<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HOUSEHOLD AUTO RECEIVABLES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 36-4220459
(State or other jurisdiction (IRS Employer
of incorporation or Identification
organization) Number)
</TABLE>
--------------------------
1111 TOWN CENTER DRIVE
LAS VEGAS, NEVADA 89134
(Address of principal executive offices of Registrant)
--------------------------
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: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective registration
statement for the same offering. / /
If this Form is filed as a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED 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>
Auto Receivables Asset Backed Securities... $1,000,000 100% $1,000,000 $278.00
</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) Paid by wire transfer on July 29, 1999.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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.
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- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1999)
HOUSEHOLD AUTOMOTIVE TRUST
SERIES NOTES
HOUSEHOLD AUTO RECEIVABLES CORPORATION, SELLER
HOUSEHOLD FINANCE CORPORATION, SERVICER
------------------
THE TRUST WILL ISSUE-
- classes of notes which are to be offered by this prospectus supplement;
and
- Certain interests in the trust which are to be held by the seller are not
offered by this prospectus supplement but serve as credit support to the
notes offered by this prospectus supplement.
THE NOTES-
- Are backed by a pledge of assets of the trust. The assets of the trust
securing the notes will include a pool of non-prime retail installment sales
contracts secured by new and used automobiles, light duty trucks and vans;
- Receive monthly distributions on the [17th] day of each month beginning on
;
- Represent debt obligations of Household Automotive Trust ; and
- Currently have no trading market.
CREDIT ENHANCEMENT FOR THE NOTES WILL CONSIST OF-
- A reserve account that can be used to pay shortfalls in payments on the
notes;
- Overcollateralization resulting from the excess of principal value of the
initial auto loans over the aggregate principal amount of the notes; and
- [A financial guarantee insurance policy issued by [Name of
Insurer]unconditionally or irrevocably guaranteeing timely payment of
interest and principal.]
- --------------------------------------------------------------------------------
WE SUGGEST THAT YOU READ THE SECTION ENTITLED "RISK FACTORS" ON PAGE 4 OF THE
PROSPECTUS AND ON PAGE 10 OF THIS PROSPECTUS SUPPLEMENT AND CONSIDER THESE
FACTORS BEFORE MAKING A DECISION TO INVEST IN THESE SECURITIES.
These notes are auto receivable asset-backed notes and are secured only by the
assets of the trust. The notes are not obligations of any other person or
entity.
Neither these notes nor the auto loans will be insured or guaranteed by any
governmental agency or instrumentality.
Retain this prospectus supplement for future reference. This prospectus
supplement may not be used to consummate sales of securities unless accompanied
by the prospectus.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<CAPTION>
INITIAL
FINAL PUBLIC PROCEEDS
ISSUANCE INTEREST SCHEDULED OFFERING UNDERWRITING TO
AMOUNT RATE PAYMENT DATE PRICE(1) DISCOUNT SELLER(2)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Class A-1
Notes
- -------------------------------------------------------------------------------------------
Class A-2
Notes
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Class A-3
Notes
- -------------------------------------------------------------------------------------------
Class A-4
Notes
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from .
(2) Before expenses, estimated to be .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITERS]
The date of this Prospectus Supplement is
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of information with the Securities
and Exchange Commission, including annual, quarterly and special reports, proxy
statements and other information. You can read and copy these documents at the
public reference facility maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, NW, Room 1024, Washington, DC 20549. You can also copy and inspect these
reports, proxy statements and other information at the following regional
offices of the SEC:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, New York 10048 Chicago, Illinois 60661
</TABLE>
All reports we file with the SEC after the date of this prospectus supplement
but before the offering of the notes ends are considered to be part of this
prospectus supplement. Information contained in those reports updates and
supercedes the information in this prospectus supplement. We will provide you
with copies of these reports, at no cost, if you write to: Household Finance
Corporation, 2700 Sanders Road, Prospect Heights, Illinois 60070, Attention:
Secretary.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. SEC filings are also available to the public on the SEC's web
site at http://www.sec.gov.
The consolidated financial statements of [Name of Insurer] are included in, or
are exhibits to, the following documents which have been filed with the SEC:
(a) Annual Report on Form 10-K for the year ended , and
(b) Quarterly Report on form 10-Q for the period ended .
We will provide you with copies of these financial statements, at no cost, if
you write us at: Household Financial Corporation, 2700 Sanders Road, Prospect
Heights, Illinois 60070, Attention: Secretary.
This prospectus supplement supplements a prospectus that is part of a
registration statement filed by the seller with the SEC (Registration No.
333- ).
You should rely only on the information provided in this prospectus supplement
and the accompanying prospectus. We have not authorized anyone else to provide
you with different information. You should not assume that the information in
this prospectus supplement or in the prospectus is accurate as of any date other
than the date on the cover page of this prospectus supplement.
You can find definitions of the technical cashflow terms used in this prospectus
supplement in the Glossary beginning on page S-43 in this prospectus supplement.
We include cross-references in this prospectus supplement to captions in these
materials where you can find further discussions. The following table of
contents provides the pages on which these captions are located.
In this prospectus, the terms "we", "us" and "our" refer to Household Auto
Receivables Corporation.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where You Can Find More Information... S-2
Summary of the Terms of the Notes..... S-4
Risk Factors.......................... S-8
Use of Proceeds....................... S-10
The Trust............................. S-10
The Trust Assets...................... S-10
Yield and Prepayment Considerations... S-18
[The Insurer]......................... S-22
Description of the Notes.............. S-24
[The Policy].......................... S-27
Material Federal Income Tax
Consequences........................ S-29
State and Local Tax Considerations.... S-31
ERISA Considerations.................. S-31
Underwriting.......................... S-32
Legal Matters......................... S-32
Glossary.............................. S-33
Report Of Independent Public
Accountants......................... F-1
</TABLE>
S-3
<PAGE>
SUMMARY OF THE TERMS OF THE NOTES
- - This summary highlights select information from this prospectus supplement and
does not contain all of the information that you need to consider in making
your investment decision. This summary provides general, simplified
descriptions of matters which, in some cases, are highly technical and
complex. To understand all of the terms of the offering of the notes,
carefully read both this entire prospectus supplement and the attached
prospectus each in its entirety.
- - This summary provides an overview of calculations, cash flows and other
information to aid your understanding. To understand all of the terms of the
offering, we suggest that you carefully read this entire document and, in
particular, the full description of these calculations, cash flows and other
information in this prospectus supplement.
SERIES NOTES
The trust will issue the notes offered by this prospectus in book-entry form
through the facilities of the Depository Trust Company.
TRUST
Household Automotive Trust . The trust will be a Delaware business trust
formed under the laws of the State of Delaware. The address of the trust is in
care of [Name of Owner Trustee] at [address].
SELLER
Household Auto Receivables Corporation. The seller has purchased the auto loans
from Household Automotive Finance Corporation and will sell them to the trust.
The seller will also own interests in the trust. The address of the seller is
1111 Town Center Drive, Las Vegas, Nevada 89134.
SERVICER
Household Finance Corporation. The servicer is responsible for servicing the
auto loans and has subcontracted with the subservicer to perform the servicing
responsibilities. The address of the servicer is 2700 Sanders Road, Prospect
Heights, Illinois 60070.
SUBSERVICER
Household Automotive Finance Corporation. The auto loans were originated by
automobile dealers that have no affiliation with the subservicer and were
purchased by the subservicer under its various financing programs. The
subservicer will service the auto loans in accordance with policies established
in consultation with the servicer. The address of the subservicer is 11452 El
Camino Real, San Diego, California 92130.
[INSURER]
[Name of Insurer], a [New York] Financial Guaranty Insurance Company.
OWNER TRUSTEE
[Name of the Owner Trustee]. The address of the owner trustee is [address].
INDENTURE TRUSTEE
[Name of Indenture Trustee]. The address of the indenture trustee is [address].
THE TRUST ASSETS
The trust will pledge assets to secure payments on the notes. The pledged assets
will include a pool of auto loans, cash on deposit in a collection account and a
reserve account and other assets as described in detail elsewhere in this
prospectus supplement.
AUTO LOANS
- - On the closing date, the seller will assign to the trust a pool of auto loans.
[On or before , the seller will assign additional auto loans to the
trust. The trust will purchase these auto loans from monies in the pre-funding
account.]
On the closing date [or the subsequent transfer date] the trust will pledge the
auto loans to the indenture trustee as collateral for the notes. As of
the aggregate PRINCIPAL BALANCE of the pool of auto loans pledged as
collateral was $ . Payments
S-4
<PAGE>
on the notes will be made from payments on the pledged auto loans and payments
received under applicable insurance policies.
- - As of :
-- The weighted average contract rate of the auto loans is approximately
%;
-- The weighted average remaining term of the auto loans, that is the period
starting after the cut-off date and including each auto loan's scheduled
maturity, is approximately months; and
-- The weighted average original term of the auto loans is approximately
months.
- - The auto loans will consist of non-prime retail installment sales contracts
secured by new and used automobiles, light duty trucks and vans which were
purchased from automobile dealers under the subservicer's financing program.
The subservicers finance programs target automobile purchasers with below
average credit who have difficulty obtaining credit from traditional lending
sources.
- - No auto loans will be more than [30] days delinquent as of .
- - Each auto loan requires the borrower to make fixed, level payments that will
fully pay the balance of the amount borrowed by its maturity date.
- - We will pay the notes from payments on the auto loans and amounts recovered
when financed vehicles are repossessed and sold, after deducting expenses.
CUT-OFF DATE
The opening of business on .
PAYMENT DATE
The [17th] day of each month if the [seventeenth] is a business day. If the
[seventeenth] is not a business day, the payment date will be the following day
that is a business day. The first payment date will be .
DETERMINATION DATE
The earliest of the fifth calendar day or the third business day before a
payment date. The servicer will calculate and instruct the trust and the
indenture trustee as to the amounts to be paid on the notes on the next payment
date.
RECORD DATE
The last business day preceding a payment date unless the notes are no longer
book-entry notes. If the notes are definitive notes, the record date is the last
business day of the month preceding a payment date.
CLOSING DATE
On or about .
DENOMINATIONS
The trust will issue the notes in minimum denominations of $100,000 and integral
multiples of $1,000. One note of each class may be issued in another
denomination.
PRIORITY OF DISTRIBUTIONS
Each month, the trust will distribute the amounts received on the auto loans and
any other collections available as property of the trust as follows:
INTEREST DISTRIBUTIONS
On each payment date, interest that accrued during the interest accrual period
is payable at the applicable note interest rate. The note rate for each class is
listed on the cover page of this prospectus. Interest 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 the interest accrual period. Interest on the Class A-3
and Class A-4 Notes will be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
Amounts paid to holders of the notes will be shared by the Class A-1, Class A-2,
Class A-3 and Class A-4 noteholders in proportion to the interest due on each
class.
PRINCIPAL DISTRIBUTIONS
On each payment date, the trust will pay principal in reduction of the
outstanding principal balance of the notes.
Principal payments will be an amount generally equal to a percentage of the
decrease in the principal value of the auto loans between the first and last day
of a calendar month. These principal payments will be paid
S-5
<PAGE>
to the Class A-1, Class A-2, Class A-3 and Class A-4 Notes, sequentially,
beginning with the Class A-1 Notes, in each case, until the respective
outstanding principal amount of each class is paid in full.
OVERCOLLATERALIZATION
The overcollateralization amount is the amount by which the POOL BALANCE exceeds
the outstanding principal balance of the notes. The overcollateralization amount
will be available to absorb any losses that noteholders would otherwise incur.
As of the closing date, the overcollateralization will be equal to $ or
of the POOL BALANCE as of .
RESERVE ACCOUNT
The owner trustee will hold a reserve account. An initial deposit of
$ will be placed in the reserve account on the closing date. The servicer
will deposit collections received from the auto loans into the reserve account
on each payment date after interest and principal payments on the notes and
payment of certain fees and expenses have been made.
The servicer will continue to make such deposits on each payment date until the
balance in the reserve account is the lesser of:
(i) greater of
(a) [ ]% of the PRINCIPAL BALANCE of the auto loans at the end of last
day of the calendar month preceding the current payment date,
and
(b) $ ,
and
(ii) the outstanding principal amount of the notes.
We will use funds in the reserve account to pay shortfalls in amounts due to the
noteholders and if Household Finance Corporation is no longer the servicer, to
pay any fees due to the servicer.
[PRE-FUNDING FEATURE]
- - [The trustee will hold $ of the proceeds of the notes in a pre-funding
account which the trust will use to purchase additional auto loans. The
subservicer will acquire these additional auto loans under the same purchase
criteria as the auto loans in the trust on the closing date.
- - The trust will purchase these additional auto loans on or before .
OPTIONAL REDEMPTION
On any payment date when the outstanding principal balance of the notes is less
than or equal to $ , which is 10% of the original principal balance of the
notes as of , the servicer or the seller may purchase the auto loans
from the trust. This will redeem the notes. If redemption occurs, we will pay
you a final distribution equaling the entire unpaid principal balance of the
notes plus any accrued and unpaid interest.
SCHEDULED MATURITY DATES
If the notes have not already been paid in full, we will pay the outstanding
principal amount of the notes in full on the following payment dates:
<TABLE>
<CAPTION>
----------------
<S> <C>
Class A-1.................
Class A-2.................
Class A-3.................
Class A-4.................
</TABLE>
Final payment on the notes will probably be earlier than the scheduled maturity
date stated above for each class of notes.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
- - Dewey Ballantine LLP, special tax counsel to the trust and counsel to the
underwriters, is of the opinion that the notes will be treated as debt and the
trust will not be treated as an association or publicly traded partnership
taxable as a corporation. By your acceptance of a note, you agree to treat the
notes as debt.
- - Interest on the notes will be taxable as ordinary income when received by a
holder on the cash method of accounting and when accrued by a holder on the
accrual method of accounting.
- - Dewey Ballantine LLP has prepared the discussion under "Material Federal
Income Tax Consequences" in this prospectus supplement and on the prospectus
S-6
<PAGE>
and is of the opinion that the discussion accurately states all material
federal income tax consequences of the purchase, ownership and disposition of
the notes to their original purchaser.
ERISA CONSIDERATIONS
Subject to the important considerations described under "ERISA Considerations"
in this prospectus supplement, pension, profit-sharing and other employee
benefit plans may purchase notes. You should consult with your counsel regarding
the applicability of the provisions of the Employee Retirement Income Security
Act of 1974, as amended, before purchasing a note.
RATINGS
- - The trust will not issue the notes unless they have been assigned the ratings
stated below:
- - You should know that the ratings could be lowered, qualified or withdrawn by
the rating agencies.
<TABLE>
<CAPTION>
--------------------------------
<S> <C> <C>
RATING
--------------------------------
CLASS [AGENCY 1] [AGENCY 2]
- ------------------------ --------------- ---------------
A-1.....................
A-2.....................
A-3.....................
A-4.....................
</TABLE>
S-7
<PAGE>
RISK FACTORS
WE RECOMMEND YOU CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS BEFORE DECIDING TO INVEST IN THE NOTES.
GEOGRAPHIC CONCENTRATION OF AUTO LOANS MAY ADVERSELY AFFECT THE NOTES.
Adverse economic conditions or other factors particularly affecting any state or
region where a high concentration of auto loans is located could adversely
affect the notes. As of , approximately % and % of the auto
loans (based on the PRINCIPAL BALANCE and mailing address of the borrowers) were
located in and , respectively. The location of the auto
loans by state, based upon borrower address, is set out in the table beginning
on page 19 of this prospectus supplement.
AN EVENT OF DEFAULT UNDER THE INDENTURE MAY CAUSE PREPAYMENT OR CHANGES IN THE
PRIORITY OF PAYMENT.
If an event of default occurs, the indenture trustee may, or if so directed by
noteholders of two-thirds of the outstanding principal of the notes, will, order
the trust to immediately repay the notes. If this occurs, the notes of all
classes will first, receive distributions of interest, and second, distributions
of principal.
The following are events of default under the indenture:
- failure to pay principal or interest within five days of the date a
payment was due;
- breaches under the agreements governing the series notes; and
- the trust's insolvency or bankruptcy.
[THE COMPANY MAY BE UNABLE TO ORIGINATE ENOUGH AUTO LOANS TO USE ALL MONEYS IN
THE PRE-FUNDING ACCOUNT AND THEREFORE YOU MAY BE EXPOSED TO REINVESTMENT
RISK].
[The ability of the subservicer to originate sufficient additional auto loans
may be affected by a variety of social and economic factors including:
- interest rates,
- unemployment levels,
- the rate of inflation, and
- consumer perception of economic conditions generally.
If the subservicer does not originate sufficient additional auto loans, the
money remaining in the pre-funding account as of will not be used to
acquire additional loans and a mandatory redemption of a portion of the notes
could result.
If a mandatory redemption occurs, you will receive a principal prepayment. You
will bear the risk of reinvesting any prepayment.]
[RATINGS ON NOTES ARE DEPENDENT UPON THE INSURER'S CREDITWORTHINESS.]
[The ratings of the notes will depend primarily on the creditworthiness of the
insurer as the provider of the financial guarantee insurance policy relating to
the notes. There is a risk that if the insurer's financial strength ratings are
reduced, the rating agencies may reduce the notes' ratings.]
S-8
<PAGE>
YEAR 2000 COMPLIANCE MAY CAUSE DELAYS IN PAYMENTS TO YOU.
The servicer and subservicer are in the process of addressing issues arising
from the year 2000 issue that could impact the timely payment of principal and
interest on the notes. The year 2000 issue is the result of prior computer
programs being written using two digits to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. Any such occurrence could result in
major computer system failure or miscalculations. Although the servicer and
subservicer reasonably believe that their servicing systems will be year 2000
compliant prior to the year 2000, they are presently engaged in various
procedures to determine if their computer systems and software, and those of
their material suppliers, customers and agents will be year 2000 compliant.
In the event that the servicer or the subservicer, or any of their suppliers,
customers or agents do not successfully and timely achieve year 2000 compliance,
the servicer's performance of its obligations under the sale and servicing
agreement could be adversely affected. This could result in delays in processing
payments on the auto loans and could cause a delay in payments to you.
S-9
<PAGE>
USE OF PROCEEDS
The net proceeds received by the trust from the sale of the notes will be used
to pay Household Auto Receivables Corporation the purchase price for the auto
loans, [to fund the initial deposit in the reserve account], [to deposit the
pre-funded amount into the pre-funding account;] and .
THE TRUST
GENERAL
The trust, Household Automotive Trust , will be a Delaware business trust
formed under the laws of the State of Delaware under a TRUST AGREEMENT, dated as
of between the seller and the owner trustee for the purpose of
engaging in the transactions described in this prospectus supplement. The trust
will not engage in any activity other than (1) acquiring, holding and managing
the auto loans and the other assets of the trust, (2) issuing notes in private
and public offerings, including the issuance of the notes, (3) making payments
on the notes and (4) engaging in other activities in connection with the notes.
The trust's principal offices are in [Wilmington], Delaware, in care of [Name of
Owner Trustee] as owner trustee, at the address listed below under "-The Owner
Trustee."
THE OWNER TRUSTEE
[Name of Owner Trustee], which will be the owner trustee under the trust
agreement, is a Delaware [banking corporation] and its principal offices are
located at [address]. 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 as stated in the trust agreement and the sale
and servicing agreement, to be dated as of , among the trust, the
seller, the servicer and the indenture trustee.
THE INDENTURE TRUSTEE
[Name of the Indenture Trustee] will be the indenture trustee under an
indenture, dated as of , among the trust and [Name of the Indenture
Trustee], as indenture trustee. [Name of the Indenture Trustee] is a [New York]
banking corporation, the principal offices of which are located at [address].
THE TRUST ASSETS
GENERAL
The trust assets consist of the following:
- the auto loans;
- all amounts paid or payable under the auto loans after the [initial or
subsequent] cut-off date;
- security interests in the financed vehicles granted by the borrowers;
- an assignment of the subservicer's rights against automobile dealers under
agreements between the subservicer and the dealers;
- 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;
- all funds on deposit from time to time in the collection account [, the
pre-funding account] and the reserve account;
S-10
<PAGE>
- an assignment of all rights and benefits under the receivables purchase
agreement which consists of a receivables purchase agreement, dated as of
between the seller and the subservicer and all supplements thereto;
- all documents related to the auto loans, including the original contracts,
documents evidencing insurance, original credit applications and original
certificates of title or copies of applications therefor;
- a share of the preferred stock of the seller; and
- all proceeds from the trust assets.
The auto loans were originated by dealers in accordance with the subservicer's
requirements, have been assigned by the dealers to the subservicer, and evidence
the indirect financing made available to the borrowers by the subservicer.
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.
All of the auto loans were sold by the subservicer to the seller under the
receivables purchase agreement and by the seller to the trust under the sale and
servicing agreement. The auto loans were originated by dealers and purchased by
the subservicer in the ordinary course of the subservicer's business in
accordance with its finance programs and underwriting standards.
The files relating to the auto loans will be held by the subservicer as
custodian for the indenture trustee.
ELIGIBILITY CRITERIA OF THE [INITIAL] AUTO LOANS
The auto loans were selected according to several criteria.
Each auto loan:
- 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,
- has a contractual annual percentage rate, or APR, of not less than
[ ]% or more than [ ]%,
- provides for level monthly payments which provide interest at the APR and
fully amortize the original PRINCIPAL BALANCE over an original term no
greater than [72] months,
- is not more than [30] days past due as of the cut-off date,
- is attributable to the purchase of a new or used automobile, light duty
truck or van,
- as of the cut-off date has a remaining term of not more than [72] months
and
- had an original PRINCIPAL BALANCE of at least $[3,000] and not more than
$[30,000]. No selection procedures adverse to the noteholders were
utilized in selecting the auto loans to be conveyed to the trust.
[ADDITIONAL AUTO LOANS]
[During the funding period, the seller will purchase the subsequent auto loans
from the subservicer and then sell them to the trust. The seller will sell the
subsequent auto loans to the trust on the subsequent transfer dates. The trust
will use the funds in the pre-funding account to purchase the subsequent auto
loans.
The trust's obligation to purchase the subsequent auto loans is subject to the
following conditions:
(a) as of each loan's subsequent cut-off date, each subsequent auto loan
and/or subsequent financed vehicle must satisfy the auto loan eligibility
criteria specified under "Eligibility Criteria" above regarding the
initial auto loans;
(b) [the insurer, if there is no insurer default, has approved the
subsequent auto loans transfer to the trust];
S-11
<PAGE>
(c) Neither the subservicer nor the seller has selected the subsequent auto
loans in a manner that either of them believes is adverse to the
interests of [the insurer or] the noteholders;
(d) The subservicer and the seller will deliver certain opinions of counsel
regarding the validity of the subsequent auto loan transfer; and
(e) [Name of Rating Agency] must confirm that the ratings on the notes have
not been withdrawn or reduced because of the subsequent auto loans
transfer to the trust.
Because the subsequent auto loans may be originated after the initial auto
loans, the auto loan pool's characteristics after the transfer of subsequent
auto loans to the pool may vary from the initial pool.
In addition, the trust's obligation to purchase the subsequent auto loans is
subject to the condition that the auto loans in the trust, including the
subsequent auto loans to be transferred, meet the following criteria:
(a) the auto loans weighted average annual percentage rate is not less than
%;
(b) the auto loan's weighted average remaining term on the subsequent
cut-off date is not greater than months; and
(c) not more than % of the obligors on the auto loans reside in and .
The criteria in clauses (a) and (b) will be based:
- on the characteristics of the initial auto loans on the initial cut-off
date and
- the auto loans, including the subsequent auto loans, on the related
subsequent cut-off date.
The criteria in clause (c) will be based on the obligor's mailing addresses on:
- the initial auto loans on the initial cut-off date and
- the subsequent auto loans on the related subsequent cut-off dates.
Except for the above described criteria, there are no required characteristics
for the subsequent auto loans. Therefore, following the transfer of subsequent
auto loans to the trust, the aggregate characteristics of the entire pool of
auto loans included in the trust may vary in the following respects:
- composition of the auto loans;
- geographic distribution;
- distribution by remaining PRINCIPAL BALANCE;
- distribution by APR;
- distribution by remaining term; and
- distribution of the auto loans secured by new and used vehicles.]
S-12
<PAGE>
COMPOSITION OF THE [INITIAL]AUTO LOANS
Presented below is a description of the material characteristics of the auto
loans as of the cut-off date:
<TABLE>
<CAPTION>
----------------------
<S> <C>
TOTAL POOL OF THE
[INITIAL] AUTO LOANS
----------------------
Original pool balance.............................
Number of auto loans..............................
Average principal balance(1)......................
Range of principal balances.....................
Average original principal balance(2).............
Range of original principal balance.............
Weighted average APR(3)...........................
Range of original APRs..........................
Weighted average original term(3).................
Range of original terms.........................
Weighted average remaining term(3)................
Range of remaining terms........................
Weighted average months of seasoning(3)...........
Range of months of seasoning....................
Number of auto loans more than 30 days
delinquent......................................
</TABLE>
(1) Pool balance as of the cut-off date divided by total number of auto loans.
(2) Aggregate amount financed divided by total number of auto loans.
(3) Weighted by principal balance as of the cut-off date.
S-13
<PAGE>
COMPOSITION OF THE [INITIAL] AUTO LOANS BY PRINCIPAL BALANCE
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
----------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF % OF PRINCIPAL % OF POOL BY
PRINCIPAL BALANCE AUTO LOANS AUTO LOANS OUTSTANDING PRINCIPAL BALANCE
- ----------------------------------------------- ----------- ------------- ----------- -----------------
$ 3,000 to 4,000............................... % $ %
4,001 to 5,000...............................
5,001 to 6,000...............................
6,001 to 7,000...............................
7,001 to 8,000...............................
8,001 to 9,000...............................
9,001 to 10,000..............................
10,001 to 11,000..............................
11,001 to 12,000..............................
12,001 to 13,000..............................
13,001 to 14,000..............................
14,001 to 15,000..............................
15,001 to 16,000..............................
16,001 to 17,000..............................
17,001 to 18,000..............................
18,001 to 19,000..............................
19,001 to 20,000..............................
20,001 to 21,000..............................
21,001 to 22,000..............................
22,001 to 23,000..............................
23,001 to 24,000..............................
24,001 to 25,000..............................
25,001 to 26,000..............................
26,001 to 27,000..............................
27,001 to 28,000..............................
28,001 to 29,000..............................
29,001 to 30,000..............................
----------- --- ----------- ---
Total........................................ % $ %
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
S-14
<PAGE>
COMPOSITION BY APR OF THE [INITIAL] AUTO LOANS
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
----------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF % OF PRINCIPAL % OF POOL BY
APR RANGE AUTO LOANS AUTO LOANS OUTSTANDING PRINCIPAL BALANCE
- ----------------------------------------------- ----------- ------------- ----------- -----------------
12.00 to 12.99%................................ % $ %
13.00 to 13.99.................................
14.00 to 14.99.................................
15.00 to 15.99.................................
16.00 to 16.99.................................
17.00 to 17.99.................................
18.00 to 18.99.................................
19.00 to 19.99.................................
20.00 to 20.99.................................
21.00 to 21.99.................................
22.00 to 22.99.................................
23.00 to 23.99.................................
24.00 to 24.99.................................
25.00 to 25.99.................................
26.00 to 27.00.................................
----------- --- ----------- ---
Total........................................ % $ %
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
COMPOSITION [OF THE INITIAL AUTO LOANS] BY INTEREST ACCRUAL METHOD
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
------------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF PRINCIPAL PRINCIPAL
INTEREST ACCRUAL METHOD AUTO LOANS AUTO LOANS OUTSTANDING OUTSTANDING
- -------------------------------------------- ----------- ------------- ----------- -------------------
Actuarial................................... % $ %
Simple Interest.............................
----------- --- ----------- ---
Total..................................... % $ %
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
S-15
<PAGE>
COMPOSITION OF THE [INITIAL] AUTO LOANS] BY STATE OF RESIDENCE
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF AUTO PRINCIPAL PRINCIPAL
LOCATION OF MAILING ADDRESS OF BORROWER AUTO LOANS LOANS OUTSTANDING BALANCE
- ----------------------------------------------- ----------- ----------- ----------- ---------------
Alabama........................................ % $ %
Alaska.........................................
Arizona........................................
Arkansas.......................................
California.....................................
Colorado.......................................
Connecticut....................................
Delaware.......................................
District of Columbia...........................
Florida........................................
Georgia........................................
Hawaii.........................................
Idaho..........................................
Illinois.......................................
Indiana........................................
Iowa...........................................
Kansas.........................................
Kentucky.......................................
Louisiana......................................
Maine..........................................
Maryland.......................................
Massachusetts..................................
Michigan.......................................
Minnesota......................................
Mississippi....................................
Missouri.......................................
Montana........................................
Nebraska.......................................
Nevada.........................................
New Hampshire..................................
New Jersey.....................................
New Mexico.....................................
New York.......................................
North Carolina.................................
North Dakota...................................
Ohio...........................................
Oklahoma.......................................
Oregon.........................................
Pennsylvania...................................
Rhode Island...................................
South Carolina.................................
South Dakota...................................
Tennessee......................................
Texas..........................................
Utah...........................................
Vermont........................................
Virginia.......................................
Washington.....................................
West Virginia..................................
Wisconsin......................................
Wyoming........................................
----------- ----------- ----------- ------
Total...................................... % $ %
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
S-16
<PAGE>
COMPOSITION BY REMAINING TERM OF THE [INITIAL] AUTO LOANS
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF AUTO PRINCIPAL PRINCIPAL
REMAINING TERM RANGE (IN MONTHS) AUTO LOANS LOANS OUTSTANDING BALANCE
- ----------------------------------------------- ----------- ----------- ----------- ---------------
18 to 23....................................... % $ %
24 to 29.......................................
30 to 35.......................................
36 to 41.......................................
42 to 47.......................................
48 to 53.......................................
54 to 59.......................................
60 to 65.......................................
66 to 71.......................................
72.............................................
----------- ----------- ----------- ------
Total...................................... % $ %
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
COMPOSITION OF THE [INITIAL] AUTO LOANS BY TYPE OF FINANCED VEHICLE
<TABLE>
<CAPTION>
--------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF AUTO PRINCIPAL PRINCIPAL
TYPE OF FINANCING AUTO LOANS LOANS OUTSTANDING OUTSTANDING
- -------------------------------------------- ----------- ----------- ----------- -----------------
New......................................... % $ %
Used........................................
----------- ----------- ----------- ------
Total................................... % $ %
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
THE RESERVE ACCOUNT
An initial deposit of $ , which is [ ]% of the POOL BALANCE as of the
cut-off date, will be placed in 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 until the amount on deposit
in the reserve account equals the TARGETED RESERVE ACCOUNT BALANCE. Amounts in
the reserve account on any payment date, after giving effect to all withdrawals
from the reserve account in excess of the Targeted Reserve Account Balance that
payment date will be paid, first to the servicer for any servicing fees and
supplemental servicing fees then due, and any remainder to the seller.
Funds will be withdrawn from the reserve account on each payment date to pay any
servicing fee then payable to a servicer other than Household Finance
Corporation, and to make required distributions on the notes to the extent funds
are not otherwise available. 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 has a par value of $1.00 and is designated the Class SV
Preferred Stock. Issuance of the preferred stock to the trust is intended to
prevent the seller from instituting bankruptcy and will have no impact on the
bankruptcy remoteness of the trust. Under the Articles of Incorporation of the
seller, the rights of the holders of the preferred stock are limited to (a)
voting 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, and (b)
receiving $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
S-17
<PAGE>
preferred stock of the seller have no other rights, including the right to
receive dividends or to vote on any other matter.
Under the trust's pledge of its interest in the trust assets, the indenture
trustee has the exclusive authority to vote the interest of the trust in the
preferred stock. In the indenture, the indenture trustee covenants that it will
not consent to any of the seller's bankruptcy initiatives. 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 auto loans are prepayable at any time. If prepayments are received on
the auto loans, the actual weighted average life of the auto loans may be
shorter than the scheduled weighted average life, since the scheduled weighted
average life assumes that payments will be made as scheduled, and that no
prepayments occur. 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 an auto loan
is outstanding.
The rate of prepayments on the auto loans 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 the subservicer. The
subservicer believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled weighted average
life of the auto loans. If a note is purchased at a premium, and 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. If a note is purchased at a discount,
and 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 yield anticipated at the time of purchase. Any reinvestment risks, which is
the risk 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
note rate, resulting from a faster or slower incidence of prepayment of auto
loans will be borne by the noteholders.
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 auto loans.
As a result, final payment of each class of notes could occur significantly
earlier than the final scheduled payment date for the class.
Prepayments on auto loans can be measured relative to a prepayment standard or
model. The model used in this prospectus supplement, the absolute prepayment
model, or ABS, represents an assumed rate of prepayment each month relative to
the original number of auto loans in a pool. ABS further assumes that all the
auto loans are the same size and amortize at the same rate and that each auto
loan in each month of its life will either be paid as scheduled or be prepaid in
full. For example, in a pool of auto loans originally containing 10,000 auto
loans, a 1% ABS rate means that 100 auto loans 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 auto loans.
The table captioned "Percent of Initial Note Principal Balance at Various ABS
Percentages", also called the ABS Table, has been prepared on the basis of the
following assumptions:
- the auto loans prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases;
- each scheduled monthly payment on the auto loans is made on the last day
of each month and each month has 30 days;
- the initial principal amount of each class of notes are as stated on the
cover page;
- interest accrues during each interest period at the following assumed
coupon rates: Class A-1 Notes, %; Class A-2 Notes, %; Class A-3
Notes, %; and Class A-4 Notes, %;
S-18
<PAGE>
- payments on the notes are made on the th day of each month whether or not
a business day;
- the notes are purchased on the closing date;
- [the entire pre-funded amount is used to purchase subsequent auto loans;]
- the scheduled monthly payment for each auto loan has been calculated on
the basis of the assumed characteristics presented in the table below, and
each auto loan will amortize in amounts sufficient to repay the PRINCIPAL
BALANCE of the auto loans by its indicated remaining term to maturity; and
- the seller or the servicer exercises its clean-up call redemption.
The ABS Table also assumes that (1) the auto loans have been aggregated into
hypothetical pools with all of the auto loans within each pool having the
following characteristics, and (2) 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 calculated so that each pool will be
fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
REMAINING TERM
AGGREGATE TO MATURITY SEASONING
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- ----------------------------------- --------------------------- ----- -------------- -----------
1.................................. $%
2..................................
3..................................
4..................................
5..................................
</TABLE>
The ABS Table indicates, based on the assumptions described 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 the notes. The actual
characteristics and performance of the auto loans 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 auto loans will prepay at a constant level
of ABS until maturity or that all of the auto loans will prepay at the same
level of ABS. Moreover, the diverse terms of auto loans 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 auto loans are as assumed. Any difference between the
assumptions and the actual characteristics and performance of the auto loans,
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 notes.
S-19
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE
AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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%
- ---------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
Weighted Average Life in Years(2).......
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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%
- ---------------------------------------- ----- ----- ----- ----- ----- ----- ----- -----
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 (1) 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 payment date, (2) adding the results
and (3) dividing the sum by the initial principal amount of the notes of
that class.
S-20
<PAGE>
DELINQUENCY AND LOSS INFORMATION OF THE SUBSERVICER
Presented below is information concerning the subservicer's delinquency and loss
experience for its servicing portfolio of auto loans for new and used
automobiles, light duty trucks and vans originated or acquired under 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 the subservicer's portfolio or changes to its underwriting
or charge-off policies during the periods shown. In response to competitive and
market conditions, the subservicer's underwriting policies have changed in
various respects over the periods presented. The subservicer does not believe
these changes had a material impact on the historical delinquency and loss
experience presented below.
In the fourth quarter of 1997 the subservicer began charging off non-securitized
auto loans at the earlier of: (1) the date an auto loan becomes 150 days
delinquent and (2) 90 days after a vehicle has been repossessed if it remains
unsold. Prior to that change, and continuing for all auto loans securitized
prior to 1998, auto loans were charged off (1) at 120 days delinquent and (2) 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 years-ended 1997 and 1998 and for the months ended ,
1999. 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 auto loans serviced for each period would be higher than those
shown. The tables below present all auto loan data for contracts purchased by
the subservicer, including auto loans managed in states which are not
represented in the pool consisting of the auto loans. Following the merger in
which Household International, Inc. acquired ACC Consumer Finance Corporation,
the subservicer assumed management and servicing responsibilities for a
portfolio of auto loans purchased or acquired by another Household subsidiary.
None of the auto loans held by this entity are included in the auto loans or the
performance results presented in the following tables.
HISTORICAL DELINQUENCY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
[YEAR] [YEAR] [YEAR] [YEAR] [YEAR]
----------------- ----------------- ----------------- ----------------- -----------------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
-------- ------- -------- ------- -------- ------- -------- ------- -------- -------
Principal................
Outstanding..............
Delinquencies(1)(2)
31-60 Days...............
61-90 Days...............
Over 90 Days.............
Subtotal.................
Repossession on
hand(3)................
Total Delinquencies and
Repossession on hand...
<CAPTION>
<S> <C> <C>
MONTHS ENDED
[YEAR]
-----------------
DOLLARS PERCENT
-------- -------
Principal................
Outstanding..............
Delinquencies(1)(2)
31-60 Days...............
61-90 Days...............
Over 90 Days.............
Subtotal.................
Repossession on
hand(3)................
Total Delinquencies and
Repossession on hand...
</TABLE>
(1) The period of delinquency is based on the number of days payments are
contractually past due.
(2) Delinquencies include bankruptcies. Bankruptcies represent approximately
% of outstanding principal for each period presented.
(3) Amounts shown under "repossession on hand" represent the expected net
realizable value for repossessed vehicles that have not been sold.
S-21
<PAGE>
HISTORICAL NET LOSS EXPERIENCE
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-----------------------------------------------------
[YEAR] [YEAR] [YEAR] [YEAR] [YEAR] [YEAR]
--------- --------- --------- --------- --------- -----------
Principal outstanding............. $ $ $ $ $ $
Average principal amount
outstanding..................... $ $ $ $ $ $
Number of contracts outstanding...
Average number of contracts
outstanding.....................
Number of repossessions...........
Number of repossessions as a
percent of average number of
contracts outstanding,
annualized......................
Net losses(1)..................... $ $ $ $ $ $
Net losses as a percent of average
principal amount outstanding,
annualized......................
</TABLE>
(1) Net losses are net of recoveries and include 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.
The seller expects that the delinquency, loss and repossession experience for
the auto loans will be generally consistent with the information provided in the
above tables. However, as the subservicer's 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 and loss pattern. The amount
of these increases cannot be estimated. There is no assurance that delinquency,
credit loss and repossession experience for auto loans in the future, or the
experience of the trust, will be similar to that described 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.
[THE INSURER]
[The following information has been obtained from [Name of Insurer] and has not
been verified by the seller or the underwriters. No representations or warranty
is made by the seller or the underwriters with respect thereto.
GENERAL
[Name of Insurer] is a monoline insurance company incorporated in under the
laws of the State of . The insurer is licensed to engage in the financial
guaranty insurance business in [all 50 states, the District of Columbia and
Puerto Rico].
The insurer and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled payments of an issuer's
securities--thereby enhancing the credit rating of those securities--in
consideration for the payment of a premium to the insurer. The insurer and its
subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow
S-22
<PAGE>
or market value. Collateralized securities include public utility first mortgage
bonds and sale/leaseback obligation bonds. Municipal securities consist largely
of general obligation bonds, special revenue bonds and other special obligations
of state and local governments. The insurer insures both newly issued securities
sold in the primary market and outstanding securities sold in the secondary
market that satisfy the insurer's underwriting criteria.
The principal executive offices of the insurer are located at [address], and its
telephone number at that location is .
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by the insurer are generally
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, the insurer reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by the insurer as
a risk management device and to comply with certain statutory and rating agency
requirements; it does not alter or limit the insurer's obligations under any
financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
The insurer's insurance financial strength is rated " " by [Rating Agency]. The
insurer's financial strength is rated " " by [Rating Agency]. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies herein.
CAPITALIZATION
The following table sets forth the capitalization of the insurer and its
wholly-owned subsidiaries on the basis of generally accepted accounting
principles as of :
<TABLE>
<CAPTION>
-----------------
<S> <C>
[DATE]
-----------------
(UNAUDITED)
(IN THOUSANDS)
Deferred Premium Revenue (net of prepaid
reinsurance premiums)........................... $
Surplus Notes.....................................
Minority Interest.................................
Shareholder's Equity:
Common Stock....................................
Additional Paid-In Capital......................
Accumulated Other Comprehensive Income (net of
deferred income taxes)........................
Accumulated Earnings............................
Total Shareholder's Equity......................
Total Deferred Premium Revenue, Surplus Notes,
Minority Interest and Shareholder's Equity...... $
</TABLE>
For further information concerning the insurer, see the consolidated financial
statements of the insurer and subsidiaries, and the notes thereto, incorporated
by reference herein. The insurer's financial statements are included as exhibits
to the annual report on Form 10-K and quarterly reports on Form 10-Q filed with
the Securities and Exchange Commission by [Name of Insurer] and may be reviewed
at the EDGAR website maintained by the Securities and Exchange Commission.
Copies of the statutory quarterly and annual statements filed with the [State of
New York Insurance Department] by the insurer are available upon request to the
[State of New York Insurance Department].
S-23
<PAGE>
INSURANCE REGULATION
The insurer is licensed and subject to regulation as a financial guaranty
insurance corporation under the laws of the State of [New York], its state of
domicile. In addition, the insurer and its insurance subsidiaries are subject to
regulation by insurance laws of the various other jurisdictions in which they
are licensed to do business. As a financial guaranty insurance corporation
licensed to do business in the State of [New York], the insurer is subject to
[Article 69 of the New York Insurance Law] which, among other things, limits the
business of each such insurer to financial guaranty insurance and related lines,
requires that each such insurer maintain a minimum surplus to policyholders,
establishes contingency, loss and unearned premium reserve requirements for each
such insurer, and limits the size of individual transactions ("single risks")
and the volume of transactions ("aggregate risks") that may be underwritten by
each such insurer. Other provisions of the [New York Insurance Law], applicable
to non-life insurance companies such as the insurer, regulate, among other
things, permitted investments, payment of dividends, transactions with
affiliates, mergers, consolidations, acquisitions or sales of assets and
incurrence of liabilities for borrowings.]
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued according to the terms of the indenture. The base
indenture and a form of the series supplement to the base indenture
have been filed as exhibits to the registration statement of which this
prospectus supplement is a part. The base indenture as supplemented by the
series supplement is referred to as the "indenture". The following
summary describes terms of the notes and the indenture.
The notes will be issued only in fully registered form, in denominations of
$ and integral multiples of $ . The notes will be secured by
the trust assets pledged by the trust to the indenture trustee according to the
indenture. Replacement notes, if issued, will be transferable and exchangeable
at the corporate trust office of the indenture trustee. 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.
The payment date is the [17th] day of each month, or if that day is not a
BUSINESS DAY, the next succeeding BUSINESS DAY.
PAYMENTS OF INTEREST
Interest on each class of notes will be payable monthly on each payment date,
commencing on , in an amount equal to interest accrued during the
applicable interest period, as defined below, at the applicable note rate on the
outstanding principal balance for the applicable 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 rates for the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes will be %, %, %, and %,
respectively.
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 the payment date. Each of these
periods is an interest period. Interest 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 on the Class A-3 and Class
A-4 Notes will be calculated on the basis of a 360-day year consisting of twelve
30-day months. The amount of interest payable on the Class A-3 and Class A-4
Notes for the initial interest period will be computed on the basis of actual
number of days elapsed in the 30-day month. Interest for any payment date due
but not paid on the payment date shall bear interest, to the extent permitted by
applicable law, at the applicable 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 (1) and (2) 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 and Class A-4 Notes.
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PAYMENTS OF PRINCIPAL
On each payment date, principal payments will be due and payable on the notes in
an amount generally equal to the PRINCIPAL DISTRIBUTABLE AMOUNT for the payment
date to the extent of funds available therefor.
On each payment date the CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT will be used to
reduce the principal balance of the Class A-1 Notes until the Class A-1 Notes
have been paid in full. On each payment date after the payment date on which the
Class A-1 Notes have been paid in full, the CLASS A PRINCIPAL DISTRIBUTABLE
AMOUNT will be used to reduce the principal balance of the Class A-2 Notes until
the Class A-2 Notes have been paid in full. On each payment date after the
payment date on which the Class A-2 Notes have been paid in full, the CLASS A
PRINCIPAL DISTRIBUTABLE AMOUNT will be used to reduce the principal balance of
the Class A-3 Notes until the Class A-3 Notes have been paid in full. On each
payment date after the payment date on which the Class A-3 Notes have been paid
in full, the CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT will be used to reduce the
principal balance of the Class A-4 Notes until the Class A-4 Notes have been
paid in full. On a payment date on which the Class A-1, Class A-2, Class A-3 or
Class A-4 Notes are paid in full, the CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT may
also be allocable to payments of the class of Class A Notes next entitled to
distributions in respect of principal.
OVERCOLLATERALIZATION
The overcollateralization is the difference between the POOL BALANCE and the
AGGREGATE NOTE PRINCIPAL BALANCE. On the closing date, the overcollateralization
will be equal to $ or % of the POOL BALANCE as of the cut-off date.
The overcollateralization will be available to absorb losses that would
otherwise be allocated to noteholders.
PAYMENT PRIORITIES
On or prior to each payment date, the servicer will instruct the indenture
trustee to make the following distributions in the following order of priority:
(1) from the AVAILABLE FUNDS, to the servicer, any supplemental servicing
fees for the applicable COLLECTION PERIOD and if Household Finance
Corporation is no longer acting as servicer, the servicing fee for the
applicable COLLECTION PERIOD;
(2) from the AVAILABLE FUNDS, to the indenture trustee and the owner
trustee, any accrued and unpaid trustees' fees, but only to the extent
these fees have not been previously paid by the servicer;
(3) from the AVAILABLE FUNDS, to the holders of the Class A Notes, the CLASS
A INTEREST DISTRIBUTABLE AMOUNT;
(4) from the AVAILABLE FUNDS, the CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT
will be paid to the Class A-1, Class A-2, Class A-3 and Class A-4 Notes,
sequentially, beginning with the Class A-1 Notes, in each case, until the
respective outstanding principal amount of the Class A-1, Class A-2,
Class A-3 and Class A-4 Notes are paid in full;
(5) from the AVAILABLE FUNDS, to the reserve account, the RESERVE ACCOUNT
DEPOSIT AMOUNT, if necessary, required to increase the amount in the
reserve account to its then required level;
(6) from the AVAILABLE FUNDS, if Household Finance Corporation is acting as
the servicer, the servicing fee for the applicable COLLECTION PERIOD; and
(7) any remainder to the seller.
If the notes are accelerated following the occurrence of an event of default,
after payment of the amounts specified in items (1) and (2) above all AVAILABLE
FUNDS, all amounts on deposit in the reserve account and the proceeds of any
sale, liquidation or other disposition 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;
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second, to pay all amounts due and unpaid on the Class A Notes for
principal, ratably without preference or priority; and
third, to pay all remaining amounts to the seller.
[Amounts on deposit in the reserve account on any payment date, after giving
effect to all distributions made on the payment date and the related payment
date, in excess of the targeted reserve account balance for the payment date may
be released first, to the servicer to pay any servicing fees and supplemental
servicing fees that are due, and any remainder may be released to the seller.]
[Amounts available under the insurance policy are available to pay the note
principal only in two circumstances:
- to reduce, after taking into account all reductions funded from other
sources, the aggregate principal balance of the notes to the collateral
balance--i.e., the sum of the POOL BALANCE plus the pre-funded amount--in
the event that the note principal balance would otherwise exceed the
collateral balance; and
- to pay off each class's principal on its scheduled maturity date, to the
extent that the class is not paid off on or prior to the scheduled
maturity date from other sources.]
[MANDATORY REDEMPTION]
[If any portion of the pre-funded amount remains on deposit in the pre-funding
account at the end of the funding period, each class of notes will be redeemed
in part on the mandatory redemption date. Each class' note prepayment amount of
the remaining pre-funded amount on that date will be an amount equal to that
class' pro rata share, based on the respective current principal amount of each
class of notes. However, if the aggregate remaining amount in the pre-funding
account is $100,000 or less, that amount will be applied exclusively to reduce
the outstanding principal balance of the class of notes then entitled to receive
principal distributions.]
MATURITY DATES; OPTIONAL REDEMPTION
Each class of notes will mature on the earlier of the date the class of notes is
paid in full or the respective scheduled maturity date for the class. The Class
A-1 scheduled maturity date is , the Class A-2 scheduled maturity
date is , the Class A-3 scheduled maturity date is and the
Class A-4 scheduled maturity date is . The payment date occurring on
is also referred to as the final scheduled payment date. In the event
there are insufficient funds to retire any class of notes by its respective
scheduled maturity date in each case, subject to a five day grace period, an
event of default will occur. In addition, the trust will pay the notes in full
on the payment date following exercise by the seller or the servicer of the
option to purchase the auto loans from the trust. This will cause a redemption
of the notes. The option may be exercised on or after the payment date on which
the AGGREGATE NOTE PRINCIPAL BALANCE is reduced to an amount less than or equal
to $ , which is % of the original aggregate principal balance of the
notes. The redemption price will be equal to the sum of the AGGREGATE NOTE
PRINCIPAL BALANCE and accrued and unpaid interest through the day preceding the
call date.
REPORTS TO NOTEHOLDERS
With each distribution to the noteholders, the indenture trustee will prepare
and forward to each noteholder a statement, which will include the following
information for that payment date:
(1) the amount of the distribution allocable to interest on each class of
the notes;
(2) the amount of the distribution allocable to principal on each class of
the notes;
(3) the aggregate outstanding principal amount for each class of notes, in
each case, after giving effect to all payments reported under (2) above
for that payment date;
(4) the CLASS A INTEREST CARRYOVER SHORTFALL and the CLASS A PRINCIPAL
CARRYOVER SHORTFALL, if any, and the change in those amounts from the
preceding statement;
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(5) the amount of the servicing fee paid to the servicer for the prior
COLLECTION PERIOD; and
(6) the TARGETED RESERVE ACCOUNT BALANCE and the amount on deposit in the
reserve account at the end of the payment date.
The information furnished under (1) through (4) above will be expressed as a
dollar amount per $ in face amount of notes.
EVENTS OF DEFAULT; SERVICER TERMINATION
The notes are subject to certain events of default as described in the
prospectus under "The Trust Agreement-- Events of Defaults; Rights Upon Event of
Default." In addition, the servicer is subject to servicer termination events as
described in the prospectus supplement under "The Trust Agreements--Servicer
Termination Events."
[THE POLICY]
The following summary of the terms of the policy does not purport to be complete
and is qualified in its entirety by reference to the policy.
Simultaneously with the issuance of the notes, the insurer will deliver the
policy to the indenture trustee for the benefit of each noteholder. Under the
policy, the insurer will unconditionally and irrevocably guarantee to the
indenture trustee, on each distribution date, for the benefit of each noteholder
the full and complete payment of (i) SCHEDULED PAYMENTS (as defined below) on
the notes and (ii) the amount of any SCHEDULED PAYMENT which subsequently is
avoided in whole or in part as a preference payment under applicable law. In the
event the indenture trustee fails to make a claim under the policy, noteholders
do not have the right to make a claim directly under the policy, but may sue to
compel the indenture trustee to do so.
SCHEDULED PAYMENTS means payments which are required to be made on the notes
during the term of the policy in accordance with the original terms of the notes
when issued and without regard to any subsequent amendment or modification of
the notes or the indenture that has not been consented to by the insurer.
Payment of claims on the policy made in respect of SCHEDULED PAYMENTS will be
made by the insurer following RECEIPT (as defined below) by the insurer of the
appropriate notice for payment on the later to occur of (i) 12:00 noon, New York
City time, on the third BUSINESS DAY following RECEIPT of such notice for
payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the notes.
If payment of any amount avoided as a preference under applicable bankruptcy,
insolvency, receivership or similar law is required to be made under the policy,
the insurer shall cause such payment to be made on the later of (a) the date
when due to be paid pursuant to the ORDER referred to below or (b) the first to
occur of (i) the [fourth] BUSINESS DAY following RECEIPT by the insurer from the
indenture trustee of (A) a certified copy of the ORDER of the court or other
governmental body that exercised jurisdiction to the effect that the noteholder
is required to return SCHEDULED PAYMENTS made with respect to the notes during
the term of the policy because such payments were avoidable as preference
payments under applicable bankruptcy law, (B) a certificate of the noteholder
that the ORDER has been entered and is not subject to any stay and (C) an
assignment duly executed and delivered by the noteholder, in such form as is
reasonably required by the insurer and provided to the noteholder by the
insurer, irrevocably assigning to the insurer all rights and claims of the
noteholder relating to or arising under the notes against the trust or otherwise
with respect to such preference payment, or (ii) the date of RECEIPT (as defined
below) by the insurer from the indenture trustee of the items referred to in
clauses (A), (B) and (C) above if, at least four BUSINESS DAYS prior to such
date of RECEIPT, the insurer shall have RECEIVED (as defined below) written
notice from the indenture trustee that such items were to be delivered on such
date and such date was specified in such notice. Such payment shall be disbursed
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the ORDER and not to the indenture trustee or any noteholder directly
(unless a noteholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the ORDER,
in which case such payment shall be disbursed to the indenture trustee for
distribution to such noteholder upon proof of such payment reasonably
satisfactory to the insurer). In connection with the foregoing, the insurer
shall have the rights provided pursuant to
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the sale and servicing agreement, including, without limitation, the right to
direct all matters relating to any preference claim and subrogation to the
rights of the indenture trustee and each noteholder in the conduct of any
proceeding with respect to a preference claim.
OTHER PROVISIONS OF THE POLICY
The terms RECEIPT and RECEIVED with respect to the policy shall mean actual
delivery to the insurer and to its fiscal agent, if any, prior to 12:00 noon,
New York City time, on a BUSINESS DAY; delivery either on a day that is not a
BUSINESS DAY or after 12:00 noon, New York City time, shall be deemed to be
RECEIVED on the next succeeding BUSINESS DAY. If any notice or certificate given
under the policy by the indenture trustee is not in proper form or is not
properly completed, executed or delivered, it shall be deemed not to have been
RECEIVED, and the insurer or its fiscal agent shall promptly so advise the
indenture trustee, and the indenture trustee may submit an amended notice.
Under the Policy, BUSINESS DAY means any day other than a Saturday, Sunday,
legal holiday or other day on which commercial banking institutions in , , ,
and or any other location of any successor servicer, successor owner trustee
or successor indenture trustee are authorized or obligated by law, executive
order or governmental decree to be closed.
The insurer's obligations under the policy in respect of SCHEDULED PAYMENTS
shall be discharged to the extent funds are transferred to the indenture trustee
as provided in the policy whether or not such funds are properly applied by the
indenture trustee.
The insurer shall be subrogated to the rights of each noteholder to receive
payments of principal and interest to the extent of any payment by the insurer
under the policy.
Claims under the policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than PARI PASSU with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the policy and each other financial guaranty insurance
policy issued thereby constitute PARI PASSU claims against the general assets of
the insurer. The terms of the policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
trust. The policy may not be canceled or revoked prior to distribution in full
of all SCHEDULED PAYMENTS. [THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.]
The Policy is governed by the laws of the State of [New York].
It is a condition to issuance that the Class A-l Notes be rated by [Rating
Agency] and by [Rating Agency], and that the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes be rated by [Rating Agency] and by [Rating
Agency]. The ratings by the rating agencies of the notes will be (i) with
respect to the Class A-1 Notes, without regard to the policy in the case of S&P
[Rating Agency] and substantially based on the policy in the case of [Rating
Agency] and (ii) with respect to all other classes of notes, based on the
issuance of the policy. To the extent that such ratings are based on the policy,
such ratings apply to distributions due on the distribution dates, and not to
distributions due on the distribution dates. A rating is not a recommendation to
purchase, hold or sell notes. In the event that the rating initially assigned to
any of the notes is subsequently lowered or withdrawn for any reason, including
by reason of a downgrading of the claims-paying ability of the insurer, no
person or entity will be obligated to provide any additional credit enhancement
with respect to the notes. Any reduction or withdrawal of a rating may have an
adverse effect on the liquidity and market price of the notes.]
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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
notes. 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. Some 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 notes 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 notes.
TAX CHARACTERIZATION OF THE TRUST
Dewey Ballantine LLP is our tax counsel, and is of the opinion that, assuming
the parties will comply with the terms of the governing agreements, the trust
will not be an association, or publicly traded partnership, taxable as a
corporation for federal income tax purposes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The seller agrees, and the noteholders
will agree by their purchase of notes, to treat the 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 notes. In general, whether instruments such as the 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 under 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 and the courts have stated 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 the transfer is a borrowing secured by the
property.
On the basis of its analysis of the above factors as applied to the facts and
its analysis of the economic substance of the contemplated transaction, tax
counsel is of the opinion that, for federal income tax purposes, the notes will
be treated as indebtedness, and not as an ownership interest in the auto loans,
nor as an equity interest in the trust or in a separate association taxable as a
corporation or other taxable entity.
If the notes are characterized as indebtedness, interest paid or accrued on a
note will be treated as ordinary income to the noteholders and principal
payments on a note will be treated as a return of capital to the extent of the
noteholder's basis in the note allocable thereto. An accrual method taxpayer
will be required to include in income interest on the notes when earned, even if
not paid, unless it is determined to be uncollectible. The trust will report to
noteholders of record and the IRS regarding the interest paid and original issue
discount, if any, accrued on the notes to the extent required by law.
Although, as described above, it is the opinion of tax counsel that, for federal
income tax purposes, the notes will be characterized as debt, this opinion is
not binding on the IRS and thus no assurance can be given that this
characterization will prevail. If the IRS successfully asserted that one or more
of the 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 notes were held to constitute
partnership interests, rather than indebtedness. Since the seller and the trust
will treat the 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 notes.
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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 notes. See "TAXATION OF CERTAIN
FOREIGN INVESTORS" below.
ORIGINAL ISSUE DISCOUNT. It is anticipated that the notes will not have any
original issue discount or 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, 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 a note multiplied by its expected weighted average life.
MARKET DISCOUNT. A subsequent purchaser who buys a 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 a note disposes of the
note, including some nontaxable dispositions such as a gift, any gain upon the
sale or other disposition will be recognized as ordinary income to the extent of
any accrued for the period that the purchaser holds the note. Similarly, if a
subsequent purchase receives a principal payment, the amount of that principal
payment will be treated as ordinary income to the extent of any market discount
accrued for the period that the purchaser holds the note. The holder may instead
elect to include market discount in income as it accrues on all debt instruments
acquired in the year of acquisition of the notes and thereafter. Market discount
generally will equal the excess, if any, of the then current unpaid PRINCIPAL
BALANCE of the note over the purchaser's basis in the note offered immediately
after the purchaser acquired the note. In general, market discount on a note
will be treated as accruing over the term of the note in the ratio of interest
for the current period over the sum of the 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 a 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 a note at a market discount may be required to defer the
deduction of all or a portion of the interest on the indebtedness until the
corresponding amount of market discount is included in income.
However, market discount on a 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 notes and, when each
distribution is received, capital gain equal to the discount allocated to the
distribution will be recognized.
MARKET PREMIUM. A subsequent purchaser who buys a note for more than its
principal amount generally will be considered to have purchased the note at a
premium. The holder may amortize the premium, using a constant yield method,
over the remaining term of the note and, except as future regulations may
otherwise provide, may apply the amortized amounts to reduce the amount of
interest reportable for the note over the period from the purchase date to the
date of maturity of the note. The amortization of the premium on an obligation
that provides for partial principal payments prior to maturity should be
governed by the methods described above for accrual of market discount on such
an obligation. A holder that elects to amortize premium must reduce his tax
basis in the 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 NOTES. If a note is sold or retired, the seller will
recognize gain or loss equal to the difference between the amount realized on
the sale and the holder's adjusted basis in the note.The 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 a note, either
on the date on which the payment is scheduled to be made or as a prepayment,
will recognize gain equal to any excess, of the amount of the payment over his
adjusted
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basis in the note allocable thereto. A noteholder who receives a final payment
which is less than his adjusted basis in the note will generally recognize a
loss in the amount of the shortfall on the last day of his taxable year.
Generally, this gain or loss realized by an investor who holds a note as a
CAPITAL ASSET within the meaning of Internal Revenue 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 FOREIGN INVESTORS. Interest payments including OID, if any, on the
notes made to a FOREIGN PERSON, which is a nonresident alien individual, foreign
corporation or other non-United States person generally will be PORTFOLIO
INTEREST. This interest is not subject to United States tax if the payments are
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and if the trust or other person who would
otherwise be required to withhold tax from these payments is provided with an
appropriate statement that the beneficial owner of the 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 notes may be subject to the
BACKUP WITHHOLDING TAX under Section 3406 of the Internal Revenue Code at a rate
of 31% if recipients of the distributions fail to furnish to the payor their
taxpayer identification numbers and other required information, or otherwise
fail to establish an exemption from tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against the
recipient's federal income tax. Furthermore, 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 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 as to the various state and local tax
consequences of an investment in the notes.
ERISA CONSIDERATIONS
The notes may be purchased by ERISA plans as described in the prospectus under
"ERISA Considerations--ERISA Considerations regarding Securities which are the
Notes." The notes should be treated as indebtedness without substantial equity
features for purposes of the plan assets regulation. This determination is based
in part on the traditional debt features of the notes, including the reasonable
expectation of purchasers of 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 notes for ERISA purposes could change if the
trust incurred losses. As described in the prospectus, the acquisition or
holding of the notes by or on behalf of an employee benefit plan could still
result in a prohibited transaction if the acquisition or holding of the notes by
or on behalf of the plan were deemed to be a prohibited loan to a party in
interest with respect to the plan. Accordingly, each purchaser and each
transferee using the assets of a plan subject to ERISA or Section 4975 of the
Internal Revenue Code to acquire the notes will be deemed to have represented
that the acquisition and continued holding of the notes will be covered by a
Department of Labor class exemption.
Any plan fiduciary considering the purchase of a note may wish to consult with
its counsel as to the potential applicability of ERISA and the Internal Revenue
Code to the investment. Moreover, each plan fiduciary may wish to determine
whether, under the general fiduciary standards of investment prudence and
diversification, an investment in the notes is appropriate for the plan, taking
into account the overall investment policy of the benefit plan and the
composition of the plan's investment portfolio.
The sale of notes to a plan is in no respect a representation by us or the
underwriters that this investment meets all relevant legal requirements for
investments by plans generally or any particular plan or that this investment is
appropriate for plans generally or any particular plan.
S-31
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement dated
among the seller, Household Finance Corporation and the underwriters
named below, the seller has agreed to sell to the underwriters and each of the
underwriters has agreed to purchase, the principal amount of the notes stated
opposite its name below.
<TABLE>
<CAPTION>
------------------------------------------
<S> <C> <C> <C> <C>
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
- ----------------------------------------------------- --------- --------- --------- ---------
[List of Underwriters]...............................
</TABLE>
The underwriters propose to offer the notes in part directly to purchasers at
the initial public offering prices stated on the cover page of this prospectus
and in part to securities dealers at prices less concessions not to exceed %,
%, % and % of the respective principal balance of the Class A-1, Class A-2,
Class A-3 and Class A-4 Notes. The underwriters may allow, and the dealers may
reallow, concessions not to exceed % of the respective principal balance of
each class of the notes to brokers and dealers.
The seller and Household Finance Corporation have agreed to indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933, as amended.
In connection with this offering the underwriters may over-allot or effect
transactions which stabilize or maintain the market prices of the notes at
levels above those which might otherwise prevail in the open market. This
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
Some 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 the servicer, the
subservicer and the seller, and by Dewey Ballantine LLP, New York, New York,
special counsel to the seller. Some legal matters will also be passed upon for
the underwriters by Dewey Ballantine LLP. As of the date of this prospectus
supplement, 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.
S-32
<PAGE>
GLOSSARY
ADDITIONAL CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT means, for any payment date,
the excess of (1) the aggregate of the PRINCIPAL BALANCE of all auto loans which
became LIQUIDATED AUTO LOANs during the immediately preceding COLLECTION PERIOD
over (2) the sum of (x) the aggregate amount of NET LIQUIDATION PROCEEDS
received by the trustee during the immediately preceding COLLECTION PERIOD and
(y) EXCESS INTEREST for that payment date. The ADDITIONAL CLASS A PRINCIPAL
DISTRIBUTABLE AMOUNT shall in no event be less than zero.
AGGREGATE NOTE PRINCIPAL BALANCE means, as of any date, the aggregate
outstanding principal amount of all the notes on that date.
AGGREGATE OPTIMAL NOTE PRINCIPAL BALANCE means, for 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 that payment date.
AMOUNT FINANCED means, for an auto loan, the aggregate amount advanced under the
auto loan toward the financed vehicle's purchase price and related costs,
including amounts advanced for 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, for any COLLECTION PERIOD, the sum of (1) the COLLECTED
FUNDS for that COLLECTION PERIOD, (2) all purchase amounts deposited in the
collection account during that COLLECTION PERIOD, (3) income on investments held
in the collection account, (4) the proceeds of any liquidation of the assets of
the trust, (5) the lesser of (a) the excess of the aggregate amount determined
under items (1)-(4) of "Payment Priorities" as stated beginning on page S-32,
over the amount on deposit in the collection account and (b) the reserve account
balance; provided that for any payment date on which amounts are payable on the
Class A-1 Notes under clause (2) of the definition of CLASS A PRINCIPAL
DISTRIBUTABLE AMOUNT, or clause (3) of that definition to the extent the amount
represents amounts not paid under clause (2) on a prior payment date, AVAILABLE
FUNDS shall not include amounts withdrawn from the reserve account necessary to
make that payment to the extent the withdrawal would result in the reserve
account balance being less than $ .
CLASS A INTEREST CARRYOVER SHORTFALL means, for any payment date and each class
of Class A Notes, the sum of: (1) excess of (a) the applicable CLASS A INTEREST
DISTRIBUTABLE AMOUNT for the preceding payment date, over (b) the amount
actually paid as interest to the noteholders on the preceding payment date, PLUS
(2) interest on that excess, to the extent permitted by law, at a rate per annum
equal to the applicable class A note rate from the preceding payment date to but
excluding the current payment date.
CLASS A INTEREST DISTRIBUTABLE AMOUNT means, for any payment date and each class
of Class A Notes, an amount equal to the sum of: (1) the aggregate amount of
interest accrued on the Class A Notes at the applicable 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 (2) the applicable CLASS A INTEREST CARRYOVER SHORTFALL for the
current payment date.
CLASS A MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT means, (1) for 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, (2) for the
payment date on which the principal balance of the Class A-1 Notes is reduced to
zero, the sum of (x) 100% of the PRINCIPAL DISTRIBUTABLE AMOUNT for that portion
of the PRINCIPAL DISTRIBUTABLE AMOUNT required to reduce the principal balance
of the Class A-1 Notes to zero, plus (y) the excess of the amount described in
clause (3) of this definition for that payment date over the amount described in
clause (2) (taking into account payment of the principal balance of the Class
A-1 Notes on that payment date), (3) for any payment date 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 aggregate outstanding principal balance of the Class A
Notes over (y)(A) the outstanding POOL BALANCE as of the end of the prior
COLLECTION PERIOD minus (B) the TARGETED OVERCOLLATERALIZATION AMOUNT for that
payment date.
S-33
<PAGE>
CLASS A PRINCIPAL CARRYOVER SHORTFALL means, for any payment date after the
payment date on which the PRINCIPAL BALANCE of the Class A-1 Notes is reduced to
zero, 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 the preceding payment date.
CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT means, for any payment date, the sum of:
(1) the CLASS A MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT for the payment date, (2)
the ADDITIONAL CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT, if any, for the payment
date, and (3) the CLASS A PRINCIPAL CARRYOVER SHORTFALL for the payment date;
HOWEVER, (1) the sum of clauses (1), (2) and (3) shall not exceed the
outstanding principal amount of the Class A Notes, and (2) 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 prior payment
date) to reduce the outstanding principal amount of the Class A Notes to zero.
COLLECTED FUNDS means, for any COLLECTION PERIOD, the amount of funds in the
collection account representing collections (excluding amounts representing
administrative charges, annual fees, taxes, assessments, credit insurance
charges or similar items) on the auto loans during the COLLECTION PERIOD,
including all NET LIQUIDATION PROCEEDS collected during the COLLECTION PERIOD
(but excluding any purchase amounts).
COLLECTION PERIOD means, for any payment date other than the first payment date,
the calendar month preceding the month in which the payment date occurs, and in
the case of the first payment date, the period from the cut-off date through
.
CRAM DOWN LOSS means, with respect to an auto loan, if a court of appropriate
jurisdiction in an insolvency proceeding issues a final order reducing the
amount owed on the auto loan or otherwise modifying or restructuring the
scheduled payments to be made on the auto loan, an amount equal to (1) the
excess of the PRINCIPAL BALANCE of the auto loan immediately prior to the order
over the PRINCIPAL BALANCE of the auto loan as reduced and/or (2) if the court
issues an order reducing the effective rate of interest on the auto loan, the
excess of the PRINCIPAL BALANCE of the auto loan immediately prior to the order
over the net present value--using as the discount rate the higher of the APR on
the auto loan or the rate of interest, if any, specified by the court in the
order--of the scheduled payments as so modified or restructured. A CRAM DOWN
LOSS shall be deemed to have occurred on the date of the order's issuance.
DETERMINATION DATE means, with respect to any payment date, the earlier of the
fifth calendar day or the third BUSINESS DAY prior to the payment date.
EXCESS INTEREST means, for a payment date, the excess of (1) interest
collections on the auto loans during the preceding COLLECTION PERIOD over (2)
amounts payable on the payment date under clauses (1) through (3) of "Payment
Priorities".
LIQUIDATED AUTO LOAN MEANS an auto loan which (1) 90 days have elapsed since the
financed vehicle was repossessed, (2) the servicer has determined in good faith
that all amounts it expects to recover have been received, (3) ten 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 (4) the financed vehicle has been sold and the proceeds
received.
MAXIMUM RESERVE ACCOUNT DEPOSIT AMOUNT means, for any payment date, an amount
equal to that portion of COLLECTED FUNDS representing interest collections on
the auto loans and NET LIQUIDATION PROCEEDS for the applicable COLLECTION PERIOD
less the sum of: the servicing fee paid to any servicer other than Household
Finance Corporation, the fees due to the trustee, and owner trustee, to the
extent not paid by the servicer, the CLASS A INTEREST DISTRIBUTABLE AMOUNT, the
aggregate PRINCIPAL BALANCES of all auto loans which became LIQUIDATED AUTO
LOANs during the COLLECTION PERIOD, plus the aggregate amount of CRAM DOWN
LOSSES during the COLLECTION PERIOD.
NET LIQUIDATION PROCEEDS means, with respect to LIQUIDATED AUTO LOANs, (1)
proceeds from the disposition of the underlying financed vehicle securing the
LIQUIDATED AUTO LOANs, minus the servicer's reasonable out-of-pocket costs,
including repossession and resale expenses not already deducted from the
proceeds, and any amounts required by law
S-34
<PAGE>
to be remitted to the borrower, (2) any insurance proceeds, or (3) other monies
received from the borrower or otherwise.
POOL BALANCE means, as of any date of determination, the aggregate PRINCIPAL
BALANCES of the auto loans, unless otherwise specified, as of the close of
business on the preceding business day.
PRINCIPAL AMOUNT AVAILABLE means, for any payment date, the amount remaining in
the collection account after the payment of the amounts listed in (1) through
(3) of "Payment Priorities", MINUS the RESERVE ACCOUNT DEPOSIT AMOUNT for the
payment date.
PRINCIPAL BALANCE means, with respect to any auto loan, as of any date, the
AMOUNT FINANCED minus (a) that portion of all amounts received on or prior to
the date and allocable to principal in accordance with the terms of the auto
loan, and (b) any CRAM DOWN LOSS in respect of the auto loan. The PRINCIPAL
BALANCE of a LIQUIDATED AUTO LOAN or a purchased receivable shall be zero.
PRINCIPAL DISTRIBUTABLE AMOUNT means, for any payment date, the lesser of (A)
the PRINCIPAL AMOUNT AVAILABLE and (B) the excess, if any, of (1) the AGGREGATE
NOTE PRINCIPAL BALANCE immediately prior to the payment date over (2) the
AGGREGATE OPTIMAL NOTE PRINCIPAL BALANCE for the payment date.
RESERVE ACCOUNT DEPOSIT AMOUNT means, for any payment date, the lesser of: (x)
the MAXIMUM RESERVE ACCOUNT DEPOSIT AMOUNT for that payment date and (y) the
RESERVE ACCOUNT SHORTFALL AMOUNT for that payment date.
RESERVE ACCOUNT SHORTFALL AMOUNT means, for any payment date, the excess of: (x)
the TARGETED RESERVE ACCOUNT BALANCE for that payment date and (y) the amount on
deposit in the reserve account as of the beginning of that payment date.
TARGETED CREDIT ENHANCEMENT AMOUNT means, for any payment date, % of the
outstanding POOL BALANCE as of the end of the applicable COLLECTION PERIOD.
TARGETED OVERCOLLATERALIZATION AMOUNT means, for any payment date, the excess
(but not less than zero), if any, of: (1) the TARGETED CREDIT ENHANCEMENT AMOUNT
over (2) the TARGETED RESERVE ACCOUNT BALANCE.
TARGETED RESERVE ACCOUNT BALANCE means, for any payment date, the lesser of: (1)
the greater of (a) % of the outstanding POOL BALANCE as of the end of the
applicable COLLECTION PERIOD, and (b) $ ( % of the POOL BALANCE as of
the cut-off date) and (2) the AGGREGATE NOTE PRINCIPAL BALANCE.
S-35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Household Automotive Trust
We have audited the accompanying balance sheet of Household Automotive Trust as
of . This financial statement is the responsibility of the trust's
management. Our responsibility is to express an opinion on the balance sheet
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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Household Automotive Trust as of
, in conformity with generally accepted accounting principles.
[Accountant]
F-1
<PAGE>
HOUSEHOLD AUTOMOTIVE TRUST
BALANCE SHEET
<TABLE>
<CAPTION>
---------
<S> <C>
ASSETS
Cash............................................................................... $
---------
Total assets....................................................................... $
---------
---------
LIABILITIES AND TRUST PRINCIPAL
Interest in the trust.............................................................. $
---------
Total liabilities and trust principal.............................................. $
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
HOUSEHOLD AUTOMOTIVE TRUST
NOTES TO FINANCIAL STATEMENT
1. NATURE OF OPERATIONS:
Household Automotive Trust , was formed in the State of Delaware on
[ ], . The trust has been inactive since that date.
The trust was organized to engage exclusively in the following business and
financial activities: to acquire motor vehicle retail installment sale contracts
from Household Auto Receivables Corporation; to issue and sell notes
collateralized by its assets; and to engage in any lawful act or activity and to
exercise any power that is incidental and is necessary or convenient to the
foregoing.
2. CAPITAL CONTRIBUTION:
Household Auto Receivables Corporation purchased, for $ , a 100% beneficial
ownership interest in the trust.
