<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1999
REGISTRATION NO. 333-76439
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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 organization Identification 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: As soon as
practicable after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(1)(2)
<S> <C> <C> <C> <C>
Household Automotive Trust III, Series 1999-1
Notes.......................................... $662,280,000 100% $662,280,000 $184,113.84
</TABLE>
(1) Pursuant to Rule 457(a) the filing fee has been calculated based upon a bona
fide estimate of the maximum offering price for the securities.
(2) On April 16, and June 3, 1999 wire transfers were sent to the Commission in
the amount of $278 and $183,835.84, respectively.
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(SUBJECT TO COMPLETION, DATED JUNE 4, 1999)
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE NOTES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
AND IT IS NOT SOLICITING AN OFFER TO BUY IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED.
$662,280,000
HOUSEHOLD AUTOMOTIVE TRUST III
ISSUER
SERIES 1999-1 NOTES
HOUSEHOLD AUTO RECEIVABLES CORPORATION, SELLER
HOUSEHOLD FINANCE CORPORATION, SERVICER
THE ISSUER WILL ISSUE--
- Four classes of notes which are to be offered by this prospectus; and
- Certain interests in the issuer which are to be held by the seller are not
offered by this prospectus but serve as credit support to the notes offered
by this prospectus.
THE NOTES--
- Are backed by a pledge of assets of the issuer. The assets of the issuer
securing the notes will include a pool of non-prime retail installment sales
contracts secured by new and used automobiles, light trucks and vans;
- Receive monthly distributions on the 17th day of each month beginning on
July 19, 1999;
- Represent debt obligations of Household Automotive Trust III; and -
Currently have no trading market.
- --------------------------------------------------------------------------------
YOU SHOULD READ THE SECTION ENTITLED "RISK FACTORS" STARTING ON PAGE 8 OF THIS
PROSPECTUS AND CONSIDER THESE FACTORS BEFORE MAKING A DECISION TO INVEST IN THE
NOTES.
The notes are only secured by the assets of the issuer. The notes are not debt
obligations of any other person or entity.
The notes will not be insured or guaranteed by any person or entity or
governmental agency or instrumentality.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL
FINAL PUBLIC
ISSUANCE INTEREST SCHEDULED OFFERING UNDERWRITING PROCEEDS
AMOUNT RATE PAYMENT DATE PRICE(1) DISCOUNT TO SELLER(2)
<S> <C> <C> <C> <C> <C> <C>
July 17,
Class A-1 Notes $147,000,000 % 2000 % % %
Class A-2 Notes $180,220,000 % May 17, 2002 % % %
June 17,
Class A-3 Notes $156,010,000 % 2003 % % %
April 17,
Class A-4 Notes $179,050,000 % 2006 % % %
</TABLE>
(1) Plus accrued interest, if any, from , 1999.
(2) Before deducting 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. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
J.P. Morgan & Co.
Chase Securities Inc.
Credit Suisse First Boston
Salomon Smith Barney
The date of this Prospectus is June , 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain 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 such 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 but
before the offering of the Notes ends are considered to be part of this
prospectus. Information contained in those reports updates and supercedes the
information in this prospectus. We will provide you with copies of these
reports, at no cost, if you write us at: 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.
This prospectus is part of a registration statement filed by the seller with
the SEC (Registration No. 333-76439).
You should rely only on the information provided in this prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus is accurate as of any date
other than the date on the cover page of this prospectus.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under "Index of Defined Terms" beginning on page 67 in
this prospectus.
We include cross-references in this prospectus to captions in these
materials where you can find further related 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.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ----------------------------------------------- -----
<S> <C>
Where You Can Find More Information............ 2
Prospectus Summary............................. 4
Risk Factors................................... 8
Use of Proceeds................................ 14
The Issuer..................................... 14
General...................................... 14
The Owner Trustee............................ 14
The Indenture Trustee........................ 14
The Seller..................................... 14
The Servicer................................... 15
The Subservicer................................ 15
The Trust Assets............................... 16
General...................................... 16
Eligibility Criteria......................... 16
Terms of the Receivables..................... 17
Composition of the Receivables............... 18
The Reserve Account.......................... 22
The Preferred Stock.......................... 22
Yield and Prepayment Considerations............ 23
The Automobile Financing Business of the
Subservicer.................................. 27
General...................................... 27
Application Processing and Purchasing
Criteria................................... 27
Funding Package Completion, Verification and
Funding.................................... 28
Post-Funding Quality Reviews................. 28
Servicing of Contracts....................... 28
Billing and Collection Process............... 29
Repossession................................. 30
Insurance.................................... 30
Delinquency and Loss Information............. 30
Description of Notes........................... 34
General...................................... 34
Payments of Interest......................... 34
Payments of Principal........................ 35
Payment Priorities........................... 35
Maturity Dates; Optional Redemption.......... 39
Reports to Noteholders....................... 40
Events of Default; Rights Upon Event of
Default; Distributions following
Acceleration............................... 40
Certain Covenants............................ 42
