Series
Supplement.
(c) The Trustee or the Trust Collateral Agent, as the case may be, shall
hold the related Series Trust Estate for the benefit of the related Series
Secured Parties. Following the payment in full of the related Series of Notes
and the release and discharge of the Indenture and the related Series
Supplement, all covenants of the Issuer under Article III of the Indenture and
the related Series Supplement shall, until payment in full of the Certificates,
remain as covenants of the Issuer for the benefit of the related Series of
Certificateholders, enforceable by the related Series of Certificateholders to
the same extent as such covenants were enforceable by the related Series of
Noteholders prior to the discharge of the Indenture. Any rights of the Trustee
under Article III of the Indenture and the related Series Supplement, following
the discharge of the Indenture and the related Series Supplement, shall vest in
related Series of Certificateholders.
(d) The Trustee or Trust Collateral Agent, as the case may be, shall, at
such time as there are no Securities of a Series outstanding and all sums due
to the Trustee, the Trust Collateral Agent, if any, or any agent or counsel
thereof pursuant to the Indenture as supplemented by the related 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 related Series Supplement and the Indenture with respect to the
related Series Trust Estate.
ARTICLE III
The Receivables
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 with respect to a Series are,
or will be, true and correct as of the respective dates specified in such
Schedule. The Issuer is deemed to have relied on such representations and
warranties in acquiring the related Receivables and the related Series
Secured Parties shall be deemed to rely on such representations and
warranties in purchasing the Notes including any Additional Principal
Amounts. Such representations and warranties shall survive the sale, transfer
and
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assignment of the related Series Trust Estate to the Issuer and any pledge
thereof to the Trustee or the Trust Collateral Agent, as the case may be,
pursuant to the Indenture and the related Series Supplement.
Repurchase upon Breach(a) . (a) The Seller, the Master Servicer, any Trust
Officer of the Trustee, Trust Collateral Agent, if any, 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 Trustee or the
Trust Collateral Agent, if any, 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 Trustee or the
Trust Collateral Agent, if any, and the Master Servicer), unless such breach
is cured by such date, the Seller shall have an obligation to repurchase or
cause HAFC to repurchase any Receivable in which the interests of the related
Series Secured Parties, if any, 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 to remit, to the
related Series 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 Trust
Collateral Agent, if any, the Trustee and the related Series Secured Parties
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 to the
Seller to repurchase such Receivables pursuant to the Purchase Agreement.
None of the Owner Trustee, the Trust Collateral Agent, if any, or the 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; provided, however, that the Trust Collateral Agent,
if any, or the Trustee shall notify the related Series Secured Parties, if
any, in writing promptly of any failure by the Seller or HAFC to repurchase
any Receivable as provided herein to the extent the Trust Collateral Agent,
if any, or the Trustee has actual knowledge of such failure.
(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 Purchase Agreement and the related
Purchase Agreement Supplement, including the Seller's rights under the
Purchase Agreement and the delivery requirements, representations and
warranties and the cure or repurchase obligations of HAFC thereunder. The
Seller hereby represents and warrants to the Trust that such assignment
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is valid, enforceable and effective to permit the Trust to enforce such
obligations of HAFC under the Purchase Agreement.
Custody of Receivables Files. In connection with the sale, transfer and
assignment of the Receivables, if any, 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 Trustee and Trust Collateral
Agent, if any, 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 HAFC's or the
applicable Unaffiliated Originator's customary form, or on a form
approved by HAFC, for such application; and
(iii) The original certificate of title (when received) and
otherwise such documents, if any, that HAFC 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
(x) HAFC (or any predecessor corporation to HAFC, or any Affiliate of
HAFC or such predecessor corporation) as first lienholder or secured
party (including any Lien Certificate received by HAFC), or, (y) an
Unaffiliated Originator as first lienholder or secured party or, if
such original certificate of title has not yet been received, a copy
of the application therefor, showing either HAFC (or any predecessor
corporation to HAFC, or any Affiliate of HAFC or such predecessor
corporation), or an Unaffiliated Originator as secured party; and
(iv) Documents evidencing or relating to any Insurance Policy, to
the extent such documents are maintained by or on behalf of the Seller
or HAFC.
Notwithstanding the foregoing, the Master Servicer may appoint a Sub-Servicer as
subcustodian, which subcustodian may hold physical possession of some or all of
the Receivable Files. Neither the Trustee nor the Trust Collateral Agent, if
any, shall have any liability for the acts or omissions of any such custodian or
subcustodian.
ARTICLE IV
Administration and Servicing of Receivables
Duties of the Master Servicer
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. The Master Servicer is hereby authorized to act as agent for the Trust (and
also on behalf of the Trust Collateral Agent, if any, the Trustee and the
Noteholders) and in such capacity shall manage, service, administer and make
collections on the Receivables, and perform the other actions required by the
Master Servicer under this Agreement. The 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 vehicles 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 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 payment coupons to Obligors, reporting any required tax information to
Obligors, monitoring the collateral, accounting for collections and furnishing
monthly and annual statements to the Trust Collateral Agent, the Trustee and
each related Series Secured Parties, if any, 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 shall
make efforts to obtain possession of the Dealer Agreements, to the extent it is
necessary to do so), the Dealer Assignments, the Purchase Agreements, the
Unaffiliated Originator Receivables Purchase Agreements and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments, the
Purchase Agreements, Unaffiliated Originator 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. 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;
provided, however, that notwithstanding the foregoing and subject to Section 4.3
hereof, the Master Servicer shall not, except pursuant to an order from a court
of competent jurisdiction, release an Obligor from payment of any unpaid amount
under any Receivable or waive the right to collect the unpaid balance of any
Receivable from the Obligor. 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 Servicer solely for
purposes of commencing or
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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 Trust Collateral Agent, if any, or the 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.
Collection of Receivable Payments; Modifications of Receivables(a) . (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 automobile receivables that it
services for itself or others and otherwise act with respect to the
Receivables, the Dealer Agreements, the Dealer Assignments, the Purchase
Agreements, the Unaffiliated Originator 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. 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 or (ii) re-amortize the
scheduled payments on the Receivable following a partial prepayment of
principal; provided, however, that no such change 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 (including those modifications
permitted by Section 4.2(b)) 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 any Series Supplement:
(i) The aggregate period of all extensions on a Receivable shall
not exceed six months; provided, however, that not more than two
months can be in any consecutive twelve month period;
(ii) In no event may a Receivable be extended by the
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Master Servicer beyond the Collection Period immediately preceding the
Final Scheduled Distribution Date of the Notes with respect to the
related Series; and
(iii) As of any Determination Date the number of Receivables
included in a Series Trust Estate the term of which have been extended
during the preceding 12-month period shall not exceed 8% of the number
of Receivables in such Series Trust Estate at the beginning of the
preceding 12-month period.
(d) Except as otherwise provided below, the Master Servicer shall
deposit collections on or with respect to Receivables into the Master
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. Subject to the express terms of any Series
Supplement, but notwithstanding anything else in this Agreement to the
contrary, for so long as (i) Household remains the Master Servicer and
maintains a commercial paper rating of not less than A-1 by Standard & Poor's
and P-1 by Moody's (or such other rating below A-1 or P-1, as the case may
be, which is satisfactory to the 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 acceptable in form
and substance to the Rating Agency (such acceptability to be evidenced in
writing by the Rating Agency to the effect that failure to make the
aforementioned deposit on the basis of the maintenance of the Master Servicer
Credit Facility will not adversely affect the then current rating of the
Notes), issued by a depository institution or insurance having a rating on
its (A) short-term obligations of at least P-1 by Moody's and A-1 by Standard
& Poor's and (B) long term obligations of at least A2 by Moody's and A by
Standard & Poor's or other ratings approved by the Rating Agency, the Master
Servicer shall not be required to make deposits of collections on or with
respect to Receivables as provided in the preceding sentence, but may make
one or more deposits of such collections with respect to a Collection Period
into the Master Collection Account in immediately available funds not later
than 1:00 P.M., Central time, on the Business Day immediately preceding the
related Distribution Date. 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 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 Trustee 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 for the related Distribution Date and
of the amounts so credited which will constitute a part of Collected Funds
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 Trustee, or any Master Servicer Credit Facility Issuer.
The Master Servicer shall give written notice to the
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Trustee and the Trust Collateral Agent, if any, if it is required to deposit
funds in accordance with the first sentence of this paragraph.
Realization Upon Receivables(a) . (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 all or any portion of
a Scheduled Payment has become 120 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 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
recover such reasonable expenses based on the information contained in the
Master Servicer's Certificate delivered on the related Determination Date.
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, Dealer Assignment or Unaffiliated Originator Receivables
Purchase Agreement, 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,
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in any enforcement suit or legal proceeding it is held that the Master Servicer
may not enforce a Dealer Agreement, Dealer Assignment or Unaffiliated Originator
Receivables Purchase Agreement on the grounds that it is not a real party in
interest or a Person entitled to enforce the Dealer Agreement, Dealer Assignment
or Unaffiliated Receivables Purchase Agreement, the Owner Trustee and/or the
Trust Collateral Agent, 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, Dealer
Assignment or Unaffiliated Originator Receivables Purchase Agreement, including
bringing suit in its name or the name of the Seller or of the Trust and the
Owner Trustee and/or the Trust Collateral Agent for the benefit of the
Securityholders. All amounts recovered shall be remitted directly by the Master
Servicer as provided in Section 4.2(d).
(c) The Master Servicer agrees that prior to delivering any repossessed
Finance Vehicle for sale to any dealer, it shall make such filings and effect
such notices as are necessary under Section 9-114(1) of the UCC to preserve
the Trust's ownership interest (or security interest, as the case may be) in
such repossessed Financed Vehicle.
Insurance(a).(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 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, 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
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a holder entitled to enforce the Insurance Policy, the Owner Trustee and/or the
Trust Collateral Agent, 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 and the Owner Trustee and/or
the Trust Collateral Agent for the benefit of the Noteholders.
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 as the Series Secured Parties 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, HAFC hereby
agrees that the designation of any of HAFC, a predecessor company to HAFC, or
any Affiliate of any of the foregoing as the secured party on the certificate
of title is in its capacity as agent of the Trust for such limited purpose.
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 Trust
Collateral Agent, if any, or the Trustee relies in accepting the related
Receivables, on which the Trustee relies in authenticating each Series of
Notes, on which the Noteholders rely on in purchasing a Series of Notes and
any Additional Principal Amount thereon on which the Owner Trustee relies in
executing each Series of Certificates.
The Master Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each
Receivable shall not be released in whole or in part from the security
interest granted by the Receivable, except upon payment in full of the
Receivable or as otherwise contemplated herein;
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(ii) No Impairment. The Master Servicer shall do nothing to
impair the rights of the Trust or the related Series of Noteholders in
the Receivables, the Dealer Agreements, the Dealer Assignments, the
Purchase Agreements, the Unaffiliated Originator 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 Trust Collateral
Agent, if any, or Trustee for the benefit of the related Series
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 of the Trust Collateral Agent, if any, or the
Trustee; and
(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) The Master Servicer shall notify the Trustee of any
relocation of the Master Servicer's principal office set forth in
Section 13.3 hereof and all Receivables Files shall be maintained by
the Master Servicer in the United States.
Repurchase of Receivables Upon Breach of Covenant. Upon discovery by any of
the Master Servicer, the Seller, a Trust Officer of the Trust Collateral
Agent, if any, the Owner Trustee or of the 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 related Series Secured Parties in any Receivable (including any
Liquidated Receivable) (or, at the Master Servicer's election, the first
Accounting Date so following)
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or the related Financed Vehicle, 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 Master Collection Account in accordance with Section
5.3 hereof. The Trust Collateral Agent or the Trustee, as the case may be, shall
notify the related Series Secured Parties promptly, in writing, of any failure
by the Master Servicer to so repurchase any Receivable to the extent the Trust
Collateral Agent or the Trustee, as the case may be, has actual knowledge of
such failure. 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 available to the related Series Secured Parties;
Total Servicing Fee; Payment of Certain Expenses by Master Servicer. As
compensation for its activities, the Master Servicer shall be entitled to
retain out of amounts otherwise to be deposited in the Master Collection
Account with respect to a Collection Period, the Base Servicing Fee and any
Supplemental Servicing Fee for each Series 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 or the Series
Secured Parties and all fees and expenses of the Owner Trustee, the Trust
Collateral Agent, if any, or the 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. The Master
Servicer shall be liable for the fees, charges and expenses of the Owner
Trustee, the Trust Collateral Agent, if any, the Trustee, any Sub-Servicer
and their respective agents.
Master Servicer's Certificate. No later than 10:00 a.m. Central time on each
Determination Date, the Master Servicer shall deliver, or cause to be
delivered, to the Trustee, the Owner Trustee, the Trust Collateral Agent, if
any, and each Series Secured Party, a Master Servicer's Certificate executed
by a responsible officer or agent of the Master Servicer containing among
other things, (i) all information necessary to enable the Trustee or Trust
Collateral Agent, if any, to make the allocations required by Section 5.5 and
the distributions with respect to such Distribution Date pursuant to each
Series Supplement and (ii) all information to be provided to each Series
Secured Parties. Upon request, the Master Servicer will also provide a
listing of all Warranty Receivables and Covenant Receivables repurchased as
of the related Determination Date, identifying the Receivables so purchased.
Such list will identify Receivables repurchased by the Master Servicer or by
the Seller on the related Determination Date and each Receivable which became
a Liquidated Receivable or
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which was paid in full during the related Collection Period by account number.