F-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOUSEHOLD AUTOMOTIVE
TRUST
SERIES
HOUSEHOLD
FINANCE
CORPORATION,
SERVICER
[UNDERWRITERS]
UNTIL ALL DEALERS THAT EFFECT TRANSACTIONS IN THE NOTES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS AND
A PROSPECTUS SUPPLEMENT. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS AND A PROSPECTUS SUPPLEMENT WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1999)
HOUSEHOLD AUTOMOTIVE TRUST
SERIES CERTIFICATES
HOUSEHOLD AUTO RECEIVABLES CORPORATION, SELLER
HOUSEHOLD FINANCE CORPORATION, SERVICER
------------------
THE TRUST WILL ISSUE-
- Two classes of certificates, which are offered by this prospectus
supplement; and
- Additional interests in the trust which are to be held by the seller are not
offered by this prospectus supplement but serve as credit support to the
certificates offered by this prospectus supplement.
THE CERTIFICATES-
- Represent beneficial ownership interests in the assets of the trust. The
assets of the trust securing the certificates will include a pool of
non-prime auto loans secured by new and used automobiles, light trucks and
vans;
- Receive monthly distributions on the [17th] day of each month beginning on
; and
- Currently have no trading market.
CREDIT ENHANCEMENT-
- For the Class A Certificates, the overcollateralization, the reserve account
and the Class B Certificates;
- For the Class B Certificates, the overcollateralization and the reserve
account; and
- [For the Class A Certificates [and the Class B Certificates] a financial
guarantee insurance policy issued by [Name of Insurer] unconditionally or
irrevocably guaranteeing timely payment of interest and principal.]
- --------------------------------------------------------------------------------
WE SUGGEST THAT YOU READ THE SECTION ENTITLED "RISK FACTORS" ON PAGE 4 OF THE
PROSPECTUS AND ON PAGE S-10 OF THIS PROSPECTUS SUPPLEMENT AND CONSIDER THESE
FACTORS BEFORE MAKING A DECISION TO INVEST IN THESE CERTIFICATES.
These certificates are auto loan asset-backed certificates which represent
beneficial ownership interests in the trust. The certificates are not interests
in or obligations of any other person or entity.
Neither these certificates nor the auto loans will be insured or guaranteed by
any governmental agency or instrumentality.
Retain this prospectus supplement for future reference. This prospectus
supplement may not be used to consummate sales of certificates unless
accompanied by the prospectus relating to the offering of these certificates.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<CAPTION>
INITIAL
FINAL PUBLIC PROCEEDS
ISSUANCE INTEREST SCHEDULED OFFERING UNDERWRITING TO
AMOUNT RATE PAYMENT DATE PRICE(1) DISCOUNT SELLER(2)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Class A
Certificates
- -------------------------------------------------------------------------------------------
Class B
Certificates
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from .
(2) Before expenses, estimated to be .
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITERS]
The date of this Prospectus Supplement is
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of information with the Securities
and Exchange Commission, including annual, quarterly and special reports, proxy
statements and other information. You can read and copy these documents at the
public reference facility maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, NW, Room 1024, Washington, DC 20549. You can also copy and inspect these
reports, proxy statements and other information at the following regional
offices of the SEC:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, New York 10048 Chicago, Illinois 60661
</TABLE>
All reports we file with the SEC after the date of this prospectus supplement
but before the offering of the certificates ends are considered to be part of
this prospectus supplement. Information contained in those reports updates and
supercedes the information in this prospectus supplement. We will provide you
with copies of these reports, at no cost, if you write to: Household Finance
Corporation, 2700 Sanders Road, Prospect Heights, Illinois 60070, Attention:
Secretary.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. SEC filings are also available to the public on the SEC's web
site at http://www.sec.gov.
[The consolidated financial statements of [Name of Insurer] are included in, or
are exhibits to, the following documents which have been filed with the SEC:
(a) Annual Report on Form 10-K for the year ended , and
(b) Quarterly Report on Form 10-Q for the period ended .
We will provide you with copies of these financial statements, at no cost, if
you write us at: Household Financial Corporation, 2700 Sanders Road, Prospect
Heights, Illinois 60070, Attention: Secretary.]
This prospectus supplement supplements a prospectus that is part of a
registration statement filed by the seller with the SEC (Registration No.
333- ).
You should rely only on the information provided in this prospectus supplement
and the accompanying prospectus. We have not authorized anyone else to provide
you with different information. You should not assume that the information in
this prospectus supplement or in the prospectus is accurate as of any date other
than the date on the cover page of this prospectus supplement.
You can find definitions of the technical cashflow terms used in this prospectus
supplement in the Glossary beginning on page S-43 in this prospectus supplement.
We include cross-references in this prospectus supplement to captions in these
materials where you can find further discussions. The following table of
contents provides the pages on which these captions are located.
In this prospectus, the terms "we", "us" and "our" refer to Household Auto
Receivables Corporation.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where You Can Find More Information... S-2
Summary............................... S-4
Risk Factors.......................... S-8
Use of Proceeds....................... S-10
The Trust............................. S-10
The Trustee........................... S-10
The Trust Assets...................... S-10
Yield and Prepayment Considerations... S-17
[The Insurer]......................... S-19
Description of the Certificates....... S-22
Credit Enhancement.................... S-25
Material Federal Income Tax
Consequences........................ S-27
ERISA Considerations.................. S-31
Underwriting.......................... S-32
Legal Matters......................... S-32
Glossary.............................. S-33
</TABLE>
S-3
<PAGE>
SUMMARY
- - This summary highlights select information from this prospectus supplement and
does not contain all of the information that you need to consider in making
your investment decision. This summary provides general, simplified
descriptions of matters which, in some cases, are highly technical and
complex. To understand all of the terms of the offering of the certificates,
carefully read both this entire prospectus supplement and the attached
prospectus each in its entirety.
- - This summary provides an overview of calculations, cash flows and other
information to aid your understanding. To understand all of the terms of the
offering, we suggest that you carefully read this entire document and, in
particular, the full description of these calculations, cash flows and other
information in this prospectus supplement.
SERIES CERTIFICATES
The trust will issue the certificates offered by this prospectus supplement in
book-entry form through the facilities of the Depository Trust Company.
TRUST
Household Automotive Trust . The trust will be a New York common law trust. The
address of the trust is in care of [Name of Trustee] at [address].
SELLER
Household Auto Receivables Corporation. The seller has purchased the auto loans
from Household Automotive Finance Corporation and will sell them to the trust.
The seller will also own interests in the trust. The address of the seller is
1111 Town Center Drive, Las Vegas, Nevada 89134.
SERVICER
Household Finance Corporation. The servicer is responsible for servicing the
auto loans and has subcontracted with the subservicer to perform the servicing
responsibilities. The address of the servicer is 2700 Sanders Road, Prospect
Heights, Illinois 60070.
SUBSERVICER
Household Automotive Finance Corporation. The auto loans were originated by
automobile dealers that have no affiliation with the subservicer and were
purchased by the subservicer under its various financing programs. The
subservicer will service the auto loans in accordance with policies established
in consultation with the servicer. The address of the subservicer is 11452 El
Camino Real, San Diego, California 92130.
INSURER
[Name of Insurer], a [New York] financial guaranty insurance company.
TRUSTEE
[Name of Trustee]. The address of the trustee is [address].
THE TRUST ASSETS
The trust's assets will include a pool of auto loans, cash on deposit in a
collection account and other assets as described in detail elsewhere in this
prospectus supplement.
AUTO LOANS
- - On the closing date, the seller will assign to the trust a pool of auto loans.
- - [On or before , the seller will assign additional auto loans to the
trust. The trust will purchase these auto loans with monies in the pre-funding
account.]
- - The trust will hold the auto loans as collateral for the certificates.
- - As of the aggregate PRINCIPAL BALANCE of the pool of auto loans
pledged as collateral was $ .
- -As of :
The weighted average contract rate of the auto loans is approximately %;
S-4
<PAGE>
The weighted average remaining term of the auto loans, that is the period
starting after the cut-off date and including each auto loan's scheduled
maturity, is approximately months; and
The weighted average original term of the auto loans is approximately months.
- The auto loans will consist of non-prime retail installment sales
contracts secured by new and used automobiles, light duty trucks and vans
which were purchased from automobile dealers under the subservicer's
financing program. The subservicers finance programs target automobile
purchasers with below average credit who have difficulty obtaining credit
from traditional lending sources.
- No auto loans will be more than [30] days delinquent as of .
- Each auto loan requires the borrower to make fixed, level payments that
will fully pay the balance of the amount borrowed by its maturity date.
- We will pay the certificates from payments on the auto loans and amounts
recovered when financed vehicles are repossessed and sold, after deducting
expenses.
CUT-OFF DATE
The opening of business on .
PAYMENT DATE
The [17th] day of each month if the [seventeenth] is a business day. If the
[seventeenth] is not a business day, the payment date will be the following day
that is a business day. The first payment date will be .
DETERMINATION DATE
The earliest of the fifth calendar day or the third business day before a
payment date. The servicer will calculate and instruct the trust and the trustee
as to the amounts to be paid on the certificates on the next payment date.
RECORD DATE
The last business day preceding a payment date unless the certificates are no
longer book-entry certificates. If the certificates are definitive certificates,
the record date is the last business day of the month preceding a payment date.
CLOSING DATE
On or about .
DENOMINATIONS
The trust will issue the certificates in minimum denominations of $100,000 and
integral multiples of $1,000. One certificate may be issued in another
denomination.
DISTRIBUTIONS
Each month, the trust will distribute the amounts received on the auto loans and
any other collections available as property of the trust as follows:
INTEREST DISTRIBUTIONS
On each payment date, interest that accrued during the interest accrual period
is payable at the applicable certificate pass-through rate. The pass-through
rate for the certificates is listed on the cover page of this prospectus
supplement. Interest on the certificates will be calculated on the basis of a
360-day year consisting of twelve thirty day months.
Amounts paid to holders of the certificates will be shared in proportion to
their interest in the trust.
PRINCIPAL DISTRIBUTIONS
On each payment date, the trust will pay principal in reduction of the
outstanding principal balance of the certificates.
Principal payments will be an amount generally equal to a percentage of the
decrease in the PRINCIPAL BALANCE of the auto loan pool during the prior
calendar month. These principal payments will be allocable between the Class A
Certificates and the Class B Certificates PRO RATA, and paid to the individual
Certificateholder in proportion to their percentage interest, until the
outstanding principal amount of that class is paid in full.
S-5
<PAGE>
PRIORITY OF DISTRIBUTIONS
On each payment date the AVAILABLE FUNDS will be paid out in the following order
of priority:
<TABLE>
<S> <C>
FIRST, if someone other than Household
Finance Corporation is the
servicer, the servicing fee;
SECOND, the trustee's fee, to the extent
not paid by the servicer;
THIRD, Class A Certificate interest;
FOURTH, Class A Certificate principal;
FIFTH, Class B Certificate interest;
SIXTH, Class B Certificate principal
SEVENTH, to fund the reserve account;
EIGHTH, if Household Finance Corporation is
the servicer, the servicing fee;
and
NINTH, to the seller.
</TABLE>
SUBORDINATION OF CLASS B CERTIFICATES
The Class B Certificates are subordinate to the Class A Certificates. On each
payment date the Class A Certificateholders will be entitled to receive the full
amount of the interest and principal due to them before any interest or
principal payments will be made to the Class B Certificateholders.
OVERCOLLATERALIZATION
The overcollateralization amount is the amount by which the POOL BALANCE exceeds
the outstanding principal balance of the certificates. The overcollateralization
amount will be available to absorb any losses that certificateholders would
otherwise incur. As of the closing date, the overcollateralization will be equal
to $ or of the POOL BALANCE as of .
RESERVE ACCOUNT
The [trustee] will hold a reserve account. We will use funds in the reserve
account to pay shortfalls in amounts due to the certificateholders of both
classes.
An initial deposit of $ will be placed in the reserve account on the
closing date. The servicer will deposit collections received from the auto loans
into the reserve account on each payment date after interest and principal
payments on the certificates and payment of certain fees and expenses have been
made.
The servicer will continue to make such deposits on each payment date until the
balance in the reserve account is the lesser of:
(i) greater of
(a) % of the PRINCIPAL BALANCE of the auto loans at the end of last day
of the calendar month preceding the current payment date,
and
(b) $ ,
and
(ii) the outstanding principal amount of the certificates.
We will use funds in the reserve account to pay shortfalls in amounts due to the
certificateholders and if Household Finance Corporation is no longer the
servicer, to pay any fees due to the servicer.
[PRE-FUNDING FEATURE]
- - [The trustee will hold $ of the proceeds of the certificates in a
pre-funding account which the trust will use to purchase additional auto loans
from the seller. The subservicer will acquire these additional auto loans
under the same purchase criteria as the auto loans in the trust on the closing
date.
- - The trust will purchase these additional auto loans on or before .]
OPTIONAL REDEMPTION
On any payment date when the outstanding principal balance of the auto loans is
less than or equal to $ , which is 10% of the original principal
balance of the auto loans as of , the servicer or the seller may purchase
the auto loans from the trust under a clean-up call. This will redeem the
certificates. If redemption occurs, we will pay you a final distribution
equaling the entire unpaid principal balance of the certificates plus any
accrued and unpaid interest.
S-6
<PAGE>
SCHEDULED MATURITY DATES
If the certificates have not already been paid in full, we will pay the
outstanding principal amount of the certificates in full on the following
payment dates:
Class A:
Class B:
Final payment on the certificates will probably be earlier than the scheduled
maturity date stated above.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
In the opinion of Dewey Ballantine LLP, the trust will be treated as a grantor
trust for federal income tax purposes and will not be subject to federal income
tax. Owners of beneficial interests in the certificates will report their pro
rata share of all income earned on the auto loans, other than amounts if any,
treated as STRIPPED COUPONS. Subject to certain limitations, such owners who are
individuals, trusts or estates, may deduct their pro rata share of reasonable
servicing and other fees.
ERISA CONSIDERATIONS
Subject to the important considerations described under "ERISA Considerations"
in this prospectus supplement, pension, profit-sharing and other employee
benefit plans may purchase the Class A Certificates. The Class B Certificates
are not eligible for purchase by ERISA plans. You should consult with your
counsel regarding the applicability of the particular provisions of ERISA,
before purchasing a Class A Certificate.
RATINGS
- - The trust will not issue the certificates unless they have been assigned the
ratings stated below:
<TABLE>
<CAPTION>
------------------------
<S> <C> <C>
RATING
------------------------
[AGENCY1] [AGENCY2]
----------- -----------
Class A Certificates....
Class B Certificates....
</TABLE>
- - You should know that the ratings could be lowered, qualified or withdrawn by
the rating agencies.
S-7
<PAGE>
RISK FACTORS
WE RECOMMEND YOU CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS BEFORE DECIDING TO INVEST IN THE CERTIFICATES OFFERED BY THIS PROSPECTUS
SUPPLEMENT.
GEOGRAPHIC CONCENTRATION OF AUTO LOANS MAY ADVERSELY AFFECT THE CERTIFICATES.
Adverse economic conditions or other factors particularly affecting any state or
region where a high concentration of auto loans is located could adversely
affect the certificates. As of , approximately % and % of
the auto loans (based on the PRINCIPAL BALANCE and mailing address of the
borrowers) were located in and , respectively. The
location of the auto loans by state, based upon borrower address, is set out in
the table beginning on page S-19 of this prospectus supplement.
THE CLASS B CERTIFICATES ARE SUBORDINATED CERTIFICATES, AND THE RISK OF LOSS OR
DELAY IN DISTRIBUTIONS IS GREATER THAN ON THE CLASS A CERTIFICATES.
Distributions of interest and principal on the Class B Certificates will be
subordinated in priority of payment to interest and principal due on the Class A
Certificates. Consequently, the Class B Certificateholders will not receive any
distributions on a payment date unless the full amount of interest and principal
due on the Class A Certificates on that payment date has been distributed to the
Class A Certificateholders. This subordination has the effect of increasing the
likelihood of payment on the Class A Certificates and therefore decreasing the
likelihood of payment on the Class B Certificates.
[THE SUBSERVICER MAY BE UNABLE TO ORIGINATE ENOUGH AUTO LOANS TO USE ALL MONEYS
IN THE PRE-FUNDING ACCOUNT AND THEREFORE YOU MAY BE EXPOSED TO REINVESTMENT
RISK].
[The ability of the subservicer to originate sufficient additional auto loans
may be affected by a variety of social and economic factors including:
- interest rates,
- unemployment levels,
- the rate of inflation, and
- consumer perception of economic conditions generally.
If the subservicer does not originate sufficient additional auto loans, the
money remaining in the pre-funding account as of will not be used to
acquire additional loans and a mandatory redemption of a portion of the
certificates could result.
If a mandatory redemption occurs then you will receive a principal prepayment.
You will bear the risk of reinvesting any prepayment.]
[RATINGS ON CERTIFICATES ARE DEPENDENT UPON THE INSURER'S CREDITWORTHINESS.]
[The ratings of the certificates will depend primarily on the creditworthiness
of the insurer as the provider of the financial guarantee insurance policy
relating to the certificates. There is a risk that if the insurer's financial
strength ratings are reduced, the rating agencies may reduce the certificates'
ratings.]
S-8
<PAGE>
YEAR 2000 COMPLIANCE MAY CAUSE DELAYS IN PAYMENTS TO YOU.
The servicer and subservicer are in the process of addressing issues arising
from the year 2000 issue that could impact the timely payment of principal and
interest on the certificates. The year 2000 issue is the result of prior
computer programs being written using two digits to define the applicable year.
Computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. Any such occurrence could
result in major computer system failure or miscalculations. Although the
servicer and subservicer reasonably believe that their servicing systems will be
year 2000 compliant prior to the year 2000, they are presently engaged in
various procedures to determine if their computer systems and software, and
those of their material suppliers, customers and agents will be year 2000
compliant.
In the event that the servicer or the subservicer, or any of their suppliers,
customers or agents do not successfully and timely achieve year 2000 compliance,
the servicer's performance of its obligations under the sale and servicing
agreement could be adversely affected. This could result in delays in processing
payments on the auto loans and could cause a delay in payments to you.
S-9
<PAGE>
USE OF PROCEEDS
The net proceeds received by the trust from the sale of the certificates will be
used to pay Household Auto Receivables Corporation the purchase price for the
auto loans, [to fund the initial deposit in the reserve account][to deposit the
pre-funded amount into the pre-funding account], and .
THE TRUST
GENERAL
The trust, Household Automotive Trust , will be a New York common law trust
formed under a POOLING AND SERVICING AGREEMENT, dated as of between
the seller, the servicer and the trustee for the purpose of engaging in the
transactions described in this prospectus supplement. The trust will not engage
in any activity other than (1) acquiring, holding and managing the auto loans
and the other assets of the trust, (2) issuing certificates in private and
public offerings, including the issuance of the certificates, (3) making
payments on the certificates and (4) engaging in other activities in connection
with the certificates.
THE TRUSTEE
[Name of the Trustee] will be the trustee under the pooling and servicing
agreement. [Name of the Trustee] is a [New York] banking corporation, the
principal offices of which are located at [address].
THE TRUST ASSETS
GENERAL
The trust assets consist of the following:
- the auto loans;
- all amounts paid or payable under the auto loans after the [initial or
subsequent] cut-off date;
- security interests in the financed vehicles granted by the borrowers;
- an assignment of the subservicer's rights against automobile dealers under
agreements between the subservicer and the dealers;
- 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;
- all funds on deposit from time to time in the collection account [and the
pre-funding account];
- an assignment of all rights and benefits under the receivables purchase
agreement which consists of a master receivables purchase agreement, dated
as of between the seller and the subservicer and all supplements
thereto;
- all documents related to the auto loans, including the original contracts,
documents evidencing insurance, original credit applications and original
certificates of title or copies of applications therefor;
- a share of the preferred stock of the seller; and
- all proceeds from the trust assets.
The auto loans were originated by dealers in accordance with the subservicer's
requirements, have been assigned by the dealers to the subservicer, and evidence
the indirect financing made available to the borrowers by the subservicer.
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.
S-10
<PAGE>
All of the auto loans were sold by the subservicer to the seller under the
receivables purchase agreement and by the seller to the trust under the sale and
servicing agreement. The auto loans were originated by dealers and purchased by
the subservicer in the ordinary course of the subservicer's business in accord
with its finance programs and underwriting standards. The files relating to the
auto loans will be held by the subservicer as custodian for the trustee.
ELIGIBILITY CRITERIA OF THE INITIAL AUTO LOANS
The auto loans were selected according to several criteria.
Each auto loan:
- 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,
- has a contractual annual percentage rate, or APR, of not less than
[ ]% or more than [ ]%,
- provides for level monthly payments which provide interest at the APR and
fully amortize the original PRINCIPAL BALANCE over an original term no
greater than [72] months,
- is not more than [30] days past due as of the cut-off date,
- is attributable to the purchase of a new or used automobile, light duty
truck or van,
- as of the cut-off date has a remaining term of not more than [72] months
and
- had an original PRINCIPAL BALANCE of at least $[3,000] and not more than
$[30,000].
- No selection procedures adverse to the certificateholders were utilized in
selecting the auto loans to be conveyed to the trust.
[ADDITIONAL AUTO LOANS]
[During the funding period, the seller will purchase the subsequent auto loans
from the subservicer and then sell them to the trust. The seller will sell the
subsequent auto loans to the trust on the subsequent transfer dates. The trust
will use the funds in the pre-funding account to purchase the subsequent auto
loans.
The trust's obligation to purchase the subsequent auto loans is subject to the
following conditions:
- as of each loan's subsequent cut-off date, each subsequent auto loan
and/or subsequent financed vehicle must satisfy the auto loan eligibility
criteria specified under "Eligibility Criteria" above regarding the
initial auto loans;
- [the insurer, if there is no insurer default, has approved the subsequent
auto loans transfer to the trust];
- Neither the subservicer nor the seller has selected the subsequent auto
loans in a manner that either of them believes is adverse to the interests
of [the insurer or] the certificateholders;
- The subservicer and the seller will deliver certain opinions of counsel
regarding the validity of the subsequent auto loan transfer; and
- [Name of rating agency] must confirm that the ratings on the certificates
have not been withdrawn or reduced because of the subsequent auto loans
transfer to the trust.
Because the subsequent auto loans may be originated after the initial auto
loans, the auto loan pool's characteristics after the transfer of subsequent
auto loans to the pool may vary from the initial pool.
In addition, the trust's obligation to purchase the subsequent auto loans is
subject to the condition that the auto loans in the trust, including the
subsequent auto loans to be transferred, meet the following criteria:
(a) the auto loans' weighted average annual percentage rate is not less than
%;
S-11
<PAGE>
(b) the auto loans' weighted average remaining term on the subsequent
cut-off date is not greater than months; and
(c) not more than % of the obligors on the auto loans reside in and .
The criteria in clauses (a) and (b) will be based:
- on the characteristics of the initial auto loans on the initial cut-off
date and
- the auto loans, including the subsequent auto loans, on the related
subsequent cut-off date.
The criteria in clause (c) will be based on the obligor's mailing addresses on:
- the initial auto loans on the initial cut-off date and
- the subsequent auto loans on the related subsequent cut-off dates.
Except for the above described criteria, there are no required characteristics
for the subsequent auto loans. Therefore, following the transfer of subsequent
auto loans to the trust, the aggregate characteristics of the entire pool of
auto loans included in the trust may vary in the following respects:
- composition of the auto loans;
- geographic distribution;
- distribution by remaining PRINCIPAL BALANCE;
- distribution by APR;
- distribution by remaining term; and
- distribution of the auto loans secured by new and used vehicles.]
COMPOSITION OF THE [INITIAL]AUTO LOANS
Presented below is a description of the material characteristics of the auto
loans as of the cut-off date:
<TABLE>
<CAPTION>
-----------------------
<S> <C>
TOTAL POOL OF THE
[INITIAL] AUTO LOANS
-----------------------
Original pool balance.............................
Number of auto loans..............................
Average principal balance(1)......................
Range of principal balances.......................
Average original principal balance(2).............
Range of original principal balance...............
Weighted average APR(3)...........................
Range of original APRs............................
Weighted average original term(3).................
Range of original terms...........................
Weighted average remaining term(3)................
Range of remaining terms..........................
Weighted average months of seasoning(3)...........
Range of months of seasoning......................
Number of auto loans more than 30 days
delinquent......................................
</TABLE>
(1) Pool balance as of the cut-off date divided by total number of auto loans.
(2) Aggregate amount financed divided by total number of auto loans.
(3) Weighted by principal balance as of the cut-off date.
S-12
<PAGE>
COMPOSITION OF THE [INITIAL] AUTO LOANS BY PRINCIPAL BALANCE
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF % OF PRINCIPAL % OF POOL BY
PRINCIPAL BALANCE AUTO LOANS AUTO LOANS OUTSTANDING PRINCIPAL BALANCE
- --------------------------------------- ------------- ------------- ------------------- -----------------
$ 3,000 to 4,000....................... % $ %
4,001 to 5,000.......................
5,001 to 6,000.......................
6,001 to 7,000.......................
7,001 to 8,000.......................
8,001 to 9,000.......................
9,001 to 10,000......................
10,001 to 11,000......................
11,001 to 12,000......................
12,001 to 13,000......................
13,001 to 14,000......................
14,001 to 15,000......................
15,001 to 16,000......................
16,001 to 17,000......................
17,001 to 18,000......................
18,001 to 19,000......................
19,001 to 20,000......................
20,001 to 21,000......................
21,001 to 22,000......................
22,001 to 23,000......................
23,001 to 24,000......................
24,001 to 25,000......................
25,001 to 26,000......................
26,001 to 27,000......................
27,001 to 28,000......................
28,001 to 29,000......................
29,001 to 30,000......................
-- -- -- --
Total................................ % $ %
-- -- -- --
-- -- -- --
</TABLE>
S-13
<PAGE>
COMPOSITION BY APR OF THE [INITIAL] AUTO LOANS
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF % OF AUTO PRINCIPAL % OF POOL BY
APR RANGE AUTO LOANS LOANS OUTSTANDING PRINCIPAL BALANCE
- ------------------------------------------------ ------------- ----------- ------------- -----------------
12.00 to 12.99%................................. % $ %
13.00 to 13.99..................................
14.00 to 14.99..................................
15.00 to 15.99..................................
16.00 to 16.99..................................
17.00 to 17.99..................................
18.00 to 18.99..................................
19.00 to 19.99..................................
20.00 to 20.99..................................
21.00 to 21.99..................................
22.00 to 22.99..................................
23.00 to 23.99..................................
24.00 to 24.99..................................
25.00 to 25.99..................................
26.00 to 27.00..................................
-- -- -- --
Total......................................... % $ %
-- -- -- --
-- -- -- --
</TABLE>
COMPOSITION OF THE [INITIAL] AUTO LOANS BY INTEREST ACCRUAL METHOD
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF PRINCIPAL PRINCIPAL
INTEREST ACCRUAL METHOD AUTO LOANS % OF AUTO LOANS OUTSTANDING OUTSTANDING
- ---------------------------------------- ------------- ----------------- ------------- -------------------
Actuarial............................... % $ %
Simple Interest.........................
-- -- -- --
Total................................. % $ %
-- -- -- --
-- -- -- --
</TABLE>
S-14
<PAGE>
COMPOSITION OF THE [INITIAL] AUTO LOANS BY STATE OF RESIDENCE
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF PRINCIPAL PRINCIPAL
LOCATION OF MAILING ADDRESS OF BORROWER AUTO LOANS AUTO LOANS OUTSTANDING BALANCE
- ----------------------------------------------- ----------- ----------- ----------- ---------------
Alabama........................................ % $ %
Alaska.........................................
Arizona........................................
Arkansas.......................................
California.....................................
Colorado.......................................
Connecticut....................................
Delaware.......................................
District of Columbia...........................
Florida........................................
Georgia........................................
Hawaii.........................................
Idaho..........................................
Illinois.......................................
Indiana........................................
Iowa...........................................
Kansas.........................................
Kentucky.......................................
Louisiana......................................
Maine..........................................
Maryland.......................................
Massachusetts..................................
Michigan.......................................
Minnesota......................................
Mississippi....................................
Missouri.......................................
Montana........................................
Nebraska.......................................
Nevada.........................................
New Hampshire..................................
New Jersey.....................................
New Mexico.....................................
New York.......................................
North Carolina.................................
North Dakota...................................
Ohio...........................................
Oklahoma.......................................
Oregon.........................................
Pennsylvania...................................
Rhode Island...................................
South Carolina.................................
South Dakota...................................
Tennessee......................................
Texas..........................................
Utah...........................................
Vermont........................................
Virginia.......................................
Washington.....................................
West Virginia..................................
Wisconsin......................................
Wyoming........................................
----------- ----------- ----------- ------
Total...................................... % $ %
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
S-15
<PAGE>
COMPOSITION BY REMAINING TERM OF THE [INITIAL] AUTO LOANS
(AS OF THE [INITIAL] CUT-OFF DATE)
<TABLE>
<CAPTION>
------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF PRINCIPAL PRINCIPAL
REMAINING TERM RANGE (IN MONTHS) AUTO LOANS AUTO LOANS OUTSTANDING BALANCE
- ----------------------------------------------- ----------- ----------- ----------- ---------------
18 to 23....................................... % $ %
24 to 29.......................................
30 to 35.......................................
36 to 41.......................................
42 to 47.......................................
48 to 53.......................................
54 to 59.......................................
60 to 65.......................................
66 to 71.......................................
72.............................................
----------- ----------- ----------- ------
Total...................................... % $ %
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
COMPOSITION OF [INITIAL] AUTO LOANS BY TYPE OF FINANCED VEHICLE
<TABLE>
<CAPTION>
--------------------------------------------------------
<S> <C> <C> <C> <C>
% OF POOL BY
NUMBER OF % OF PRINCIPAL PRINCIPAL
TYPE OF FINANCING AUTO LOANS AUTO LOANS OUTSTANDING OUTSTANDING
- -------------------------------------------- ----------- ----------- ----------- -----------------
New......................................... % $ %
Used........................................
----------- ----------- ----------- ------
Total................................... % $ %
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
THE PREFERRED STOCK
The trust assets include one share of preferred stock of the seller. 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 trust is intended to
prevent the seller from instituting bankruptcy and will have no impact on the
bankruptcy remoteness of the trust. Under the Articles of Incorporation of the
seller, the rights of the holders of the preferred stock are limited to (a)
voting 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, and (b)
receiving $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.
Under the trust's pledge of its interest in the trust assets, the trustee has
the exclusive authority to vote the interest of the trust in the preferred
stock. In the pooling and servicing agreement, the trustee covenants that it
will not consent to any of the seller's bankruptcy initiatives. 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 certificates will
be able to unilaterally prevent the implementation of the seller's bankruptcy
initiatives.
S-16
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
All the auto loans are prepayable at any time. If prepayments are received on
the auto loans, the actual weighted average life of the auto loans may be
shorter than the scheduled weighted average life, since the scheduled weighted
average life assumes that payments will be made as scheduled, and that no
prepayments occur. 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 an auto loan
is outstanding.
The rate of prepayments on the auto loans 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 the subservicer. The
subservicer believes that the actual rate of prepayments will result in a
substantially shorter weighted average life than the scheduled weighted average
life of the auto loans. If a certificate is purchased at a premium, and the
actual rate of prepayments exceed the rate of prepayments anticipated at the
time the certificate was purchased, the actual yield to maturity of the
certificate will be less than the yield anticipated at the time of purchase. If
a certificate is purchased at a discount, and the rate of prepayments is less
than the rate of prepayments anticipated at the time the certificate was
purchased, the actual yield to maturity will be less than the yield anticipated
at the time of purchase. Any reinvestment risk, which is the risk that a
certificateholder will not be able to reinvest amounts received in payment on
the certificates at interest rates that are greater than or equal to the
certificate rate, resulting from a faster or slower incidence of prepayment of
auto loans will be borne by the certificateholders.
The rate of payment of principal of the certificates will depend on the rate of
payment, including prepayments, of the PRINCIPAL BALANCE of the auto loans. As a
result, final payment of the certificates could occur significantly earlier than
the final scheduled payment date for the class.
Prepayments on auto loans can be measured relative to a prepayment standard or
model. The model used in this prospectus supplement, the absolute prepayment
model, or ABS, represents an assumed rate of prepayment each month relative to
the original number of auto loans in a pool. ABS further assumes that all the
auto loans are the same size and amortize at the same rate and that each auto
loan in each month of its life will either be paid as scheduled or be prepaid in
full. For example, in a pool of auto loans originally containing 10,000 auto
loans, a 1% ABS rate means that 100 auto loans 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 auto loans.
The tables captioned "Percent of Initial Certificate Principal Balance at
Various ABS Percentages", also called the ABS Tables, have been prepared on the
basis of the following assumptions:
- the auto loans prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases;
- each scheduled monthly payment on the auto loans is made on the last day
of each month and each month has 30 days;
- the initial principal amount of the certificates is as stated on the cover
page;
- interest on the certificates accrues during each interest period at the
following assumed coupon rates: Class A Certificates, %; and Class B
Certificates, %.
- payments on the certificates are made on the day of each month whether or
not a business day;
- the certificates are purchased on the closing date;
- [the entire pre-funded amount issued to purchase subsequent auto loans;]
- the scheduled monthly payment for each auto loan has been calculated on
the basis of the assumed characteristics presented in the table below, and
each auto loan will amortize in amounts sufficient to repay the PRINCIPAL
BALANCE of the auto loans by its indicated remaining term to maturity; and
- the seller or the servicer exercises its clean-up call redemption.
S-17
<PAGE>
The ABS Tables also assume that (1) the auto loans have been aggregated into
hypothetical pools with all of the auto loans within each pool having the
following characteristics, and (2) 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 calculated so that each pool will be
fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
----------------------------------------------------
<S> <C> <C> <C> <C>
REMAINING
AGGREGATE TERM
PRINCIPAL TO MATURITY SEASONING
POOL BALANCE APR (IN MONTHS) (IN MONTHS)
- ----------------------------------------------- ------------- --------- ------------- -----------
1.............................................. $%
2..............................................
3..............................................
4..............................................
5..............................................
</TABLE>
The ABS Tables indicate, based on the assumptions described above, the
percentages of the initial principal amount of the certificates that would be
outstanding after each of the payment dates shown at various percentages of ABS
and the corresponding weighted average lives of the certificates. The actual
characteristics and performance of the auto loans will differ from the
assumptions used in constructing the ABS Tables. 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 auto loans will prepay at a constant level
of ABS until maturity or that all of the auto loans will prepay at the same
level of ABS. Moreover, the diverse terms of auto loans could produce slower or
faster principal distributions than indicated in the ABS Tables at the various
constant percentages of ABS specified, even if the original and remaining terms
to maturity of the auto loans are as assumed. Any difference between the
assumptions and the actual characteristics and performance of the auto loans,
including actual prepayment experience or losses, will affect the percentages of
initial balances outstanding over time and the weighted average lifes of the
certificates.
S-18
<PAGE>
PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE
AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A CERTIFICATES CLASS B CERTIFICATES
------------------------------------------ ------------------------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- -------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Weghted 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 certificate is determined by (1) multiplying
the amount of each principal payment on a certificate by the number of years
from the date of the issuance of the certificates to the payment date, (2)
adding the results and (3) dividing the sum by the initial principal amount
of the certificates of that class.
DELINQUENCY AND LOSS INFORMATION OF THE SUBSERVICER
Presented below is information concerning the subservicer's delinquency and loss
experience for its servicing portfolio of auto loans for new and used
automobiles, light duty trucks and vans originated or acquired under 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 the subservicer's portfolio or changes to its underwriting
or charge-off policies during the periods shown. In response to competitive and
market conditions, the subservicer's underwriting policies have changed in
various respects over the periods presented. The subservicer does not believe
these changes had a material impact on the historical delinquency and loss
experience presented below.
In the fourth quarter of 1997 the subservicer began charging off non-securitized
auto loans at the earlier of: (1) the date an auto loan becomes 150 days
delinquent and (2) 90 days after a vehicle has been repossessed if it remains
unsold. Prior to that change, and continuing for all auto loans securitized
prior to 1998, auto loans were charged off (1) at 120 days delinquent and (2) 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 years-end 1997 and 1998 and for the months ended . 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 auto loans serviced for each period would be higher than those
shown. The tables below present all auto loan data for auto loans purchased by
the subservicer, including auto loans managed in states which are not
represented in the pool consisting of the auto loans. Following the merger in
which Household International, Inc. acquired ACC Consumer Finance Corporation,
the subservicer assumed management and servicing responsibilities for a
portfolio of auto loans purchased or acquired by another Household
International, Inc. subsidiary. None of the auto loans held by this entity are
included in the auto loans or the performance results presented in the following
tables.
S-19
<PAGE>
HISTORICAL DELINQUENCY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
[YEAR] [YEAR] [YEAR] [YEAR] [YEAR]
----------------- ----------------- ----------------- ----------------- -----------------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Principal.....................
Outstanding
Delinquencies(1)(2).........
31-60 Days..................
61-90 Days..................
Over 90 Days................
Subtotal..................
Repossession on hand(3).......
Total Delinquencies and
Repossession on hand........
<CAPTION>
<S> <C> <C>
MONTHS
ENDED
-----------------
[YEAR]
-----------------
DOLLARS PERCENT
------- -------
Principal.....................
Outstanding
Delinquencies(1)(2).........
31-60 Days..................
61-90 Days..................
Over 90 Days................
Subtotal..................
Repossession on hand(3).......
Total Delinquencies and
Repossession on hand........
</TABLE>
(1) The period of delinquency is based on the number of days payments are
contractually past due.
(2) Delinquencies include bankruptcies. Bankruptcies represent approximately %
of outstanding principal for each period presented.
(3) Amounts shown under "repossession on hand" represent the expected net
realizable value for repossessed vehicles that have not been sold.
HISTORICAL NET LOSS EXPERIENCE
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, MONTHS
----------------------------------------------------- ENDED
[YEAR] [YEAR] [YEAR] [YEAR] [YEAR] ,
--------- --------- --------- --------- --------- -----------
Principal outstanding......................... $ $ $ $ $ $
Average principal amount outstanding.......... $ $ $ $ $ $
Number of contracts outstanding...............
Average number of contracts outstanding.......
Number of repossessions.......................
Number of repossessions as a percent of
average number of contracts outstanding,
annualized..................................
Net losses(1)................................. $ $ $ $ $ $
Net losses as a percent of average principal
amount outstanding, annualized..............
</TABLE>
(1) Net losses are net of recoveries and include 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.
S-20
<PAGE>
The seller expects that the delinquency, loss and repossession experience for
the auto loans will be generally consistent with the information provided in the
above tables. However, as the subservicer's 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 and loss pattern. The amount
of these increases cannot be estimated. There is no assurance that delinquency,
credit loss and repossession experience for auto loans in the future, or the
experience of the trust, will be similar to that described 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.
[THE INSURER]
[The following information has been obtained from [Name of Insurer] and has not
been verified by the seller or the underwriters. No representations or warranty
is made by the seller or the underwriters with respect thereto.
GENERAL
[Name of Insurer] is a monoline insurance company incorporated in under
the laws of the State of . The insurer is licensed to engage in the
financial guaranty insurance business in [all 50 states, the District of
Columbia and Puerto Rico].
The insurer and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled payments of an issuer's
securities--thereby enhancing the credit rating of those securities--in
consideration for the payment of a premium to the insurer. The insurer and its
subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments. The
insurer insures both newly issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy the insurer's
underwriting criteria.
The principal executive offices of the insurer are located at [address], and its
telephone number at that location is .
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by the insurer are generally
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, the insurer reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by the insurer as
a risk management device and to comply with certain statutory and rating agency
requirements; it does not alter or limit the insurer's obligations under any
financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
The insurer's insurance financial strength is rated " " by [Rating Agency].
The insurer's financial strength is rated " " by [Rating Agency]. The
insurer's claims-paying ability is rated " " by [Rating Agency]. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies herein.
S-21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the insurer and its
wholly-owned subsidiaries on the basis of generally accepted accounting
principles as of :
<TABLE>
<CAPTION>
------------------
<S> <C>
[DATE]
------------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
Deferred Premium Revenue (net of prepaid
reinsurance premiums)........................... $
Surplus Certificates..............................
Minority Interest.................................
Shareholder's Equity:
Common Stock....................................
Additional Paid-In Capital......................
Accumulated Other Comprehensive Income (net of
deferred income taxes)........................
Accumulated Earnings............................
Total Shareholder's Equity......................
Total Deferred Premium Revenue, Surplus
Certificates, Minority Interest and
Shareholder's Equity............................ $
</TABLE>
For further information concerning the insurer, see the consolidated financial
statements of the insurer and subsidiaries, and the certificates thereto,
incorporated by reference herein. The Insurer's financial statements are
included as exhibits to the annual report on Form 10-K and quarterly reports on
Form 10-Q filed with the Securities and Exchange Commission by [Name of Insurer]
and may be reviewed at the EDGAR website maintained by the Securities and
Exchange Commission. Copies of the statutory quarterly and annual statements
filed with the [State of New York Insurance Department] by the insurer are
available upon request to the [State of New York Insurance Department].
INSURANCE REGULATION
The insurer is licensed and subject to regulation as a financial guaranty
insurance corporation under the laws of the State of [New York], its state of
domicile. In addition, the insurer and its insurance subsidiaries are subject to
regulation by insurance laws of the various other jurisdictions in which they
are licensed to do business. As a financial guaranty insurance corporation
licensed to do business in the State of [New York], the insurer is subject to
[Article 69 of the New York Insurance Law] which, among other things, limits the
business of each such insurer to financial guaranty insurance and related lines,
requires that each such insurer maintain a minimum surplus to policyholders,
establishes contingency, loss and unearned premium reserve requirements for each
such insurer, and limits the size of individual transactions ("single risks")
and the volume of transactions ("aggregate risks") that may be underwritten by
each such insurer. Other provisions of the [New York Insurance Law], applicable
to non-life insurance companies such as the insurer, regulate, among other
things, permitted investments, payment of dividends, transactions with
affiliates, mergers, consolidations, acquisitions or sales of assets and
incurrence of liabilities for borrowings.]
DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates will be issued according to the terms of the pooling and
servicing agreement. The pooling and servicing agreement has been filed as an
exhibit to the registration statement of which this prospectus supplement is a
part. The following summary describes terms of the certificates and the pooling
and servicing agreement.
The certificates will be issued only in fully registered form, in denominations
of $ and integral multiples of $ . The certificates will represent
beneficial ownership interests in the assets of the trust. Replacement
certificates, if issued, will be transferable and exchangeable at the corporate
trust office of the trustee. No service
S-22
<PAGE>
charge will be made for any registration, exchange or transfer of certificates,
but the trustee may require payment of a sum sufficient to cover any tax or
other governmental charge.
The payment date is the [17th] day of each month, or if that day is not a
BUSINESS DAY, the next succeeding BUSINESS DAY.
The class A certificateholders are entitled to receive, on each payment date,
the CLASS A PERCENTAGE of the PRINCIPAL DISTRIBUTABLE AMOUNT plus interest at
the class A pass-through rate on the class A PRINCIPAL BALANCE. Subject to the
prior rights of the class A certificateholders, the class B certificateholders
are entitled receive, on each payment date, the CLASS B PERCENTAGE of the
PRINCIPAL DISTRIBUTABLE AMOUNT plus interest at the class B pass-through rate on
the class B PRINCIPAL BALANCE.
The certificates represent beneficial ownership interests in the trust. The
Class A Certificates will evidence in the aggregate an undivided ownership
interest of approximately %, which is the CLASS A PERCENTAGE of the trust and
the Class B Certificates will evidence in the aggregate an undivided ownership
interest of approximately %, which is the CLASS B PERCENTAGE of the trust.
PAYMENTS OF INTEREST
Interest on the certificates will be payable monthly on each payment date,
commencing on , in an amount equal to interest accrued during the
applicable interest period, as defined below, at the certificate rate on the
outstanding principal balance for certificates. The per annum rate of interest
accruing on the certificates of each class is referred to as the pass-through
rate for that class certificates. The pass-through rate for the Class A
Certificates is %, and the pass-through rate for the Class B Certificates is
%.
Interest on the certificates for a 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 the payment date. Each
of these periods is an interest period. Interest on the certificates will be
calculated on the basis of a 360-day consisting of twelve thirty day months.
Interest for any payment date due but not paid on the payment date will bear
interest, to the extent permitted by applicable law, at the applicable
pass-through rate until paid.
PAYMENTS OF PRINCIPAL
On each payment date, principal payments will be distributed on the certificates
in an amount generally equal to a percentage of the decease in the PRINCIPAL
BALANCE of the auto loan pool during the prior calendar month to the extent of
funds available. These principal payments will be allocable between the Class A
Certificates and the Class B Certificates PRO RATA, and will be paid to the
certificateholders in proportion to their percentage interest, until the
outstanding principal amount of that class is paid in full.
PAYMENT PRIORITIES
You can find definitions of the technical cashflow terms used in this section in
the Glossary beginning on page S-43 of this prospectus supplement.
On or prior to each payment date, the servicer will instruct the trustee to make
the following distributions in the following order of priority:
(1) from the AVAILABLE FUNDS, to the servicer, any supplemental servicing
fees for the COLLECTION PERIOD and if Household Finance Corporation is no
longer acting as servicer, the servicing fee for the COLLECTION PERIOD;
(2) from the remaining AVAILABLE FUNDS, to the trustee, any accrued and
unpaid trustee's fees, but only to the extent these fees have not been
previously paid by the servicer;
(3) from the remaining AVAILABLE FUNDS, the CLASS A INTEREST DISTRIBUTABLE
AMOUNT will be paid to the class A certificateholders;
S-23
<PAGE>
(4) from the remaining AVAILABLE FUNDS, the CLASS A PRINCIPAL DISTRIBUTABLE
AMOUNT will be paid to the class A certificateholders, until the
outstanding principal amount of the Class A Certificates is paid in full;
(5) from the remaining AVAILABLE FUNDS, the CLASS B INTEREST DISTRIBUTABLE
AMOUNT will be paid to the class B certificateholders;
(6) from the remaining AVAILABLE FUNDS, the CLASS B PRINCIPAL DISTRIBUTABLE
AMOUNT will be paid to the Class B Certificateholders until the
outstanding PRINCIPAL BALANCE of the Class B Certificates is reduced to
zero.
(7) from the remaining AVAILABLE FUNDS, to the reserve account, the RESERVE
ACCOUNT DEPOSIT AMOUNT, if necessary, required to increase the amount in
the reserve account to its then required level;
(8) from the remaining AVAILABLE FUNDS, if Household Finance Corporation is
acting as the servicer, the servicing fee for the prior COLLECTION
PERIOD; and
(9) any remainder to the seller.
[Amounts on deposit in the reserve account on any payment date, after giving
effect to all distributions made on the payment date and the related payment
date, in excess of the TARGETED RESERVE ACCOUNT BALANCE for the payment date may
be released first, to the servicer to pay any servicing fees and supplemental
servicing fees that are due, and any remainder may be released to the seller.]
[Amounts available under the insurance policy are available to pay the
certificate principal only in two circumstances:
- to reduce, after taking into account all reductions funded from other
sources, the aggregate principal balance of the certificates to the
collateral balance--i.e., the sum of the POOL BALANCE plus the pre-funded
amount--in the event that the certificate principal balance would
otherwise exceed the collateral balance; and
- to pay off each class's principal on its final scheduled distribution
date, to the extent that the class is not paid off on or prior to the
final scheduled distribution date from other sources.]
[MANDATORY REDEMPTION]
[If any portion of the pre-funded amount remains on deposit in the pre-funding
account at the end of the funding period, each class of certificates will be
redeemed in part on the mandatory redemption date. Each class' certificate
prepayment amount of the remaining pre-funded amount on that date will be an
amount equal to that class' pro rata share, based on the respective current
principal amount of each class of certificates. However, if the aggregate
remaining amount in the pre-funding account is $100,000 or less, that amount
will be applied exclusively to reduce the outstanding principal balance of the
class of certificates then entitled to receive principal distributions.]
MATURITY DATES; OPTIONAL REDEMPTION
Each class of certificates will mature on the earlier of the date the class of
certificates is paid in full or the respective scheduled maturity date for the
class. The class A scheduled maturity date is and the class B
scheduled maturity date is . The payment date occurring on
is also referred to as the final scheduled payment date. In the event
there are insufficient funds to retire either class of certificates by its
respective scheduled maturity date in each case, subject to a five day grace
period, an event of default will occur. In addition, the trust will pay the
certificates in full on the payment date following exercise by the seller or the
servicer of the option to purchase the auto loans from the trust. This will
cause a redemption of the certificates. The option may be exercised on or after
the payment date on which the AGGREGATE CERTIFICATE PRINCIPAL BALANCE is reduced
to an amount less than or equal to $ , which is % of the original
AGGREGATE CERTIFICATE PRINCIPAL BALANCE. The redemption price will be equal to
the sum of the AGGREGATE CERTIFICATE PRINCIPAL BALANCE and accrued and unpaid
interest through the day preceding the call date.
S-24
<PAGE>
REPORTS TO CERTIFICATEHOLDERS
With each distribution to the certificateholders, the trustee will prepare and
forward to each certificateholder a statement, which will include the following
information for that payment date:
(1) the amount of the distribution allocable to interest on each class of
the certificates;
(2) the amount of the distribution allocable to principal on each class of
the certificates;
(3) the aggregate outstanding principal amount for each class of
certificates, in each case, after giving effect to all payments reported
under (2) above for that payment date;
(4) the CLASS A INTEREST CARRYOVER SHORTFALL and the Class A Principal
Carryover Shortfall, if any, and the change in those amounts from the
preceding statement;
(5) the amount of the servicing fee paid to the servicer for the prior
COLLECTION PERIOD; and
(6) the TARGETED RESERVE ACCOUNT BALANCE and the amount on deposit in the
reserve account at the end of the payment date.
The information furnished under (1) through (4) above will be expressed as a
dollar amount per $ in face amount of certificates.
CREDIT ENHANCEMENT
SUBORDINATION OF THE CLASS B CERTIFICATES
The rights of the Class B Certificateholders to receive distributions generally
will be subordinated to the rights of the Class A Certificateholders in the
event of defaults and delinquencies on the auto loans. The protection afforded
to the Class A Certificateholders through subordination will be effected by the
preferential right of the Class A Certificateholders to receive current
distributions of interest and principal, before any interest or principal is
payable to the Class B Certificateholders.
THE RESERVE ACCOUNT
An initial deposit of $ , which is [ ]% of the POOL BALANCE as of the
cut-off date, will be placed in 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 the certificateholders and any fees until the amount
on deposit in the reserve account equals the TARGETED RESERVE ACCOUNT BALANCE
after first determining whether any servicing fees or supplemental servicing
fees are due. Amounts in the reserve account on any payment date, after giving
effect to all withdrawals from the reserve account in excess of the TARGETED
RESERVE ACCOUNT BALANCE that payment date will be paid, first to the servicer
for any servicing fees and supplemental servicing fees then due, and any
remainder to the seller.
The reserve account will not be part of the trust, but will be a segregated
trust account held by the trustee. Amounts in the reserve account will be held
for the benefit of holders of the certificates of both classes. Funds in the
reserve account shall be invested in eligible investments. The Seller is
entitled to receive all investment earnings on amounts in the reserve account,
as well as any amounts in the reserve account in excess of the TARGETED RESERVE
ACCOUNT BALANCE.
Amounts in the reserve account on a payment date will be used to fund any
shortfalls in AVAILABLE FUNDS on that payment date to fund the full amounts of
the servicing fee then payable to a servicer other than Household Finance
Corporation, the CLASS A INTEREST DISTRIBUTABLE AMOUNT, the CLASS A PRINCIPAL
DISTRIBUTABLE AMOUNT, the CLASS B INTEREST DISTRIBUTABLE AMOUNT and the CLASS B
PRINCIPAL DISTRIBUTABLE AMOUNT, in that order.
OVERCOLLATERALIZATION
The overcollateralization is the difference between the POOL BALANCE and the
AGGREGATE CERTIFICATE PRINCIPAL BALANCE. On the closing date, the
overcollateralization will be equal to $ or % of the POOL BALANCE as
of the
S-25
<PAGE>
cut-off date. The overcollateralization will be available to absorb losses that
would otherwise be allocated to certificateholders.
The subordination of the class B Certificates, the reserve account and the
overcollateralization are intended to enhance the likelihood of receipt by class
A certificateholders of the full amount of principal and interest due them and
to decrease the likelihood that the class A certificateholders will experience
losses.
If on any payment date the holders of the Class A Certificates do not receive
the full amount then due them, including interest carryover shortfalls and
principal carryover shortfalls, after giving effect to any amounts withdrawn
from the reserve account, the holders of the Class B Certificates generally will
not receive any distributions. While the Class B certificateholders are entitled
to receive amounts from the reserve account their entitlement is subordinated to
the rights of the Class A certificateholders. If the reserve account becomes
depleted and the overcollateralization is exhausted, the Class B
certificateholders may experience shortfalls in the distributions due them and
incur a loss on their investment.
[THE INSURANCE POLICY]
[The following summary of the terms of the policy does not purport to be
complete and is qualified in its entirety by reference to the policy.
Simultaneously with the issuance of the certificates, the insurer will deliver
the policy to the trustee for the benefit of each certificateholder. Under the
policy, the insurer will unconditionally and irrevocably guarantee to the
trustee, on each distribution date, for the benefit of each certificateholder
the full and complete payment of (i) SCHEDULED PAYMENTS (as defined below) on
the certificates and (ii) the amount of any SCHEDULED PAYMENT which subsequently
is avoided in whole or in part as a preference payment under applicable law. In
the event the trustee fails to make a claim under the policy, certificateholders
do not have the right to make a claim directly under the policy, but may sue to
compel the trustee to do so.
SCHEDULED PAYMENTS means payments which are required to be made on the
certificates during the term of the policy in accordance with the original terms
of the certificates when issued and without regard to any subsequent amendment
or modification of the certificates or the trust documents that has not been
consented to by the insurer.
Payment of claims on the policy made in respect of SCHEDULED PAYMENTS will be
made by the insurer following RECEIPT (as defined below) by the insurer of the
appropriate notice for payment on the later to occur of (i) 12:00 noon, New York
City time, on the third BUSINESS DAY following RECEIPT of such notice for
payment, and (ii) 12:00 noon, New York City time, on the date on which such
payment was due on the certificates.
If payment of any amount avoided as a preference under applicable bankruptcy,
insolvency, receivership or similar law is required to be made under the policy,
the insurer shall cause such payment to be made on the later of (a) the date
when due to be paid pursuant to the ORDER referred to below or (b) the first to
occur of (i) the [fourth] BUSINESS DAY following RECEIPT by the insurer from the
trustee of (A) a certified copy of the ORDER of the court or other governmental
body that exercised jurisdiction to the effect that the certificateholder is
required to return SCHEDULED PAYMENTS made with respect to the certificates
during the term of the policy because such payments were avoidable as preference
payments under applicable bankruptcy law, (B) a certificate of the
certificateholder that the ORDER has been entered and is not subject to any stay
and (C) an assignment duly executed and delivered by the certificateholder, in
such form as is reasonably required by the insurer and provided to the
certificateholder by the insurer, irrevocably assigning to the insurer all
rights and claims of the certificateholder relating to or arising under the
certificates against the trust or otherwise with respect to such preference
payment, or (ii) the date of RECEIPT (as defined below) by the insurer from the
trustee of the items referred to in clauses (A), (B) and (C) above if, at least
four BUSINESS DAYS prior to such date of RECEIPT, the insurer shall have
RECEIVED (as defined below) written notice from the trustee that such items were
to be delivered on such date and such date was specified in such notice. Such
payment shall be disbursed to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the ORDER and not to the trustee or any
certificateholder directly (unless a certificateholder has previously paid such
amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the ORDER, in which case such payment shall be disbursed to
the trustee for distribution to such certificateholder upon proof of such
payment
S-26
<PAGE>
reasonably satisfactory to the insurer). In connection with the foregoing, the
insurer shall have the rights provided pursuant to the pooling and servicing
agreement, including, without limitation, the right to direct all matters
relating to any preference claim and subrogation to the rights of the trustee
and each certificateholder in the conduct of any proceeding with respect to a
preference claim.
The terms RECEIPT and RECEIVED with respect to the policy shall mean actual
delivery to the insurer and to its fiscal agent, if any, prior to 12:00 noon,
New York City time, on a BUSINESS DAY; delivery either on a day that is not a
BUSINESS DAY or after 12:00 noon, New York City time, shall be deemed to be
RECEIVED on the next succeeding BUSINESS DAY. If any notice or certificate given
under the policy by the trustee is not in proper form or is not properly
completed, executed or delivered, it shall be deemed not to have been RECEIVED,
and the insurer or its fiscal agent shall promptly so advise the trustee, and
the trustee may submit an amended notice.
Under the policy, BUSINESS DAY means any day other than a Saturday, Sunday,
legal holiday or other day on which commercial banking institutions in , , ,
and or any other location of any successor servicer or successor trustee are
authorized or obligated by law, executive order or governmental decree to be
closed.
The insurer's obligations under the policy in respect of Scheduled Payments
shall be discharged to the extent funds are transferred to the trustee as
provided in the policy whether or not such funds are properly applied by the
trustee.
The insurer shall be subrogated to the rights of each certificateholder to
receive payments of principal and interest to the extent of any payment by the
insurer under the policy.
Claims under the policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than PARI PASSU with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the policy and each other financial guaranty insurance
policy issued thereby constitute PARI PASSU claims against the general assets of
the insurer. The terms of the policy cannot be modified or altered by any other
agreement or instrument, or by the merger, consolidation or dissolution of the
trust. The policy may not be canceled or revoked prior to distribution in full
of all Scheduled Payments. [THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY
INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.]
The Policy is governed by the laws of the State of [New York].
It is a condition to issuance that the Class A Certificates be rated by [Rating
Agency] and by [Rating Agency], and that the Class B Certificates be rated by
[Rating Agency] and by [Rating Agency]. The ratings by the rating agencies of
the certificates will be (i) with respect to the Class A Certificates, without
regard to the policy in the case of [Rating Agency]and substantially based on
the policy in the case of [Rating Agency] and (ii) with respect to the Class B
Certificates, based on the issuance of the policy. To the extent that such
ratings are based on the policy, such ratings apply to distributions due on the
distribution dates, and not to distributions due on the distribution dates. A
rating is not a recommendation to purchase, hold or sell certificates. In the
event that the rating initially assigned to any of the certificates is
subsequently lowered or withdrawn for any reason, including by reason of a
downgrading of the claims-paying ability of the insurer, no person or entity
will be obligated to provide any additional credit enhancement with respect to
the certificates. Any reduction or withdrawal of a rating may have an adverse
effect on the liquidity and market price of the certificates.]
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material federal income tax
consequences of the purchase, ownership and disposition of the certificates.
This summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the certificates as "CAPITAL ASSETS" which
generally means property held for investment, within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended, referred to in this prospectus
supplement as the CODE. Investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the certificates. Prospective investors should
S-27
<PAGE>
know that no rulings have been or will be sought from the IRS regarding any of
the federal income tax consequences discussed below, and no assurance can be
given that the IRS will not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Dewey Ballantine LLP, special tax counsel to the seller, the
trust will be classified as a grantor trust under subpart E, part I of
subchapter J of Chapter 1 of Subtitle A of the Code and not as an association or
publicly traded partnership taxable as a corporation for federal income tax
purposes. Certificateholders will be treated as the owners of the trust, except
as described below.
GENERAL
For purposes of federal income tax, the certificateholders will each be deemed
to have acquired a fixed portion of the interest due on each auto loan. These
fixed portions of interest will be treated as "STRIPPED COUPONS" within the
meaning of the Code. Accordingly, for federal income tax purposes, each
certificateholder will be treated as owning its pro rata percentage interest in
the principal of each auto loan and such interest in each auto loan will be
treated as a "STRIPPED BOND" within the meaning of Section 1286 of the Code.
INCOME ON THE AUTO LOANS
Each certificateholder will be required to report on its federal income tax
return, in a manner consistent with its method of accounting, its pro rata
allocable share of the entire gross income of the trust, including interest or
finance charges earned on the auto loans, and any gain or loss upon collection
or disposition of the auto loans. In computing its federal income tax liability,
a certificateholder will be entitled to deduct, consistent with its method of
accounting, its pro rata allocable share of reasonable fees and expenses that
are paid or incurred by the trust as provided in Section 162 or 212 of the Code.
If a certificateholder is an individual, estate or trust the deduction for its
pro rata share of such fees will be allowed only to the extent that all of its
miscellaneous itemized deductions, including its share of such fees, exceed 2%
of its adjusted gross income. In addition, Code Section 68 provides that
itemized deductions otherwise allowable for a taxable year of an individual
taxpayer whose adjusted gross income exceeds a specified amount will be reduced
by the lesser of (1) 3% of the excess, if any, of adjusted gross income over
such amount, or (2) 80% of the amount of itemized deductions otherwise allowable
for such year. As a result, such investors holding certificates, directly or
indirectly through a pass-through entity, may have aggregate taxable income in
excess of the aggregate amount of cash received on such certificates with
respect to interest at the certificate rate. A certificateholder using the cash
method of accounting must take into account its pro rata share of income and
deductions as and when collected by or paid by the trust. A certificateholder
using the accrual method of accounting must take into account its pro rata share
of income and deductions as and when such amounts become due to or payable by
the trust.
A certificateholder will not be subject to the market discount rules discussed
below regarding the stripped auto loans, but instead will be subject to the
original issue discount rules contained in the Code. A certificateholder will be
required to include any original issue discount in income as it accrues,
regardless of whether cash payments are received, using a method reflecting a
constant rate of interest on the auto loans.
STRIPPED BONDS AND STRIPPED COUPONS
Although the tax treatment of stripped bonds is not entirely clear, based on
guidance by the IRS, each purchaser of a certificate will be treated as the
purchaser of a stripped bond or stripped coupon which generally should be
treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, under Treasury
regulations, if the discount on a stripped bond certificate is larger than a de
minimis amount, as calculated for purposes of the original issue discount rules
of the Code, that stripped bond certificate will be considered to have been
issued with original issue discount. See "--Accrual of Original Issue Discount."
S-28
<PAGE>
ACCRUAL OF ORIGINAL ISSUE DISCOUNT
In determining whether a certificateholder has purchased its interest in the
auto loans or any auto loan at a discount, a portion of the purchase price for a
certificate may be allocated to the accrued interest on the auto loans at the
time of purchase as though that accrued interest were a separate asset. This
would reduce the portion of the purchase price allocable to the
certificateholder's undivided interest in the auto loans. If the interests in
the auto loans represented by the certificates are considered to be issued with
original issue discount, the rules described in this paragraph would apply.
Generally, the owner of a stripped bond or stripped coupon issued or acquired
with original issue discount must include in gross income the sum of the DAILY
PORTIONS, as described below, of such original issue discount for each day on
which it owns a certificate, including the date of purchase but excluding the
date of disposition. In the case of an original certificateholder, the daily
portions of original issue discount for a certificate generally would be
determined as follows. A calculation will be made of the portion of original
issue discount that accrues with respect to the certificate during each
successive monthly accrual period. This will be done, in the case of each full
monthly accrual period, by adding (1) the present value of all remaining
payments to be received on the certificate under the prepayment assumption used
for the certificates and (2) any payments received during such accrual period,
and subtracting from that total the ADJUSTED ISSUE PRICE of the certificate at
the beginning of that accrual period. No representation is made that the auto
loans will prepay at any specified rate. The adjusted issue price of a
certificate at the beginning of the first accrual period is its issue price, as
determined for purposes of the original issue discount rules of the Code, and
the adjusted issue price of a certificate at the beginning of a subsequent
accrual period is the adjusted issued price at the beginning of the immediately
preceding accrual period plus the amount of original issue discount allocable to
that accrual period and reduced by the amount of any payment made at the end of
or during that accrual period. The original issue discount accruing during such
accrual period will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. For an initial accrual period shorter than a full monthly accrual
period, the daily portions of original issue discount must be determined
according to a reasonable method as set forth in the Treasury Regulations
regarding original issue discount.
For the certificates, the method of calculating original issue discount as
described above will cause the accrual of original issue discount to either
increase or decrease but never below zero, in any given accrual period to
reflect the fact that prepayments are occurring at a faster or slower rate than
the prepayment assumption used for the certificates.
Subsequent purchasers that purchase certificates at more than a DE MINIMIS
discount should consult their tax advisors about the proper method to accrue
such original issue discount.
PREMIUM
The purchase of a certificate at more than its adjusted principal amount will
result in the creation of a premium with respect to the interest in the
underlying auto loans represented by those certificates. In determining whether
a certificateholder has purchased its interest in the auto loans at a premium, a
portion of the purchase price for a certificate may be allocated to the accrued
interest on the auto loans at the time of purchase as though such accrued
interest were a separate asset, thus reducing the portion of the purchase price
allocable to the certificateholder's undivided interest in the auto loans. A
purchaser who does not hold the certificate for sale to borrowers or in
inventory may elect under Section 171 of the Code to amortize that premium.
Under the Code, premium is allocated among the interest payments on the auto
loans to which it relates and is considered as an offset against and thus a
reduction of such interest payments. With certain exceptions, that election
would apply to all debt instruments held or subsequently acquired by the
electing holder. If the election is not made, the premium will be deductible as
an ordinary loss only upon disposition of the certificate or pro rata as
principal is paid on the auto loans.
Holders of certificates acquired at a premium are urged to consult with their
own tax advisors regarding the proper treatment of the certificates for federal
income tax purposes.
S-29
<PAGE>
SALE OF A CERTIFICATE
If a certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale, allocable to each of the
auto loans and the certificateholder's adjusted basis in each of them. However,
amounts attributable to accrued and unpaid interest which will be treated as
ordinary income. A certificateholder's adjusted basis will equal the
certificateholder's cost for the certificate, increased by any discount
previously included in income, and decreased, but not below zero, by any
previously amortized premium and by the amount of payments previously received
on the auto loans. Any gain or loss will be capital gain or loss if the
certificate was held as a capital asset, except that gain will be treated in
whole or in part as ordinary interest income to the extent of the seller's
interest in accrued market discount not previously taken into income on
underlying auto loans having a fixed maturity date of more than one year from
the date of origination. A capital gain or loss will be long-term or short-term
depending on whether or not the certificates have been owned for more than one
year.
FOREIGN CERTIFICATEHOLDERS
Interest attributable to the auto loans which is received by a foreign
certificateholder will generally not be subject to the normal 30% withholding
tax imposed on those payments, provided that (1) the foreign certificateholder
does not own, directly or indirectly, 10% or more of, and is not a controlled
foreign corporation related to, the seller and (2) that holder fulfills certain
certification requirements. Under those requirements, the holder must certify,
under penalty of perjury, that it is not a UNITED STATES PERSON and provide its
name and address. For this purpose, United States person means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision of the United States, an estate the income of which is includible in
gross income for United States federal income tax purposes regardless of its
source or a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust. Gain realized upon the sale of a certificate by a foreign
certificateholder generally will not be subject to United States withholding
tax. If, however, such interest or gain is effectively connected to the conduct
of a trade or business within the United States by that foreign
certificateholder, that holder will be subject to United States federal income
tax on the certificates at regular rates. Potential investors who are not United
States persons should consult their own tax advisors regarding the specific tax
consequences to them of owning a certificate.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The trustee will furnish or make available, within the prescribed period of time
for tax reporting purposes after the end of each calendar year, to each
certificateholder or each person holding a certificate on behalf of a
certificateholder at any time during such year, such information as the trustee
deems necessary or desirable to assist certificateholders in preparing their
federal income tax returns. Payments made on the certificates and proceeds from
the sale of the certificates will not be subject to a "BACKUP" withholding tax
of 31% unless, in general, a certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued NEW WITHHOLDING REGULATIONS
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The new withholding regulations
attempt to unify certification requirements and modify reliance standards. The
new withholding regulations will generally be effective for payments made after
December 31, 2000, subject to certain transition rules. Prospective investors
are urged to consult their own tax advisors regarding the new withholding
regulations.
S-30
<PAGE>
ERISA CONSIDERATIONS
CLASS A CERTIFICATES
The Class A Certificates may be purchased by ERISA plans as described in the
prospectus under "ERISA CONSIDERATIONS--ERISA CONSIDERATIONS REGARDING
SECURITIES WHICH ARE CERTIFICATES."
The Department of Labor has issued to the underwriter an individual prohibited
transaction exemption which, as described in the prospectus, generally exempts
from the application of the prohibited transaction provisions of Section 406(a),
Section 406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA and the excise
taxes imposed by Sections 4975(a) and (b) of the Internal Revenue Code,
transactions concerning the initial purchase, the holding and the subsequent
resale by employee benefit plans of certificates in pass-through trusts that
consist of receivables, loans and other obligations that meet the conditions and
requirements of the exemption. The loans covered by the underwriter's exemption
include loans such as the auto loans.
As of the initial cut-off date, there is no single auto loan included in the
trust that constitutes more than five percent of the aggregate unamortized
principal balance of the assets of the trust. Before purchasing a certificate
based on the underwriter's exemption, a fiduciary of a plan should itself
confirm (1) that such certificate constitutes a concerning CERTIFICATE for
purposes of the exemption and (2) that the conditions and other requirements set
forth in the exemption would be satisfied.
Any plan fiduciary considering the purchase of a Class A Certificate should
consult with its counsel as to the potential applicability of ERISA, the Code
and the underwriter's exemption prior to making an investment in the Class A
Certificates. Moreover, each plan fiduciary should determine whether, under the
general fiduciary standards of investment prudence and diversification, an
investment in the certificates is appropriate for the plan, taking into account
the overall investment policy of the plan and the composition of the plan's
investment portfolio.
The sale of the Class A Certificates to a plan is not a representation by us or
the underwriter that this investment meets all relevant legal requirements for
investments by plans generally or by any particular plan or that this investment
is appropriate for plans generally or any particular plan.
CLASS B CERTIFICATES
The Class B Certificates may not be acquired by (1) an employee benefit plan
that is subject to the provisions of ERISA, (2) a plan described in Section 4975
(e) (1) of the Internal Revenue Code or (3) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity. By its
acceptance of a Class B Certificate, each Class B Certificateholder will be
considered to have represented and warranted that it is not subject to these
limitations. For additional information regarding treatment of the Class B
Certificates under ERISA, see "ERISA CONSIDERATIONS--ERISA CONSIDERATIONS
REGARDING SECURITIES WHICH ARE CERTIFICATES" in the prospectus.
S-31
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement dated
among the seller, Household Finance Corporation and the underwriters
named below, the seller has agreed to sell to the underwriters and each of the
underwriters has agreed to purchase, the principal amount of the certificates
stated opposite its name below.
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
CLASS A CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
- -------------------------------------------------- -------------- --------------
[List of Underwriters]............................
</TABLE>
The underwriters propose to offer the certificates in part directly to
purchasers at the initial public offering prices stated on the cover page of
this prospectus supplement and in part to securities dealers at prices less
concessions not to exceed % per Class A Certificate and % per Class B
Certificate. The underwriters may allow, and the dealers may reallow,
concessions to brokers and dealers which will not exceed % per Class A
Certificate and % per Class B Certificate.
The seller and Household Finance Corporation have agreed to indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933, as amended.
In connection with this offering the underwriters may over-allot or effect
transactions which stabilize or maintain the market prices of the certificates
at levels above those which might otherwise prevail in the open market. This
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
Some legal matters relating to the certificates 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 Household Finance
Corporation, Household Automotive Finance Corporation and the seller, and by
Dewey Ballantine LLP, New York, New York, special counsel to the seller. Some
legal matters will also be passed upon for the underwriters by Dewey Ballantine
LLP. As of the date of this prospectus supplement, 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.
S-32
<PAGE>
GLOSSARY
AGGREGATE CERTIFICATE PRINCIPAL BALANCE means, as of any date, the aggregate
outstanding principal amount of all the certificates on that date.
AMOUNT FINANCED means, for an auto loan, the aggregate amount advanced under the
auto loan toward the financed vehicle's purchase price and related costs,
including amounts advanced for 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, for any COLLECTION PERIOD, the sum of (1) the COLLECTED
FUNDS for that COLLECTION PERIOD, (2) all PURCHASE AMOUNTS deposited in the
collection account during that COLLECTION PERIOD, (3) income on investments held
in the collection account, (4) the proceeds of any liquidation of the assets of
the trust, (5) the lesser of (a) the excess of the aggregate amount determined
under items (1)-(6) of "Payment Priorities" as stated beginning on page S-31,
over the amount on deposit in the collection account and (b) the reserve account
balance.
CLASS A INTEREST CARRYOVER SHORTFALL means, for any payment date, the sum of:
(1) excess of (a) the CLASS A INTEREST DISTRIBUTABLE AMOUNT for the preceding
payment date, over (b) the amount actually paid as interest to the class A
certificateholders on the preceding payment date, PLUS (2) interest on that
excess, to the extent permitted by law, at a rate per annum equal to the Class A
pass-through rate from the preceding payment date to but excluding the current
payment date.
CLASS A INTEREST DISTRIBUTABLE AMOUNT means, for any payment date, an amount
equal to the sum of: (1) the aggregate amount of interest accrued on the Class A
Certificates at the class A pass-through 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 (2) the
applicable CLASS A INTEREST CARRYOVER SHORTFALL for the current payment date.
CLASS A PERCENTAGE means %.
CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT means, for any payment date, the CLASS A
PERCENTAGE of the PRINCIPAL DISTRIBUTABLE AMOUNT.
CLASS B INTEREST DISTRIBUTABLE AMOUNT means, for any payment date, an amount
equal to the sum of: (1) the aggregate amount of interest accrued on the Class B
Certificates at the class B pass-through 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 (2) the
applicable CLASS B INTEREST CARRYOVER SHORTFALL for the current payment date.
CLASS B PERCENTAGE means %.
CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT means, for any payment date, the CLASS B
PERCENTAGE of the PRINCIPAL DISTRIBUTABLE AMOUNT.
COLLECTED FUNDS means, for any COLLECTION PERIOD, the amount of funds in the
collection account representing collections (excluding amounts representing
administrative charges, annual fees, taxes, assessments, credit insurance
charges or similar items) on the auto loans during the COLLECTION PERIOD,
including all NET LIQUIDATION PROCEEDS collected during the COLLECTION PERIOD
(but excluding any PURCHASE AMOUNTS).
COLLECTION PERIOD means, for any payment date other than the first payment date,
the calendar month preceding the month in which the payment date occurs, and in
the case of the first payment date, the period from the cut-off date through
.
CRAM DOWN LOSS means, with respect to an auto loan, if a court of appropriate
jurisdiction in an insolvency proceeding issues a final order reducing the
amount owed on the auto loan or otherwise modifying or restructuring the
scheduled payments to be made on the auto loan, an amount equal to (1) the
excess of the PRINCIPAL BALANCE of the auto loan immediately prior to the order
over the PRINCIPAL BALANCE of the auto loan as reduced and/or (2) if the
S-33
<PAGE>
court issues an order reducing the effective rate of interest on the auto loan,
the excess of the PRINCIPAL BALANCE of the auto loan immediately prior to the
order over the net present value--using as the discount rate the higher of the
APR on the auto loan or the rate of interest, if any, specified by the court in
the order--of the scheduled payments as so modified or restructured. A CRAM DOWN
LOSS shall be deemed to have occurred on the date of the order's issuance.
LIQUIDATED AUTO LOAN means an auto loan which if (1) 90 days have elapsed since
the financed vehicle was repossessed, (2) the servicer has determined in good
faith that all amounts it expects to recover have been received, (3) ten 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 (4) the financed vehicle has been sold and the proceeds
received.