Annual Compliance Statement.................. 42
Satisfaction and Discharge of Indenture...... 43
Modification of Indenture.................... 43
Certain Matters Regarding the Indenture
Trustee and the Issuer..................... 43
<CAPTION>
CAPTION PAGE
- ----------------------------------------------- -----
<S> <C>
Limitation on Liability of the Indenture
Trustee.................................... 44
Resignation of Indenture Trustee............. 44
Registration of the Notes.................... 44
Description of the Trust Documents............. 48
Sale and Assignment of Receivables........... 48
Representation and Warranties; Repurchase
Obligation................................. 49
Payments on Receivables; Deposits to
Collection Account......................... 50
Collection and Other Servicing Procedures.... 52
Servicing Compensation and Payment of
Expenses................................... 52
Evidence as to Compliance.................... 52
Certain Matters Regarding the Servicer and
the Seller................................. 53
Servicer Termination Event................... 53
Rights Upon Servicer Termination Event....... 54
Amendment.................................... 54
Description of the Receivables Purchase
Agreement.................................... 55
Sales of Receivables......................... 55
Representations and Warranties............... 55
Amendments................................... 56
Certain Legal Aspects of the Receivables....... 56
Security Interests in Vehicles............... 56
Repossession................................. 57
Notice of Sale; Redemption Rights............ 58
Deficiency Judgments and Excess Proceeds..... 58
Consumer Protection Laws..................... 59
Soldiers' and Sailors' Civil Relief Act of
1940....................................... 60
Other Limitations............................ 60
Material Federal Income Tax Consequences....... 61
Tax Characterization of the Issuer........... 61
Tax Consequences to Holders of the Notes..... 61
State and Local Tax Considerations............. 64
ERISA Considerations........................... 64
Underwriting................................... 66
Legal Matters.................................. 66
Index of Defined Terms......................... 67
Global Clearance, Settlement and Tax
Documentation Procedures..................... A-1
Initial Settlement........................... A-1
Secondary Market Trading..................... A-1
Certain U.S. Federal Income Tax Documentation
Requirements............................... A-3
Financial Statements of the Issuer............. F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
- - This summary highlights select information from this prospectus 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 this entire
prospectus.
- - This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding. To understand all of the terms of
the offering, carefully read this entire document and, in particular, the full
description of these calculations, cash flows and other information in this
prospectus.
SERIES 1999-1 NOTES
The issuer will issue the notes offered by this prospectus in book-entry form
through the facilities of The Depository Trust Company.
ISSUER
Household Automotive Trust III. The issuer will be a Delaware business trust
formed under the laws of the State of Delaware. The address of the issuer is in
care of Wilmington Trust Company at 1100 North Market Street, Wilmington,
Delaware 19890.
SELLER
Household Auto Receivables Corporation. The seller has purchased the receivables
from Household Automotive Finance Corporation and will sell them to the issuer.
The seller will also own certain interests in the issuer. The address of the
Seller is 1111 Town Center Drive, Las Vegas, Nevada 89134.
SERVICER
Household Finance Corporation. The servicer is responsibile for servicing the
receivables 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 receivables 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 receivables in accordance with policies established
in consultation with the servicer. The address of the subservicer is 11452 El
Camino Real, San Diego, California 92130.
OWNER TRUSTEE
Wilmington Trust Company. The address of the owner trustee is 1100 North Market
Street, Wilmington, Delaware 19890.
INDENTURE TRUSTEE
The Chase Manhattan Bank. The address of the indenture trustee is 450 West 33rd
Street, New York, New York 10001.
THE TRUST ASSETS
The issuer will pledge assets to secure payments on the notes. The pledged
assets will include a pool of receivables, cash on deposit in a collection
account and a reserve account and other assets as described in detail elsewhere
in this prospectus.
RECEIVABLES
- - On the closing date, the seller will assign to the issuer a pool of
receivables and the right to receive payments under certain insurance
policies. The insurance policies provide
4
<PAGE>
coverage for loss, damage, theft, credit life, credit disability and other
insurance coverage with respect to the financed vehicle or the borrower. On
the closing date the issuer will pledge the receivables to the indenture
trustee as collateral for the notes. As of May 1, 1999 the aggregate principal
balance of the pool of receivables pledged as collateral was $966,830,520.51.
Payments on the notes will be made from payments on the pledged receivables
and payments received under related insurance policies.
- - The receivables will consist of non-prime retail installment sales contracts
secured by new and used automobiles, light 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 receivable will be more than 30 days delinquent as of May 1, 1999.
- - Each receivable 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 receivables and amounts recovered
when financed vehicles are repossessed and sold, after deducting expenses.
CUT-OFF DATE
The opening of business on May 1, 1999.
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 July 19, 1999.
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 issuer 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 June , 1999.
DENOMINATIONS
The issuer 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 issuer will distribute the amounts received on the receivables
and any other collections available as property of the issuer 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
5
<PAGE>
and Class A-4 noteholders in proportion to the interest due on each class.