In addition to the information set forth in the preceding sentence, the Master
Servicer's Certificate shall also contain the information required by any Series
Supplement.
Annual Statement as to Compliance, Notice of Master Servicer Termination
Event(a) . (a) The Master Servicer shall deliver or cause to be delivered to
the Trustee, the Owner Trustee, the Trust Collateral Agent, if any, and each
Series Secured Party 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, 1999, an Officer's Certificate signed by any
responsible officer of the Master Servicer, or such Eligible Sub-Servicer 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 Sub-Servicer who is performing the servicing duties of the Master
Servicer, during the preceding 12-month period 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 Sub-Servicer 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 Sub-Servicer who is performing the
servicing duties of the Master Servicer, shall deliver to the Trustee, the Owner
Trustee, the Trust Collateral Agent, if any, each Series Secured Party and, in
the event that such notice is delivered by the Sub-Servicer, 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 Trustee, the Owner
Trustee, the Trust Collateral Agent, if any, each Series Secured Party, 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.
Annual Independent Accountants' Report(a) . (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 Trustee,
the Owner Trustee, the Trust Collateral Agent, any Series Secured Parties on
or before April 30 (or 120 days after the end of the Master Servicer's
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fiscal year, if other than December 31) of each year, beginning on April 30,
1999, with respect to the twelve months ended the immediately preceding December
31 (or other applicable date), a report to the effect that they have examined
certain documents and records relating to the servicing of Receivables under
this Agreement and each Series Supplement, compared the information contained in
the Master Servicer's Certificates delivered pursuant to Section 4.9 during the
period covered by such report with such documents and records and that, on the
basis of such examination, such accountants are of the opinion that the
servicing has been conducted in compliance with the terms and conditions as set
forth in Articles IV and V of this Agreement and the applicable provisions of
each Series Supplement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such statement.
Such report shall acknowledge that the Trustee, or the Trust Collateral Agent,
as the case may be, shall be a "non-participating party" with respect to such
report, or words to similar effect. Neither the Trustee nor the Trust Collateral
Agent, if any, shall have any duty to make any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency of such procedures.
(b) On or before April 30 of each calendar year, beginning with April
30, 1999, the Master Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Master Servicer or Seller) to furnish a report to the Trustee, the Master
Servicer and each Rating Agency and any Series Secured Parties 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. Such report
shall acknowledge that the Trustee, or the Trust Collateral Agent, as the
case may be, shall be a "non-participating party" with respect to such
report, or words to similar effect. Neither the Trustee nor the Trust
Collateral Agent, if any, shall have any duty to make any independent inquiry
or investigation as to, and shall have no obligation or liability in respect
of, the sufficiency of such procedures.
Access to Certain Documentation and Information Regarding Receivables. The
Master Servicer shall provide to representatives of the Trustee, the Owner
Trustee, the Trust Collateral Agent and the Series Secured Parties 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.
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Fidelity Bond and Errors and Omissions Policy. The Master Servicer or such
Eligible Sub-Servicer 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
automobile receivables.
Year 2000 Compliance. The Master Servicer covenants that its computer and
other systems used in servicing the Receivables will be modified to operate
in a manner such that on and after January 1, 2000 (i) the Master Servicer
can service the Receivables in accordance with the terms of this Agreement
and (ii) the Master Servicer can operate its business in the same manner as
it is operating on the date hereof.
ARTICLE V
Trust Accounts; Distributions;
Statements to Certificateholders and Noteholders
Establishment of Trust Accounts(a) . (a) (i) The Master Servicer, on behalf
of the Series Secured Parties with respect to each Series the holders of the
Series Trust Certificates of each Series and the holders of the Owner Trust
Certificates, shall establish and maintain in the name of the Trustee, a
trust account which is an Eligible Deposit Account (the "Master Collection
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Series Secured Parties with respect
to the Household Automotive Revolving Trusts the holders of the Series Trust
Certificates of each Series and the holders of the Owner Trust Certificates.
The Master Collection Account shall initially be established with the
Trustee. The Trustee shall possess all right, title and interest in all funds
on deposit from time to time in, and shall have sole dominion and control
with respect to, the Master Collection Account and in all proceeds thereof
for the benefit of the Series Secured Parties, the holders of the Series
Trust Certificates of each Series, the holders of the Owner Trust
Certificates, and, if a Trust Collateral Agent shall have been appointed with
respect to any Series, the Trust Collateral Agent. Except as expressly
provided in this Agreement, the Master Servicer agrees that it shall have no
right of setoff or banker's lien against, and no right to otherwise deduct
from, any funds held in the Master Collection Account for any amount owed to
it by the Trust Collateral Agent, the Trust, or any Series Secured Party.
(ii) With respect to each Series, the Master Servicer shall
establish and maintain the Series Trust Accounts required to be
established and
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maintained pursuant to the related Series Supplement.
(b) Funds on deposit in the Master Collection Account and any Series
Trust Accounts (collectively, the "Trust Accounts") shall be invested by the
Trust Collateral Agent, if any, or the Trustee, as the case may be, (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. 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 not required to be invested overnight. 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 Trust Collateral Agent, if any,
or the Trustee, as the case may be, in the Master Collection Account or the
related Series 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 Master Collection
Account. The Master Servicer will not direct the Trust Collateral Agent, if any,
or the Trustee, as the case may be, 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 Trust Collateral Agent, if any, or the Trustee, as the case may be, to
make any such investment, if necessary, the Master Servicer shall deliver to the
Trust Collateral Agent, if any, or the Trustee, as the case may be, an Opinion
of Counsel to such effect.
(d) The Trust Collateral Agent, if any, or the Trustee, as the case may
be, 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 Trust Collateral
Agent's or the Trustee's, as the case may be, negligence or bad faith or its
failure to make payments on such Eligible Investments issued by the Trust
Collateral Agent, or the Trustee, as the case may be, in its commercial
capacity as principal obligor and not as Trust Collateral Agent or Trustee,
as the case may be, 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 Trust
Collateral Agent, if any, or the Trustee, as the case may be, by 2:00 p.m.
Eastern Time (or such other time as may be agreed by the Issuer and Trust
Collateral Agent, if any, or the Trustee, as the case may be) on any Business
Day; or (ii) an Event of Default shall have occurred and be continuing with
respect to a Series of Notes, the Trust Collateral Agent, if any, or the
Trustee, as the case may be, shall, to the fullest extent practicable, invest
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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 Trustee, or the Trust Collateral Agent, as the case may be, in its
respective capacities with respect to the various Series 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 (excluding all Investment Earnings on the
Master Collection Account and the Series Collection Accounts) and all such
funds, investments, proceeds and income shall be part of the Owner Trust Estate.
Except as otherwise provided herein, the Trust Accounts shall be under the sole
dominion and control of the Trustee, or the Trust Collateral Agent, as the case
may be, for the benefit of the related Secured Parties. If, at any time, any of
the Trust Accounts ceases to be an Eligible Deposit Account, the Trustee, or the
Trust Collateral Agent, as the case may be, (or the Master Servicer on its
behalf) shall within five Business Days (or such longer period as to which each
Rating Agency may consent) establish a new Trust Account as an Eligible Deposit
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 Trustee or
the Trust Collateral Agent, as the case may be, the Master Servicer shall notify
the Trustee or the Trust Collateral Agent, as the case may be, in writing
promptly upon any of such Trust Accounts ceasing to be an Eligible Deposit
Account. Pursuant to the authority granted to the Master Servicer under this
Agreement, the Master Servicer shall have the revocable power, granted by the
Trustee or the Trust Collateral Agent, as the case may be, to make withdrawals
and payments from the Master Collection Account and to instruct the Trustee or
the Trust Collateral Agent, as the case may be, to make withdrawals and payments
from the Master Collection Account for the purposes of carrying out the Master
Servicer's duties hereunder. The Master Servicer may net against any deposits
required to be made to the Master Collection Account on the Business Day before
any Determination Date amounts that the Seller, as Certificateholder or
otherwise, is entitled to receive as distributions directly or indirectly from
the Master Collection Account on such Determination Date.
Certain Reimbursements to the Master Servicer. The Master Servicer shall be
entitled to withhold from amounts otherwise required to be remitted to the
Master Collection Account with respect to a Collection Period an amount in
respect of funds deposited with respect to prior Collection Periods in the
Master 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 Trustee or the Trust Collateral Agent,
as the case may be, as may be necessary in the opinion of the Trust
Collateral Agent, as the case may be, to verify the accuracy of such
certification.
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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 Supplemental
Servicing Fees with respect to such Receivable, to the extent collected) 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 Supplemental
Servicing Fees with respect to such Receivable, to the extent collected) shall
be applied to interest and principal in accordance with the Actuarial Method.
Additional Deposits. HAFC and the Seller, as applicable, shall deposit or
cause to be deposited in the Master Collection Account for distribution to
the appropriate Series Collection Account on the Business Day preceding the
Determination Date following the date on which such obligations are due the
aggregate Repurchase Amount with respect to Repurchased Receivables.
Distributions(a) . (a) On each Distribution Date, the Trustee, shall transfer
Collected Funds with respect to a Series Trust Estate in the respective
amounts set forth in the Master Servicer's Certificates with respect to each
Series from the Master Collection Account to the related Series Collection
Account for further application and distribution as set forth in the related
Series Supplement. On each Distribution Date, the Trustee shall also
distribute to the Certificate Paying Agent, amounts on deposit in the Master
Collection Account representing Collected Funds with respect to the Unpledged
Trust Estate for further application and distribution pursuant to Section
3.11 of the Trust Agreement.
(b) In the event that the Master Collection Account is maintained with an
institution other than the Trustee, the Master Servicer shall instruct and cause
such institution to make all deposits and distributions pursuant to Section
5.5(a) on the related Distribution Date.
ARTICLE VI
RESERVED
ARTICLE VII
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RESERVED
ARTICLE VIII
The Seller
Representations of Seller. The Seller makes the following representations on
which each Series Support Provider shall be deemed to have relied in
providing the Series Support and 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 in
connection with the Series Trust Estate. The representations speak as of the
execution and delivery of this Agreement and each Transfer Agreement and as
of each Transfer Date and each Series Closing Date and shall survive each
sale of the Receivables to the Issuer and each pledge thereof to the Trustee
or the Trust Collateral Agent, as the case may be, pursuant to the Indenture
and each Series Supplement.
(a) Schedule of Representations. The representations and warranties set
forth on the Schedule of Representations attached as Schedule B to the
related Transfer Agreement are true and correct.
(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 each Series 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 Series Trust Estate or to perform Seller's obligations
hereunder and under the Basic 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 its Basic Documents and to carry out
its terms and their terms, respectively; the Seller has full power and
authority to sell and assign each Series 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 Basic Documents to which
the Seller is a party have been duly authorized by the Seller by all
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necessary corporate action.
(e) Valid Sale, Binding Obligations. This Agreement and each related
Transfer Agreement effects a valid sale, transfer and assignment of the related
Series Trust Estate, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the Basic Documents to which
the Seller is a party, when duly executed and delivered, shall constitute legal,
valid and binding obligations of 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 Basic Documents and the fulfillment of the terms of
this Agreement and the Basic Documents shall not 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 material default under the certificate 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, or 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 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.
(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 Basic
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 Basic 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 Basic 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 consummation of
the transactions contemplated hereby have been or will be taken or obtained on
or prior to the Closing Date and each Transfer Date.
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(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.
(j) Chief Executive Office. The chief executive office of the Seller is at
1111 Town Center Drive, Las Vegas, Nevada 89134.
Corporate Existence(a) . (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 Basic Documents and each other
instrument or agreement necessary or appropriate to the proper administration
of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall not engage in any other business other
than as provided in Article THIRD of Seller's Articles of
Incorporation;
(ii) the Seller shall maintain corporate records and books of
account separate from those of its Affiliates;
(iii) except as otherwise provided in this Agreement, the Seller
shall not commingle its assets and funds with those of its Affiliates;
(iv) the Seller shall hold such appropriate meetings of its Board
of Directors as are necessary to authorize all the Seller's corporate
actions required by law to be authorized by the Board of Directors,
shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities
(and any successor Seller 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;
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(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 Certificates
of Incorporation, and will not incur indebtedness other than pursuant to or
as expressly permitted by the Basic Documents or the Series Related Documents
with respect to each Series.
Liability of Seller; Indemnities. The Seller shall be liable in accordance
herewith only to the extent of the obligations specifically undertaken under
this Agreement by the Seller and the representations made by the Seller under
this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trust, the Trustee and the Trust Collateral Agent, if any,
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 Trust Collateral Agent, the Trustee and each Series
Support Provider and except any taxes to which the Owner Trustee, the Trust
Collateral Agent or the 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, the Trustee and the Trust Collateral Agent, if any, 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, Trustee and the Trust Collateral Agent, if any, and their respective
officers,
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directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities arising out of, or incurred in
connection with, the acceptance or performance of the trusts and duties set
forth herein and in the Basic Documents, except to the extent that such cost,
expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Person seeking indemnification.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee, the Trustee or the Trust Collateral Agent, if any, 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.
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
a certificate of incorporation containing provisions relating to limitations
on business and other matters substantially identical to those contained in
the Seller's certificate of incorporation and (y) executes an agreement of
assumption to perform every obligation of the Seller under this Agreement,
the other Basic Documents and the applicable Series 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 Rating Agency Condition shall have been satisfied
with respect to such transaction.