MAXIMUM RESERVE ACCOUNT DEPOSIT AMOUNT means, for any payment date, an amount
equal to that portion of COLLECTED FUNDS representing interest collections on
the auto loans and NET LIQUIDATION PROCEEDSfor the applicable COLLECTION PERIOD
less the sum of: the servicing fee paid to any servicer other than Household
Finance Corporation, the fees due to the trustee, to the extent not paid by the
servicer, the CLASS A INTEREST DISTRIBUTABLE AMOUNT, the CLASS B INTEREST
DISTRIBUTABLE AMOUNT, the aggregate PRINCIPAL BALANCEs of all auto loans which
became LIQUIDATED AUTO LOANS during the COLLECTION PERIOD, plus the aggregate
amount of CRAM DOWN LOSSES during the COLLECTION PERIOD.
NET LIQUIDATION PROCEEDS means, with respect to LIQUIDATED AUTO LOANS, (1)
proceeds from the disposition of the underlying financed vehicle securing the
LIQUIDATED AUTO LOANS, minus the servicer's reasonable out-of-pocket costs,
including repossession and resale expenses not already deducted from the
proceeds, and any amounts required by law to be remitted to the borrower, (2)
any insurance proceeds, or (3) other monies received from the borrower or
otherwise.
POOL BALANCE means, as of any date of determination, the aggregate PRINCIPAL
BALANCEs of the auto loans, unless otherwise specified, as of the close of
business on the preceding business day.
PRINCIPAL BALANCE means, with respect to any auto loan, as of any date, the
AMOUNT FINANCED minus (a) that portion of all amounts received on or prior to
the date and allocable to principal in accordance with the terms of the auto
loan, and (b) any CRAM DOWN LOSS in respect of the auto loan. The PRINCIPAL
BALANCE of a LIQUIDATED AUTO LOAN or a purchased auto loan shall be zero.
PRINCIPAL DISTRIBUTABLE AMOUNT means, for any payment date, the product of (1)
% and (2) the excess of (a) the POOL BALANCE at the end of the second preceding
COLLECTION PERIOD, over (b) the POOL BALANCE at the end of the immediately
preceding COLLECTION PERIOD.
PURCHASE AMOUNT means, with respect to an auto loan, the PRINCIPAL BALANCE as of
the date the auto loan is purchased from the trust by the seller or the
servicer.
RESERVE ACCOUNT DEPOSIT AMOUNT means, for any payment date, the lesser of: (x)
the MAXIMUM RESERVE ACCOUNT DEPOSIT AMOUNT for that payment date and (y) the
RESERVE ACCOUNT SHORTFALL AMOUNT for that payment date.
RESERVE ACCOUNT SHORTFALL AMOUNT means, for any payment date, the excess of: (x)
the TARGETED RESERVE ACCOUNT BALANCE for that payment date over (y) the amount
on deposit in the reserve account as of the beginning of that payment date.
TARGETED RESERVE ACCOUNT BALANCE means, for any payment date, the lesser of: (1)
the greater of (a) % of the outstanding POOL BALANCE as of the end of the
prior COLLECTION PERIOD, and (b) $ ( % of the POOL BALANCE as of the
cut-off date) and (2) the AGGREGATE CERTIFICATE PRINCIPAL BALANCE.
S-34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOUSEHOLD AUTOMOTIVE
TRUST
SERIES
HOUSEHOLD
FINANCE
CORPORATION,
SERVICER
[UNDERWRITERS]
UNTIL ALL DEALERS THAT EFFECT TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS AND A PROSPECTUS SUPPLEMENT. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS AND A PROSPECTUS SUPPLEMENT WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
HOUSEHOLD AUTOMOTIVE TRUSTS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
------------------
THE SECURITIES--
- will be issued from time to time in series;
- will be issued by trusts established by Household Auto Receivables
Corporation;
- will be backed by a pool of auto loans held by the issuing trust;
- will be rated in one of the four highest rating categories by at least one
nationally recognized statistical rating organization; and
- may have the benefit of one or more forms of credit enhancement, such as
insurance policies, overcollateralization, subordination or reserve funds.
THE ASSETS--
The assets of each trust will primarily consist of a pool of auto loans, funds
on deposit in one or more accounts and forms of credit support described in this
prospectus and in the prospectus supplement.
- --------------------------------------------------------------------------------
YOU ARE ENCOURAGED TO READ THE SECTION ENTITLED "RISK FACTORS" ON PAGE 4 OF THIS
PROSPECTUS AND CONSIDER THESE FACTORS BEFORE MAKING A DECISION TO INVEST IN
THESE SECURITIES.
These securities are auto receivable asset-backed securities which represent
interests in or obligations of the trust issuing a series of securities and are
not interests in or obligations of any other person or entity.
Neither these securities nor the auto loans will be insured or guaranteed by any
governmental agency or instrumentality.
Retain this prospectus for future reference. This prospectus may not be used to
consummate sales of securities unless accompanied by the prospectus supplement
relating to the offering of these securities.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 1999
<PAGE>
IMPORTANT INFORMATION ABOUT THE INFORMATION PRESENTED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate documents
that progressively provide more detail: (1) this prospectus, which provides
general information, some of which may not apply to a particular series of
securities, and (2) the prospectus supplement, which describes the specific
terms of your series of securities.
This prospectus by itself does not contain complete information about the
offering of your securities; the balance of that information is contained in the
prospectus supplement. We suggest that you read both this prospectus and the
prospectus supplement in full. We cannot sell the securities to you unless you
have received both this prospectus and the prospectus supplement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Summary of Terms...................... 1
Risk Factors.......................... 3
Trust Assets.......................... 6
The Trustee........................... 6
The Servicer.......................... 7
The Subservicer....................... 7
The Seller............................ 7
The Automobile Financing Business of
the Subservicer..................... 8
General............................. 8
Application Processing and
Purchasing Criteria............... 8
Funding Package Completion,
Verification and Funding.......... 9
Post-Funding Quality Reviews........ 9
Servicing of Contracts.............. 9
Billing and Collection Process...... 10
Repossession........................ 10
Payment Terms of the Auto Loans..... 11
Insurance........................... 11
Description of the Securities......... 12
General Payment Terms of
Securities........................ 13
Payment Date Distributions.......... 13
Determination of Principal and
Interest on the Securities........ 13
Fixed Rate Securities............... 14
Floating Rate Securities............ 14
Indexed Securities.................. 14
Scheduled Amortization Securities;
Companion Securities.............. 15
Maturity and Prepayment
Considerations.................... 15
Yield Considerations................ 15
Book-Entry Registration............. 16
Definitive Securities............... 19
Credit and Cash Flow Enhancements... 19
The Trust Documents................... 20
<CAPTION>
Page
<S> <C>
Sale of Auto Loans by the
Subservicer to the Seller......... 20
Representations and Warranties of
the Subservicer................... 20
Transfer and Assignment of the Auto
Loans by the Seller to the
Trust............................. 21
Representation and Warranties of the
Seller; Repurchase Obligation..... 21
Payments on Auto Loans; Deposits to
Collection Account................ 23
Collection and Other Servicing
Procedures........................ 24
Servicing Compensation and Payment
of Expenses....................... 24
Evidence as to Compliance........... 24
Certain Matters Regarding the
Servicer and the Seller........... 25
Servicer Termination Event.......... 25
Rights Upon Servicer Termination
Event............................. 26
Certain Covenants of Each Trust..... 27
Certain Matters Regarding the
Trustee and the Trust............. 28
Limitation on Liability of the
Trustee........................... 28
Resignation of Trustee.............. 29
Legal Aspects Of The Auto Loans....... 29
Security Interest in Vehicles....... 29
Repossession........................ 30
Notice of Sale; Redemption Rights... 31
Deficiency Judgments and Excess
Proceeds.......................... 31
Consumer Protection Laws............ 31
Soldiers' and Sailors' Civil Relief
Act of 1940....................... 32
Other Limitations................... 32
Material Federal Income Tax
Considerations...................... 32
General............................. 32
Grantor Trust Securities............ 33
Debt Securities..................... 34
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Partnership Interests............... 35
FASIT Securities.................... 36
Discount and Premium................ 38
Backup Withholding.................. 41
Foreign Investors................... 41
State Tax Considerations.............. 42
ERISA Considerations.................. 42
General............................. 42
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ERISA Considerations regarding
Securities which are
Certificates...................... 42
ERISA Considerations regarding
Securities which are Notes........ 44
Consultation With Counsel........... 44
Methods of Distribution............... 45
Legal Matters......................... 45
Clearance, Settlement and Tax
Documentation Procedures............ A-1
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SUMMARY OF TERMS
This summary highlights selected information from this prospectus and does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
securities, we suggest that you carefully read this entire prospectus and the
accompanying prospectus supplement.
THE TRUSTS
Each series of securities will be issued by a separate trust.
SELLER
Household Auto Receivables Corporation, a Nevada corporation. The address of the
seller is 1111 Town Center Drive, Las Vegas, Nevada 89134.
SERVICER
Household Finance Corporation, a Delaware corporation. The address of the
servicer is
2700 Sanders Road, Prospect Heights, Illinois 60010.
SUBSERVICER
Household Automotive Finance Corporation, a Delaware corporation. The address of
the subservicer is 11452 El Camino Real, Suite 400, San Diego, California 92130.
THE SECURITIES
The securities of a series may be issued in one or more classes, as specified in
the prospectus supplement. One or more classes of securities:
- - may be entitled to receive distributions only of principal, only of interest
or any combination of principal and interest;
- - may be subordinated in right to receive distributions of principal and
interest to one or more other classes of the same series throughout the life
of the securities or during specified time periods;
- - may be entitled to receive distributions only after a specified period of time
has passed, a specified amount of principal has been paid down, or a specified
percentage of credit enhancement has built up; this could take the form of a
lockout feature, in which a class receives no principal distributions for an
initial period, then receives all or a portion of the principal distributions
during a subsequent period;
- - may be entitled to receive distributions in accordance with a schedule or
formula or on the basis of collections from designated portions of the assets
in the issuing trust;
- - may be entitled to receive interest at a fixed rate or a variable rate; and
- - may have a balance that may decrease based on the amortization of auto loans
or increase based on principal collections used to purchase additional auto
loans or classes of securities.
The timing and amounts of distributions may vary among classes, over time, or
otherwise as specified in the prospectus supplement.
Interest only and principal only securities are subject to investment risks that
are a function of how quickly principal payments are received on the underlying
pool of auto loans, optional or mandatory prepayment features of the securities,
and the price paid for the securities. Investors in these types of securities
could lose their investment. The ratings assigned to these securities frequently
will not address these risks, so a substantial loss may not be inconsistent with
a high rating. These interest only and principal only securities are appropriate
investments only for sophisticated investors who are able to independently
assess the risks of their investment.
TRUST PROPERTY
Each trust will hold:
- - a pool of auto loans, each of which will be secured by new or used
automobiles, vans and light duty trucks;
- - amounts held in trust accounts; and
- - forms of credit support, if applicable.
You will find a description of the pool of auto loans in the prospectus
supplement. The seller will have purchased the auto loans from the subservicer
and will sell them to the trust. If a trust has not purchased all of the auto
loans at the time you purchase your securities, it will purchase the remainder
from the
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subservicer over a period specified in the prospectus supplement. Some trusts
may, during a specified time period, use principal collections on its auto loans
to purchase additional auto loans.
CREDIT ENHANCEMENT
Credit enhancement refers to a mechanism that is intended to protect the owners
of securities against losses due to defaults on the auto loans. A series of
securities, or some of the classes within the series, may have the benefit of
one or more types of credit enhancement such as the following:
- - the use of excess interest to cover losses and to distribute as principal to
create overcollateralization;
- - the subordination of distributions on the lower classes of securities to the
required distributions of more senior classes of securities;
- - the allocation of losses on the auto loans to the lower classes of securities;
- - the use of cross support, reserve funds, financial guarantee insurance
policies, guarantees, letters of credit and similar instruments and
arrangements;
- - swaps (including currency swaps) and other derivative instruments and interest
rate protection agreements;
- - repurchase or put obligations;
- - yield supplement agreements; and
- - other arrangements similar to those described above.
The protection against losses afforded by any credit enhancement will be limited
in the manner described in the prospectus supplement.
PRE-FUNDING FEATURE
A trust may enter into agreements with the seller, in which the seller will sell
additional auto loans to the trust after the securities are issued. The transfer
of auto loans after the date the securities are issued is known as the
pre-funding feature. Any subsequent auto loans will be required to conform to
the requirements described in the prospectus supplement. If the pre-funding
feature is used, the trustee will be required to deposit all or a portion of the
proceeds of the sale of the securities of the series in a segregated account.
The subsequent auto loans will be transferred to the trust in exchange for money
released from the segregated account. These transfers must occur within a
specified period, not to exceed one year. If a trust elects federal income
treatment as a grantor trust, the pre-funding period will be limited to three
months. If all of the monies originally deposited in the account are not used by
the end of the specified period, all remaining monies will be applied as a
mandatory prepayment of a class or classes of securities.
FEDERAL INCOME TAX CONSEQUENCES
The securities of each series will, for federal income tax purposes, constitute
one of the following:
- - interests in a trust treated as a grantor trust under applicable provisions of
the Internal Revenue Code;
- - debt secured by the underlying auto loans;
- - interests in a trust which is treated as a partnership; or
- - REGULAR INTERESTS or HIGH-YIELD INTERESTS in a trust treated as a financial
asset securitization investment conduit or, FASIT under the Internal Revenue
Code.
We suggest that you review "Material Federal Income Tax" Consequences beginning
on page 45 in this prospectus and in the prospectus supplement. In addition, you
should consult your own tax advisor concerning your investment.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit sharing or other employee benefit plan may wish
to review with its legal advisors whether the purchase, holding or disposition
of securities could give rise to a prohibited transaction under ERISA, or the
Internal Revenue Code, and whether an exemption from the prohibited transaction
rules is available. We suggest that you review "ERISA Considerations" beginning
on page 59 in this prospectus and in the prospectus supplement.
RATING
Each class of securities offered by a prospectus supplement will be rated in one
of the four highest rating categories of at least one nationally recognized
statistical rating agency.
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS PRIOR TO ANY PURCHASE OF ANY
CLASS OF SECURITIES. YOU SHOULD ALSO CONSIDER THE INFORMATION UNDER THE CAPTION
"RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
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YOU MAY NOT BE ABLE TO SELL YOUR A secondary market for these securities is
SECURITIES, AND MAY HAVE TO HOLD YOUR unlikely to develop. If it does develop, it may
SECURITIES TO MATURITY EVEN THOUGH not provide you with sufficient liquidity of
YOU MAY WANT TO SELL THEM. investment or continue for the life of these
securities. The underwriters may establish a
secondary market in the securities, although no
underwriter will be obligated to do so. The
securities are not expected to be listed on any
securities exchange or quoted in the automated
quotation system of a registered securities
association.
Issuance of the securities in book-entry form may
also reduce the liquidity in the secondary trading
market, since some investors may be unwilling to
purchase securities for which they cannot obtain
definitive physical securities.
PREPAYMENTS ON THE AUTO LOANS COULD - The yield to maturity of the securities may be
CAUSE YOU TO BE PAID EARLIER THAN YOU adversely affected by a higher or lower than
EXPECT, WHICH MAY ADVERSELY AFFECT anticipated rate of prepayments on the auto
YOUR YIELD TO MATURITY. loans. If you purchase a security at a premium
based on your expectations as to its maturity
or weighted average life, and the security pays
principal more quickly than you expected, your
yield will be reduced and you may not recover
the premium you paid. In addition, if you
purchase a security at a discount based on your
expectations as to its maturity or weighted
average life, and the security pays principal
more slowly than you expected, your yield will
be lower than you anticipated.
- The yield to maturity on interest only
securities will be extremely sensitive to the rate
of prepayments on the auto loans. If the auto
loans prepay very quickly the yield on an
interest-only security could be dramatically
reduced.
- The auto loans may be prepaid in full or in
part at any time.
- We cannot predict the rate of prepayments of
the loans, which is influenced by a wide variety
of economic, social and other factors,
including prevailing interest rates, the
availability of alternative financing, local
and regional economic conditions and certain
natural disasters such as floods, hurricanes,
earthquakes and tornadoes. Therefore, we can
give no assurance as to the level of
prepayments that a trust will experience.
- One or more classes of securities of any series
may be subject to optional or mandatory redemption
in whole or in part, on or after a specified
date, or on or after the time when the
aggregate outstanding principal amount of the
auto loans or the securities is less than a
specified amount or percentage.
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- One or more classes of securities of any series
may be subject to optional or mandatory redemption
in whole or in part, on or after a specified
date, or on or after the time when the
aggregate outstanding principal amount of the
auto loans or the securities is less than a
specified amount or percentage.
- Since prevailing interest rates are subject to
fluctuation, there can be no assurance that you
will be able to reinvest these amounts at a
yield equaling or exceeding the yield on your
securities. You will bear the risk of
reinvesting unscheduled distributions resulting
from a redemption.
NON-PRIME AUTO LOAN POOLS WILL INCUR A loan is usually considered non-prime because the
HIGHER LOSSES THAN PRIME AUTO LOAN borrower has limited income, past credit problems,
POOLS. such as prior bankruptcy or a history of
delinquent payments on other debt, or a limited or
no credit history. Non-prime loans experience a
higher rate of delinquency and loss than prime
loans.
Non-prime loans frequently finance the purchase of
used vehicles. Because the value of a used vehicle
is more difficult to determine, upon sale of a
repossessed vehicle, a greater loss may be
incurred.
The added risk presented by non-prime auto loans
is considered in structuring the issuances of
securities. However, we can give no assurance that
the structure established will be adequate to
prevent losses to some or all of the
securityholders.
SECURITY INTERESTS MAY NOT BE The certificates of title for the financed
PERFECTED, WHICH COULD ALLOW OTHERS vehicles will be held by the subservicer. The
SUPERIOR RIGHTS TO THE TRUST ASSETS. certificates of title will not be endorsed or
amended to identify the secured party. Because
this will not be done, the security interests may
be defeated through fraud, forgery, negligence or
error and will not be perfected in every state. If
someone has a security interest in a vehicle that
is superior to the interest of the trustee, you
could experience delays in payments or a loss on
your investment in the securities.
STATE AND FEDERAL CREDIT PROTECTION Auto lending is regulated at both the federal and
LAWS MAY LIMIT COLLECTION OF state levels and violations of these laws,
PRINCIPAL AND INTEREST ON THE AUTO policies and principles may limit the ability of
LOANS. the servicer to collect all or part of the amounts
due on the auto loans, may entitle the borrower to
a refund of amounts previously paid and, in
addition, could subject the trust, as the owner of
the auto loan, to claims for damages and to
administrative enforcement. The occurrence of any
of the foregoing could cause losses on your
securities.
INSOLVENCY OF THE SELLER OR SUBSERVICER In some circumstances, a bankruptcy of the seller
MAY REDUCE OR DELAY PAYMENTS TO or subservicer may delay or reduce payments to
SECURITYHOLDERS. securityholders. In the event of a bankruptcy of
the subservicer or the seller, a court or
bankruptcy trustee could conclude the subservicer
or seller still owns the auto loans or that the
seller, the subservicer and the trust are all a
single entity for bankruptcy purposes. If a court
or bankruptcy trustee would reach either of these
conclusions,
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you could experience delays in payments or a loss
on your investment in the securities.
We have taken steps in structuring the
transactions contemplated by this prospectus to
minimize these bankruptcy risks. Our legal counsel
has advised us that a court would not order a
consolidation of the seller, subservicer and the
trust for bankruptcy purposes or determine that
the sale of the auto loans to the seller was
actually a pledge rather than a sale.
SECURITYHOLDERS HAVE NO RECOURSE There is no recourse for losses against the
AGAINST THE SELLER, SERVICER OR servicer, subservicer or seller. The securities
SUBSERVICER FOR LOSSES. represent obligations solely of the issuing trust.
No securities will be guaranteed by the seller,
the servicer, or the trustee. Consequently, if
payments on the auto loans, and to the extent
available, any credit enhancement, are
insufficient to pay the securities in full, you
have no rights to obtain payment from the
servicer, subservicer or seller.
INSURANCE ON VEHICLES MAY NOT BE At the time the subservicer purchases the auto
MAINTAINED, WHICH MAY LEAD TO LOSSES loans from the dealers it requires that the
ON THE AUTO LOANS. borrowers have theft and damage insurance on the
vehicles. There can be no assurance that the
borrower will maintain the insurance coverage on
the vehicle. The subservicer will not obtain
insurance coverage without the consent of the
borrower if it learns that a vehicle is uninsured.
If an uninsured loss occurs and the borrower
defaults on the auto loan at a time when the
overcollateralization or subordination provisions
are not sufficient to ensure payments are made to
securityholders, securityholders may be subject to
a delay in receiving payments or a loss on their
investment in the securities.
THE RATINGS ASSIGNED TO YOUR SECURITIES The ratings assigned to the securities will be
BY THE RATING AGENCIES MAY BE LOWERED based on, among other things, the adequacy of the
OR WITHDRAWN AT ANYTIME, WHICH MAY assets of the trust and any credit enhancement for
AFFECT YOUR ABILITY TO SELL YOUR a series of securities. Any rating which is
SECURITIES. assigned may not remain in effect for any given
period of time or may be lowered or withdrawn
entirely by the rating agencies if, in their
judgment, circumstances in the future so warrant.
Ratings may also be lowered or withdrawn because
of an adverse change in the financial or other
condition of a provider of credit enhancement or a
change in the rating of a credit enhancement
provider's long term debt at any time, which may
affect your ability to sell your securities.
INABILITY OF THE SELLER OR SERVICER TO If a representation and warranty concerning an
PURCHASE AUTO LOANS FROM THE TRUST auto loan is breached, the transaction documents
WHEN A REPRESENTATION OR WARRANTY IS require either the seller or the servicer to
BREACHED MAY CAUSE YOUR PAYMENTS TO purchase the loan from the trust. If the seller or
BE REDUCED OR DELAYED. servicer, as applicable, is unable to purchase
such auto loans and no other party is obligated to
perform or satisfy these obligations, you may
experience delays in receiving payments and
losses.
SUBORDINATION OF CERTAIN SECURITIES MAY Distributions on one or more classes of securities
RESULT IN REDUCED PAYMENTS TO THOSE of a series may be subordinated in priority of
SECURITIES. payment to distributions on one or more other
classes of securities. Subordination of a class of
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securities has the effect of increasing the
likelihood of payment on the senior classes of
securities in that series and decreasing the
likelihood of payment on that subordinated class
of securities.
CREDIT ENHANCEMENT, IF PROVIDED, WILL Credit enhancement may be provided in limited
BE LIMITED IN BOTH AMOUNT AND SCOPE amounts to cover some, but not all, types of
OF COVERAGE, AND MAY NOT BE losses on the auto loans and may reduce over time
SUFFICIENT TO COVER ALL LOSSES OR in accordance with a schedule or formula.
RISKS ON YOUR INVESTMENT. Furthermore, credit enhancement may provide only
very limited coverage as to some types of losses,
and may provide no coverage as to other types of
losses. Credit enhancement does not guarantee any
specified rate of prepayments, which is one of the
principal risks of your investment. The amount and
types of credit enhancement coverage, the
identification of any entity providing the credit
enhancement, the terms of any subordination and
any other information will be described in the
accompanying prospectus supplement.
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TRUST ASSETS
We will establish a separate trust to issue each series of securities. The
securities will be backed by the property of that issuing trust. The primary
asset of each trust will be a pool of auto loans originated by the dealers and
purchased by the subservicer according to the subservicer's agreements with the
dealers.
The property of each trust will include:
- the pool of auto loans for new and used automobiles, vans and light duty
trucks;
- any amounts in the accounts established for that trust;
- security interests in the financed vehicles;
- rights to proceeds from insurance policies covering the borrowers or the
financed vehicles; and
- contract rights against dealers and against the seller, servicer and
subservicer for breaches of representations or warranties relating to the
auto loans.
THE TRUSTEE
The trustee for each trust will be named in the accompanying prospectus
supplement. The trustee's liability in connection with the issuance and sale of
the securities is limited to the express obligations of that trustee set out in
the trust documents. A trustee may resign at any time, in which event the
servicer will be obligated to appoint a successor trustee. In addition, if the
trustee ceases to be eligible as trustee pursuant to the trust documents or it
becomes insolvent, the trustee may be removed. Any resignation or removal of a
trustee will not become effective until acceptance of the appointment by the
successor trustee.
THE SERVICER
Household Finance Corporation will act as the servicer for the auto loans. The
servicer was incorporated in Delaware in 1925, as successor to an enterprise
which was established by the same ownership in 1878. The address of its
principal executive office is 2700 Sanders Road, Prospect Heights, Illinois
60070. The servicer is a subsidiary of Household International, Inc.
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The servicer and its subsidiaries offer a diversified range of financial
services. The principal product of the servicer'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, auto loans
and unsecured loans to middle-income consumers in the United States. Loans are
made through branch lending offices under the brands "HFC" and "Beneficial," and
through direct mail and telemarketing efforts. The servicer also acquires
portfolios of open-end and closed-end, secured and unsecured loans.
Through banking subsidiaries, the servicer also offers both MasterCard* and
VISA* credit cards to residents throughout the United States. Through its
subsidiaries, the servicer 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.
Where permitted by law, the servicer offers credit life and credit accident,
health and disability insurance to its customers. This insurance is generally
written directly by, or reinsured with, one of the servicer's insurance
affiliates.
The servicer also operates a cooperative program with H&R Block Tax Services,
Inc. and some of its franchises and independent tax preparers to provide loans
to borrowers who electronically file their income tax returns with the IRS and
are entitled to tax refunds.
As of June 30, 1999, the servicer had approximately $ billion in total assets,
approximately $ billion in total liabilities and approximately $ billion in
shareholder's equity. The servicer is not subject to legal proceedings which are
expected to have a material impact on its business or financial condition, taken
as a whole.
THE SUBSERVICER
The subservicer, Household Automotive Finance Corporation, is a Delaware
corporation. It was formed in a merger between a subsidiary of Household
International, Inc. and ACC Consumer Finance Corporation. 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 the subservicer
are at 11452 El Camino Real, Suite 400, San Diego, California 92130.
The subservicer is an automobile finance company specializing in the indirect
financing of auto sales contracts to consumers with non-prime credit. Through a
subsidiary, the subservicer also offers auto loans directly to consumers. The
indirect lending program provides automobile dealers with an alternative source
of financing for those consumers who typically are not qualified to use the
dealer's traditional financing sources, such as banks. Under this program, the
subservicer purchases auto loans from originating automobile dealers.
The subservicer is licensed, where required, to purchase and service auto loans.
The subservicer is not subject to any legal proceedings which are expected to
have a material impact on its business or financial condition.
THE SELLER
The seller, Household Auto Receivables Corporation, was incorporated in the
State of Nevada on March 25, 1998. It is a wholly-owned special purpose
subsidiary of the servicer, Household Finance Corporation. The seller was
organized for the special purposes of engaging in the type of transactions
described in this prospectus and any activities which help accomplish those
purposes. Neither the servicer's nor the seller's board of directors intends to
change the business purpose of the seller. The seller's principal executive
office is at 1111 Town Center Drive, Las Vegas, Nevada 89134. As of the date of
this prospectus, the seller is not subject to any legal proceedings.
* MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and VISA, USA, Inc., respectively.
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The seller has purchased or will purchase non-prime auto loan contracts secured
by new and used automobiles, light duty trucks and vans from the subservicer.
The seller will sell each auto loan to the trust at a price equal to its
principal balance.
Information with respect to the specific auto loan pool will be set out in the
prospectus supplement, including, to the extent appropriate, the composition,
the distribution by APR and by the states of origination, the portion of the
auto loan pool consisting of actuarial loans and of simple interest loans and
the portion of the auto loan pool secured by new vehicles and by used vehicles.
THE AUTOMOBILE FINANCING BUSINESS OF THE SUBSERVICER
GENERAL
The automobile financing business of the subservicer consists of (1) the
purchase of auto loans of non-prime borrowers from a network of automobile
dealers and (2) the origination through a subsidiary of the subservicer of auto
loans made directly to non-prime borrowers. NON-PRIME BORROWERS are borrowers
who are unable to obtain automobile financing from traditional sources because
of limited credit history or past credit problems including bankruptcy,
chargeoffs or other derogatory credit events. Approximately 95% of the dealers
are franchisees of major automobile manufacturers. The auto loans are secured by
new or used automobiles, light duty trucks and vans. They typically bear a
higher APR than charged by traditional sources of financing.
APPLICATION PROCESSING AND PURCHASING CRITERIA
The subservicer markets its services to dealers under several different programs
and uses a tiered pricing structure designed to price loans according to the
borrower's credit characteristics. For example, there are different programs for
borrowers with limited credit histories and for borrowers who have been the
subject of a bankruptcy that was discharged within the last five years. In
addition, borrowers meeting progressively more stringent credit criteria are
offered more favorable rates under other programs.
The subservicer's application processing is conducted in seven regional credit
centers. It focuses 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. Then, a conditional underwriting decision is made in one of
two ways. If the application meets certain criteria, then the decision is made
by an automated application decision model. If not, the decision is made by a
credit officer after evaluating the credit bureau data, whether the application
meets the criteria under the subservicer's policy guidelines and its proprietary
credit scoring model. Despite deficiencies that may exist in a borrower's credit
history, the credit scoring model predicts future delinquency and credit loss
based on statistical modeling of the subservicer's historical portfolio. The
criteria under the subservicer's policy guidelines include the following
factors: the borrower's residence stability; employment stability; income level
relative to expenses; and past performance on automobile-related debt. Once a
conditional underwriting decision is made, 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 the subservicer, prohibit the sale or transfer of the
financed vehicle without the subservicer's consent, and allow for acceleration
of maturity of the 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.
Currently, for new vehicles, the subservicer finances 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,
the subservicer finances 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 does not
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exceed 150% of the invoice or wholesale value as quoted in the used car guide.
The maximum amount financed does not exceed $30,000. 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 better credit profiles, no downpayment is currently required
while other programs require a minimum downpayment of $1,000. The value of a
trade-in vehicle (as determined by industry accepted used car guides) may be
applied to the downpayment; however, manufacturer rebates may not be applied
toward the required downpayment.
FUNDING PACKAGE COMPLETION, VERIFICATION AND FUNDING
After receiving an approval from one of the subservicer's regional credit
centers, the dealers compile a set of documents that are consistent with the
subservicer's documentation requirements. Then, they send funding packages to
the subservicer's central funding group in San Diego, California. The
subservicer 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.
The subservicer'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, the terms of the contract, the
source of the down payment and the equipment on the vehicle. The subservicer
requires a telephone interview of the borrower prior to funding a contract if
the borrower is a higher credit risk. The subservicer believes this process
reduces the risk of misrepresentation by dealers and/or borrowers and provides a
basis for future borrower contact.
The subservicer may return the funding package if it does not comply with the
terms of the initial approval or contains facts that were not disclosed during
the approval process. As an additional quality control check, the subservicer's
data processing systems perform an automated review of the contracts and
identify any characteristics that do not comply with the subservicer's minimum
underwriting standards.
POST-FUNDING QUALITY REVIEWS
The subservicer 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 weekly for each of the subservicer'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 weekly basis, reports are prepared which summarize policy
exceptions, processing errors, documentation deficiencies and credit decisions
which are considered overly aggressive by the subservicer's quality control
manager.
SERVICING OF CONTRACTS
The subservicer services all of the contracts it purchases or originates. The
subservicer'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. The subservicer services
all contracts in accordance with policies and procedures established by the
subservicer in consultation with the servicer, from time to time. In accordance
with these policies and procedures and reasonable commercial practice, the
subservicer may take appropriate action in its discretion, including, but not
limited to, extending payment arrangements, deferment pending a change in
circumstances, referral for repossession and/or legal action and contract
restructuring. The subservicer'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 two months in any contract in a consecutive twelve month period.
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An auto loan is considered contractually delinquent if less than 90% of the
required payment due from the borrower has been received by the subservicer.
Generally, auto loans that are more than 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 these payments must be made within a 30 day
period. When a loan is extended, it is no longer considered delinquent. Under
the subservicer's current policies, an auto loan will generally be charged-off
upon the earlier of:
- the elapse of 90 days since the financed vehicle was repossessed;
- a good faith determination that all amounts expected to be recovered have
been received;
- 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
- the date on which the financed vehicle has been sold and the proceeds
received.
The delinquency and charge-off policies and collection practices discussed in
this prospectus may change over time in accordance with the business judgment of
the subservicer and the servicer, changes in applicable laws and regulations,
and other considerations.
BILLING AND COLLECTION PROCESS
The subservicer 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 the subservicer. On a daily basis, the lock-box bank retrieves
and processes payments received and then deposits the entire amount into the
lock-box account. Borrower payment data is simultaneously electronically
transferred to the subservicer for posting to computerized records.
The subservicer's collection process aims to closely monitor contracts and
maintain frequent contact with borrowers. As part of this process, the
subservicer makes early, frequent contact with delinquent borrowers in an
attempt to identify the underlying causes of a borrower's delinquency and to
make an early collection risk assessment.
The subservicer maintains a collection software package with customized features
designed for high-intensity collection operations. The package includes a
high-penetration autodialer, which the subservicer uses to contact each borrower
whose account becomes past due. In addition to telephonic contact, the
subservicer also typically sends past due notices to borrowers when an account
becomes ten days past due. In some cases, the subservicer uses the Western Union
Quick Collection Service to collect borrowers' payments and to reduce the
incidence of bad checks. The subservicer believes that these proactive steps in
the collection process reduce its repossession rates and loss levels.
REPOSSESSION
The subservicer repossesses a vehicle when it believes that the resolution of a
delinquency is not likely generally when the borrower is 80 days delinquent, or
when the collateral is at risk. The subservicer 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. The
subservicer uses independent, licensed and bonded repossession agencies to
repossess vehicles as well as the services of an agency that traces SKIPS, which
are situations where neither the borrower nor the vehicle can be located, to
assist them in locating vehicles. When a vehicle is repossessed, it generally is
sold through a public auction within 60 days of repossession. The subservicer
generally uses its own staff to pursue recoveries of deficiency balances, but it
may also use outside collection agencies which share in any recoveries. If the
subservicer has reason to believe that a dealer violated any representations or
warranties made to the subservicer on a defaulted contract, the subservicer may
pursue its remedies against the dealer under the dealer agreement.
The subservicer 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, the subservicer records a net loss equal to
the outstanding principal balance of the auto loan, less the proceeds from the
sale of the vehicle.
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If an auto loan becomes 150 days delinquent, but is not in bankruptcy, and the
subservicer has repossessed the vehicle, but not yet received the sale proceeds,
then the subservicer reports a loss equal to the outstanding principal balance
of the contract, less the estimated auction value of the vehicle and any
expected insurance recoveries. The estimated auction value is based upon
wholesale used car values published by nationally recognized firms. If a
contract becomes 150 days delinquent or 210 days delinquent, in the case of a
bankrupt borrower, and the subservicer has not repossessed the vehicle, then the
subservicer records a loss equal to the outstanding principal balance of the
contract. Any recoveries received subsequent to the contract being charged-off,
including amounts from the borrower's insurance policies or service contracts,
from dealers under a breach of the dealer agreements or from deficiency balances
recovered from borrowers, are treated as loss adjustments in the period when
these recoveries are received.
PAYMENT TERMS OF THE AUTO LOANS
Each auto loan provides for the allocation of payments according to the SIMPLE
INTEREST method or the ACTUARIAL METHOD. The scheduled payment on each auto loan
is a fixed level payment that will pay off the full amount over its term
assuming the simple interest borrower makes no early or late payments.
Payments on simple interest loans will be applied first to interest accrued
through the date immediately before the date of payment and then to unpaid
principal. Accordingly, if a borrower makes his payment before its due date, the
portion of the payment applied to interest will be less than if the payment had
been made on the due date. As a result, the portion of the payment applied to
reduce the principal balance will be correspondingly greater, and the principal
balance will pay down more rapidly than scheduled.
Conversely, if a borrower pays an installment after its due date, the portion of
the payment applied to interest will be greater than if the payment had been
made on the due date. As a consequence, the portion of the payment applied to
reduce the principal balance will be correspondingly less, and the principal
balance will pay down 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 loan provides for principal reduction of the loan over a series of
fixed level monthly installments. Each scheduled payment is deemed to consist of
an amount of interest equal to 1/12 of the stated annual percentage rate of
interest, commonly known as annual percentage rate or APR, of the loan
multiplied by the scheduled principal balance of the receivable and an amount of
principal equal to the remainder of the scheduled payment. No adjustment is made
in the event of early or late payments, although in the case of late payments
the borrower may be subject to a late charge.
Information with respect to the specific auto loan pool will be set out in the
prospectus supplement, including, to the extent appropriate, the composition,
the distribution by APR and by the states of residence at origination, the
portion of the auto loan pool consisting of actuarial loans and of simple
interest loans and the portion of the auto loan pool secured by new vehicles and
by used vehicles.
INSURANCE
The subservicer requires that theft and physical damage insurance policies be
maintained by the borrowers naming the subservicer as the loss payee. Currently,
the maintenance of this insurance is monitored by a third party. The subservicer
does not force-place insurance.
The subservicer maintains fidelity bond coverage insuring against losses through
wrongdoing of its officers, employees and agents.
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DESCRIPTION OF THE SECURITIES
The securities will be issued in series. The following summaries describe the
material provisions of the securities.
The securities may be offered in the form of certificates representing
beneficial ownership interests in the auto loans held by the trust or in the
form of notes representing debt secured by the auto loans held by the trust.
Each series or class of securities may have a different rate of interest, which
may be fixed or adjustable. The prospectus supplement will specify the interest
rate for each series or class of securities, or the initial interest rate and
the method for determining subsequent changes to the interest rate.
A series may include one or more classes of interest only or principal only
securities. In addition, a series may include two or more classes that differ as
to timing, sequential order, priority of payment, interest rate or amount of
distributions of principal or interest or both. Distributions of principal or
interest or both on any class may be made upon the occurrence of specified
events, in accordance with a schedule or formula, or on the basis of collections
from designated assets of the trust. A series may include one or more classes of
securities, as to which accrued interest will not be distributed but rather will
be added to the principal or notional balance of the security on each payment
date.
A series of securities may include one or more classes of securities that are
senior to one or more classes of subordinate securities in respect of
distributions of principal and interest and allocations of losses on the auto
loans.
A series of securities may have a balance that may decrease based on the
amortization of auto loans or increase based on principal collections used to
purchase additional auto loans.
Each trust may also issue classes of subordinated equity securities which will
represent the right to receive the proceeds of the trust property after all
required payments have been made to the holders of all of the senior and
subordinate notes or certificates issued by the trust, and following any
required deposits to any reserve account that may be established for the benefit
of the holders of the notes or certificates. These subordinated classes may
constitute what are commonly referred to as the RESIDUAL INTEREST, SELLER'S
INTEREST OR THE GENERAL PARTNERSHIP INTEREST, depending upon the treatment of
the trust for federal income tax purposes. These subordinated classes generally
will not have principal and interest components. Any losses suffered by the
trust will first be absorbed by the residual class of securities, or as
described in the prospectus supplement.
The prospectus supplement relating to a series of securities will describe the
following specific terms of that series:
- the aggregate principal amount, interest rate, and authorized
denominations of each class of securities;
- a statistical profile of the auto loans backing that series;
- the terms of any credit enhancement for that series;
- a description of other material assets in the trust, including any reserve
fund;
- the final scheduled distribution date of each class of securities;
- the method used to calculate the rate at which interest on each class of
securities will accrue, the time period during which interest on each
class of securities will accrue, the order of priority of the application
of interest to the respective classes and the manner of distribution of
interest among each class of securities;
- the method to be used to calculate the amount of principal required to be
applied to each class of securities of each series on each payment date,
the timing of the application of principal and the order of priority of
the application of principal to the respective classes of securities;
- additional information about the plan of distribution of the securities;
and
- the federal income tax characterization of the securities.
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GENERAL PAYMENT TERMS OF SECURITIES
Securityholders will be entitled to receive payments on their securities on
specified payment dates. Payment dates will occur monthly, quarterly or
semi-annually, as described in the prospectus supplement.
The prospectus supplement will describe a record date for each payment date, as
of which the trustee or its paying agent will fix the identity of the
securityholders for the purpose of receiving payments on that payment date. The
prospectus supplement and the agreements will describe a period, known as the
COLLECTION PERIOD, prior to each payment date. Interest accrued and principal
collected on the auto loans during a collection period will be required to be
remitted by the servicer to the trustee prior to the payment date and will be
used to distribute payments to securityholders on that payment date.
The agreements may provide that all or a portion of the principal collected on
the auto loans may be applied by the trustee to the acquisition of subsequent
auto loans during a specified period rather than used to distribute payments of
principal to securityholders during that period. These securities would then
possess an interest only period, also commonly referred to as a REVOLVING
PERIOD, which will be followed by an AMORTIZATION PERIOD, during which principal
will be paid. Any interest only or revolving period may terminate prior to the
end of the specified period and result in the earlier than expected principal
repayment of the securities.
None of the securities or the auto loans will be guaranteed or insured by any
governmental agency or instrumentality, the seller, the servicer, the
subservicer, the trustee, or any of their respective affiliates.
PAYMENT DATE DISTRIBUTIONS
On each payment date, distributions of principal and interest or, where
applicable, of principal only or interest only, on each class of securities will
be made either by the trustee or a paying agent appointed by the trustee, to the
persons who are registered as securityholders at the close of business on the
record date. Interest that accrues and is not payable on a class of securities
may be added to the principal balance of each security of the class.
Distributions will be made in immediately available funds, by wire transfer or
otherwise, to the account of a securityholder. If the securityholder has
notified the trustee or the paying agent, as the case may be, and the agreements
provide, payment may be in the form of a check mailed to the address of the
person entitled thereto as it appears on the register. The final payment
distribution upon retirement of the securities will be made only upon
presentation and surrender of the securities at the office or agency of the
trustee specified in the notice to securityholders of the final distribution.
DETERMINATION OF PRINCIPAL AND INTEREST ON THE SECURITIES
The method of determining, and the amount of, distributions of principal and
interest or, principal only or interest only, on a particular series of
securities will be described in the prospectus supplement. Each class of
securities, except for principal only securities, may bear interest at a
different interest rate. Interest on the securities will be calculated either on
the basis of a 360-day year consisting of twelve 30-day months, on the basis of
the actual number of days in the interest period over 360, or on the basis of
the actual number of days in the interest period over 365.
On each payment date, the trustee or the paying agent will distribute to each
securityholder an amount equal to the percentage interest represented by the
security held by the holder multiplied by the total amount to be distributed on
that payment date on account of that class.
For a series of securities that includes two or more classes, the timing,
sequential order, priority of payment, amount of distributions in respect of
principal, any schedule or formula or other provisions applicable to the
determination of distributions among multiple classes of senior securities or
subordinate securities will be described in the prospectus supplement.
Prior to each payment date the trustee will determine the amounts of principal
and interest which will be due to securityholders on that payment date. If the
amount then available to the trustee is insufficient to cover the amount due to
securityholders, the trustee will be required to notify the credit enhancement
provider, if there is one for that series, and the credit enhancement provider,
will be required to fund the deficiency.
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FIXED RATE SECURITIES
Each class of securities may bear interest at an annual fixed rate or at a
variable or adjustable rate per annum, as more fully described below and in the
prospectus supplement. Each class of fixed rate securities will bear interest at
the applicable interest rate specified in the prospectus supplement.
FLOATING RATE SECURITIES
Each class of floating rate securities will bear interest for each related
interest period at a rate per annum determined by reference to an interest rate
index, commonly known as the BASE RATE, plus or minus a spread, if any, or
multiplied by a spread multiplier, in each case as specified in the prospectus
supplement. The SPREAD is the percentage above or below the base rate at which
interest will be calculated that may be specified in the prospectus supplement
as being applicable to such class, and the SPREAD MULTIPLIER is the percentage
that may be specified in the prospectus supplement as being applicable to such
class.
The prospectus supplement will designate a base rate for a given floating rate
security based on the London interbank offered rate, commonly called LIBOR,
eurodollar synthetic forward rates, commercial paper rates, federal funds rates,
U.S. Government treasury securities rates, negotiable certificates of deposit
rates or another rate as set forth in the prospectus supplement.
As specified in the prospectus supplement, floating rate securities may also
have either or both of the following, in each case expressed as an annual rate:
(1) a maximum limitation, or ceiling, on the rate at which interest may accrue
during any interest period, which may be an available funds cap rate and (2) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. The interest rate on either type of security will not be
higher than the maximum rate permitted by applicable law.
Each trust that issues a class of floating rate securities will appoint and
enter into agreements with a calculation agent to calculate interest rates on
each class of floating rate securities. The prospectus supplement will set forth
the identity of the calculation agent for each such class of floating rate
securities which may be the trustee for the series. All determinations of
interest by the calculation agent will, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of floating rate
securities of a given class.
The trust may also include a derivative arrangement for any series or any class
of securities. A derivative arrangement may include a guaranteed rate agreement,
a maturity liquidity facility, a tax protection agreement, an interest rate cap
or floor agreement, an interest rate or currency swap agreement or any other
similar arrangement.
INDEXED SECURITIES
Any class of securities may consist of securities in which the INDEXED PRINCIPAL
AMOUNT, the principal amount payable at the final scheduled distribution date
for such class is determined by reference to a measure, commonly known as an
INDEX, which will be related to one of the following:
- the difference in the rate of exchange between United States dollars and a
currency or composite currency specified in the prospectus supplement;
- the difference in the price of a specified commodity on specified dates;
- the difference in the level of a specified stock index which may be based
on U.S. or foreign stocks, on specified dates;
- such other objective price or economic measure as is described in the
prospectus supplement. The manner of determining the indexed principal
amount of an indexed security and historical and other information
concerning the applicable index will be set forth in the prospectus
supplement, together with information concerning tax consequences to the
holders of such indexed securities.
If the determination of the indexed principal amount of an indexed security is
based on an index calculated or announced by a third party and that third party
either suspends the calculation or announcement of that index or
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changes the basis upon which that index is calculated, then that index shall be
calculated for purposes of such indexed security by an independent calculation
agent named in the prospectus supplement on the same basis, and subject to the
same conditions and controls, as applied to the original third party. If for any
reason that index cannot be calculated on the same basis and subject to the same
conditions and controls as applied to the original third party, then the indexed
principal amount of that indexed security will be calculated in the manner set
out in the prospectus supplement. Any determination of the independent
calculation agent shall in the absence of manifest error be binding on all
parties.
Interest on an indexed security will be payable based on the amount designated
in the prospectus supplement as the face amount of that indexed security. The
prospectus supplement will describe how the principal amount of the related
indexed security, if any, would be paid upon redemption or repayment prior to
the applicable final scheduled distribution date.
SCHEDULED AMORTIZATION SECURITIES; COMPANION SECURITIES
The securities may include one or more classes of SCHEDULED AMORTIZATION
SECURITIES and COMPANION SECURITIES. Scheduled amortization securities are
securities for which payments of principal are to be made in specified amounts
on specified payment dates, to the extent of funds being available on that
payment date. Companion securities are securities which receive payments of all
or a portion of any funds available on a given payment date which are in excess
of amounts required to be applied to payments on scheduled amortization
securities on such payment date. Because of the manner of application of
payments of principal to companion securities, the weighted average lives of
companion securities of a series may be expected to be more sensitive to the
actual rate of prepayments on the auto loans in the related trust than will the
scheduled amortization securities of that series.
MATURITY AND PREPAYMENT CONSIDERATIONS
The weighted average life of the securities will be influenced by the rate at
which the principal of the auto loans backing those securities are paid. Payment
on the auto loans may be in the form of scheduled payments or prepayments.
Prepayments will shorten the weighted average life of the securities. The rate
of prepayments on the auto loans may be influenced by a variety of economic,
financial and other factors. In addition, under various circumstances, the
seller or servicer will be obligated to acquire auto loans from the trust as a
result of breaches of representations and warranties. Any reinvestment risks
resulting from a faster or slower rate of principal repayment on the securities
will be borne entirely by the securityholders.
Each prospectus supplement will set forth additional information about the
maturity and prepayment considerations applicable to a particular pool of auto
loans and series of securities.
YIELD CONSIDERATIONS
The yield to maturity of a security will depend on the price paid, its interest
rate and the rate of payment of principal on the security or on its notional
amount, if the security is not entitled to payments of principal, as well as
other factors.
A class of securities may be entitled to variable payments of interest at a
fixed, maximum interest rate, commonly referred to as an AVAILABLE FUNDS CAP,
which is calculated based on the weighted average APR of the auto loan pool
minus any interest strips retained by the originator and all trust fees, if
specified in the prospectus supplement, or at another maximum interest rate as
may be described in the prospectus supplement.
The yield to maturity of the securities may be adversely affected by a higher or
lower than anticipated rate of prepayments on the auto loans. If you purchase a
security at a premium based on your expectations as to its maturity or weighted
average life, and the security pays principal more quickly than you expected,
your yield will be reduced and you may not recover the premium you paid. In
addition, if you purchase a security at a discount based
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on your expectations as to its maturity or weighted average life, and the
security principal more slowly than you expected, your yield will be lower than
you anticipated.
The yield on the securities also will be affected by liquidations of auto loans
following borrowers' defaults, receipt of proceeds from credit life, credit
disability or casualty insurance policies and by repurchases of auto loans in
the event of breaches of representations. The yield to maturity on some types of
securities, including interest only and principal only securities, and
securities in a series including more than one class, may be relatively more
sensitive to the rate of prepayment on the auto loans than other classes of
securities.
The timing of changes in the rate of principal payments on or repurchases of the
auto loans may significantly affect an investor's actual yield to maturity, even
if the average rate of principal payments experienced over time is consistent
with an investor's expectation. As a result, the effect on an investor's yield
of principal payments and repurchases occurring at a rate higher, or lower, than
the rate anticipated by the investor during the period immediately following the
issuance of a series of securities would not be fully offset by a subsequent
like reduction or increase in the rate of principal payments.
BOOK-ENTRY REGISTRATION
The securities are sometimes referred to in this prospectus as BOOK-ENTRY
SECURITIES. No person acquiring an interest in the book-entry securities will be
entitled to receive a definitive note representing an obligation of the trust,
except under the limited circumstances described in the prospectus. Beneficial
owners may elect to hold their interests through the Depository Trust Company,
commonly known as DTC, in the United States, or Cedelbank or the Euroclear
System, in Europe. Transfers within DTC, Cedelbank or Euroclear, as the case may
be, will be in accordance with the usual rules and operating procedures of that
system. So long as the securities are book-entry securities, they will be
evidenced by one or more securities registered in the name of Cede & Co., which
will be the HOLDER of those securities, as the nominee of DTC or one of the
relevant depositaries. Cross-market transfers between persons holding directly
or indirectly through DTC, on the one hand, and counterparties holding directly
or indirectly through Cedelbank or Euroclear, on the other, will be effected in
DTC through The Chase Manhattan Bank, the relevant depositories of Cedelbank or
Euroclear, respectively, and each participating member of DTC. The securities
will initially be registered in the name of Cede & Co. The interests of the
holders of those securities will be represented by book-entries on the records
of DTC and participating members thereof. All references in this prospectus to
any securities reflect the rights of beneficial owners only as those rights may
be exercised through DTC and its participating organizations for so long as
those securities are held by DTC.
The beneficial owners of securities may elect to hold their securities through
DTC in the United States, or Cedelbank or Euroclear if they are participants in
these systems, or indirectly through organizations which are participants in
these systems. The book-entry securities will be issued in one or more
securities per class of securities which in the aggregate equal the outstanding
principal balance of the related class of securities and will initially be
registered in the name of Cede & Co., the nominee of DTC. Cedelbank and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in Cedelbank'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.
Chase will act as depositary for Cedelbank and Morgan Guaranty Trust Company of
New York will act as depositary for Euroclear. Investors may hold beneficial
interests in the book-entry securities in minimum denominations representing
principal amounts of $1,000. Except as described below, no beneficial owner will
be entitled to receive a physical or definitive security representing that
security. Unless and until definitive securities are issued, it is anticipated
that the only holder of these securities will be Cede & Co., as nominee of DTC.
Beneficial owners will not be "holders", "noteholders" or "certificateholders",
as the case may be, as those terms are used in the trust documents. Beneficial
owners are only permitted to exercise their rights indirectly through
participants and DTC.
The beneficial owner's ownership of a book-entry security will be recorded on
the records of the brokerage firm, bank, thrift institution or other financial
intermediary that maintains the beneficial owner's account for that purpose. In
turn, the financial intermediary's ownership of such book-entry security will be
recorded on the records of DTC or on the records of a participating firm that
acts as agent for the financial intermediary, whose interest will in turn be
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recorded on the records of DTC, if the beneficial owner's financial intermediary
is not a DTC participant and on the records of Cedelbank or Euroclear, as
appropriate.
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 UCC and a "clearing agency" registered
pursuant to section 17A of the Exchange Act. DTC was created to hold securities
for its participants and to facilitate the clearance and settlement of
securities transactions between participants through electronic book-entries,
thereby eliminating the need for physical movement of securities. Participants
include securities brokers and dealers, including the underwriter, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
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.
Under the rules, regulations and procedures creating and affecting DTC and its
operations, DTC is required to make book-entry transfers of book-entry
securities, such as the securities, among participants on whose behalf it acts
with respect to the book-entry securities and to receive and transmit
distributions of principal of and interest on the book-entry securities.
Participants and indirect participants with which beneficial owners have
accounts with respect to the book-entry securities similarly are required to
make book-entry transfers and receive and transmit payments on behalf of their
respective beneficial owners.
Beneficial owners that are not participants or indirect participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
book-entry securities may do so only through participants and indirect
participants. In addition, beneficial owners will receive all distributions of
principal and interest from the trustee, or a paying agent on behalf of the
trustee, through DTC participants. DTC will forward these distributions to its
participants, which thereafter will forward them to indirect participants or
beneficial owners. Beneficial owners will not be recognized by the trustee, the
servicer or any paying agent as holders of the securities, and beneficial owners
will be permitted to exercise the rights of the holders of the securities only
indirectly through DTC and its participants.
Because of time zone differences, credits of securities received in Cedelbank or
Euroclear as a result of a transaction with a participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Credits or any transactions in these securities settled
during that processing will be reported to the relevant Euroclear or Cedelbank
participants on that business day. Cash received in Cedelbank or Euroclear as a
result of sales of securities by or through a Cedelbank participant or Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Cedelbank or Euroclear
cash account only as of the business day following settlement in DTC.
Transfers between participants will conform with DTC rules. Transfers between
Cedelbank participants and Euroclear participants will conform with their
respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Cedelbank 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 the relevant depositary; however, these cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that system in accordance with its rules and
procedures and within its established deadlines. The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to the relevant 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. Cedelbank participants and
Euroclear participants may not deliver instructions directly to the European
depositaries.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participant organizations and
facilitates the clearance and settlement of securities transactions between
Cedelbank participants through electronic book-entry changes in accounts of
Cedelbank participants, thereby eliminating the need for physical movement of
securities. Transactions may be settled in Cedelbank in any of 38 currencies,
including United States dollars. Cedelbank provides to its Cedelbank
participants, among other things, services for safekeeping,
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administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedelbank interfaces with domestic markets
in several countries. As a professional depository, Cedelbank is subject to
regulation by the Luxembourg Monetary Institute. Cedelbank 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 Cedelbank is also available
to others, including banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedelbank participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of Euroclear
and to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
both the need for physical movement of securities and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 37 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, under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation. 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 Euroclear Clearance. Euroclear
Clearance 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. 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 securities 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 on the book-entry securities will be made on each distribution
date by the trustee to Cede & Co., as nominee of DTC. DTC will be responsible
for crediting the amount of those payments to the accounts of the applicable DTC
participants in accordance with DTC's normal procedures. Each DTC participant
will be responsible for disbursing payments to the beneficial owners of the
book-entry securities that it represents and to each financial intermediary for
which it acts as agent. Each financial intermediary will be responsible for
disbursing funds to the beneficial owners of the book-entry securities that it
represents.
Under a book-entry format, beneficial owners of the book-entry securities may
experience some delay in their receipt of payments, since those payments will be
forwarded by the trustee to Cede & Co., as nominee of DTC. Distributions with
respect to securities held through Cedelbank or Euroclear will be credited to
the cash accounts of Cedelbank participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by the relevant depositary. These distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
Because DTC can only act on behalf of financial intermediaries, the ability of a
beneficial owner to pledge book-entry securities to persons or entities that do
not participate in the DTC system, or otherwise take actions on those book-entry
securities, may be limited due to the lack of physical securities for such
book-entry securities. In addition, issuance of the book-entry securities in
book-entry form may reduce the liquidity of such securities in the secondary
market since certain potential investors may be unwilling to purchase securities
for which they cannot obtain physical securities.
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Monthly and annual reports on the trust provided by the trustee to Cede & Co.,
as nominee of DTC, may be made available to beneficial owners upon request, in
accordance with the rules, regulations and procedures creating and affecting
DTC, and to the financial intermediaries to whose DTC accounts the book-entry
securities of the beneficial owners are credited.
DTC has advised the seller and the servicer that it will take any action
permitted to be taken by a holder of the securities under the trust documents
only at the direction of one or more participants to whose accounts with DTC the
book-entry securities are credited. Additionally, DTC has advised the seller
that it will take such actions with respect to specified percentages of voting
rights only at the direction of and on behalf of participants whose holdings of
book-entry securities evidence such specified percentages of voting rights. DTC
may take conflicting actions with respect to percentages of voting rights to the
extent that participants whose holdings of book-entry securities evidence such
percentages of voting rights authorize divergent action.
None of the trust, the seller, the servicer, the insurer or the trustee will
have any responsibility for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the book-entry securities
held by Cede & Co., as nominee for DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of securities among participants of DTC, Cedelbank
and Euroclear, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
DEFINITIVE SECURITIES
The securities, which will be issued initially as book-entry securities, will be
converted to definitive securities and reissued to beneficial owners or their
nominees, rather than to DTC or its nominee, only if (a) DTC or the servicer
advises the trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to the
book-entry securities and DTC or the servicer is unable to locate a qualified
successor or (b) the trustee, at its option, elects to terminate the book-entry
system through DTC.
If any event described in the preceding paragraph occurs, DTC will be required
to notify all participants of the availability through DTC of definitive
securities. Upon delivery of definitive securities, the trustee will reissue the
book-entry securities as definitive securities to beneficial owners.
Distributions of principal of, and interest on, the book-entry securities will
thereafter be made by the trustee, or a paying agent on behalf of the trustee,
directly to holders of definitive securities in accordance with the procedures
set forth in the trust documents.
Definitive securities will be transferable and exchangeable at the offices of
the trustee or the registrar. No service charge will be imposed for any
registration of transfer or exchange, but the trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of credit enhancement arrangements, if any, and the credit
enhancement provider, for each class of securities will be detailed in the
related prospectus supplement. Credit enhancement may be in the form of:
- an insurance policy;
- subordination of one or more classes of securities;
- reserve accounts;
- overcollateralization;
- letters of credit;
- credit or liquidity facilities;
- third party payments or other support;
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- surety bonds;
- guaranteed cash deposits;
- swap contracts, including interest rate and currency swaps; or
- other arrangements or any combination of two or more of the above.
Credit enhancement may cover one or more classes of the series. Credit
enhancement for any class or series of securities is intended to enhance the
likelihood that securityholders of that class or series will receive the full
amount of principal and interest due and to decrease the likelihood that the
securityholders will experience losses. Credit enhancement for a class or series
of securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest. If losses
occur which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, securityholders will bear their allocable
share of deficiencies. In addition, if a form of credit enhancement covers more
than one series of securities, securityholders of those series will be subject
to the risk that the credit enhancement will be exhausted by the claims of
securityholders of other series.
THE TRUST DOCUMENTS
Each series of securities will be issued under one or more TRUST DOCUMENTS which
term refers to pooling and servicing agreements, trust agreements, receivables
purchase agreements, sale and servicing agreements and indentures which will
establish the trust, transfer the auto loans, provide for the servicing of the
auto loans and issue the securities. The following paragraphs describe the
material provisions common to the trust documents. A more detailed discussion of
the trust documents governing your specific series will appear in the prospectus
supplement.
SALE OF AUTO LOANS BY THE SUBSERVICER TO THE SELLER
The subservicer will sell to the seller all its right, title and interest in and
to all of the auto loans. The purchase price of the auto loans will be not less
than the principal amount as of the time of sale, plus the present value of the
anticipated excess spread discounted to account for uncertainty in the future
performance of the auto loans.
The subservicer will indicate in its computer files that the auto loans have
been sold to the seller and that the auto loans have been further sold or
transferred by the seller to the trust. In addition, the subservicer will
provide to the seller a computer file or a microfiche list containing a true and
complete list showing each auto loan, identified by account number and by total
outstanding balance on the date the auto loans was sold to the seller. In its
capacity as subservicer, the subservicer has retained possession of the records
and agreements relating to the auto loans. The records and agreements will not
be segregated by the subservicer from other documents and agreements relating to
other auto loans and are not stamped or marked to reflect the sale or transfer
of the auto loans to the seller. However, the computer records of the
subservicer are or will be marked to evidence the sale or transfer. The
subservicer will file a UCC financing statement meeting the requirements of
applicable state law and in each of the jurisdictions in which these filings are
required in order to maintain the lien priority of the auto loans.
REPRESENTATIONS AND WARRANTIES OF THE SUBSERVICER
In the trust documents, the subservicer will represent and warrant to the seller
to the effect, among other things, that:
- each auto loan satisfies the eligibility criteria;
- the sale constitutes a valid sale to the seller of all right, title and
interest of the subservicer in and to the auto loans, and the security
interests in the financed vehicles, or, if held not to constitute a sale,
constitutes a grant of a security interest in the auto loans;
- the sale constitutes a valid sale to the seller of all right, title and
interest in and to any service contracts on financed vehicles and rights
against dealers under dealer agreements; and
- the sale 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.
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If the breach of any of the subservicer's representations and warranties results
in the obligation of the seller to repurchase auto loans, either the seller, or
at the seller's election, the subservicer, will repurchase the affected auto
loans for an amount equal to the unpaid principal balance, plus accrued and
unpaid finance charges from the last date billed through the end of the current
collection period.
TRANSFER AND ASSIGNMENT OF THE AUTO LOANS BY THE SELLER TO THE TRUST
On the closing date for a series, the seller will transfer and assign to the
trust, without recourse, its entire interest in the auto loans, including its
security interests in the financed vehicles. Each of these auto loans will be
identified in a schedule of auto loans delivered to the trustee. The net
proceeds received from the sale of the securities will be used by the trust to
the purchase of the auto loans from the seller and, if applicable, to the
deposit of the pre-funded amount into the pre-funding account. The prospectus
supplement for a series of securities will specify whether, and the terms,
conditions and manner under which subsequent auto loans for the series will be
sold by the seller to the applicable trust from time to time during any
pre-funding period.
REPRESENTATION AND WARRANTIES OF THE SELLER; REPURCHASE OBLIGATION
If the seller breaches the representations and warranties relating to the auto
loans and the financed vehicles in a manner that materially and adversely
affects any auto loan or the interests of the securityholders or the interests
of the trustee, the seller will be obligated, unless the breach is cured, to
repurchase the auto loans from the trust. The seller will be obligated to
repurchase the auto loans if its breach 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 trust documents
state that each auto loan:
- was originated by a properly licensed dealer in the ordinary course of
business, purchased by the subservicer pursuant to a dealer agreement,
sold to the seller, assigned to the trust and then assigned by the trust
to the trustee;
- the assignment was valid and made pursuant to the respective agreements
upon customary and enforceable terms;
- is fully amortizing with level monthly payments;
- was originated and sold to the seller without fraud or material
misrepresentation on the part of the dealer or the borrower;
- was originated in material compliance with all applicable laws and
regulations relating to the auto loans and all applicable laws and
regulations were complied with in writing any insurance policies with
respect thereto, and the auto loans and any insurance policies continue to
be in compliance with applicable laws and regulations;
- was originated in the United States and complied at the time of purchase
with the subservicer's then current underwriting and funding policies;
- is a valid, legal and binding obligation of the borrower, enforceable in
accordance with its terms subject to exceptions for bankruptcy, insolvency
or the Soldiers' & Sailors' Civil Relief Act of 1940;
- is not due from any governmental body;
- meets the statistical characteristics specified in the prospectus
supplement;
- has had no funds advanced by any party to maintain the auto loan as
current;
- as to which the information on the schedule of auto loans provided to the
trustee is true and correct in all material respects;
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- as to which the subservicer's and the servicer's records reflect the
successive assignments or pledge from the subservicer to the seller, from
the seller to the trust and by the trust to the trustee;
- will be accurately reflected in any list of auto loans provided by the
subservicer;
- constitutes chattel paper under the UCC;
- is documented by only one original executed contract;
- as to which the loan file contains the executed original contract,
evidence of physical damage insurance coverage, the original lien
certificate naming the subservicer or any predecessor or affiliate as
first lienholder and an original credit application;
- has not been satisfied, subordinated or rescinded and the financed vehicle
has not been released from the lien;
- 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
auto loans and the auto loans is not subject to any agreement restricting
or conditioning the assignment;
- 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 on the auto loans, any insurance policy or dealer
agreement;
- which creates a valid, binding and enforceable first priority security
interest in favor of the subservicer in the financed vehicle; the 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 prior
liens exist;
- as to which all filings required to give the trustee a first priority
perfected lien on, or ownership interest in, the auto loans and the
proceeds have been made;
- as to which, the subservicer, or any predecessor or affiliate, has not
conveyed any interest thereto to any person that would impair the rights
of the trustee thereto;
- is not assumable;
- is not subject to recision, set off, counterclaim or defense and as to
which no right has been asserted or threatened with respect thereto;
- 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 as to which the
financed vehicle has not been repossessed;
- at the time of origination was covered by comprehensive, collision, loss
and damage insurance naming the subservicer, its successors and assigns as
loss payee;
- as to which the lien certificate names, or will name, the subservicer or
its predecessors or affiliates as the original secured party and all
required filings and recordings required to name that entity as the
original secured party have been made; and
- as to which no selection procedures adverse to the securityholder were
utilized.
Any deviations from these representations and warranties will be described in
the prospectus supplement.
In addition to the warranty that it will maintain the subservicer's perfected
security interest in the financed vehicles, the servicer will represent and
warrant in the trust documents that it:
- will do nothing to impair the rights of the trust or securityholders in
the auto loans, dealer agreements, the trust documents, any insurance
policies or any other trust asset;
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- will not create or allow to exist any lien or restriction on transfer of
the auto loans except for the lien in favor of the trustee, or sign or
file under the UCC of any jurisdiction any financing statement or security
agreement naming the subservicer, the servicer or any affiliate as debtor
or authorizing any other filing;
- will not extend or amend any auto loans other than as specified in the
trust documents;
- will service the auto loans in compliance with the trust documents and in
material compliance with its standard and customary procedures for
servicing; and
- will notify the trustee of any change in its principal offices and will
maintain the files relating to the auto loans in the United States.
PAYMENTS ON AUTO LOANS; DEPOSITS TO COLLECTION ACCOUNT
The trustee will establish and maintain a collection account. The collection
account will be a separate trust account for the benefit of the securityholders
and the trust, and will be an eligible account. Except as otherwise described in
this prospectus and subject to the investment provision described in the
following paragraphs, within two business days following receipt by the servicer
or the subservicer of amounts representing collected funds, the servicer will
cause these 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 payment date. However, for as long as Household
Finance Corporation remains the servicer and maintains a commercial paper rating
specified by the rating agencies, the servicer is not required to deposit
collections into the collection account within two business days following
receipt, but may use for its own benefit, all collections until the payment
date. So long as these ratings are maintained, the servicer will, on or prior to
each payment date, make deposits in an amount equal to collected funds for the
applicable collection period. RATING AGENCIES will be defined in the prospectus
supplement for each series.
ELIGIBLE INVESTMENTS will mean negotiable instruments or securities which
evidence:
(1) direct obligations of, or obligations fully guaranteed as to timely
payment by, the United States of America;
(2) 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 and subject to supervision and
examination by federal or state banking or depository institution
authorities; provided the short-term debt rating of the depository
institution or trust company shall be in the highest rating category of the
rating agencies;
(3) 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;
(4) demand deposits, time deposits and certificates of deposit which are
fully insured by the FDIC having, at the time of the trust's investment in
them, a rating in the highest rating category of the rating agencies;
(5) bankers' acceptances issued by any depository institution or trust
company described in (2) above;
(6) money market funds having, at the time of the trust's investment in
them, a rating in the highest rating category of the rating agencies;
(7) time deposits, other than as referred to in (4) above, with an
entity, having a credit rating in the highest rating category of the rating
agencies;
(8) demand notes of Household Finance Corporation for so long as it's
commercial paper has, at the time of the trust's investment, a rating in the
highest rating category of the rating agencies; and
(9) any other investment acceptable to the rating agencies.
At any time that the commercial paper issued by Household Finance Corporation
does not satisfy the rating requirements specified above, it may continue to
hold collections prior to distribution as described above so long as it
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provides as security an irrevocable letter of credit, surety bond or other
instrument satisfactory to each rating agency from an entity having ratings on
its short-term and long-term obligations acceptable to the rating agencies.
An ELIGIBLE ACCOUNT is an account that is either (1) a segregated account with a
depository institution organized under the laws of the United States or any of
the states 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 (2) 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, and acting as a trustee for funds deposited in the account, so long as
any of the unsecured, unguaranteed senior debt securities of the 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 trustee to make withdrawals and payments from the
collection account for the purpose of carrying out its duties under the trust
documents.
COLLECTION AND OTHER SERVICING PROCEDURES
The servicer will make reasonable efforts to collect all payments called for
under the auto loans and will, consistent with the trust documents, follow the
collection procedures as it follows from time to time for motor vehicle retail
installment sales contracts in its servicing portfolio which are comparable to
the auto loans. The subservicer, will follow the servicer's collection
procedures as they may be revised from time to time. Consistent with the above,
the subservicer 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 auto loans.
The subservicer or the servicer may arrange with a borrower a schedule for the
payment of interest due and unpaid for a period, provided that the arrangement
is consistent with the servicer's policies for comparable auto loans held in its
portfolio.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
As long as Household Finance Corporation is the servicer it will receive, or be
entitled to retain a SERVICING FEE on behalf of itself and the subservicer,
after making payments on the securities and making required deposits in the
reserve account. The servicing fee will be paid monthly in arrears at the annual
percentage described in the prospectus supplement on the pool balance as of the
beginning of the prior collection period. If Household Finance Corporation is no
longer the servicer, the servicing fee will be paid to the successor servicer
prior to any distributions on the securities and making required deposits in the
reserve account. The servicer is also entitled to retain SUPPLEMENTAL SERVICING
FEES which are all administrative fees, expenses and charges paid on behalf of
borrowers, including late fees, prepayment fees and liquidation fees.
The servicer will pay the ongoing expenses associated with the trust and the
securities, and incurred by it in connection with its responsibilities under the
trust documents, including payment of the fees and disbursements of the
trustees. In addition, the servicer will be entitled to reimbursement for
expenses incurred by it in connection with its servicing duties, this right of
reimbursement being prior to the rights of securityholders to payments of
principal and interest.
EVIDENCE AS TO COMPLIANCE
The trust documents provide for the delivery of an annual statement signed by an
officer of the servicer or of the subservicer to the effect that the servicer or
the subservicer has fulfilled the material obligations of the servicer under the
trust documents throughout the preceding calendar year, except as specified in
the statement.
Each year, the servicer will furnish a report prepared by a firm of independent
certified public accountants to the effect that the accountants have examined
documents and the records relating to servicing of the auto loans, and compared
mathematical calculations for monthly servicing reports selected by the
accountants with the servicer's computer reports, and the examination, has
disclosed no items of noncompliance with the provision of the trust documents or
variations in the results of the calculations which, in the opinion of the firm,
are material, except for the items of non-compliance as shall be referred to in
the report.
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CERTAIN MATTERS REGARDING THE SERVICER AND THE SELLER
The trust documents provide that the servicer may not resign from its
obligations and duties, except in connection with a permitted transfer of
servicing, unless:
- those 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
- upon the satisfaction of the following conditions: (1) the servicer has
delivered an executed assumption agreement in form satisfactory to the
trustee, assigning its obligations and duties to an entity as to which the
rating agencies have confirmed that the assumption will not result in a
lowering of the then current ratings of the securities, and (2) the
successor meets the eligibility requirements specified in the trust
document that defines the servicer's obligations.
No resignation will become effective until the trustee or a successor servicer
has assumed the servicer's obligations and duties.
The servicer may perform any of its duties and obligations through one or more
subservicers or delegates, which may be affiliates of the servicer.
Notwithstanding these arrangements, the servicer will remain liable and
obligated to the trust, the trustee, and the securityholders for the servicer's
duties and obligations, as if the servicer itself were performing the duties and
obligations. It is expected that so long as Household Finance Corporation is the
servicer, the subservicer will subservice the auto loans on behalf of it.
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
A SERVICER TERMINATION event under the trust document defining its servicing
obligations will consist of the occurrence and continuance of any of the
following:
- any failure by the servicer to deliver to the trustee for distribution to
the securityholders any required payment, which failure continues
unremedied for five days after written notice is received by the servicer
from the trustee or after discovery of the failure by a responsible
officer of the servicer;
- any failure by the servicer duly to observe or perform in any material
respect the material covenants and agreements in the trust documents which
failure continues unremedied for 60 days after written notice of the
failure is given;
- events of insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings concerning the servicer or actions by
the servicer indicating its insolvency, inability to pay its obligations
or initiating a reorganization under bankruptcy laws; and
- the material breach of the servicer's material representations or
warranties and the servicer's failure to cure the breach within 60 days
after notice.
Notwithstanding the foregoing, a delay in or failure of performance referred to
in the first clause above, for five business days and in the second clause
above, for a period of 60 days, shall not constitute a servicer termination
event if the delay or failure could not be prevented by the exercise of
reasonable diligence by the servicer and the delay or failure was caused by an
act of God or other similar occurrence. Upon the occurrence of any event the
servicer shall provide the seller prompt notice of the failure or delay by it,
together with a description of its efforts to so perform its obligations.
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RIGHTS UPON SERVICER TERMINATION EVENT
If a servicer termination event occurs and remains unremedied, the trustee may
terminate all the rights and obligations of the servicer under the trust
document, and the trustee or a successor servicer appointed by the trustee will
succeed to all the responsibilities, duties, and liabilities of the servicer
under that agreement. Any successor servicer will succeed to all the
responsibilities, duties, and liabilities of the servicer and will be entitled
to similar compensation 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 servicer.
AMENDMENT
If it will not materially adversely affect the securityholders, the trust
documents may be amended, without the consent of the related securityholders,
for the purpose of adding, changing or eliminating any provisions or of
modifying in any manner the rights of the securityholders. The trust documents
may also be amended by the seller, the servicer, and the trustee with the
consent of securityholders evidencing at least a majority of the voting rights
of the then outstanding securities for the purpose of adding, changing in any
manner, or eliminating any provisions of the trust documents, including
provisions that would adversely affect the ratings of the securities; but no
amendment may, without the consent of all securityholders, (1) increase or
reduce the amount or priority of, or accelerate or delay the timing of,
collections on the related auto loans or distributions that are required to be
made for the benefit of the securityholders or (2) reduce the percentage of
securities which are required to consent to any amendment, without the consent
of all securityholders.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
Any of the following will be an event of default for a series of securities
which are notes:
- a default in the payment of any interest on any security that, when it
becomes due and payable, continues for a period of five days;
- a default in the payment of the outstanding principal balance of a class
of notes of that series on the scheduled maturity date of the class, that
continues for a period of five days;
- default in the observance or performance of any covenant or agreement of
the trust made in the trust documents for that series, or any
representation or warranty of the trust made in the trust documents or in
any certificate or other writing delivered under the trust documents
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 the default
shall continue or not be cured, for a period of 60 days after notice is
given to the trust by the trustee or to the trust and the trustee by the
holders of at least 25% in principal amount of the notes of that series
then outstanding, specifying the default or incorrect representation or
warranty;
- the filing of a decree or order for relief by a court having jurisdiction
in the premises in respect of the trust 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 trust or for any substantial part
of the trust assets, or ordering the winding-up or liquidation of the
trust's affairs, and the decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
- the commencement by the trust 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 trust to the entry of an order
for relief in an involuntary case, or the consent by the trust to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the trust or for
any substantial part of the trust assets, or the making by the trust of
any general assignment for the benefit of creditors, or the failure by the
trust generally to pay its debts as those debts become due, or the taking
of any action by the trust in furtherance of any of the foregoing. The
amount of principal required to be paid to noteholders on any payment date
will be limited to amounts available to be deposited in the account.
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Therefore, the failure to pay principal on a class of notes will not
result in the occurrence of an event of default until the scheduled
maturity date for that 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 the principal and the
overdue interest at the applicable interest rate on the note until the overdue
principal and interest is paid. If an event of default for a series occurs and
continues, and the trustee may, and at the direction of noteholders of that
series representing at least 66 2/3% of the aggregate outstanding principal
amount of the notes of that series shall, declare the principal of the notes to
be immediately due and payable. The declaration may, under some circumstances,
be rescinded by the holders of a majority in principal amount of the then
outstanding.
If the notes are accelerated following an event of default in that series, the
trustee may institute proceedings to collect amounts due or foreclose on
property comprising trust assets or exercise remedies as a secured party. If the
trustee determines that the auto loans will not provide sufficient funds for the
payment of principal and interest on the notes as the payments would become due,
any sale, liquidation or other disposition of the trust assets in that series
for an amount less than the amounts due on the notes will not occur without the
consent of holders of 66 2/3% of the outstanding principal amount of the notes
in that series. If the trustee has not made a determination that a sale or
liquidation of the trust assets in that series will not provide sufficient funds
to pay principal and interest on the notes, it may sell, liquidate or otherwise
dispose of the trust assets only if all noteholders consent.
If an event of default occurs and is continuing, the trustee will be under no
obligation to exercise any of the rights or powers under the trust documents at
the request or direction of any of the holders of the notes, if the trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with the
request. Subject to the provisions for indemnification and limitations contained
in the trust documents, 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 trustee, and the
holders of a majority in principal amount of the notes then outstanding may, in
some cases, waive any default, except a default in the payment of principal or
interest or a default in respect of a covenant or provision of the trust
documents that cannot be modified without the waiver or consent of all the
holders of the outstanding notes. No holder of a note of a series will have the
right to institute any proceeding under the trust documents, unless:
- the holder previously has given the trustee written notice of a continuing
event of default;
- the holders of not less than 25% of the aggregate principal balance of all
outstanding notes of a series have made written request to the trustee to
institute the proceeding in its own name as trustee;
- the holder or holders have offered the trustee reasonable indemnity
against costs, expenses and liabilities to be incurred in complying with
the request;
- the trustee has for 60 days failed to institute the proceeding; and
- no direction inconsistent with the written request has been given to the
trustee during the 60-day period by the holders of a majority of the
aggregate principal balance of all outstanding notes of a series. In
addition, the 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 trust or the seller, or join in any institution
against the trust or the seller of, any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
CERTAIN COVENANTS OF EACH TRUST
The trust documents provide that the trust may not consolidate with or merge
into any other entity, unless:
- the entity formed by or surviving the consolidation or merger is organized
under the laws of the United States, any state or the District of
Columbia;
- the entity expressly assumes the trust's obligation to make due and
punctual payments upon the securities and the performance or observance of
any agreement and covenant of the trust under the trust documents;
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- no event of default shall have occurred and be continuing immediately
after the merger or consolidation;
- the trust has been advised that the ratings of the securities then in
effect would not be reduced or withdrawn by any rating agency as a result
of the merger or consolidation;
- any action that is necessary to maintain the lien and security interest
created by the indenture is taken; and
- the trust has received an opinion of counsel to the effect that the
consolidation or merger would have no material adverse tax consequence to
the trust or to any securityholder.
The trust will not, among other things:
- except as expressly permitted by the trust documents, sell, transfer,
exchange or otherwise dispose of any of the assets of the trust,
- claim any credit on or make any deduction from the principal and interest
payable in respect of the securities other than amounts withheld under the
Internal Revenue Code or applicable state law or assert any claim against
any present or former holder of securities because of the payment of taxes
levied or assessed upon the trust,
- permit the validity or effectiveness of the trust documents to be impaired
or permit any person to be released from any covenants or obligations with
respect to the securities under the trust documents except as may be
expressly permitted thereby, or
- 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 trust or any part of the trust, or any interest
therein or the proceeds of the trust.
The trust may not engage in any activity other than as specified under the trust
documents.
CERTAIN MATTERS REGARDING THE TRUSTEE AND THE TRUST
Neither the trust, the trustee nor any director, officer or employee of the
trust or the trustee will be under any liability to the trust or the
securityholders for any action taken or for refraining from the taking of any
action in good faith under the indenture or for errors in judgment. However, the
trustee, the trust and any director, officer or employee will not 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 trust documents.
LIMITATION ON LIABILITY OF THE TRUSTEE
The trustee will make no representations as to the validity or sufficiency of
the trust documents, the securities or of the trust assets or related documents.
If no event of default has occurred, the trustee is required to perform only
those duties specifically required of it under the trust documents. Upon receipt
of the various certificates, statements, reports or other instruments required
to be furnished to it, the trustee will be required to examine them to determine
whether they are in the form required by the indenture; however, the trustee
will not be responsible for the accuracy or content of any of the documents
furnished by it.
The trustee may be held liable for its own negligent action or failure to act,
or for its own misconduct; provided, however, the trustee will not be personally
liable for 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
securityholders in an event of default. The 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
the funds or adequate indemnity against the risk or liability is not reasonably
assured to it.
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RESIGNATION OF TRUSTEE
The trustee may, upon written notice to the seller and the trust, resign at any
time, in which event the servicer will be obligated to use its best efforts to
appoint a successor trustee. If no successor trustee has been appointed and has
accepted the appointment within 60 days after giving notice of resignation, the
resigning trustee or the trust may petition any court of competent jurisdiction
for appointment of a successor trustee. The trustee may also be removed at any
time by the servicer. In addition, the trust may, and at the request of a
majority of the securityholders of a series shall, remove the trustee under a
series:
- if the trustee ceases to be eligible to continue as trustee under the
trust documents;
- if the trustee becomes insolvent; or
- the trustee's long-term debt ratings are below investment grade.
Any resignation or removal of the trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
LEGAL ASPECTS OF THE AUTO LOANS
The following discussion contains summaries of the material legal aspects of the
auto loans that are general in nature. These legal aspects are governed in part
by state laws, which may be different in the various states.
SECURITY INTEREST IN VEHICLES
In all the states in which the auto loans have been originated, retail
installment sale contracts evidence the credit sale of automobiles, light duty
trucks and vans by dealers to borrowers. The auto loans are CHATTEL PAPER under
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 most states, a security interest in a vehicle generally may be
perfected only by amendment of that vehicle's certificate of title to note the
security interest of the secured party. That notation of a secured party's
security interest is generally effected in those states by depositing with the
applicable state highway department, motor vehicles registrar, or similar
authority along with any registration fees, the vehicle's certificate of title
and an application containing the name and address of the secured party.
The subservicer will assign its security interest in the financed vehicles
securing the auto loans to the seller, and the seller will then assign the
security interests to the trust. However, because of the administrative burden
and expense, involved, we will not amend any certificate of title to identify
the related trust as the new secured party on the certificates of title relating
to the financed vehicles. Also, the subservicer, as agent for the servicer, may
continue to hold the certificates of title in its possession.
Even though we are not amending the certificates of title, the assignment to the
trust will, in most states, be an effective conveyance of a security interest.
Under the laws of most states, a transferee of a security interest in a motor
vehicle is not required to reapply to the related department of motor vehicles
or analogous state office for a transfer of registration when the security
interest is sold or transferred by the lienholder to secure payment or
performance of an obligation. Accordingly, under the laws of these states, the
assignment by the subservicer to the seller and the seller to the trustee
effectively conveys the security in the auto loans, and specifically, the
vehicles, without re-registration and without amendment of any lien noted on the
certificate of title.
If there are any financed vehicles as to which a perfected security interest is
not obtained, the trust's security interest will be subordinate to the rights
of, 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 trust documents, and would create an
obligation of the seller to repurchase the auto loan unless the breach is cured.
By not identifying the trust as the secured party on the certificate of title,
the security interest of the trust in the financed vehicle could be defeated
through fraud or negligence.
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In Texas, unless the borrower has notice of the sale of its auto loan, payment
by the borrower to the owner of the auto loan last known to that borrower will
be binding upon all subsequent owners of the auto loan. By not notifying the
borrower of the sale of the auto loan to the trust, the trust would not have a
claim against the borrower for payments made by the borrower to the owner last
known to that borrower.
In most states, the perfected security interest in a vehicle continues for four
months after a vehicle leaves the state of its registration until
re-registration 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 new state. 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 auto loans, the subservicer takes steps to re-perfect upon receipt of
notice of re-registration or information from the borrower as to relocation.
Similarly, when a borrower sells a vehicle, the subservicer must surrender
possession of the certificate of title or will receive notice as a result of its
security interest and will have an opportunity to require satisfaction of the
related receivable before release of the security interest. The servicer will be
obligated to take appropriate steps, at its expense, to maintain perfection of
security interests in the financed vehicles.
In most states, liens for repairs performed on, and for storage of, a motor
vehicle, and liens for some types of unpaid taxes, take priority over a
perfected security interest in a financed vehicle. The Internal Revenue Code
also grants priority to some federal tax liens over the lien of a secured party.
The laws of some 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
vehicle. The seller will represent 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, and security interests in that 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 an auto loan. No notice will
be given to the indenture trustee in the event such a lien arises or
confiscation occurs.
REPOSSESSION
In the event of a default by a borrower, the servicer will be entitled to
exercise 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, the UCC remedies of a secured
party include:
- right to repossession by self-help means, unless those means would
constitute a breach of the peace;
- unless a vehicle is voluntarily surrendered, self-help repossession is the
method that will be employed by the subservicer in the majority of
instances in which a default occurs and is accomplished by retaking
possession of the financed vehicle; and
- 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 to seize the vehicle.
In some states under certain circumstances after the vehicle has been
repossessed, the borrower may reinstate the auto loan by paying the delinquent
amounts due on the auto loan.
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NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the borrower, some states require that the borrower
be notified of the default and be given some time to 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 vehicle may be held. In some states
the borrower has the right to vehicle prior to actual sale by paying the secured
party the unpaid principal balance of the auto loan plus reasonable expenses for
repossessing, holding, and preparing the vehicle 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 the subservicer through automobile
auctions 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 outstanding balance of
the auto loan. While some states impose prohibitions or limitations on
deficiency judgments, if the net proceeds from resale do not cover the full
amount of the auto loan, a deficiency judgment can be sought in those states
that do not prohibit or limit those judgments. Additionally, in Texas, in order
for a creditor in a secured transaction to sue for a deficiency, the lender must
first dispose of the vehicle in a commercially reasonable manner in accordance
with the governing UCC provisions. 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.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and accompanying regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. Also, state laws may impose finance charge ceilings and other
restrictions on consumer transactions and require 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 the ability of the servicer to
enforce auto loans.
The so-called HOLDER-IN-DUE-COURSE RULE of the Federal Trade Commission has the
effect of subjecting the trust to all claims and defenses which the borrower
could assert against the originator of the auto loan. The provisions of the
holder-in due-course rule are generally duplicated by the Uniform Consumer
Credit Code, state statutes or the common law in some states. Liability under
the holder-in due-course rule is limited to the amounts paid by the borrower
under the auto loan, and the trust may be unable to collect any remaining
balance from the borrower.
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,
federal law requires that all sellers of new and used vehicles furnish a signed
written statement 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 financed vehicle, the borrower may be able to assert a
defense against the seller.
Courts have imposed general equitable principles on secured parties pursuing
repossession of collateral or litigation involving deficiency balances. These
equitable principles may relieve 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 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.
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The seller will represent and warrant that each auto loan complies with all
requirements of law in all material respects. Accordingly, if a borrower has a
claim against the trust for violation of any law and that claim materially and
adversely affects the trust's interest in the auto loan, that violation would
constitute a breach and would oblige the seller to repurchase the auto loan
unless the breach is cured.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Relief Act of 1940, which is
referred to in this prospectus as the RELIEF ACT, members of all branches of the
military on active duty, including draftees and reservists on active duty, are
entitled to have interest rates reduced and capped at 6% annum on obligations,
including the auto loans, incurred prior to the commencement of active duty and
for the duration of active duty. Because the Relief Act applies to borrowers who
enter military service after origination of the auto loan, no information can be
provided as to the number of auto loans that may be effected by the Relief Act.
The Relief Act would adversely affect, for an indeterminate period of time, the
ability of the servicer to collect full amounts of interest on some of the auto
loans. Any loss resulting from the application of the Relief Act or similar
legislation or regulations would reduce the amounts available to be paid to the
securityholders. In addition, the Relief Act limits the ability of the servicer
to repossess a vehicle during the borrower's period of active duty status, and,
under certain circumstances, during an additional three month period. Thus, in
the event that the Relief Act or similar legislation or regulations applies to
any auto loan which goes into default, there may be delays in payment and losses
on the securities. Any other interest shortfalls, deferrals or forgiveness of
payments on the auto loans resulting from similar legislation or regulations may
result in delays in payments or losses to securityholders.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments, other
statutory provisions, including the United States Bankruptcy Code and similar
state laws, may affect the ability of the trust and the servicer to repossess a
vehicle 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. Furthermore, as part of the rehabilitation plan, a
court may reduce the amount of the secured indebtedness to the market value of
the motor vehicle at the time of bankruptcy, leaving the lender 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 interest
rate and time of repayment.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a general discussion of the material anticipated federal income
tax consequences to investors of the purchase, ownership and disposition of the
securities offered by this prospectus. 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
consequences applicable to all categories of investors, 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, all of whom may be subject to special
rules. Investors are urged to consult their own tax advisors in determining the
particular federal, state and local consequences to them of the purchase,
ownership and disposition of the securities.
The following discussion addresses securities of four general types:
(1) GRANTOR TRUST SECURITIES, representing interests in a trust, a
GRANTOR TRUST;
(2) DEBT SECURITIES, that are intended to be treated for federal income
tax purposes as indebtedness secured by the underlying loans;
(3) PARTNERSHIP INTERESTS, representing interests in a trust, a
PARTNERSHIP, that is intended to be treated as a partnership under the
Internal Revenue Code of 1986, as amended, referred to as CODE the "Code";
and
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(4) FASIT SECURITIES, representing interests in a financial asset
securitization investment trust, a FASIT, or portion thereof, which the
seller will covenant to elect to have treated as a FASIT under sections 860H
through 860L of the Code. The prospectus supplement for each series of
securities will indicate whether a FASIT election, or elections, will be
made for the related trust and, if a FASIT election is to be made, will
identify all "regular interests," "high-yield interests" and the "ownership
interest" in the FASIT.
The Taxpayer Relief Act of 1997 adds provisions to the Code that require the
recognition of gain upon the "constructive sale of an appreciated financial
position." A constructive sale of an appreciated financial position occurs if a
taxpayer enters into a transaction or series of transactions with respect to a
financial instrument that have the effect of substantially eliminating the
taxpayer's risk of loss and opportunity for gain with respect to the financial
instrument. These provisions apply only to classes of securities that do not
have a principal balance.
GRANTOR TRUST SECURITIES
With respect to each series of grantor trust securities, Dewey Ballantine LLP,
special tax counsel to the seller, will deliver its opinion to the seller that
the related grantor trust will be classified as a grantor trust and not as a
partnership or an association taxable as a corporation. The opinion shall be
attached on Form 8-K to be filed with the SEC within fifteen days after the
initial issuance of the securities or filed with the SEC as a post-effective
amendment to the prospectus. Accordingly, each beneficial owner of a grantor
trust security will generally be treated as the owner of an interest in the auto
loans included in the grantor trust.
For purposes of the following discussion, a grantor trust security representing
an undivided equitable ownership interest in the principal of the auto loans
constituting the related grantor trust, together with interest thereon at a
pass-through rate, will be referred to as a GRANTOR TRUST FRACTIONAL INTEREST
SECURITY. A grantor trust security representing ownership of all or a portion of
the difference between interest paid on the auto loans constituting the related
grantor trust and interest paid to the beneficial owners of grantor trust
fractional interest securities issued with respect to a grantor trust will be
referred to as a GRANTOR TRUST STRIP SECURITY.
TAXATION OF BENEFICIAL OWNERS OF GRANTOR TRUST SECURITIES. Beneficial owners of
grantor trust fractional interest securities generally will be required to
report on their federal income tax returns their respective shares of the income
from the auto loans, including amounts used to pay reasonable servicing fees and
other expenses but excluding amounts payable to beneficial owners of any
corresponding grantor trust strip securities, and, subject to the limitations
described below, will be entitled to deduct their shares of any reasonable
servicing fees and other expenses. If a beneficial owner acquires a grantor
trust fractional interest security for an amount that differs from its
outstanding principal amount, the amount includible in income on a grantor trust
fractional interest security may differ from the amount of interest
distributable thereon. See "Discount and Premium" below. Individuals holding a
grantor trust fractional interest security directly or through a pass-through
entity will be allowed a deduction for reasonable servicing fees and expenses
only to the extent that the aggregate of a beneficial owner's miscellaneous
itemized deductions exceeds 2% of a beneficial owner's adjusted gross income.
Further, beneficial owners, other than corporations, subject to the alternative
minimum tax may not deduct miscellaneous itemized deductions in determining
alternative minimum taxable income.
Beneficial owners of grantor trust strip securities generally will be required
to treat the securities as "stripped coupons" under section 1286 of the Code.
Accordingly, a beneficial owner will be required to treat the excess of the
total amount of payments on a security over the amount paid for a security as
original issue discount and to include a discount in income as it accrues over
the life of a security. See "Discount and Premium" below.
Grantor trust fractional interest securities may also be subject to the coupon
stripping rules if a class of grantor trust strip securities is issued as part
of the same series of securities. The consequences of the application of the
coupon stripping rules would appear to be that any discount arising upon the
purchase of a security, and perhaps all stated interest thereon, would be
classified as original issue discount and includible in the beneficial owner's
income as it accrues, regardless of the beneficial owner's method of accounting,
as described below under "Discount and Premium." The coupon stripping rules will
not apply, however, if (1) the pass-through rate is no more than 100 basis
points lower than the gross rate of interest payable on the underlying auto
loans and (2) the difference between
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the outstanding principal balance on the security and the amount paid for a
security is less than 0.25% of the principal balance times the weighted average
remaining maturity of the security.
SALES OF GRANTOR TRUST SECURITIES. Any gain or loss recognized on the sale of a
grantor trust security, equal to the difference between the amount realized on
the sale and the adjusted basis of a grantor trust security, will be capital
gain or loss, except to the extent of accrued and unrecognized market discount,
which will be treated as ordinary income, and in the case of banks and other
financial institutions except as provided under section 582(c) of the Code. The
adjusted basis of a grantor trust security will generally equal its cost,
increased by any income reported by the originator, including original issue
discount and market discount income, and reduced, but not below zero, by any
previously reported losses, any amortized premium and by any distributions of
principal.
GRANTOR TRUST REPORTING. The trustee will furnish to each beneficial owner of a
grantor trust fractional interest security with each distribution a statement
setting forth the amount of the distribution allocable to principal on the
underlying the auto loans and to interest thereon at the related interest rate.
In addition, within a reasonable time after the end of each calendar year, based
on information provided by the servicer, the trustee will furnish to each
beneficial owner during the year the customary factual information as the
servicer deems necessary or desirable to enable beneficial owners of grantor
trust securities to prepare their tax returns and will furnish comparable
information to the IRS as and when required to do so by law.
DEBT SECURITIES
With respect to each series of debt securities, Dewey Ballantine LLP, special
tax counsel to the seller, will deliver its opinion to the seller that the
securities will be classified as debt secured by the related auto loans.
Consequently, the debt securities will not be treated as ownership interests in
the auto loans or the trust. Beneficial owners will be required to report income
received with respect to the debt securities in accordance with their normal
method of accounting. For additional tax consequences relating to debt
securities purchased at a discount or with premium, see "Discount and Premium"
below.
TAXATION OF BENEFICIAL OWNERS OF DEBT SECURITIES. If the debt securities are
characterized as indebtedness, interest paid or accrued on a debt security will
be treated as ordinary income to the beneficial owner and principal payments on
a debt security will be treated as a return of capital to the extent of the
beneficial owner's basis in the debt security allocable thereto. An accrual
method taxpayer will be required to include in income interest on the debt
security when earned, even if not paid, unless it is determined to be
uncollectible. The trust will report to beneficial owners of record and the IRS
in respect of the interest paid and original issue discount, if any, accrued on
the debt securities to the extent required by law.
SALES OF DEBT SECURITIES. If a beneficial owner of a debt security sells or
exchanges the security, the beneficial owner will recognize gain or loss equal
to the difference, if any, between the amount received and the beneficial
owner's adjusted basis in the security. The adjusted basis in the security
generally will equal its initial cost, increased by any original issue discount
or market discount previously included in the seller's gross income with respect
to the security and reduced by the payments previously received on the security,
other than payments of qualified stated interest, and by any amortized premium.
In general, except as described in "Discount and Premium--Market Discount,"
below, except for financial institutions subject to section 582(c) of the Code,
any gain or loss on the sale or exchange of a debt security recognized by an
investor who holds the security as a capital asset, within the meaning of
section 1221 of the Code, will be capital gain or loss and will be long-term or
short-term depending on whether the security has been held for more than one
year.
DEBT SECURITIES REPORTING. The trustee will furnish to each beneficial owner of
a debt security with each distribution a statement setting forth the amount of a
distribution allocable to principal on the underlying auto loans and to interest
on it at the related interest rate. In addition, within a reasonable time after
the end of each calendar year, based on information provided by the servicer,
the trustee will furnish to each beneficial owner during a year the customary
factual information as the servicer deems necessary or desirable to enable
beneficial owners of debt
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securities to prepare their tax returns and will furnish comparable information
to the IRS as and when required to do so by law.
PARTNERSHIP INTERESTS
For each series of partnership interests, Dewey Ballantine LLP will deliver its
opinion to the seller that the trust will be treated as a partnership and not an
association taxable as a corporation for federal income tax purposes. The
opinion shall be attached on Form 8-K to be filed with the SEC within fifteen
days after the initial issuance of the securities or filed with the SEC as a
post-effective amendment to the prospectus. Accordingly, each beneficial owner
of a partnership interest will generally be treated as the owner of an interest
in the auto loans.
TAXATION OF BENEFICIAL OWNERS OF PARTNERSHIP INTERESTS. If the trust is treated
as a partnership for federal income tax purposes, the trust will not be subject
to federal income tax. Instead, each beneficial owner of a partnership interest
will be required to separately take into account its allocable share of income,
gains, losses, deductions, credits and other tax items of the trust. These
partnership allocations are made in accordance with the Code, Treasury
regulations and the partnership agreement, here, the trust agreement and related
documents.
The trust's assets will be the assets of the partnership. The trust's income
will consist primarily of interest and finance charges earned on the underlying
the auto loans. The trust's deductions will consist primarily of interest
accruing with respect to any indebtedness issued by the trust, servicing and
other fees, and losses or deductions upon collection or disposition of the
trust's assets.
In certain instances, the trust could have an obligation to make payments of
withholding tax on behalf of a beneficial owner of a partnership interest. See
"Backup Withholding" and "Foreign Investors" below.
Substantially all of the taxable income allocated to a beneficial owner of a
partnership interest that is a pension, profit sharing or employee benefit plan
or other tax-exempt entity, including an individual retirement account, will
constitute "unrelated business taxable income" generally taxable to a holder
under the Code.
Under section 708 of the Code, the trust will be deemed to terminate for federal
income tax purposes if 50% or more of the capital and profits interests in the
trust are sold or exchanged within a 12-month period. Under Treasury regulations
issued on May 9, 1997 if a termination occurs, the trust is deemed to contribute
all of its assets and liabilities to a newly formed partnership in exchange for
a partnership interest. Immediately thereafter, the terminated partnership
distributes interests in the new partnership to the purchasing partner and
remaining partners in proportion to their interests in liquidation of the
terminated partnership.
SALE OR EXCHANGE OF PARTNERSHIP INTERESTS. Generally, capital gain or loss will
be recognized on a sale or exchange of partnership interests in an amount equal
to the difference between the amount realized and the seller's tax basis in the
partnership interests sold. A beneficial owner's tax basis in a partnership
interest will generally equal the beneficial owner's cost increased by the
beneficial owner's share of trust income and decreased by any distributions
received with respect to the partnership interest. In addition, both the tax
basis in the partnership interest and the amount realized on a sale of a
partnership interest would take into account the beneficial owner's share of any
indebtedness of the trust. A beneficial owner acquiring partnership interests at
different prices may be required to maintain a single aggregate adjusted tax
basis in the partnership interest, and upon sale or other disposition of some of
the partnership interests, allocate a portion of the aggregate tax basis to the
partnership interests sold, rather than maintaining a separate tax basis in each
partnership interest for purposes of computing gain or loss on a sale of that
partnership interest.
Any gain on the sale of a partnership interest attributable to the beneficial
owner's share of unrecognized accrued market discount on the assets of the trust
would generally be treated as ordinary income to the holder and would give rise
to special tax reporting requirements. If a beneficial owner of a partnership
interest is required to recognize an aggregate amount of income over the life of
the partnership interest that exceeds the aggregate cash distributions with
respect thereto, the excess will generally give rise to a capital loss upon the
retirement of the partnership interest. If a beneficial owner sells its
partnership interest at a profit or loss, the transferee will have a higher or
lower
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basis in the partnership interests than the transferor had. The tax basis of the
trust's assets will not be adjusted to reflect that higher or lower basis unless
the trust files an election under section 754 of the Code.
PARTNERSHIP REPORTING. The trustee is required to (1) keep complete and
accurate books of the trust, (2) file a partnership information return with the
IRS (IRS Form 1065) and with any state where required for each taxable year of
the trust and (3) report each beneficial owner's allocable share of items of
trust income and expense to beneficial owners and the IRS on Schedule K-1. The
trust will provide the Schedule K-1 information to nominees that fail to provide
the trust with the information statement described below and the nominees will
be required to forward the information to the beneficial owners of the
partnership interests. Generally, beneficial owners of a partnership interest
must file tax returns that are consistent with the information return filed by
the trust or be subject to penalties unless the beneficial owner of a
partnership interest notifies the IRS of all inconsistencies.
Under section 6031 of the Code, any person that holds partnership interests as a
nominee at any time during a calendar year is required to furnish the trust with
a statement containing information on the nominee, the beneficial owners and the
partnership interests so held. The information includes (a) the name, address
and taxpayer identification number of the nominee and (b) as to each beneficial
owner (1) the name, address and identification number of the person, (2) whether
the person is a United States person, a tax-exempt entity or a foreign
government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (3) information on partnership
interests that were held, bought or sold on behalf of the person throughout the
year. In addition, brokers and financial institutions that hold partnership
interests through a nominee are required to furnish directly to the trust
information as to themselves and their ownership of partnership interests. A
clearing agency registered under section 17A of the Securities Exchange Act of
1934 is not required to furnish any information statement to the trust.
Nominees, brokers and financial institutions that fail to provide the trust with
the information described above may be subject to penalties.
The Code provides for administrative examination of a partnership as if the
partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
beneficial owner of a partnership interests, and, under certain circumstances, a
beneficial owner of a partnership interest may be precluded from separately
litigating a proposed adjustment to the items of the trust. An adjustment could
also result in an audit of the beneficial owner of a partnership interest's
returns and adjustments of items note related to the income and losses of the
trust.
FASIT SECURITIES
If provided in a related prospectus supplement, an election will be made to
treat the trust as a FASIT within the meaning of section 860L(a) of the Code.
Qualification as a FASIT requires ongoing compliance with certain conditions.
With respect to each series of securities for which an election is made, Dewey
Ballantine LLP will deliver its opinion to the seller that assuming compliance
with the trust agreements, the trust will be treated as a FASIT for federal
income tax purposes. A trust for which a FASIT election is made will be referred
to in this prospectus as a FASIT TRUST. The securities of each class will be
designated as "regular interests" or "high-yield regular interests" in the FASIT
trust except that one separate class will be designated as the "ownership
interest" in the FASIT trust. The prospectus supplement for each series of
securities will state whether securities of each class will constitute either a
regular interest or a high-yield regular interest, a FASIT REGULAR SECURITY, or
an ownership interest, a FASIT OWNERSHIP SECURITY. An opinion shall be attached
on Form 8-K to be filed with the SEC within fifteen days after the initial
issuance of the securities or filed with the SEC as a post-effective amendment
to the prospectus.
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TAXATION OF BENEFICIAL OWNERS OF FASIT REGULAR SECURITIES. A FASIT trust will
not be subject to federal income tax except with respect to income from
prohibited transactions and in certain other instances as described below. The
FASIT regular securities generally will be treated for federal income tax
purposes as newly-originated debt instruments. In general, interest, original
issue discount and market discount on a FASIT regular security will be treated
as ordinary income to the beneficial owner, and principal payments, other than
principal payments that do not exceed accrued market discount, on an FASIT
regular security will be treated as a return of capital to the extent of the
beneficial owner's basis allocable thereto. Beneficial owners must use the
accrual method of accounting with respect to FASIT regular securities,
regardless of the method of accounting otherwise used by the beneficial owners.
See "Discount and Premium" below.
In order for the FASIT trust to qualify as a FASIT, there must be ongoing
compliance with the requirements set forth in the Code. The FASIT must fulfill
an asset test, which requires that substantially all the assets of the FASIT, as
of the close of the third calendar month beginning after the "Startup Day",
which for purposes of this discussion is the date of the initial issuance of the
FASIT securities, and at all times thereafter, must consist of cash or cash
equivalents, debt instruments, other than debt instruments issued by the owner
of the FASIT or a related party, and hedges, and contracts to acquire the same,
foreclosure property and regular interests in another FASIT or in a Real Estate
Mortgage Investment Conduit, commonly referred to as a REMIC. Based on identical
statutory language applicable to REMICs, it appears that the "substantially all"
requirement should be met if at all times the aggregate adjusted basis of the
nonqualified assets is less than one percent of the aggregate adjusted basis of
all the FASIT's assets. The FASIT provisions of the Code, sections 860H through
860L, also require the FASIT ownership interest and "high-yield regular
interests," described below, to be held only by fully taxable domestic
corporations.
Permitted debt instruments must bear interest, if any, at a fixed or qualified
variable rate. Permitted hedges include interest rate or foreign currency
notional principal contracts, letters of credit, insurance, guarantees of
payment default and similar instruments to be provided in regulations, and which
are reasonably required to guarantee or hedge against the FASIT's risks
associated with being the obligor on interests issued by the FASIT. Foreclosure
property is real property acquired by the FASIT in connection with the default
or imminent default of a qualified mortgage, provided the seller had no
knowledge or reason to know as of the date the asset was acquired by the FASIT
that a default had occurred or would occur.
In addition to the foregoing requirements, the various interests in a FASIT also
must meet certain requirements. All of the interests in a FASIT must be either
of the following: (a) one or more classes of regular interests or (b) a single
class of ownership interest. A regular interest is an interest in a FASIT that
is issued on or after the STARTUP DAY with fixed terms, is designated as a
regular interest, and (1) unconditionally entitles the holder to receive a
specified principal amount, or other similar amount, (2) provides that interest
payments, or other similar amounts, if any, at or before maturity either are
payable based on a fixed rate or a qualified variable rate, (3) has a stated
maturity of not longer than 30 years, (4) has an issue price not greater than
125% of its stated principal amount, and (5) has a yield to maturity not greater
than 5 percentage points higher than the related applicable federal rate, as
defined in Code section 1274(d). A regular interest that is described in the
preceding sentence except that if it fails to meet one or more of requirements
(1), (2), (4), or (5). A high-yield regular interest that fails requirement (2)
must consist of a specified, nonvarying portion of the interest payments on the
permitted assets, by reference to the REMIC rules. An ownership interest is an
interest in a FASIT other than a regular interest that is issued on the startup
day, is designated an ownership interest and is held by a single, fully-taxable,
domestic corporation. An interest in a FASIT may be treated as a regular
interest even if payments of principal with respect to interest are subordinated
to payments on other regular interests or the ownership interest in the FASIT,
and are dependent on the absence of defaults or delinquencies on permitted
assets lower than reasonably expected returns on permitted assets, unanticipated
expenses incurred by the FASIT or prepayment interest shortfalls.
If an entity fails to comply with one or more of the ongoing requirements of the
Code for status as a FASIT during any taxable year, the Code provides that the
entity or applicable potion thereof will not be treated as a FASIT thereafter.
The legislative history to the FASIT provisions indicates, however, that an
entity can continue to be a FASIT if loss of its status was inadvertent, it
takes prompt steps to requalify and other requirements that may be provided in
Treasury regulations are met. Loss of FASIT status results in retirement of all
regular interests and their
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reissuance. If the resulting instruments would be treated as equity under
general tax principles, cancellation of debt income may result.
TAXES ON A FASIT TRUST. Income from certain transactions by a FASIT, called
prohibited transactions, are taxable to the holder of the ownership interest in
a FASIT at a 100% rate. Prohibited transactions generally include (1) the
disposition of a permitted asset other than for (a) foreclosure, default, or
imminent default, (b) bankruptcy or insolvency of the FASIT, (c) a qualified,
complete, liquidation, (d) substitution for another permitted debt instrument or
distribution of the debt instrument to the holder of the ownership interest to
reduce overcollateralization, but only if a principal purpose of acquiring the
debt instrument which is disposed of was not the recognition of gain, or the
reduction of a loss, on the withdrawn asset as a result of an increase in the
market value of the asset after its acquisition by the FASIT or (e) the
retirement of a class of FASIT regular interests; (2) the receipt of income from
nonpermitted assets; (3) the receipt of compensation for services; or (4) the
receipt of any income derived from a loan originated by the FASIT. It is unclear
the extent to which tax on the transactions could be collected from the FASIT
trust directly under the applicable statutes rather than from the holder of the
FASIT Residual Security.
DUE TO THE COMPLEXITY OF THESE RULES, THE ABSENCE OF TREASURY REGULATIONS AND
THE CURRENT UNCERTAINTY AS TO THE MANNER OF THEIR APPLICATION TO THE TRUST AND
TO HOLDERS OF FASIT SECURITIES, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL
INVESTORS CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX TREATMENT OF THEIR
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE FASIT REGULAR SECURITIES.
DISCOUNT AND PREMIUM
A security purchased for an amount other than its outstanding principal amount
will be subject to the rules governing original issue discount, market discount
or premium. In addition, all GRANTOR TRUST STRIP SECURITIES and certain GRANTOR
TRUST FRACTIONAL INTEREST SECURITIES will be treated as having original issue
discount by virtue of the coupon stripping rules in section 1286 of the Code. In
very general terms, (1) original issue discount is treated as a form of interest
and must be included in a beneficial owner's income as it accrues, regardless of
the beneficial owner's regular method of accounting, using a constant yield
method; (2) market discount is treated as ordinary income and must be included
in a beneficial owner's income as principal payments are made on the security,
or upon a sale of a security; and (3) if a beneficial owner so elects, premium
may be amortized over the life of the security and offset against inclusions of
interest income. These tax consequences are discussed in greater detail below.
ORIGINAL ISSUE DISCOUNT. In general, a security will be considered to be issued
with original issue discount equal to the excess, if any, of its "stated
redemption price at maturity" over its "issue price." The issue price of a
security is the initial offering price to the public, excluding bond houses and
brokers, at which a substantial number of the securities were sold. The issue
price also includes any accrued interest attributable to the period between the
beginning of the first remittance period and the closing date. The stated
redemption price at maturity of a security that has a notional principal amount
or receives principal only or that is or may provide for accruals of interest is
equal to the sum of all distributions to be made under the security. The stated
redemption price at maturity of any other security is its stated principal
amount, plus an amount equal to the excess, if any, of the interest payable on
the first payment date over the interest that accrues for the period from the
closing date to the first payment date. The trustee will supply, at the time and
in the manner required by the IRS, to beneficial owners, brokers and middlemen
information with respect to the original issue discount accruing on the
securities.
Notwithstanding the general definition, original issue discount will be treated
as zero if the discount is less than 0.25% of the stated redemption price at
maturity of the security multiplied by its weighted average life. The weighted
average life of a security is apparently computed for this purpose as the sum,
for all distributions included in the stated redemption price at maturity, of
the amounts determined by multiplying (1) the number of complete years, rounding
down for partial years, from the closing date until the date on which each
distribution is expected to be made under the assumption that the auto loans
prepay at the rate specified in the related prospectus supplement, the
PREPAYMENT ASSUMPTION, by (2) a fraction, the numerator of which is the amount
of the distribution and the denominator of which is the security's stated
redemption price at maturity. Even if original issue discount is treated as zero
under this rule, the actual amount of original issue discount must be allocated
to the principal distributions
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on the security and, when each distribution is received, gain equal to the
discount allocated to the distribution will be recognized.
Section 1272(a)(6) of the Code contains special original issue discount rules
applicable to prepayable securities. Under these rules, described in greater
detail below, (a) the amount and rate of accrual of original issue discount on
each series of securities will be based on (1) a prepayment assumption as
described below, and (2) in the case of a security calling for a variable rate
of interest, an assumption that the value of the index upon which the variable
rate is based remains equal to the value of that rate on the closing date, and
(b) adjustments will be made in the amount of discount accruing in each taxable
year in which the actual prepayment rate differs from the prepayment assumption.
Section 1272(a)(6)(B)(iii) of the Code requires that the prepayment assumption
used to calculate original issue discount be determined in the manner prescribed
in Treasury regulations. To date, no regulations have been promulgated. The
legislative history of this Code provision indicates that the assumed prepayment
rate must be the rate used by the parties in pricing the particular transaction.
The seller anticipates that the prepayment assumption for each series of
securities will be consistent with this standard. The seller makes no
representation, however, that the auto loans for a given series will prepay at
the rate reflected in the prepayment assumption for that series or at any other
rate. Each investor must make its own decision as to the appropriate prepayment
assumption to be used in deciding whether or not to purchase any of the
securities.
Each beneficial owner must include in gross income the sum of the "daily
portions" of original issue discount on its security for each day during its
taxable year on which it held the security. For this purpose, in the case of an
original beneficial owner, the daily portions of original issue discount will be
determined as follows. A calculation will first be made of the portion of the
original issue discount that accrued during each "accrual period." Original
issue discount calculations must be based on accrual periods of no longer than
one year either (1) beginning on a payment date, or, in the case of the first
period, the Closing date, and ending on the day before the next payment date or
(2) beginning on the next day following a payment date and ending on the next
payment date.
Under section 1272(a)(6) of the Code, the portion of original issue discount
treated as accruing for any accrual period will equal the excess, if any, of (a)
the sum of (1) the present values of all the distributions remaining to be made
on the security, if any, as of the end of the accrual period and (2) the
distribution made on the security during the accrual period of amounts included
in the stated redemption price at maturity, over (b) the adjusted issue price of
the security at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be calculated
based on (1) the yield to maturity of the security, calculated as of the closing
date, giving effect to the prepayment assumption, (2) events, including actual
prepayments, that have occurred prior to the end of the accrual period, (3) the
prepayment assumption, and (4) in the case of a security calling for a variable
rate of interest, an assumption that the value of the index upon which the
variable rate is based remains the same as its value on the closing date over
the entire life of the security. The adjusted issue price of a security at any
time will equal the issue price of the security, increased by the aggregate
amount of previously accrued original issue discount with respect to the
security, and reduced by the amount of any distributions made on the security as
of that time of amounts included in the stated redemption price at maturity. The
original issue discount accruing during any accrual period will then be
allocated ratably to each day during the period to determine the daily portion
of original issue discount.
In the case of GRANTOR TRUST STRIP SECURITIES as described in the related
prospectus supplement, and certain FASIT securities, the calculation described
in the preceding paragraph may produce a negative amount of original issue
discount for one or more accrual periods. No definitive guidance has been issued
regarding the treatment of negative amounts. The legislative history to section
1272(a)(6) indicates that negative amounts may be used to offset subsequent
positive accruals but may not offset prior accruals and may not be allowed as a
deduction item in a taxable year in which negative accruals exceed positive
accruals. Beneficial owners of the securities should consult their own tax
advisors concerning the treatment of negative accruals.
A subsequent purchaser of a security that purchases the security at a cost less
than its remaining stated redemption price at maturity also will be required to
include in gross income for each day on which it holds the security, the
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daily portion of original issue discount with respect to the security, but
reduced, if the cost of the security to the purchaser exceeds its adjusted issue
price, by an amount equal to the product of (1) the daily portion and (2) a
constant fraction, the numerator of which is the excess and the denominator of
which is the sum of the daily portions of original issue discount on the
security for all days on or after the day of purchase.
MARKET DISCOUNT. A beneficial owner that purchases a security at a market
discount, that is, at a purchase price less than the remaining stated redemption
price at maturity of the security, or, in the case of a security with original
issue discount, its adjusted issue price, will be required to allocate each
principal distribution first to accrued market discount on the security, and
recognize ordinary income to the extent the distribution does not exceed the
aggregate amount of accrued market discount on the security not previously
included in income. For securities that have unaccrued original issue discount,
the market discount must be included in income in addition to any original issue
discount. A beneficial owner that incurs or continues indebtedness to acquire a
security at a market discount may also be required to defer the deduction of all
or a portion of the interest on the indebtedness until the corresponding amount
of market discount is included in income. In general terms, market discount on a
security may be treated as accruing either (1) under a constant yield method or
(2) in proportion to remaining accruals of original issue discount, if any, or
if none, in proportion to remaining distributions of interest on the security,
in any case taking into account the prepayment assumption. The trustee will make
available, as required by the IRS, to beneficial owners of securities
information necessary to compute the accrual of market discount.
Regardless of the above rules, market discount on a security will be considered
to be zero if the discount is less than 0.25% of the remaining stated redemption
price at maturity of the security multiplied by its weighted average remaining
life. Weighted average remaining life presumably would be calculated in a manner
similar to weighted average life, taking into account payments, including
prepayments, prior to the date of acquisition of the security by the subsequent
purchaser. If market discount on a security is treated as zero under this rule,
the actual amount of market discount must be allocated to the remaining
principal distributions on the security and, when each distribution is received,
gain equal to the discount allocated to the distribution will be recognized.
PREMIUM. A purchaser of a security that purchases the security at a cost
greater than its remaining stated redemption price at maturity will be
considered to have purchased the security, a PREMIUM SECURITY, at a premium. A
purchaser need not include in income any remaining original issue discount and
may elect, under section 171(c)(2) of the Code, to treat the premium as
"amortizable bond premium." If a beneficial owner makes an election, the amount
of any interest payment that must be included in the beneficial owner's income
for each period ending on a payment date will be reduced by the portion of the
premium allocable to that period based on the premium security's yield to
maturity. The premium amortization should be made using constant yield
principles. If an election is made by the beneficial owner, the election will
also apply to all FULLY TAXABLE BONDS, the interest on which is not excludible
from gross income, held by the beneficial owner at the beginning of the first
taxable year to which the election applies and to all fully taxable bonds
thereafter acquired by it, and is irrevocable without the consent of the IRS. If
an election is not made, (1) a beneficial owner must include the full amount of
each interest payment in income as it accrues, and (2) the premium must be
allocated to the principal distributions on the premium security and when each
distribution is received a loss equal to the premium allocated to the
distribution will be recognized. Any tax benefit from the premium not previously
recognized will be taken into account in computing gain or loss upon the sale or
disposition of the premium security.
SPECIAL ELECTION. A beneficial owner may elect to include in gross income all
"interest" that accrues on the security by using a constant yield method. For
purposes of the election, the term INTEREST includes stated interest,
acquisition discount, original issue discount, DE MINIMIS original issue
discount, market discount, DE MINIMIS market discount and unstated interest as
adjusted by any amortizable bond premium or acquisition premium. A beneficial
owner should consult its own tax advisor regarding the time and manner of making
and the scope of the election and the implementation of the constant yield
method.
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BACKUP WITHHOLDING
Distributions of interest and principal, as well as distributions of proceeds
from the sale of securities, may be subject to the "backup withholding tax"
under section 3406 of the Code at a rate of 31% if recipients of the
distributions fail to furnish to the payor certain information, including their
taxpayer identification numbers, or otherwise fail to establish an exemption
from the tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against the recipient's federal income
tax. Furthermore, 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.
The IRS recently issued the WITHHOLDING REGULATIONS, which change some of the
rules relating to presumptions currently available relating to information
reporting and backup withholding. The withholding regulations would provide
alternative methods of satisfying the beneficial ownership certification
requirement. The withholding regulations are effective January 1, 2001.
FOREIGN INVESTORS
The withholding regulations would require, in the case of securities held by a
foreign partnership, that (1) the certification described above be provided by
the partners rather than by the foreign partnership and (2) the partnership
provide information, including a United States taxpayer identification number.
See "Backup Withholding" above. A look-through rule would apply in the case of
tiered partnerships. Non-U.S. persons should consult their own tax advisors
regarding the application to them of the withholding regulations.
GRANTOR TRUST SECURITIES, DEBT SECURITIES, AND FASIT REGULAR
SECURITIES. Distributions made on a grantor trust security, debt security or a
FASIT regular security to, or on behalf of, a beneficial owner that is not a
U.S. person generally will be exempt from U.S. federal income and withholding
taxes. The term U.S. PERSON means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income, or
a trust if a court within the United States can exercise primary supervision
over its administration and at least one United States person has the authority
to control all substantial decisions of the trust. This exemption is applicable
provided (a) the beneficial owner is not subject to U.S. tax as a result of a
connection to the United States other than ownership of the security, (b) the
beneficial owner signs a statement under penalties of perjury that certifies
that the beneficial owner is not a U.S. person, and provides the name and
address of the beneficial owner, and (c) the last U.S. person in the chain of
payment to the beneficial owner receives a statement from a beneficial owner or
a financial institution holding on its behalf and does not have actual knowledge
that the statement is false. Beneficial owners should be aware that the IRS
might take the position that this exemption does not apply to a beneficial owner
of a FASIT regular security that also owns 10% or more of the FASIT ownership
securities of any FASIT trust, or to a beneficial owner that is a "controlled
foreign corporation" described in section 881(c)(3)(C) of the Code.
HIGH-YIELD FASIT REGULAR SECURITIES. High-yield FASIT regular securities may
not be sold to or beneficially owned by non-U.S. persons. Any purported transfer
will be null and void and, upon the trustee's discovery of any purported
transfer in violation of this requirement, the last preceding owner of a
high-yield FASIT regular securities will be restored to ownership thereof as
completely as possible. The last preceding owner will, in any event, be taxable
on all income with respect to a high-yield FASIT regular securities for federal
income tax purposes. The trust documents will provide that, as a condition to
transfer of a high-yield FASIT regular security, the proposed transferee must
furnish an affidavit as to its status as a U.S. person and otherwise as a
permitted transferee.
PARTNERSHIP INTERESTS. Depending upon the particular terms of the trust
agreement, a trust may be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to non-U.S.
persons. If the trust is considered to be engaged in a trade or business in the
United States for such purposes and the trust is treated as a partnership, the
income of the trust distributable to a non-U.S. person would be subject to
federal withholding tax. Also, in such cases, a non-U.S. beneficial owner of a
partnership interest that is a corporation may be subject to the branch profits
tax. If the trust is notified that a beneficial owner of a partnership interest
is a
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foreign person, the trust may withhold as if it were engaged in a trade or
business in the United States in order to protect the trust from possible
adverse consequences of a failure to withhold. A foreign holder generally would
be entitled to file with the IRS a claim for refund with respect to withheld
taxes, taking the position that no taxes were due because the trust was not in a
U.S. trade or business.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described above, potential
investors should consider the state and local income tax consequences of the
acquisition, ownership, and disposition of the securities. State and local
income tax law 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 investors should consult their
own tax advisors with respect to the various state and local tax consequences of
an investment in the securities.
ERISA CONSIDERATIONS
GENERAL
Provisions of ERISA and of the Internal Revenue Code prohibit a pension, profit
sharing or other employee benefit plan and other individual retirement
arrangements from engaging in transactions involving PLAN ASSETS with persons
that are PARTIES IN INTEREST under ERISA or DISQUALIFIED PERSONS under the Code
with respect to the plan. However, if a statutory or administrative exemption
applies to the transaction, plans may engage in these transactions. ERISA and
the Code also prohibit generally actions involving conflicts of interest by
fiduciaries of plans or arrangements. Persons who violate these PROHIBITED
TRANSACTION rules may incur excise tax and other liabilities under ERISA and the
Code. In addition, investments by plans are subject to ERISA's general fiduciary
requirements, including ERISA's investment prudence and diversification
requirements and the requirement that a plan make its investments in accordance
with its governing documents. Employee benefit plans that are governmental plans
and church plans under ERISA, are not subject to ERISA requirements.
Accordingly, these plans may invest in securities without regard to the ERISA
considerations discussed below. Any plan, which is qualified and exempt from
taxation under section 401(a) and 501(a) of the Code, however, is subject to the
prohibited transaction rules detailed in section 503 of the Code.
Transactions involving a trust might be deemed to constitute prohibited
transactions under ERISA and the Code with respect to a plan, including an
individual retirement arrangement, that purchased securities. In the absence of
an exemption, the purchase, sale or holding of a security by a plan, including
an individual retirement arrangement, might result in prohibited transactions.
This may result in excise taxes and civil penalties being imposed.
ERISA CONSIDERATIONS REGARDING SECURITIES WHICH ARE CERTIFICATES
The Department of Labor has issued to various underwriters individual prohibited
transaction exemptions which generally exempt transactions meeting the
department's requirements from:
a) the application of the prohibited transaction provisions of section
406(a), section 406(b)(1), section 406(b)(2) and section 407(a) of ERISA, and
b) excise taxes imposed under sections 4975(a) and (b) of the Code.
These exempted transactions deal with the initial purchase, holding and the
subsequent resale by plans of certificates in pass-through trusts which hold:
- secured receivables,
- secured loans, and
- other secured obligations.
These UNDERWRITER EXEMPTIONS will only be available for securities that are
certificates.
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Among the conditions that must be satisfied for the underwriter exemptions to
apply are the following:
(1) the plan must acquire the certificates on terms, including the certificate's
price, that are at least as favorable to the plan as they would be in an
arm's-length transaction with an unrelated party;
(2) the certificates must not be subordinated to the trust's other certificates;
(3) when the plan acquires the certificates, the certificates must have a rating
in one of the three highest generic rating categories from Standard & Poor's
Rating Group, Moody's Investors Service, Duff & Phelps Credit Rating Co. or
Fitch IBCA Inc.;
(4) the trustee must not be an affiliate of any other member of the restricted
group;
(5) the sum of all payments made to and retained by the underwriters must not
total more than reasonable compensation for underwriting the certificates;
the sum of all payments made to and retained by the seller and the
subservicer for assigning the loans to the trust must not total more than
the fair market value of the loans; the sum of all payments made to and
retained by the servicer must not total more than reasonable compensation
and expense reimbursement for its services;
(6) the plan must be an ACCREDITED INVESTOR as defined in Regulation D of the
commission under the Securities Act; and
(7) in the event that all of the auto loans to be held by the trust have not
been transferred to the trust on the closing date, additional auto loans
having an aggregate value equal to no more than 25% of the certificate's
total principal amount may be transferred to the trust under a pre-funding
feature, within 90 days or 3 months following the closing date.
The trust must also meet the following requirements:
- the trust property must consist solely of assets of the type that have
been included in other investment pools;
- certificates in the other investment pools must have been rated in one of
the three highest rating categories of Standard & Poor's Rating Group,
Moody's Investors Service, Fitch IBCA Inc. or Duff & Phelps Credit Rating
Co. for at least one year prior to the date the plan acquired the
certificates; and
- investors other than plans must have purchased certificates evidencing
interests in the other investment pools for at least one year prior to the
date the plan acquired the certificates.
Moreover, the underwriter exemptions provide relief from various
self-dealing/conflict of interest prohibited transactions that may occur when
the plan fiduciary causes a plan to acquire certificates in a trust in which the
fiduciary--or its affiliate--is an obligor on the auto loans held in the trust;
provided that, among other requirements:
(1) when a plan acquires an initial issuance of certificates, at least fifty
percent of each class in which a plan has invested is acquired by persons
independent of the restricted group and at least fifty percent of the
aggregate interest in the trust is acquired by persons independent of the
restricted group;
(2) the fiduciary--or its affiliate--is an obligor with respect to five percent
or less of the fair market value of the obligations contained in the trust;
(3) when the plan acquires the certificates the plan's investment in any class
does not exceed twenty-five percent of all of the certificates of that
class; and
(4) immediately after the plan acquires the certificates, no more than
twenty-five percent of the plan's assets for which the person is a fiduciary
are invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
The underwriter exemptions do not apply to plans sponsored by a member of the
RESTRICTED GROUP, which is the seller, the subservicer, the servicer, the
underwriters, the trustee, any obligor with respect to auto loans included in
the trust property constituting more than five percent of the aggregate
unamortized principal balance of the trust estate's assets, or any affiliate of
these parties.
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ERISA CONSIDERATIONS REGARDING SECURITIES WHICH ARE NOTES
The underwriter exemptions will not be available for securities that are notes.
Under the PLAN ASSETS REGULATION issued by the Department of Labor, the trust's
assets would be treated as a plan's assets for the purposes of ERISA and the
Code only if the plan acquired an equity interest in the trust and none of the
exceptions contained in the plan assets regulation were 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.
If the notes are treated as having substantial equity features, the purchase,
holding and resale of the notes could result in a transaction that is prohibited
under ERISA or the Code. If the notes are treated as indebtedness without
substantial equity features, the trust's property would not be deemed assets of
a plan. In that case, the acquisition or holding of the notes by or on behalf of
a plan could still result in a prohibited transaction, if the acquisition or
holding of notes by or on behalf of a plan were deemed to be a prohibited loan
to a party in interest with respect to the plan. Exemptions from these
prohibited transaction rules could apply to a plan's purchase and its holding of
notes, depending on the type and circumstances of the plan fiduciary making the
decision to acquire the notes. Included among these exemptions are:
- PTCE 84-14, regarding transactions effected by QUALIFIED PROFESSIONAL
ASSET MANAGERS;
- PTCE 90-1, regarding transactions entered into by INSURANCE COMPANY POOLED
SEPARATE ACCOUNTS;
- PTCE 91-38, regarding transactions entered into by BANK COLLECTIVE
INVESTMENT FUNDS;
- PTCE 95-60, regarding transactions entered into by INSURANCE COMPANY
GENERAL ACCOUNTS; and
- PTCE 96-23, regarding transactions effected by IN-HOUSE ASSET MANAGERS.
Each purchaser and each transferee of a note that is treated as debt for
purposes of the plan assets regulation may be required to represent and warrant
that its purchase and holding of the note will be covered by one of the
exemptions listed above or by another Department of Labor class exemption.
CONSULTATION WITH COUNSEL
The prospectus supplement will provide further information that plans should
consider before purchasing the securities. A plan fiduciary considering the
purchase of securities may wish to consult its tax or legal advisors regarding:
- whether the trust's property would be considered plan assets,
- the possibility of exemptive relief from the prohibited transaction rules;
and
- other ERISA issues and their potential consequences.
In addition, each plan fiduciary should determine whether under the general
fiduciary standards of investment prudence and diversification, investing in the
securities is appropriate for the plan, taking into account the plan's overall
investment policy and the composition of the plan's investment portfolio. The
sale of securities to a plan is in no respect a representation by us or by the
underwriters that this investment meets all relevant requirements regarding
investments by plans generally, by any particular plan or that this investment
is appropriate for plans generally or any particular plan.
In JOHN HANCOCK MUTUAL LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK, 510
U.S. 86 (1993), the United States 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.
44
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METHODS OF DISTRIBUTION
The trusts will offer the securities in series through one or more of the
methods described below. The prospectus supplement will describe the offering
method and will state the public offering or purchase price and the net proceeds
to the seller from the sale.
The securities will be offered through the following methods from time to time
and that offerings may be made concurrently through more than one of these
methods or that an offering of a particular series of securities may be made
through a combination of two or more of these methods. The methods are as
follows:
- by negotiated firm commitment or best efforts underwriting and public
re-offering by underwriters;
- by placements by the company with institutional investors through dealers;
- by direct placements by the company with institutional investors; and
- by competitive bid.
In addition, securities may be offered in whole or in part in exchange for the
auto loans--and other assets, if applicable--that would comprise the trust
property.
If underwriters are used in a sale of any securities, other than in connection
with an underwriting on a best efforts basis, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at fixed public
offering prices or at varying prices to be determined at the time of sale or at
the time of commitment. The securities will be described on the cover of the
prospectus supplement and the members of the underwriting syndicate, if any,
will be named in the prospectus supplement.
In connection with the sale of the securities, underwriters may receive
compensation from the seller or from purchasers of the securities in the form of
discounts, concessions or commissions. Underwriters and dealers participating in
the distribution of the securities may be deemed to be underwriters in
connection with the securities, and any discounts or commissions received by
them and any profit on the resale of securities by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. The
prospectus supplement will describe any compensation paid by the seller or its
affiliates.
It is anticipated that the underwriting agreement pertaining to the sale of
securities will provide that the obligations of the underwriters will be subject
to conditions precedent providing that the underwriters will be obligated to
purchase all the securities if any are purchased, other than in connection with
an underwriting on a best efforts basis, and that, in limited circumstances, the
seller indemnify the several underwriters and the underwriters will indemnify
the seller against certain civil liabilities, including liabilities under the
Securities Act of 1933 or will contribute to payments required to be made.
The prospectus supplement for any securities offered by placements through
dealers will contain information regarding the nature of the offering and any
agreements to be entered into between the seller or its affiliates and
purchasers of securities.
Purchasers of securities, including dealers, may, depending on the facts and
circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with reoffers and sales by
them of securities. Securityholders should consult with their legal advisors in
this regard prior to any reoffer or sale.
LEGAL MATTERS
Legal matters relating to these securities will be passed upon by legal officers
of Household International, Inc., and by Dewey Ballantine LLP, New York, New
York.
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ANNEX I
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the securities will be available only in
book-entry form. Investors in the securities may hold the securities through any
of DTC, Cedelbank or Euroclear. The securities will be tradable 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 through Cedelbank and Euroclear will
be conducted in the ordinary way in accordance with the normal rules and
operating procedures of Cedelbank and Euroclear and in accordance with
conventional eurobond practice, which is seven calendar day settlement.
Secondary market trading between investors through DTC will be conducted
according to DTC's rules and procedures applicable to U.S. corporate debt
obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
participants holding securities will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear and as DTC
participants.
Non-U.S. holders of global securities will be subject to U.S. withholding taxes
unless the holders meet a number of requirements and deliver appropriate U.S.
tax documents to the securities clearing organizations or their participants.
INITIAL SETTLEMENT
All securities will be held in book-entry form by DTC in the name of Cede & Co.
as nominee of DTC. Investors' interests in the securities will be represented
through financial institutions acting on their behalf as direct and indirect
participants in DTC. As a result, Cedelbank and Euroclear will hold positions on
behalf of their participants through their relevant depository which in turn
will hold these positions in their accounts as DTC participants.
Investors electing to hold their securities through DTC will follow DTC
settlement practices. 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 securities through Cedelbank or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary security and no lock-up or
restricted period. 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 asset-back
securities issues in same-day funds.
TRADING BETWEEN CEDELBANK OR EUROCLEAR PARTICIPANTS. Secondary market trading
between Cedelbank participants or Euroclear participants will be settled using
the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC, SELLER AND CEDELBANK OR EUROCLEAR PARTICIPANTS. When
securities are to be transferred from the account of a DTC participant to the
account of a Cedelbank participant or a Euroclear participant, the purchaser
will send instructions to Cedelbank or Euroclear through a Cedelbank participant
or Euroclear participant at least one business day prior to settlement.
Cedelbank or Euroclear will instruct the relevant depository, as the case may
be, to receive the securities against payment. Payment will include interest
accrued on the securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in the
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
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then be made by the relevant depository to the DTC participant's account against
delivery of the securities. After settlement has been completed, the securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedelbank 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 and the trade fails, the Cedelbank or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedelbank 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 Cedelbank or Euroclear. Under this approach,
they may take on credit exposure to Cedelbank or Euroclear until the securities
are credited to their account one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit to
them, Cedelbank participants or Euroclear participants can elect not to
preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Cedelbank participants or Euroclear
participants purchasing securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the securities were credited to their
accounts. However, interest on the 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 the
overdraft charges, although the result will depend on each Cedelbank
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 crediting global securities
to the respective European depository for the benefit of Cedelbank participants
or Euroclear participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC participants a cross-market transaction
will settle no differently than a trade between two DTC participants.
TRADING BETWEEN CEDELBANK OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedelbank participants and Euroclear
participants may employ their customary procedures for transactions in which
securities are to be transferred by the respective clearing system, through the
respective depository, to a DTC participant. The seller will send instructions
to Cedelbank or Euroclear through a Cedelbank participant or Euroclear
participant at least one business day prior to settlement. In these cases
Cedelbank or Euroclear will instruct the respective depository, as appropriate,
to credit the securities to the DTC participant's account against payment.
Payment will include interest accrued on the securities from and including the
last interest payment to and excluding the settlement date on the basis of the
actual number of days in the 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 Cedelbank participant or
Euroclear participant the following day, and receipt of the cash proceeds in the
Cedelbank participant's or Euroclear participant's account would be back-valued
to the value date, which would be the preceding day, when settlement occurred in
New York. In the event that the Cedelbank participant or Euroclear participant
has a line of credit with its respective clearing system and elects 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 and the trade fails,
receipt of the cash proceeds in the Cedelbank participant's or Euroclear
participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase global
securities from DTC participants for delivery to Cedelbank participants or
Euroclear participants may wish to note that these trades would automatically
fail on the sale side unless affirmative action is taken. At least three
techniques should be readily available to eliminate this potential problem:
- borrowing through Cedelbank or Euroclear for one day, until the purchase
side of the trade is reflected in their Cedelbank or Euroclear accounts in
accordance with the clearing system's customary procedures;
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- borrowing the securities in the U.S. from a DTC participant no later than
one day prior to settlement, which would give the securities sufficient
time to be reflected in their Cedelbank or Euroclear account in order to
settle the sale side of the trade; or
- 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 Cedelbank participant or
Euroclear participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of securities holding securities through Cedelbank 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:
(1) 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 the beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements
and
(2) the 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 the 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 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 securityholders or
their 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".
- U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The 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.
On April 22, 1996, the IRS proposed regulations relating to withholding, backup
withholding and information reporting that, if adopted in their current form
would, among other things, unify current certification procedures and forms and
clarify reliance standards. The regulations are proposed to be effective for
payments made after December 31, 2000 but provide that securities issued on or
before the date that is 60 days after the proposed regulations are made final
will continue to be valid until they expire. Proposed regulations, however, are
subject to change prior to their adoption in final form.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the securities. Investors
should consult their own tax advisors for specific tax advice concerning their
holding and disposing of the securities.
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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.................................................... $ 278.00*
Trustee's Fees and Expenses....................................... +
Legal Fees and Expenses........................................... +
Accounting Fees and Expenses...................................... +
Printing and Engraving Expenses................................... +
Blue Sky Qualification and Legal Investment Fees and Expenses..... +
Rating Agency Fees................................................ +
Miscellaneous..................................................... +
---------
Total......................................................... $ +
---------
---------
</TABLE>
- ------------------------
* Actual.
+ To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. INDEMNIFICATION. The General Corporation Law of Delaware (Section 145)
gives Delaware corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers, subject to specified
conditions and exclusions; gives a director or officer who successfully defends
an action the right to be so indemnified; and authorizes said corporation to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other right to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or otherwise.
The General Corporation Law of Nevada (Section 78.751) permits Nevada
corporations to indemnify their present and former directors and officers and
those serving at the request of the corporation against expenses reasonably
incurred in connection with: (1) an action other than one by or in the right of
the corporation, and (2) an action by or in the right of the corporation if a
court determines that such indemnification is proper; gives a director or
officer who successfully defends an action the right to be so indemnified; and
authorizes said corporation to buy directors' and officers' liability insurance.
Such indemnification: (1) must be authorized in the specific case upon a
determination by the stockholders, disinterested directors, or independent
counsel that it is proper, and (2) is not exclusive of any other right to which
those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or otherwise, so long as the defendant's acts or conduct did not
involve intentional misconduct, fraud or a knowing violation of the law.
A bylaw adopted by Household Finance Corporation, a Delaware corporation
("HFC"), and the immediate parent of the Seller states and makes mandatory the
indemnification expressly authorized under the General Corporation Law of
Delaware, in the absence of other indemnification by contract, vote of
stockholders or otherwise except that the bylaw makes no distinction between
litigation brought by third parties and litigation brought by or in the right of
HFC as regards the required standard of conduct
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<PAGE>
imposed upon the individual in order to be entitled to indemnification. The
bylaw standard applicable in all cases (excepting indemnification in connection
with the successful defense of any proceeding or matter therein, which is
mandatory under the General Corporation Law of Delaware and the bylaw without
reference to any such standard) is that the individual shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of HFC, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Further, the bylaw would
protect directors, officers, employees and agents against any and all expenses
and liability with respect to actions brought against them by or in the right of
HFC if the required standard of conduct is met. The bylaw is qualified in its
entirety in that no indemnification will be made if prohibited by applicable
law. The bylaw is applicable only to claims, actions, suits or proceedings made
or commenced after its adoption, whether arising from prior or subsequent acts
or omissions to act. The bylaw is applicable to directors, officers, employees
or agents of HFC and also to persons who are serving at the request of HFC as
directors, officers, employees or agents or other corporations (including
subsidiaries such as the Seller).
Article VII of Household International, Inc.'s Certificate of Incorporation
provides for indemnification to the fullest extent permitted by Section 145 of
the General Corporation of Delaware for directors, officers and employees of
Household International, Inc., and also to persons who are serving at the
request of Household International, Inc. as directors, officers or employees of
other corporations (including subsidiaries such as the Seller). Household
International, Inc. has also purchased liability policies which indemnify the
Seller, officers and directors against loss arising from claims by reason of
their legal liability for acts as officers and directors, subject to limitations
and conditions as set forth in the policies.
Article Ninth and Tenth of the Seller's charter also provides for
indemnification as permitted by the Nevada Revised Statues.
The forms of the Underwriting Agreement, filed as Exhibits 1.1 and 1.2 to this
Registration Statement, provide that the Registrant will indemnify and reimburse
the underwriter(s) and each controlling person of the underwriter(s) with
respect to certain expenses and liabilities, including liabilities under the
1933 Act or other federal or state regulations or under the common law, which
arise out of or are based on certain material misstatements or omissions in the
Registration Statement. In addition, the Underwriting Agreements provide that
the underwriter(s) will similarly indemnify and reimburse the Registrant with
respect to certain material misstatements or omissions in the Registration
Statement which are based on certain written information furnished by the
underwriter(s) for use in connection with the preparation of the Registration
Statement.
B. INSURANCE. As permitted under the laws which govern the organization of
the Registrant, the registrant's Certificate of Incorporation permits the board
of directors to purchase and maintain insurance on behalf of the Registrant's
agents, including its officers and directors, against any liability asserted
against them in such capacity or arising out of such agents' status as such,
whether or not such Registrant would have the power to indemnify them against
such liability under applicable law.
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S> <C>
1.1 - Form of Underwriting Agreement-Notes.
1.2 - Form of Underwriting Agreement-Certificates.
3.1 - Certificate of Incorporation of Seller (incorporated by reference to Exhibit 3.1 to File No.
333-59837).
3.2 - By-Laws of Seller (incorporated by reference to Exhibit 3.2 to File No. 333-59837).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
4.1 - Form of Trust Agreement between the Owner Trustee and the Seller.
4.2 - Form of Indenture between the Issuer and the Indenture Trustee.
4.3 - Form of Series Supplement to the Indenture, the Trust Agreement and the Master Sale and Servicing
Agreement.
4.4 - Form of Master Sale and Servicing Agreement among the Seller, the Servicer, the Issuer, and the
Indenture Trustee.
4.5 - Form of Master Receivables Purchase Agreement between Household Automotive Finance Corporation and the
Seller.
4.6 - Form of Pooling and Servicing Agreement among the Seller, the Servicer and the Trustee.
5.1 - Opinion of John W. Blenke, Esq., Vice President-Corporate Law and Assistant Secretary of Household
International, Inc. (for Grantor Trust structure).
5.2 - Opinion of John W. Blenke, Esq., Vice President-Corporate Law and Assistant Secretary of Household
International, Inc. (for Owner Trust structure).
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 5.1,
5.2 and 8 hereto, respectively.
24 - Powers of Attorney (included on page II-5 hereto).
</TABLE>
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING IN RESPECT OF INDEMNIFICATION. Insofar as indemnification
for liabilities arising under the 1933 Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described above in Item 15, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by them is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
B. UNDERTAKING PURSUANT TO RULE 415. The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent on more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
II-3
<PAGE>
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change of such information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in the post-effective amendment is
contained in periodic reports filed by the Issuer pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
C. UNDERTAKING PURSUANT TO RULE 430A. The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a registration statement in Reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<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
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 30th
day of July, 1999.
<TABLE>
<S> <C> <C> <C>
HOUSEHOLD AUTO RECEIVABLES CORPORATION
By:
<CAPTION>
/s/ RELLEN M. STEWART
-----------------------------------------
Rellen M. Stewart
PRESIDENT
</TABLE>
Each person whose signature appears below constitutes and appoints J.W. Blenke,
L.S. Mattenson and P.D. Schwartz and each or any of them (with full power to act
alone), as his/her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him/her in his/her name, place and
stead, in any and all capacities, to sign and file with the Securities and
Exchange Commission, any and all amendments including post-effective amendments
to the Registration Statement, granting unto each such attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he/she might or could do in person, hereby ratifying and confirming all that
such attorney-in-fact and agent or their substitutes may lawfully do or cause to
be done by virtue hereof.
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 Registration
Statement has been signed below by the following persons in the capacities
indicated on the 30th day of July, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ RELLEN M. STEWART
------------------------------------------- President (Principal Executive Officer)
(Rellen M. Stewart) and Director
/s/ EDGAR ANCONA
------------------------------------------- Senior Vice President, Treasurer and Director (Principal
(Edgar Ancona) Financial Officer)
/s/ JOHN W. BLENKE
-------------------------------------------
(John W. Blenke) Vice President, Secretary and Director
/s/ STEVEN H. SMITH
-------------------------------------------
(Steven H. Smith) Vice President, Assistant Treasurer and Director
/s/ STEVEN L. MCDONALD
------------------------------------------- Vice President and Controller
(Steven L. McDonald) (Principal Accounting Officer)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- -----
<C> <S> <C> <C>
1.1 - Form of Underwriting Agreement-Notes.
1.2 - Form of Underwriting Agreement-Certificates.
3.1 - Certificate of Incorporation of Seller (incorporated by reference to Exhibit 3.1 to File No.
333-59837).
3.2 - By-Laws of Seller (incorporated by reference to Exhibit 3.2 to File No. 333-59837).
4.1 - Form of Trust Agreement between the Owner Trustee and the Seller.
4.2 - Form of Indenture between the Issuer and the Indenture Trustee.
4.3 - Form of Series Supplement to the Indenture, the Trust Agreement and the Master Sale and
Servicing Agreement.
4.4 - Form of Master Sale and Servicing Agreement among the Seller, the Servicer, the Issuer, and the
Indenture Trustee.
4.5 - Form of Master Receivables Purchase Agreement between Household Automotive Finance Corporation
and the Seller.
4.6 - Form of Pooling and Servicing Agreement among the Seller, the Servicer and the Trustee.
5.1 - Opinion of John W. Blenke, Esq., Vice President-Corporate Law and Assistant Secretary of
Household International, Inc. (for Grantor Trust structure).
5.2 - Opinion of John W. Blenke, Esq., Vice President-Corporate Law and Assistant Secretary of
Household International, Inc. (for Owner Trust structure).
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
5.1, 5.2 and 8 hereto, respectively.
24 - Powers of Attorney (included on page II-5 hereto).
</TABLE>
II-6
<PAGE>
EXHIBIT 1.1
HOUSEHOLD AUTOMOTIVE TRUST ___
SERIES _____
[$___________ ___% Class A-1 Notes
$___________ ___% Class A-2 Notes
$___________ ___% Class A-3 Notes
$___________ ___% Class A-4 Notes]
UNDERWRITING AGREEMENT
[Name of Lead Underwriter]
As Representative of the Underwriters
[address] [date]
Dear Sirs:
Household Finance Corporation, a corporation organized and
existing under the laws of Delaware, individually ("HFC") and as Master Servicer
(the "MASTER SERVICER"), Household Auto Receivables Corporation, a corporation
organized and existing under the laws of Nevada and a wholly owned subsidiary of
HFC, individually ("HARC") and as Seller (the "SELLER"), and Household
Automotive Finance Corporation, a corporation organized and existing under the
laws of Delaware and wholly owned subsidiary of HFC ("HAFC"), agree with you as
follows:
Section 1. ISSUANCE AND SALE OF SERIES _____ NOTES. The
Seller has authorized the issuance and sale of
[$___________ ___% Class A-1 Notes, $___________ ___% Class A-2 Notes,
$___________ ___% Class A-3 Notes and $___________ ___% Class A-4 Notes]
(collectively, the "SERIES _____ NOTES"). The Series _____ Notes are to be
issued by Household Automotive Trust ___ (the "TRUST") pursuant to an
Indenture, dated as of ____________, as supplemented by a Series ______
Supplement (the "INDENTURE") by and among HFC, the Master Servicer, the Trust
and __________________, a [New York] banking corporation, as indenture
trustee (the "INDENTURE TRUSTEE"). In addition to the Series _____ Notes, the
Trust will also issue the Series _____ Certificates (the "SERIES _____
CERTIFICATES") pursuant to a Trust Agreement, dated as of ____________,
between the Seller and the Owner Trustee as supplemented by a Series _____
Supplement (the "TRUST AGREEMENT"). The Series _____ Notes and the Series
_____ Certificates are referred to herein collectively as the "SERIES _____
SECURITIES." The assets of the Trust will include a pool of non-prime retail
installment sales contracts secured by new or used automobiles, light duty
trucks and vans (the "RECEIVABLES") and certain monies due thereunder on or
after __________ (the "CUT-OFF DATE").
<PAGE>
As used herein, the term "SELLER AGREEMENTS" means the Master
Sale and Servicing Agreement dated as of _________ among the Trust, the Seller,
the Master Servicer and _____________________, as trustee (the "MASTER SALE AND
SERVICING AGREEMENT"), the Master Receivables Purchase Agreement dated as of
____________ 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 _____ Notes are being purchased by the Underwriters
named in Schedule 1 hereto, and the Underwriters are purchasing, severally, only
the Series _____ 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. [Name of Lead Underwriter] is acting as representative of
the Underwriters and in such capacity, is hereinafter referred to as the
"REPRESENTATIVE."