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 Trust Collateral Agent, the Securityholders, any Series 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
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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.
(b) All obligations of the Seller under this Agreement (including, but not
limited to, repurchase and indemnification obligations) and under any of the
Basic Documents shall be limited in recourse to property, if any, which the
Seller may hold from time to time, not subject to any Lien.
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, 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 any such Notes will not
be entitled to the benefits of any financial guaranty insurance policy. The
Seller shall notify the Owner Trustee, the Trustee, the Trust Collateral
Agent, if any, promptly after it or any of its Affiliates become the owner or
pledgee of a Certificate or a Note.
ARTICLE IX
The Master Servicer
Representations of Master Servicer. The Master Servicer makes the following
representations on which each Series Support Provider shall be deemed to have
relied in executing and delivering the Series Support and 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 in connection with the Series Trust Estate. The
representations speak as of the execution and delivery of this Agreement and
each Series Supplement, each Series Closing Date and as of each Transfer Date
and shall survive each sale of the Series Trust Estate to the Issuer and each
pledge thereof to the Trustee or the Trust Collateral Agent 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
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legal right to enter into and perform its obligations under this
Agreement and the other Basic Documents to which it is a party;
(ii) Due Qualification. The Master Servicer is duly qualified to
do business as a foreign corporation in good standing and has obtained
all necessary licenses and approvals, in all jurisdictions in which
the ownership or lease of property or the 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 Basic 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 its Basic
Documents and to carry out its terms and their terms, respectively,
and the execution, delivery and performance of this Agreement and the
Basic 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 Basic 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 Basic Documents to which the
Master Servicer is a party, and the fulfillment of the terms of this
Agreement and the Basic Documents to which the Master Servicer is a
party, shall not 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 material 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 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 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, or any way materially
adversely affect the interest of the Noteholders or the Trust in any
Receivable or affect the Master Servicer's ability
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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 Basic 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 Basic 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 Basic 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.
Liability of Master Servicer; Indemnities(a) . (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 Trustee, the Trust Collateral Agent, if any, the Owner Trustee and
their respective officers, directors, agents and employees, from and against any
and all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation arising out
of or resulting from the use, ownership or operation of, or lien on, any
Financed Vehicle;
(c) The Master Servicer (when the Master Servicer is Household or an
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Affiliate of Household) shall indemnify, defend and hold harmless the Trust, the
Trustee, the Trust Collateral Agent, if any, the Owner Trustee 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,
including franchise taxes asserted with respect to, and as of the date of, the
sale of the Receivables and the Other Conveyed Property to the Trust or the
issuance and original sale of any Series of the Notes) and costs and expenses in
defending against the same, except to the extent that such costs, expenses,
losses, damages, claims and liabilities arise out of the negligence or willful
misconduct of such parties;
The Master Servicer (when the Master Servicer is not Household) shall
indemnify, defend and hold harmless the Trust, the Trustee, the Trust Collateral
Agent, if any, the Owner Trustee 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, including franchise taxes
asserted with respect to, and as of the date of, the sale of the Series Trust
Estate to the Trust or the issuance and original sale of the Securities) and
costs and expenses in defending against the same; and
(d) The Master Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, if any, the Owner Trustee,
each Series 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 Trustee
or the Trust Collateral Agent, if any, 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 any Series Supplement or by reason of reckless disregard of its
obligations and duties under this Agreement or any 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.
(e) The Master Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Trust Collateral Agent, if any, the Owner Trustee and
their respective officers, directors, agents and employees from and against any
loss, liability or expense incurred by reason of the violation by Master
Servicer of federal or state securities laws in connection with the registration
or the sale of the Securities, except to the extent that such costs, expenses,
losses, damages, claims, and liabilities arise out of the negligence or willful
misconduct of such parties.
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(f) 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 as the Master Servicer and shall survive any termination of this
Agreement.
Merger or Consolidation of, or Assumption of the Obligations of the Master
Servicer or the Trust Collateral Agent(a) . (a) 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 Basic Document and Series Related Document and, whether or
not such assumption agreement is executed, shall be the successor to the
Master Servicer under this Agreement and each Basic Document and Series
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 and each Series
Supplement, anything in this Agreement and each 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 (x)
the Master Servicer shall have delivered to the Owner Trustee, the Trust
Collateral Agent, if any, the Rating Agencies and the 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(a) and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and (y)
the Rating Agency Condition shall have been satisfied with respect to such
assignment or succession.
(b) Any Person (i) into which the Trust Collateral Agent, if any, may be
merged or consolidated, (ii) resulting from any merger or consolidation to
which the Trust Collateral Agent shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Trust
Collateral Agent, or (iv) succeeding to the business of the Trust Collateral
Agent, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of the Trust Collateral Agent under this
Agreement and each Series Supplement and, whether or not such assumption
agreement is executed, shall be the successor to the Trust Collateral Agent
under this Agreement and each Series
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Supplement without the execution or filing of any paper or any further act on
the part of any of the parties to this Agreement and each Series Supplement,
anything in this Agreement and each Series Supplement to the contrary
notwithstanding. In the event that the resulting entity does not meet the
eligibility requirements set forth in Section 6.11 of the Indenture, the Trust
Collateral Agent shall resign. Upon such resignation, the Seller shall appoint a
successor thereto, provided, that, if no successor shall have been so appointed
and have accepted within 30 days, the resigning Trust Collateral Agent may
petition a court of competent jurisdiction for the appointment of a successor
Trust Collateral Agent; provided, further, that in no event shall the
resignation of the Trust Collateral Agent be effective unless a successor
thereto shall have assumed the duties of Trust Collateral Agent hereunder .
Nothing contained herein shall be deemed to release the Trust Collateral Agent
from any obligation.
Limitation on Liability of Master Servicer, Trust Collateral Agent and
Others(a) . (a) Neither the Master Servicer, the Trust Collateral Agent, the
Trustee nor any of the directors or officers or employees or agents of the
Master Servicer, the Trustee or the Trust Collateral Agent shall be under any
liability to the Trust or the Series Secured Parties, except as provided in
this Agreement and each Basic Document or Series Related Document, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement and each Basic Document or Series Related Document; provided,
however, that this provision shall not protect the Master Servicer, the
Trustee, the Trust Collateral Agent or any such person 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 Basic Document or Series Related
Document or any violation of law by the Master Servicer, the Trustee, the
Trust Collateral Agent or such person, as the case may be; provided, further,
that this provision shall not affect any liability to indemnify the Trust
Collateral Agent, the Trustee and the Owner Trustee for costs, taxes,
expenses, claims, liabilities, losses or damages paid by the Trust Collateral
Agent, the Trustee and the Owner Trustee, in their individual capacities. The
Master Servicer, the Trust Collateral Agent, the Trustee and any director,
officer, employee or agent of the Master Servicer or Trust Collateral Agent
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 this Agreement. The Trust Collateral Agent 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) Notwithstanding anything herein to the contrary, the Trust Collateral
Agent and the Trustee shall not be liable for any obligation of the Master
Servicer contained in this Agreement and each Basic Document and Series Related
Document, and the Trust Collateral Agent and the Owner Trustee, the Seller, any
Series
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Secured Party and the Noteholders shall look only to the Master Servicer
to perform such obligations.
(c) The parties expressly acknowledge and consent to Norwest Bank
Minnesota, National Association acting in the potential dual capacity of
successor Master Servicer and in the capacity as Trust Collateral Agent
and/or Trustee. Norwest Bank Minnesota, National Association 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 Norwest Bank Minnesota,
National Association 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 and willful misconduct by Norwest Bank Minnesota,
National Association.
Delegation of Duties. In the ordinary course of business, the Master Servicer
at any time may delegate any of its duties hereunder to any Person, including
any of its Affiliates, who agrees to conduct such duties in accordance with
standards employed by the Master Servicer 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. The Master Servicer shall
provide each Rating Agency, the Series Secured Parties, the Trustee and the
Trust Collateral Agent, if any, with written notice prior to the delegation
of any of its duties to any Person other than any of the Master Servicer's
Affiliates or their respective successors and assigns.
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, the other
activities of the Master Servicer so causing such a conflict being of a type
and nature carried on by the Master Servicer or its subsidiaries or
Affiliates at the date of this Agreement or (ii) upon satisfaction of the
following conditions: (a) the Master Servicer has proposed a successor
servicer to the Trustee in writing and such proposed successor servicer is
reasonably acceptable to the Trustee; (b) the Rating Agency shall have
delivered a letter to the Trustee stating that the appointment of such
proposed successor servicer as Master Servicer hereunder will satisfy the
Rating Agency Condition; and (c) such proposed successor servicer has agreed
in writing to assume the obligations of Master Servicer hereunder and under
each relevant Basic Document and Series Related Document and (d) the Master
Servicer has delivered to the Trustee an Opinion of Counsel to the effect
that all conditions precedent to the resignation of the Master Servicer and
the appointment of
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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 Trustee shall have assumed the
Master Servicer's responsibilities and obligations hereunder or the Trustee
shall have designated a successor servicer in accordance with Section 10.3 which
shall have assumed such responsibilities and obligations. Any such resignation
shall not relieve the Master Servicer of responsibility for any of the
obligations specified in Sections 10.1 and 10.3 as obligations that survive the
resignation or termination of the Master Servicer. 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
Trustee and any Series Secured Parties.
Sub-Servicing Agreements Between Master Servicer and Sub-Servicers. The
Master Servicer may enter into agreements for any subservicing and
administration of Receivables with any institution 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. For purposes of this Agreement and each Basic Document and Series
Related Document, the Master Servicer shall be deemed to have received
payments on Receivables when any Sub-Servicer has received such payments. Any
such 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 and Series Related Document
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.
The Issuer shall have no liability to the Master Servicer except for payment
of the Base Servicing Fee and any Supplemental Services Fee. The Issuer shall
have no obligation to indemnify the Master Servicer for costs or expenses,
except with respect to the preceding sentence. 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 each Series
Supplement, including, but not limited to, Sections 4.9, 4.10 and 4.11
hereof, that a statement or certificate delivered by the Sub-Servicer shall
be sufficient to discharge the Master Servicer's obligation to deliver such
certificate or statement.
Successor Sub-Servicers. The Master Servicer may terminate any Sub-Servicer
and either directly service the related Receivables itself or enter into an
agreement with a successor Sub-Servicer that is an Eligible Sub-Servicer.
None of the Owner Trustee, the Trustee or the Trust Collateral Agent, if any,
shall have no duty or obligation to monitor or supervise the performance of
any Sub-Servicer.
ARTICLE X
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Default
Master Servicer Termination Event. For purposes of this Agreement, each of
the following shall constitute a "Master Servicer Termination Event", but
shall only constitute a Master Servicer Termination Event with respect to the
Series and the related Series Trust Estates with respect to which such event
arose:
(a) Any failure by the Master Servicer to deliver, or cause to be
delivered, to the Trust Collateral Agent or Trustee, as applicable for
distribution pursuant to the terms of this Agreement any proceeds or payment
required to be so delivered under the terms of this Agreement (including
deposits of the Repurchase Amount pursuant to Section 3.2 and Section 4.7) that
continues unremedied for a period of five Business Days after written notice is
received by the Master Servicer from the Trust Collateral Agent or Trustee, as
applicable, or after discovery of such failure by a responsible Officer of the
Master Servicer (but in no event later than five 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 and each Basic Document or Series Related Document, which
failure (i) materially and adversely affects the rights of Noteholders of a
Series (determined without regard to the availability of funds under any
Series Support) and (ii) continues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Trust
Collateral Agent or the Trustee;
(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
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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
(e) Any representation, warranty or certification of the Master Servicer
made in this Agreement or any Series Supplement 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 Trust, or the Series Secured Parties in
the related Series Trust Estate and, within 60 days after written notice thereof
shall have been given to the Master Servicer by the Trust Collateral Agent or
the Trustee, as the case may be, 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) Notwithstanding the foregoing, a delay in or failure of performance
under Section 10.1(a) for a period of five 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, 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 Trust Collateral Agent, or the
Trustee, as the case may be, the Seller and any Series Secured Parties 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.
Consequences of a Master Servicer Termination Event. If a Master Servicer
Termination Event shall occur and be continuing, the Trust Collateral Agent
or the Trustee, as the case may be, (to the extent a Trust Officer of the
Trust Collateral Agent or the Trustee, as the case may be, has actual
knowledge thereof) at the direction of the Trustee, by notice given in
writing to the Master Servicer (and to the Trust Collateral Agent if given by
the Trustee) may terminate all of the rights and obligations of the Master
Servicer under this Agreement and the other Basic Documents as they relate to
a Series and a Series Trust Estate out of which such Servicer Termination
Event arose. 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 or the Other
Conveyed Property or otherwise, automatically shall pass to, be vested in,
and become obligations and responsibilities, of the Trustee (or such other
successor Master Servicer appointed by Trustee pursuant to Section 10.3);
provided, however, that the successor Master Servicer shall (i) have no
liability with respect to any obligation which was required to be
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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 and (ii) no
obligation to perform any repurchase or advancing obligations, if any, of the
terminated Master Servicer.
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 Series 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 as they relate to the Series
Trust Estate with respect to which such termination has been effected ,
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 the Master Collection Account or thereafter received with
respect to the Receivables in the subject Series Trust Estate 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 such Series Trust Estate. If requested by the Trustee, 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)). The terminated Master Servicer shall grant the Trust Collateral Agent,
the Trustee and the successor Master Servicer reasonable access to the
terminated Master Servicer's premises at the terminated Master Servicer's
expense.
Appointment of Successor(a). (a) On and after the time the Master Servicer
receives a notice of termination pursuant to Section 10.2 or upon the
resignation of the Master Servicer pursuant to Section 9.6, the Master
Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in such termination notice or until such
resignation becomes effective or until a date mutually agreed upon by the
Master Servicer and the Trustee. The Trustee shall as promptly as possible
after such termination or resignation appoint an Eligible Servicer as a
successor servicer (the "Successor Master Servicer"), and such Successor
Master Servicer shall accept its appointment by a written assumption in a
form acceptable to the Trustee. In the event that a Successor Master Servicer
has not been appointed or has not accepted its appointment at the time when
the Master Servicer ceases to act as Master Servicer, the Trustee without
further action shall automatically be appointed the Master Successor
Servicer. The Trustee may delegate any of its servicing obligations to an
Affiliate or
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agent in accordance with Section 9.6. Notwithstanding the foregoing, the 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 Trustee shall give
prompt notice to each Rating Agency upon the appointment of a Successor Master
Servicer. The 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 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 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 Master Collection Account or otherwise) equal to the
greater of (a) the compensation the Master Servicer would have been entitled to
under this Agreement if the Master Servicer had not resigned or been terminated
hereunder and (b) compensation calculated with a Servicing Fee Rate equal to the
then-current "market rate" fee for servicing assets comparable to the
Receivables, which rate shall be determined by averaging three fee bids obtained
by the Trustee from third party servicers selected by the Trustee. In addition,
any successor Master Servicer shall be entitled to reasonable transition
expenses incurred in acting as successor Master Servicer payable by the outgoing
Master Servicer, and to the extent such transition expenses have not been paid
by the outgoing Master Servicer, such successor Master Servicer shall be
entitled to reimbursement for such reasonable expenses pursuant to the related
Series Supplement.
Notification to Noteholders and Certificateholders. Upon any termination of,
or appointment of a successor to, the Master Servicer, the Trust Collateral
Agent or Trustee, as the case may be, shall give prompt written notice
thereof to each Noteholder.
Waiver of Past Defaults. 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
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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.
Successor to Master Servicer(a). (a) The 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 Basic
Document and Series 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 Trustee.
(b) In the absence of bad faith or negligence on its part, the 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
Trustee and conforming to the requirements of this Agreement and each 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 Trustee , the
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 each Series
Supplement.
(c) The Trustee shall have no liability for any actions taken or omitted by
the terminated Master Servicer.
ARTICLE XI
Termination
Optional Purchase of All Receivables(a). (a) To the extent and under the
circumstances provided in a Series Supplement, the Master Servicer and the
Seller each shall have the option to purchase the related Series Trust
Estate, other than the Trust Accounts; provided, however, that the amount to
be paid for such purchase shall be sufficient to pay the full amount of
principal, premium, if any, and interest then due and payable on the Notes of
such Series and all other amounts due to the Series Secured Parties, the
Trustee, Trust Collateral Agent, if any, and Owner Trustee under the related
Series Supplement and Note Purchase Agreement. To exercise such option, the
Master Servicer or the Seller, as the case may be, shall deposit pursuant to
Section 5.3 in the Master Collection Account an amount equal to the aggregate
Repurchase Amount for the related Receivables, plus the appraised value of
any other property constituting such Series Trust Estate, such value to be
determined by an appraiser mutually agreed upon by the Master Servicer and
the Trust, and shall succeed to all interests in and to the related Series
Trust Estate.
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(b) Upon any sale of the assets of the Trust pursuant to Section 9.1 of the
Trust Agreement, the Master Servicer shall instruct the Trustee or Trust
Collateral Agent, as the case may be, to deposit the proceeds from such sale
after all payments and reserves therefrom (including the expenses of such sale)
have been made (the "Insolvency Proceeds") in the Master Collection Account.
(c) Notice of any termination of the Trust shall be given by the Master
Servicer to the Owner Trustee, the Trustee, the Trust Collateral Agent, each
Series Secured Party (and the Rating Agencies 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 payment of all
amounts due to each Series Secured Party, the termination of any Series Support
(as provided therein) and the surrender of any Series Support to the Series
Support Provider, 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 Trustee or the Trust Collateral Agent, as the
case may be, pursuant to this Agreement.
ARTICLE XII
Administrative Duties of the Master Servicer
SECTION XII.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, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 5.4, 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 Basic 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,
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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 Basic Documents or under state and
federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the
Issuer to take pursuant to this Agreement or any of the Basic
Documents, including, without limitation, pursuant to Sections 2.6
and 2.11 of the Trust Agreement. In accordance with the directions
of the Issuer or the Owner Trustee, the Master Servicer shall
administer, perform or supervise the performance of such other
activities in connection with the Trust Estate (including the
Basic 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 Trust
Collateral Agent in the event that any withholding tax is imposed on
the Issuer's payments (or allocations of income) to an Owner (as
defined in the Trust Agreement) 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
Trust Collateral Agent 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 or 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(g) 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 Basic
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 of
any Series in accordance with the Indenture or any Series Supplement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Master Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any
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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, 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 and the Trustee of the proposed action and the Owner Trustee and
the 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 Paying
Agents and successor Trustees pursuant to the Indenture or the
consent to the assignment by the Note Registrar, Paying Agent
or Trustee of its obligations under the Indenture; and
(C) the removal of the Trustee or the Trust Collateral Agent.
(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 Trust Property
pursuant to Section 5.5 of the Indenture, (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) None of the Trust Collateral Agent, if any, the Trustee, or any
successor Master Servicer shall be responsible for any obligations or duties of
the Master Servicer under Section 12.1.
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
Trust Collateral Agent, if any, or the
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Trustee at any time during normal business hours.
Additional Information to be Furnished to the Issuer. The Master Servicer
shall furnish to the Issuer, the Trustee, and the Trust Collateral Agent, if
any, from time to time such additional information regarding any Series Trust
Estate as the Issuer and the Trust Collateral Agent shall reasonably request.
ARTICLE XIII
Miscellaneous Provisions
Amendments(a). (a) This Agreement may be amended by the parties hereto at
any time when no Series of Securities or commitment to purchase a Series of
Securities is outstanding without the requirement of any consents or the
satisfaction of any conditions set forth below.
(b) Except as otherwise provided with respect to a Series in a Series
Supplement, this Agreement may be amended from time to time by the parties
hereto, by a written instrument signed by each of the parties hereto, without
the consent of any of the Securityholders, provided that (i) an Opinion of
Counsel for the Seller (which Opinion of Counsel may, as to factual matters,
rely upon officers' certificates of the Seller or the Master Servicer) is
addressed and delivered to the Trustee, dated the date of any such amendment,
to the effect that the conditions precedent to any such amendment have been
satisfied and (ii) the Seller shall have delivered to the Trustee and each
Rating Agency, an Officer's Certificate dated the date of any such Amendment,
stating that the Seller reasonably believes that such amendment will not have
a material adverse effect on the rights of the Noteholders.
(c) Except as otherwise provided with respect to a Series in a Series
Supplement, this Agreement may also be amended from time to time by the
Servicer, the Seller, the Trustee and the Trust Collateral Agent, if any, with
the consent of the Noteholders evidencing in each case not less than a majority
of the outstanding principal amount of the Notes of each affected Series for
which the Seller has not delivered an Officer's Certificate stating that there
is no adverse effect on the rights of Noteholders of each Series, 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, (iii) reduce the
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aforesaid percentage required to consent to any such amendment without the
consent of each Securityholder or (iv) adversely affect any rating of a Series
by each Rating Agency without the consent of the Noteholders evidencing not less
than a majority of the outstanding principal amount of the outstanding Notes of
such Series.
Promptly after the execution of any such amendment or supplement, the
Trustee shall furnish written notification of the substance of such amendment or
supplement to each Securityholder.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner 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 Trustee or the Owner
Trustee, as applicable, may prescribe, including the establishment of record
dates.
The Owner Trustee, the Trust Collateral Agent and the Trustee may, but
shall not be obligated to, enter into any amendment which affects the Issuer's,
the Owner Trustee's, the Trust Collateral Agent's or the 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 Trustee and
the Trust Collateral Agent, if any, shall be entitled to receive or 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.
Protection of Title to Trust(a). (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 and the
interests of the Trust Collateral Agent, if any, and the Trustee on behalf of
the related Series Secured Parties in the related Series Trust Estate and in
the proceeds thereof.
(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 ss. 9-402(7) of
the UCC, unless it shall have given the Owner Trustee, the Trust Collateral
Agent and the 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.
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(c) Each of the Seller and the Master Servicer shall have an obligation to
give the Owner Trustee, the Trust Collateral Agent and the Trustee prompt notice
of any relocation of its principal executive office if, as a result of such
relocation, 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, and its principal executive office, within the United States of
America.
(d) The Master Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Master 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 to which Series Trust Estate such
Receivable has been pledged pursuant to the Indenture. Indication of the Trust'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
or repurchased by HAFC or the Seller.
(f) If at any time the Seller or HAFC shall propose to sell, grant a
security interest in or otherwise transfer any interest in automotive
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 or
repurchased by HAFC or the Seller.
(g) With respect to any Series Trust Estate, upon request, the Master
Servicer shall furnish or cause to be furnished to the related Series Support
Provider (only in the event that there is a Series Support Provider with
respect to such Series), the Owner Trustee or to the Trustee, within five
Business Days, a list of all Receivables (by contract number) then held as
part of the related Series Trust Estate, together with a reconciliation of
such list to the related Schedule of Receivables and to each of the Master
Servicer's Certificates furnished before such request indicating removal of
Receivables from the related Series Trust Estate. The 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
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their desire to conduct an examination.
(h) The Master Servicer shall deliver to the Owner Trustee, the Trust
Collateral Agent, if any, and the Trustee and each Series Secured party:
(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, the Trustee and the Trust Collateral Agent, if any, in the
Receivables then held as part of the related 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
in 1999, 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, the Trustee and
the Trust Collateral Agent, if any, 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.
Notices. All demands, notices and communications upon or to the Seller, the
Master Servicer, the Owner Trustee, the Trustee, the Trust Collateral Agent,
if any, any Series Secured Party or the Rating Agencies under this Agreement
shall be in writing, personally delivered, or mailed by certified mail, or
sent by confirmed telecopier transmission and shall be deemed to have been
duly given upon receipt (a) in the case of the Seller to Household Auto
Receivables Corporation, 1111 Town Center Drive, Las Vegas, Nevada 89134,
with a copy to Household International, Inc., 2700 Sanders Road, Prospect
Heights, Illinois, 60070, Attn: Treasurer (Telecopy No. (847) 205-7538), (b)
in the case of the Master Servicer to Household Finance Corporation, 2700
Sanders Road, Prospect Heights, Illinois 60070, Attention: Treasurer,
Telecopier # (847) 205-7538, (c) in the case of the Issuer or the Owner
Trustee, at the Corporate Trust Office of the Owner Trustee, Telecopier #
302-651-8882, (d) in the case of the Trustee or the Trust Collateral Agent,
at the Corporate Trust Office, Telecopier # (612) 667-3464, (e) in the case
of the Series Support Provider to the address set forth in the related Series
Supplement, and (f) in the case of any Rating Agency, to the address set
forth in the related Series Supplement. Any notice required or permitted to
be mailed to a Noteholder or
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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.
Assignment. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Notwithstanding anything to the contrary contained herein, except as provided
in Sections 8.4 and 9.3 and as provided in the provisions of this Agreement
concerning the resignation of the Master Servicer, this Agreement may not be
assigned by the Seller or the Master Servicer without the prior written
consent of the Owner Trustee, the Trust Collateral Agent, if any, and the
Trustee. In the event that a successor Issuer with respect to a Series is
formed as contemplated in the related 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.
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 Trustee and the Series Secured
Parties, as third-party beneficiaries. Each Series Support Provider and its
successors and assigns shall be a third-party beneficiary to the provisions
of this Agreement and to each Series Supplement with respect to each Series
for which they are providing Series Support, and shall be entitled to rely
upon and directly enforce such provisions of this Agreement and to each
Series Supplement with respect to each Series for which they are providing
Series Support, so long as no default with respect to such Series Support
Provider shall have occurred and be continuing. Nothing in this Agreement or
in any 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.
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.
Separate Counterparts. This Agreement and each Transfer Agreement may be
executed by the parties hereto in
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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.
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.
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 LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Assignment to Trustee. The Seller hereby acknowledges and consents to any
mortgage, pledge, assignment and grant of a security interest by the Issuer
to the Trustee or Trust Collateral, if any, pursuant to the Indenture, as
supplemented by a Series Supplement for the benefit of the related Series
Secured Parties of all right, title and interest of the Issuer in, to and
under the applicable Series Trust Estate.
Nonpetition Covenants(a). (a) Notwithstanding any prior termination of this
Agreement or any Series Supplement, the Master Servicer and the Seller shall
not, prior to the date which is one year and one day after the termination of
this Agreement or any Series Supplement with respect to the Issuer,
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.
(b) Notwithstanding any prior termination of this Agreement or any Series
Supplement, the Master Servicer shall not, prior to the date that is one year
and one day after the termination of this Agreement or any Series Supplement
with respect to the Seller, 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.
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Limitation of Liability of Owner Trustee and the Trust Collateral Agent(a).