The offering of the Series _____ Notes will be made by the
Underwriters and the Household Entities understand that the Underwriters propose
to make a public offering of the Series _____ Notes for settlement on
___________, as the Underwriters deem advisable.
None of the Series _____ 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 _____
Supplement dated as of __________ among the Master Servicer, the Trust, the
Seller, the Indenture Trustee and ___________________, as Owner Trustee (the
"SERIES _____ 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"). A registration Statement on For S-3 (no.
333-______) has (a) been prepared by the Seller on such
Form in conformity with the requirements of the Act and the
rules and regulations of the United States Securities and
Exchange Commission (the "COMMISSION") thereunder, (b) been
filed with the Commission and (c) been declared effective
by the Commission, and no stop order suspending the
effectiveness of the Registration Statement has been
issued, and no proceeding for that purpose has
2
<PAGE>
been initiated or threatened, by the Commission. Copies of
such Registration Statement have been delivered by the
Seller to the Underwriters. There are no contracts or
documents of the Seller which are required to be filed as
exhibits to the Registration Statement pursuant to the Act
or the rules and regulations of the Commission which have
not been so filed or incorporated by reference therein on
or prior to the Effective Date of the Registration
Statement.
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. The term "BASE PROSPECTUS" means the prospectus included in the
Registration Statement. The term "PROSPECTUS SUPPLEMENT" means the prospectus
supplement dated the date hereof, specifically relating to the Notes, as
filed with the Commission pursuant to Rule 424 of the Rules and Regulations.
The term "PROSPECTUS" means, together, then Base Prospectus and the
Prospectus Supplement. "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 _____ 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
the applicable requirements of the Act and the Rules and
Regulations thereunder; assuming compliance by each
Underwriter with Sections 3(a), 3(b), 3(c) and 3(f) 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
3
<PAGE>
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 _____ Securities and the
4
<PAGE>
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 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
_____ 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,
5
<PAGE>
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 _____
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
Series _____ Related Documents. The Seller has no
indebtedness to any Person other than pursuant to this
Agreement and the Series _____ Related Documents. Each of
the Issuer, HAFC and the Seller, after giving effect to the
transactions contemplated by this Agreement and the other
Series _____ 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 _____ 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 _____
6
<PAGE>
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
_____ 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 _____ Notes and the subsequent distribution
of the Series _____ 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 Cutoff Date, each of the Receivables
will meet the eligibility criteria described in the
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
7
<PAGE>
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 _____ 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 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
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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 1997, 1998 and 1999. 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 _____
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 _____ Notes and the subsequent
distribution of the Series _____ 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 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 _____ Notes to any prospective
investor.
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(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-Provided 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.
(f) Any "electronic roadshow" presentation used by such
Underwriter (an "ER PRESENTATION") shall be made available only to institutional
investors, investment advisors and other persons of a type the Underwriter would
customarily invite to a road show who have been provided with a password by such
Underwriter. If the ER Presentation is transmitted during the "waiting period"
between filing and effectiveness of the Registration Statement, a preliminary
prospectus pursuant to Section 10(b) of the Act will be made available to the
prospective investor
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prior to the release of the password to such investor. In such event, the ER
Presentation will be preceded and conclude with the following statement:
A preliminary prospectus has been furnished to each person
authorized to receive this transmission. You should refer to
such prospectus, and to the registration statement of which it
is a part, for more complete information about the offering.
By electing to view this transmission, you represent, warrant
and agree that you will not videotape, record or otherwise
attempt to reproduce or retransmit the contents of this
transmission.
In addition an ER Presentation transmitted during the waiting
period shall also include a legend complying in substance with Rule 134(b) of
the Act. Any ER Presentation transmitted prior to effectiveness of the
Registration Statement will be coded so that viewers will not be able to copy,
print or down-load information contained in the ER Presentation and will be able
to view the ER Presentation only during the 24-hour period beginning with
initial access to the ER Presentation.
If the Registration Statement is effective at the time the ER
Presentation is transmitted, a prospectus pursuant to Section 10(a) of the Act
will be made available to each prospective investor that is provided access to
the ER Presentation, or if a prospectus pursuant to Section 10(a) of the Act is
not yet available, then a preliminary prospectus pursuant to Section 10(b) of
the Act will be made available to each prospective investor that is provided
access to the ER Presentation.
The content of the ER Presentation shall be approved by HAFC,
the Seller and HFC prior to transmission and shall not be inconsistent with the
prospectus made available to such investors prior to the ER Presentation
transmission.
Section 4. PURCHASE AND SALE. The Underwriters' commitment
to purchase the Series _____ Notes 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 _____ Notes to the Underwriters, and the Underwriters agree to
purchase the Series _____ Notes on the date of issuance thereof. The purchase
prices for the Series _____ 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 _____ 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 __________ (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 _____ Notes so
to be delivered shall be represented by one or more global Series _____ Notes
registered in the name of Cede & Co., as nominee for The Depository Trust
Company.
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The Household Entities agree to have the Series _____ 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 _____ 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 _____ 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 _____ 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 _____ 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 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 _____ 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.
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B. If, at any time when a Prospectus relating to the Series
_____ 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 _____ 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 _____ Notes for sale under the
laws of such jurisdictions as the Underwriters designate, (iv) the fees and
expenses of (A) Dewey 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 _____ 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 _____ Notes, and (vii) the cost
of delivering the Series _____ 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 _____ Notes by it and advertising expenses connected with any offers
that the Underwriters may make).
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F. The Seller will take all reasonable actions requested by
the Underwriters to arrange for the qualification of the Series _____ 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 _____ Notes and
will arrange for the determination of the legality of the Series _____ Notes
for purchase by institutional investors.
G. For so long as the Series _____ 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
_____ 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 _____ Notes by the Rating Agency that initially rate
the Series _____ 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.
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 (5) business days after the later
of the termination of the underwriting syndicate or the Closing Date.
M. So long as any of the Series _____ 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
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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
_____ 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 _____ 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 material fact necessary
in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; and
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(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 _____ 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,
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the Indenture, the Master Sale and Servicing Agreement or
the Series _____ Supplement nor the issuance or delivery of
the Series _____ Notes, nor the consummation of any of the
transactions contemplated herein or therein, nor the
fulfillment of the terms of the Series _____ Notes, the
Underwriting Agreement, the Master Receivables Purchase
Agreement, the Trust Agreement, the Indenture, the Master
Sale and Servicing Agreement or the Series _____ 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 _____ Notes, the Master Receivables
Purchase Agreement, the Trust Agreement, the Indenture, the
Master Sale and Servicing Agreement or the Series _____
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
has 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)
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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,
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 _____ 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 _____ Notes
by the Underwriters and the subsequent distribution of the
Series _____ 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 _____ 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 Supplement
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;
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(xii) the statements in the Base 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;
(xiii) 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
(xiv) 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 LLP, 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 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.
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 _____ Notes, the Underwriting Agreement, the
Series _____ 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.
19
<PAGE>
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 _____ 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 _____ 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 _____ 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 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 _____
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.
20
<PAGE>
(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 Notes.
(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 Notes, as applicable.
G. [Name of Owner Trustee] shall have furnished to the
Underwriters and the Household Entities a certificate of
[Name of Owner Trustee], signed by one or more duly authorized officers of
___ [Name of Owner Trustee], dated the Closing Date, as to the due
authorization, execution and delivery of the Trust Agreement by ___
[Name of Owner Trustee] 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.
H. [Name of Indenture Trustee] shall have furnished to the
Underwriters and the Household Entities a certificate of ____
[Name of Indenture Trustee], signed by one or more duly authorized officers
of _____ [Name of Indenture Trustee], dated the Closing Date, as to the due
authorization, execution and delivery of the Indenture and the Master Sale
and Servicing Agreement by _____ [Name of Indenture Trustee] and the
acceptance by the Indenture Trustee of the trusts created thereby and the due
execution and delivery of the Series _____ Notes by the Indenture Trustee
under the Indenture and such other matters as the Underwriters shall
reasonably request.
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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 the Class A-4
Notes] shall have been rated "[AAA]" or its equivalent, in each case, by at
least two nationally recognized Ratings 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 _____ 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 _____
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 Closing Date, Arthur Andersen LLP shall have
furnished to the Underwriters a letter or letters, dated as 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 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 _____ 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
22
<PAGE>
reasonable fees and disbursements of counsel) that shall have been incurred
by it in connection with the proposed purchase and Sale of the Series _____
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 _____ 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 _____ 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 written confirmation of the sale of such Series _____ 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.
23
<PAGE>
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
Supplement and the Base 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 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.
24
<PAGE>
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 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
25
<PAGE>
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 Supplement bears to the
public offering price appearing on the cover page of the Prospectus Supplement.
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
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 _____ Notes purchased by such Underwriter hereunder. No
person guilty of fraudulent misrepresentation (within the meaning of
26
<PAGE>
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
(i) set forth in the Prospectus Supplement relating to market making, (ii)
set forth under the caption "Underwriting" in the Prospectus Supplement, and
(iii) provided in response to Section 3(b) hereof, assuming the accuracy of
the Seller-Provided Information used in the preparation of Derived
Information, 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/or 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 _____ Notes shall fail at the Closing Date to purchase the Series
_____ 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 _____ 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 _____ 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 _____
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 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
27
<PAGE>
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 _____ 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
[Name of Lead Underwriter), [address], attention: __________, Fax: __________;
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 _____ 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
counterparts, each of which shall be deemed to be an original, but together they
shall constitute but one instrument.
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<PAGE>
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.
29
<PAGE>
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:
[Name of Lead Underwriter]
Acting on its own behalf and as Representative of the
Underwriters referred to in the foregoing Agreement
By:
------------------------------
Name:
Title: Authorized Signatory
30
<PAGE>
[Underwriting Agreement]
31
<PAGE>
Schedule 1
Purchase Price (excluding accrued interest)
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
[List Names of Underwriters] _____% _____% _____% _____%
_____________________________ _____% _____% _____% _____%
_____________________________ _____% _____% _____% _____%
_____________________________ _____% _____% _____% _____%
</TABLE>
Notional Principal Amount
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
[List Names of Underwriters] $__________ $__________ $__________ $__________
____________________________ __________ __________ __________ __________
____________________________ __________ __________ __________ __________
____________________________ __________ __________ __________ __________
Total $__________ $__________ $__________ $__________
</TABLE>
Proceeds (excluding accrued interest)
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
[List Names of Underwriters] $__________ $__________ $__________ $__________
____________________________ __________ __________ __________ __________
____________________________ __________ __________ __________ __________
____________________________ __________ __________ __________ __________
Total $__________ $__________ $__________ $__________
</TABLE>
32
<PAGE>
EXHIBIT 1.2
HOUSEHOLD AUTOMOTIVE TRUST ___
SERIES _____
$___________ ___% Class A Certificates
UNDERWRITING AGREEMENT
[Name of Lead Underwriter]
As Representative of the Underwriters
[address] [date]
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 _____ CERTIFICATES.
The Seller has authorized the issuance and sale of $___________ ___% Class A
Certificates (the "SERIES _____ OFFERED CERTIFICATES"). The Series _____
Offered Certificates are to be issued by Household Automotive Trust ___ (the
"TRUST") pursuant to an Pooling and Servicing Agreement, dated as of
____________, (the "POOLING AND SERVICING AGREEMENT") by and among HFC, the
Master Servicer, the Trust and __________________, a [New York] banking
corporation, as trustee (the "TRUSTEE"). In addition to the Series _____
Offered Certificates, the Trust will also issue the Series _____ Non-Offered
Certificates (the "SERIES _____ NON-OFFERED CERTIFICATES") pursuant to the
Pooling and Servicing Agreement, dated as of ____________. The Series _____
Offered Certificates and the Series _____ Non-Offered Certificates are
referred to herein collectively as the "SERIES _____ SECURITIES." The assets
of the Trust will include a pool of non-prime retail installment sales
contracts secured by new or used automobiles, light duty trucks and vans (the
"RECEIVABLES") and certain monies due thereunder on or after __________ (the
"CUT-OFF DATE").
As used herein, the term "SELLER AGREEMENTS" means the
Pooling and Servicing Agreement, the Master Receivables Purchase Agreement
dated as of ____________ between the Seller and HAFC (the "MASTER RECEIVABLES
PURCHASE AGREEMENT") and this Underwriting
<PAGE>
Agreement (this "AGREEMENT"); the term "HAFC AGREEMENTS" means the Master
Receivables Purchase Agreement and this Agreement; the term "HFC AGREEMENTS"
means the Pooling and Servicing Agreement 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 _____ Offered Certificates are being purchased
by the Underwriters named in Schedule 1 hereto, and the Underwriters are
purchasing, severally, only the Series _____ Offered Certificates 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.
[Name of Lead Underwriter] is acting as representative of the Underwriters
and in such capacity, is hereinafter referred to as the "REPRESENTATIVE."
The offering of the Series _____ Offered Certificates will
be made by the Underwriters and the Household Entities understand that the
Underwriters propose to make a public offering of the Series _____ Offered
Certificates for settlement on ___________, as the Underwriters deem
advisable.
None of the Series _____ Non-Offered 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 1.1 of the Pooling and
Servicing Agreement.
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"). A registration Statement on For S-3 (no.
333-______) has (a) been prepared by the Seller on such
Form in conformity with the requirements of the Act and the
rules and regulations of the United States Securities and
Exchange Commission (the "COMMISSION") thereunder, (b) been
filed with the Commission and (c) been declared effective
by the Commission, and no stop order suspending the
effectiveness of the Registration Statement has been
issued, and no proceeding for that purpose has been
initiated or threatened, by the Commission. Copies of such
Registration Statement have been delivered by the Seller to
the Underwriters. There are no contracts or documents of
the Seller which are required to be filed as exhibits to
the Registration Statement pursuant to the Act or the rules
and regulations of the Commission which have not been so
filed or incorporated by reference therein on or prior to
the Effective Date of the Registration Statement.
2
<PAGE>
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. The term "BASE PROSPECTUS" means the prospectus included in the
Registration Statement. The term "PROSPECTUS SUPPLEMENT" means the prospectus
supplement dated the date hereof, specifically relating to the Notes, as
filed with the Commission pursuant to Rule 424 of the Rules and Regulations.
The term "PROSPECTUS" means, together, then Base Prospectus and the
Prospectus Supplement. "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 _____ Certificates 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
the applicable requirements of the Act and the Rules and
Regulations thereunder; assuming compliance by each
Underwriter with Sections 3(a), 3(b), 3(c) and 3(f) 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
3
<PAGE>
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 _____ 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 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
4
<PAGE>
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
_____ 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.
5
<PAGE>
(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 _____
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
Series _____ Related Documents. The Seller has no
indebtedness to any Person other than pursuant to this
Agreement and the Series _____ Related Documents. Each of
the Issuer, HAFC and the Seller, after giving effect to the
transactions contemplated by this Agreement and the other
Series _____ 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 and the Securities
shall have been paid or will be paid by the Seller at or
prior to the Closing Date.
(xii) The Series _____ Offered Certificates have
been duly and validly authorized, and, when validly
executed, authenticated, issued and delivered in accordance
with the Pooling and Servicing Agreement 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 Pooling and Servicing Agreement.
(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 _____ Offered Certificates, or the consummation by
HAFC or the Seller of the other transactions contemplated
by this Agreement, the Master Receivables Purchase
Agreement or the Pooling and Servicing Agreement, except
for (A) the registration under the Act of the Series _____
Offered Certificates, (B) such consents, approvals,
authorizations, orders, registrations, qualifications,
licenses
6
<PAGE>
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 _____ Offered Certificates and
the subsequent distribution of the Series _____ Offered
Certificates 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
Pooling 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 Pooling and Servicing Agreement.
(xvii) As of the Cutoff Date, each of the
Receivables will meet the eligibility criteria described in
the 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
7
<PAGE>
of the Series _____ Offered Certificates, 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 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
8
<PAGE>
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 1997, 1998 and 1999. 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
_____ Offered Certificates, (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 _____
Offered Certificates and the subsequent distribution of the
Series _____ Offered Certificates 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 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 _____ Offered Certificates 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
9
<PAGE>
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-Provided
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.
(f) Any "electronic roadshow" presentation used by such
Underwriter (an "ER PRESENTATION") shall be made available only to
institutional investors, investment advisors and other persons of a type the
Underwriter would customarily invite to a road show who have been provided
with a password by such Underwriter. If the ER Presentation is transmitted
during the "waiting period" between filing and effectiveness of the
Registration Statement, a preliminary prospectus pursuant to Section 10(b) of
the Act will be made available to the prospective investor prior to the
release of the password to such investor. In such event, the ER Presentation
will be preceded and conclude with the following statement:
10
<PAGE>
A preliminary prospectus has been furnished to each person
authorized to receive this transmission. You should refer
to such prospectus, and to the registration statement of
which it is a part, for more complete information about the
offering. By electing to view this transmission, you
represent, warrant and agree that you will not videotape,
record or otherwise attempt to reproduce or retransmit the
contents of this transmission.
In addition an ER Presentation transmitted during the
waiting period shall also include a legend complying in substance with Rule
134(b) of the Act. Any ER Presentation transmitted prior to effectiveness of
the Registration Statement will be coded so that viewers will not be able to
copy, print or down-load information contained in the ER Presentation and
will be able to view the ER Presentation only during the 24-hour period
beginning with initial access to the ER Presentation.
If the Registration Statement is effective at the time the
ER Presentation is transmitted, a prospectus pursuant to Section 10(a) of the
Act will be made available to each prospective investor that is provided
access to the ER Presentation, or if a prospectus pursuant to Section 10(a)
of the Act is not yet available, then a preliminary prospectus pursuant to
Section 10(b) of the Act will be made available to each prospective investor
that is provided access to the ER Presentation.
The content of the ER Presentation shall be approved by
HAFC, the Seller and HFC prior to transmission and shall not be inconsistent
with the prospectus made available to such investors prior to the ER
Presentation transmission.
Section 4. PURCHASE AND SALE. The Underwriters' commitment
to purchase the Series _____ Offered Certificates 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 _____ Offered Certificates to the Underwriters, and
the Underwriters agree to purchase the Series _____ Offered Certificates on
the date of issuance thereof. The purchase prices for the Series _____
Offered Certificates 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 _____ Offered Certificates 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 __________ (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 _____
Offered Certificates so to be delivered shall be represented by one or more
global Series _____ Offered Certificates registered in the name of Cede &
Co., as nominee for The Depository Trust Company.
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The Household Entities agree to have the Series _____
Offered Certificates 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 _____ Offered Certificates 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 _____ Offered Certificates 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 _____ Offered Certificates 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 _____
Offered Certificates, 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 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 _____ Offered
Certificates 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.
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B. If, at any time when a Prospectus relating to the Series
_____ Offered Certificates 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 Certificateholders 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 _____ Offered Certificates, (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 _____ Offered
Certificates for sale under the laws of such jurisdictions as the
Underwriters designate, (iv) the fees and expenses of (A) Dewey Ballantine
LLP as special counsel for the Household Entities and (B) Arthur Andersen
LLP, (v) the fees and expenses of the Trustee and any agent of the Trustee
and the fees and disbursements of counsel for the Trustee in connection with
the Pooling and Servicing Agreement and the Series _____ Offered
Certificates, and (vi) the cost of delivering the Series_____ Offered
Certificates 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 _____ Offered Certificates 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 _____ Offered
Certificates for sale under the laws of such jurisdictions within the United
States or as necessary to qualify for the Euroclear System or
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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 _____ Offered Certificates and will arrange for
the determination of the legality of the Series _____ Offered Certificates
for purchase by institutional investors.
G. For so long as the Series _____ Offered Certificates 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 Certificateholders under the Pooling
and Servicing Agreement 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
_____ Offered Certificates 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 _____ Offered Certificates by the Rating Agency that
initially rate the Series _____ Offered Certificates 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.
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 (5) business days after the later
of the termination of the underwriting syndicate or the Closing Date.
M. So long as any of the Series _____ Offered Certificates
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 of the Pooling and Servicing Agreement, and (ii) the
annual statement of a firm of independent public accountants furnished to the
Trustee pursuant to Section 4.11 of the Pooling and Servicing Agreement with
respect to the Master Servicer.
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Section 8. CONDITIONS OF THE OBLIGATIONS OF THE
UNDERWRITERS. The obligations of the Underwriters to purchase the Series
_____ Offered Certificates 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 _____ 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 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.
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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 _____
Offered Certificates have been duly authorized and, when
executed and authenticated in accordance with the terms of
the Pooling and Servicing Agreement 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 Pooling and Servicing Agreement,
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 or the Pooling and Servicing Agreement nor the
issuance or delivery of the Series _____ Offered
Certificates, nor the consummation of any of the
transactions contemplated herein or therein, nor the
fulfillment of the terms of the Series _____ Offered
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Certificates, the Underwriting Agreement, the Master
Receivables Purchase Agreement or the Pooling and Servicing
Agreement 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 _____ Offered
Certificates, the Master Receivables Purchase Agreement or
the Pooling and Servicing Agreement 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
Certificateholders 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 has 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
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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,
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 Master Receivables Purchase Agreement or the
Pooling and Servicing Agreement, 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 _____ Offered Certificates by
the Underwriters and the subsequent distribution of the
Series _____ Offered Certificates 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 _____ Offered Certificates, the
Underwriting Agreement, the Master Receivables Purchase
Agreement and the Pooling and Servicing Agreement conform
in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus;
(x) the Issuer is not required to be registered
under the Investment Company Act of 1940;
(xi) the statements in the Prospectus Supplement
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) the statements in the Base 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
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reviewed by counsel and represent a fair and accurate
summary of the matters addressed therein, under existing
law and the assumptions stated therein;
(xiii) no other filings or other actions, with
respect to the Trustee's interest in the Receivables, are
necessary to perfect the interest of the 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
(xiv) 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 LLP, 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 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 _____ Offered Certificates, the Underwriting
Agreement, the Series _____ 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 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:
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(i) The 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 Trustee has full corporate trust power
and authority to enter into and perform its obligations
under the Pooling and Servicing Agreement, including, but
not limited to, its obligation to serve in the capacity of
the Trustee and to execute, issue, countersign and deliver
the Series _____ Offered Certificates.
(iii) The Pooling and Servicing Agreement has
been duly authorized, executed and delivered by the Trustee
and constitutes a legal, valid and binding obligation of
the Trustee enforceable against the 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 _____ Offered Certificates
have been duly authorized, executed and authenticated by
the Trustee on the date hereof on behalf of the Trust in
accordance with the Pooling and Servicing Agreement.
(v) The execution, delivery and performance of
the Pooling and Servicing Agreement and the Series _____
Offered Certificates by the 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 Trustee pursuant to the terms
of the articles of association or the by-laws of the
Trustee or any statute, rule, regulation or order of any
governmental agency or body, or any court having
jurisdiction over the Trustee or its property or assets or
any agreement or instrument known to such counsel, to which
the Trustee is a party or by which the 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 Trustee
of the Pooling and Servicing Agreement and the Series _____
Offered Certificates.
F. [Name of Trustee] shall have furnished to the
Underwriters and the Household Entities a certificate of ____
[Name of Trustee], signed by one or more duly authorized officers of _____
[Name of Trustee], dated the Closing Date, as to the due authorization,
execution and delivery of the Pooling and Servicing Agreement by _____
[Name of Trustee] and the acceptance by the Trustee of the trusts created
thereby and the due execution and delivery of the Series _____ Offered
Certificates by the Trustee under the Pooling and Servicing Agreement and
such other matters as the Underwriters shall reasonably request.
G. The Class A Certificates shall have been rated "___" or
its equivalent by at least two nationally recognized Ratings Agencies.
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H. 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 _____ Offered Certificates as set forth in Section I
above.
I. 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 _____
Offered Certificates.
J. 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, Offered Certificates
and documents as they may reasonably request in writing.
K. The Prospectus 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.
L. At the Closing Date, Arthur Andersen LLP shall have
furnished to the Underwriters a letter or letters, dated as 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 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 _____ Offered Certificates 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
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 _____
Offered Certificates.
Section 10. INDEMNIFICATION.
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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 _____ Offered Certificates), 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 _____ Offered Certificates 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 written confirmation of the sale of such
Series _____ Offered Certificates (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
22
<PAGE>
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 Supplement and the Base 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 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
23
<PAGE>
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 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 Offered Certificates 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
24
<PAGE>
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
Supplement bears to the public offering price appearing on the cover page of
the Prospectus Supplement.
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 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 _____ Offered Certificates 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
(i) set forth in the Prospectus Supplement relating to market making, (ii)
set forth under the caption "Underwriting" in the Prospectus Supplement, and
(iii) provided in response to Section 3(b) hereof, assuming the accuracy of
the Seller-Provided Information used in the preparation of Derived
Information, is
25
<PAGE>
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/or 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 _____ Offered Certificates shall fail at the Closing Date to purchase
the Series _____ Offered Certificates 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 _____ Offered Certificates
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 _____ Offered Certificates 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 _____
Offered Certificates 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 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 _____
Offered Certificates. 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.
26
<PAGE>
Section 13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO
SURVIVE DELIVERY. All representations, warranties and agreements contained in
this Agreement or contained in Offered 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 Offered 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 [Name of Lead Underwriter], [address], attention: __________,
Fax: __________; 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 _____ Offered Certificates 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
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.
27
<PAGE>
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:
[Name of Lead Underwriter]
Acting on its own behalf and as Representative of the
Underwriters referred to in the foregoing Agreement
By: ___________________________________________
Name:
Title: Authorized Signatory
28
<PAGE>
[Underwriting Agreement]
29
<PAGE>
Schedule 1
Purchase Price (excluding accrued interest)
CLASS A
[List Names of Underwriters] _____%
____________________ _____%
____________________ _____%
____________________ _____%
Notional Principal Amount
CLASS A
[List Names of Underwriters] $__________
____________________ __________
____________________ __________
____________________ __________
Total $__________
Proceeds (excluding accrued interest)
CLASS A-1
[List Names of Underwriters] $__________
____________________ __________
____________________ __________
____________________ __________
Total $__________
30
<PAGE>
EXHIBIT 4.1
TRUST AGREEMENT
between
HOUSEHOLD AUTO RECEIVABLES CORPORATION
and
[Name of Owner Trustee]
Owner Trustee
Dated as of ____ __, ____
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS....................................................................................1
Section 1.1. Capitalized Terms...................................................................1
Section 1.2. Other Definitional Provisions.......................................................2
Section 1.3. Action by or Consent of Noteholders and Certificate-holders.........................3
Section 1.4. Material Adverse Effect.............................................................3
ARTICLE II ORGANIZATION..................................................................................4
Section 2.1. Name................................................................................4
Section 2.2. Office..............................................................................4
Section 2.3. Purposes and Powers.................................................................4
Section 2.4. Appointment of Owner Trustee........................................................5
Section 2.5. Initial Capital Contribution of Trust Estate........................................5
Section 2.6. Declaration of Trust................................................................5
Section 2.7. Liability...........................................................................5
Section 2.8. Title to Trust Property.............................................................5
Section 2.9. Situs of Trust......................................................................6
Section 2.10. Representations and Warranties of the Depositor.....................................6
Section 2.11. Federal Income Tax Allocations......................................................8
Section 2.12. Covenants of the Depositor..........................................................8
Section 2.13. Covenants of the Certificateholders.................................................9
ARTICLE III CERTIFICATES AND TRANSFER OF INTERESTS.......................................................9
Section 3.1. Initial Ownership...................................................................9
Section 3.2. The Certificates...................................................................10
Section 3.3. Authentication of Certificates.....................................................11
Section 3.4. Registration of Transfer and Exchange of Certificates..............................12
Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates..................................13
Section 3.6. Persons Deemed Certificateholders..................................................13
Section 3.7. Access to List of Certificateholders'Names and Addresses...........................13
Section 3.8. Maintenance of Office or Agency....................................................14
Section 3.9. ERISA Restrictions.................................................................14
Section 3.10. Securities Matters.................................................................14
Section 3.11. Distributions......................................................................14
Section 3.12. Paying Agent.......................................................................14
ARTICLE IV VOTING RIGHTS AND OTHER ACTIONS..............................................................15
Section 4.1. Prior Notice to Holders with Respect to Certain Matters............................15
Section 4.2. Action by Certificateholders with Respect to Certain Matters.......................16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Section 4.3. Action by Certificateholders with Respect to Bankruptcy............................16
Section 4.4. Restrictions on Certificateholders'Power...........................................16
Section 4.5. Majority Control...................................................................17
ARTICLE V CERTAIN DUTIES................................................................................17
Section 5.1. Accounting and Records to the Noteholders, Certificate-holders, the Internal
Revenue Service and Others.....................................................17
Section 5.2. Signature on Returns; Tax Matters Partner..........................................18
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE........................................................18
Section 6.1. General Authority..................................................................18
Section 6.2. General Duties.....................................................................18
Section 6.3. Action upon Instruction............................................................19
Section 6.4. No Duties Except as Specified in this Agreement or in Instructions.................20
Section 6.5. No Action Except under Specified Documents or Instructions.........................20
Section 6.6. Restrictions.......................................................................20
ARTICLE VII CONCERNING THE OWNER TRUSTEE................................................................21
Section 7.1. Acceptance of Trusts and Duties....................................................21
Section 7.2. Furnishing of Documents............................................................22
Section 7.3. Representations and Warranties.....................................................22
Section 7.4. Reliance; Advice of Counsel........................................................22
Section 7.5. Not Acting in Individual Capacity..................................................23
Section 7.6. Owner Trustee Not Liable for Certificates or Receivables...........................24
Section 7.7. Owner Trustee May Own Certificates and Notes.......................................24
Section 7.8. Payments from Owner Trust Estate...................................................24
Section 7.9. Doing Business in Other Jurisdictions..............................................24
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE..............................................................25
Section 8.1. Owner Trustee's Fees and Expenses..................................................25
Section 8.2. Indemnification....................................................................25
Section 8.3. Payments to the Owner Trustee......................................................26
Section 8.4. Non-recourse Obligations...........................................................26
ARTICLE IX TERMINATION OF AGREEMENT.....................................................................26
Section 9.1. Termination of Agreement...........................................................26
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES........................................28
Section 10.1. Eligibility Requirements for Owner Trustee.........................................28
Section 10.2. Resignation or Removal of Owner Trustee............................................28
Section 10.3. Successor Owner Trustee............................................................29
Section 10.4. Merger or Consolidation of Owner Trustee...........................................29
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Section 10.5. Appointment of Co-Trustee or Separate Trustee......................................30
ARTICLE XI MISCELLANEOUS................................................................................31
Section 11.1. Supplements and Amendments.........................................................31
Section 11.2. No Legal Title to Owner Trust Estate in Certificateholders.........................32
Section 11.3. Limitations on Rights of Others....................................................32
Section 11.4. Notices............................................................................32
Section 11.5. Severability.......................................................................33
Section 11.6. Separate Counterparts..............................................................33
Section 11.7. Assignments; Series Support Provider...............................................33
Section 11.8. Covenants of the Depositor.........................................................33
Section 11.9. No Petition........................................................................33
Section 11.10. No Recourse........................................................................34
Section 11.11. Headings...........................................................................34
Section 11.12. GOVERNING LAW......................................................................34
Section 11.13. Master Servicer....................................................................34
</TABLE>
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
(iii)
<PAGE>
THIS TRUST AGREEMENT, dated as of ____ __, ____, is by and
between HOUSEHOLD AUTO RECEIVABLES CORPORATION, a Nevada corporation (the
"Depositor"), and ______________________, a Delaware banking corporation, as
Owner Trustee (the "Owner Trustee").
ARTICLE I
DEFINITIONS
.1. CAPITALIZED TERMS. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Amended and Restated 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.
"Certificates" means, if the Depositor elects (i) to evidence
its interest in certificated form pursuant to Section 3.2, the certificate
substantially in the form of Exhibit A or (ii) to have its interest be
uncertified pursuant to Section 3.2, such uncertificated interest.
"Certificate Majority" shall have the meaning assigned to such term in
Section 4.1.
"Certificate Paying Agent" means ________________.
"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.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
_______________________________________________, Attention: ______________, 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).
"Depositor" shall mean Household Auto Receivables Corporation
in its capacity as Depositor hereunder.
<PAGE>
"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 a 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 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 ___________________, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor Owner Trustee hereunder.
"Percentage Interest" shall mean, with respect to a Certificate,
the portion of the interests in the Trust represented by a Certificate, as
reflected in the Certificate Register.
"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 Trust Estate" shall mean the property granted to the Owner
Trustee on behalf of the Trust pursuant to Section 1.02 of the Series _______
Supplement.
"Treasury Regulations" shall mean regulations, including proposed
or temporary regulations, promulgated under the Code. References herein to
specific 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.
.2. 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 the Series of
Notes and Series of Certificates with respect to
2
<PAGE>
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.
.3. 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 for the purpose of determining whether the
Trustee is entitled to rely upon any such action or consent, only Notes which
the Owner Trustee or the Trustee knows to be so owned shall be so disregarded.
.4. 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.
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ARTICLE II
ORGANIZATION
.1. NAME. There is hereby formed a trust to be known as "Household
Automotive Trust ___", 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.
.2. 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.
.3. 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 pursuant to the Indenture and the related
Series Supplement for the benefit of the Noteholders;
(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;
(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.
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(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.
.4. 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.
.5. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The Depositor
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee,
on behalf of the Trust, as of the date hereof, the sum of $1,000 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.
.6. 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, on behalf of the Trust, 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 and franchise 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 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.
.7. 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.
.8. 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
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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 Certificates shall not have legal title to
any part of the related Series Trust Estate. The Holders of the 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.
.9. 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 with the Certificate Paying Agent in the
State of _______. Payments will be received by the Certificate Paying Agent
on behalf of the Trust in _______ and payments will be made by the Trust from
________. 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.
.10. 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 executing 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 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
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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 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.
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.11. FEDERAL INCOME TAX ALLOCATIONS. (a) For so long as the Trust
has a single owner for federal income tax purposes, it will, pursuant to
Treasury Regulations promulgated under section 7701 of the Code, be
disregarded as an entity distinct from the Certificateholder for all federal
income tax purposes. Accordingly, for federal income tax purposes, the
Certificateholder will be treated as (i) owning all assets owned by the
Trust, (ii) having incurred all liabilities incurred by the Trust, and (iii)
all transactions between the Trust and the Certificateholder will be
disregarded.
(b) In the event that the Trust has two equity owners for federal
income tax purposes, the Trust will be treated as a partnership. At any such
time that the Trust has two equity owners, this Agreement will be amended, in
accordance with Section 11.1 herein, and appropriate provisions will be added
so as to provide for treatment of the Trust as a partnership.
.12. COVENANTS OF THE DEPOSITOR. The Depositor agrees and covenants
for the benefit of 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
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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.
.13. COVENANTS OF THE CERTIFICATEHOLDERS. Each Certificateholder
agrees:
(a) to be bound by the terms and conditions of the related
Certificates, of this Agreement and, with respect to the holders of
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 the Noteholders;
(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
.1. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5, the Trust shall issue
an uncertificated ownership interest in the Trust (the "Uncertificated
Certificate") to the Depositor. Unless
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and until the Depositor transfers all or a portion of the Percentage Interest
represented by such Uncertificated Certificate, such Uncertificated
Certificate shall represent one hundred percent (100%) of the Percentage
Interest.
.2. THE CERTIFICATES. (a) The Certificates shall be in
uncertificated form with records of interest ownership maintained by the
Certificate Registrar in the Certificate Register. If, on or after the
Closing Date, the holder of any Uncertificated Certificate delivers to the
Owner Trustee a written request that the Uncertificated Certificate specified
in such request be issued in certificated form (a related "Certification
Request"), the Owner Trustee shall promptly issue such Certificate to the
holder thereof in certificated form. If a Certification Request has been
delivered, the Certificate will be issued in registered form, substantially
in the form of Exhibit A, and shall upon issue, be executed and delivered by
the Depositor to the Owner Trustee for authentication and redelivery as
provided in Section 3.3.
(b) If the Certificates are in certificated form, they shall be
executed on behalf of the Trust 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.
(c) A transferee of a Certificate (whether in certificated or
uncertificated form) 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.
(d) No 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 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.
(e) Upon the written direction of the Depositor, the Owner Trustee
and the Depositor shall enter into one or more Supplements, providing for the
issuance of separate Series of Certificates. Each Series shall be a separate
Series of the Trust within the meaning of Section 3806(b)(2) of the Business
Trust Statute. Separate and distinct records (including tax records) shall be
maintained for each Series and the Owner Trust Estate associated with each
such Series shall be maintained for each Series and the Owner Trust Estate
associated with each such Series shall be held in Trust and accounted for
separately from the Owner Trust Estate of any other Series. Except as
specified in this Agreement or in any Supplement, the Owner Trust Estate of
any Series shall not be subject to claims, debts, liabilities, expenses or
obligations arising from or with respect to the Trust or any other Series.
The debts, obligations and expenses incurred, contracted
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for or otherwise existing with respect to a particular Series shall be
enforceable against the related Owner Trust Estate only and not against the
assets of the Trust generally or any other Series. Notice of this limitation
on inter-series liabilities shall be set forth in the Certificate of Trust
(whether originally or by amendment) as filed with the Secretary of State
pursuant to the Business Trust Statute, and upon the giving of such notice in
the Certificate of Trust, the statutory provisions of Section 3804 of the
Business Trust Statute relating to limitations on inter-series liabilities
(and the statutory effect under Section 3804 of setting forth such notice in
the Certificate of Trust) shall become applicable to the Trust and each
Series of Certificates.
(f) Each Supplement shall contain provisions requiring that neither
the Depositor nor any Holder of a Certificate of the related Series of
Certificates shall direct the Owner Trustee to (i) take any action that would
cause the Owner Trust Estate of the related Series to be substantively
consolidated into any other Owner Trust Estate of any other Series such that
it will have its separate existence disregarded in the event of an insolvency
event with respect to any Certificateholder of such Series, the Trust or
another Series, (ii) to commingle any of the Owner Trust Estate of the
related Series with the Owner Trust Estate of any other Series, (iii) to
maintain the corporate, financial and accounting books and records and
statements of the related Series, if any, in a manner such that they cannot
be separated from those of any other Series, (iv) to take any action that
would cause (a) the funds and other assets of the related Series, if any, not
to be identifiable or the bank accounts, corporate records and books of
account, if any, of the related Series not to be inseparable from those of
any other Series and (b) the Trust to pay, other than from assets of the
related Series, any obligations or indebtedness of any kind incurred by the
related Series and payable by the Trust pursuant to this Agreement, (v) to
maintain the assets and liabilities of the related Series so that they are
not readily ascertainable from those of any other Series and subject to
segregation without requiring substantial time or expense to effect and
account for such segregated assets and liabilities, (vi) to take any actions
with respect to the related Series except in its capacity as Owner Trustee in
respect of such Series. The Master Servicer shall have the right to take any
action on behalf of the Trust to enforce the foregoing provisions of each
Supplement for the benefit of the Trust and of each Series.
(g) Each Certificateholder shall hold an exclusive, divided
beneficial interest in the Owner Trust Estate of its related Series of
Certificates.
(h) The Certificateholders of any Series of Certificates shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with the provisions of Section 3.11 and
the related Supplement.
.3. AUTHENTICATION OF CERTIFICATES. If the Certificates are in
certificated form, 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
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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.
.4. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) 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 (whether in certificated or
uncertificated form) and of transfers and exchanges of Certificates (whether
in certificated or uncertificated form) as herein provided. The Owner Trustee
shall be the initial Certificate Registrar .
(b) The Certificate Registrar shall provide the Trustee 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 Trustee of the name and address of the
transferee in writing, by facsimile, on the day of such transfer.
(c) If a Certificate is in certificated form, upon surrender for
registration of transfer of any Certificate to the Certificate Registrar 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
the aggregate Percentage Interest to be transferred, dated the date of
authentication by the Owner Trustee or any authenticating agent. If a
Certificate is in uncertificated form, upon representation of such
Certificate in accordance with Section 3.2, the Certificate Registrar shall
reflect in the Certificate Registrar the transfer of the relevant Percentage
Interest. If a Certificate is in certificated form, at the option of the
Holder thereof, such Certificate may be exchanged for one or more other
Certificates of the same Series in authorized denominations of a like
Percentage Interest upon surrender of the Certificates of the same Series, to
be exchanged at the office or agency maintained pursuant to Section 3.8.
Certificates may be issued in any Percentage Interest not to exceed 100%.
(d) Every Certificate presented or, in the case of certificated
Certificates, 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 certificated
Certificate surrendered for registration of transfer or exchange shall be
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canceled and subsequently disposed of by the Owner Trustee in accordance with
its customary practice.
(e) 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.
.5. 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 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.
.6. 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 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.
.7. 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 Percentage Interest 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
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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.
.8. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee or the
Certificate Registrar shall maintain in _________, 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.
.9. 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 (as
defined in Section 4975(e)(1) of the Code) that is subject to Section 4975 of
the Code or (iii) any entity whose underlying assets include assets of a plan
described in (i) or (ii) by reason of such plan's investment in the entity
(each, a "Benefit Plan"). The Certificate Registrar shall not register the
transfer of a Certificate unless the transferee has delivered to the Owner
Trustee a representation letter in form and substance satisfactory to the
Owner Trustee to the effect that the transferee is not, and is not acquiring
the Certificate for the account of, a Benefit Plan.
.10. 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
Agreement and shall promptly notify the party delivering the same if such
certificate does not so conform.
.11. DISTRIBUTIONS. Distributions shall be made from time to time
by the Owner Trustee or the Certificate Paying Agent in accordance with the
Percentage Interests of the Certificateholders.
.12. 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
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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 Certificates.
ARTICLE IV
VOTING RIGHTS AND OTHER ACTIONS
.1. 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 Certificateholders holding, in the aggregate, greater than 50% of the
Percentage Interests (a "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.
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The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar or Certificate Registrar within
five Business Days thereof.
.2. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN MATTERS.
The Owner Trustee shall not have the power (a) to remove the Master Servicer
under the Master Sale and Servicing Agreement or (b) except as expressly
provided in the Indenture and the related Series Supplement and at the
written 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.
.3. 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 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.
.4. 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
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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
Certificateholder and the Owner Trustee shall be entitled to such relief as
can be given either at law or in equity.
.5. 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
.1. 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 Master Servicer 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.
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.2. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (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.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
.1. GENERAL AUTHORITY. The Owner Trustee is authorized and directed
to execute and deliver on behalf of the Trust 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 Depositor
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.
.2. 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 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 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 Basic Document and,
with respect to 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.
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.3. 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 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 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 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
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 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 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 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 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
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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.
.4. 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 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 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.
.5. 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.
.6. 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
.1. 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 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 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 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 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 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 respect of the
validity or sufficiency of the Basic Documents or,
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with respect to 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, the
Certificate Paying Agent, any Noteholder or to any Certificateholder, other
than as expressly provided for herein, in the Basic Documents or, with
respect to 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 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 Certificates,
any Series Supplement or any Series Related Document that are required to be
performed by the Depositor or the Certificate Paying Agent under this
Agreement, by the Trustee under the Indenture, any Series Supplement or any
Series Related Document 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
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.
.2. 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 Certificates, any
Series Supplement or any Series Related Document.
.3. 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.
.4. 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 Certificates, any Series Supplement or any
Series Related Document.
.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in this
Article VII, in accepting the trusts hereby created [Name of Owner Trustee]
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 Certificates, any Series Supplement or any
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Series Related Document shall look only to the Owner Trust Estate for payment
or satisfaction thereof.
.6. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES. The
recitals contained herein and in certificated Certificates (other than the
signature and countersignature of the Owner Trustee on such 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 certificated 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.
.7. 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.
.8. PAYMENTS FROM OWNER TRUST ESTATE. All payments to be made by
the Owner Trustee or any Certificate Paying Agent under this Agreement or any
of the Basic Documents or, with respect to 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. [Name of Owner Trustee], 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 Certificates, any Series Supplement or any Series Related Document
to which the Trust or the Owner Trustee is a party.
.9. DOING BUSINESS IN OTHER JURISDICTIONS. Notwithstanding anything
contained to the contrary, neither [Name of Owner Trustee] or any successor
thereto, nor
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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 [Name of Owner Trustee] (or any successor
thereto); or (iii) subject [Name of Owner Trustee] (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 [Name of Owner Trustee] (or any successor thereto) or the
Owner Trustee, as the case may be, contemplated hereby.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
.1. 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 Certificates,
under any Series Supplement or under any Series Related Documents.
.2. 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 at any time be imposed on,
incurred by, or asserted against the Owner Trustee (in its trust or
individual capacities) or any Indemnified Party in any way relating to or
arising out of this Agreement or the Basic Documents or, with respect to
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 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.
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.3. 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.
.4. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in this
Agreement or any Basic Document or, with respect to 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 AGREEMENT
.1. TERMINATION OF AGREEMENT. (a) This Agreement shall terminate
and the Trust shall wind up, dissolve and be of no further force or effect
upon the latest to occur of (i) the maturity or other liquidation of the last
Receivable (including the optional purchase by the Depositor or the Master
Servicer 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
and, with respect to amounts released from the Lien of the Indenture,
distribution thereof to the Certificateholders, 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, including, with
respect to amounts released from the Lien of the Indenture, distribution
thereof to the Certificateholders, 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.
(b) Except as provided in clause (a), neither the Depositor nor any
other Certificateholder shall be entitled to revoke or terminate the Trust.
(c) If any Certificates are in certificated form, notice of any
termination of a Series Trust Estate, specifying the Distribution Date upon
which the Certificateholders of such Series shall surrender their
Certificates to the Certificate
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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 Certificates of such
Series shall be made upon presentation and surrender of the 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) If any Certificates are in certificated form, in the event that
all of the Certificateholders holding certificated Certificates of such
Series shall not surrender their 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 holding certificated Certificates of such Series to
surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the certificated 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 holding certificated Certificates
concerning surrender of their 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.
(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 dissolution, 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.
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ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
.1. 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.
.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 Depositor
is not the sole Certificateholder, the Certificate Majority), 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
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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.
.3. 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
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.
.4. 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
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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 (i) that the Owner Trustee
shall mail notice of such merger or consolidation to the Rating Agencies, the
Depositor and the Master Servicer and (ii) any successor Owner Trustee shall
file an amendment to the Certificate of Trust as required by Section 10.3.
.5. 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 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.
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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
.1. 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
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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 adversely affects its own rights, duties or
immunities under this Agreement.
.2. 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 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.
.3. LIMITATIONS ON RIGHTS OF OTHERS. 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.
.4. 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
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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.
.5. 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.
.6. 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 together
constitute but one and the same instrument.
.7. 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.
.8. 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.
.9. 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
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obligations relating to the Certificates, the Notes, this Agreement, any of
the Basic Documents, any Series Supplement or any Series Related Documents.
.10. 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.
.11. 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.
.12. 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.
.13. 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers hereunto duly authorized as
of the day and year first above written.
[Name of Owner Trustee]
Owner Trustee
By:_________________________________
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION
Depositor
By:_________________________________
Name:
Title:
Acknowledged and Agreed:
HOUSEHOLD FINANCE CORPORATION
Master Servicer
By:____________________________
Name:
Title:
[Name of Trustee],
not in its individual capacity
but solely as Certificate Paying Agent
By:____________________________
Name:
Title:
[Signature Page for Agreement]
<PAGE>
EXHIBIT A
[FORM OF SERIES _____ TRUST CERTIFICATE]
NUMBER
HOUSEHOLD AUTOMOTIVE TRUST ____
SERIES _____ CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS SERIES _____ 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 AGREEMENT PERTAINING TO THE HOUSEHOLD
AUTOMOTIVE TRUST ___ (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 ______ CERTIFICATES UNDER
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
---------------------------------
SERIES ____ CERTIFICATE
evidencing a beneficial ownership interest in the assets of the Trust relating
to the Series ____ Trust Estate, which includes a pool of motor vehicle retail
installment sale contracts sold to the Trust by Household Auto Receivables
Corporation.
(This Series ______ 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 representing a ___% Percentage Interest in the assets of Household
Automotive Trust ___(the
A-1
<PAGE>
"Trust") formed by Household Auto Receivables Corporation, a Nevada
corporation (the "Depositor") and the Series _____ Trust Estate.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
[Name of Owner Trustee]
not in its individual
capacity but solely as
Owner Trustee
by _______________________________________________ Authenticating Agent
by ____________________________________________________________________
Household Automotive Trust ___ (the "Trust"), was created pursuant
to a trust agreement, dated as of ____ __, ____ (the "Agreement"), between
the Depositor and _______________, as owner trustee (the "Owner Trustee") as
supplemented by a Series _____ Supplement dated as of ____ __, ____ (the
"Series _____ Supplement"). A summary of certain of the pertinent provisions
of the Agreement and Series ____ 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 Agreement and the Series _____ Supplement.
This certificate is one of the duly authorized certificates of
Trust of Household Automotive Trust ___ designated as Series _____
Certificates.
This Series _____ Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Series _____
Supplement, to which Agreement the holder of this Series ______ Certificate
by virtue of the acceptance hereof assents and by which such holder is bound.
The property of the Trust consists of the Series _____ 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 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 ___ __, ____ between Household Automotive Finance
Corporation and the Depositor and each Receivables Purchase Agreement
Supplement and all proceeds of the foregoing.
Series _____ Notes have been issued pursuant to an Indenture dated
as of ____ __, ____ (the "Indenture"), among the Trust, Household Finance
Corporation, as Master Servicer and _______________, as Trustee and the
Series _____ Supplement.
A-2
<PAGE>
Under the Series _____ Supplement, there will be distributed on the
__ day of each month or, if such ___ day is not a Business Day, the next
Business Day (the "Distribution Date"), commencing on ______, _____, to the
Person in whose name this Series _____ Certificate is registered at the close
of business on the Business Day preceding such Distribution Date (the "Record
Date") such Series ______ Certificateholder's fractional undivided interest
in any amount to be distributed to Series _____ Certificateholders on such
Distribution Date.
The holder of this Series _____ Certificate acknowledges and agrees
that its rights to receive distributions in respect of this Series _____
Certificate are subordinated to the rights of the Series ____ Noteholders as
described in the Master Sale and Servicing Agreement, the Indenture, the
Agreement and the Series _____ Supplement, as applicable.
Distributions on this Series _____ Certificate will be made as
provided in the Agreement by the Owner Trustee by wire transfer or check
mailed to the Series ____ 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 Agreement
and notwithstanding the above, the final distribution on this Series _____
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 ____ 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
______ 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 _____ Certificate shall not entitle the holder hereof to any
benefit under the Agreement or the Master Sale and Servicing Agreement or be
valid for any purpose.
THIS SERIES _____ 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.
A-3
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Series _____ Certificate to
be duly executed.
HOUSEHOLD AUTOMOTIVE TRUST ___
By: [Name of Owner Trustee] not in its
individual capacity but
solely as Owner Trustee
Dated: By:______________________________
By: ____________________________
Name:
Title:
A-4
<PAGE>
(Reverse of Certificate)
The Series _____ 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 Agreement, the Indenture, the Basic Documents or any Series Related
Documents. In addition, this Series _____ 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 Agreement and the Series
_____ 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 _____ Certificateholder upon
written request.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Series _____ Certificate is
registrable in the Certificate Register upon surrender of this Series _____
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 _____ 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 Agreement is [Name of Owner Trustee].
The Certificates are issuable as registered Certificates in any
Percentage Interest not to exceed 100%. As provided in the Agreement and
subject to certain limitations therein set forth, Series ____ Certificates
are exchangeable for new Series _____ Certificates in authorized
denominations evidencing the same aggregate Percentage Interest, 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.
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 _____ 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 _____ Certificates may not be acquired by or for the
account of (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 (as defined
in Section 4975(e) (1) of the Code) that is subject to Section 4975 of the
Code or (c) any entity whose underlying assets include plan assets by reason
of such plan's investment in the entity (each, a "Benefit Plan"). The
A-5
<PAGE>
Certificate Registrar shall not register the transfer of a Series _____
Certificate unless the transferee has delivered to the Owner Trustee a
representation letter in form and substance satisfactory to the Trustee to
the effect that the transferee is not, and is not acquiring the Series _____
Certificate for the account of, 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 _____ 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 _____ Certificate shall not entitle the
holder hereof to any benefit under the Agreement or the Master Sale and
Servicing Agreement or be valid for any purpose.
A-6
<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-7
<PAGE>
EXHIBIT B
[FORM OF CERTIFICATE OF TRUST]
CERTIFICATE OF TRUST
OF
HOUSEHOLD AUTOMOTIVE TRUST ___
THIS Certificate of Trust of Household Automotive Trust ___ (the
"Trust") is being duly executed and filed on behalf of the Trust by the
undersigned, as trustee, to form a business trust under the Delaware Business
Trust Act (12 DEL. C. 3801 ET SEQ.) (the "Act").
1. NAME. The name of the business trust formed by this
Certificate of Trust is Household Automotive Trust ___.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware are _____________________, ________________,
________________, _____________, _________, Attn: _______________________.
3. SERIES TRUST. The Trust may issue series of beneficial interests,
having separate rights, powers or duties with respect to property or obligations
of the Trust, as provided in 12 Del. C. 3804 and 3806(b)(2), such that the
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series shall be enforceable
against the assets of such series only, and not against the assets of the Trust
generally.
4. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Trust in accordance with Section 3811(a)(1) of the Act.
[Name of Owner Trustee], not in its
individual capacity but solely as Trustee
By: _________________________
Name:
Title:
A-8
<PAGE>
EXHIBIT 4.2
------------------------------------------------------------------------
HOUSEHOLD AUTOMOTIVE TRUST ___
Issuer
INDENTURE
Dated as of ____ __, ____
[Name of Trustee]
Trustee
------------------------------------------------------------------------
<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.........................6
SECTION 1.3 Rules of Construction.........................................................7
SECTION 1.4 Action by or Consent of Noteholders and Certificateholders....................7
SECTION 1.5 Conflict with TIA.............................................................7
ARTICLE II. The Notes....................................................................................8
SECTION 2.1 Form; Amount Limited; Issuable in Series......................................8
SECTION 2.2 Execution, Authentication and Delivery........................................8
SECTION 2.3 Temporary Notes...............................................................9
SECTION 2.4 Registration; Registration of Transfer and Exchange...........................9
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes...................................12
SECTION 2.6 Persons Deemed Owner.........................................................13
SECTION 2.7 Payment of Principal and Interest; Defaulted Interest........................13
SECTION 2.8 Cancellation.................................................................14
SECTION 2.9 Release of Collateral........................................................14
SECTION 2.10 Book-Entry Notes.............................................................15
SECTION 2.11 Notices to Clearing Agency...................................................15
SECTION 2.12 Definitive Notes.............................................................16
SECTION 2.13 Final Distribution...........................................................16
ARTICLE III. Covenants..................................................................................17
SECTION 3.1 Payment of Principal and Interest............................................17
SECTION 3.2 Maintenance of Office or Agency..............................................17
SECTION 3.3 Money for Payments to be Held in Trust.......................................18
SECTION 3.4 Existence....................................................................19
SECTION 3.5 Protection of Trust Property.................................................19
SECTION 3.6 Opinions as to Trust Property................................................20
SECTION 3.7 Performance of Obligations; Servicing of Receivables.........................21
SECTION 3.8 Negative Covenants...........................................................22
SECTION 3.9 Annual Statement as to Compliance............................................22
SECTION 3.10 Issuer May Consolidate, Etc. Only on Certain Terms...........................23
SECTION 3.11 Successor or Transferee......................................................24
SECTION 3.12 No Other Business............................................................25
SECTION 3.13 No Borrowing.................................................................25
SECTION 3.14 Master Servicer's Obligations................................................25
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities............................25
SECTION 3.16 Capital Expenditures.........................................................25
SECTION 3.17 Compliance with Laws.........................................................26
SECTION 3.18 Restricted Payments..........................................................26
SECTION 3.19 Notice of Events of Default..................................................26
SECTION 3.20 Further Instruments and Acts.................................................26
i
<PAGE>
SECTION 3.21 Amendments of Master Sale and Servicing Agreement and Trust Agreement........26
SECTION 3.22 Income Tax Characterization..................................................26
ARTICLE IV. Satisfaction and Discharge..................................................................27
SECTION 4.1 Satisfaction and Discharge of Indenture......................................27
SECTION 4.2 Application of Trust Money...................................................28
SECTION 4.3 Repayment of Monies Held by Note Paying Agent................................28
ARTICLE V. Remedies.....................................................................................28
SECTION 5.1 Events of Default............................................................28
SECTION 5.2 Collection of Indebtedness and Suits for Enforcement by Trustee..............28
SECTION 5.3 Limitation of Suits..........................................................30
SECTION 5.4 Unconditional Rights of Noteholders To Receive Principal and Interest........31
SECTION 5.5 Restoration of Rights and Remedies...........................................31
SECTION 5.6 Rights and Remedies Cumulative...............................................31
SECTION 5.7 Delay or Omission Not a Waiver...............................................32
SECTION 5.8 Control by Noteholders.......................................................32
SECTION 5.9 Waiver of Past Defaults......................................................32
SECTION 5.10 Undertaking for Costs........................................................32
SECTION 5.11 Waiver of Stay or Extension Laws.............................................33
SECTION 5.12 Action on Notes..............................................................33
SECTION 5.13 Performance and Enforcement of Certain Obligations...........................33
ARTICLE VI. The Trustee.................................................................................34
SECTION 6.1 Duties of Trustee............................................................34
SECTION 6.2 Rights of Trustee............................................................36
SECTION 6.3 Individual Rights of Trustee.................................................37
SECTION 6.4 Trustee's Disclaimer.........................................................38
SECTION 6.5 Notice of Defaults...........................................................38
SECTION 6.6 Reports by Trustee to Holders................................................38
SECTION 6.7 Compensation and Indemnity...................................................38
SECTION 6.8 Replacement of Trustee.......................................................39
SECTION 6.9 Successor Trustee by Merger..................................................40
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee................................41
SECTION 6.11 Eligibility: Disqualification................................................42
SECTION 6.12 Preferential Collection of Claims Against Issuer.............................42
SECTION 6.13 Representations and Warranties of the Trustee................................42
SECTION 6.14 Waiver of Setoffs............................................................43
SECTION 6.15 No Consent to Certain Acts of Seller.........................................43
ARTICLE VII. Noteholders'Lists and Reports..............................................................43
SECTION 7.1 Issuer To Furnish To Trustee Names and Addresses of Noteholders..............43
ii
<PAGE>
SECTION 7.2 Preservation of Information; Communications to Noteholders...................43
SECTION 7.3 Reports by Issuer............................................................44
SECTION 7.4 Reports by Trustee...........................................................44
ARTICLE VIII. Accounts, Disbursements and Releases......................................................45
SECTION 8.1 Collection of Money..........................................................45
SECTION 8.2 Release of Trust Property....................................................45
SECTION 8.3 Opinion of Counsel...........................................................45
ARTICLE IX. Amendments; Series Supplements..............................................................46
SECTION 9.1 Amendments Without Consent of Noteholders....................................46
SECTION 9.2 Amendments With Consent of Noteholders.......................................47
SECTION 9.3 Supplements Authorizing a Series of Notes....................................49
SECTION 9.4 Execution of Series Supplements..............................................49
SECTION 9.5 Effect of Series Supplement..................................................49
SECTION 9.6 Conformity With Trust Indenture Act..........................................49
SECTION 9.7 Reference in Notes to Series Supplements.....................................49
ARTICLE X. Reserved.....................................................................................50
ARTICLE XI. Miscellaneous...............................................................................50
SECTION 11.1 Compliance Certificates and Opinions, etc....................................50
SECTION 11.2 Form of Documents Delivered to Trustee.......................................52
SECTION 11.3 Acts of Noteholders..........................................................53
SECTION 11.4 Notices, etc., to Trustee, Issuer and Rating Agencies........................53
SECTION 11.5 Notices to Noteholders; Waiver...............................................54
SECTION 11.6 Alternate Payment and Notice Provisions......................................54
SECTION 11.7 Conflict with Trust Indenture Act............................................55
SECTION 11.8 Effect of Headings and Table of Contents.....................................55
SECTION 11.9 Successors and Assigns.......................................................55
SECTION 11.10 Separability.................................................................55
SECTION 11.11 Benefits of Indenture........................................................55
SECTION 11.12 Legal Holidays...............................................................55
SECTION 11.13 GOVERNING LAW................................................................55
SECTION 11.14 Counterparts.................................................................56
SECTION 11.15 Recording of Indenture.......................................................56
SECTION 11.16 Trust Obligation.............................................................56
SECTION 11.17 No Petition..................................................................56
SECTION 11.18 Limited Recourse.............................................................56
SECTION 11.19 Inspection...................................................................57
SECTION 11.20 Limitation of Liability......................................................57
EXHIBIT A -- Form of Transferee Certificate
</TABLE>
iii
<PAGE>
INDENTURE dated as of _____ __, ____, between HOUSEHOLD
AUTOMOTIVE TRUST ___, a Delaware business trust (the "Issuer")
___________________, a [New York] banking corporation, as trustee (the
"Trustee").
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 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.
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
.1 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.
"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.
<PAGE>
"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 2.10.
"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, the
Treasurer, or any Assistant 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 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.
2
<PAGE>
"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 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 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 Servicing Agreement dated as of ____ __, ____, among the Issuer, the
Seller, the Master Servicer and the Trustee, 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,
3
<PAGE>
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 Series ______ Collection 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
Section 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 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;
4
<PAGE>
PROVIDED, HOWEVER, 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. However, if Definitive Notes are issued, the Record Date shall be the last
Business Day of the month preceding a Distribution Date.
"Registration Statement" has the meaning specified therefor
in the Securities Act.
"Responsible Officer" means, with respect to the Trustee or
the Owner 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
having direct responsibility for the administration of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
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"State" means any one of the 50 states of the United States
of America or the District of Columbia.
"Tranche" means all of the Notes of a Series (or a Class
within a Series) having the same date of authentication.
"Trust Agreement" means the Trust Agreement dated as of ______
__, ____ between the Seller and the Owner Trustee, as the same may be amended
and supplemented from time to time.
"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), 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, initially, _____________________, a
[New York] banking corporation, not in its individual capacity but as trustee
under this Indenture, or any successor trustee under this Indenture.
"Trustee Fee" means the fees due to the Trustee, as may be set
forth in that certain fee letter, dated as of the date hereof between the Master
Servicer and the Trustee.
"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.
.2 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.
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"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.
.3 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;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in
the plural include the singular.
.4 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 the Seller and/or an Affiliate
thereof then owns all outstanding Notes and Certificates); PROVIDED, HOWEVER,
that, solely for the purpose of determining whether the Trustee 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.
.5 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.
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ARTICLE II.
THE NOTES
.1 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.
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.
.2 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
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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 Seller 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.
.3 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).
.4 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable
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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 written 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 Supplement, be (i) duly endorsed by, or be
accompanied by a written instrument of transfer in the form attached as an
exhibit to the Note duly executed by the Holder thereof or such Holder's
attorney duly authorized in writing, with such signature guaranteed by
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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.
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.
The Note Registrar shall not register the transfer of a
Definitive Note unless the transferee has executed and delivered to the
Trustee a certification, in the form of EXHIBIT A hereto, to the effect that
either (i) the transferee is not (A) an employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) that is subject to Title I of ERISA or (B) a plan
(within the meaning of Section 4975(e)(1) of the Code) that is subject to
Section 4975 of the Code (each of the foregoing, a "Plan"), and is not acting
on behalf of or investing the assets of a Plan or (ii) that the transferee's
acquisition and continued holding of the Definitive Note will be covered by a
prohibited transaction class exemption issued by the U.S. Department of
Labor. Each Note Owner that purchases a Book-Entry Note, or to whom a
Book-Entry Note is transferred, shall be deemed to represent that either (i)
it is not a Plan and is not acting on behalf of or investing the assets of a
Plan or (ii) its acquisition and continued holding of the Book-Entry Note
will be covered by a prohibited transaction class exemption issued by the
U.S. Department of Labor.
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 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
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EXCHANGE COMMISSION OR REGULATORY AUTHORITY OF ANY STATE. THIS NOTE
HAS BEEN OFFERED AND SOLD PRIVATELY. 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.
.5 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.
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Upon the issuance of any replacement Note under this
Section, the Issuer 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.
.6 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.
.7 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 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 represented by any such checks returned undelivered
shall be held in accordance with Section 3.3.
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(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. 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 Note 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.
.8 CANCELLATION. 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.
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
Indenture. 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.
.9 RELEASE OF COLLATERAL. The Trustee 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 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 Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.1.
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.10 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 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.
.11 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
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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.
.12 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 upon the written direction of the Issuer 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.
.13 FINAL DISTRIBUTION.
(a) The Master Servicer on behalf of the Issuer 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
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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
related Issuers 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
.1 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 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.
.2 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.
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.3 MONEY FOR PAYMENTS TO BE HELD IN TRUST. One Business Day
prior to each Distribution Date, the Issuer shall deposit or cause to be
deposited to the related Series Collection Account Available Funds (which
shall be immediately available) with respect to the related Collection
Period. Such sum shall be held in trust for the benefit of the Persons
entitled thereto and (unless the Note Paying Agent is the Trustee), the
Issuer 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 a Responsible Officer of the Note Paying Agent
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 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.
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The Trust hereby appoints [Name of Trustee] 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 [Name of Trustee] 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:
(vi) 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;
(vii) give the Owner Trustee notice of any default by
the Issuer of which a Responsible Officer of the Trustee has actual
knowledge in the making of any payment required to be made with
respect to the Certificates;
(viii) 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;
(ix) 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
(x) 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.
.4 EXISTENCE. 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.
.5 PROTECTION OF TRUST PROPERTY. The Issuer intends the
security interest Granted pursuant to this Indenture and the related Series
Supplement in favor of the Holders 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 for
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the benefit of the Holders 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 for the
benefit of the Holders 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 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.
.6 OPINIONS AS TO TRUST PROPERTY.
(a) On the Closing Date, the Issuer shall furnish to the
Trustee 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 for the
benefit of the Holders, 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 ____ the Master Servicer on behalf of the Issuer shall
furnish to the Trustee 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
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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.
.7 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.
(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.
(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 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.
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.8 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;
(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 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 or (E) except as expressly
permitted therein, amend, modify or fail to comply with the
provisions of the Series Related Documents.
.9 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, ____), 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
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(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.
.10 ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS.
(a) The Issuer shall not consolidate or merge with or into
any other Person, unless
(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).
(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
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(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 Series 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
Series 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 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).
.11 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
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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 Automotive
Trust ___ 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 Automotive Trust ___ is
to be so released.
.12 NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables, entering and maintaining any ancillary agreement related to
issuance of the Notes 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.
.13 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,
or to obtain release of the lien relating to the pledge of the Receivables
for a prior series of notes issued by the Issuer, the purchase of related
property of the Series Trust Estate, to fund any trust account and to pay the
Issuer's organizational, transactional and start-up expenses.
.14 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 Servicer thereunder.
.15 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.
.16 CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personally).
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.17 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.
.18 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 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
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.
.19 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.
.20 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.
.21 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.
.22 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.
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ARTICLE IV.
SATISFACTION AND DISCHARGE
.1 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
(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 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
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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 hereunder by the Issuer.
.2 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.
.3 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
.1 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.
.2 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 Note
Rate and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
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compensation, expenses, disbursements and advances of the Trustee and its
agents and outside counsel.
(b) If an Event of Default occurs and is continuing with
respect to a Series, the Trustee may in its discretion 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.
(c) 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
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(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 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.
(d) 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.
(e) 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.
(f) 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.
.3 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
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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 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; and
(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.
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.
.4 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.
.5 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.
.6 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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.7 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.
.8 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.
.9 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.
.10 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
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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.
.11 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.
.12 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.
.13 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 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.
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(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
.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing of which
Responsible Officer of the Trustee has actual knowledge, the Trustee 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 of which a Responsible Officer of the Trustee has actual
knowledge:
(i) the Trustee 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
(ii) in the absence of bad faith 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 as the case may be and conforming to the
requirements of this Indenture and the related Series Supplement;
however, the Trustee 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 provided, further,
that the Trustee shall not be responsible for the accuracy or content
of any resolution, certificate, statement, opinion, report, document,
order or other instrument furnished to it, including, without limitation,
any statistical, numerical or financial data contained therein.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
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(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.8.
(d) The Trustee 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 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 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 shall be subject to the provisions of this Section
and to the provisions of the TIA.
(h) The Trustee shall, and hereby agrees that it will, perform all
of the obligations and duties required of it under the Master Sale and
Servicing Agreement.
(i) 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
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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.
(j) In no event shall [Name of Trustee], 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.
.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee 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 or Opinion of Counsel.
(c) The Trustee 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 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 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 conduct does not
constitute willful misconduct, negligence or bad faith.
(e) The Trustee 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 and such advice or opinion of counsel 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 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 reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby; PROVIDED,
HOWEVER, that the Trustee shall, upon the occurrence of an Event of Default
(that has not been cured), exercise the rights and powers vested in it by this
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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 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, PROVIDED, HOWEVER, that if the payment within a
reasonable time to the Trustee 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 not reasonably assured to the Trustee by the security afforded
to it by the terms of this Indenture, any Series Supplement or the Master
Sale and Servicing Agreement, the Trustee 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 shall be
reimbursed by the Person making such request upon demand.
(h) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
(i) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Estate created hereby or the powers
granted hereunder.
(j) Anything in this Indenture or any Supplement hereto to the
contrary notwithstanding, in no event shall the Trustee be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Trustee has been
advised of the likelihood of such loss or damage and regardless of the form
of action.
(k) The Trustee shall not be required to take notice or be deemed
to have notice or knowledge of any default, Event of Default, Master Servicer
Termination Event unless a Responsible Officer of the Trustee shall have
actual notice thereof.
(l) The Trustee shall not in any way be held liable by reason of
any insufficiency in any Trust Account (including, without limitation, the
Master Collection Account, the Series _______ Reserve Account and the Series
______ Collection Account or any subaccount thereof) held by or on behalf of
the Trustee resulting from any investment loss on any Eligible Investment
included therein.
.3 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.
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.4 TRUSTEE'S DISCLAIMER. The Trustee 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.
.5 NOTICE OF DEFAULTS. If an Event of Default occurs and is
continuing and if it is either actually 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.
.6 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.
.7 COMPENSATION AND INDEMNITY.
(a) As payable in each Series Supplement, the Issuer shall, or
shall cause the Master Servicer to, pay to the Trustee from time to time the
Trustee Fee as compensation for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Master Servicer to reimburse the
Trustee 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 agents, outside
counsel, accountants and experts. The Issuer shall or shall cause the Master
Servicer to indemnify the Trustee, and its 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 shall notify the Issuer and
the Master Servicer promptly of any claim for which it may seek indemnity.
Failure by the Trustee 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, or the Trustee 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 through such Person's own
willful misconduct, negligence or bad faith.
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(b) The Issuer's payment obligations to the Trustee pursuant to
this Section shall survive the resignation or removal of the Trustee and 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.
.8 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. In addition, 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:
(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
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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", "Baa2" 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 Master Servicer and the Master
Servicer may appoint a successor Trustee. If the Master Servicer fails to
appoint such a successor Trustee, the Issuer or a resigning Trustee may
petition any court of competent jurisdiction to 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 Certificate Paying Agent.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee 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 the Series Supplement. 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.
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.
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.
.9 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.
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
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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.
.10 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 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
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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.
.11 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", "Baa2" or
equivalent rating from each of the Rating Agencies. 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.
.12 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.
.13 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE. The Trustee
represents and warrants to the Issuer as follows:
(a) DUE ORGANIZATION. The Trustee is a [New York] banking
corporation, duly organized, validly existing and in good standing under the
laws of the State of [New York] and is duly authorized and licensed under
applicable law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Trustee 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 hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by 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
Trustee of its duties hereunder and
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thereunder, have been duly authorized by all necessary corporate proceedings
which are required for the valid execution and delivery by the Trustee, or
the performance by the Trustee, of this Indenture, each Series Supplement and
such other Series Related Documents.
(d) VALID AND BINDING INDENTURE. The Trustee 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 enforceable against the Trustee 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.
.14 WAIVER OF SETOFFS. The Trustee hereby expressly waives any and
all rights of setoff that the Trustee 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.
.15 NO CONSENT TO CERTAIN ACTS OF SELLER. The Seller shall not
request that the Trustee consent to, nor shall the Trustee consent to any
action proposed to be taken by the Seller pursuant to Article FIFTEENTH of
the Seller's Articles of Incorporation.
ARTICLE VII.
NOTEHOLDERS' LISTS AND REPORTS
.1 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.
.2 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
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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).
.3 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 tofile 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 regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
(c) 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.
.4 REPORTS BY TRUSTEE. If required by TIA Section 313(a), within
60 days after each March 31 beginning with March 31, ____ 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
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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
.1 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 pursuant to this Indenture and the Master Sale and Servicing
Agreement. The Trustee shall apply all such money received by it as provided
in this Indenture and the Series Supplement. 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 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.
.2 RELEASE OF TRUST PROPERTY.
(a) Subject to the payment of its fees and expenses pursuant to
Section 6.7, the Trustee 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 as provided in this Article VIII shall
be bound to ascertain the Trustee's authority, inquire into the satisfaction
of any conditions precedent or see to the application of any monies.
(b) The Trustee 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.
.3 OPINION OF COUNSEL. The Trustee 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
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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
.1 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, the parties hereto may
enter into one or more amendments hereto, in form satisfactory to the
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 this Indenture, or better to assure,
convey and confirm unto the Trustee 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;
(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
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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 written 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.
.2 AMENDMENTS WITH CONSENT OF NOTEHOLDERS. Except as otherwise
provided in the Series Supplement, the Issuer and the 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 Notes affected thereby, 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;
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(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 the 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 Series Supplement; or
(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 Series Trust Estate or, except as otherwise
permitted or contemplated herein or in the Series Supplement
or the 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.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed amendment, 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
amendment pursuant to this Section, the Trustee shall mail to the Holders of
the Notes to which such amendment relates a notice setting forth in general
terms the substance of such amendment. 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 amendment.
Prior to the execution of any amendment to this Indenture, the
Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or
permitted by this Indenture. The Indenture
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Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Indenture Trustee's own rights, duties or immunities under
this Indenture.
.3 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.
.4 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 immunities
under this Indenture or otherwise.
.5 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.
.6 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.
.7 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.
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ARTICLE X.
RESERVED
ARTICLE XI.
MISCELLANEOUS
.1 COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Issuer to the Trustee to
take any action under any provision of this Indenture or any Series
Supplement, the Issuer shall furnish to the Trustee (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) (i) Prior to the deposit of any property or securities with
the Trustee 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
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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 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.
(ii) 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 deliver to the Trustee 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 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.
(iii) 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 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.
(iv) 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 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.
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(v) 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.
.2 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 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.
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.3 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.
(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.
.4 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
Automotive Trust ___, in care of [Name and Address of Owner Trustee),
Attention: __________________, 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.
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
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overnight courier or first class or via facsimile to (i) in the case of
Moody's, 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, 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.
.5 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
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.
.6 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
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<PAGE>
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.
.7 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 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.
.8 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.
.9 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 Master
Servicer in this Indenture or any Series Supplement shall bind its successors
and assigns.
.10 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.
.11 BENEFITS OF INDENTURE. 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.
.12 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.
.13 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.
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.14 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.
.15 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 under this Indenture or any Series Supplement.
.16 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 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 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 Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Seller, the Master Servicer, the Owner Trustee or the Trustee or of any
successor or assign of the Seller, the Master Servicer, 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 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 Trust Agreement.
.17 NO PETITION. The Trustee, 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,
cooperate with or encourage others in connection with the 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.
.18 LIMITED RECOURSE.