(a) Notwithstanding anything contained herein to the contrary, this Agreement
and each Series Supplement has been countersigned by Wilmington Trust Company
not in its individual capacity but solely in its capacity as Owner Trustee of
the Issuer and in no event shall Wilmington Trust Company 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 each 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 Norwest Bank Minnesota, National
Association not in its individual capacity but solely as Trust Collateral Agent
and in no event shall Norwest Bank Minnesota, National Association, 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.
(c) In no event shall Wilmington Trust Company, in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the
Delaware Business Trust Statute, common law, or the Trust Agreement.
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 Trust Collateral Agent, the 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 any 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.
No Joint Venture. Nothing contained in this Agreement or any 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.
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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 AUTOMOBILE REVOLVING TRUST I
by Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
by
------------------------------------
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
by
------------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
by
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Trustee, and to the extent
provided herein, as Trust Collateral
Agent
by
------------------------------------
Name:
Title:
[Signature Page for Sale and Servicing Agreement]
76
<PAGE>
EXHIBIT A
FORM OF MASTER SERVICER'S CERTIFICATE
77
<PAGE>
EXHIBIT B
FORM OF TRANSFER AGREEMENT
TRANSFER No. OF Receivables pursuant to the Master Sale and
Servicing Agreement dated as of March 1, 1998 (the "Sale and Servicing
Agreement"), among HOUSEHOLD AUTOMOBILE REVOLVING TRUST I, a Delaware
business trust (the "Issuer"), HOUSEHOLD AUTO RECEIVABLES CORPORATION, a
Nevada corporation (the "Seller"), HOUSEHOLD FINANCE CORPORATION, a Delaware
corporation (the "Master Servicer"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a New York banking Corporation (the "Trust Collateral Agent").
W I T N E S S E T H:
WHEREAS pursuant to the Master Sale and Servicing Agreement, the Seller
wishes to convey the Receivables 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 Trust
Collateral Agent 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,
_______________, 1998.
"Transfer Date" shall mean. with respect to the Receivables conveyed
hereby, _____________, 1998.
2. Schedule of Receivables. Annexed hereto is a supplement to Schedule A to
the Master Sale and Servicing Agreement listing the Receivables that constitute
the Receivables to be conveyed pursuant to this Agreement on the Transfer Date.
The Receivables conveyed pursuant to this Agreement shall be a component of the
Series __ Trust Estate.
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 Master Sale and Servicing Agreement), all right, title
and interest of the Seller in and to:
(i) each and every Receivable listed on Schedule A
B-78
<PAGE>
to the related Receivables Purchase Agreement Supplement and
all monies paid or payable thereon or in respect thereof on
or after the related Cutoff Date (including amounts due on
or before the related Cutoff Date but received by the Seller
on or after such date);
(ii) 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;
(iii) all rights of the Seller against Dealers pursuant to Dealer
Agreements, Dealer Assignments or Unaffiliated Originator Receivables
Purchase Agreements related to such Receivables;
(iv) any proceeds and the right to receive proceeds with respect
to such Receivables repurchased by either (i) a Dealer, pursuant to a
Dealer Agreement, or (ii) an Unaffiliated Originator, pursuant to an
Unaffiliated Originator Receivables Purchase Agreement as a result of
a breach of representation or warranty in the related Dealer Agreement
or Unaffiliated Originator Receivables Purchase Agreement, as
applicable;
(v) all rights of Seller under any Service Contracts on the
related Financed Vehicles;
(vi) any proceeds and the right to receive proceeds with respect
to the related Receivables from claims on any physical damage, credit
life or disability insurance policies, if any, covering Financed
Vehicles or Obligors, including rebates of insurance premiums relating
to the Receivables and any proceeds from the liquidation of such
Receivables;
(vii) all items contained in the Receivables Files with respect
to such Receivables and any and all other documents that Seller or
Master Servicer keeps on file in accordance with its customary
procedures relating to the related Receivables, or the related
Financed Vehicles or Obligor;
(viii) 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 HARC pursuant to liquidation of
such Receivable;
(ix) 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
B-79
<PAGE>
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 date of this Agreement and as of
the Transfer Date that:
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 Receivables and the Other Conveyed Property
transferred to the Trust.
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 Seller's Basic Documents.
Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and its Basic Documents and to
carry out its terms and their terms, respectively; the Seller has full
power and authority to sell and assign the Receivables and the Other
Conveyed Property 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 Seller's Basic Documents
have been duly authorized by the Seller by all necessary corporate
action.
Valid Sale, Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other
Conveyed Property, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the Seller's Basic
Documents, when duly executed and delivered, shall constitute legal,
valid and binding obligations of 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.
No Violation. The consummation of the transactions contemplated
by this Agreement and the Basic Documents and the
B-80
<PAGE>
fulfillment of the terms of this Agreement and the Basic Documents
shall not 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 certificate 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, or 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 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.
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 Basic 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 Basic
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 Basic Documents, or (D) seeking to adversely
affect the federal income tax or other federal, state or local tax
attributes of the Securities.
Approvals. All approvals, authorizations, consents, order 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 consummation of the transactions contemplated hereby
have been or will be taken or obtained on or prior to the Closing Date.
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.
Chief Executive Office. The chief executive office of the Seller
is at 111 Town Center Drive, Las Vegas, Nevada 89134.
Principal Balance. The aggregate Principal Balance of the
Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Issuer pursuant to this Agreement as of the Cutoff
Date is $____________.
B-81
<PAGE>
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 and in
Section 3.1 of the Sale and Servicing Agreement shall be true and
correct as of the date of this Agreement and 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 (i) the accuracy of the representations and
warranties set forth in Section 4 of this Agreement and in Section 6.1
of the Sale and Servicing Agreement and (ii) the satisfaction of the
conditions set forth in this Section 5.
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.
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.
9.
B-82
<PAGE>
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 AUTOMOBILE REVOLVING TRUST I
by Wilmington Trust Company, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
by
------------------------------------
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION, Seller,
by
------------------------------------
Title:
HOUSEHOLD FINANCE CORPORATION, Master Servicer,
by
------------------------------------
Title:
Acknowledged and Accepted:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual
capacity but solely as
Trust Collateral Agent
by
---------------------------
Title:
B-84
<PAGE>
EXHIBIT C
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: Norwest Bank Minnesota, National Association
Re: Sale and Servicing Agreement (the "Servicing
Agreement, dated as of March 1, 1998 between
Household Auto Receivables Corporation (the
"Seller"), Household Automobile Revolving Trust I
(the "Trust"), Household Finance Corporation
individually and in its capacity as Servicer (the
"Servicer"), and Norwest Bank Minnesota, National
Association, as Trust Collateral Agent (the "Trust
Collateral Agent")
In connection with the administration of the Receivables held by you as the
Trust Collateral Agent, we request the release, and acknowledged receipt, of the
Receivable and related Receivable File described below, for the reason
indicated.
Obligor's Name, Customer Account Number and Vehicle Identification Number
1. Receivable Paid in Full. All amounts received in connection with
- --------- such payments have been deposited as required pursuant to Section
3.3(b) of the Master Servicing Agreement
2. Receivable Purchased from Trust pursuant to Section 3.2 or 4.7 of
- --------- the Servicing Agreement.
3. Receivable is being serviced or subject to enforcement of rights
- --------- and remedies pursuant to Section 3.3(b) of the Servicing
Agreement.
4. Other (explain)
- --------- ------------------------------------------------
If item 1 or 2 above is checked, and if all or part of the Receivable or
Receivable File was previously released to us, please release to us any
additional documents in your possession to the above specified Receivable.
C-85
<PAGE>
If Item 3 or 4 above is checked, upon our return of all of the above documents
to you as the Indenture Trustee, please acknowledge your receipt by signing in
the space indicated below and returning this form.
[ ] HOUSEHOLD FINANCE CORPORATION
as Servicer
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Date:
------------------------
DOCUMENTS RETURNED TO THE TRUST COLLATERAL AGENT
Norwest Bank Minnesota, National Association (Trust Collateral Agent)
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Date:
------------------------
C-86
<PAGE>
EXHIBIT D
TRUST COLLATERAL AGENT'S ACKNOWLEDGEMENT
Norwest Bank Minnesota, National Association (the "Trust
Collateral Agent"), holds on behalf of the [Securityholders] certain
"Receivable Files," as described in the Sale and Servicing Agreement, dated
as of _____________ (the "Sale and Servicing Agreement"), among [ ]
Automobile Revolving Trust, [ ] Auto Receivables Corp. II., as Seller,
[ ] Auto Finance Corporation, as Master Servicer, and the Trust
Collateral Agent, hereby acknowledges receipt of the Receivable File for each
Receivable listed in the Schedule of Receivables attached as Schedule A to
said Sale and Servicing Agreement except as noted in the Exception List
attached as Schedule I hereto.
IN WITNESS WHEREOF, Norwest Bank Minnesota, National
Association has caused this acknowledgement to be executed by its duly
authorized officer as of this ___________________.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trust Collateral Agent
by
--------------------------------------
Name:
Title:
C-87
<PAGE>
Exhibit 4.5
MASTER RECEIVABLES PURCHASE AGREEMENT
between
HOUSEHOLD AUTOMOTIVE FINANCE CORPORATION
Seller
and
HOUSEHOLD AUTO RECEIVABLES CORPORATION
Purchaser
dated as of
March 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS ............................................... 1
SECTION 1.1 General.................................................... 1
SECTION 1.2 Specific Terms............................................. 1
SECTION 1.3 Other Definitional Provisions.............................. 2
SECTION 1.4 Certain References......................................... 2
SECTION 1.5 No Recourse................................................ 2
ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED
PROPERTY ................................................. 3
SECTION 2.1 Purchase................................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES............................. 5
SECTION 3.1 Representations and Warranties of Seller................... 5
SECTION 3.2 Representations and Warranties of HARC..................... 6
ARTICLE IV COVENANTS OF SELLER........................................ 8
SECTION 4.1 Seller's Covenants......................................... 8
ARTICLE V REPURCHASES ............................................... 9
SECTION 5.1 Repurchase of Receivables Upon Breach of Warranty.......... 9
SECTION 5.2 Reassignment of Repurchased Receivables.................... 9
SECTION 5.3 Waivers.................................................... 10
ARTICLE VI MISCELLANEOUS ............................................. 10
SECTION 6.1 Liability of Seller........................................ 10
SECTION 6.2 Amendment.................................................. 10
SECTION 6.3 GOVERNING LAW.............................................. 10
SECTION 6.4 Notices.................................................... 10
SECTION 6.5 Severability of Provisions................................. 11
SECTION 6.6 Assignment................................................. 11
SECTION 6.7 Acknowledgment and Agreement of each Seller................ 11
SECTION 6.8 Further Assurances......................................... 11
SECTION 6.9 No Waiver; Cumulative Remedies............................. 12
SECTION 6.10 Counterparts............................................... 12
SECTION 6.11 Binding Effect; Third-Party Beneficiaries.................. 12
SECTION 6.12 Merger and Integration..................................... 12
SECTION 6.13 Heading.................................................... 12
SECTION 6.14 Schedules and Exhibits..................................... 12
SECTION 6.15 Survival of Representations and Warranties................. 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.16 Nonpetition Covenant....................................... 12
</TABLE>
3
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Purchase Agreement Supplement
SCHEDULE A Schedule of Receivables
</TABLE>
4
<PAGE>
MASTER RECEIVABLES PURCHASE AGREEMENT
THIS MASTER RECEIVABLES PURCHASE AGREEMENT, dated as of March 1, 1998,
executed between Household Auto Receivables Corporation, a Nevada corporation,
as purchaser ("HARC") and Household Automotive Finance Corporation, a Delaware
corporation, as seller ("Seller").
W I T N E S S E T H :
WHEREAS, HARC has agreed to purchase from time to time from Seller, and
Seller, pursuant to this Agreement, has agreed to transfer from time to time to
HARC the Receivables and the Other Conveyed Property.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter contained, and for other good and valuable consideration, the
receipt of which is acknowledged, HARC and Seller, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
General. Capitalized terms used herein without definition shall have the
respective meanings assigned to such terms in the Master Sale and Servicing
Agreement dated as of March 1, 1998, by and among Household Automobile Revolving
Trust I, as Issuer, HARC, as Seller, Household Finance Corporation, as Master
Servicer, and Norwest Bank Minnesota, National Association, as Trustee and Trust
Collateral Agent, if any.
Specific Terms. Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
"Agreement" means this Master Receivables Purchase Agreement and all
amendments hereof and supplements hereto.
"Closing Date" means March 31, 1998.
"Conveyance" shall have the meaning specified in Section 2.1.
"Conveyance Papers" shall have the meaning specified in Section 3.1.
"Cutoff Date" shall have the meaning assigned to such term in the
5
<PAGE>
applicable Purchase Agreement Supplement.
"Other Conveyed Property" means all money, instruments, rights and
other property that are subject or intended to be subject to the lien and
security interest of the Indenture (including all property and interests
granted to the Trust Collateral Agent or the Trustee, as the case may be),
including all proceeds thereof, other than the Receivables.
"Purchase Date" means, with respect to Receivables, any date, on which
Receivables are to be purchased by HARC pursuant to this Agreement and a
Purchase Agreement Supplement is executed and delivered by the Seller and
HARC.
"Receivables" means the Receivables listed on the Schedules of
Receivables attached to each Receivables Purchase Agreement Supplement as
Schedule A.
"Receivables Purchase Agreement Supplement" means the agreement
between HARC and the Seller, substantially in the form of Exhibit A hereto.
"Repurchase Event" means a determination pursuant to Section 3.2 of
the Master Sale and Servicing Agreement that HARC is required to repurchase
a Receivable.
"Schedule of Receivables" means the schedule of Receivables sold and
transferred pursuant to this Agreement and the related Receivables Purchase
Agreement Supplement which is attached as Schedule A to the related
Receivables Purchase Agreement Supplement.
SECTION I.3 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate, other documents, or Conveyance Paper made or
delivered pursuant hereto unless otherwise defined herein.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement or any Conveyance Paper shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
Section, Subsection, Schedule and Exhibit references contained in this Agreement
are references to Sections, Subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified.
(c) All determinations of the principal or finance charge balance of
Receivables, and of any collections thereof, shall be made in accordance with
the Master Sale and Servicing Agreement and all applicable Series Supplements.
Certain References. All references to the Principal Balance of a Receivable
as of any date of determination
6
<PAGE>
shall refer to the close of business on such day, or as of the first day of a
Collection Period shall refer to the opening of business on such day. All
references to the last day of a Collection Period shall refer to the close of
business on such day.
No Recourse. Without limiting the obligations of 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 Seller, or of any
predecessor or successor of Seller.
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
-------------------------------
SECTION II.1 Purchase.
(a) By execution of this Agreement and subject to the terms and conditions
of this Agreement and simultaneously with the execution and delivery of the
related Receivables Purchase Agreement Supplement, the Seller shall sell,
transfer, assign, and otherwise convey to HARC (collectively, the "Conveyance")
without recourse (but without limitation of its obligations in this Agreement),
and HARC shall purchase, all right, title and interest of Seller in and to:
(i) each and every Receivable listed on Schedule A to the related
Receivables Purchase Agreement Supplement and all monies paid or payable
thereon or in respect thereof on or after the related Cutoff Date
(including amounts due on or before the related Cutoff Date but received by
the Seller on or after such date);
(ii) 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;
(iii) all rights of the Seller against Dealers pursuant to Dealer
Agreements, Dealer Assignments or Unaffiliated Originator Receivables
Purchase Agreements related to such Receivables;
(iv) any proceeds and the right to receive proceeds with respect to
such Receivables repurchased by either (i) a Dealer, pursuant to a Dealer
Agreement, or (ii) an Unaffiliated Originator, pursuant to an Unaffiliated
Originator Receivables Purchase Agreement as a result of a breach of
representation or warranty in the related Dealer Agreement or Unaffiliated
Originator Receivables Purchase Agreement, as applicable;
7
<PAGE>
(v) all rights of Seller under any Service Contracts on the related
Financed Vehicles;
(vi) any proceeds and the right to receive proceeds with respect to
the related Receivables from claims on any physical damage, credit life or
disability insurance policies, if any, covering Financed Vehicles or
Obligors, including rebates of insurance premiums relating to the
Receivables and any proceeds from the liquidation of such Receivables;
(vii) all items contained in the Receivables Files with respect to
such Receivables and any and all other documents that Seller or Master
Servicer keeps on file in accordance with its customary procedures relating
to the related Receivables, or the related Financed Vehicles or Obligor;
(viii) 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 HARC pursuant to liquidation of such Receivable;
(ix) 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, 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) Simultaneously with the conveyance of the Receivables and the Other
Conveyed Property to HARC by Seller, HARC has paid or caused to be paid to or
upon the order of Seller an amount equal to 100% of the Principal Balance of the
Receivables on the books and records of Seller, plus the present value of
anticipated excess spread on such Receivables, discounted to take into account
any uncertainty as to future performance matching historical performance,
servicing fees, delinquencies, pay down rates, yield and such other factors as
may be mutually agreed upon between Seller and HARC, by wire transfer of
immediately available funds.
(c) In connection with such Conveyance, Seller further agrees that it will,
at its own expense, on or prior to the Purchase Date (i) indicate in its
computer files or microfiche lists that the Receivables have been conveyed to
HARC in accordance with this Agreement and have been conveyed by HARC to the
Trustee or the Trust Collateral Agent, as the case may be, pursuant to the
Master Sale and Servicing Agreement for the benefit of the related Series
Secured Parties by including in such computer files and microfiche lists the
code identifying each such Receivable and (ii) deliver to HARC (or to the
Trustee or the Trust Collateral Agent, as the case may be, if
8
<PAGE>
HARC so directs) a computer file or microfiche list containing a true and
complete list of all such Receivables specifying for each such Receivable, as of
the Cut-Off Date (A) its account number and (B) the outstanding balance of such
Receivable. Such computer files or microfiche lists shall be delivered to HARC
(or to the Trustee or to the Trust Collateral Agent, if any, if so directed by
HARC) and marked as proprietary and confidential. Seller further agrees not to
alter the code referenced in clause (i) of this paragraph with respect to any
Receivable during the term of this Agreement.
(d) The parties hereto intend that the conveyance of the Seller's right,
title and interest in and to the Receivables and Other Conveyed Property shall
constitute a sale, conveying good title free and clear of any liens, claims,
encumbrances or rights of others from Seller to HARC and that the Receivables
and Other Conveyed Property shall not be part of Seller's estate in the event of
the insolvency of Seller or a conservatorship, receivership or similar event
with respect to Seller. It is the intention of the parties hereto that the
arrangements with respect to the Receivables and Other Conveyed Property shall
constitute a purchase and sale of such Receivables and not a loan. In the event,
however, that a court of competent jurisdiction were to hold that the
transactions evidenced hereby constitute a loan and not a purchase and sale, it
is the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law, and that Seller shall be deemed to have
granted to HARC a first priority perfected security interest in all of such
Seller's right, title and interest in and to the Receivables and Other Conveyed
Property.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Representations and Warranties of Seller. Seller makes the following
representations and warranties as of the date hereof on which HARC relies in
purchasing the Receivables and the Other Conveyed Property and in transferring
the Receivables and the Other Conveyed Property to the Issuer under the Master
Sale and Servicing Agreement. Such representations are made as of the execution
and delivery of this Agreement and as to Receivables and Other Conveyed Property
conveyed thereunder, as of the execution and delivery of each Receivables
Purchase Agreement Supplement, but shall survive the sale, transfer and
assignment of the Receivables and the Other Conveyed Property hereunder, and the
sale, transfer and assignment thereof by HARC to the Issuer under the Master
Sale and Servicing Agreement. Seller and HARC agree that HARC will assign to
Issuer all HARC's rights under this Agreement and each Receivables Purchase
Agreement Supplement and that the Trustee will thereafter be entitled to enforce
this Agreement and each Receivables Purchase Agreement Supplement against Seller
in the Trustee's own name on behalf of the Securityholders.
(a) Eligibility Criteria. Each of the Receivables which is to
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be pledged as collateral for a Series of Notes satisfies the applicable
Eligibility Criteria set forth in, or to be set forth in, Schedule 1 to the
Series Supplement establishing such Series.
(b) Organization and Good Standing. The Seller is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware and has, in all material respects, full power and authority to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under this Agreement.
(c) Due Obligation. The Seller is duly qualified to do business and is in
good standing as a foreign corporation (or is exempt from such requirements) and
has obtained all necessary licenses and approvals, in each jurisdiction in which
failure to so qualify or to obtain such licenses and approvals would (i) render
any Receivable unenforceable by the Seller, HARC or the Trust and (ii) have a
material adverse effect on the related Series Secured Parties.
(d) Due Authorization. The execution, delivery and performance of this
Agreement and any other document or instrument delivered pursuant hereto (such
other documents and instruments, including, but not limited to, the Receivables
Purchase Agreement Supplement collectively, the "Conveyance Papers") and the
consummation of the transactions provided for in this Agreement or any other
Conveyance Papers have been duly authorized by all necessary corporate action on
the part of the Seller.
(e) No Conflict. The execution and delivery of this Agreement and the
Conveyance Papers, the performance of the transactions contemplated by this
Agreement and the Conveyance Papers, and the fulfillment of the terms of this
Agreement and the Conveyance Papers applicable to the Seller will not conflict
with, violate or result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
material default under, any indenture, contract, agreement, mortgage, deed of
trust, or other instrument to which the Seller is a party or by which it or any
of its properties are bound.
(f) No Violation. The execution, delivery and performance of this Agreement
and the Conveyance Papers and the fulfillment of the terms contemplated herein
and therein applicable to the Seller will not conflict with or violate any
requirements of law applicable to the Seller.
(g) No Proceedings. There are no proceedings or investigations pending or,
to the best knowledge of the Seller, threatened against the Seller, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or the Conveyance
Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or the Conveyance Papers, (iii) seeking
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any determination or ruling that, in the reasonable judgment of the Seller,
would materially and adversely affect the performance by the Seller of its
obligations under this Agreement or the Conveyance Papers, (iv) seeking any
determination or ruling that would materially and adversely affect the validity
or enforceability of this Agreement or the Conveyance Papers or (v) seeking to
affect adversely the income tax attributes of the Trust under United States
Federal, Nevada or California income tax systems.
(h) All Consents. All authorizations, consents, orders, approvals,
registrations or declarations with, or of, any Governmental Authority required
to be obtained, effected or given by the Seller in connection with the execution
and delivery by the Seller of this Agreement or the Conveyance Papers and the
performance of the transactions contemplated by this Agreement or the Conveyance
Papers by the Seller have been duly obtained, effected or given and are in full
force and effect.
Representations and Warranties of HARC. HARC makes the following
representations and warranties, on which Seller relies in selling, assigning,
transferring and conveying the Receivables and the Other Conveyed Property to
HARC hereunder. Such representations are made as of the execution and delivery
of this Agreement and as to Receivables and Other Conveyed Property conveyed
thereunder, as of the execution and delivery of each Receivables Purchase
Agreement Supplement, but shall survive the sale, transfer and assignment of the
Receivables and the Other Conveyed Property hereunder and the sale, transfer and
assignment thereof by HARC to the Issuer under the Master Sale and Servicing
Agreement.
(a) Organization and Good Standing. HARC is a corporation duly organized
and validly existing under the laws of the State of Nevada and has, in all
material respects, full power and authority to own its properties and conduct
its business as such properties are presently owned and such business is
presently conducted and to execute, deliver and perform its obligations under
this Agreement and the Conveyance Papers.
(b) Due Authorization. The execution and delivery of this Agreement and the
Conveyance Papers and the consummation of the transactions provided for in this
Agreement and the Conveyance Papers have been duly authorized by HARC by all
necessary corporate action on the part of HARC.
(c) No Conflict. The execution and delivery of this Agreement and the
Conveyance Papers, the performance of the transactions contemplated by this
Agreement and the Conveyance Papers, and the fulfillment of the terms hereof and
thereof, will not conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which HARC is a party or by which it or its
properties is bound.
(d) No Violation. The execution, delivery and performance
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of this Agreement and the Conveyance Papers by HARC and the fulfillment of the
terms contemplated herein and therein applicable to HARC will not conflict with
or violate any requirements of law applicable to HARC.
(e) No Proceeding. There are no proceedings or investigations pending or,
to the best knowledge of HARC, threatened against HARC, before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or the Conveyance
Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or the Conveyance Papers, (iii) seeking any
determination or ruling that, in the reasonable judgment of HARC, would
materially and adversely affect the performance by HARC of its obligations under
this Agreement or the Conveyance Papers or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or enforceability
of this Agreement or the Conveyance Papers.
(f) All Consents. All authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required to be
obtained, effected or given by HARC in connection with the execution and
delivery by HARC of this Agreement and the Conveyance Papers and the performance
of the transactions contemplated by this Agreement and the Conveyance Papers or
the fulfillment of the terms of this Agreement and the Conveyance Papers by HARC
have been duly obtained.
In the event of any breach of a representation and warranty made by HARC
hereunder, Seller covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all Notes,
Certificates, pass-through certificates or other similar securities issued by
the Trust or similar vehicle formed by HARC, have been paid in full. Seller and
HARC agree that damages will not be an adequate remedy for such breach and that
this covenant may be specifically enforced by HARC, Issuer or by the Trustee on
behalf of the Noteholders and Owner Trustee on behalf of the Certificateholders.
Seller agrees that with respect to its obligations in connection with a
Repurchase Event it will exercise no rights of offset with respect to any claims
it may have against HARC.
ARTICLE IV
COVENANTS OF SELLER
-------------------
Seller's Covenants. Seller hereby covenants and agrees with HARC as
follows:
(a) Receivables Not To Be Evidenced by Promissory Notes. Seller will
take no action to cause any Receivable to be evidenced by any
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instrument (as defined in the UCC).
(b) Security Interests. Except for the conveyances hereunder or as
otherwise provide herein, Seller will not sell, pledge, assign or transfer
to any other Person, or take any other action inconsistent with HARC's
ownership of the Receivables or grant, create, incur, assume or suffer to
exist any Lien on any Receivable, whether now existing or hereafter
created, or any interest therein, and Seller shall not claim any ownership
interest in the Receivables and shall defend the right, title and interest
of HARC in and to the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under
Seller.
(c) Security's Interest. Except for the conveyances hereunder and in
connection with any transaction permitted pursuant to Section 6.6, Seller
hereby agrees not to transfer, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in the
Receivables and any such attempted transfer, assignment, exchange,
conveyance, pledge, hypothecation or grant shall be void.