(a) Notwithstanding anything in the Series ______ Related Documents
to the contrary, the Series ______ Notes constitute limited recourse
obligations of the Issuer and are limited in recourse to the Series ______
Trust Estate. The Trustee, by
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entering into this Indenture and the related Series ______ Supplement, and
each Series ______ Noteholder agree that recourse for the Series ______ Notes
is limited to the Series ______ Trust Estate and, if the Series ______ Trust
Estate shall prove to be insufficient to pay amounts due under the Series
______, shall have no claim against the assets of the Issuer or the Seller
other than the Series ______ Trust Estate.
(b) If, notwithstanding paragraph (a) above, the Series ______
Noteholders are deemed to have any interest in any asset of the Seller other
than the Seller's interest in the Series ______ Trust Estate, including any
interest in assets of the Seller pledged to secure debt obligations of the
Seller other than the Series ______ Notes, the Trustee, by entering into this
Indenture and the related Series ______ Supplement, and each Series ______
Noteholder agree that any such interest is subordinate to the claims of the
holders of any such debt obligations, and the Series ______ Noteholders shall
have no rights in such assets until such other debt obligations are
indefeasibly paid in full. The agreement of the Trustee and the Series ______
Noteholders pursuant to this Section 11.18(b) is intended to constitute a
subordination agreement for the purposes of Section 510(a) of the Bankruptcy
Code.
.19 INSPECTION. The Issuer agrees that, on reasonable prior notice,
it will permit any representative of the Trustee, 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.
.20 LIMITATION OF LIABILITY. It is expressly understood and agreed
by the parties hereto that (a) this Agreement is executed and delivered by
[Name of Owner Trustee], 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 [Name of Owner Trustee] 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 [Name of Owner Trustee] 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 [Name of Owner Trustee] 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 and the Trustee 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 AUTOMOTIVE TRUST ___
By: [Name of Owner Trustee], not in
its individual capacity but solely
as Owner Trustee
By:
---------------------------------
Name:
Title:
[Name of Trustee], not in its
individual capacity but solely as Trustee
By:
---------------------------------
Name:
Title:
[Signature Page for the Indenture]
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EXHIBIT A
FORM OF TRANSFEREE CERTIFICATE
Pursuant to Section 2.4 of the Indenture dated as of __________
between the Household Automotive Trust ___ and ____________________,
___________ (the "Transferee") hereby certifies on the date hereof that
either (check appropriate certification):
_____ (i) the Transferee is not (A) an employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to Title I of
ERISA or (B) a plan (within the meaning of Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (the "Code")) that is subject to Section
4975 of the Code (each of the foregoing, a "Plan"), and is not acting on
behalf of or investing the assets of a Plan; or
_____ (ii) that the Transferee's acquisition and continued holding
of the Definitive Note will be covered by a prohibited transaction class
exemption issued by the U.S. Department of Labor.
By:
------------------------
[Name of Transferee]
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EXHIBIT 4.3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
HOUSEHOLD FINANCE CORPORATION,
as the Master Servicer,
together with
HOUSEHOLD AUTOMOTIVE TRUST ___,
as Issuer,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Seller,
[Name of Indenture Trustee],
as Indenture Trustee
and
[Name of Owner Trustee],
as Owner Trustee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SERIES ____ SUPPLEMENT
Dated as of ______
to the
INDENTURE
Dated as of _______
MASTER SALE AND SERVICING AGREEMENT
Dated as of ______
and to the
TRUST AGREEMENT
Dated as of June ______
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I CREATION OF THE SERIES ______ NOTES...............................................1
SECTION 1.01. DESIGNATION................................................................1
SECTION 1.02. PLEDGE OF SERIES ______ 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 _____ NOTEHOLDERS;
SERIES SPECIFIC COVENANTS....................................................11
SECTION 3.01. SERIES _____ TRUST ACCOUNTS...............................................11
SECTION 3.02. RESERVE ACCOUNT...........................................................12
SECTION 3.03. DISTRIBUTIONS.............................................................12
SECTION 3.04. STATEMENTS TO NOTEHOLDERS.................................................14
SECTION 3.05. REPORTING REQUIREMENTS....................................................14
SECTION 3.06. COMPLIANCE WITH WITHHOLDING REQUIREMENTS..................................15
SECTION 3.07. SPECIAL COVENANTS AND ACKNOWLEDGEMENTS....................................15
SECTION 3.08. TAX CHARACTERIZATION......................................................15
ARTICLE IV EVENTS OF DEFAULT; REMEDIES.....................................................15
SECTION 4.01. EVENTS OF DEFAULT.........................................................15
SECTION 4.02. RIGHTS UPON EVENT OF DEFAULT..............................................17
SECTION 4.03. REMEDIES..................................................................17
SECTION 4.04. PRIORITIES................................................................18
ARTICLE V PREPAYMENT AND REDEMPTION........................................................19
SECTION 5.01. OPTIONAL "CLEAN-UP" REDEMPTION............................................19
ARTICLE VI MISCELLANEOUS...................................................................20
SECTION 6.01. RATIFICATION OF BASIC DOCUMENTS...........................................20
SECTION 6.02. COUNTERPARTS..............................................................20
SECTION 6.03. GOVERNING LAW.............................................................20
SECTION 6.04. AMENDMENTS WITHOUT CONSENT OF NOTEHOLDERS.................................20
SECTION 6.05. AMENDMENTS WITH CONSENT OF THE SERIES _____ NOTEHOLDERS...................21
SECTION 6.06. AUTHORITY TO REGISTER NOTES AND FILE REPORTS..............................23
SECTION 6.07. AUTHORITY TO PERFORM DUTIES OF THE ISSUER.................................23
Schedule I Schedule of Eligibility Criteria
Schedule II Schedule of Receivables
Exhibit A Form of Master Servicer's Certificate
</TABLE>
1
<PAGE>
This Series ______ Supplement, dated as of ________, is by and among
Household Finance Corporation, a Delaware corporation, as master servicer (the
"MASTER SERVICER"), Household Automotive Trust ___, a Delaware business trust,
as Issuer (the "ISSUER"), Household Auto Receivables Corporation, a Nevada
corporation, as Seller ("SELLER"), ______________, a [New York] banking
corporation, as trustee for the Noteholders (the "INDENTURE TRUSTEE") and
______________, a Delaware banking corporation, as owner trustee (the "OWNER
TRUSTEE") for the Certificateholders.
RECITALS
This Series _____ Supplement, is executed and delivered by the parties
hereto pursuant to Section 9.3 of the Indenture dated as of __________ (the
"INDENTURE") among the Issuer, the Master Servicer and the Indenture Trustee and
pursuant to Section 3.2 of the Trust Agreement (the "TRUST AGREEMENT") dated as
of ________ between the Seller and the Owner Trustee. In the event that any term
or provision contained herein shall conflict with or be inconsistent with any
term or provision contained in the Indenture or the Trust Agreement, the terms
and provisions of this Series ______ Supplement shall govern with respect to
Series ______.
Article I
CREATION OF THE SERIES ______ NOTES
.1. DESIGNATION.
(a) There is hereby created a Series of Notes to be issued pursuant to
the Indenture and this Series _____ Supplement to be known as "Household
Automotive Trust ___, Series _____ Notes" (as used herein, the "SERIES _____
NOTES"). The Series _____ Notes shall be issued in [four] 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").]
(b) There is hereby created a Series of Certificates to be issued
pursuant to the Trust Agreement and this Series _____ Supplement to be known as
the "Household Automotive Trust ___, Series _____ Certificates."
.2. PLEDGE OF SERIES _____ TRUST ESTATE.
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
_____ Receivable on the Schedule of Receivables
<PAGE>
attached hereto as Schedule II 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
_____ 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 _____ Receivables;
(d) any proceeds and the right to receive proceeds with respect to such
Series _____ 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 _____ Receivables from claims on any physical
damage, loss, credit life or disability insurance policies covering the
related Financed Vehicles or Obligors including rebates of insurance premiums
relating to such Series _____ Receivables; (g) all funds on deposit from time
to time in the Series _____ Trust Accounts (including all investments and
proceeds thereof from time to time allocable to the Series _____ Reserve
Account, but excluding all investments and proceeds thereof allocable to the
other Series _____ Trust Accounts or allocable to the Master Collection
Account); (h) all rights of the Seller in and to the Master Receivables
Purchase Agreement and the Receivables Purchase Agreement Supplements,
including the delivery requirements, representations and warranties and the
cure and repurchase obligations of HAFC under the Master Receivables Purchase
Agreement and such Receivables Purchase Agreement Supplements; (i) all
property (including the right to receive future Net Liquidation Proceeds)
that secures such Series _____ Receivables and that has been acquired by or
on behalf of the Issuer pursuant to liquidation of such Series _____
Receivables; (j) all items contained in the Receivable Files with respect to
such Series _____ 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 _____ Receivables, or the related Financed Vehicles
or Obligors; (k) all rights of the Seller in and to the Master Sale and
Servicing Agreement and the Transfer Agreement or Transfer Agreements related
to Series _____ (including all rights of the Seller under the Master
Receivables Purchase Agreement and the related Receivables Purchase Agreement
Supplements, assigned to the Issuer pursuant to the Master Sale and Servicing
Agreement and the related Transfer Agreement or Transfer Agreements); (l) one
share of the Class SV Preferred Stock of the Seller; and (m) 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 (collectively, the "Series _____ Trust Estate").
The foregoing Grant is made in trust to the Indenture Trustee for the
benefit of the Holders of the Notes. The Indenture Trustee hereby acknowledges
such Grant, accepts the trusts under the Indenture and this Series _____
Supplement in accordance with the provisions of the Indenture and this Series
_____ Supplement and agrees to perform its duties required in the
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<PAGE>
Indenture and in this Series _____ Supplement in accordance with the
provisions hereof and of the Indenture to the best of its ability to the end
that the interests of such parties, recognizing the priorities of their
respective interests may be adequately and effectively protected.
.3. 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.
.4. 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
.1. DEFINITIONS.
(a) Whenever used in this Series _____ Supplement and when used in the
Series _____ Related Documents with respect to the Series _____ Notes or the
Series _____ 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 _____ Supplement, terms defined in the Basic Documents are used
herein as therein defined. A term used herein preceded by the designation
"Series _____" but not defined herein, shall have the meaning specified for such
term in the Basic Documents as such term relates to Series _____.
"Additional Class A Principal Distributable Amount" means with respect
to any Distribution Date, the excess of (i) the aggregate of the Principal
Balance of all Receivables which became Liquidated Receivables during the
immediately preceding Collection Period over (ii) the sum of (x) the aggregate
amount of Net Liquidation Proceeds received by the Indenture Trustee during the
immediately preceding Collection Period and (y) Excess Interest with respect to
such Distribution Date. The "Additional Class A Principal Distributable Amount"
shall in no event be less than zero.
"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 close
of business on the
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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 on the Series _____ Trust
Accounts during the related Collection Period, (iii) all Repurchase Amounts
deposited in the Collection Account during such Collection Period, (iv) any
proceeds 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) - (iv) on such Distribution Date, over the
aggregate of the amounts specified in clauses (i), (ii) and (iii) hereof with
respect to such Collection Period and (b) the Reserve Account Balance; provided
that with respect to any Distribution Date on which amounts are payable with
respect to the Class A-1 Notes pursuant to clause (ii) of the definition of
Class A Principal Distributable Amount (or clause (iii) of such definition to
the extent such amount represents amounts not paid pursuant to clause (ii) on a
prior Distribution Date), Available Funds shall not include amounts withdrawn
from the Reserve Account necessary to make such payment to the extent such
withdrawal would result in the Reserve Account Balance being less than
$___________.
"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 _____ 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 Master Receivables Purchase Agreement, and
other documents and certificates delivered therewith or pursuant thereto in
connection with Series _____.
"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 _____ Certificates.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the amount payable pursuant to Section 3.03 (a)(vii) 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
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excess, to the extent permitted by law, at a rate per annum equal to the
related Note Rate with respect to the Class A Notes from such preceding
Distribution Date to but excluding the current Distribution Date.
"Class A Interest Distributable Amount" means, with respect to any
Distribution Date and each class of Class A Notes, an amount equal to the sum
of: (i) the aggregate amount of interest accrued on the Class A Notes at the
related Note Rate from and including the preceding Distribution Date (or, in the
case of the initial Distribution Date, from and including the Closing Date) to
but excluding the current Distribution Date PLUS (ii) the related Class A
Interest Carryover Shortfall for the current Distribution Date.
"Class A 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, the sum
of (x) 100% 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 (y) the excess of the amount described in
clause (iii) of this definition for such Distribution Date over the amount
described in clause (ii)(x) (taking into account payment of the principal
balance of the Class A-1 Notes on such Distribution Date), (iii) with respect to
any Distribution Date 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)
the aggregate outstanding principal balance of the Class A Notes over (y) (A)
the outstanding 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 after the Distribution Date on which the principal balance
of the Class A-1 Notes is reduced to zero, the excess of the Class A
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, (ii) the Additional Class A Principal
Distributable Amount, if any, for such Distribution Date and (iii) the Class A
Principal Carryover Shortfall for such Distribution Date; PROVIDED, HOWEVER,
that (x) the sum of clauses (i), (ii) and (iii) 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.
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"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-2 Scheduled Maturity Date" means with respect to the Class
A-2 Notes, _________________.
"Class A-3 Noteholders" means the Holders of the Class A-3 Notes.
"Class A-3 Scheduled Maturity Date" means with respect to the Class
A-3 Notes, _________________.
"Class A-4 Noteholders" means the Holders of the Class A-4 Notes.
"Class A-4 Scheduled Maturity Date" means with respect to the Class
A-4 Notes, _________________.
"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).
"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
____________ day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing on
____________.
"Eligibility Criteria" means the criteria for eligibility for Eligible
Receivables set forth on Schedule I hereto.
"Eligible Receivable" or "Series _______ Eligible Receivable" means a
Series ______ 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.
"Excess Interest" means with respect to a Distribution Date the excess
of (i) interest collections on the Receivables during the preceding Collection
Period over (ii) amounts payable on such Distribution Date pursuant to Section
3.03(a)(i)-(iii).
"Final Scheduled Distribution Date" means ____________.
"HAFC " means Household Automotive Finance Corporation.
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"HFC" means Household Finance Corporation.
"Indenture" means the indenture dated as of ___________ between the
Issuer and ______________, as indenture trustee, as supplemented by the Series
______ Supplement.
"Initial Reserve Account Deposit" means 1% of the Pool Balance as of
the Cutoff Date.
"Interest Period" means, with respect to any Distribution Date, the
period from and including the prior Distribution Date (or, in the case of the
first Distribution Date, from and including the Series ______ Closing Date)
through (and including) the day preceding such Distribution Date.
"Master Servicer's Certificate" means, with respect to Series _____, a
report in substantially the form of EXHIBIT A 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 Master Servicer other than HFC, the fees due to
the Indenture Trustee and Owner Trustee, to the extent not paid by the Master
Servicer, plus, the Class A Interest Distributable Amounts 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 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: __%
Interest 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 on the Class A-3 and Class A-4 Notes will
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
The amount of interest payable on the Class A-3 and Class A-4 Notes for the
initial Interest Period will be computed on the basis of the actual number of
days elapsed in the 30-day months.
"Notes" means the Class A Notes.
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"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 ____________________, not in its individual
capacity but solely as trustee under the Trust Agreement.
"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 _____ Trust
Estate, each Series _____ Receivable, together with all associated property and
rights with respect thereto described in the definition of Series _____ Trust
Estate.
"Pool Balance" means, as of any date of determination, the aggregate
of the outstanding Principal Balances of the Receivables, unless otherwise
specified, as of the close of business on the preceding Business Day.
"Principal Amount Available" means, with respect to any Distribution
Date, the amount remaining in the Series _____ Collection Account on such
Distribution Date after the payment of the amounts required to be paid pursuant
to clause (i) through (iii) 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 (A) the Principal Amount Available for such
Distribution Date and (B) 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 the 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 _____ Reserve Account which shall
be an Eligible Deposit Account created pursuant to Section 3.01 hereof, which
initially shall be account no. __________ for further credit, account no.
_______, reference Household Automotive Trust ___, Series _____, at the
Indenture Trustee, ABA No. ________.
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"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.
"Schedule of Receivables" means the schedule of all retail installment
sales contracts and promissory notes held as part of the Series _____ Trust
Estate attached hereto as Schedule II.
"Series _____ Certificates" means the Certificates (as defined in the
Trust Agreement).
"Series _____ Closing Date" means ___________.
"Series _____ Collected Funds" means, with respect to a date of
determination, the amount of Collected Funds with respect to the Collection
Period immediately preceding such date of determination, including all Net
Liquidation Proceeds collected during the related Collection Period (but
excluding any Purchase Amounts).
"Series _____ Collection Account" means the Eligible Deposit Account
created pursuant to Section 3.01 hereof which initially shall be account no.
__________, for further credit, account no. ________, reference Household
Automotive Trust ___, Series ______, at the Indenture Trustee, ABA No.
__________.
"Series _____ Eligible Investments" means, with respect to funds in
the Series ______ 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)(except if such investment
is in commercial paper issued by HFC, the required rating shall mean not less
than "A-1"), 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 _____ Receivables" means each Receivable listed on the
Schedule of Receivables, which (a) has not been released from the Series _____
Trust Estate as provided herein or in the Indenture and (b) is not a Liquidated
Receivable.
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"Series _____ Related Documents" means the Basic Documents, this
Series _____ Supplement, each Receivables Purchase Agreement Supplement related
to the Series _____ Trust Estate, each Transfer Agreement related to the Series
_____ Trust Estate, the Series _____ Notes, the Series _____ Certificates and
other documents and certificates delivered in connection therewith.
"Series _____ Reserve Account" means the Reserve Account.
"Series _____ Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to the Holders of the Series _____ Notes.
"Series _____ Securities" means the Series _____ Notes and the Series
_____ Certificates.
"Series _____ Supplement" means this Series _____ Supplement to the
Indenture and the Trust Agreement.
"Series _____ Support" means, with respect to the Series _____ Notes,
the Series ______ Certificates.
"Series _____ Trust Accounts" means the Series _____ Collection
Account and the Series _____ Reserve Account.
"Series _____ Trust Estate" means the property Granted to the
Indenture Trustee pursuant to Section 1.02.
"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 _____ Receivables during such Collection Period, and
(ii) the net realized investment earnings of funds on deposit in the Series
_____ Collection Account or on deposit in the Master Collection Account and
allocable to the investment of Available Funds with respect to Series _____.
"Targeted Credit Enhancement Amount" means, with respect to any
Distribution Date, _____% 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) __% of the outstanding
Pool Balance as of the end of the related Collection Period, and (b)
$___________ (__% of the Pool Balance as of the Cutoff Date) and (ii) the
Aggregate Note Principal Balance.
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"Trust" means the Issuer.
"Trust Agreement" means the Trust Agreement, dated as of ________,
between the Seller and the Owner Trustee, as supplemented by the Series _____
Supplement.
Article III
DISTRIBUTIONS AND STATEMENTS TO
SERIES _____ NOTEHOLDERS; SERIES SPECIFIC COVENANTS
.1. SERIES _____ TRUST ACCOUNTS.
(a) The Indenture Trustee, for the benefit of the Holders of the
Series _____ Securities, shall establish and maintain an account (the "SERIES
_____ COLLECTION ACCOUNT") as a segregated trust account in the Indenture
Trustee's corporate trust department, identified as the "Collection Account for
Household Automotive Trust ___, in trust for the registered Holders of the
Series _____ Securities." The Indenture Trustee shall make or permit withdrawals
from the Series _____ Collection Account only as provided in this Series _____
Supplement. Notwithstanding anything in the Series _____ Related Documents to
the contrary, at least one Business Day prior to each Distribution Date the
Master Servicer and the Issuer shall deposit Collected Funds (which shall be
immediately available) directly into the Series _____ Collection Account without
any prior deposit into the Master Collection Account.
(b) The Indenture Trustee for the benefit of the Holders of the Series
_____ Notes shall establish and maintain an account (the "SERIES _____ RESERVE
ACCOUNT") as a segregated trust account in the Indenture Trustee's corporate
trust department, identified as the "Series _____ Reserve Account for Household
Automotive Trust ___, in trust for the registered Holders of the Series _____
Notes." The Indenture Trustee shall make or permit withdrawals from the Reserve
Account only as provided in this Series _____ Supplement. On the Series _____
Closing Date, the Series _____ Reserve Account will be funded with the Initial
Reserve Account Deposit.
(c) In the event that any Series _____ Trust Account ceases to be an
Eligible Deposit Account, 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 _____ Trust Account except as provided in
this Series _____ Supplement. Except as specifically provided in this Series
_____ Supplement, funds in the Series _____ Trust Accounts shall not be
commingled with any other moneys. All moneys deposited from time to time in each
of the Series _____ Trust Accounts shall be invested and reinvested by the
Indenture Trustee in Series ______ 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 the investment of funds in the
Series _____ Trust Accounts to the same extent as they apply to the Master
Collection Account.
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.2. RESERVE ACCOUNT.
On the earlier of (x) the maturity date of the Series ______ 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.
.3. 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 unreimbursed costs and expenses (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) (i) to the Class A-1 Noteholders, 100% of the Class A
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 Distribution Date on which the outstanding principal amount of the
Class A-1 Notes has been reduced to zero, the Class A Principal
Distributable Amount will be allocated to payment of the Class A-2,
Class A-3 and Class A-4 Notes, in "sequential pay" fashion, beginning
with the Class A-2 Notes, 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;
(v) to the Reserve Account, the Reserve Account Deposit Amount,
if any, required to increase the amount therein to the Targeted
Reserve Account Balance;
(vi) if HFC is acting as the Master Servicer, the Base Servicing
Fee for the related Collection period; and
(vii) to the holders of the Series _____ Certificates, any
remaining Available Funds.
(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
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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 (iv) of paragraph (a) above on such Distribution Date,
the Indenture Trustee shall withdraw from the Series _____ Reserve Account an
amount up to the amount of such deficiency and distribute such amount as a
component of Available Funds.
(c) Each Series _____ Certificateholder by its acceptance of its
Certificate will be deemed to have consented to the provisions of paragraph (a)
above relating to the priority of distributions, and will be further deemed to
have acknowledged that no property rights in any amount or the proceeds of any
such amount shall vest in such Certificateholder until such amounts have been
distributed to such Certificateholder 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 _____
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 _____ Reserve Account, such monies being held in trust for the
benefit of the Series _____ Noteholders.
(d) Amounts on deposit in the Reserve Account on any Distribution Date
(after giving effect to all distributions made on such Distribution Date and the
related Distribution Date) in excess of the Targeted Reserve Account Balance for
such Distribution Date shall be released first, to the Master Servicer for any
Servicing Fees and Supplemental Servicing Fees then due, and any remainder to
the Seller.
(e) In the event that the Series _____ 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(b) to the Indenture Trustee
for distribution pursuant to Section 3.03(a) one Business Day Prior to the
related Distribution Date.
(f) Unless Definitive Notes are issued pursuant to Section 2.12 of the
Indenture, with respect to Notes registered on the related Record Date in the
name of a nominee of the Clearing Agency, payment will be made by wire transfer
to an account designated by such nominee, without presentation or surrender of
the Series _____ Notes or the making of any notation thereon.
(g) If not theretofore paid in full, all amounts outstanding with
respect to the Class A-1 Notes shall be due and payable on the Class A-1
Scheduled Maturity Date, if not theretofore paid in full, all amounts
outstanding with respect to the Class A-2 Notes shall be due and payable on the
Class A-2 Scheduled Maturity Date, if not theretofore paid in full, all amounts
outstanding with respect to the Class A-3 Notes shall be due and payable on the
Class A-3 Scheduled Maturity Date, and if not theretofore paid in full, all
amounts outstanding with respect to the Class A-4 Notes shall be due and payable
on the Class A-4 Scheduled Maturity Date.
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.4. STATEMENTS TO NOTEHOLDERS.
On or prior to each Determination Date, the Master Servicer shall
provide to the Indenture Trustee (with a copy to the Rating Agencies) for the
Indenture Trustee to forward to each Noteholder of record, and to each
Certificateholder of record, a statement setting forth at least the following
information as to the Notes to the extent applicable:
(i) the amount of such distribution allocable to principal of
each Class of Notes;
(ii) the amount of such distribution allocable to interest on or
with respect to each Class of Notes;
(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 A
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; and
(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 (iv) above shall be
expressed as a dollar amount per $1,000 of the initial principal balance of the
applicable Class of Notes.
.5. REPORTING REQUIREMENTS.
(a) The Master Servicer's Certificate shall be in the form attached as
EXHIBIT A hereto.
(b) By January 31 of each calendar year, commencing January 31, ____,
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.
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.6. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.
Notwithstanding any other provisions of this Series _____ 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
Indenture. In no event shall the consent of any Noteholder be required for any
such withholding.
.7. SPECIAL COVENANTS AND ACKNOWLEDGEMENTS.
With respect to the Series _____ Notes, the Issuer hereby represents
and warrants, as of the Series _____ 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 _____ 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 _____
Supplement, the Indenture, and each Series _____ Related Document to
which it is a party.
.8. TAX CHARACTERIZATION.
It is the intent of the parties hereto that, for all Federal, state,
local and foreign taxes, the Series _____ 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 _____ Notes by acceptance of such
interest, agrees to treat the Series _____ Notes for purposes of all Federal,
state, local and foreign taxes as indebtedness secured by the Series _____ Trust
Estate.
Article IV
EVENTS OF DEFAULT; REMEDIES
.1. 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):
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(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 _____ 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 _____ Related Documents or in any certificate or other writing
delivered pursuant thereto or in connection therewith proving to have
been incorrect in any material respect as of the time when the same
shall have been made and has a material adverse effect on the
Noteholders, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation
or warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 60 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee
or 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 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 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 Property, 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.
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.2. RIGHTS UPON EVENT OF DEFAULT.
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee in its discretion may, or if so requested in writing by
Holders holding Notes representing at least 66 2/3% of the Outstanding Amount of
the Notes shall, declare by written notice to the Issuer that the Notes have
become due and payable, whereupon they shall become, immediately due and payable
at 100% of the outstanding principal balance of the Notes, and accrued interest
thereon (together with interest accrued at the relevant Note Rate on such
overdue interest).
(b) At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee, the 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
(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.
.3. 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
Property;
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<PAGE>
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee and the Holders of the Notes;
and
(iv) sell the Trust Property 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
Property following an Event of Default unless:
(x) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for
principal and interest, or
(y) the Indenture Trustee determines that the Trust
Property 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, or
(z) the Indenture Trustee has not determined that the
Trust Property will not continue to provide sufficient funds
for the principal of and interest on the Notes and the
proceeds of such sale or liquidation distributable to the
Noteholders are not sufficient to discharge in full all
amounts then due and unpaid upon such Notes for principal and
interest, and the Indenture Trustee obtains the consent of
Holders of 100% 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 investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Property for such purpose.
.4. PRIORITIES.
(a) On and after the maturity date of the Series _____ 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 _____ 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;
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<PAGE>
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 Servicer for any Servicing Fees and Supplemental
Servicing Fees then due;
Fifth: to the Series _____ Certificateholders, any remaining
Available Funds.
(b) The Indenture Trustee may fix a record date and distribution date
for any payment to Series _____ 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
.1. OPTIONAL "CLEAN-UP" REDEMPTION.
On any Distribution Date occurring on or after the date upon which the
aggregate outstanding principal balance of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes shall have been reduced to an
amount which is less than or equal to 10% of the aggregate outstanding principal
balance of such Classes of Notes as of the Series _____ Closing Date, the Master
Servicer and the Seller on behalf of the Issuer, shall each have the option to
redeem the outstanding Series _____ 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 and the Master Servicer (if other than
HFC) under the Series _____ 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.
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<PAGE>
Article VI
MISCELLANEOUS
.1. RATIFICATION OF BASIC DOCUMENTS.
Each of the Basic Documents, and to the extent appropriate, as
supplemented by this Series _____ Supplement, is in all respects ratified and
confirmed and each of the Basic Documents, as so supplemented by this Series
_____ Supplement shall be read, taken and construed as one and the same
instrument.
.2. COUNTERPARTS.
This Series _____ Supplement may be executed in one or more
counterparts, each of which so executed shall be deemed to be an original, but
all of which shall together constitute but one and the same instrument.
.3. GOVERNING LAW.
THIS SERIES _____ 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.
.4. 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 _____ Supplement, or better to assure, convey and confirm unto
the Indenture Trustee, if any, any property subject or required to be
subjected to the lien of the Indenture as supplemented by this Series
_____ Supplement, or to subject to the lien of the Indenture as
supplemented by this Series _____ Supplement additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Noteholders, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee, if any;
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<PAGE>
(v) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or to make any other provisions with respect to matters or
questions arising under the Indenture, the Trust Agreement or in
this Series _____ Supplement; provided that such action shall not
adversely affect the interests of the Series _____ 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 _____ 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 _____ Supplement to such extent as shall
be necessary to effect the qualification of the Indenture under the
TIA or under any similar federal statute hereafter enacted and to add
to the Indenture such other provisions as may be expressly required by
the TIA.
Each of the 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 _____ Noteholders but with prior written 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
_____ Supplement of modifying in any manner the rights of the Series _____
Noteholders under the Indenture or under this Series _____ Supplement; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Series _____
Noteholder.
.5. AMENDMENTS WITH CONSENT OF THE SERIES _____ 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 _____ 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 _____ Supplement or of modifying in any manner the
rights of the Series _____ Noteholders under the Indenture or under this Series
_____ Supplement; provided, however, that no such amendment shall, without the
consent of the Holder of each Outstanding Series _____ Note affected thereby:
21
<PAGE>
(i) change the date of payment of any installment of
principal of or interest on any Series _____ Note, or reduce the
principal amount thereof, the interest rate thereon, change the
provision of the Indenture relating to the application of
collections on, or the proceeds of the sale of, all or any portion
of any Series _____ Trust Estate to payment of principal of or
interest on the Series _____ Notes, or change any place of payment
where, or the coin or currency in which, any Series _____ 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 _____ Notes on or after
the respective due dates thereof;
(iii) reduce the percentage of the Outstanding Amount of the
Series _____ Notes, the consent of the Holders of which is required
for this Series _____ Supplement, or the consent of the Holders of
which is required for any waiver of compliance with certain provisions
of the Indenture or certain defaults hereunder and their consequences
provided for in the Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell
or liquidate the Series _____ 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 _____ 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 _____ 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
_____ Notes to the benefit of any provisions for the mandatory
redemption of the Series _____ 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 _____ Trust Estate or, except as otherwise permitted or
contemplated herein or the Series _____ Related Documents, terminate
the lien of the Indenture on any property at any time subject hereto
or deprive the Holder of any Series _____ Note of the security
provided by the lien of the Indenture.
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<PAGE>
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of an amendment to this Series _____
Supplement, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture Trustee
of an amendment to this Series _____ Supplement, the Indenture Trustee shall
mail to the Series _____ 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 any amendment to the Series _____ Supplement.
Prior to the execution of any amendment to this Supplement, the
Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Supplement. The Indenture Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Indenture Trustee's own rights,
duties or immunities under this Supplement.
By its acceptance of its interest in the Series _____ Notes, each
owner of a beneficial interest in a Note shall be deemed to have agreed that
prior to the date which is one year and one day after the termination of the
Indenture, such Person shall not acquiesce, petition or otherwise invoke or
cause the Issuer or the Seller to invoke the process of any governmental
authority for the purpose of commencing or sustaining a case against the Seller
or Issuer under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of or for the Issuer or the Seller or any substantial
part of its property or ordering the winding-up or liquidation of the affairs of
the Issuer or the Seller.
.6. AUTHORITY TO REGISTER NOTES AND FILE REPORTS.
The Issuer hereby authorizes the Seller to prepare and execute on
behalf of the Issuer, filings with the Securities and Exchange Commission and
any applicable state agencies of documents required to register or qualify the
Notes for public distribution and to file on a periodic basis, such documents as
may be required by rules and regulations prescribed by such authorities.
.7. AUTHORITY TO PERFORM DUTIES OF THE ISSUER.
(a) 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 pursuant to Section 3.5 of the
Indenture, 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 Section 3.5 of the Indenture or the adequacy of any financing
statement, continuation statement or other instrument prepared by the Master
Servicer.
(b) The Issuer hereby appoints the Master Servicer to assist the
Issuer in performing its duties under the Series _____ Related Documents,
including, but not limited to, Sections 2.13 and 3.9 of the Indenture, and the
Master Servicer hereby accepts such appointment.
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(c)
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Series _____
Supplement to be fully executed by their respective officers as of the day and
year first above written.
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By
----------------------------------------
Name:
Title:
HOUSEHOLD AUTOMOTIVE TRUST ___,
as Issuer
By [Name of Owner Trustee]
Not in its individual capacity but solely as
Owner Trustee
By
----------------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION
By
----------------------------------------
Name:
Title:
[Name of Indenture Trustee],
as Indenture Trustee
By
----------------------------------------
Name:
Title:
<PAGE>
[Name of Owner Trustee],
as Owner Trustee
By
----------------------------------------
Name:
Title:
<PAGE>
Schedule I
Eligibility Criteria
"ELIGIBLE RECEIVABLE" means a Series _____ Receivable with respect to which each
of the following is true as of the Cutoff Date:
(a) that (i) was originated directly by HAFC (or any predecessor or
Affiliate of HAFC) with the consumer or was originated by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such Dealer's
business and (A) in the case of a Dealer originated receivable, such Dealer had
all necessary licenses and permits to originate receivables in the state where
such Dealer was located, and such receivable was purchased by HAFC (or any
predecessor or Affiliate of HAFC) from such Dealer under an existing Dealer
Agreement with HAFC (or any predecessor or Affiliate of HAFC), and (B) in the
case of a Dealer originated receivable or a receivable originated by HAFC (or
any predecessor or Affiliate of HAFC) such receivable was purchased (x) by HARC
pursuant to the terms of the Master Receivables Purchase Agreement or by a
master receivables purchase agreement between HARC and HAFC, dated as of
______________, that is substantially the same as the Master Receivables
Purchase Agreement (the "Trust __ Receivables Purchase Agreement"), (y) by the
Issuer pursuant to the Master Sale and Servicing Agreement; and each Series
_____ Receivable was validly assigned (1) if Dealer originated, by such Dealer
to HAFC (or any predecessor or Affiliate of HAFC), (2) by HAFC to HARC pursuant
to the terms of the Master Receivables Purchase Agreement or the Trust __
Receivables Purchase Agreement, (3) by HARC to the Issuer pursuant to the Master
Sale and Servicing Agreement and (4) by the Issuer to the Trustee pursuant to
the Indenture, (ii) was fully and properly executed by the parties thereto,
(iii) contains customary and enforceable provisions such as to render the rights
and remedies of the holder thereof adequate for realization against the
collateral security, and (iv) is fully amortizing and provides for level monthly
payments (PROVIDED that the first and final payment of the Series _____
Receivable may be minimally different from the level payment) which, if made
when due, shall fully amortize the Amount Financed over the original term;
(b) that if originated by a Dealer, was sold by the Dealer to HAFC (or
any predecessor or Affiliate of HAFC) without any fraud or material
misrepresentation on the part of such Dealer in either case or on the part of
the Obligor;
(c) with respect to which all requirements of applicable federal,
state and local laws, and regulations thereunder (including, without limitation,
usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations "B" and "Z", the Soldiers'
and Sailors' Civil Relief Act of 1940 and state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code and other consumer credit
laws and equal credit opportunity and disclosure laws) in respect of all of the
Series _____ Receivables, each and every sale of Financed Vehicles and the sale
of any physical damage, loss, credit life and credit
SCH-I-1
<PAGE>
accident and health insurance and any extended service contracts, have been
complied with in all material respects, and each Series _____ Receivable and
the sale of the Financed Vehicle evidenced by each Series _____ Receivable
and the sale of any physical damage, loss, credit life and credit accident
and health insurance and any extended service contracts complied at the time
it was originated or made and now complies in all material respects with all
applicable legal requirements;
(d) that was originated in the United States of America and, at the
time of origination materially conformed to all requirements of the Dealer
Underwriting Guides (or such similar guidelines of any predecessor or affiliate
of HAFC) applicable thereto;
(e) which represents the genuine, legal, valid and binding payment
obligation of the Obligor thereon, enforceable by the holder thereof in
accordance with its terms, except (A) as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and by equitable limitations on the availability
of specific remedies, regardless of whether such enforceability is considered in
a proceeding in equity or at law and (B) as such Receivable may be modified by
the application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended; and all parties thereto had full legal capacity to execute and deliver
such Receivable and all other documents related thereto and to grant the
security interest purported to be granted thereby;
(f) which is not due from the United States of America or any state or
from any agency, department, subdivision or instrumentality thereof;
(g) which (i) had an original maturity of at least __ months but not
more than __ months, (ii) had an original Amount Financed of at least $____ and
not more than $____, (iii) had an Annual Percentage Rate of at least ___% and
not more than __%, (iv) was not more than __ days past due, (v) no funds have
been advanced by the Issuer, the Master Servicer, HAFC, any predecessor or
Affiliate of HAFC, any Dealer, or anyone acting on behalf of any of them in
order to cause such Series _____ Receivable to qualify under SUBCLAUSE (iv) of
this CLAUSE (g) and (vi) had no provision thereof waived, altered or modified in
any respect since its origination;
(h) with respect to which the information pertaining to such Series
_____ Receivable set forth in each Schedule of Receivables is true and correct
in all material respects;
(i) with respect to which HAFC will have caused the portions of HAFC's
and the Master Servicer's servicing records relating to such Series _____
Receivable to be clearly and unambiguously marked to show that such Series _____
Receivable has been transferred by HAFC to HARC in accordance with the terms of
the Master Receivables Purchase Agreement and by HARC to the Issuer pursuant to
the Master Sale and Servicing Agreement or the Trust __ Receivables Purchase
Agreement, and by the Issuer to the Indenture Trustee pursuant to the Indenture;
(j) with respect to which the computer tape or listing to be made
available by HAFC to HARC, the Master Servicer or the Trustee is complete and
accurate and includes a
SCH-I-2
<PAGE>
description of the same Series _____ Receivables that are, or will be,
described in the related Schedule of Receivables;
(k) which constitutes chattel paper within the meaning of the UCC;
(l) of which there is only one original executed copy;
(m) with respect to which there exists a Receivable File and such
Receivable File contains, without limitation, (a) a fully executed original of
such Receivable, (b) a certificate of insurance, application form for insurance
signed by the Obligor, or a signed representation letter from the relevant
Obligor named pursuant to which the Obligor has agreed to obtain physical damage
insurance for the related Financed Vehicle, (c) the original Lien Certificate or
application therefor showing HAFC (or any predecessor or Affiliate of HAFC) as
first lienholder and by HAFC (or any predecessor or Affiliate of HAFC) to HARC
and by HARC to the Issuer and by the Issuer to the Trustee) and (d) an original
credit application signed by the Obligor; and (x) each of the documents relating
thereto which is required to be signed by the Obligor has been signed by the
Obligor in the appropriate spaces and (y) all blanks on any form relating
thereto by HAFC (or any predecessor or Affiliate of HAFC) to be completed have
been properly filled in and each form has otherwise been correctly prepared;
and, notwithstanding the above, with respect to which, a copy of the complete
Receivable File for such Series _____ Receivable, which fulfills the
documentation requirements of the Dealer Underwriting Guides as in effect at the
time of purchase is in the possession of the Master Servicer or Sub-Servicer;
(n) which has not been satisfied, subordinated or rescinded, and the
Financed Vehicle securing such Series _____ Receivable has not been released
from the lien of such Series _____ Receivable in whole or in part;
(o) which was not originated in, and is not subject to the laws of,
any jurisdiction the laws of which would make unlawful, void or voidable the
sale, transfer and assignment of such Series _____ Receivable and with respect
to which neither HAFC (nor any predecessor or affiliate of HAFC) nor the Issuer
has entered into any agreement with any account debtor that prohibits, restricts
or conditions the assignment of any portion of such Series _____ Receivable;
(p) which has not been sold, transferred, assigned or pledged to any
Person other than to (i) HAFC (or any predecessor or Affiliate of HAFC) by a
Dealer, (ii) HARC by HAFC pursuant to the terms of the Master Receivables
Purchase Agreement or the Trust __ Receivables Purchase Agreement, (iii) the
Issuer by HARC pursuant to the terms of the Master Sale and Servicing Agreement
and (iv) the Trustee by the Issuer pursuant to the terms of the Indenture. No
Dealer has a participation in, or other right to receive, proceeds of any Series
_____ Receivable and with respect to which neither HAFC (nor any predecessor or
Affiliate of HAFC), HARC nor the Issuer has taken any action to convey any right
to any Person that would result in such Person having a right to payments
received under the related Insurance Policy or the related Dealer Agreement or
Dealer Assignment or to payments due under such Series _____ Receivable;
SCH-I-3
<PAGE>
(q) which creates or shall create a valid, binding and enforceable
first priority security interest in favor of HAFC in the Financed Vehicle;
(r) which is secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in favor of HAFC as secured party,
which security interest is prior to all other Liens upon and security interests
in such Financed Vehicle which now exist or may hereafter arise or be created
(except, as to priority, for any Lien for taxes, labor or materials affecting a
Financed Vehicle); and, with respect to which there are no Liens or claims for
taxes, work, labor or materials affecting the related Financed Vehicle which are
or may be Liens prior or equal to the lien of such Receivable;
(s) as to which all filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be taken or
performed by any Person in any jurisdiction to give the Trustee a first priority
perfected lien on, or ownership interest in, the Series _____ Receivables and
the proceeds thereof have been made, taken or performed;
(t) as to which HAFC (or any predecessor or Affiliate of HAFC), HARC
or the Issuer has not done anything to convey any right to any Person that would
result in such Person having a right to payments due under such Series _____
Receivable or otherwise to impair the rights of the Trustee, the Noteholders or
the Certificateholders in such Series _____ Receivable or the proceeds thereof;
(u) which is not assumable by another Person in a manner which would
release the Obligor thereof from such Obligor's obligations with respect to such
Receivable;
(v) which is not subject to any right of rescission, setoff,
counterclaim or defense and no such right has been asserted or threatened with
respect thereto;
(w) as to which there has been no default, breach, violation or event
permitting acceleration under the terms of such Series _____ Receivable (other
than payment delinquencies of not more than 30 days) and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or both
would constitute a default, breach, violation or event permitting acceleration
under the terms of such Series _____ Receivable, and there has been no waiver of
any of the foregoing, and with respect to which the related Financed Vehicle had
not been repossessed;
(x) at the time of the origination of which, the related Financed
Vehicle was covered by a comprehensive and collision insurance policy (i) in an
amount at least equal to the lesser of (a) its maximum insurable value and (b)
the principal amount due from the Obligor thereunder, (ii) naming HAFC (or any
predecessor or Affiliate of HAFC) and its successors and assigns as loss payee
and (iii) insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage and with respect to which the Obligor is required to maintain physical
loss and damage insurance, naming HAFC (or any predecessor or Affiliate of HAFC)
and its successors and assigns as additional insured parties, and such
Receivable permits the holder thereof to obtain physical loss and damage
insurance at the expense of the Obligor if the Obligor fails to do so;
SCH-I-4
<PAGE>
(y) with respect to which the following is true:
The Lien Certificate for the related Financed Vehicle shows, or if a
new or replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of the
Series _____ Closing Date and will show, HAFC (or any predecessor or Affiliate
of HAFC) named as the original secured party under such Series _____ Receivable
and, accordingly, HAFC will be the holder of a first priority security interest
in such Financed Vehicle. With respect to each Series _____ Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Titles,
HAFC has received written evidence from the related Dealer or the Obligor that
such Lien Certificate showing HAFC as first lienholder has been applied for. If
the Series _____ Receivable was originated in a state in which a filing or
recording is required of the secured party to perfect a security interest in
motor vehicles, such filings or recordings have been duly made to show HAFC
named as the original secured party under the related Series _____ Receivable;
and
(z) as to which no selection procedures adverse to the Noteholders or
the Certificateholder have been utilized in selecting such Series _____
Receivable from all other similar Receivables purchased by HAFC or any
predecessor or Affiliate of HAFC.
SCH-I-5
<PAGE>
Schedule II
Schedule of Receivables
<PAGE>
Exhibit A
Form of Master Servicer's Certificate
<PAGE>
EXHIBIT 4.4
- -------------------------------------------------------------------------------
MASTER SALE AND SERVICING AGREEMENT
among
HOUSEHOLD AUTOMOTIVE TRUST ___,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
HOUSEHOLD FINANCE CORPORATION,
Master Servicer
and
[Name of Trustee],
Trustee
Dated as of __________
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
Definitions
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Interpretive Provisions . . . . . . . . . . . . . . . . . .19
SECTION 1.3. Usage of Terms. . . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 1.4. Certain References. . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 1.6. Action by or Consent of Noteholders . . . . . . . . . . . . . . .20
ARTICLE II
Conveyance of Receivables
SECTION 2.1. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . .21
SECTION 2.2. Further Encumbrance of Series Trust Estate. . . . . . . . . . . .24
ARTICLE III
The Receivables
SECTION 3.1. Representations and Warranties of Seller. . . . . . . . . . . . .25
SECTION 3.2. Repurchase upon Breach. . . . . . . . . . . . . . . . . . . . . .25
SECTION 3.3. Custody of Receivables Files. . . . . . . . . . . . . . . . . . .26
ARTICLE IV
Administration and Servicing of Receivables
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
SECTION 4.9. Master Servicer's Certificate . . . . . . . . . . . . . . . . . .34
SECTION 4.10. Annual Statement as to Compliance, Notice of Master
Servicer Termination Event . . . . . . . . . . . . . . . . . .34
i
<PAGE>
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 . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE V
Trust Accounts; Distributions;
Statements to Certificateholders and Noteholders
SECTION 5.1. Establishment of Trust Accounts . . . . . . . . . . . . . . . . .36
SECTION 5.2. Certain Reimbursements to the Master Servicer . . . . . . . . . .38
SECTION 5.3. Application of Collections. . . . . . . . . . . . . . . . . . . .39
SECTION 5.4. Additional Deposits . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 5.5. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE VI
RESERVED
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
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. . . . . . . . . . . . . . .44
ARTICLE IX
The Master Servicer
SECTION 9.1. Representations of Master Servicer. . . . . . . . . . . . . . . .45
SECTION 9.2. Liability of Master Servicer; Indemnities . . . . . . . . . . . .47
ii
<PAGE>
SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of the Master Servicer . . . . . . . . . . . . . .49
SECTION 9.4. Limitation on Liability of Master Servicer and Others . . . . . .49
SECTION 9.5. Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . .50
SECTION 9.6. Master Servicer Not to Resign . . . . . . . . . . . . . . . . . .50
SECTION 9.7. Sub-Servicing Agreements Between Master Servicer
and Sub-Servicers. . . . . . . . . . . . . . . . . . . . . . .51
SECTION 9.8. Successor Sub-Servicers . . . . . . . . . . . . . . . . . . . . .51
ARTICLE X
Default
SECTION 10.1. Master Servicer Termination Event. . . . . . . . . . . . . . . .52
SECTION 10.2. Consequences of a Master Servicer Termination Event. . . . . . .53
SECTION 10.3. Appointment of Successor . . . . . . . . . . . . . . . . . . . .54
SECTION 10.4. Notification to Noteholders and Certificateholders . . . . . . .55
SECTION 10.5. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . .55
SECTION 10.6. Successor to Master Servicer . . . . . . . . . . . . . . . . . .56
ARTICLE XI
Termination
SECTION 11.1. Optional Purchase of All Receivables . . . . . . . . . . . . . .56
ARTICLE XII
Administrative Duties of the Master Servicer
SECTION 12.1. Administrative Duties. . . . . . . . . . . . . . . . . . . . . .57
SECTION 12.2. Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 12.3. Additional Information to be Furnished to the Issuer . . . . . .60
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . .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
SECTION 13.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . .64
SECTION 13.7. Separate Counterparts. . . . . . . . . . . . . . . . . . . . . .64
SECTION 13.8. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
iii
<PAGE>
SECTION 13.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . .64
SECTION 13.10. Assignment to Trustee . . . . . . . . . . . . . . . . . . . . .64
SECTION 13.11. Nonpetition Covenants . . . . . . . . . . . . . . . . . . . . .65
SECTION 13.12. Limitation of Liability of Owner Trustee. . . . . . . . . . . .65
SECTION 13.13. Independence of the Master Servicer . . . . . . . . . . . . . .65
SECTION 13.14. No Joint Venture. . . . . . . . . . . . . . . . . . . . . . . .65
EXHIBITS
Exhibit A - Form of Master 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
</TABLE>
iv
<PAGE>
MASTER SALE AND SERVICING AGREEMENT dated as of ________, among
HOUSEHOLD AUTOMOTIVE TRUST ___, 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 [Name of Trustee], a [New York] banking corporation, in its capacity as
Trustee.
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
.1. DEFINITIONS. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.11.
"Accounting Date" means, with respect to a Distribution Date, the last
day of the Collection Period immediately preceding such Distribution Date.
"Actuarial Method" means the method of allocating a fixed level
monthly payment on an obligation between principal and interest, pursuant to
which the portion of such payment that is allocated to interest is equal to the
product of (a) 1/12, (b) the fixed annual rate of interest on such obligation
and (c) the outstanding principal balance of such obligation.
"Actuarial Receivable" means a Receivable under which the portion of
the payment allocated to interest and the portion allocable to principal is
determined in accordance with the Actuarial Method.
"Addition Notice" means, with respect to any transfer of Receivables
to the Trust pursuant to Section 2.1 of this Agreement, notice of the Seller's
election to
<PAGE>
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 Pool Balance for
such Series Trust Estate determined as of the first day of such Collection
Period.
"Basic Documents" means this Agreement, the Certificate of Trust, the
Trust Agreement, the Indenture, the Master Receivables Purchase Agreements 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, California or
New York are authorized or obligated to be closed.
"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.
2
<PAGE>
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Class" means a class of Notes or Certificates, as the context
requires.
"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 [address], Attention: ______________________,
and (ii) with respect to the Trustee, the principal corporate trust office of
[Name of Trustee], which at the time of execution of this agreement is
[address], Attention: ______________________.
"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
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
3
<PAGE>
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 (i) the Transfer
Date as of which such Receivable is transferred to the Trust, (a) the Accounting
Date immediately preceding such Transfer Date or (b) if such Receivable is
originated in the month of the related Transfer Date, the date of origination or
(ii) the date designated in the related Series Supplement as the Cutoff Date for
such Series.
"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 under a Dealer Agreement or pursuant to a Dealer Assignment.
"Dealer Agreement" means any agreement between HAFC and a Dealer
relating to the acquisition of Receivables from a Dealer by HAFC.
"Dealer Assignment" means, with respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to HAFC.
"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.
"Delivery" means with respect to the Trust Account Property:
(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
4
<PAGE>
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 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
5
<PAGE>
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 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
6
<PAGE>
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.
(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
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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 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.
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"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)
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 & 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 Trustee in trust for the benefit
of the Holders of the Securities of the relevant Series, subject to the
exclusive custody and control of the Trustee and for which the Trustee has sole
signature authority, which evidence:
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(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;
(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 through any of its Affiliates.
"Eligible Servicer" means Household Finance Corporation or any Person
which at the time of its appointment as Master Servicer, (i) is servicing a
portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, (iv) is qualified and entitled to use, pursuant
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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.
"Financed Vehicle" means a new or used automobile, light-duty truck or
van securing an Obligor's indebtedness under the respective Receivable.
"HAFC" means Household Automotive Finance Corporation.
"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 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,
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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.
"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 Automotive Trust ___, 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 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) 90 days have elapsed
since the Master Servicer repossessed the Financed Vehicle, (iii) proceeds have
been received in respect of such Receivable which, in the Master Servicer's
reasonable judgment, constitute the final amounts recoverable in respect of such
Receivable or (iv) 10% or more of a Scheduled Payment shall have become 150 or
more days delinquent (or, in the case where the Obligor of such Receivable is
subject to an Insolvency Event, 10% or more of a Scheduled Payment shall have
become 210 or more days delinquent). 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 Receivables Purchase Agreements" means (i) the Master
Receivables Purchase Agreement between the Seller and HAFC, dated as
____________, pursuant to which the Seller acquired the Series _____
Receivables, as such agreement
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may be amended or supplemented from time to time and (ii) the Master
Receivables Purchase Agreement between the Seller and HAFC, dated as of
________, pursuant to which the Seller acquired the Series _____ Receivables,
as such agreement may be amended or supplemented from time to time .
"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.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn or received from any Series Support) net of (i) reasonable
expenses, 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.
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"Noteholder" means the Person in whose name a Note is registered on
the Note Register.
"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 (xii) 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 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 ________________, 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
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Interest Method, as appropriate, and (ii) any Cram Down Loss in respect of
such Receivable. The "Principal Balance" of a Repurchased Receivable or
Liquidated Receivable shall be deemed to be zero.
"Rating Agency" means, with respect to any outstanding Series or
Class, each Rating Agency specified in the Series Supplement.
"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 and the
Trustee in writing) that such action will not result in a reduction or
withdrawal of the then current rating of any Class of Notes.
"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 II to the Series
Supplement or 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.
"Receivables Purchase Agreement Supplement" means any Receivables
Purchase Agreement Supplement to either Master Receivables Purchase Agreement.
"Record Date" with respect to each Distribution Date means the
Business Day immediately preceding such Distribution Date, unless otherwise
specified in the 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).
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"Schedule of Eligibility Criteria" means the Schedule of Eligibility
Criteria attached as Schedule I 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 II to
the Series Supplement or Schedule A to the Transfer Agreements 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 Series Closing Date, the
Obligor's obligation under a Receivable with respect to a Collection Period has
been modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or (iii) modifications or extensions of the Receivable permitted by
Sections 4.2(b) and (c), the Scheduled Payment with respect to such Collection
Period shall refer to the Obligor's payment obligation with respect to such
Collection Period as so modified.
"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 Supplement" means, with respect to any Series, a Series
Supplement to the Indenture and the Trust Agreement, executed and delivered in
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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 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.
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"Standard & Poor's" means Standard & Poor's, a division of the McGraw
Hill Companies, Inc., 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.
"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 and
Series 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 _________,
between the Seller and the Owner Trustee, as supplemented by the Series _____
Supplement, and as the same may be amended and further supplemented from time to
time.
"Trust Officer" means, (i) in the case of the Trustee, 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 Trustee 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 and having
direct responsibility for the Administration of this Agreement, and (ii) in the
case of the Owner Trustee, any officer in the corporate trust office of the
Owner
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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 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 as may be set forth in
that certain fee agreement dated as of the date hereof between the Master
Servicer and [Name of Trustee].
"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.
.2. OTHER INTERPRETIVE PROVISIONS. (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.
(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.
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(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.
.3. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
the terms "include" or "including" mean "include without limitation" or
"including without limitation;" the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and Article, Section, Schedule
and Exhibit references, unless otherwise specified, refer to Articles and
Sections of Schedules and Exhibits to this Agreement.
.4. CERTAIN REFERENCES. All references to the Principal Balance of
a Receivable as of any date of determination shall refer to the close of
business on such day, or as of the first day of an Interest Period shall refer
to the opening of business on such day. All references to the last day of an
Interest Period shall refer to the close of business on such day.
.5. NO RECOURSE. Without limiting the obligations of the Master
Servicer or Seller hereunder, no recourse may be taken, directly or indirectly,
under this Agreement or any certificate or other writing delivered in connection
herewith or therewith, against any stockholder, officer or director, as such, of
the Master Servicer or Seller, or of any of their respective Affiliates,
predecessors or successors.
.6. ACTION BY OR CONSENT OF NOTEHOLDERS. Whenever any provision of
this Agreement refers to action to be taken, or consented to, by Noteholders,
such provision shall be deemed to refer to the Noteholders of record as of the
Record Date immediately preceding the date on which such action is to be taken,
or consent given, by Noteholders. Solely for the purposes of any action to be
taken, or consented to, by Noteholders, any Note registered in the name of HAFC
or any Affiliate thereof shall be deemed not to be outstanding; PROVIDED,
HOWEVER, that, solely for the purpose of determining whether the 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.
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ARTICLE II
CONVEYANCE OF RECEIVABLES
.1. CONVEYANCE OF RECEIVABLES. (a) Subject to the conditions set
forth in paragraph (b) below, in consideration of the Issuer's delivery to or
upon the order of the Seller on the Series Closing Date or a Transfer Date of
the net proceeds from the sale of a Series of Notes 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:
(i) each and every Receivables listed on Schedule II to
the Series Supplement and Schedule A to the related Transfer
Agreement, if any, and all monies paid or payable thereon or in
respect thereof after the Series Closing Date or 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;
(iv) any proceeds and the right to receive proceeds with
respect to such 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;
(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
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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 Master Receivables Purchase Agreements and
the Receivables Purchase Agreement Supplements, including the
delivery requirements, representations and warranties and the
cure and repurchase obligations of HAFC under each of the
Master Receivables Purchase Agreements and the Receivables
Purchase Agreement Supplements, on or after the related Cutoff
Date;
(xi) one share of Class SV Preferred Stock of the Seller;
and
(xii) all present and future claims, demands, causes and
choses in action in respect of any or all of the foregoing and
all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, 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 Series Closing Date or the related Transfer Date:
(i) if the transfer is not on the Closing Date, the
Seller shall have provided the Trustee 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
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information reasonably requested by any of the foregoing with
respect to the related Receivables;
(ii) the Seller shall have delivered to the Owner Trustee
and the Trustee a duly executed Transfer Agreement or Series
Supplement which shall include a schedule (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 the Series Closing Date and 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 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 the Series Closing Date or the
related Transfer Date shall be true and correct as of the
Series Closing Date or 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 Series Closing Date or the related Transfer Date indicate
in its computer files that the Receivables identified in the
Schedule to the Series Supplement or to the related 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
Trustee 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;
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(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 any amounts required to be deposited in the related
Trust Accounts with respect to the Receivables transferred on
such Series Closing Date or Transfer Date; and
(xi) the Seller shall have delivered to the Trustee 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 3.2.
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.
.2. FURTHER ENCUMBRANCE OF SERIES TRUST ESTATE. (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 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 shall hold the related Series Trust Estate
for the benefit of the related Series Securityholders. Following the payment in
full of the related
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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 shall, at such time as there are no
Securities of a Series outstanding and all sums due to the Trustee 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
.1. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller
represents and warrants as to the related Receivables that the representations
and warranties set forth on the Schedule of Eligibility Criteria 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
Securityholders shall be deemed to rely on such representations and warranties
in purchasing the Notes. Such representations and warranties shall survive the
sale, transfer and assignment of the related Series Trust Estate to the Issuer
and any pledge thereof to the Trustee pursuant to the Indenture and the related
Series Supplement.
.2. REPURCHASE UPON BREACH. (a) The Seller, the Master Servicer,
any Trust Officer of the Trustee or the Owner Trustee, as the case may be, shall
inform each of the other parties to this Agreement promptly, in writing, upon
the discovery of any breach of the Seller's representations and warranties made
pursuant to Section 3.1; PROVIDED, HOWEVER, that the failure to give any such
notice shall not derogate from any obligations of the Seller under this Section
3.2. As of the last day of the second (or, if the Seller so elects, the first,
or with respect to any exceptions appearing on any exception report delivered by
the Trustee, the first) month following the discovery by the Seller or receipt
by the Seller of notice of such breach (or such longer period not in excess of
120 days, as may be agreed upon by the Trustee 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 Securityholders are materially and adversely affected by any
such breach. In consideration of and simultaneously with the repurchase of the
Receivables, the Seller shall remit, or cause
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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 Trustee and the related Series Securityholders 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 Master Receivables Purchase Agreements. Neither
the Owner Trustee nor 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.
(b) Pursuant to Section 2.1 of this Agreement and pursuant to
the related Transfer Agreement, the Seller conveyed to the Trust all of the
Seller's right, title and interest in its rights and benefits, but none of its
obligations or burdens, under the Master Receivables Purchase Agreements and the
related Receivables Purchase Agreement Supplements, including the Seller's
rights under the Master Receivables Purchase Agreements and the delivery
requirements, representations and warranties and the cure or repurchase
obligations of HAFC thereunder. The Seller hereby represents and warrants to
the Trust that such assignment is valid, enforceable and effective to permit the
Trust to enforce such obligations of HAFC under the Master Receivables Purchase
Agreements.
.3. 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 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 Dealer'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
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by HAFC), or, (y) a Dealer 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 a
Dealer 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. The Trustee shall have no liability for the acts or
omissions of any such custodian or subcustodian.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
.1. DUTIES OF THE MASTER SERVICER. The Master Servicer is hereby
authorized to act as agent for the Trust (and also on behalf of the 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 statements to Obligors, reporting any required tax information
to Obligors, accounting for collections and furnishing monthly and annual
statements to the Trustee 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 and the Insurance Policies, to the extent that such
Dealer Agreements, Dealer Assignments 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 Servier 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,
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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 its 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
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 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.
.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Master Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, 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.
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(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
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
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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. 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
Trustee if it is required to deposit funds in accordance with the first
sentence of this paragraph.
.3. REALIZATION UPON RECEIVABLES. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Master
Servicer shall use its best efforts to repossess (or otherwise comparably
convert the ownership of) and liquidate any Financed Vehicle securing a
Receivable with respect to which the Master Servicer has determined that
payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
10% or more of a Scheduled Payment has become 150 days delinquent (other than in
the case of Financed Vehicles where neither the Financed Vehicle nor the Obligor
can be physically located by the Master Servicer (using procedures consistent
with the standards, policies and procedures of the Master Servicer required by
this Agreement) and other than in the case of an Obligor who is subject to a
bankruptcy proceeding); PROVIDED, HOWEVER, that the Master Servicer may elect
not to repossess a Financed Vehicle within such time period if in its good faith
judgment it determines that the proceeds ultimately recoverable with respect to
such Receivable would be increased by forbearance. The Master Servicer is
authorized to follow such customary practices and procedures as it shall deem
necessary or advisable, consistent with the standard of care required by Section
4.1, which practices and procedures may include reasonable efforts to realize
upon any recourse to Dealers, the sale of the related Financed Vehicle at public
or private sale, the submission of claims under an Insurance Policy and other
actions, including, without limitation, entering into settlements with Obligors,
by the Master Servicer in order to realize upon such a Receivable. The
foregoing is subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Master Servicer shall not expend funds
in connection with any repair or towards the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair and/or
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
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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 or Dealer Assignment, the act of
commencement shall be deemed to be an automatic assignment from the Trust to the
Master Servicer of the rights under such Dealer Agreement and Dealer Assignment
for purposes of collection only. If, HOWEVER, in any enforcement suit or legal
proceeding it is held that the Master Servicer may not enforce a Dealer
Agreement or Dealer Assignment on the grounds that it is not a real party in
interest or a Person entitled to enforce the Dealer Agreement or Dealer
Assignment, the Owner Trustee, at the Master Servicer's written direction and
expense, or the Seller, at the Seller's expense, shall take such steps as the
Master Servicer deems reasonably necessary to enforce the Dealer Agreement or
Dealer Assignment, including bringing suit in its name or the name of the Seller
or of the Trust and the Owner Trustee 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.
.4. INSURANCE. (a) The Master Servicer shall require, in
accordance with its customary servicing policies and procedures, that each
Financed Vehicle be insured by the related Obligor under an insurance policy
covering physical loss and damage to the related Financed Vehicle and shall
monitor the status of such physical loss and damage insurance coverage
thereafter, in accordance with its customary servicing procedures. Each
Receivable requires the Obligor to obtain such physical loss and damage
insurance, naming HAFC 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.
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(b) The Master Servicer may sue to enforce or collect upon
the Insurance Policies, in its own name, if possible, or as agent of the Trust.
If the Master Servicer elects to commence a legal proceeding to enforce an
Insurance Policy, the act of commencement shall be deemed to be an automatic
assignment of the rights of the Trust under such Insurance Policy to the Master
Servicer for purposes of collection only. If, HOWEVER, in any enforcement suit
or legal proceeding it is held that the Master Servicer may not enforce an
Insurance Policy on the grounds that it is not a real party in interest or a
holder entitled to enforce the Insurance Policy, the Owner Trustee, at the
Master Servicer's written direction and expense, or the Seller, at the Seller's
expense, shall take such steps as the Master Servicer deems reasonably necessary
to enforce such Insurance Policy, including bringing suit in its name or the
name of the Trust and the Owner Trustee for the benefit of the Noteholders.
.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. Consistent with
the policies and procedures required by this Agreement, the Master Servicer
shall take such steps on behalf of the Trust as are necessary to maintain
perfection of the security interest created by each Receivable in the related
Financed Vehicle on behalf of the Trust as the Trustee shall reasonably request,
including, but not limited to, obtaining the execution by the Obligors and the
recording, registering, filing, re-recording, re-filing, and re-registering of
all security agreements, financing statements and continuation statements as are
necessary to maintain the security interest granted by the Obligors under the
respective Receivables. The Owner Trustee, on behalf of the Trust, hereby
authorizes the Master Servicer, and the Master Servicer agrees, to take any and
all steps necessary to re-perfect such security interest on behalf of the Trust
as necessary because of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Trust, HAFC
hereby agrees that the designation of any 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.
.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF MASTER SERVICER.
By its execution and delivery of this Agreement, the Master Servicer makes the
following representations, warranties and covenants on which the 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 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
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security interest granted by the Receivable, except upon
payment in full of the Receivable or as otherwise contemplated
herein;
(ii) NO IMPAIRMENT. The Master Servicer shall do nothing
to impair the rights of the Trust or the related Series of
Noteholders in the Receivables, the Dealer Agreements, the
Dealer Assignments, 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 Trustee for the benefit of the related Series
Securityholders, 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 Trustee;
(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) RELOCATION OF OFFICE. 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.
.7. REPURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Master Servicer, the Seller, a Trust Officer of 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
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4.6 which materially and adversely affects the interests of the related
Series Securityholders in any Receivable (including any Liquidated
Receivable) (or, at the Master Servicer's election, the first Accounting Date
so following) 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. 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;
.8. 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 and
all fees and expenses of the Owner Trustee 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 Trustee, any Sub-Servicer and their respective agents.
.9. 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 and the Owner Trustee, a Master Servicer's
Certificate executed by a responsible officer or agent of the Master Servicer
containing among other things, all information necessary to enable the Trustee
to make the allocations required by Section 5.5 and the distributions with
respect to such Distribution Date pursuant to each Series Supplement. 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
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.
.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF MASTER SERVICER
TERMINATION EVENT. (a) The Master Servicer shall deliver or cause to be
delivered to the Trustee and the Owner Trustee on or before April 30 (or 120
days after the end of the Master Servicer's fiscal year, if other than December
31) of each year, beginning on April
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30, ____, 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 and the Owner Trustee 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 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.
.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The Master
Servicer shall cause a firm of nationally recognized independent certified
public accountants (the "Independent Accountants"), who may also render other
services to the Master Servicer or to the Seller, to deliver to the Trustee
and the Owner Trustee on or before April 30 (or 120 days after the end of the
Master Servicer's fiscal year, if other than December 31) of each year,
beginning on April 30, ____, 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 shall be a "non-participating party" with
respect to such report, or words to similar effect. The Trustee shall have no
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.
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(b) On or before April 30 of each calendar year, beginning
with April 30, ____, 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 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 shall be a "non-participating party" with respect to such report, or
words to similar effect. The Trustee shall have no 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.
.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Master Servicer shall provide to representatives of the
Trustee and the Owner Trustee reasonable access to the documentation regarding
the Receivables. In each case, such access shall be afforded without charge but
only upon reasonable request and during normal business hours. Nothing in this
Section shall derogate from the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Master Servicer to provide access as provided in this Section
as a result of such obligation shall not constitute a breach of this Section.
.13. 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.
.14. YEAR 2000 COMPLIANCE. The Master Servicer covenants that its
computer and other systems used in servicing the Receivables have or 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
.1. ESTABLISHMENT OF TRUST ACCOUNTS. (a) (i) Except as otherwise
provided with respect to a Series in the related Series Supplement, the Master
Servicer,
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on behalf of the Noteholders 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 Noteholders with respect to
the Household Automotive Trusts, 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 Noteholders, the holders of the Series Trust Certificates of
each Series and the holders of the Owner Trust Certificates. 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.
(ii) With respect to each Series, the Trustee shall establish and
maintain the Series Trust Accounts required to be established and 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 Trustee (or any custodian with respect to funds on deposit in any such
account) in Eligible Investments selected in writing by the Master Servicer
(pursuant to standing instructions or otherwise) which absent any instruction
shall be the investments specified in clause (d) of the definition of Eligible
Investments set forth herein. 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
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 Trustee 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
Trustee to make any investment of any funds held in any of the Trust Accounts
unless the security interest granted and perfected in such account will continue
to be perfected in such investment, in either case without any further action by
any Person, and, in connection with any direction to the Trustee to make any
such investment, if necessary, the Master Servicer shall deliver to the Trustee
an Opinion of Counsel to such effect.
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(d) The Trustee shall not in any way be held liable by reason
of any insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Trustee's negligence or bad faith or its failure to make payments on such
Eligible Investments issued by the Trustee in its commercial capacity as
principal obligor and not as Trustee in accordance with their terms.
(e) If (i) the Master Servicer shall have failed to give
investment directions for any funds on deposit in the Trust Accounts to the
Trustee by 2:00 p.m. Eastern Time (or such other time as may be agreed by the
Issuer and the Trustee) on any Business Day; or (ii) an Event of Default shall
have occurred and be continuing with respect to a Series of Notes, the Trustee
shall, to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments in accordance with paragraph (b)
above; PROVIDED that, if following an Event of Default amounts are to be
distributed to Securityholders other than on a Distribution Date, investments
shall mature on the Business Day preceding any such proposed date of
distribution.
(f) The Trustee, 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
for the benefit of the related Noteholders. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the Trustee (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, the Master Servicer shall notify the Trustee 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 to
make withdrawals and payments from the Master Collection Account and to instruct
the Trustee 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.
.2. 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
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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, as may be necessary in the opinion of the Trustee to verify the
accuracy of such certification.
.3. APPLICATION OF COLLECTIONS. All collections for the
Collection Period shall be applied by the Master Servicer as follows:
With respect to each Simple Interest Receivable (other than a
Repurchased Receivable), payments by or on behalf of the Obligor, (other than
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.
.4. 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.
.5. DISTRIBUTIONS. (a) If, with respect to a Series, Collected
Funds are deposited in the Master Collection Account, on each Distribution Date,
the Trustee shall transfer Collected Funds with respect to such Series Trust
Estate in the respective amounts set forth in the Master Servicer's Certificates
with respect to such 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.
(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
RESERVED
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ARTICLE VIII
THE SELLER
.1. 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. 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 pursuant to
the Indenture and each Series Supplement.
(a) SCHEDULE OF REPRESENTATIONS. The representations and
warranties set forth on the Schedule of Eligibility Criteria attached as
Schedule I to the Series Supplement 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 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
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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 each Series Closing Date and each Transfer Date.
(i) NO CONSENTS. The Seller is not required to obtain the
consent of any other party or any consent, license, approval or authorization,
or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement which has not already been obtained.
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(j) CHIEF EXECUTIVE OFFICE. The chief executive office of
the Seller is at 1111 Town Center Drive, Las Vegas, Nevada 89134.
.2. CORPORATE EXISTENCE. (a) During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the 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;
(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;
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(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.
.3. LIABILITY OF SELLER; INDEMNITIES. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken under this Agreement by the Seller and the representations made by
the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless
the Issuer, the Owner Trustee, the Trust and the Trustee from and against any
taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated in this Agreement and any of the Basic
Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Trustee and each Series Support Provider and except any taxes to
which the Owner Trustee 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 and the Trustee against any loss, liability or
expense incurred by reason of (i) the Seller's willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement, or by
reason of reckless disregard of its obligations and duties under this
Agreement and (ii) the Seller's or the Issuer's violation of Federal or state
securities laws in connection with the offering and sale of the Notes.
(c) The Seller shall indemnify, defend and hold harmless
the Owner Trustee and the Trustee and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities arising out of, or incurred in connection
with, the acceptance or performance of the trusts and duties set forth herein
and in the Basic Documents, except to the extent that such cost, expense,
loss, claim, damage or liability shall be due to the willful misfeasance, bad
faith or negligence (except for errors in judgment) of the Person seeking
indemnification.
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Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Trustee and the termination of this
Agreement or the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation. If the Seller shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Seller, without interest.
.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS
OF, SELLER. Any Person (a) into which the Seller may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Seller shall
be a party or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases (x) has 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.
.5. LIMITATION ON LIABILITY OF SELLER AND OTHERS. (a) The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the written advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising under any Basic Document. The Seller shall not be under any obligation
to appear in, prosecute or defend any legal action that shall not be incidental
to its obligations under this Agreement, and that in its opinion may involve it
in any expense or liability. Except as provided in Section 8.3 hereof, neither
the Seller nor any of the directors, officers, employees or agents of the Seller
acting in such capacities shall be under any liability to the Trust, the
Securityholders, any 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 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.
.6. SELLER MAY OWN CERTIFICATES OR NOTES. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an
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Affiliate thereof, except as expressly provided herein or in any Basic
Document. Notes or Certificates so owned by the Seller or such Affiliate
shall have an equal and proportionate benefit under the provisions of the
Basic Documents, without preference, priority, or distinction as among all of
the Notes or Certificates; PROVIDED, HOWEVER, except in the event that all
outstanding Notes and Certificates are owned by the Seller and/or any
Affiliate thereof, that any Notes or Certificates owned by the Seller or any
Affiliate thereof, during the time such Notes or Certificates are owned by
them, shall be without voting rights for any purpose set forth in the Basic
Documents and any such Notes will not be entitled to the benefits of any
financial guaranty insurance policy. The Seller shall notify the Owner
Trustee and the Trustee promptly after it or any of its Affiliates become the
owner or pledgee of a Certificate or a Note.
ARTICLE IX
THE MASTER SERVICER
.1. 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.
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 pursuant to the Indenture.
(i) ORGANIZATION AND GOOD STANDING. The Master Servicer
has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of organization,
with power, authority and legal right to own its properties and
to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right
to enter into and perform its obligations under this Agreement
and the other 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;
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(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 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
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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 Series 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.
.2. LIABILITY OF MASTER SERVICER; INDEMNITIES. (a) The Master
Servicer (in its capacity as such) shall be liable hereunder only to the extent
of the obligations in this Agreement specifically undertaken by the Master
Servicer and the representations made by the Master Servicer.
(b) The Master Servicer shall defend, indemnify and hold
harmless the Trust, the Trustee, 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 Affiliate of Household) shall indemnify, defend and hold
harmless the Trust, the Trustee, 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
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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 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 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 or the Trustee by reason of the breach of this
Agreement by the Master Servicer, the negligence, misfeasance, or bad faith of
the Master Servicer in the performance of its duties under this Agreement or 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 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.
(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
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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.
.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF
THE MASTER SERVICER. (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 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.
.4. LIMITATION ON LIABILITY OF MASTER SERVICER AND OTHERS.
(a) Neither the Master Servicer, the Trustee nor any of the directors or
officers or employees or agents of the Master Servicer or the Trustee shall be
under any liability to the Trust, 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 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 or such person, as the case may be; PROVIDED, FURTHER, that this
provision shall not affect any liability to indemnify the Trustee and the Owner
Trustee for costs, taxes, expenses, claims, liabilities, losses or damages paid
by the Trustee and the Owner Trustee, in their individual capacities. The
Master Servicer, the Trustee and any director, officer, employee or agent of the
Master Servicer may rely in
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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 Trustee shall not be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if the repayment of such funds or adequate written
indemnity against such risk or liability is not reasonably assured to it in
writing prior to the expenditure of risk of such funds or incurrence of
financial liability.