(d) Delivery of Collections or Recoveries. In the event that Seller
receives collections or recoveries with respect to the Receivables, Seller
agrees to pay to HARC (or to the Master Servicer if HARC so directs) all
such collections and recoveries to the extent such amounts are payable to
HARC as soon as practicable after receipt thereof.
(e) Notice of Liens. The Seller shall notify HARC promptly after
becoming aware of any Lien on any Receivable other than the conveyances
hereunder.
(f) Documentation of Transfer. The Seller shall undertake to file the
documents which would be necessary to perfect and maintain the transfer of
the security interest in and to the Receivables and Other Conveyed Assets.
(g) Approval of Office Records. Seller shall cause this Agreement to
be duly approved by Seller's Board of Directors, and Seller shall maintain
the Agreement as a part of the official records of Seller for the term of
the Agreement.
ARTICLE V
REPURCHASES
-----------
Repurchase of Receivables Upon Breach of Warranty. Upon the occurrence of a
Repurchase Event, Seller shall, unless the breach which is the subject of such
Repurchase Event shall have been cured in all material respects, repurchase the
Receivable relating thereto from the Issuer by the last day of the first full
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calendar month following the discovery of such breach by the Seller or receipt
by the Seller of notice of such breach from any of the Master Servicer, HARC, a
Trust Officer of the Trustee or the Trust Collateral Agent, if any, or the Owner
Trustee and, simultaneously with the repurchase of the Receivable, Seller shall
deposit the Repurchase Amount in full, without deduction or offset, in the
Master Collection Account, pursuant to Section 3.2 of the Master Sale and
Servicing Agreement. It is understood and agreed that, except as set forth in
Section 6.1 hereof, the obligation of Seller to repurchase any Receivable, as to
which a breach occurred and is continuing, shall, if such obligation is
fulfilled, constitute the sole remedy against Seller for such breach available
to HARC, the Issuer, the Series Secured Parties, the Noteholders, the
Certificateholders, the Trust Collateral Agent, if any, on behalf of the
Noteholders or the Owner Trustee on behalf of Certificateholders. The provisions
of this Section 5.1 are intended to grant the Trustee or the Issuer and the
Trust Collateral Agent, if any, a direct right against Seller to demand
performance hereunder, and in connection therewith, Seller waives any
requirement of prior demand against HARC with respect to such repurchase
obligation. Any such repurchase shall take place in the manner specified in
Section 3.2 of the Master Sale and Servicing Agreement. Notwithstanding any
other provision of this Agreement or the Master Sale and Servicing Agreement to
the contrary, the obligation of Seller under this Section shall not terminate
upon a termination of Household Finance Corporation as Master Servicer under the
Master Sale and Servicing Agreement and shall be performed in accordance with
the terms hereof notwithstanding the failure of the Master Servicer or HARC to
perform any of their respective obligations with respect to such Receivable
under the Master Sale and Servicing Agreement.
Reassignment of Repurchased Receivables. Upon deposit in the Master
Collection Account of the Repurchase Amount of any Receivable repurchased by
Seller under Section 5.1 hereof, HARC and the Issuer shall take such steps as
may be reasonably requested by Seller in order to assign to Seller all of HARC's
and the Issuer's right, title and interest in and to such Receivable and all
security and documents and all Other Conveyed Property conveyed to HARC and the
Issuer directly relating thereto, without recourse, representation or warranty,
except as to the absence of liens, charges or encumbrances created by or arising
as a result of actions of HARC or the Issuer. Such assignment shall be a sale
and assignment outright, and not for security. If, following the reassignment of
a Repurchased Receivable, in any enforcement suit or legal proceeding, it is
held that Seller may not enforce any such Receivable on the ground that it shall
not be a real party in interest or a holder entitled to enforce the Receivable,
HARC and the Issuer shall, at the expense of Seller, take such steps as Seller
deems reasonably necessary to enforce the Receivable, including bringing suit in
HARC's or in the Issuer's name.
Waivers. No failure or delay on the part of HARC, or the Issuer as assignee
of HARC, in exercising any power, right or remedy under this Agreement shall
operate as a waiver
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thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other or future exercise thereof or the exercise of any
other power, right or remedy.
ARTICLE VI
MISCELLANEOUS
-------------
Liability of Seller. Seller shall be liable in accordance herewith only to
the extent of the obligations in this Agreement specifically undertaken by
Seller and the representations and warranties of Seller.
Amendment. This Agreement and any Conveyance Papers and the rights and
obligations of the parties hereunder may not be changed orally, but only by an
instrument in writing signed by HARC and the Seller in accordance with this
Section 6.2. This Agreement and any Conveyance Papers may be amended from time
to time by HARC and the Seller, provided that HARC provides to the Seller (a) an
Officer's Certificate to the effect that HARC reasonably believes that such
amendment will not have an adverse effect upon the interest of the Noteholders,
Certificateholders or any Series Secured Party and (b) an Opinion of Counsel
addressed and delivered to the Seller, dated the date of such amendment, to the
effect that the conditions precedent to any such amendment have been satisfied.
GOVERNING LAW. THIS AGREEMENT AND THE CONVEYANCE PAPERS 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.
Notices. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered
at or mailed by registered mail, return receipt requested, to (a) in the case
of the Seller, 11452 Elcamino Real, San Diego, CA. 94123, Attention: Chief
Operating Officer, with a copy to 2700 Sanders Road, Prospect Heights,
Illinois 60070 Attention: Director--Asset Securitization, (b) in the case of
HARC, 1111 Town Center Drive, Las Vegas, Nevada 89134 Attention: Compliance
Officer, with a copy to 2700 Sanders Road, Prospect Heights, Illinois 60070,
Attention: Treasurer; or, as to each party, at such other address as shall be
designated by
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such party in a written notice to each other party.
Severability of Provisions. If any one or more of the covenants,
agreements, provisions, or terms of this Agreement or Conveyance Paper shall for
any reason whatsoever be held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions, and terms of this Agreement or any Conveyance Paper and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of any Conveyance Paper.
Assignment. Notwithstanding anything to the contrary contained herein,
other than HARC's assignment of its rights, title, and interests in, to, and
under this Agreement to the Trustee or the Trust Collateral Agent, if any, for
the benefit of the related Series Secured Parties, as contemplated by the Master
Sale and Servicing Agreement and Section 6.6 hereof, the Receivables, the Other
Conveyed Property, this Agreement and all other Conveyance Papers may not be
assigned by the parties hereto, provided, however, that Seller shall have the
right to assign its rights, title and interests, in to and under this Agreement
to (i) any successor by merger or consolidation, or any Person which acquires by
conveyance, transfer or sale the properties and assets of Seller (ii) any
Affiliate owned directly or indirectly by Household International, Inc. or (iii)
to any entity provided that the Rating Agency has advised HARC and Seller that
the Rating Agency Condition has been satisfied. The right granted in the
foregoing proviso is subject to the further condition that any such successor or
other Person shall expressly assume by written agreement, in form and substance
satisfactory to HARC, the obligations of Seller hereunder and under the
Conveyance Papers.
Acknowledgment and Agreement of each Seller. By execution below, the Seller
expressly acknowledges and agrees that all of HARC's right, title, and interest
in, to, and under this Agreement, including, without limitation, all of HARC's
right title, and interest in and to the Receivables purchased pursuant to this
Agreement, shall be assigned by HARC to the Trustee or the Trust Collateral
Agent, if any, for the benefit of the related Series Secured Parties, and Seller
consents to such assignment. Additionally, Seller agrees for the benefit of the
Trustee and the Trust Collateral Agent, if any, that any amounts payable by
Seller to HARC hereunder which are to be paid by HARC to the Trustee or the
Trust Collateral Agent, if any, for the benefit of the related Series Secured
Parties shall be paid by Seller, on behalf of HARC, directly to the Trustee or
to the Trust Collateral Agent, as the case may be. Any payment required to be
made on or before a specified date in same-day funds may be made on the prior
business day in next-day funds.
Further Assurances. HARC and Seller agree to do and perform, from time to
time, any and all acts and to
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execute any and further instruments required or reasonably requested by the
other party more fully to effect the purposes of this Agreement and the
Conveyance Papers, including, without limitation, the execution of any financing
statements or continuation statements or equivalent documents relating to the
Receivables for filing under the provisions of the UCC or other law of any
applicable jurisdiction.
No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of HARC or Seller, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
Counterparts. This Agreement and all Conveyance Papers may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Binding Effect; Third-Party Beneficiaries. This Agreement and the
Conveyance Papers will inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Each of the
Trustee, the Trust Collateral Agent, if any, and the Owner Trustee shall be
considered a third-party beneficiary of this Agreement.
Merger and Integration. Except as specifically stated otherwise herein,
this Agreement and the Conveyance Papers set forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement and the Conveyance Papers.
This Agreement and the Conveyance Papers may not be modified, amended, waived or
supplemented except as provided herein.
Heading. The headings are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
Schedules and Exhibits. The schedules and exhibits attached hereto and
referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
Survival of Representations and Warranties. All representations, warranties
and agreements contained in this Agreement or contained in any Conveyance Paper,
shall remain operative and in full force and effect
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and shall survive conveyance of the Receivables by HARC to the Trustee or the
Trust Collateral Agent, if any, pursuant to the Master Sale and Servicing
Agreement.
Nonpetition Covenant. Until the date which is one year and one day after
payment in full of all the Notes of all Series, neither HARC nor Seller shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against HARC, Seller or 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 HARC, Seller or the Issuer or any substantial part of
their respective properties, or ordering the winding up or liquidation of the
affairs of HARC, Seller or the Issuer. This provision shall survive the
termination of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Master Purchase Agreement
to be duly executed by their respective officers as of the day and year first
above written.
HOUSEHOLD AUTOMOTIVE FINANCE CORPORATION,
as Seller
By
---------------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Purchaser
By
---------------------------------------
Name:
Title:
[Signature Page for Master Purchase Agreement]
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EXHIBIT A
FORM OF RECEIVABLES PURCHASE AGREEMENT SUPPLEMENT
Transfer No. of Receivables, dated as of ___________________,
pursuant to a Master Receivables Purchase Agreement (the "Purchase
Agreement") dated as of March 1, 1998, between Household Automotive Finance
Corporation, a Delaware corporation (the "Seller") and Household Auto
Receivables Corporation, a Nevada corporation ("HARC").
W I T N E S S E T H :
WHEREAS pursuant to the Purchase Agreement, the Seller wishes to convey
Receivables and Other Conveyed Property to HARC; and
WHEREAS, HARC is willing to accept such conveyance subject to the terms and
conditions hereof.
NOW, THEREFORE, the Seller and HARC hereby agree as follows:
1. Defined Terms. Capitalized terms used herein shall have the meanings
ascribed to them in the Purchase Agreement unless otherwise defined herein.
"Cutoff Date" shall mean with respect to the Receivables conveyed hereby,
- --------------------------.
"Purchase Date" shall mean with respect to the Receivables conveyed hereby,
- ------------------------.
"Purchase Price" shall mean 100% of the Principal Balance of the
Receivables on the books and records of the Seller, plus the present value of
anticipated excess spread on such Receivables, discounted to take into account
any uncertainty as to future performance, matching historical performance,
servicing fees, delinquencies, paydown rates, yield and such other factors as
may be mutually agreed upon by Seller and HARC.
2. Schedule of Receivables. Annexed as Schedule A hereto is a computer tape
which reflects the Receivables that constitute the Receivables to be conveyed
pursuant to this Agreement on the Purchase Date.
3. Conveyance of Receivables. In consideration of HARC's delivery to or
upon the order of the Seller of the Purchase Price, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to HARC, without recourse
A-1
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(except as expressly provided in the Purchase Agreement), all right, title and
interest of the Seller in and to:
(i) each and every Receivable listed on Schedule A to the related
Receivables Purchase Agreement Supplement and all monies paid or payable
thereon or in respect thereof on or after the related Cutoff Date
(including amounts due on or before the related Cutoff Date but received by
the Seller on or after such date);
(ii) 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;
(iii) all rights of the Seller against Dealers pursuant to Dealer
Agreements, Dealer Assignments or Unaffiliated Originator Receivables
Purchase Agreements related to such Receivables;
(iv) any proceeds and the right to receive proceeds with respect to
such Receivables repurchased by either (i) a Dealer, pursuant to a Dealer
Agreement, or (ii) an Unaffiliated Originator, pursuant to an Unaffiliated
Originator Receivables Purchase Agreement as a result of a breach of
representation or warranty in the related Dealer Agreement or Unaffiliated
Originator Receivables Purchase Agreement, as applicable;
(v) all rights of Seller under any Service Contracts on the related
Financed Vehicles;
(vi) any proceeds and the right to receive proceeds with respect to
the related Receivables from claims on any physical damage, credit life or
disability insurance policies, if any, covering Financed Vehicles or
Obligors, including rebates of insurance premiums relating to the
Receivables and any proceeds from the liquidation of such Receivables;
(vii) all items contained in the Receivables Files with respect to
such Receivables and any and all other documents that Seller or Master
Servicer keeps on file in accordance with its customary procedures relating
to the related Receivables, or the related Financed Vehicles or Obligor;
(viii) 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 HARC pursuant to liquidation of such Receivable;
(ix) 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
A-2
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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. As of the Purchase Date,
the Seller hereby makes the representations and warranties to HARC that are set
forth in Section 3.1 of the Purchase Agreement with respect to the Conveyance
effected hereby to the same extent as if set forth in full herein.