(b) Notwithstanding anything herein to the contrary, 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
Owner Trustee, the Seller and the Noteholders shall look only to the Master
Servicer to perform such obligations.
(c) The parties expressly acknowledge and consent to [Name of
Trustee] acting in the potential dual capacity of successor Master Servicer and
in the capacity as Trustee [Name of Trustee] may, in such dual or other
capacity, discharge its separate functions fully, without hindrance or regard to
conflict of interest principles, duty of loyalty principles or other breach of
fiduciary duties to the extent that any such conflict or breach arises from the
performance by [Name of Trustee] of express duties set forth in this Agreement
in any of such capacities, all of which defenses, claims or assertions are
hereby expressly waived by the other parties hereto and the Noteholders except
in the case of negligence and willful misconduct by [Name of Trustee].
.5. 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 and the Trustee 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.
.6. MASTER SERVICER NOT TO RESIGN. Subject to the provisions of
Section 9.3, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it or its subsidiaries or Affiliates, 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
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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 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.
.7. 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. The Master Servicer initially appoints HAFC to
subservice the Receivables. 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 Servicing
Fee and reimbursement of repossession and liquidation expenses. The Issuer
shall have no obligation to indemnify the Master Servicer for costs or
expenses, except with respect to the preceding sentence. 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.
.8. 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
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Owner Trustee or the Trustee shall have no duty or obligation to monitor or
supervise the performance of any Sub-Servicer.
ARTICLE X
DEFAULT
.1. 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 Trustee 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 Trustee 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 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,
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assignee, trustee, custodian, sequestrator or other similar official of the
Master Servicer or of any substantial part of its property or the making by
the Master Servicer of an assignment for the benefit of creditors or the
failure by the Master Servicer generally to pay its debts as such debts
become due or the taking of corporate action by the Master Servicer in
furtherance of any of the foregoing; or
(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 in the
related Series Trust Estate and, within 60 days after written notice thereof
shall have been given to the Master Servicer by the Trustee 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 Trustee and the Seller with an
Officers' Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
.2. CONSEQUENCES OF A MASTER SERVICER TERMINATION EVENT. If a
Master Servicer Termination Event shall occur and be continuing, the Trustee
(to the extent a Trust Officer of the Trustee has actual knowledge thereof),
by notice given in writing to the Master Servicer 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 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
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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 Trustee and the successor Master Servicer reasonable access to the
terminated Master Servicer's premises at the terminated Master Servicer's
expense.
.3. APPOINTMENT OF SUCCESSOR. (a) On and after the time the
Master Servicer receives a notice of termination pursuant to Section 10.2 or
upon the resignation of the Master Servicer pursuant to Section 9.6, the Master
Servicer shall continue to perform all servicing functions under this Agreement
until the date specified in such termination notice or until such resignation
becomes effective or until a date mutually agreed upon by the Master Servicer
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 Successor Master Servicer. The Trustee may
delegate any of its servicing obligations to an Affiliate or 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
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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.
.4. NOTIFICATION TO NOTEHOLDERS AND CERTIFICATEHOLDERS. Upon any
termination of, or appointment of a successor to, the Master Servicer or the
Trustee shall give prompt written notice thereof to each Noteholder.
.5. 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 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.
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.6. SUCCESSOR TO MASTER SERVICER. (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
.1. OPTIONAL PURCHASE OF ALL RECEIVABLES. (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
and interest then due and payable on the Notes of such Series and all other
amounts due to the Series Securityholders, the Trustee and Owner Trustee under
the related Series Supplement. 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.
(b) Upon any sale of the assets of the Trust pursuant to
Article IV of the Indenture , the Master Servicer shall instruct the Trustee
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 and the Rating
Agencies as soon as practicable after the Master Servicer has received notice
thereof.
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(d) Following the satisfaction and discharge of the
Indenture, the payment in full of the principal of and interest on the Notes,
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
pursuant to this Agreement.
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
.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, 3.4, 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, 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 Property
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(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
Trustee in the event that any withholding tax is imposed on the
Issuer's payments (or allocations of income) to a
Certificateholder (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 and the Trustee pursuant to
such provision.
(iii) Notwithstanding anything in this Agreement or the
Basic Documents to the contrary, the Master Servicer shall be
responsible for performance of the duties of the Issuer 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(b) of the Trust Agreement for the
distribution of the Schedule K-1s necessary to enable each
Certificateholder to prepare its Federal and state income tax
returns.
(iv) The Master Servicer shall perform the duties of the
Depositor specified in Section 10.2 of the Trust Agreement
required to be performed in connection with the resignation or
removal of the Owner Trustee, and any other duties expressly
required to be performed by the Master Servicer under this
Agreement or any of the 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
directions received from
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the Issuer and shall be, in the Master Servicer's opinion, no
less favorable to the Issuer in any material respect.
(c) TAX MATTERS. The Master Servicer shall prepare and
file, or cause to be prepared and filed, on behalf of the Seller, all tax
returns, tax elections, financial statements and such annual or other reports
of the Issuer as are necessary for preparation of tax reports as provided in
Article V of the Trust Agreement, including without limitation forms 1099 and
1066. All tax returns will be signed by the Seller.
(d) NON-MINISTERIAL MATTERS. With respect to matters that
in the reasonable judgment of the Master Servicer are non-ministerial, the
Master Servicer shall not take any action pursuant to this Article XII unless
within a reasonable time before the taking of such action, the Master
Servicer shall have notified the Owner Trustee 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 Note Paying
Agents and successor Trustees pursuant to the Indenture or the
consent to the assignment by the Note Registrar, Note Paying Agent
or Trustee of its obligations under the Indenture; and
(C) the removal of the Trustee.
(e) EXCEPTIONS. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Basic
Documents, the Master Servicer, in its capacity hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Noteholders or
Certificateholders under the Basic Documents, (2) sell any Trust Property
pursuant to Section 4.03 of the Series _____ Supplement, (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) The Trustee shall not be responsible for any obligations
or duties of the Master Servicer under Section 12.1.
.2. RECORDS. The Master Servicer shall maintain appropriate
books of account and records relating to services performed under this
Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Trustee at any time during normal business
hours.
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.3. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Master Servicer shall furnish to the Issuer and the Trustee from time to time
such additional information regarding any Series Trust Estate as the Issuer
and the Trustee shall reasonably request.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
.1. AMENDMENTS. (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 and the Trustee, 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 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.
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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 and the Trustee may, but shall not be obligated
to, enter into any amendment which affects the Issuer's, the Owner Trustee'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 shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by
this Agreement and that all conditions precedent to the execution and
delivery of such amendment have been satisfied.
.2. PROTECTION OF TITLE TO TRUST. (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 Trustee on behalf of the related Series
Securityholders 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 Section 9-402(7) of the UCC, unless it shall have given the Owner Trustee
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.
(c) Each of the Seller and the Master Servicer shall have
an obligation to give the Owner Trustee 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.
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(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 their desire to conduct an
examination.
(h) The Master Servicer shall deliver to the Owner Trustee
and the Trustee:
(1) simultaneously with the execution and delivery of the Agreement
and, if required pursuant to Section 13.1, of each amendment, an Opinion of
Counsel stating that, in the opinion of such Counsel, in form and substance
reasonably satisfactory to the addressees of such Opinion, either (A) all
financing
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statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Trust and the Trustee 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 ____, dated as of a date during such 90-day period, stating
that, in the opinion of such counsel, either (A) all financing statements
and continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Trustee in
the Series Trust Estate or (B) no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
.3. NOTICES. All demands, notices and communications upon or to
the Seller, the Master Servicer, the Owner Trustee, the Trustee 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 (Telecopier # (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 #
_______________, (d) in the case of the Trustee at the Corporate Trust Office,
Telecopier # _____________, (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
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.
.4. ASSIGNMENT. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
PROVIDED in Sections 8.4 and 9.3 and as PROVIDED in the provisions of this
Agreement concerning the resignation of the Master Servicer, this Agreement may
not be assigned by the Seller or the Master Servicer without the prior written
consent of the Owner Trustee and the
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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.
.5. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Certificateholders (including the Seller), the Owner Trustee and the
Trustee, 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.
.6. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
.7. SEPARATE COUNTERPARTS. This Agreement and each Transfer
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
.8. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
.9. GOVERNING LAW. THIS AGREEMENT AND EACH TRANSFER AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
.10. 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 pursuant to the Indenture, as supplemented by a Series
Supplement for the benefit of the related Series Securityholders of all right,
title and interest of the Issuer in, to and under the applicable Series Trust
Estate.
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.11. NONPETITION COVENANTS. (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.
.12. LIMITATION OF LIABILITY OF OWNER TRUSTEE. Notwithstanding
anything contained herein to the contrary, this Agreement and each Series
Supplement has been countersigned by [Name of Trustee] not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall [Name of Trustee] in its individual capacity or, except as expressly
provided in the Trust Agreement, as Owner Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement and 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.
.13. 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 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.
.14. 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,
65
<PAGE>
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.
66
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Master Sale
and Servicing Agreement to be duly executed and delivered by their respective
duly authorized officers as of the day and the year first above written.
HOUSEHOLD AUTOMOTIVE TRUST ___
by ______________________ , 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:
[Name of Trustee]
not in its individual capacity but solely as
Trustee,
by_____________________________________
Name:
Title:
[Signature Page for Master Sale and Servicing Agreement]
67
<PAGE>
EXHIBIT A
FORM OF MASTER SERVICER'S CERTIFICATE
<PAGE>
EXHIBIT B
FORM OF TRANSFER AGREEMENT
TRANSFER No. of Receivables pursuant to the Master Sale and
Servicing Agreement dated as of __________, ____ (the "Sale and Servicing
Agreement"), among HOUSEHOLD AUTOMOTIVE TRUST ___, 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 ________________________, a [New York] banking
corporation, in its capacity as Trustee (the "Trustee ").
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
Trustee hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein shall have the
meanings ascribed to them in the Sale and Servicing Agreement unless otherwise
defined herein.
"Cutoff Date" shall mean, with respect to the Receivables conveyed
hereby, _______________, ____.
"Transfer Date" shall mean. with respect to the Receivables conveyed
hereby, _____________, ____.
2. SCHEDULE OF RECEIVABLES. Annexed hereto is a supplement to
Schedule II to the Series _____ Supplement 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:
(A) each and every Receivable listed on Schedule A to the
related Receivables Purchase Agreement Supplement and all monies paid or
payable
<PAGE>
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);
(B) the security interests in the related Financed Vehicles
granted by Obligors pursuant to such Receivables and any other interest of
the Seller in such Financed Vehicles;
(C) all rights of the Seller against Dealers pursuant to Dealer
Agreements or Dealer Assignments related to such Receivables;
(D) any proceeds and the right to receive proceeds with respect
to such Receivables repurchased by a Dealer, pursuant to a Dealer
Agreement, as a result of a breach of representation or warranty in the
related Dealer Agreement;
(E) all rights of Seller under any Service Contracts on the
related Financed Vehicles;
(F) 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;
(G) 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;
(H) 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;
(I) 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-2
<PAGE>
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:
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 default under
the certificate of incorporation or by-laws of
B-3
<PAGE>
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.
(f) 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.
(g) 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 Transfer Date.
(h) 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.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at 1111 Town Center Drive, Las Vegas, Nevada 89134.
(j) 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
$____________.
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:
B-4
<PAGE>
(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 Sale and Servicing Agreement shall be true and correct
as of the date of this Agreement and as of the Transfer Date.
(b) 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.
(c) 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.
B-5
<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 AUTOMOTIVE TRUST ___
by __________________________, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust,
by_____________________________________
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION, Seller,
by_____________________________________
Name:
Title:
HOUSEHOLD FINANCE CORPORATION, Master Servicer,
by_____________________________________
Name:
Title:
Acknowledged and Accepted:
[Name of Trustee],
not in its individual
capacity but solely as Trustee
by___________________________
Name:
Title:
<PAGE>
EXHIBIT C
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: ____________________ (name of Trustee)
Re: Sale and Servicing Agreement (the "Servicing Agreement, dated
as of __________, ____ between Household Auto Receivables
Corporation (the "SELLER"), Household Automotive Trust ___ (the
"TRUST"), Household Finance Corporation individually and in its
capacity as Master Servicer (the "SERVICER"), and
_______________, as Trustee (the "TRUSTEE")
In connection with the administration of the Receivables held by you
as the Trustee, 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.
<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 TRUSTEE
[Name of Trustee]
By:__________________________
Name:________________________
Title:_______________________
Date:________________________
C-2
<PAGE>
EXHIBIT D
TRUSTEE'S ACKNOWLEDGEMENT
_______________________ (the "Trustee"), 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 Household Automotive Trust ___, Household Auto Receivables
Corporation, as Seller, Household Finance Corporation, as Master Servicer, and
the Trustee, 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, [Name of Trustee] has caused this acknowledgement
to be executed by its duly authorized officer as of this ___________________.
[Name of Trustee], as Trustee
by__________________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.5
MASTER RECEIVABLES PURCHASE AGREEMENT
BETWEEN
HOUSEHOLD AUTOMOTIVE FINANCE CORPORATION
SELLER
AND
HOUSEHOLD AUTO RECEIVABLES CORPORATION
PURCHASER
DATED AS OF
----------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <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..............................................3
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.................10
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.................................................11
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......................................12
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
i
<PAGE>
SECTION 6.16 Nonpetition Covenant....................................12
</TABLE>
ii
<PAGE>
EXHIBITS
EXHIBIT A Form of Receivables Purchase Agreement Supplement
SCHEDULE A Schedule of Receivables
iii
<PAGE>
MASTER RECEIVABLES PURCHASE AGREEMENT
THIS MASTER RECEIVABLES PURCHASE AGREEMENT, dated as of ___________,
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
.1 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 _________, by and among Household Automotive
Trust ___, as Issuer, HARC, as Seller, Household Finance Corporation, as Master
Servicer, and [Name of Trustee], as Trustee.
.2 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 ____________.
"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
applicable Series Supplement or Receivables Purchase Agreement Supplement.
<PAGE>
"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 Trustee), 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 this Agreement or 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 this Agreement or to the
related Receivables Purchase Agreement Supplement.
.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.
.4 CERTAIN REFERENCES. All references to the Principal Balance of a
Receivable as of any date of determination shall refer to the close of business
on such day, or as of the first day of 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.
2
<PAGE>
.5 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
.1 PURCHASE.
(a) By execution of this Agreement and subject to the terms and
conditions of this Agreement, 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 hereto or 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 or Dealer Assignments related to such Receivables;
(iv) any proceeds and the right to receive proceeds with respect to
such Receivables repurchased by a Dealer, pursuant to a Dealer Agreement,
as a result of a breach of representation or warranty in the related Dealer
Agreement;
(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, loss, 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
3
<PAGE>
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 pursuant to the Master Sale and Servicing Agreement for the benefit of
the Noteholders by including in such computer files and microfiche lists the
code identifying each such Receivable and (ii) deliver to HARC (or to the
Trustee if 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 Cutoff 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 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
4
<PAGE>
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
.1 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 be
pledged as collateral for a Series of Notes satisfies the applicable Eligibility
Criteria set forth in, or to be set forth in, Schedule I 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
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unenforceable by the Seller, HARC or the Trust and (ii) have a material
adverse effect on the Noteholders.
(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 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.
.2 REPRESENTATIONS AND WARRANTIES OF HARC. HARC makes the following
representations and warranties, on which Seller relies in selling, assigning,
transferring
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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 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,
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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 and
Certificates issued by the Trust, 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
.1 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 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
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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
.1 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 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 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
Noteholders, the Certificateholders, the Trustee, 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 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.
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.2 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.
.3 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 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
.1 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.
.2 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
or Certificateholders 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.
.3 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
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REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
.4 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 El Camino 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
such party in a written notice to each other party.
.5 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.
.6 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 for the benefit of the Noteholders, 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.
.7 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 for the
benefit of the Noteholders, and Seller consents to such assignment.
Additionally, Seller agrees for the benefit of the Trustee that any amounts
payable by Seller to HARC hereunder which are to be paid by HARC to the Trustee
for the benefit of the Noteholders shall be paid by Seller, on behalf of HARC,
directly to the Trustee. 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.
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.8 FURTHER ASSURANCES. HARC and Seller agree to do and perform, from
time to time, any and all acts and to 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.
.9 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.
.10 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.
.11 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 and the Issuer shall be considered a third-party beneficiary of this
Agreement.
.12 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.
.13 HEADING. The headings are for purposes of reference only and shall
not otherwise affect the meaning or interpretation of any provision hereof.
.14 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.
.15 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 and shall
survive conveyance of the Receivables by HARC to the Trustee pursuant to the
Master Sale and Servicing Agreement.
.16 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
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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 ________, 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
(except as expressly provided in the Purchase Agreement), all right, title and
interest of the Seller in and to:
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(i) each and every Receivable listed on Schedule A hereto 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 or Dealer Assignments related to such Receivables;
(iv) any proceeds and the right to receive proceeds with respect to
such Receivables repurchased by a Dealer, pursuant to a Dealer Agreement,
as a result of a breach of representation or warranty in the related Dealer
Agreement;
(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, loss, 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.
A-2
<PAGE>
1. 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.
2. 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 and
Certificates issued by the Trust 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.
3. CONDITIONS PRECEDENT. The obligation of HARC to acquire the
Receivables hereunder is subject to the satisfaction, on or prior to the
Purchase 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.
4. 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
Agreement shall be read, taken and construed as one and the same instrument.
5. 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.
6. 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,
A-3
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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 Issuer, the Owner
Trustee, 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 Issuer,
the Owner Trustee, the Trustee and the Noteholders and that, notwithstanding
anything to the contrary in this Agreement, Seller shall be directly liable
to the Issuer, the Owner Trustee, the Trustee and the Noteholders
(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 the Noteholders and the Owner
Trustee.
7. 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)
<PAGE>
EXHIBIT 4.6
POOLING AND SERVICING AGREEMENT
RELATING TO
HOUSEHOLD AUTOMOTIVE TRUST ______
among
HOUSEHOLD AUTO RECEIVABLES CORPORATION.
as Seller,
HOUSEHOLD FINANCE CORPORATION
as Master Servicer
and
[Name of Trustee]
as Trustee
----------------------
Dated as of ________
----------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I DEFINITIONS...............................................................................................1
Section 1.1 Definitions.......................................................................................1
Section 1.2 Usage of Terms...................................................................................22
Section 1.3 Calculations.....................................................................................22
Section 1.4 Section References...............................................................................22
Section 1.5 Action by or Consent of Certificateholders.......................................................22
Section 1.6 No Recourse......................................................................................22
Section 1.7 Material Adverse Effect..........................................................................23
Article II CREATION OF TRUST.......................................................................................23
Section 2.1 Creation of Trust................................................................................23
Article III CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE; ORIGINAL ISSUANCE OF CERTIFICATES....................23
Section 3.1 Conveyance of Receivables........................................................................23
Section 3.2 Custody of Receivable Files......................................................................25
Section 3.3 Conditions to Issuance by Trust..................................................................26
Section 3.4 Representations of Seller With Respect to the Receivables........................................27
Section 3.5 Repurchase of Receivables Upon Breach of Warranty................................................27
Section 3.6 [Reserved].......................................................................................28
Article IV ADMINISTRATION AND SERVICING OF RECEIVABLES.............................................................28
Section 4.1 Duties of the Master Servicer....................................................................28
Section 4.2 Collection of Receivable Payments; Modifications of Receivables..................................29
Section 4.3 Realization Upon Receivables.....................................................................31
Section 4.4 Insurance........................................................................................32
Section 4.5 Maintenance of Security Interests in Vehicles....................................................33
Section 4.6 Covenants, Representations, and Warranties of Master Servicer....................................33
Section 4.7 Repurchase of Receivables Upon Breach of Covenant................................................34
Section 4.8 Total Servicing Fee; Payment of Certain Expenses by Master Servicer..............................34
Section 4.9 Master Servicer's Certificate....................................................................35
Section 4.10 Annual Statement as to Compliance, Notice of Master Servicer Termination Event...................35
Section 4.11 Annual Independent Accountants' Report...........................................................36
Section 4.12 Access to Certain Documentation and Information Regarding Receivables............................37
Section 4.13 Fidelity Bond and Errors and Omissions Policy....................................................37
Section 4.14 Year 2000 Compliance.............................................................................37
Article V DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS..........................................................38
Section 5.1 Establishment of Trust Accounts..................................................................38
Section 5.2 Certain Reimbursements to the Master Servicer....................................................39
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<PAGE>
Section 5.3 Application of Collections.......................................................................39
Section 5.4 Additional Deposits..............................................................................40
Section 5.5 Distributions....................................................................................40
Section 5.6 Net Deposits.....................................................................................41
Section 5.7 Statements to Certificateholders.................................................................41
Article VI REPRESENTATIONS OF the SELLER...........................................................................42
Section 6.1 Representations of Seller........................................................................43
Section 6.2 Corporate Existence..............................................................................44
Article VII THE CERTIFICATES.......................................................................................46
Section 7.1 The Certificates.................................................................................46
Section 7.2 Authentication of Certificates...................................................................46
Section 7.3 Registration of Transfer and Exchange of Certificates............................................46
Section 7.4 Mutilated, Destroyed, Lost or Stolen Certificates................................................49
Section 7.5 Persons Deemed Owners............................................................................49
Section 7.6 Access to List of Certificateholders' Names and Addresses........................................50
Section 7.7 Maintenance of Office or Agency..................................................................50
Section 7.8 Affiliated Group May Own Certificates............................................................50
Article VIII THE SELLER............................................................................................50
Section 8.1 Liability of Seller; Indemnities.................................................................50
Section 8.2 Merger or Consolidation of, or Assumption of the Obligations of, Seller..........................51
Section 8.3 Limitation on Liability of Seller and Others.....................................................52
Section 8.4 Seller May Own Certificates......................................................................52
Section 8.5 Restrictions on Liens............................................................................52
Article IX THE MASTER SERVICER.....................................................................................53
Section 9.1 Representations of Master Servicer...............................................................53
Section 9.2 Liability of Master Servicer; Indemnities........................................................55
Section 9.3 Merger or Consolidation of, or Assumption of the Obligations of the Master Servicer..............56
Section 9.4 Limitation on Liability of Master Servicer and Others............................................57
Section 9.5 Delegation of Duties.............................................................................57
Section 9.6 Master Servicer Not to Resign....................................................................58
Section 9.7 Sub-Servicing Agreements Between Master Servicer and Sub-Servicers...............................58
Section 9.8 Successor Sub-Servicers..........................................................................59
Article X MASTER SERVICER TERMINATION EVENTS.......................................................................60
Section 10.1 Master Servicer Termination Event................................................................60
Section 10.2 Consequences of a Master Servicer Termination Event..............................................61
Section 10.3 Appointment of Successor.........................................................................62
Section 10.4 Notification to Certificateholders...............................................................63
Section 10.5 Waiver of Past Defaults..........................................................................63
-ii-
<PAGE>
Article XI THE TRUSTEE.............................................................................................63
Section 11.1 Duties of Trustee................................................................................63
Section 11.2 Trustee's Assignment of Warranty Receivables.....................................................65
Section 11.3 Certain Matters Affecting the Trustee............................................................65
Section 11.4 Trustee Not Liable for Certificates or Receivables...............................................67
Section 11.5 Trustee May Own Certificates.....................................................................68
Section 11.6 Trustee's Fees and Expenses; Indemnification.....................................................68
Section 11.7 Eligibility Requirements for Trustee.............................................................68
Section 11.8 Resignation or Removal of Trustee................................................................68
Section 11.9 Successor Trustee................................................................................69
Section 11.10 Merger or Consolidation of Trustee...............................................................70
Section 11.11 Appointment of Co-Trustee or Separate Trustee....................................................70
Section 11.12 Representations and Warranties of Trustee........................................................71
Section 11.13 Tax Returns......................................................................................72
Section 11.14 Trustee May Enforce Claims Without Possession of Certificates....................................72
Section 11.15 Suit for Enforcement.............................................................................73
Section 11.16 Rights to Direct Trustee.........................................................................73
Article XII TERMINATION............................................................................................73
Section 12.1 Termination of the Trust.........................................................................73
Section 12.2 Optional Purchase of All Receivables.............................................................74
Article XIII MISCELLANEOUS PROVISIONS..............................................................................75
Section 13.1 Amendment........................................................................................75
Section 13.2 Protection of Title to Trust.....................................................................76
Section 13.3 Limitation on Rights of Certificateholders.......................................................78
Section 13.4 Governing Law....................................................................................78
Section 13.5 Severability of Provisions.......................................................................79
Section 13.6 Assignment.......................................................................................79
Section 13.7 Certificates Nonassessable and Fully Paid........................................................79
Section 13.8 Third-Party Beneficiaries........................................................................79
Section 13.9 Counterparts.....................................................................................79
Section 13.10 Notices..........................................................................................79
Section 13.11 Successors and Assigns...........................................................................80
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<PAGE>
SCHEDULES
Schedule A - Schedule of Receivables
Schedule B - Representations and Warranties of the Seller
EXHIBITS
Exhibit A - Form of Class A Certificate
Exhibit B - Form of Class B Certificate
Exhibit C - Form of Servicer's Certificate
</TABLE>
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<PAGE>
THIS POOLING AND SERVICING AGREEMENT (this "AGREEMENT"), dated
as of _____________, is made with respect to the formation of the Household
Automotive Trust ___ (the "TRUST"), among Household Finance Corporation, a
Delaware corporation ("HFC"), in its capacity as Master Servicer (the "MASTER
SERVICER"), Household Auto Receivables Corporation, a Nevada corporation
("HARC"), as the Initial Class B Certificateholder and as the Seller (the
"SELLER") and [Name of Trustee], a [New York] banking corporation, as Trustee
(in such capacity, tHE "TRUSTEE") and as Backup Servicer (in such capacity, the
"BACKUP SERVICER").
WHEREAS, the Seller wishes to establish a trust and provide
for the allocation and sale of the beneficial interests therein and the
maintenance and distribution of the trust estate;
WHEREAS, the Master Servicer has agreed to service the
Receivables, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee, valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done; and
WHEREAS, [Name of Trustee] is willing to serve in the capacity
of Trustee and Backup Servicer hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Seller, the Master Servicer, the Trustee
and the Backup Servicer hereby agree as follows:
Article I
DEFINITIONS
.1 DEFINITIONS. Whenever capitalized and used in this
Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
ACCOUNTANTS' REPORT: The report of a firm of nationally
recognized independent accountants described in Section 4.11.
ACCOUNTING DATE: With respect to a Distribution Date, the last
day of the Collection Period immediately preceding such Distribution Date.
ACTUARIAL METHOD: 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.
<PAGE>
ACTUARIAL RECEIVABLE: A Receivable under which the portion of
the payment allocated to interest and the portion allocable to principal is
determined in accordance with the Actuarial Method.
AFFILIATE: With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect 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 voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
AGGREGATE PRINCIPAL BALANCE: 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: Shall have the meaning set forth in the first
paragraph of this Agreement.
AMOUNT AVAILABLE: With respect to any Distribution Date, shall
equal the Available Funds for the immediately preceding Determination Date.
AMOUNT FINANCED: 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 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: With respect to a Receivable
means the annual percentage rate of finance charges or service charges, as
stated in the related Contract.
ANNUAL TRUSTEE'S FEE: Shall have the meaning set forth in
Section 11.6.
AVAILABLE FUNDS: With respect to any Determination Date, the
sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account on the related Deposit Date and
(iii) all income from investments of funds in the Collection Account during
the prior Collection Period.
BASIC DOCUMENTS: This Agreement and the Master Receivables
Purchase Agreement and any other documents or certificates delivered in
connection therewith. The Basic Documents to be executed by any party are
referred to herein as "such party's Basic Documents," "its Basic Documents"
or by a similar expression.
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<PAGE>
BACKUP SERVICER: [Name of Trustee], or its successor in interest
pursuant to Section 10.2, or such Person as shall have been appointed as Backup
Servicer or successor servicer pursuant to Section 10.3.
BASIC SERVICING FEE: 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 Basic Servicing
Fee Rate multiplied by the Aggregate Principal Balance as of the first day of
the Collection Period.
BASIC SERVICING FEE RATE: ___% per annum, payable monthly at
one-twelfth of the annual rate.
BOOK-ENTRY CERTIFICATE: Any Certificate registered in the name
of the Depository or its nominee, ownership of which is reflected on the
books of the Depository or on the books of a person maintaining an account
with such Depository (directly or as an indirect participant in accordance
with the rules of such Depository).
BUSINESS DAY: Any day other than a Saturday, a 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.
CERTIFICATE: Any one of the Class A Certificates or Class B
Certificates executed by the Trustee on behalf of the Trust in substantially
the form set forth in Exhibit A or B, respectively.
CERTIFICATE MAJORITY: Holders of Class A Certificates and
Class B Certificates representing a majority of the sum of the Class A
Certificate Balance and the Class B Certificate Balance, or if there are no
Class A Certificates outstanding, holders of Class B Certificates
representing a majority of the Class B Certificate Balance, provided, that
for so long as the Class B Certificate is held by any Affiliate of HFC or by
HFC, it shall be disregarded for purposes of this definition.
CERTIFICATEHOLDER OR HOLDER: The Person in whose name a
Certificate is registered in the Certificate Register.
CERTIFICATE REGISTER AND CERTIFICATE REGISTRAR: The register
maintained and the registrar appointed pursuant to Section 7.3.
CLASS: A class of Certificates.
CLASS A CERTIFICATE: Any one of the Certificates executed by
the Trust and authenticated by the Trustee in substantially the form set forth
in Exhibit A hereto.
CLASS A CERTIFICATE BALANCE: Initially, the Class A Percentage
of the Cut-off Date Principal Balance and, thereafter, the initial Class A
Certificate Balance reduced by all amounts distributed to the Class A
Certificateholders and allocable to principal.
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<PAGE>
CLASS A CERTIFICATE FACTOR: As of any Distribution Date, a
seven-digit decimal figure equal to the Class A Certificate Balance as of the
close of business on such Distribution Date divided by the initial Class A
Certificate Balance as of the Cut-off Date.
CLASS A DISTRIBUTABLE AMOUNT: On any Distribution Date, the sum
of the Class A Principal Distributable Amount and the Class A Interest
Distributable Amount.
CLASS A INTEREST CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the Class A Interest
Distributable Amount for such Distribution Date plus any outstanding Class A
Interest Carryover Shortfall from the preceding Distribution Date plus
interest on such outstanding Class A Interest Carryover Shortfall, to the
extent permitted by law, at the Class A Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class A Certificates actually received on
such current Distribution Date.
CLASS A INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of (i) for the initial Distribution Date ______ (__)
days of interest and for any Distribution Date thereafter, thirty (30) days of
interest, in any case calculated on the basis of a 360-day year consisting of
twelve 30-day months, at the Class A Pass-Through Rate on the Class A
Certificate Balance as of the close of business on the last day of the preceding
Collection Period and (ii) any outstanding Class A Interest Carryover Shortfall
with respect to the immediately preceding Distribution Date.
CLASS A PASS-THROUGH RATE: ___% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
CLASS A PERCENTAGE: __%.
CLASS A PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the Class A Principal
Distributable Amount plus any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date over the amount of principal that the
holders of the Class A Certificates actually received on such current
Distribution Date.
CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, other than the Final Scheduled Distribution Date, without
duplication, the sum of (x) the Class A Percentage of the sum of (i) the
principal portion of all Collected Funds received during or with respect to the
immediately preceding Collection Period (other than Liquidated Receivables and
Repurchased Receivables) including the principal portion of all prepayments,
(ii) the Principal Balance of all Receivables that became Liquidated Receivables
during the related Collection Period (other than Repurchased Receivables), (iii)
the principal portion of the Purchase Amount of all Receivables that became
Repurchased Receivables as of the immediately preceding Accounting Date, and
(iv) the aggregate amount of Cram Down Losses that shall have occurred during
the
4
<PAGE>
related Collection Period, and (y) Class A Principal Carryover Shortfall. On
the Final Scheduled Distribution Date the Class A Principal Distributable
Amount shall be the Outstanding Class A Certificate Balance.
CLASS B CERTIFICATE: Any one of the Certificates executed by
the Trust and authenticated by the Trustee in substantially the form set
forth in Exhibit B hereto.
CLASS B CERTIFICATE BALANCE: Initially, the Class B Percentage
of the Cut-off Date Principal Balance and, thereafter, the initial Class B
Certificate Balance, reduced by (x) all amounts distributed (pursuant to the
provision set forth in Section 5.5(b) hereof) to Class B Certificateholders and
allocable to principal and (y) on any Distribution Date on which (i) the sum of
the Class A Certificate Balance and the Class B Certificate Balance as of such
Distribution Date and after taking into account all distributions to be made on
such Distribution Date exceeds (ii) the Pool Balance with respect to the
immediately preceding Collection Period, the amount of such excess.
CLASS B CERTIFICATE FACTOR: As of any Distribution Date, a
seven-digit decimal figure equal to the Class B Certificate Balance as of the
close of business on such Distribution Date divided by the initial Class B
Certificate Balance as of the Cut-Off Date.
CLASS B CERTIFICATE INTEREST AMOUNT: With respect to any
Distribution Date, the sum of (i) for the initial Distribution Date ______
(__) days of interest and for any Distribution Date thereafter, thirty (30)
days of interest, in any case calculated on the basis of a 360-day year
consisting of twelve 30-day months, at the pass-through rate appropriate to
the Class B Certificate Balance as of the close of business on the last day
of the preceding Collection Period and (ii) any outstanding Class B
CERTIFICATE Interest Carryover Shortfall with respect to the immediately
preceding Distribution Date.
CLASS B CERTIFICATE INTEREST CARRYOVER SHORTFALL: As of the
close of business on any Distribution Date, the excess of the Class B
CERTIFICATE Interest Amount for such Distribution Date plus any outstanding
Class B CERTIFICATE Interest Carryover Shortfall from the preceding Distribution
Date, over the amount of interest that the holders of the Class B Certificates
actually received on such current Distribution Date.
CLASS B EXCESS INTEREST AMOUNT: With respect to any
Distribution Date, an amount equal to the portion of Available Funds, if any,
remaining after the distribution of amounts required to be distributed on such
Distribution Date pursuant to clauses (i) through (vii) of Section 5.5(a).
CLASS B PERCENTAGE: __%.
CLASS B PRINCIPAL CARRYOVER SHORTFALL: As of the close of
business on any Distribution Date, the excess of the Class B Principal
Distributable Amount plus any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date
5
<PAGE>
over the amount of principal that the holders of the Class B Certificates
actually received on such current Distribution Date.
CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, without duplication, the Class B Percentage of the sum of:
(i) the principal portion of all Collected Funds received during or with
respect to the immediately preceding Collection Period (other than Liquidated
Receivables and Repurchased Receivables) including the principal portion of
all prepayments, (ii) the Principal Balance of all Receivables that became
Liquidated Receivables during the related Collection Period (other than
Repurchased Receivables), (iii) the principal portion of the Purchase Amount
of all Receivables that became Repurchased Receivables as of the immediately
preceding Accounting Date, and (iv) the aggregate amount of Cram Down Losses
that shall have occurred during the related Collection Period.
CLOSING DATE: ____________.
COLLATERAL INSURANCE: Shall have the meaning set forth in
Section 4.4(a).
COLLECTED FUNDS: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during or with respect to the related Collection Period, including
all Liquidation Proceeds collected during the related Collection Period (but
excluding any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section 5.1.
COLLECTION PERIOD: With respect to the first Distribution
Date, the period beginning on the close of business on the 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 the following calculations
as determined as of the end of the day on such last day: (i) all applications of
collections, and (ii) all distributions.
COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
COMPENSATING INTEREST: Shall have the meaning set forth in
Section 4.8(b) hereof.
COMPUTER TAPE OR LISTING: The computer tape or listing
generated on behalf of the Seller which provides information relating to the
Receivables and which was used by the Seller in selecting the Receivables
conveyed to the Trust hereunder.
CORPORATE TRUST OFFICE: The principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the
6
<PAGE>
Closing Date is located at [address], Attention: ____________. The telecopy
number for the Corporate Trust Office on the Closing Date is ___________.
CRAM DOWN LOSS: 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 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.
CUMULATIVE NET LOSSES: The difference between (A) the sum of
(i) the aggregate Principal Balances (plus accrued and unpaid interest, at the
applicable APR) of all Receivables that became Liquidated Receivables through
the Accounting Date of the latest Collection Period, plus (ii) the Principal
Balance of all Receivables that became Repurchased Receivables through the
Accounting Date of the latest Collection Period and that were delinquent with
respect to [5]% or more of a Scheduled Payment more than 30 days through the
Accounting Date of the latest Collection Period, plus (iii) the aggregate of all
Cram Down Losses that occurred through the Accounting Date of the latest
Collection Period, and (B) the Liquidation Proceeds received by the Seller
through the Accounting Date of the latest Collection Period.
CUT-OFF DATE: ____________.
CUT-OFF DATE PRINCIPAL BALANCE: $_______________.
DEALER: 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 under a Dealer Agreement or pursuant to a Dealer
Assignment.
DEALER AGREEMENT: Any agreement between HAFC and a Dealer
relating to the acquisition of Receivables from a Dealer by HAFC.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to HAFC.
DEALER UNDERWRITING GUIDE: 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.
7
<PAGE>
DEFAULT RATIO: With respect to any Determination Date, the
fraction, expressed as a percentage, the numerator of which is equal to 12 times
the sum of the Principal Balances (as of the related Accounting Date) of all
Receivables that became Defaulted Receivables during the related monthly period
or that became Repurchased Receivables as of the related Accounting Date and
that were delinquent with respect to 5% or more of a Scheduled Payment more than
30 days as of such Accounting Date, and the denominator of which is equal to the
Aggregate Principal Balance as of the second preceding Accounting Date.
DEFAULTED RECEIVABLE: Any Receivable with respect to which (i)
5% or more of a Scheduled Payment has become more than 90 days delinquent, (ii)
the Master Servicer has repossessed the Financed Vehicle (and any applicable
redemption period has expired), or (iii) the Master Servicer has determined in
good faith that the payments under the Receivable are not likely to be resumed.
DELINQUENCY RATIO: With respect to any Determination Date, the
fraction, expressed as a percentage, the numerator of which is equal to the sum
of the Principal Balances (as of the related Accounting Date) of all Receivables
that were delinquent with respect to 5% or more of a Scheduled Payment more than
30 days as of the related Accounting Date or that became a Repurchased
Receivable as of the related Accounting Date and that were delinquent with
respect to 5% or more of a Scheduled Payment more than 30 days as of such
Accounting Date and the denominator of which is equal to the Aggregate Principal
Balance as of the second preceding Accounting Date.
DELIVERY: With respect to the Trust Account Property:
(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
8
<PAGE>
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 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
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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 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
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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.
(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
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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 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.
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DEPOSIT DATE: With respect to any Collection Period, the Business
Day immediately preceding the related Determination Date.
DEPOSITORY: The Depository Trust Company, 7 Hanover Square, New
York, New York 10004 and any successor Depository hereafter named.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited from time to
time.
DETERMINATION DATE: 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 AMOUNT: With respect to a Distribution Date, shall
equal the Available Funds for such Distribution Date.
DISTRIBUTION DATE: 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: The electronic master record of the retail
installment sales contracts or installment loans of the Master Servicer.
ELIGIBILITY CRITERIA: The criteria set forth in the Schedule B.
ELIGIBLE BANK: Any depository institution (which shall
initially be the Trustee) organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
United States branch or agency of a foreign bank), which is subject to
supervision and examination by federal or state banking authorities and which at
all times (a) has a net worth in excess of $50,000,000 and (b) has either (i) a
rating of P-1 from Moody's and A-1 from Standard & 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: 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.
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ELIGIBLE INVESTMENTS: 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 Trustee in
trust for the benefit of the Holders of the Certificates, subject to the
exclusive custody and control of the Trustee and for which the Trustee 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;
(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 through any of its Affiliates.
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ELIGIBLE SERVICER: Household Finance Corporation or any Person
which at the time of its appointment as Master Servicer, (i) is servicing a
portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, (iv) is qualified and entitled to use, pursuant to a
license or other written agreement, and agrees to maintain the confidentiality
of, the software which the Master Servicer uses in connection with performing
its duties and responsibilities under this Agreement or otherwise has available
software which is adequate to perform its duties and responsibilities under this
Agreement and (v) has a net worth of at least $50,000,000.
ELIGIBLE SUB-SERVICER: 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.
FINAL SCHEDULED DISTRIBUTION DATE: ___________.
FINANCED VEHICLE: A new or used automobile or light-duty truck or
van securing an Obligor's indebtedness under the respective Receivable.
FRACTIONAL UNDIVIDED INTEREST: The fractional undivided interest
in the Trust that is evidenced by a Certificate.
HAFC: Household Automotive Finance Corporation.
INDEPENDENT ACCOUNTANTS: Shall have the meaning set forth in
Section 4.11(a).
INSOLVENCY EVENT: 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 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
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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: With respect to a Receivable, any insurance
policy 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.
INVESTMENT EARNINGS: 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.
LIEN: 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
hereby and the lien created by this Agreement shall not be deemed to constitute
a Lien.
LIEN CERTIFICATE: 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 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: 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) 90 days have elapsed
since the Master Servicer repossessed the Financed Vehicle, (iii) proceeds have
been received in respect of such Receivable which, in the Master Servicer's
reasonable judgment, constitute the final amounts recoverable in respect of such
Receivable or (iv) 10% or more of a Scheduled Payment shall have become 150 or
more days delinquent (or, in the case where the Obligor of such Receivable is
subject to an Insolvency Event, 10% or more of a Scheduled Payment shall have
become 210 or more days delinquent). Any Receivable that becomes a Repurchased
Receivable on or before the related Accounting Date shall not be a Liquidated
Receivable.
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LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable,
all amounts realized with respect to such Receivable net of (i) reasonable
expenses incurred by the Master Servicer in connection with the collection of
such Receivable and the repossession and disposition of the Financed Vehicle and
(ii) amounts that are required to be refunded to the Obligor on such Receivable;
provided, however, that the Liquidation Proceeds with respect to any Receivable
shall in no event be less than zero.
MASTER SERVICER: Household Finance Corporation, as the servicer
of the Receivables, and each successor Master Servicer pursuant to Section 10.3.
MASTER SERVICER CREDIT FACILITY: 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: A depository institution
or insurance company that qualifies pursuant to Section 4.2(d).
MASTER SERVICER TERMINATION EVENT: An event specified in Section
10.1.
MASTER SERVICER'S CERTIFICATE: With respect to each
Determination Date, a certificate, completed by and executed on behalf of the
Master Servicer, in accordance with Section 4.9, substantially in the form
attached hereto as Exhibit C.
MONTHLY RECORDS: 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.
MOODY'S: Moody's Investors Service, Inc., or any successor
thereto.
NET LIQUIDATION PROCEEDS: With respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable 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.
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OBLIGOR: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.
OFFICERS' CERTIFICATE: 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: An opinion of counsel who may be counsel to
the Master Servicer or the Seller, acceptable to the Trustee.
OTHER CONVEYED PROPERTY: All property conveyed by the Seller to
the Trust pursuant to this Agreement other than the Receivables.
PAYMENT RECORD: The record maintained by the Master Servicer for
the Trust as provided in Section 4.2(d).
PERSON: Any legal person, including any individual,
corporation, partnership, joint venture, estate, association, joint stock
company, trust (including any beneficiary thereof), unincorporated organization
or government or any agency or political subdivision thereof, or any other
entity.
POOL BALANCE: As of the close of business on the last day of a
Collection Period, the aggregate Principal Balance of the Receivables (excluding
Repurchased Receivables and Liquidated Receivables).
POOL FACTOR: With respect to any Distribution Date, a seven
digit decimal figure equal to, as applicable, the Class A Certificate Balance as
of such Distribution Date (after giving effect to distributions on such date)
divided by the Class A Certificate Balance as of the Closing Date, or, the Class
B Certificate Balance as of such Distribution Date (after giving effect to
distributions on such date) divided by the Class B Certificate Balance as of the
Closing Date.
PREPAYMENT: Any payment in full made by an Obligor of the
principal of a Receivable which is received by the Master Servicer in advance of
the scheduled maturity date for such Receivable.
PRINCIPAL BALANCE: 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.
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PURCHASE AMOUNT: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable as of the date of
purchase.
RATING AGENCIES: 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 the Seller, notice of which designation
shall be given to the Indenture Trustee, the Owner Trustee and the Master
Servicer.
RATING AGENCY CONDITION: 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 and the Trustee in
writing) that such action will not result in a reduction or withdrawal of the
then current rating of any Class of Certificates.
REALIZED LOSSES: 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: A retail installment sale contract or promissory
note (and related security agreement) for a new or used automobile or light
truck, vans or mini-vans (and all accessories thereto) that is included in the
Schedule of Receivables, and all rights and obligations under such a contract,
but not including (i) any Liquidated Receivable (other than for purposes of
calculating, as applicable, the Class A Principal Distributable Amount and the
Class B Principal Distributable Amount hereunder), or (ii) any Repurchased
Receivable on or after the Accounting Date immediately preceding the Deposit
Date on which payment of the Purchase Amount is made in connection therewith
pursuant to Section 5.4.
RECEIVABLES PURCHASE AGREEMENT: Shall mean the Receivables
Purchase Agreement between the Seller and HAFC, dated as of _________, pursuant
to which the Seller acquired the Receivables, as such agreement may be amended
or supplemented from time to time.
RECEIVABLE FILE: The documents, electronic entries, instruments
and writings listed in Section 3.2 pertaining to a particular Receivable.
RECORD DATE: With respect to each Distribution Date, the Business
Day immediately preceding such Distribution Date.
REGISTRAR OF TITLES: 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: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable, after giving
effect to the receipt of
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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.
REPURCHASE EVENTS: The occurrence of a breach of any of the
Seller's or the Master Servicer's representations and warranties in this
Agreement which requires the repurchase of a Receivable by the Seller or the
Master Servicer pursuant hereto.
REPURCHASED RECEIVABLE: A Receivable purchased by the Master
Servicer pursuant to Section 4.7 or repurchased by the Seller pursuant to
Section 3.5 or the Seller or HAFC pursuant to Section 12.2(a).
REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of "[P-1]" by Moody's and at least "[A-1+]" by Standard & Poor's
(or such other rating as may be acceptable to the Rating Agencies) so as to
not affect the rating on the Certificates.
RESPONSIBLE OFFICER: When used with respect to the Trustee,
any officer of the Trustee assigned by the Trustee to administer its
corporate trust affairs relating to the Trust. When used with respect to any
other Person that is not an individual, the President, any Vice-President or
Assistant Vice-President or the Controller of such Person, or any other
officer or employee having similar functions.
SCHEDULE OF RECEIVABLES: The Schedule of Receivables attached
as Schedule A.
SCHEDULE OF REPRESENTATIONS: The criteria set forth in
Schedule B.
SCHEDULED PAYMENT: With respect to any Collection Period for
any Receivable, the amount set forth in such Receivable as required to be
paid by the Obligor in such Collection Period. If after the Closing Date, the
Obligor's obligation under a Receivable with respect to a Collection Period
has been modified so as to differ from the amount specified in such
Receivable as a result of (i) the order of a court in an insolvency
proceeding involving the Obligor, (ii) pursuant to the Soldiers' and Sailors'
Civil Relief Act of 1940 or (iii) modifications or extensions of the
Receivable permitted by Section 4.2(b), 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.
SELLER: Household Auto Receivables Corporation, a Nevada
corporation, and its successors in interest to the extent permitted hereunder.
SERVICE CONTRACT: With respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of such Financed Vehicle.
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SIMPLE INTEREST METHOD: 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: 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: Standard & Poor's Ratings Service, or any
successor thereto.
SUB-SERVICER: 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.
SUPPLEMENTAL SERVICING Fee: 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 Collection Account .
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRUST: Shall have the meaning set forth in Section 2.1.
TRUST ACCOUNT PROPERTY: means the Trust Accounts and all
amounts and investments held from time to time in any 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 OFFICER: 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 Trustee 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 and having direct
responsibility for the Administration of this Agreement.
TRUSTEE: The Person acting as Trustee under this Agreement, its
successors in interest and any successor Trustee under this Agreement.
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TRUSTEE FEE: The fees due to the Trustee as may be set forth in
that certain fee agreement dated as of the date hereof between the Master
Servicer and [Name of Trustee].
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
WARRANTY RECEIVABLE: With respect to any Collection Period, a
Receivable which the Seller has become obligated to repurchase pursuant to
Section 3.5.
.2 USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other genders; 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; and the
terms "include" or "including" mean "include without limitation" or
"including without limitation."
.3 CALCULATIONS. All calculations of the amount of interest
accrued on the Certificates and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All references to the Principal Balance of a Receivable
as of a Accounting Date shall refer to the close of business on such day.
.4 SECTION REFERENCES. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
this Agreement unless otherwise specified.
.5 ACTION BY OR CONSENT OF CERTIFICATEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Accounting Date immediately preceding
the date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name
of HFC or any Affiliate thereof shall be deemed not to be outstanding and the
Fractional Undivided Interest evidenced thereby shall not be taken into
account in determining whether the requisite Fractional Undivided Interest
necessary to effect any such action or consent has been obtained; PROVIDED,
HOWEVER, that, solely for the purpose of determining whether the Trustee is
entitled to rely upon any such action or consent, only Certificates which the
Trustee knows to be so owned shall be so disregarded.
.6 NO RECOURSE. 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 Seller, the Master
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Servicer or the Trustee or of any predecessor or successor of the Seller, the
Master Servicer or the Trustee.
.7 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 Trust or the Certificateholders (or any similar or
analogous determination), such determination shall be made without taking
into account the insurance provided by the Policy.
ARTICLE II
CREATION OF TRUST
.1 CREATION OF TRUST. The Seller does hereby create and
establish, pursuant to the laws of the State of New York and this Agreement a
trust (the "Trust"), which for convenience shall be known as "Household
Automotive Trust _____."
ARTICLE III
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE;
ORIGINAL ISSUANCE OF CERTIFICATES
.1 CONVEYANCE OF RECEIVABLES. (a) Subject to the terms and
conditions of this Agreement, the Seller, pursuant to the mutually
agreed upon terms contained herein, hereby sells, transfers,
assigns, and otherwise conveys to the Trust, without recourse (but
without limitation of its obligations in this Agreement), all of
the right, title and interest of the Seller in and to:
(ii) each and every Receivables listed on Schedule A
and all monies paid or payable thereon or in respect thereof after
the Closing Date (including amounts due on or before the Cutoff
Date but received by HAFC, the Seller or the Trust on or after
the Cutoff Date);
(iii) 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;
(iv) all rights of the Seller against the Dealers
pursuant to Dealer Agreements;
(v) any proceeds and the right to receive proceeds
with respect to such 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;
(vi) all rights under any Service Contracts on the
related Financed Vehicles:
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(vii) 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;
(viii) 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;
(ix) all funds on deposit from time to time in the
Trust Accounts (including all investments and proceeds thereof);
(x) 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;
(xi) all of the Seller's right, title and interest in
its rights and benefits, but none of its obligations or burdens,
under the Receivables Purchase Agreement including the delivery
requirements, representations and warranties and the cure and
repurchase obligations of HAFC under the Receivables Purchase
Agreement, on or after the Cutoff Date;
(xii) one share of Class SV Preferred Stock of the
Seller; and
(xiii) 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 Trust 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 Closing Date:
(i) the Seller shall, to the extent required by
Section 4.2, have deposited in the Collection Account all
collections received after the Cutoff Date in respect of the
Receivables to be transferred;
(ii) as of the Closing Date, (A) the Seller shall not be
insolvent and shall not become insolvent as a result of the
transfer of Receivables on such
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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;
(iii) each of the representations and warranties made by
the Seller pursuant Section 3.4 with respect to the Receivables
to be transferred on the Closing Date shall be true and correct
as of the Closing Date, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to such
Closing Date;
(iv) the Seller shall, at its own expense, on or prior
to the Closing Date indicate in its computer files that the
Receivables identified in the Schedule A have been sold to the
Trust pursuant to this Agreement;
(v) the Seller shall have taken any action necessary
or, if required by the Trustee, advisable to maintain the first
priority perfected security interest of the Trustee in the Trust
Estate;
(vi) no selection procedures adverse to the interests
of the Certficateholders shall have been utilized in selecting
the Receivables; and
(vii) the Seller shall have delivered to the Trustee 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 3.5.
It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the
related Trust Estate from the Seller to the Trust and the beneficial interest
in and title to the related 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 shall constitute a grant of
a security interest in the property referred to in this Section 3.1 for the
benefit of the Certificateholders.
.2 CUSTODY OF RECEIVABLE FILES. In connection with the
sale, transfer and assignment of the Receivables, if any, to the Trust
pursuant to this Agreement, the Master Servicer shall act as custodian for
the benefit of the Trustee of the following documents or instruments with
respect to each Receivable:
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(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
Dealer'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) a Dealer 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 a Dealer 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.
(b) 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. The Trustee shall have no
liability for the acts or omissions of any such custodian or subcustodian.
.3 CONDITIONS TO ISSUANCE BY TRUST. As conditions to the
Trustee's execution and delivery of the Certificates on the Closing Date, the
Trustee shall have received the following on or before the Closing Date:
(a) The Schedule of Receivables certified by the
President, Controller or Treasurer of the Seller;
(b) The Receivable File relating to each Receivable;
(c) Copies of resolutions of the Board of Directors of the
Seller approving the execution, delivery and performance of this Agreement,
the Basic Documents and the transactions contemplated hereby and thereby,
certified by a Secretary or an Assistant Secretary of the Seller;
(d) Copies of resolutions of the Board of Directors of HFC
approving the execution, delivery and performance of this Agreement, the
Basic Documents and the transactions contemplated hereby and thereby,
certified by a Secretary or an Assistant Secretary of HFC;
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(e) Evidence that all filings (including, without limitation,
UCC filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give the Trustee a
first priority perfected lien on, or ownership interest in, the Receivables
and the Other Conveyed Property have been made, taken or performed.
.4 REPRESENTATIONS OF SELLER WITH RESPECT TO THE RECEIVABLES.
The Seller represents and warrants as to the related Receivables that the
representations and warranties set forth on the Schedule B are, or will be,
true and correct as of the respective dates specified in such Schedule. The
Trust is deemed to have relied on such representations and warranties in
acquiring the related Receivables and the related Certificateholders shall be
deemed to rely on such representations and warranties in purchasing the
Certificates. Such representations and warranties shall survive the sale,
transfer and assignment of the Trust Estate to the Trust and any pledge
thereof to the Trustee pursuant to this Agreement.
.5 REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. (a) The
Seller, the Master Servicer or any Trust Officer of the 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 3.4; PROVIDED, HOWEVER, that the failure
to give any such notice shall not derogate from any obligations of the Seller
under this Section 3.5. 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, 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 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 Certificateholders 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 Collection Account, the
Repurchase Amount in the manner specified in Section 5.4 and the Trustee
shall execute such assignments and other documents reasonably requested by
such person in order to effect such repurchase. The sole remedy of the Trust,
the Trustee and the Certificateholders with respect to a breach of
representations and warranties pursuant to Section 3.4 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 Receivables Purchase Agreement. The Trustee shall not 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.
Pursuant to Section 3.1 of this 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 Receivables
Purchase Agreement including the Seller's rights under the Receivables
Purchase Agreement and the delivery requirements,
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representations and warranties and the cure or repurchase obligations of HAFC
thereunder. The Seller hereby represents and warrants to the Trust that such
assignment is valid, enforceable and effective to permit the Trust to enforce
such obligations of HAFC under the Receivables Purchase Agreement.
.6 [RESERVED].
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
.1 DUTIES OF THE MASTER SERVICER. The Master Servicer is
hereby authorized to act as agent for the Trust (and also on behalf of the
Trustee and the Certificateholders) 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 statements
to Obligors, reporting any required tax information to Obligors, accounting
for collections and furnishing monthly and annual statements to the Trustee
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 and the Insurance Policies, to the extent that such Dealer
Agreements, Dealer Assignments 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
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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 its 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 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 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.
.2 COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Master Servicer shall make reasonable efforts
to collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with
respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
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:
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(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 Master Servicer beyond the Collection Period immediately
preceding the Final Scheduled Distribution Date of the
Certificates; and
(iii) As of any Determination Date the number of
Receivables included in the 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 the 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
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. 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 Certificates), 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 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. 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
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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 Trustee if it is required to deposit funds in accordance with
the first sentence of this paragraph.
.3 REALIZATION UPON RECEIVABLES. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Master
Servicer shall use its best efforts to repossess (or otherwise comparably
convert the ownership of) and liquidate any Financed Vehicle securing a
Receivable with respect to which the Master Servicer has determined that
payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
10% or more of a Scheduled Payment has become 150 days delinquent (other than
in the case of Financed Vehicles where neither the Financed Vehicle nor the
Obligor can be physically located by the Master Servicer (using procedures
consistent with the standards, policies and procedures of the Master Servicer
required by this Agreement) and other than in the case of an Obligor who is
subject to a bankruptcy proceeding); PROVIDED, HOWEVER, that the Master
Servicer may elect not to repossess a Financed Vehicle within such time
period if in its good faith judgment it determines that the proceeds
ultimately recoverable with respect to such Receivable would be increased by
forbearance. The Master Servicer is authorized to follow such customary
practices and procedures as it shall deem necessary or advisable, consistent
with the standard of care required by Section 4.1, which practices and
procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private sale,
the submission of claims under an Insurance Policy and other actions,
including, without limitation, entering into settlements with Obligors, by
the Master Servicer in order to realize upon such a Receivable. The foregoing
is subject to the provision that, in any case in which the Financed Vehicle
shall have suffered damage, the Master Servicer shall not expend funds in
connection with any repair or towards the repossession of such Financed
Vehicle unless it shall determine in its discretion that such repair and/or
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 or Dealer Assignment, the act of
commencement shall be deemed to be an automatic assignment from the Trust to
the Master Servicer of the rights under such Dealer Agreement and Dealer
Assignment for purposes of collection only. If, HOWEVER, in any enforcement
suit or legal proceeding it is held that the Master Servicer
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may not enforce a Dealer Agreement or Dealer Assignment on the grounds that
it is not a real party in interest or a Person entitled to enforce the Dealer
Agreement or Dealer Assignment, the Trustee, at the Master Servicer's written
direction and expense, or the Seller, at the Seller's expense, shall take
such steps as the Master Servicer deems reasonably necessary to enforce the
Dealer Agreement or Dealer Assignment, including bringing suit in its name or
the name of the Seller or of the Trust and the Trustee for the benefit of the
Certificateholders. 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.
.4 INSURANCE. (a) The Master Servicer shall require, in
accordance with its customary servicing policies and procedures, that each
Financed Vehicle be insured by the related Obligor under an insurance policy
covering physical loss and damage to the related Financed Vehicle and shall
monitor the status of such physical loss and damage insurance coverage
thereafter, in accordance with its customary servicing procedures. Each
Receivable requires the Obligor to obtain such physical loss and damage
insurance, naming HAFC 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 a holder entitled to enforce the Insurance Policy, the Trustee,
at the Master Servicer's written direction and expense, or the Seller, at the
Seller's expense, shall take such steps as the Master Servicer deems
reasonably necessary to enforce such Insurance Policy, including bringing
suit in its name or the name of the Trust and the Trustee for the benefit of
the Certificateholders.
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.5 MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. Consistent
with the policies and procedures required by this Agreement, the Master
Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the security interest created by each Receivable in
the related Financed Vehicle on behalf of the Trust as the Trustee shall
reasonably request, including, but not limited to, obtaining the execution by
the Obligors and the recording, registering, filing, re-recording, re-filing,
and re-registering of all security agreements, financing statements and
continuation statements as are necessary to maintain the security interest
granted by the Obligors under the respective Receivables. The 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 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.
.6 COVENANTS, REPRESENTATIONS, AND WARRANTIES OF MASTER
SERVICER. By its execution and delivery of this Agreement, the Master
Servicer makes the following representations, warranties and covenants on
which the Trustee relies in accepting the Receivables and issuing the
Certificates and on which the Trustee relies in authenticating the
Certificates.
The Master Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing
each Receivable shall not be released in whole or in part from the
security interest granted by the Receivable, except upon payment in
full of the Receivable or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Master Servicer shall do
nothing to impair the rights of the Trust or the Certificateholders
in the Receivables, the Dealer Agreements, the Dealer Assignments,
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
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transferability of the Receivables except for the Lien in favor of
the Trustee for the benefit of the Certificateholders, 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 Trustee;
(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) RELOCATION OF OFFICE. The Master Servicer shall
notify the Trustee of any relocation of the Master Servicer's
principal office set forth in Section 13.10 hereof and all
Receivables Files shall be maintained by the Master Servicer in
the United States.
.7 REPURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon
discovery by any of the Master Servicer, the Seller or 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 Certificateholders in any Receivable
(including any Liquidated Receivable) (or, at the Master Servicer's election,
the first Accounting Date so following) 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 Collection Account in accordance with Section 5.3 hereof. 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.
.8 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 Collection
Account with respect to a Collection Period, the Basic Servicing Fee and any
Supplemental Servicing Fee 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
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the Master Servicer to Certificateholders and all fees and expenses of 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 Trustee, any Sub-Servicer and their respective
agents.
(b) On or prior to each Determination Date, the Master
Servicer shall deposit in the Collection Account with respect to any
Prepayment received on a Receivable during the related Collection Period, out
of its own funds without any right of reimbursement therefor, an amount equal
to the difference between (x) 30 days' interest at an interest rate equal to
the weighted average of the Class A Pass-Through Rate and the Class B
Pass-Through Rate on the Principal Balance of such Receivable as of the first
day of the related Collection Period and (y) the interest actually paid by
the Obligor with respect to the Receivable during such Collection Period (any
such amount paid by the Master Servicer, "Compensating Interest"). The Master
Servicer shall in no event be required to pay Compensating Interest with
respect to any Collection Period in an amount in excess of the aggregate
Servicing Fee received by the Master Servicer with respect to all Receivables
for the related Collection Period.
.9 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, a Master Servicer's Certificate
executed by a responsible officer or agent of the Master Servicer containing
among other things, all information necessary to enable the Trustee to make
the allocations required by Section 5.5 and the distributions with respect to
such Distribution Date. 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 which was paid in full during the related
Collection Period by account number.
.10 ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF MASTER
SERVICER TERMINATION EVENT. (a) The Master Servicer shall deliver or cause to
be delivered to the Trustee on or before April 30 (or 120 days after the end
of the Master Servicer's fiscal year, if other than December 31) of each
year, beginning on April 30, ____, 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
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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 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 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.
.11 ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The Master
Servicer shall cause a firm of nationally recognized independent certified
public accountants (the "Independent Accountants"), who may also render other
services to the Master Servicer or to the Seller, to deliver to the Trustee
on or before April 30 (or 120 days after the end of the Master Servicer's
fiscal year, if other than December 31) of each year, beginning on April 30,
____, 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, 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, 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 shall
be a "non-participating party" with respect to such report, or words to
similar effect. The Trustee shall have no 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, ____, 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 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
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be immaterial and such other exceptions as shall be set forth in such
statement. Such report shall acknowledge that the Trustee shall be a
"non-participating party" with respect to such report, or words to similar
effect. The Trustee shall have no 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.
.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES. The Master Servicer shall provide to representatives of the
Trustee reasonable access to the documentation regarding the Receivables. In
each case, such access shall be afforded without charge but only upon
reasonable request and during normal business hours. Nothing in this Section
shall derogate from the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors,
and the failure of the Master Servicer to provide access as provided in this
Section as a result of such obligation shall not constitute a breach of this
Section.
.13 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.
.14 YEAR 2000 COMPLIANCE. The Master Servicer covenants that
its computer and other systems used in servicing the Receivables have or 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.
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ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
.1 ESTABLISHMENT OF TRUST ACCOUNTS. (a) The Master Servicer,
on behalf of the Certificateholders shall establish and maintain in the name
of the Trustee, a trust account which is an Eligible Deposit Account (the
"COLLECTION ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders
with respect to Household Automotive Trust ___ and holders of the
Certificates. The 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 Collection Account and in all proceeds thereof for the
benefit of the Certificateholders. 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 Collection Account for any amount owed to it by the Trust.
(b) Funds on deposit in the Collection Account and any Trust
Accounts (collectively, the "Trust Accounts") shall be invested by the
Trustee (or any custodian with respect to funds on deposit in any such
account) in Eligible Investments selected in writing by the Master Servicer
(pursuant to standing instructions or otherwise) which absent any instruction
shall be the investments specified in clause (d) of the definition of
Eligible Investments set forth herein. 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 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 Trustee in the
Collection Account or the related Collection Account no later than the close
of business on the Business Day immediately preceding the related
Distribution Date, and any loss resulting from such investments shall be
charged to the Collection Account. The Master Servicer will not direct the
Trustee to make any investment of any funds held in any of the Trust Accounts
unless the security interest granted and perfected in such account will
continue to be perfected in such investment, in either case without any
further action by any Person, and, in connection with any direction to the
Trustee to make any such investment, if necessary, the Master Servicer shall
deliver to the Trustee an Opinion of Counsel to such effect.
(d) The Trustee shall not in any way be held liable by reason
of any insufficiency in any of the Trust Accounts resulting from any loss on
any Eligible Investment included therein except for losses attributable to
the Trustee's negligence or bad faith or its failure to make payments on such
Eligible Investments issued by the Trustee in its commercial capacity as
principal obligor and not as Trustee in accordance with their terms.
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(e) If (i) the Master Servicer shall have failed to give
investment directions for any funds on deposit in the Trust Accounts to the
Trustee by 2:00 p.m. Eastern Time (or such other time as may be agreed by the
Trustee) on any Business Day; or (ii) an Event of Default shall have occurred
and be continuing with respect to the Certificates, the Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Trust Accounts
in one or more Eligible Investments in accordance with paragraph (b) above;
PROVIDED that, if following an Event of Default amounts are to be distributed
to Certificateholders other than on a Distribution Date, investments shall
mature on the Business Day preceding any such proposed date of distribution.
The Trustee shall possess all right, title and interest in all funds on deposit
from time to time in the Trust Accounts and in all proceeds thereof (excluding
all Investment Earnings on the Collection Account) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. Except as
otherwise provided herein, the Trust Accounts shall be under the sole dominion
and control of the Trustee for the benefit of the related Certificateholders.
If, at any time, any of the Trust Accounts ceases to be an Eligible Deposit
Account, the Trustee (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, the Master Servicer shall
notify the Trustee 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 to make withdrawals and payments from
the Collection Account and to instruct the Trustee to make withdrawals and
payments from the 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 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
Collection Account on such Determination Date.
.2 CERTAIN REIMBURSEMENTS TO THE MASTER SERVICER. The Master
Servicer shall be entitled to withhold from amounts otherwise required to be
remitted to the Collection Account with respect to a Collection Period an
amount in respect of funds deposited with respect to prior Collection Periods
in the Collection Account but later determined by the Master Servicer to have
resulted from mistaken deposits or postings or checks returned for
insufficient funds; PROVIDED, THAT, such withholding may be made only
following certification by the Master Servicer of such amounts and the
provision of such information to the Trustee, as may be necessary in the
opinion of the Trustee to verify the accuracy of such certification.
.3 APPLICATION OF COLLECTIONS. All collections for the
Collection Period shall be applied by the Master Servicer as follows:
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(a) 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.
.4 ADDITIONAL DEPOSITS. HAFC and the Seller, as applicable,
shall deposit or cause to be deposited in the Collection Account for
distribution 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.
.5 DISTRIBUTIONS. (a) From the Collection Account, on each
Distribution Date, the Trustee shall (based solely on the information
contained in the Master Servicer's Certificate delivered with respect to the
related Determination Date) distribute the following amounts to the holders
of record on the Record Date and in the following order of priority:
(i) first, from the Distribution Amount, to the
Master Servicer, the Basic Servicing Fee for the related Collection
Period, any Supplemental Servicing Fees for the related Collection
Period, and any amounts specified in Section 5.2, to the extent the
Master Servicer has not reimbursed itself in respect of such
amounts pursuant to Section 5.6;
(ii) second, from the Distribution Amount, to the
Trustee or Backup Servicer, any accrued and unpaid fees (in each
case, to the extent such Person has not previously received such
amount from the Master Servicer or HFC);
(iii) third, from the Amount Available to the Class A
Certificateholders, the Class A Interest Distributable Amount for
such Distribution Date;
(iv) fourth, from the Amount Available to the Class
A Certificateholders, the Class A Principal Distributable Amount
for such Distribution Date;
(v) fifth, from Available Funds, to the Class B
Certificateholders, the Class B Certificate Interest Distributable
Amount for such Distribution Date;
(vi) sixth, from Available Funds, to the Class B
Certificateholders, the Class B Principal Distributable Amount for
such Distribution Date; and
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(vii) seventh, from Available Funds, to the Class B
Certificateholders, the Class B Excess Interest Amount for such
Distribution Date.
(b) Subject to Section 12.1 respecting the final payment upon
retirement of each Certificate, and provided that the Trustee has received
the applicable Master Servicer's Certificate, on each Distribution Date the
Trustee shall distribute to each Certificateholder of record on the preceding
Accounting Date either (i) by wire transfer, in immediately available funds
to the account of such holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder holds Certificates
representing at least $5 million in Class A Certificate Balance or Class B
Certificate Balance as of the Cut-off Date, and if such Certificateholder
shall have provided to the Trustee appropriate instructions not later than 15
days prior to such Distribution Date, or (ii) by check mailed to such
Certificateholder at the address of such Holder appearing in the Certificate
Register, such Holder's Fractional Undivided Interest of either the Class A
Distributable Amount or the Class B Distributable Amount, as applicable, to
the extent funds therefore are distributed under Section 5.5(a).
.6 NET DEPOSITS. The Master Servicer may make the remittances
to be made by it pursuant to Section 5.2 net of amounts (which amounts may be
netted prior to any such remittance for a Collection Period) to be
distributed to it pursuant to Sections 4.8 and 5.2 and (subject to payment by
the Master Servicer of amounts otherwise payable pursuant to Sections 4.8,
5.2, 5.5(a)(i) and 5.5(a)(ii), for so long as no Master Servicer Termination
Event has occurred and is continuing; PROVIDED, HOWEVER, that the Master
Servicer shall account for all of such amounts in the related Master
Servicer's Certificate as if such amounts were deposited and distributed
separately; and, PROVIDED, FURTHER, that if an error is made by the Master
Servicer in calculating the amount to be deposited or retained by it, with
the result that an amount less than required is deposited in the Collection
Account, the Master Servicer shall make a payment of the deficiency to the
Collection Account, immediately upon becoming aware, or receiving notice from
the Trustee, of such error.
.7 STATEMENTS TO CERTIFICATEHOLDERS. (a) On each Distribution
Date, the Trustee shall include with each distribution to each
Certificateholder, a statement (which statement shall also be provided to
each Rating Agency) based on information in the Master Servicer's Certificate
delivered on the related Determination Date pursuant to Section 4.9, setting
forth for the Collection Period relating to such Distribution Date the
following information:
(i) in the case of the Class A and Class B
Certificateholders, the amount of such distribution allocable to
principal;
(ii) in the case of the Class A and Class B
Certificateholders, the amount of such distribution allocable to
interest;
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(iii) the Class A Certificate Balance and the Class B
Certificate Balance, as applicable, (after giving effect to
distributions made on such Distribution Date);
(iv) the amount of fees paid by the Trust with
respect to such Collection Period;
(v) the amount of the Class A Interest Carryover
Shortfall, Class A Principal Carryover Shortfall, Class B Interest
Carryover Shortfall and Class B Principal Carryover Shortfall, if
any, on such Distribution Date and the change in such amounts from
those of the prior Distribution Date;
(vi) the Class A Certificate Factor and the Class B
Certificate Factor as of such Distribution Date;
(vii) the Delinquency Ratio, Average Delinquency
Ratio, Default Ratio, average Default Ratio, Net Loss Ratio and
average Net Loss Ratio for such Determination Date;
(viii) the Pool Factor (after giving effect to
distributions made on such Distribution Date); and
(ix) Cumulative Net Losses.
Each amount set forth pursuant to subclauses (i) (such amounts broken down by
Class of Certificate), (ii) (such amounts broken down by Class of Certificate),
(iv) and (vi) above shall be expressed as a dollar amount per $1,000 of original
principal balance of a Certificate of the related Class.
(b) Within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of this
Agreement, the Trustee shall mail, to each Person who at any time during such
calendar year shall have been a Holder of a Certificate, a statement
containing the sum of the amounts set forth in clauses (i), (ii), and (v)
(separately indicating amounts in respect of the Class A Certificates and the
Class B Certificates in the case of (i) and (ii)) and such other information,
requested in writing by the Master Servicer, if any, as the Master Servicer
determines is necessary to permit the Certificateholder to ascertain its
share of the gross income and deductions of the Trust (exclusive of the
Supplemental Servicing Fee), for such calendar year or, in the event such
Person shall have been a Holder of a Certificate during a portion of such
calendar year, for the applicable portion of such year, for the purposes of
such Certificateholder's preparation of federal income tax returns.
ARTICLE VI
REPRESENTATIONS OF the SELLER
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.1 REPRESENTATIONS OF SELLER. The Seller makes the following
representations on which the Trust is deemed to have relied in acquiring the
Receivables and on which the Certificateholders are deemed to have relied on
in the purchasing of Certificates. The representations speak as of the
execution and delivery of this Agreement and the Closing Date and shall
survive each sale of the Receivables to the Trust and each pledge thereof to
the Trustee pursuant to this Agreement.
(a) SCHEDULE OF REPRESENTATIONS. The representations and
warranties set forth on Schedule B 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 the 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 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 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
necessary corporate action.
(e) VALID SALE, BINDING OBLIGATIONS. This Agreement effects a
valid sale, transfer and assignment of the related 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.
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(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.
(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.
.2 CORPORATE EXISTENCE. (a) During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic
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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;
(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.
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ARTICLE VII
THE CERTIFICATES
.1 THE CERTIFICATES. The Class A Certificates and the Class B
Certificates shall be issued in denominations of $1,000 initial principal
amount and integral multiples thereof, except that one Class A Certificate
and one Class B Certificate shall be issued in a denomination that includes
any residual amount. The Certificates shall be executed on behalf of the
Trustee by manual or facsimile signature of any Responsible Officer of the
Trustee having such authority under the Trustee's seal imprinted or otherwise
affixed thereon and attested on behalf of the Trustee by the manual or
facsimile signature of any other Responsible Officer of the Trustee.
Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures were affixed, authorized to sign on
behalf of the Trustee shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the execution and delivery of such Certificates. All
Certificates shall be dated the date of their execution.
.2 AUTHENTICATION OF CERTIFICATES. The Trustee shall cause the
Certificates to be executed on behalf of the Trust, authenticated, and
delivered to or upon the order of the Seller (or in the case of the Class B
Certificates, the Seller hereby authorizes the Trustee to execute such
Certificates on behalf of the Trust), signed by its chairman of the board,
its vice chairman, its chief financial officer, its president, any vice
president, its treasurer, or any assistant treasurer, its secretary or any
assistant secretary, without further corporate action by the Seller, in
exchange for the Receivables and the other Trust Property, simultaneously
with the sale, assignment and transfer to the Trustee of the Receivables, and
the delivery to the Trustee of the Receivable Files and the other Trust
Property. Such Certificates shall be duly executed by the Trustee, in
authorized denominations equaling in the aggregate the Cut-off Date Principal
Balance and evidencing the entire ownership of the Trust. No Certificate
shall entitle its holder to any benefit under the Agreement, 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 or Exhibit B hereto executed by the Trustee by manual signature of an
authorized signatory; 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 and shall be numbered in the manner determined by the Trustee.
.3 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a)
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 7.7, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges
of Certificates as herein provided. The Trustee shall be the initial
Certificate Registrar. In the event that, subsequent to the Cut-off Date, the
Trustee notifies the Master Servicer that it is unable to act as Certificate
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Registrar, the Master Servicer shall appoint another bank or trust company,
agreeing to act in accordance with the provisions of this Agreement
applicable to it, and otherwise acceptable to the Trustee, to act as
successor Certificate Registrar under this Agreement.
(b) At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of the same Class, in authorized
denominations of a like aggregate original denomination, upon surrender of
such Certificates to be exchanged at such office. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall be duly endorsed by, or shall be accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar
duly executed by the holder thereof or his or her attorney duly authorized in
writing.
(c) Except as provided in paragraph (d) below the Book-Entry
Certificates shall at all times remain registered in the name of the
Depository or its nominee and at all times: (i) registration of the Class A
Certificates may not be transferred by the Trustee except to another
Depository; (ii) the Depository shall maintain book-entry records with
respect to the Certificateholders and with respect to ownership and transfers
of such Class A Certificates; (iii) ownership and transfers of registration
of the Class A Certificates on the books of the Depository shall be governed
by applicable rules established by the Depository; (iv) the Depository may
collect its usual and customary fees, charges and expenses from its
Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives
of the Certificateholders of the Class A Certificates for purposes of
exercising the rights of Holders under this Agreement, and requests and
directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificateholders;
and (vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificateholders.
All transfers by Certificateholders of Book-Entry Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificateholder. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificateholders it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
(d) If (x) (i) the Company or the Depository advises the
Trustee in writing that the Depository is no longer willing or able properly
to discharge its responsibilities as Depository and (ii) the Trustee or
Company is unable to locate a qualified successor or (y) the Company at its
sole option advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository, the Trustee shall notify all
Certificateholders, through the Depository, of the occurrence of any such
event
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and of the availability of definitive, fully registered Class A Certificates
(the "Definitive Certificates") to Certificateholders requesting the same.
Upon surrender to the Trustee of the Class A Certificates by the Depository,
accompanied by registration instructions from the Depository for
registration, the Trustee shall issue the Definitive Certificates. Neither
the Company nor 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 Certificates all
references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates and the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.
(e) On or prior to the Closing Date, there shall be delivered
to the Depository one Class A Certificate, in registered form registered in
the name of the Depository's nominee, Cede & Co., the total face amount of
which represents 100% of the Original Class A Principal Balance. Each such
Class A Certificate registered in the name of the Depositary's nominee shall
bear the following legend:
"Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC")
to the Trustee or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
(f) No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Trustee 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.
(g) Notice of any transfer of one or more Certificates to HFC
or any Affiliate thereof other than the Seller shall be given to each Rating
Agency.
(h) The Class B Certificates shall initially be retained by
the Seller. No sale, assignment, pledge, encumbrance or transfer of any
interest in any Class B Certificate shall be made or permitted without prior
notice to the Rating Agencies until the Class A Certificate Balance is
reduced to zero, all payments in respect of interest on the Class A
Certificates have been made in full and the Final Termination Date with
respect to the Series ______ Certificates shall have occurred. The Class B
Certificates shall be subject to the same restrictions on transfer that the
Class A Certificates are subject to in Section 7.3 hereof. For purposes of
the restrictions on transfer of Class B Certificates, the Seller shall be
treated as the initial purchaser. No transfer of a Class B
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Certificate or any interest therein shall be made unless prior to such
transfer the Holder of such Class B Certificates delivers to the Seller and
the Trustee either a ruling of the Internal Revenue Service or an Opinion of
Counsel, which shall be independent outside counsel, satisfactory to the
Trustee and the Rating Agencies in either case, to the effect that the
proposed transfer (x) will not result in the arrangement contemplated by this
Agreement being treated as an association taxable as a corporation under
either (I) the Code, as from time to time in force or (II) the tax laws of
the State of Illinois and (y) will not have any adverse effect on the Federal
income taxation of the Trust or the Certificateholders.
The Certificate Registrar shall not register the transfer of
any Class B Certificate unless it shall have received a representation letter
that (a) the transferee will not acquire the Class B Certificate with the assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a "plan" as
defined in Section 4975(e)(l) of the Internal Revenue Code of 1986, as amended
(the "Code"), or (b) in the case of a transfer to an insurance company general
account, either (a) above or pursuant to Section I of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60"), the acquisition and holding of the
certificate and, pursuant to Section III of PTCE 95-60, the servicing,
management and operation of the trust are, with respect to such transferee,
exempt from the "prohibited transaction" provisions of ERISA and the Code.
.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)
any mutilated Certificate is surrendered to the Certificate Registrar, or the
Certificate Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Trustee such security or indemnity as may
be required by them to save each of them harmless, then, in the absence of
notice to the Certificate Registrar or the Trustee that such Certificate has
been acquired by a bona fide purchaser, the Trustee on behalf of the Trust
shall execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
Fractional Undivided Interest. In connection with the issuance of any new
Certificate under this Section 7.4, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee and the Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 7.4 shall
constitute complete and indefeasible evidence of ownership in the Trust, as
if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
.5 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Certificate
Registrar and any agent of the Trustee or the Certificate Registrar may treat
the person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section
5.5 and for all other purposes whatsoever, and neither the Trustee, the
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Certificate Registrar nor any agent of the Trustee or the Certificate
Registrar shall be affected by any notice to the contrary.
.6 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Trustee shall furnish or cause to be furnished to the Master Servicer,
within 10 days after receipt by the Trustee of a written request therefor
from such party, a list, in such form as such party may reasonably require,
of the names and addresses of the Certificateholders as of the most recent
Accounting Date for payment of distributions to Certificateholders. If three
or more Certificateholders, or one or more Certificateholders evidencing not
less than 25% of the Class A Certificate Balance and the Class B Certificate
Balance (disregarding any Class B Certificate held by HFC or any Affiliate
thereof) (hereinafter referred to as "Applicants"), apply in writing to the
Trustee, and such application states that the Applicants desire to
communicate with other Certificateholders of such Class with respect to their
rights under this Agreement or under the Certificates and is accompanied by a
copy of the communication that such Applicants propose to transmit, then the
Trustee 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. Every Certificateholder, by receiving
and holding a Certificate, agrees with the Master Servicer and the Trustee
that neither the Master Servicer nor the Trustee shall be held accountable by
reason of the disclosure of any such information as to the names and
addresses of the Certificateholders under this Agreement, regardless of the
source from which such information was derived.
.7 MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall maintain
in [Place of Office], an office or offices or agency or agencies where
Certificates may be surrendered for registration of transfer or exchange and
an office in [Place of Office] where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served. The
Trustee initially designates the Corporate Trust Office as specified in this
Agreement as its office for such purposes. The Trustee shall give prompt
written notice to the Master Servicer and to Certificateholders of any change
in the location of the Certificate Register or any such office or agency.
.8 AFFILIATED GROUP MAY OWN CERTIFICATES. To the extent that
the Seller or any Affiliate of the Seller becomes the owner or pledgee of any
Certificate pursuant to Section 7.3(g) hereof, during the time such
Certificate is owned by it, such Certificate shall be without voting rights
for any purpose set forth in this Agreement or any Related Document. The
Seller shall notify the Trustee promptly after it or any of its Affiliates
become the owner or pledgee of a Certificate.
ARTICLE VIII
THE SELLER
.1 LIABILITY OF SELLER; INDEMNITIES. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken under
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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
Trust and the Trustee from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions
contemplated in this Agreement and any of the Basic Documents (except any
taxes to which 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 Trust, not including any taxes
asserted with respect to, federal or other income taxes arising out of
distributions on the Certificates) and costs and expenses in defending
against the same.
(b) The Seller shall indemnify, defend and hold harmless the
Trust and the Trustee against any loss, liability or expense incurred by
reason of (i) the Seller's willful misfeasance, bad faith or negligence in
the performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's or the Trustee's violation of Federal or state securities laws in
connection with the offering and sale of the Certificates.
(c) The Seller shall indemnify, defend and hold harmless the
Trustee and their respective officers, directors, employees and agents from
and against any and all costs, expenses, losses, claims, damages and
liabilities arising out of, or incurred in connection with, the acceptance or
performance of the trusts and duties set forth herein and in the Basic
Documents, except to the extent that such cost, expense, loss, claim, damage
or liability shall be due to the willful misfeasance, bad faith or negligence
(except for errors in judgment) of the Person seeking indemnification.
Indemnification under this Section shall survive the
resignation or removal of the Trustee and the termination of this Agreement 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.
.2 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 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
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Agreement; PROVIDED, HOWEVER, that the Rating Agency Condition shall have been
satisfied with respect to such transaction.
.3 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 8.1 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 Certificateholders or any other Person for
any action taken or for refraining from the taking of any action in good
faith in such capacities pursuant to this Agreement; provided, however, that
this provision shall not protect the Seller or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.
(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.
.4 SELLER MAY OWN CERTIFICATES. The Seller and any Affiliate
thereof may in its individual or any other capacity become the owner or
pledgee of Certificates 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. 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 Certificates; PROVIDED, HOWEVER, except in the event that all outstanding
Certificates are owned by the Seller and/or any Affiliate thereof, that any
Certificates owned by the Seller or any Affiliate thereof, during the time
such Certificates are owned by them, shall be without voting rights for any
purpose set forth in the Basic Documents and any such Certificates will not
be entitled to the benefits of any financial guaranty insurance policy. The
Seller shall notify the Trustee promptly after it or any of its Affiliates
become the owner or pledgee of a Certificate.
.5 RESTRICTIONS ON LIENS. The Seller 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 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 HFC or the Seller as a debtor, or sign any security agreement
authorizing any secured party
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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 Trustee for the benefit of the Certificateholders.
ARTICLE IX
THE MASTER SERVICER
.1 REPRESENTATIONS OF MASTER SERVICER. The Master Servicer
makes the following representations on which the Trust is deemed to have
relied in acquiring the Receivables and on which the Certificateholders are
deemed to have relied on in the purchasing of Certificates. The
representations speak as of the execution and delivery of this Agreement and
the Closing Date and shall survive each sale of the Trust Estate to the Trust
and each pledge thereof to the Trustee pursuant to this Agreement.
(i) ORGANIZATION AND GOOD STANDING. The Master Servicer
has been duly organized and is validly existing and in good standing
under the laws of its jurisdiction of organization, with power,
authority and legal right to own its properties and to conduct its
business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has,
power, authority and legal right to enter into and perform its
obligations under this Agreement and the other 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
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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 Certificateholders or the Trust
in any Receivable or affect the Master Servicer's ability to perform
its obligations under this Agreement;
(vi) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Master Servicer's knowledge,
threatened against the Master Servicer, before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Master Servicer or its
properties (A) asserting the invalidity of this Agreement or any of
the 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 Certificates;
(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,
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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.
.2 LIABILITY OF MASTER SERVICER; INDEMNITIES. (a) The Master
Servicer (in its capacity as such) shall be liable hereunder only to the
extent of the obligations in this Agreement specifically undertaken by the
Master Servicer and the representations made by the Master Servicer.
(b) The Master Servicer shall defend, indemnify and hold
harmless the Trust, the 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 Affiliate of Household) shall indemnify, defend and hold harmless the
Trust, the 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 Certificates) 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 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 Trust Estate to the Trust or the issuance and original sale of the
Certificates) and costs and expenses in defending against the same; and
(d) The Master Servicer shall indemnify, defend and hold
harmless the Trust, the Trustee, 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
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upon the Trust or the Trustee by reason of the breach of this Agreement by
the Master Servicer, the negligence, misfeasance, or bad faith of the Master
Servicer in the performance of its duties under this Agreement or by reason
of reckless disregard of its obligations and duties under this Agreement,
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 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.
(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.
.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF THE MASTER SERVICER. (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, whether or not such assumption
agreement is executed, shall be the successor to the Master Servicer under
this Agreement and each Basic Document without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement,
anything in this Agreement 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 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.
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.4 LIMITATION ON LIABILITY OF MASTER SERVICER AND OTHERS. (a)
Neither the Master Servicer, the Trustee nor any of the directors or officers
or employees or agents of the Master Servicer or the Trustee shall be under
any liability to the Trust, except as provided in this Agreement and each
Basic Document, for any action taken or for refraining from the taking of any
action pursuant to this Agreement and each Basic Document; PROVIDED, HOWEVER,
that this provision shall not protect the Master Servicer, the Trustee 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 any violation of law by the Master Servicer, the Trustee or
such person, as the case may be; PROVIDED, FURTHER, that this provision shall
not affect any liability to indemnify the Trustee for costs, taxes, expenses,
claims, liabilities, losses or damages paid by the Trustee. The Master
Servicer, the Trustee and any director, officer, employee or agent of the
Master Servicer 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 Trustee shall
not be required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if the repayment of such funds or
adequate written indemnity against such risk or liability is not reasonably
assured to it in writing prior to the expenditure of risk of such funds or
incurrence of financial liability.
(b) Notwithstanding anything herein to the contrary, the
Trustee shall not be liable for any obligation of the Master Servicer
contained in this Agreement and each Basic Document, and the Seller and the
Certificateholders shall look only to the Master Servicer to perform such
obligations.
(c) The parties expressly acknowledge and consent to
[Name of Trustee] acting in the potential dual capacity of successor Master
Servicer and in the capacity as Trustee. [Name of Trustee] may, in such dual
or other capacity, discharge its separate functions fully, without hindrance
or regard to conflict of interest principles, duty of loyalty principles or
other breach of fiduciary duties to the extent that any such conflict or
breach arises from the performance by [Name of Trustee] of express duties set
forth in this Agreement in any of such capacities, all of which defenses,
claims or assertions are hereby expressly waived by the other parties hereto
and the Certificateholders except in the case of negligence and willful
misconduct by [Name of Trustee].
.5 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 and the Trustee with written
notice
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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.
.6 MASTER SERVICER NOT TO RESIGN. Subject to the provisions of
Section 9.3, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the
performance of its obligations or duties hereunder are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it or its subsidiaries or Affiliates,
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 (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 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.
.7 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. The Master Servicer initially appoints HAFC to
subservice the Receivables. For purposes of this Agreement and each Basic
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 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 Trust shall have no liability to the
Master Servicer except for payment of the Basic Servicing Fee and any
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Supplemental Servicing Fee and reimbursement of repossession and liquidation
expenses. The Trust 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, 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.
.8 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. The Trustee shall have no duty or obligation to monitor or
supervise the performance of any Sub-Servicer.
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ARTICLE X
MASTER SERVICER TERMINATION EVENTS
.1 MASTER SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "Master Servicer
Termination Event":
(a) Any failure by the Master Servicer to deliver, or cause to be
delivered, to the Trustee 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 3.5 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 Trustee 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, which failure (i) materially and
adversely affects the rights of Certificateholders 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 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 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 certificate, report or other writing
delivered pursuant
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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 in the Trust Estate and, within 60 days after written
notice thereof shall have been given to the Master Servicer by the Trustee
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 Trustee and the
Seller with an Officers' Certificate giving prompt notice of such failure or
delay by it, together with a description of its efforts to so perform its
obligations.
.2 CONSEQUENCES OF A MASTER SERVICER TERMINATION EVENT. If a
Master Servicer Termination Event shall occur and be continuing, the Trustee
(to the extent a Trust Officer of the Trustee has actual knowledge thereof),
by notice given in writing to the Master Servicer may terminate all of the
rights and obligations of the Master Servicer under this Agreement and the
other Basic Documents as they relate to the Trust Estate out of which such
Master 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 Certificates 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 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 Trust Estate and related documents to show
the Trust as lienholder or secured party on the related Lien
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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 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 Collection
Account or thereafter received with respect to the Receivables in the subject
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 the
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 Trustee and the successor Master
Servicer reasonable access to the terminated Master Servicer's premises at
the terminated Master Servicer's expense.
.3 APPOINTMENT OF SUCCESSOR. (a) On and after the time the Master
Servicer receives a notice of termination pursuant to Section 10.2 or upon
the resignation of the Master Servicer pursuant to Section 9.6, the Master
Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in such termination notice or until such
resignation becomes effective or until a date mutually agreed upon by the
Master Servicer 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 Successor Master
Servicer. The Trustee may delegate any of its servicing obligations to an
Affiliate or 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
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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 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.
.4 NOTIFICATION TO CERTIFICATEHOLDERS. Upon any termination of,
or appointment of a successor to, the Master Servicer pursuant to this
Article X, the Trust shall give prompt written notice thereof to each Rating
Agency to the Certificateholders at their respective addresses appearing in
the Certificate Register.
.5 WAIVER OF PAST DEFAULTS. A Certificate Majority may, on behalf
of all Holders of Certificates, waive any default by the Seller or the Master
Servicer in the performance of its obligations hereunder and its consequences.
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.
ARTICLE XI
THE TRUSTEE
.1 DUTIES OF TRUSTEE. (a) Subject to paragraph (c) of this
Section 11.1, the Trustee, both prior to and after the occurrence of a Master
Servicer Termination Event, undertakes to perform as Trustee such duties and
only such duties as are specifically set forth in this Agreement.
(b) The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee that are specifically required to be furnished
pursuant to any provisions of this Agreement, shall examine them to determine
whether they conform on their face to the requirements of this Agreement.
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(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act (other than errors in judgment) or its own bad faith or
willful misfeasance; PROVIDED, HOWEVER, that:
(i) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless
it shall be proven that the Trustee was negligent in performing its
duties in accordance with the terms of this Agreement;
(iii) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights
or powers conferred upon it by this Agreement; and
(iv) the Trustee shall not be liable for any action it takes
or omits to take in good faith at the direction of a Certificate
Majority.
(d) Notwithstanding any other provision of this Agreement, the
Trustee shall not be required to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties under this
Agreement, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of,
any of the obligations of the Master Servicer under this Agreement except
during such time, if any, as the Backup Servicer shall be the successor to,
and be vested with the rights, duties, powers and privileges of, the Master
Servicer in accordance with the terms of this Agreement.
(e) The Trustee shall not be charged with knowledge of any failure
by the Master Servicer to comply with the obligations of the Master Servicer
referred to in this Agreement, or of any failure by the Seller to comply with
the obligations of the Seller referred to in this Agreement, unless a Trustee
officer obtains actual knowledge of such failure (it being understood that
knowledge of the Master Servicer is not attributable to the Trustee) or the
Trustee receives written notice of such failure from the Master Servicer or
the Seller, as the case may be, or the Holders of Certificates evidencing not
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less than 25% of the sum of the Class A Certificate Balance and the Class B
Certificate Balance, or, if there are no Class A Certificates then
outstanding, by Holders of Class B Certificates evidencing not less than 25%
of the Class B Certificate Balance;
(f) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security
interests created or existing under any Receivable or Financed Vehicle or to
impair the value of any Receivable or Financed Vehicle; and
(g) Without limiting the generality of this Section 11.1, the
Trustee, in its capacity as Trustee, shall have no duty (i) to see to any
recording, filing or depositing of this Agreement 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 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 or observance of any of the
Seller's or the Master Servicer's representations, warranties or covenants or
the Master Servicer's duties and obligations as Master Servicer.
.2 TRUSTEE'S ASSIGNMENT OF WARRANTY RECEIVABLES. With respect to
all Administrative Receivables and all Warranty Receivables purchased by the
Master Servicer or the Seller, the Trustee shall take any and all actions
reasonably requested by the Seller or the Master Servicer, at the expense of
the Person whose obligation was to repurchase the Administrative Receivable
or the Warranty Receivable, to assign, without recourse, representation or
warranty, to the Seller or the Master Servicer, as applicable, including,
without limitation, all the items conveyed to the Trustee pursuant to
Section 3.1(a) with respect to such Repurchased Receivable, all monies due
thereon, the security interests in the related Financed Vehicles, proceeds
from any Insurance Policies, proceeds from recourse against Dealers on such
Receivables and the interests of the Trust in certain rebates of premiums and
other amounts relating to the Insurance Policies and any documents relating
thereto, such assignment being an assignment outright and not for security;
and the Seller or the Master Servicer, as applicable, shall thereupon own
such Receivable, and all such security and documents, free of any further
obligation to the Trustee or the Certificateholders with respect thereto.
.3 CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise
provided in Section 11.1(c):
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(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it under this Agreement in good
faith and in accordance with such Opinion of Counsel;
(c) the 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 in relation to this Agreement,
at the request, order or direction of any of the Certificateholders, pursuant
to the provisions of this Agreement, unless such Certificateholders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that may be incurred therein or thereby;
PROVIDED, HOWEVER, that the Trustee shall, upon the occurrence of a Master
Servicer Termination Event (that has not been cured), exercise the rights and
powers vested in it by this Agreement with reasonable care and skill;
(d) the Trustee shall not be bound to make any investigation into
the facts of 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 Holders
of Certificates evidencing not less than 25% of the sum of the Class A
Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee 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, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity 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, shall be reimbursed by the Person making such request upon
demand;
(e) The Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement ether directly or by or
through agents or attorneys or custodians. The Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by the Trustee. The Trustee shall not be
responsible for any misconduct or negligence attributable to the acts or
omissions of the Master Servicer;
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(f) The Trustee may rely, as to factual matters relating to the
Seller or the Master Servicer, on an Officer's Certificate of a Responsible
Officer of the Seller or Master Servicer, respectively; and
(g) The Trustee shall not be required to take any action or
refrain from taking any action under this Agreement, or any Related Document
referred to herein, nor shall any provision of this Agreement, or any such
Related Document be deemed to impose a duty on the Trustee to take action, if
the Trustee shall have been advised by counsel that such action is contrary
to the terms of this Agreement, or any Related Document or is contrary to law.
.4 TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the execution of the
Certificates) or of any Receivable or Related Document, except to the extent
otherwise expressly provided herein. The Trustee shall at no time (except
during such time, if any, as it is acting as successor Master Servicer) have
any responsibility or liability for or with respect to the legality, validity
and enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to
the efficiency of the Trust or its ability to generate the payments to be
distributed to Certificateholders under this Agreement, including, without
limitation, the existence, condition, location and ownership of any Financed
Vehicle; the existence and enforceability of any insurance thereon; the
existence of any Receivable or any computer or other record thereof (it being
understood that the Trustee has not reviewed and does not intend to review
such matters, the sole responsibility for such review being vested in the
Seller and the Master Servicer as applicable); the completeness of any
Receivable; the receipt by the Master Servicer of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Seller
and the Master Servicer with any covenant or the breach by the Seller and the
Master Servicer of any warranty or representation made under this Agreement
or in any Related Document and the accuracy of any such warranty or
representation prior to the Trustee's receipt of notice or other discovery of
any noncompliance therewith or any breach thereof, any investment of monies
by or at the direction of the Master Servicer or any loss resulting therefrom
(it being understood, however, that the Trustee shall remain responsible for
any Trust Property that it may hold directly); the acts or omissions of the
Seller, the Master Servicer or any Obligor; any action of the Master Servicer
taken in the name of the Trustee; the accuracy, content or completeness of
any offering documents used in connection with the sale of the Certificates
or any action by the Trustee taken at the instruction of the Master Servicer,
the Seller or the Certificateholders holding the requisite percentage of
Certificates; PROVIDED, HOWEVER, that the foregoing shall not relieve the
Trustee of its obligation to perform its duties under this Agreement, whether
as Trustee or as Backup Servicer. The Trustee shall not be accountable for
the use or application by the Seller of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds
paid to the Master Servicer in respect of the Receivables prior to the time
such funds are deposited in the Collection Account.
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.5 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual or
any other capacity may become the owner or pledgee of Certificates with the
same rights as it would have if it were not Trustee and may deal with the
Seller and the Master Servicer in banking transactions with the same rights
as it would have if it were not Trustee.
.6 TRUSTEE'S FEES AND EXPENSES; INDEMNIFICATION. The Master
Servicer in a separate agreement (the "Fee Letter") has covenanted and agreed
to pay to the Trustee, and the Trustee shall be entitled to, certain annual
fees (the "Annual Trustee's Fee") (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust) for all services, including services as Backup Servicer, rendered by
it in the execution of the trusts created by this Agreement and in the
exercise and performance of any of the powers and duties under this Agreement
of the Trustee. To the extent not covered by Article IX, the Seller and the
Master Servicer shall indemnify, defend, and hold harmless the Trustee and
the Backup Servicer from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance of the performance of the trusts and duties contained in this
Agreement, except to the extent that such cost, expense, loss, claim, damage
or liability is due to the bad faith or gross negligence (except for errors
in judgment) of the Trustee or the Backup Servicer, respectively. In
addition, the Master Servicer in Section 9.2 has agreed to indemnify the
Trustee with respect to certain matters, and the Certificateholders in their
individual capacity under Section 11.3(c) or (d) may agree to indemnify the
Trustee under certain circumstances. The provisions of this Section 11.6
shall (i) not be in limitation of the Fee Letter entered into in connection
with this Agreement between the Master Servicer and the Trustee (ii) shall
not terminate or be deemed released upon the resignation or termination of
HFC as the Master Servicer and (iii) shall survive any termination of this
Agreement.
.7 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee under this
Agreement shall at all times be a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority, satisfactory to HFC and (if Moody's then has a
rating outstanding on the Certificates) with a long-term debt rating from
Moody's of ["Baa3"] or higher or otherwise acceptable to Moody's. If such
corporation publishes 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 11.7, 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 Trustee shall cease to be eligible in accordance with the provisions
of this Section 11.7, the Trustee shall resign immediately in the manner and
with the effect specified in Section 11.8.
.8 RESIGNATION OR REMOVAL OF TRUSTEE. (a) Subject to the
provisions of subsection (c) of this Section 11.8, the Trustee may at any
time resign and be discharged from the trusts created by this Agreement by
giving written notice thereof to the Master
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Servicer. Upon receiving such notice of resignation, the Master Servicer
shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.8 and shall fail to resign
after written request therefor by the Master Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent or a receiver of the Trustee or of its property shall be appointed
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Master Servicer shall remove the Trustee. If the
Trustee is removed under the authority of the immediately preceding sentence,
the Master Servicer shall promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee. The Master
Servicer shall also pay all fees due and owing to the outgoing Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 11.8
shall not become effective until acceptance of appointment by the successor
Trustee as provided in Section 11.9.
(d) If the Trustee and the Backup Servicer shall be the same
Person and the rights and obligations of the Backup Servicer shall have been
terminated pursuant to Section 10.2, then a Certificate Majority shall have
the option, by 60 days' prior notice in writing to the Seller, the Master
Servicer and the Trustee, to remove the Trustee, and such Certificateholders
shall not have any liability to the Trustee, HFC, the Seller, the Master
Servicer or any Certificateholder in connection with such removal.
.9 SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided
in Section 11.8 shall execute, acknowledge and deliver to the Master Servicer
and to its predecessor Trustee an instrument accepting such appointment under
this Agreement, and thereupon the resignation or removal of the predecessor
Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance (except as provided below), 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
Trustee; but, on request of the Master Servicer or the successor trustee,
such predecessor Trustee shall, upon payment of its charges then unpaid,
execute and deliver an instrument transferring to such successor trustee all
of the rights, powers and trusts of the Trustee so ceasing to act, and shall
duly assign, transfer and deliver to such successor trustee all property and
money held by such trustee so ceasing to act hereunder. Upon request of any
such successor trustee, the Seller, on behalf of the Trust, shall execute any
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and all instruments for more fully and certainly vesting in and confirming to
such successor trustee all such rights, powers and trusts. The predecessor
Trustee shall deliver to the successor Trustee all documents and statements
held by it under this Agreement or any Related Document; and the predecessor
Trustee and the other parties to the Basic Documents shall amend any Related
Document to make the successor Trustee the successor to the predecessor
Trustee thereunder; and the Master Servicer and the predecessor 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 Trustee all such rights, powers, duties and obligations. No
successor Trustee shall accept appointment as provided in this Section 11.9
unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.7. Upon acceptance of appointment
by a successor Trustee as provided in this Section 11.9, the Seller shall
mail notice by first-class mail of the successor of such Trustee and the
address of the successor Trustee's corporate trust office under this Agreement
to each Rating Agency and all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Seller fails to mail such notice
within 10 days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Seller.
.10 MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation into
which the Trustee may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Trustee
shall be a party, or any corporation succeeding to the business of the
Trustee, shall be the successor of the Trustee under this Agreement, provided
such corporation shall be eligible under the provisions of Section 11.7,
without the execution or filing of any instrument or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to
the contrary notwithstanding. The Trustee or its successor hereunder shall
provide the Master Servicer with prompt notice of any such transaction.
.11 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
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 Trust Property or any Financed Vehicle may at the time be
located, the Trustee, with the consent of the Master Servicer shall have the
power and may execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Property, and to vest in such Person or Persons, in such
capacity and for the benefit of the Certificateholders, such title to the
Trust Property, or any part thereof, and, subject to the other provisions of
this Section 11.11, such powers, duties, obligations, rights and trusts as
the Master Servicer, the Trustee may consider necessary or desirable. If the
Master Servicer shall not have consented to such appointment within 15 days
after the receipt by it of a request to do so, or if a Master Servicer
Termination Event shall have occurred and be continuing, the consent of the
Master Servicer shall not be required. No co-Trustee or separate Trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor trustee under Section 11.7 and no notice to Certificateholders of
the
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appointment of any co-trustee or separate trustee shall be required under
Section 11.9. 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
cotrustee jointly (it being understood that such separate trustee
or cotrustee 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 by the Trustee, 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 Property 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 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 Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
(b) 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 XI. 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 Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed with the
Trustee and a copy thereof given to the Master Servicer.
(c) 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, 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.
.12 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. Each of the
Trustee and Backup Servicer represents and warrants as of the date of this
Agreement that:
(a) it is either (i) a banking corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
or (ii) a national
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banking association duly organized, validly existing and in good standing
under the laws of the United States of America;
(b) it has full power, authority and legal right to execute,
deliver and perform this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement;
(c) the execution, delivery and performance by it of this
Agreement (a) do not violate any provision of any law or regulation governing
the banking and trust powers of it or any order, writ, judgment, or decree of
any court, arbitrator, or governmental authority applicable to it or any of
its assets, (b) do not violate any provision of its corporate charter or
by-laws, or (c) to the best of its knowledge do not violate any provision of,
or constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of any lien on any of the Trust Property
pursuant to the provisions of any mortgage, indenture, contract, agreement or
other undertaking other than this Agreement to which it is a party;
(d) the execution, delivery and performance by it of this
Agreement do not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with, or the taking of any
other action in respect of, any governmental authority or agency regulating
its banking and corporate trust activities; and
(e) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding agreement of it, enforceable 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.
.13 TAX RETURNS. In the event the Trust shall be required to file
tax returns, the Master Servicer shall prepare or shall cause to be prepared
any tax returns required to be filed by the Trust and shall remit such
returns to the Trustee for signature at least five Business Days before such
returns are due to be filed. The Trustee, upon request, shall furnish the
Master Servicer with all such information known to the Trustee as may be
reasonably required in connection with the preparation of all tax returns of
the Trust, and shall execute such returns and cause such returns to be filed
on or prior to the date on which such returns are due; provided, that such
returns have been provided to the Trustee by the Master Servicer as described
in the previous sentence.
.14 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CERTIFICATES.
All rights of action and claims under this Agreement or the Certificates may
be prosecuted and enforced by the Trustee without the possession of any of
the Certificates or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought
in its own name as trustee. Any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment
has been obtained.
.15 SUIT FOR ENFORCEMENT. If a Master Servicer Termination Event
shall occur and be continuing, the Trustee, in its discretion may (but shall
have no duty or obligation so to proceed), subject to the provisions of
Section 11.1, proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution
of any power granted in this Agreement or for the enforcement of any other
legal, equitable or other remedy as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of the
Trustee or the Certificateholders.
.16 RIGHTS TO DIRECT TRUSTEE. Subject to Section 11.3(c), a
Certificate Majority shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee; PROVIDED, HOWEVER,
that subject to Section 11.1, the Trustee shall have the right to decline to
follow any such direction if the Trustee being advised by counsel determines
that the action so directed may not lawfully be taken, or if the Trustee in
good faith shall, by a Responsible Officer, determine that the proceedings so
directed would be in violation of this Agreement or any of the Basic Documents
or would subject it to personal liability against which it has not been
provided reasonable indemnity or be unduly prejudicial to the rights of
Certificateholders not parties to such direction; and provided further that
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificateholders.
ARTICLE XII
TERMINATION
.1 TERMINATION OF THE TRUST. (a) The respective obligations and
responsibilities of the Seller, the Master Servicer and the Trustee created
by this Agreement and the Trust created by this Agreement shall terminate
upon the latest of (i) the maturity or other liquidation of the last
Receivable (including the purchase as of any Accounting Date by the Seller or
the Master Servicer at its option of the corpus of the Trust as described in
Section 12.2) and the subsequent distribution to Certificateholders pursuant
to Section 5.5 of the amount required to be deposited pursuant to Section
12.2 or (ii) the payment to Certificateholders of all amounts required to be
paid to them pursuant to this Agreement. In either case, there shall be
delivered to the Trustee an Opinion of Counsel that all applicable preference
periods under federal, state and local bankruptcy insolvency and similar laws
have expired with respect to the payments pursuant to clause (ii); PROVIDED,
HOWEVER, that in no event shall the trust created by this Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants
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living on the date of this Agreement of Rose Kennedy of the Commonwealth of
Massachusetts; and provided, further, that the rights to indemnification
under Sections 9.2 and 11.6 shall survive the termination of the Trust. The
Master Servicer shall promptly notify the Trustee and the Rating Agencies of
any prospective termination pursuant to this Section 12.1.
(b) Notice of any final distribution, specifying the Distribution
Date upon which the Certificateholders may surrender their Certificates to
the Trustee for payment of the final distribution and retirement of the
Certificates, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 1st day and not later than the
10th day of the month of such final distribution specifying (i) the
Distribution Date upon which final payment of the Certificates shall be made
upon presentation and surrender of Certificates at the office of the Trustee
therein specified, (ii) the amount of any such final payment, and (iii) that
the Accounting Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Trustee therein specified. The Trustee
shall give such notice to the Certificate Registrar at the time such notice
is given to Certificateholders. In the event such notice is given, the Master
Servicer or the Trustee, as the case may be, shall make deposits into the
Collection Account in accordance with Section 5.4, or, in the case of an
optional purchase of Receivables pursuant to Section 12.2, shall deposit the
amount specified in Section 12.2. Upon presentation and surrender of the
Certificates, the Trustee shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date pursuant to Section 5.5.
(c) In the event that all of the Certificateholders shall not
surrender their Certificates for retirement within six months after the date
specified in the above-mentioned written notice, the Trustee shall have a
second written notice to the remaining Certificateholders to surrender their
Certificates for retirement and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates
shall not have been surrendered for retirement, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and other
assets that remain subject to this Agreement.
.2 OPTIONAL PURCHASE OF ALL RECEIVABLES. On each Determination
Date as of which the Class A Certificate Balance is less than 10% of the
Cut-Off Date Class A Certificate Balance, the Master Servicer and the Seller
each shall have the option to purchase the corpus of the Trust. To exercise
such option, the Master Servicer or the Seller, as the case may be, shall pay
the aggregate Purchase Amounts for the Receivables, plus the appraised value
of any other property (including the right to receive any future recoveries)
held as part of the Trust, such appraisal to be conducted by an appraiser
mutually agreed upon by the Master Servicer or the Seller, as the case may
be, and the Trustee and shall succeed to all interests in and to the Trust
Property. The Master
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Servicer or Seller shall promptly notify the Rating Agencies of any proposed
exercise of such option. The fees and expenses related to such appraisal
shall be paid by the party exercising the option to purchase.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
.1 AMENDMENT. (a) This Agreement may be amended by the Seller,
the Master Servicer and the Trustee but without the consent of any of the
Certificateholders, (i) to cure any ambiguity, or (ii) to correct or
supplement any provisions in this Agreement; PROVIDED, HOWEVER, that such
action shall not, as evidenced by an Opinion of Counsel, adversely affect in
any material respect the interests of the Certificateholders.
(b) This Agreement may also be amended from time to time by the
Seller, the Master Servicer and the Trustee with the consent of a Certificate
Majority (which consent of any Holder of a Certificate given pursuant to this
Section 13.1(b) or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Certificate and of any Certificate issued upon the transfer thereof or in
exchange thereof or in lieu thereof whether or not notation of such consent
is made upon the Certificate) 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 Holders of
Certificates; PROVIDED, HOWEVER, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be
required to be made on any Certificate or the Class A Pass-Through Rate or
the Class B Pass-Through Rate or (b) reduce the aforesaid percentage required
to consent to any such amendment or any waiver hereunder, without the consent
of the Holders of all Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment
or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of Certificateholders
pursuant to Section 13.1(b) 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) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may
prescribe, including the establishment of record dates.
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(f) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by
this Agreement, in addition to the Opinion of Counsel referred to in
Section 13.2(i). The Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Trustee's own rights, duties or
immunities under this Agreement or otherwise.
.2 PROTECTION OF TITLE TO TRUST. (a) The Seller or the Master
Servicer or both shall execute and file such financing statements and cause
to be executed and filed such continuation and other 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 Trust and the Trustee under this
Agreement in the Trust Property and in the proceeds thereof. The Seller or
the Master Servicer or both shall deliver (or cause to be delivered) to the
Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(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 by the
Seller in accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless it shall have given the
Trustee at least 60 days prior written notice thereof, and shall promptly
file appropriate amendments to all previously filed financing statements and
continuation statements.
(c) Each of the Seller and the Master Servicer shall give the
Trustee at least 60 days prior written 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. The Master Servicer shall at all times maintain each office from
which it services 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 Collection
Account in respect of such Receivable.
(e) The Master Servicer shall maintain its computer systems so
that, from and after the time of sale under this Agreement of the Receivables
to the Trustee, the Master Servicer's master computer records (including any
backup archives) that refer to any Receivable indicate clearly (with
reference to the particular grantor trust) that the Receivable is owned by
the Trust. Indication of the Trust's ownership of a Receivable shall be
deleted from or modified on the Master Servicer's computer systems when, and
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only when, the Receivable has been paid in full or repurchased by the Seller
or the Master Servicer.
(f) If at any time the Seller or the Master Servicer
proposes 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 refer in any
manner whatsoever to any Receivable, 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 the Seller or the Master Servicer.
(g) The Master Servicer shall permit the Trustee, the
Backup Servicer, the Seller and their respective agents, at any time to
inspect, audit and make copies of and abstracts from the Master Servicer's
records regarding any Receivables or any other portion of the Trust Property.
(h) The Master Servicer shall furnish to the Trustee, the
Backup Master Servicer and the Seller at any time upon request a list of all
Receivables then held as part of the Trust, together with a reconciliation of
such list to the Schedule of Receivables and to each of the Master Servicer's
Certificates furnished before such request indicating removal of Receivables
from the Trust. 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
their desire to conduct an examination.
(i) The Seller and the Master Servicer shall deliver to the
Trustee simultaneously with the execution and delivery of this Agreement and
of each amendment thereto and upon the occurrence of the events giving rise
to an obligation to give notice pursuant to Section 13.2(b) or (c), an
Opinion of Counsel (a) stating that, in the opinion of such Counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trustee
in the Receivables and the other Trust Property, and reciting the details of
such filing or referring to prior Opinions of Counsel in which such details
are given, (b) stating that, in the opinion of such counsel, no such action
is necessary to preserve and protect such interest, or (c) stating in the
opinion of such counsel, any action which is necessary to preserve and
protect such interest during the following 12-month period.
(j) The Master Servicer shall deliver to the Trustee,
within 90 days after __________, an Opinion of Counsel, either (a) stating
that, in the opinion of such counsel, all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (b) stating that, in the opinion
of such counsel, no action shall be necessary to preserve and protect such
interest.
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.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The
death or incapacity of any Certificateholder shall not operate to terminate
this Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Certificateholder shall have any right to vote
(except as provided in this Section 13.3 or Sections 10.5 or 13.1) or in any
manner otherwise control the operation and management of the Trust, or the
obligations of the parties to this Agreement, nor shall anything set forth in
this Agreement, or contained in the terms of the Certificates, be construed
so as to constitute the Certificateholders from time to time as partners or
members of an association; nor shall any Certificateholder be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision of this Agreement or any Related
Document.
(c) 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, unless such Holder previously shall have given to the Trustee
a written notice of default and of the continuance thereof, as provided in
this Agreement and unless also the Holders of Certificates evidencing not
less than 25% of the sum of the Class A Certificate Balance and the Class B
Certificate Balance, or, if there are no Class A Certificates then
outstanding, by Holders of Class B Certificates evidencing not less than 25%
of the Class B Certificate Balance shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as
Trustee under this Agreement and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the 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 Trustee pursuant to and in compliance
with this Section 13.3 or Section 10.5; it being understood and intended, and
being expressly covenanted by each Certificateholder with every other
Certificateholder and the 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 13.3, each and every Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or
in equity.
.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
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NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
.5 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
.6 ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 8.2 or Section 9.3
and as provided in the provisions of the Agreement concerning the resignation
of the Master Servicer and the Backup Servicer, this Agreement may not be
assigned by the Seller or the Master Servicer without the prior written
consent of the Trustee and a Certificate Majority.
.7 CERTIFICATES NONASSESSABLE AND FULLY PAID.
Certificateholders shall not be personally liable for obligations of the
Trust, the Fractional Undivided Interests represented by the Certificates
shall be nonassessable for any losses or expenses of the Trust or for any
reason whatsoever, and Certificates upon authentication thereof by the
Trustee pursuant to Section 7.2 are and shall be deemed fully paid.
.8 THIRD-PARTY BENEFICIARIES. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this
Article XIII, no other Person shall have any right or obligation hereunder.
.9 COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
.10 NOTICES. All demands, notices and communications upon
or to the Seller, the Master Servicer, the Trustee 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 (Telecopier # (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 Trustee at the
Corporate Trust Office, Telecopier # ______________, and (e) in the case of
any Rating Agency, [Names and Addresses of Ratings Agencies]. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown
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in the Certificate Register. 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 shall receive such notice.
.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the parties hereof and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereof and
their respective successors and assigns permitted hereunder. All covenants
and agreements contained herein shall be binding upon, and inure to the
benefit of, the Trustee and the Certificateholders and their respective
permitted successors and assigns, if any. Any request, notice, direction,
consent, waiver or other instrument or action by any Certificateholder shall
bind its successors and assigns.
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IN WITNESS WHEREOF, the Seller, the Master Servicer and the
Trustee have caused this Pooling and Servicing Agreement to be duly executed
by their respective officers, effective as of the day and year first above
written.
HOUSEHOLD AUTO RECEIVABLES
CORPORATION,
as Seller,
by
---------------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
by
---------------------------------------
Name:
Title:
[Name of Trustee]
not in its individual capacity but as Trustee
and Backup Servicer,
by
---------------------------------------
Name:
Title:
[Signature Page for Pooling and Servicing Agreement]
81
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SCHEDULE A
SCHEDULE OF RECEIVABLES
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF THE SELLER
CHARACTERISTICS OF RECEIVABLES.
The Seller represents and warrants as to the related Receivables that the
representations and warranties set forth hereunder are, or will be, true and
correct as of the Cutoff Date. The Trust is deemed to have relied on such
representations and warranties in acquiring the related Receivables and the
related Certificateholders shall be deemed to rely on such representations
and warranties in purchasing the Certificates. Such representations and
warranties shall survive the sale, transfer and assignment of the related
Trust Estate to the Trust and any pledge thereof to the Trustee pursuant to
the Pooling and Servicing Agreement and the related Supplement.
"ELIGIBLE RECEIVABLE" means a Series _____ Receivable with respect to which
each of the following is true as of the Cutoff Date:
(a) that (i) was originated directly by HAFC (or any predecessor or
Affiliate of HAFC) with the consumer or was originated by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such Dealer's
business and (A) in the case of a Dealer originated receivable, such Dealer
had all necessary licenses and permits to originate receivables in the
state where such Dealer was located, and such receivable was purchased by
HAFC (or any predecessor or Affiliate of HAFC) from such Dealer under an
existing Dealer Agreement with HAFC (or any predecessor or Affiliate of
HAFC), and (B) in the case of a Dealer originated receivable or a
receivable originated by HAFC (or any predecessor or Affiliate of HAFC)
such receivable was purchased (x) by HARC pursuant to the terms of the
Master Receivables Purchase Agreement or by a master receivables purchase
agreement between HARC and HAFC, dated as of ______________, that is
substantially the same as the Master Receivables Purchase Agreement (the
"Trust __ Receivables Purchase Agreement"), (y) by the Trust pursuant to
the Pooling and Servicing Agreement; and each Series _____ Receivable was
validly assigned (1) if Dealer originated, by such Dealer to HAFC (or any
predecessor or Affiliate of HAFC), (2) by HAFC to HARC pursuant to the
terms of the Master Receivables Purchase Agreement or the Trust __
Receivables Purchase Agreement and (3) by HARC to the Trust pursuant to the
Pooling and Servicing Agreement, (ii) was fully and properly executed by
the parties thereto, (iii) contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate
for realization against the collateral security, and (iv) is fully
amortizing and provides for level monthly payments (provided that the first
and final payment of the Series _____ Receivable may be minimally different
from the level payment) which, if made when due, shall fully amortize the
Amount Financed over the original term;
B-1
<PAGE>
(b) that if originated by a Dealer, was sold by the Dealer to HAFC (or any
predecessor or Affiliate of HAFC) without any fraud or material
misrepresentation on the part of such Dealer in either case or on the part
of the Obligor;
(c) with respect to which all requirements of applicable federal, state and
local laws, and regulations thereunder (including, without limitation,
usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair
Debt Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940 and state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code and other consumer credit laws and equal credit opportunity and
disclosure laws) in respect of all of the Series _____ Receivables, each
and every sale of Financed Vehicles and the sale of any physical damage,
loss, credit life and credit accident and health insurance and any extended
service contracts, have been complied with in all material respects, and
each Series _____ Receivable and the sale of the Financed Vehicle evidenced
by each Series _____ Receivable and the sale of any physical damage, loss,
credit life and credit accident and health insurance and any extended
service contracts complied at the time it was originated or made and now
complies in all material respects with all applicable legal requirements;
(d) that was originated in the United States of America and, at the time of
origination materially conformed to all requirements of the Dealer
Underwriting Guides (or such similar guidelines of any predecessor or
affiliate of HAFC) applicable thereto;
(e) which represents the genuine, legal, valid and binding payment
obligation of the Obligor thereon, enforceable by the holder thereof in
accordance with its terms, except (A) as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B) as
such Receivable may be modified by the application of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended; and all parties thereto had
full legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to
be granted thereby;
(f) which is not due from the United States of America or any state or from
any agency, department, subdivision or instrumentality thereof;
(g) which (i) had an original maturity of at least __ months but not more
than __ months, (ii) had an original Amount Financed of at least $____ and
not more than $____, (iii) had an Annual Percentage Rate of at least ___%
and not more than __%, (iv) was not more than __ days past due, (v) no
funds have been advanced by the Trusts, the Master Servicer, HAFC, any
predecessor or Affiliate of HAFC, any Dealer, or anyone acting on behalf of
any of them in order to cause such Series _____ Receivable to qualify under
subclause (iv) of this clause (g) and (vi) had no provision thereof waived,
altered or modified in any respect since its origination;
B-2
<PAGE>
(h) with respect to which the information pertaining to such Series _____
Receivable set forth in each Schedule of Receivables is true and correct in
all material respects;
(i) with respect to which HAFC will have caused the portions of HAFC's and
the Master Servicer's servicing records relating to such Series _____
Receivable to be clearly and unambiguously marked to show that such Series
_____ Receivable has been transferred by HAFC to HARC in accordance with
the terms of the Master Receivables Purchase Agreement and by HARC to the
Trust pursuant to the Pooling and Servicing Agreement or the Trust __
Receivables Purchase Agreement;
(j) with respect to which the computer tape or listing to be made available
by HAFC to HARC, the Master Servicer or the Trustee is complete and
accurate and includes a description of the same Series _____ Receivables
that are, or will be, described in the related Schedule of Receivables;
(k) which constitutes chattel paper within the meaning of the UCC;
(l) of which there is only one original executed copy;
(m) with respect to which there exists a Receivable File and such
Receivable File contains, without limitation, (a) a fully executed original
of such Receivable, (b) a certificate of insurance, application form for
insurance signed by the Obligor, or a signed representation letter from the
relevant Obligor named pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related Financed Vehicle, (c) the
original Lien Certificate or application therefor showing HAFC (or any
predecessor or Affiliate of HAFC) as first lienholder and by HAFC (or any
predecessor or Affiliate of HAFC) to HARC and by HARC to the Trust) and (d)
an original credit application signed by the Obligor; and (x) each of the
documents relating thereto which is required to be signed by the Obligor
has been signed by the Obligor in the appropriate spaces and (y) all blanks
on any form relating thereto by HAFC (or any predecessor or Affiliate of
HAFC) to be completed have been properly filled in and each form has
otherwise been correctly prepared; and, notwithstanding the above, with
respect to which, a copy of the complete Receivable File for such Series
_____ Receivable, which fulfills the documentation requirements of the
Dealer Underwriting Guides as in effect at the time of purchase is in the
possession of the Master Servicer or Sub-Servicer;
(n) which has not been satisfied, subordinated or rescinded, and the
Financed Vehicle securing such Series _____ Receivable has not been
released from the lien of such Series _____ Receivable in whole or in part;
(o) which was not originated in, and is not subject to the laws of, any
jurisdiction the laws of which would make unlawful, void or voidable the
sale, transfer and assignment of such Series _____ Receivable and with
respect to which neither HAFC (nor any predecessor or affiliate of HAFC)
nor the Trust has entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any portion of such
Series _____ Receivable;
B-3
<PAGE>
(p) which has not been sold, transferred, assigned or pledged to any Person
other than to (i) HAFC (or any predecessor or Affiliate of HAFC) by a
Dealer, (ii) HARC by HAFC pursuant to the terms of the Master Receivables
Purchase Agreement or the Trust __ Receivables Purchase Agreement and (iii)
the Trust by HARC pursuant to the terms of the Pooling and Servicing
Agreement. No Dealer has a participation in, or other right to receive,
proceeds of any Series _____ Receivable and with respect to which neither
HAFC (nor any predecessor or Affiliate of HAFC), HARC nor the Trustee has
taken any action to convey any right to any Person that would result in
such Person having a right to payments received under the related Insurance
Policy or the related Dealer Agreement or Dealer Assignment or to payments
due under such Series _____ Receivable;
(q) which creates or shall create a valid, binding and enforceable first
priority security interest in favor of HAFC in the Financed Vehicle;
(r) which is secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in favor of HAFC as secured
party, which security interest is prior to all other Liens upon and
security interests in such Financed Vehicle which now exist or may
hereafter arise or be created (except, as to priority, for any Lien for
taxes, labor or materials affecting a Financed Vehicle); and, with respect
to which there are no Liens or claims for taxes, work, labor or materials
affecting the related Financed Vehicle which are or may be Liens prior or
equal to the lien of such Receivable;
(s) as to which all filings (including, without limitation, UCC filings)
required to be made by any Person and actions required to be taken or
performed by any Person in any jurisdiction to give the Trustee a first
priority perfected lien on, or ownership interest in, the Series _____
Receivables and the proceeds thereof have been made, taken or performed;
(t) as to which HAFC (or any predecessor or Affiliate of HAFC), HARC or the
Trust has not done anything to convey any right to any Person that would
result in such Person having a right to payments due under such Series
_____ Receivable or otherwise to impair the rights of the Trustee, the
Certificateholders in such Series _____ Receivable or the proceeds thereof;
(u) which is not assumable by another Person in a manner which would
release the Obligor thereof from such Obligor's obligations with respect to
such Receivable;
(v) which is not subject to any right of rescission, setoff, counterclaim
or defense and no such right has been asserted or threatened with respect
thereto;
(w) as to which there has been no default, breach, violation or event
permitting acceleration under the terms of such Series _____ Receivable
(other than payment delinquencies of not more than 30 days) and no
condition exists or event has occurred and is continuing that with notice,
the lapse of time or both would constitute a default, breach, violation or
event permitting acceleration under the terms of such Series _____
Receivable, and there has been no waiver of any of the foregoing, and with
respect to which the related Financed Vehicle had not been repossessed;
B-4
<PAGE>
(x) at the time of the origination of which, the related Financed Vehicle
was covered by a comprehensive and collision insurance policy (i) in an
amount at least equal to the lesser of (a) its maximum insurable value and
(b) the principal amount due from the Obligor thereunder, (ii) naming HAFC
(or any predecessor or Affiliate of HAFC) and its successors and assigns as
loss payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage and with respect to which the Obligor
is required to maintain physical loss and damage insurance, naming HAFC (or
any predecessor or Affiliate of HAFC) and its successors and assigns as
additional insured parties, and such Receivable permits the holder thereof
to obtain physical loss and damage insurance at the expense of the Obligor
if the Obligor fails to do so;
(y) with respect to which the following is true:
The Lien Certificate for the related Financed Vehicle shows, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days of
the Series _____ Closing Date and will show, HAFC (or any predecessor or
Affiliate of HAFC) named as the original secured party under such Series
_____ Receivable and, accordingly, HAFC will be the holder of a first
priority security interest in such Financed Vehicle. With respect to each
Series _____ Receivable for which the Lien Certificate has not yet been
returned from the Registrar of Titles, HAFC has received written evidence
from the related Dealer or the Obligor that such Lien Certificate showing
HAFC as first lienholder has been applied for. If the Series _____
Receivable was originated in a state in which a filing or recording is
required of the secured party to perfect a security interest in motor
vehicles, such filings or recordings have been duly made to show HAFC named
as the original secured party under the related Series _____ Receivable;
and
(z) as to which no selection procedures adverse to the Certificateholders
or the Certificateholder have been utilized in selecting such Series _____
Receivable from all other similar Receivables purchased by HAFC or any
predecessor or Affiliate of HAFC.
B-5
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
SEE ATTACHED PAGES FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC") TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
A-1
<PAGE>
HOUSEHOLD AUTOMOTIVE TRUST
-----
% ASSET BACKED CERTIFICATE, CLASS A
----
NUMBER
A-1 $
-------
THIS CERTIFIES THAT CEDE & CO. is the registered owner of
__________ cent nonassessable, fully-paid, fractional undivided interest in
the Household Automotive Trust _____ (the "Trust") formed by Household Auto
Receivables Corporation., a Nevada corporation (the "Seller"). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of ________
(the "Agreement"), among the Seller, Household Finance Corporation, as master
servicer (the "Master Servicer"), and [Name of Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth below. Unless the certificate of authentication hereon shall have been
executed by an authorized signatory of the Trustee, by manual signature, this
Class A Certificate shall not entitle the holder hereof to any benefit under
the Agreement or be valid for any purpose. All capitalized terms not
otherwise defined herein have the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and
not in its individual capacity has caused this Class A Certificate to be duly
executed.
HOUSEHOLD AUTOMOTIVE
TRUST ___
By: [NAME OF TRUSTEE], as
Trustee
By:
---------------------------------
DATED:
-------------
This is one of the Class A Certificates referred to in
the within-mentioned Agreement.
[Name of Trustee], as Trustee
By:
---------------------------------
Authorized Signatory
A-2
<PAGE>
This Certificate evidences a fractional undivided interest
in the Trust, as defined above, the property of which includes a pool of
retail installment sale contracts secured by new and used automobiles and
light trucks and sold to the Trust by the Seller. This Certificate does not
represent an interest in or obligation of the Seller, in its individual
capacity or as the Master Servicer or any of their respective affiliates
thereof, except to the extent described below.
To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "___%
Asset Backed Certificates, Class A" (herein called the "Class A
Certificates"). Also issued under the Agreement are Certificates designated
as "Asset Backed Certificates, Class B" (the "Class B Certificates"). The
Class B Certificates and the Class A Certificates are hereinafter
collectively called the "Certificates." The Class A Certificates represent
initially, or in the aggregate, __% of the principal balance of all
Certificates. This Class A Certificate is issued under and is subject to the
terms, provisions, and conditions of the Agreement, to which Agreement the
holder of this Class A Certificate by virtue of the acceptance hereof assents
and by which such holder is bound. The property of the Trust includes (as
more fully described in the Agreement) a pool of retail installment sale
contracts for new and used automobiles and light duty trucks (the
"Receivables"), certain monies due thereunder on or after _________, security
interests in the vehicles financed thereby, certain bank accounts and the
proceeds thereof, property securing the Receivables and held by the Trustee,
proceeds from claims on physical damage, credit life and disability insurance
policies covering vehicles financed thereby and the obligors thereunder, all
Collateral Insurance relating to the Receivables and the financed vehicles,
certain rights against Dealers and in contracts with Dealers, all right,
title and interest of the Seller in and to this Agreement and any and all
proceeds of the foregoing.
Under the Agreement, 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 _________, to the
person in whose name this Class A Certificate is registered at the close of
business on the last day of the prior calendar month (the "Accounting Date"),
to the extent available from the Amount Available, such Class A
Certificateholder's fractional undivided interest in the sum of the Class A
Interest Distributable Amount for such Distribution Date, any outstanding
Class A Interest Carryover Shortfall for such Distribution Date, the Class A
Principal Distributable Amount for such Distribution Date and any Class A
Principal Carryover Shortfall for such Distribution Date.
Except as otherwise provided in the Agreement,
distributions on this Class A Certificate will be made by the Trustee by wire
transfer (as provided in the Agreement), check or money order mailed to the
Class A Certificateholder of record in the Certificate Register without the
presentation or surrender of this Class A Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Class A Certificate
will be made
A-3
<PAGE>
after due notice by the Trustee of the pendency of such distribution and only
upon presentation and surrender of this Class A Certificate at the office or
agency maintained for that purpose by the Trustee in [Place of Office]. The
Accounting Date otherwise applicable to such distribution shall not be
applicable.
The Certificates do not represent an obligation of, or an
interest in, the Seller, the Master Servicer, the Trustee or any affiliate of
any of them. The Certificates are limited in right of payment to certain
collections and recoveries respecting the Receivables, all as more
specifically set forth in the Agreement. A copy of the Agreement may be
examined during normal business hours at the principal office of the Seller,
and at such other places, if any, designated by the Seller, by any
Certificateholder upon request.
As provided in the Agreement, no Certificateholder shall
have any right by virtue or by availing itself of any provisions of the
Agreement to institute any suit, action, or proceeding in equity or at law
upon or under or with respect to the Agreement, unless such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as provided in the Agreement and unless also the Holders
of Certificates evidencing not less than 25% of the sum of the Class A
Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee under the Agreement.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Seller and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent the
Holders of Certificates, voting together as a Class, evidencing not less than
a Certificate Majority. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and on all future Holders of
this Certificate and of any Certificate issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations set forth therein, the transfer of this Certificate is
registrable in the Certificate Registrar upon surrender of this Certificate
for registration of transfer at the offices or agencies maintained by the
Trustee in its capacity as Certificate Registrar, or by any successor
Certificate Registrar, in the City of [Place of Office], accompanied by a
written instrument of transfer in form satisfactory to the 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
Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee.
A-4
<PAGE>
The Class A Certificates and the Class B Certificates are
issuable only as registered Certificates without coupons in denominations of
$1,000 and integral multiples of $1,000 in excess thereof; however, one
Certificate of each such Class may be issued in a denomination representing
or including any remaining portion of the original Class A Certificate
Balance or the original Class B Certificate Balance, as the case may be. As
provided in the Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates of 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 Trustee may require payment of
a sum sufficient to cover any tax or governmental charges payable in
connection therewith.
The Trustee, the Certificate Registrar, and any agent of
the Trustee or the Certificate Registrar may treat the person in whose name
this Class A Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Certificate Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Agreement and the disposition of all property held as part of the Trust. The
Master Servicer of the Receivables may at its option purchase the corpus of
the Trust at a price specified in the Agreement, and such purchase of the
Receivables and other property of the Trust will effect early retirement of
the Certificates; however, such right of purchase is exercisable only as of
the last day of any Collection Period as of which the Class A Certificate
Balance is 10% or less of the Cut-Off Date Class A Certificate Balance.
The recitals contained herein (other than the certificate
of authentication herein) shall be taken as the statements of the Seller or
the Master Servicer, as the case may be, and the Trustee assumes no
responsibility for the correctness thereof. The Trustee makes no
representations as to the validity or sufficiency of this Certificate (other
than the certificate of authentication herein), or of any Receivable or
related document.
A-5
<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 typewrite 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 as
it appears upon the face of the within Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must
be guaranteed by a member firm of the New York Stock Exchange or a commercial
bank or trust company.
A-6
<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
SEE ATTACHED PAGES FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF CERTAIN
PAYMENTS TO THE CLASS A CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED
TO HEREIN. IN ADDITION, ALL DISTRIBUTIONS HEREON ARE SUBJECT TO THE PRIOR
CLAIMS OF CERTAIN PARTIES TO RECEIVE AMOUNTS ON DEPOSIT IN THE SPREAD ACCOUNT.
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 7.3 OF THE POOLING AND SERVICING 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 TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A REPRESENTATION LETTER IN
SUBSTANTIALLY THE FORM REQUIRED BY THE AGREEMENT REFERRED TO BELOW FROM THE
TRANSFEREE OF THIS CERTIFICATE OR SUCH OTHER REPRESENTATIONS (OR AN OPINION OF
COUNSEL) AS MAY BE APPROVED BY THE SELLER, TO THE EFFECT THAT SUCH A TRANSFER
MAY BE MADE PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT, INCLUDING RULE
144A THEREUNDER, AND APPLICABLE STATE SECURITIES LAWS AND (A) SUCH TRANSFEREE
WILL NOT ACQUIRE THIS CERTIFICATE WITH THE ASSETS OF ANY "EMPLOYEE BENEFIT PLAN"
AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
<PAGE>
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (B)
IN THE CASE OF A TRANSFER TO AN INSURANCE COMPANY GENERAL ACCOUNT, EITHER (A)
ABOVE OR, PURSUANT TO SECTION I OF PROHIBITED TRANSACTION CLASS EXEMPTION
95-60 ("PTCE 9560"), THE ACQUISITION AND HOLDING OF THE CERTIFICATE AND,
PURSUANT TO SECTION III OF PTCE 95-60, THE SERVICING, MANAGEMENT AND
OPERATION OF THE TRUST ARE, WITH RESPECT TO SUCH TRANSFEREE, EXEMPT FROM THE
"PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE CODE.
B-2
<PAGE>
HOUSEHOLD AUTOMOTIVE TRUST ______
ASSET BACKED CERTIFICATE, CLASS B
NUMBER
RB $____________
THIS CERTIFIES THAT Household Auto Receivables Corporation
is the registered owner of a $_______ dollars nonassessable, fully-paid,
fractional undivided interest in the Household Automotive Trust _____ (the
"Trust") formed Household Auto Receivables Corporation, a Nevada corporation
(the "Seller"). The Trust was created pursuant to a Pooling and Servicing
Agreement dated as of ________ (the "Agreement"), among the Seller, Household
Finance Corporation, as master servicer (the "Master Servicer") , and
[Name of Trustee], as Trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below.
Reference is made to the further provisions of this Class B
Certificate set forth in the attached pages 3 through 7, 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 signatory of the Trustee, by manual signature, this
Class B Certificate shall not entitle the holder hereof to any benefit under
the Agreement or be valid for any purpose. All capitalized terms not
otherwise defined herein have the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and
not in its individual capacity has caused this Class B Certificate to be duly
executed.
HOUSEHOLD AUTOMOTIVE
TRUST______
By: [Name of Trustee], as Trustee
By:_______________________________
________
DATED: _________
This is one of the Class B Certificates referred to in
the within-mentioned Agreement.
[Name of Trustee], as Trustee
By:______________________________
B-3
<PAGE>
Authorized Signatory
B-4
<PAGE>
This Certificate evidences a fractional undivided interest
in the Trust, as defined below, the property of which includes a pool of
retail installment sale contracts secured by new and used automobiles and
light duty trucks and sold to the Trust by the Seller. This Certificate does
not represent an interest in or obligation of the Seller, in its individual
capacity or of the Master Servicer or any of their respective affiliates
thereof, except to the extent described below.
To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "Asset
Backed Certificates, Class B" (herein called the "Class B Certificates").
Also issued under the Agreement are Certificates designated as "___% Asset
Backed Certificates, Class A" (the "Class A Certificates"). The Class B
Certificates and the Class A Certificates are hereinafter collectively called
the "Certificates." This Class B Certificate is issued under and is subject
to the terms, provisions, and conditions of the Agreement, to which Agreement
the holder of this Class B Certificate by virtue of the acceptance hereof
assents and by which such holder is bound. The property of the Trust includes
(as more fully described in the Agreement) a pool of retail installment sale
contracts for new and used automobiles and light duty trucks (the
"Receivables"), certain monies due thereunder on or _________, security
interests in the vehicles financed thereby, certain bank accounts and the
proceeds thereof, property securing the Receivables and held by the Trustee,
proceeds from claims on physical damage, credit life and disability insurance
policies covering vehicles financed thereby and the obligors thereunder, all
Collateral Insurance relating to the Receivables and the financed vehicles,
certain rights against Dealers and in contracts with Dealers, all right,
title and interest of the Seller in and to this Agreement and any and all
proceeds of the foregoing. The rights of the holders of the Class B
Certificates to receive certain payments are subordinated to the rights of
the holders of the Class A Certificates, as set forth in the Agreement.
Under the Agreement, 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 ____________, the Class B Distributable Amount (as
defined in the Agreement) will be applied as follows:
(A) Holder of the Class B Certificate.
Except as otherwise provided in the Agreement,
distributions on this Class B Certificate will be made by the Trustee by wire
transfer (as provided in the Agreement), check or money order mailed to the
Class B Certificateholder of record in the Certificate Register without the
presentation or surrender of this Class B Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Class B Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class B
Certificate at the office or agency maintained for that purpose by the
Trustee in [Place of Office].
B-5
<PAGE>
The Certificates do not represent an obligation of, or an
interest in, the Seller, the Master Servicer, the Trustee or any affiliate of
any of them. The Certificates are limited in right of payment to certain
collections and recoveries respecting the Receivables, all as more
specifically set forth in the Agreement. A copy of the Agreement may be
examined during normal business hours at the principal office of the Seller,
and at such other places, if any, designated by the Seller, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Seller and the rights of the Certificateholders under the
Agreement at any time by the Seller and the Trustee with the consent of the
Holders of Certificates, voting together as a Class, evidencing not less than
a Certificate Majority. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and on all future Holders of
this Certificate and of any Certificate issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates. Notwithstanding the
foregoing, however, no consent of any Class A Certificateholder or Class B
Certificateholder shall be required in connection with any amendment in order
for the Seller to sell, assign, transfer or otherwise dispose of the excess
interest.
As provided in the Agreement and subject to certain
limitations set forth therein, the transfer of this Certificate is
registrable in the Certificate Registrar upon surrender of this Certificate
for registration of transfer at the offices or agencies maintained by the
Trustee in its capacity as Certificate Registrar, or by any successor
Certificate Registrar, in [Place of Office], accompanied by a written
instrument of transfer in form satisfactory to the 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
Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee.
The Class A Certificates and Class B Certificates are
issuable only as registered Certificates without coupons in denominations of
$1,000,000 and integral multiples of $1,000 in excess thereof; however, one
Certificate of each such Class may be issued in a denomination representing
or including any remaining portion of the original Class A Certificate
Balance or the original Class B Certificate Balance, as the case may be. As
provided in the Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates of 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 Trustee may require payment of
a sum sufficient to cover any tax or governmental charges payable in
connection therewith.
B-6
<PAGE>
The Trustee, the Certificate Registrar, and any agent of
the Trustee or the Certificate Registrar may treat the person in whose name
this Class B Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Certificate Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Agreement and the disposition of all property held as part of the Trust. The
Master Servicer may at its option purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates;
however, such right of purchase is exercisable only as of the last day of any
Collection Period as of which the Class A Certificate Balance is less than
[10]% of the Cut-Off Date Class A Certificate Balance.
The recitals contained herein (other than the certificate
of authentication herein) shall be taken as the statements of the Seller or
the Servicer, as the case may be, and the Trustee assumes no responsibility
for the correctness thereof. The Trustee makes no representations as to the
validity or sufficiency of this Certificate (other than the certificate of
authentication herein), or of any Receivable or related document.
B-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 typewrite 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 as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
B-8
<PAGE>
EXHIBIT C
FORM OF MASTER SERVICER'S CERTIFICATE
<PAGE>
July 30, 1999
Exhibits 5.1 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 "Servicer"), Household Auto
Receivables Corporation (the "Seller") and Household Automotive Finance
Corporation ("HAFC"). I am generally familiar with the proceedings in
connection with the Seller's Registration Statement on Form S-3 (the
"Registration Statement") pursuant to which Auto Receivables Asset Backed
Securities are to be registered for issuance from time to time in series by one
or more trusts established by the Seller. Each series of securities will be
issued by a trust which will be either (a) an owner trust or (b) a grantor
trust. This opinion relates to the issuance by grantor trusts of certain asset
backed certificates (the "Certificates") to be sold from time to time in one or
more series in amounts to be determined at the time of each sale and as will be
set forth in one or more supplements (each, a "Prospectus Supplement") to the
prospectus (the "Prospectus") included in the Registration Statement.
As described in the Registration Statement, the Certificates will be issued
by grantor trusts (the "Trusts"). The Trusts will be formed by the Seller
pursuant to Pooling and Servicing Agreements (the "Pooling and Servicing
Agreement") by and among the Seller, the Servicer and the trustee for each
Trust, as specified in the related Prospectus Supplement (the "Trustee"). A form
of the Pooling and Servicing Agreement is included as an exhibit to the
Registration Statement.
I am, or attorneys under my supervision are, familiar with the proceedings
to date with respect to the Registration Statement 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.
<PAGE>
Household Auto Receivables Corporation
July 30, 1999
Page 2
Based on the foregoing, it is my opinion that the Certificates will be
fully paid and non-assessable, legally and validly issued and will be legal and
binding obligations of the issuing Trust, when the following have occurred:
1) the Registration Statement shall have been declared
effective by the Commission under the Securities Act of 1933, as amended,
2) the Seller's Board of Directors shall have adopted
resolutions authorizing the Seller to execute all required documents,
including the Pooling and Servicing Agreement and the Underwriting
Agreement (as defined below), and to take all action required to cause the
Certificates to be issued under each Pooling and Servicing Agreement and to
be sold pursuant to each Underwriting Agreement,
3) the Pooling and Servicing Agreement relating to the
Certificates each shall be duly executed and delivered by the parties
thereto,
4) the Certificates shall have been duly authenticated
by the Trustee in accordance with the Pooling and Servicing Agreement, 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
5) the Seller shall have received the agreed purchase price for the
Certificates 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.
<PAGE>
Household Auto Receivables Corporation
July 30, 1999
Page 3
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,
/s/ John W. Blenke
- ------------------------------
John W. Blenke
Vice President-Corporate Law
and Assistant Secretary
<PAGE>
July 30, 1999
Exhibits 5.2 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 "Servicer"), Household Auto
Receivables Corporation (the "Seller") and Household Automotive Finance
Corporation ("HAFC"). I am generally familiar with the proceedings in
connection with the Seller's Registration Statement on Form S-3 (the
"Registration Statement") pursuant to which Auto Receivables Asset Backed
Securities are to be registered for issuance from time to time in series by one
or more trusts established by the Seller. Each series of securities will be
issued by a trust which will be either (a) an owner trust or (b) a grantor
trust. This opinion relates to the issuance by owner trusts of certain asset
backed notes (the "Notes") to be sold from time to time in one or more series in
amounts to be determined at the time of each sale and as will be set forth in
one or more supplements (each, a "Prospectus Supplement") to the prospectus (the
"Prospectus") included in the Registration Statement.
As described in the Registration Statement, the Notes will be issued by
owner trusts (the "Trusts"). The Trusts will be formed by the Seller pursuant
to a Certificate of Trust filed with the Secretary of State of Delaware. The
operations of the Trust will be defined in a Trust Agreement (the "Trust
Agreement") between the Seller, and the owner trustee for each Trust, as
specified in the related Prospectus Supplement. The Notes will be issued
pursuant to an Indenture (the "Indenture") among the Seller, the Servicer, the
Trust, the owner trustee and an indenture trustee. The indenture trustee will
also be specified in the related Prospectus Supplement. Forms of the Trust
Agreement and Indenture are included as exhibits to the Registration Statement.
I am, or attorneys under my supervision are, familiar with the proceedings
to date with respect to the Registration Statement 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.
<PAGE>
Household Auto Receivables Corporation
July 30, 1999
Page 2
Based on the foregoing, it is my opinion that the Notes will be fully paid
and non-assessable, legally and validly issued and will be legal and binding
obligations of the issuing Trust, when the following have occurred:
1) the Registration Statement shall have been declared
effective by the Commission under the Securities Act of 1933, as amended,
2) the Seller's Board of Directors shall have adopted
resolutions authorizing the Seller to execute all required documents,
including the Trust Agreement, Indenture and the Underwriting Agreement (as
defined below), and to take all action required to cause the Notes to be
issued pursuant to each Indenture, and to be sold pursuant to each
Underwriting Agreement,
3) the Trust Agreement and Indenture relating to the
Notes each shall be duly executed and delivered by the parties thereto,
4) 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
5) 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.
<PAGE>
Household Auto Receivables Corporation
July 30, 1999
Page 3
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,
/s/ John W. Blenke
- -------------------------------
John W. Blenke
Vice President-Corporate Law
and Assistant Secretary
<PAGE>
EXHIBIT 8
July 30, 1999
Household Auto Receivables Corporation
2700 Sanders Road
Prospect Heights, Illinois 60070
Re: REGISTRATION STATEMENT
Dear Ladies and Gentlemen:
We have acted as special tax counsel to Household Auto Receivables
Corporation, a Nevada corporation (the "Company"), in connection with the
Prospectus filed by the Company.
The term "Prospectus" means the prospectus included in the
Registration Statement. The term "Registration Statement" means (i) the
Registration Statement on Form S-3 including the exhibits thereto and (ii) any
post-effective amendment filed and declared effective prior to the date of
issuance of the asset-backed securities registered thereby (the "Securities").
We have examined the question of whether the Securities will have the
tax treatment described in the Prospectus. Our analysis is based on the
provisions of the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder as in effect on the date hereof and on
existing judicial and administrative interpretations thereof. These authorities
are subject to change and to differing interpretations, which could apply
retroactively. The opinion of special tax counsel is not binding on the courts
or the Internal Revenue Service (the "IRS").
In general, whether a transaction constitutes the issuance of
indebtedness or the sale of assets 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 the form of the transaction or the manner in which the instruments are
labeled. The IRS and the courts have set forth various factors to be taken into
account in determining whether or not a transaction constitutes the issuance of
indebtedness or the sale of assets for federal income tax
<PAGE>
purposes, which we have reviewed as they apply to the transactions described on
the Prospectus.
Based on the foregoing, and such legal and factual investigations as
we have deemed appropriate, we are of the opinion that for federal income tax
purposes:
(1) The Securities, assuming they are issued in accordance with the
Prospectus, will have the federal income tax treatment described in the
Prospectus.
(2) We hereby adopt and confirm the information appearing under the
caption "Material Federal Income Tax Considerations" in the Prospectus and
confirm that it represents our opinion with respect to the matters discussed
therein.
This opinion is furnished by us as counsel to the Registrant. We
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to Dewey Ballantine LLP in the Registration
Statement and the related prospectus under the heading "Legal Matters."
Very truly yours,
/s/ DEWEY BALLANTINE, LLP