5. Representations and Warranties of HARC. As of the Purchase Date, HARC
hereby makes the representations and warranties to the Seller that are set forth
in Section 3.2 of the Purchase Agreement with respect to the Conveyance effected
hereby to the same extent as if set forth in full herein.
In the event of any breach of a representation and warranty made by HARC
hereunder, Seller covenants and agrees that it will not take any action to
pursue any remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which all Notes,
Certificates, pass-through certificates or other similar securities issued by
the Trust or similar vehicle formed by HARC have been paid in full. Seller and
HARC agree that damages will not be an adequate remedy for such breach and that
this covenant may be specifically enforced by HARC, Issuer or by the Trustee on
behalf of the Noteholders and Owner Trustee on behalf of the Certificateholders.
6. Conditions Precedent. The obligation of HARC to acquire the Receivables
hereunder is subject to the satisfaction, on or prior to the Purchase Transfer
Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section
3.1 of the Master Receivables Purchase Agreement shall be true and correct
as of the date of this Agreement and as of the Purchase Date.
(b) Additional Information. The Seller shall have delivered to HARC
such information as was reasonably requested by HARC to satisfy itself as
to (i) the accuracy of the representations and warranties set forth in
Section 4 of this Agreement and in Section 3.1 of the Master Receivables
Purchase Agreement and (ii) the satisfaction of the conditions set forth in
this Section.
7. Ratification of Agreement. As supplemented by this Agreement, the Master
Receivables Purchase Agreement is in all respects ratified and confirmed and the
Master Receivables Purchase Agreement as so supplemented by this
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Agreement shall be read, taken and construed as one and the same instrument.
8. 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.
9. Conveyance of the Receivables and the Other Conveyed Property to the
Issuer. Seller acknowledges that HARC intends, pursuant to the Master Sale and
Servicing Agreement, to convey the Receivables and the Other Conveyed Property,
together with its rights under this Agreement, to the Issuer on the Transfer
Date. Seller acknowledges and consents to such conveyance and pledge and waives
any further notice thereof and covenants and agrees that the representations and
warranties of Seller contained in this Agreement and the rights of HARC
hereunder are intended to benefit the related Series Support Provider, if any,
the Issuer, the Owner Trustee, the Trust Collateral Agent, the Noteholders and
the Certificateholders. In furtherance of the foregoing, Seller covenants and
agrees to perform its duties and obligations hereunder, in accordance with the
terms hereof for the benefit of the related Series Secured Parties, the Issuer,
the Owner Trustee, the Trustee, the Trust Collateral Agent, if any, and the
Series Secured Parties and that, notwithstanding anything to the contrary in
this Agreement, Seller shall be directly liable to the Issuer, the Owner
Trustee, the Trustee, the Trust Collateral Agent and the Series Secured Parties
(notwithstanding any failure by the Master Servicer or HARC to perform their
respective duties and obligations hereunder or under Basic Documents) and that
the Trustee may enforce the duties and obligations of Seller under this
Agreement against Seller for the benefit of any Series Secured Parties, the
Owner Trustee and the Trust Collateral Agent.
10. 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
<PAGE>
IN WITNESS WHEREOF, the Seller and HARC have caused this Purchase Agreement
to be duly executed and delivered by their respective duly authorized officers
as of day and the year first above written.
HOUSEHOLD AUTOMOTIVE FINANCE CORPORATION,
as Seller
By
---------------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Purchaser
By
---------------------------------------
Name:
Title:
A-5
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
(COMPUTER TAPE)
SCH-A-1
<PAGE>
November 4, 1998 Exhibits 5 and 23.1
Household Auto Receivables Corporation
1111 Town Center Drive
Las Vegas, Nevada 89134
Gentlemen:
I am a Vice President-Corporate Law and Assistant Secretary of Household
International, Inc., a Delaware corporation ("Household"), the ultimate
parent corporation of Household Finance Corporation (the "Master Servicer"),
Household Auto Receivables Corporation (the "Seller"), Household Automotive
Finance Corporation ("HAFC"). Pursuant to your request I am providing this
opinion to you in connection with the issuance of the Household Automobile
Trust I, Series 1998-1 Notes (as defined herein), issued pursuant to a Trust
Agreement (the "Trust Agreement"), dated as of March 1, 1998, between the
Seller and Wilmington Trust Company, as Owner Trustee (the "Owner Trustee").
The Trust Agreement creates Household Automotive Revolving Trust I (the
"Issuer"), a statutory business trust established under the laws of the State
of Delaware.
Pursuant to a supplement expected to be dated as of October 1, 1998
among the Master Servicer, the Issuer, the Seller, the Trustee (as defined
below), and the Owner Trustee (the "Series 1998-1 Supplement"), the Seller
proposes to direct the Owner Trustee to issue the Series 1998-1 Notes (the
"Notes"). The Series 1998-1 Supplement supplements the terms of the Trust
Agreement and an Indenture (the "Indenture"), dated as of October 1, 1998
among the Issuer, the Master Servicer and The Chase Manhattan Bank as Trustee
and Trust Collateral Agent (the "Trustee"). The terms of the Indenture are
governed by the laws of the State of New York.
In connection with the issuance of the Notes, the HAFC has entered into
a Master Receivables Purchase Agreement with the Seller, dated as of March 1,
1998 (the "Purchase Agreement"), which as supplemented by Receivables
Purchase Agreement Supplements thereto, provides for the sale and transfer
from time to time of certain retail installment sales contracts secured by
new and used automobile and light trucks (the "Receivables") from the HAFC to
the Seller. In connection with each such transfer, the Seller intends to
transfer the Receivables to the Issuer pursuant to the terms of the Master
Sale and Servicing Agreement (the "Sale and
<PAGE>
Household Auto Receivables Corporation
November 4, 1998
Page 2
Servicing Agreement"), dated as of March 1, 1998 among the Issuer, the
Seller, the Master Servicer, and Norwest Bank Minnesota, National
Association, as Trust Collateral Agent, as supplemented from time to time by
certain Transfer Agreements. The Chase Manhattan Bank has succeeded Norwest
Bank Minnesota, National Association Collateral Agent under the Sale and
Servicing Agreement.
I refer to the Registration Statement, as amended, on Form S-3 (File
Nos. 333-59837 and 333-59837-01) (the "Registration Statement") filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Act"), pertaining to the Notes.
Terms used herein that are not defined herein shall have the meanings
ascribed thereto in the Registration Statement.
The Registration Statement relates to a financing program which involves
the sale by HAFC to the Seller and the assignment by the Seller to the Issuer
of the Receivables acquired by HAFC from automotive dealers. The Receivables
and certain other assets of the Issuer will be pledged by the Issuer to the
Trustee pursuant to the Indenture. The Notes will be debt of the Issuer and
will be offered pursuant to the Registration Statement. The Notes shall be
issued in seven classes under the Indenture as set forth in the Registration
Statement.
I am, or attorneys under my supervision are, familiar with the
proceedings to date with respect to the proposed offering and sale to the
public of the Notes and have examined such records, documents and matters of
law and satisfied myself as to such matters of fact as I have considered
relevant for the purposes of this opinion.
Based on the foregoing, it is my opinion that the Notes will be legally
and validly issued and will be legal and binding obligations of the Issuer,
entitled to the benefits of the Indenture and the Series 1998-1 Supplement
when the following has occurred:
1) the Registration Statement shall have been declared effective
by the Commission under the Act,
2) the Indenture, the Trust Agreement, the Sale and Servicing
Agreement and the Series 1998-1 Supplement each shall be duly executed
and delivered by the parties thereto,
3) the Notes shall have been duly authenticated by the Indenture
Trustee in accordance with the Indenture, and delivered by the Seller
in accordance with the Underwriting Agreement among HFC, the Seller, HAFC
and the Underwriters named therein (the "Underwriting Agreement"), and
<PAGE>
Household Auto Receivables Corporation
November 4, 1998
Page 3
4) the Seller shall have received the agreed purchase price for
the Notes in accordance with the Underwriting Agreement.
In giving the opinions expressed herein, I express no opinion other than
as to the laws of the State of Illinois, the general corporation laws of the
States of Delaware and New York and the Federal laws of the United States. As
to matters of New York law, I have conferred with attorneys employed by
Household who are licensed to practice law in the State of New York.
I do not find it necessary for the purposes of this opinion, and
accordingly do not purport to cover herein, the application of the "Blue Sky"
or securities laws of the various states to sale of the Notes.
I hereby consent to the use of my name and my opinion in the Prospectus
filed pursuant to Rule 430A or 424 of Regulation C of the Act, in connection
with the Registration Statement, including any references to my opinions set
forth in the documents incorporated by reference therein, and to the filing
of this consent as an exhibit to the Registration Statement. In giving such
consent I do not admit that I am in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
John W. Blenke
Vice President-Corporate Law
and Assistant Secretary
<PAGE>
November 4, 1998 Exhibit 8
Household Auto Receivables Corporation
2700 Sanders Road
Prospect Heights, IL 60070
Re: HOUSEHOLD AUTOMOTIVE REVOLVING TRUST I
SERIES 1998-1
Dear Ladies and Gentlemen:
We have acted as counsel to Household Auto Receivables Corporation in
connection with the preparation and filing of a registration statement on
Form S-3 (the "Registration Statement") being filed today with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended
(the "Act"), in respect of Household Automobile Revolving Trust I, Series
1998-1 Class A and Class B-1 Notes (the "Offered Notes") which the Registrant
plans to offer.
We adopt and confirm the opinions contained in the relevant prospectus
under the heading "Material Federal Income Tax Consequences" to the extent
they constitute legal conclusions with respect to matters of federal law and
constitute a part of this Registration Statement.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the references to Dewey Ballantine LLP in the
Registration Statement and related prospectus under the heading "Material
Federal Income Tax Consequences."
Very truly yours,
Dewey Ballantine LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Household Automobile Revolving Trust I:
As independent public accountants, we hereby consent to the incorporation of
our report dated October 29, 1998, included in this registration statement on
Form S-3 of Household Automobile Revolving Trust I and to all references to
our Firm included in the registration statement.
Chicago, Illinois
November 4, 1998
<PAGE>
___________________________________________________________________
__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I
(Exact name of obligor as specified in its charter)
DELAWARE NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
111 TOWN CENTER DRIVE
LAS VEGAS, NE 89134
(Address of principal executive offices) (Zip Code)
___________________________________________
Series 1998-1
(Title of the indenture securities)
_____________________________________________________
1
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
2
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14,
1996, in connection with the merger of Chemical Bank and The Chase Manhattan
Bank (National Association), Chemical Bank, the surviving corporation, was
renamed The Chase Manhattan Bank.)
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement
No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank.)
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining
authority. (On July 14, 1996, in connection with the merger of Chemical Bank
and The Chase Manhattan Bank (National Association), Chemical Bank, the
surviving corporation, was renamed The Chase Manhattan Bank.)
8. Not applicable.
9. Not applicable.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York and State of New York, on the 26TH
day of October 1998.
THE CHASE MANHATTAN BANK
By /s/ Kimberly K. Costa
-------------------------------------
Kimberly K. Costa
Second Vice President
4
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin..................................... $ 12,546
Interest-bearing balances............................. 6,610
Securities:
Held to maturity securities................................ 2,014
Available for sale securities.............................. 46,342
Federal funds sold and securities purchased under
agreements to resell.................................. 27,489
Loans and lease financing receivables:
Loans and leases, net of unearned income.............. $129,281
Less: Allowance for loan and lease losses............. 2,796
Less: Allocated transfer risk reserve................. 0
Loans and leases, net of unearned income, --------
allowance, and reserve................................ 126,485
Trading Assets............................................. 58,015
Premises and fixed assets (including capitalized
leases)............................................... 3,001
Other real estate owned.................................... 260
Investments in unconsolidated subsidiaries and
associated companies.................................. 255
Customers' liability to this bank on acceptances
outstanding........................................... 1,245
Intangible assets.......................................... 1,492
Other assets............................................... 16,408
--------
TOTAL ASSETS............................................... $302,162
--------
--------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits
In domestic offices................................... $ 99,347
Noninterest-bearing................................... $ 41,566
Interest-bearing...................................... 57,781
--------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's.............................. 80,602
Noninterest-bearing................................... $ 4,109
Interest-bearing...................................... 76,493
Federal funds purchased and securities sold under agree-
ments to repurchase..................................... 37,760
Demand notes issued to the U.S. Treasury................... 1,000
Trading liabilities........................................ 42,941
Other borrowed money (includes mortgage indebtedness and
obligations under capitalized leases):
With a remaining maturity of one year or less......... 4,162
With a remaining maturity of more than one year
through three years............................ 213
With a remaining maturity of more than three years.... 106
Bank's liability on acceptances executed and outstanding... 1,245
Subordinated notes and debentures.......................... 5,408
Other liabilities.......................................... 11,796
TOTAL LIABILITIES.......................................... 284,580
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus.............. 0
Common stock............................................... 1,211
Surplus (exclude all surplus related to preferred stock)... 10,441
Undivided profits and capital reserves..................... 5,916
Net unrealized holding gains (losses) on available-for-sale
securities.............................................. (2)
Cumulative foreign currency translation adjustments........ 16
TOTAL EQUITY CAPITAL....................................... 17,582
--------
TOTAL LIABILITIES AND EQUITY CAPITAL....................... $302,162
--------
--------
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with
the instructions issued by the appropriate Federal regulatory authority and
is true to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and
correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
6