PRINCIPAL DISTRIBUTIONS
On each payment date, the issuer 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 receivables between the first and last
day of a calendar month. Such principal payments will be paid to the Class A-1,
Class A-2, Class A-3 and Class A-4 Notes in "sequential pay" fashion, beginning
with the Class A-1 Notes, in each case, until the respective outstanding
principal amount of each class is paid in full.
THIS GENERAL DESCRIPTION OF DISTRIBUTIONS OF PRINCIPAL TO THE NOTES IS SUBJECT
TO CERTAIN TARGETS AND FLOORS. WE REFER YOU TO "DESCRIPTION OF THE
NOTES--PAYMENTS OF INTEREST", "--PAYMENTS OF PRINCIPAL" "--OVERCOLLATERALIZATION
AMOUNT" AND "--PAYMENT PRIORITIES" IN THIS PROSPECTUS FOR FURTHER INFORMATION
REGARDING THE PAYMENT OF INTEREST AND PRINCIPAL ON THE NOTES.
OVERCOLLATERALIZATION AMOUNT
As of the closing date, the overcollateralization amount will be equal to
$304,550,520.51 or 31.50% of the pool balance as of May 1, 1999. On any date,
the overcollateralization amount will equal 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.
RESERVE ACCOUNT
The owner trustee will hold the reserve account. An initial deposit of
$9,668,305.21 will be placed in the reserve account on the closing date. The
servicer will deposit collections received from the receivables 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) 3% of the principal balance
of the receivables at the end of last day of the calendar month preceding the
current payment date, and (b) $19,336,610.41, 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 to pay any fees due to the servicer
(provided the servicer is not Household Finance Corporation).
OPTIONAL REDEMPTION
On any payment date when the outstanding principal balance of the notes is less
than or equal to $66,228,000 (10% of the total principal value of the notes as
of June , 1999), the servicer or the seller may purchase the receivables from
the issuer. 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>
<S> <C>
Class A-1 July 17, 2000
Class A-2 May 17, 2002
Class A-3 June 17, 2003
Class A-4 April 17, 2006
</TABLE>
Final payment on the notes will probably be earlier than the scheduled maturity
date set forth above for the related class of notes.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes:
- - Dewey Ballantine LLP, special tax counsel to the issuer and counsel to the
underwriters, is of the opinion that the notes will be treated as debt and the
issuer will not be treated as an association (or publicly traded partnership)
6
<PAGE>
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" and is of the opinion that such 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, 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 issuer will not issue the notes unless they have been assigned the ratings
set forth below:
<TABLE>
<CAPTION>
RATING
----------------------------------------
CLASS STANDARD & POOR'S MOODY'S
- ---------------- ------------------- -------------------
<S> <C> <C>
A-1 A-1+ P-1
A-2 AAA Aaa
A-3 AAA Aaa
A-4 AAA Aaa
</TABLE>
- - You should know that the ratings could be lowered, qualified or withdrawn by
the rating agencies.
7
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS BEFORE DECIDING TO INVEST IN THE NOTES OFFERED BY THIS PROSPECTUS.
<TABLE>
<S> <C>
LIMITED ABILITY TO RESELL YOUR The notes will not be listed on any securities exchange
NOTES and there is currently no public market for the notes.
The underwriters expect, but are not obligated, to make
a market in the notes. If no public market develops, as
a noteholder, you may not be able to sell the notes you
purchased prior to maturity. There is no assurance that
any such market will be created or, if created, will
continue.
Transfers of the notes can only be made through The
Depository Trust Company, Cedel, Euroclear, and direct
and indirect participating organizations. You may not be
able to pledge a note as collateral to an entity or
person that does not participate in those transfer
systems. In addition, some investors may be unwilling to
purchase notes for which there is no physical
certificate.
PREPAYMENTS AND RELATED All of the receivables may be prepaid at any time
REINVESTMENT RISK MAY REDUCE without penalty. If a note is purchased at a discount
YIELD TO NOTEHOLDERS and repayment is slower than anticipated, it will result
in an actual yield that is less than the anticipated
yield. Additionally, if a note is purchased at a premium
and repayment is faster than anticipated, it will result
in a lower yield than anticipated.
Be aware that you bear the risk of reinvesting
unscheduled distributions resulting from prepayments of
the notes.
The rate of repayment of principal on the notes is
unpredictable because the rate of payment on the notes
will depend on, among other things, the rate of payment
on the underlying receivables. In addition to the
normally scheduled payments on the receivables, payments
may come from a number of different sources, including
amounts received from the seller or servicer to purchase
the receivables. Sources of payments will include the
following:
- payments (including prepayments) by borrowers;
- payments as a result of resale of repossessed
vehicles;
- payments as a result of exercise of the seller's or
servicer's options to repurchase the receivables when
the balance of the notes is $66,228,000 or less;
- payments due to loss, theft, destruction or other
casualty; and
- payments upon repurchases by the seller or servicer
due to a breach of certain representations and
warranties.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
The rate of prepayment and default of receivables may be
influenced by a variety of economic and other factors.
For example, changes in economic conditions, interest
rates and certain natural disasters such as floods,
hurricanes, earthquakes and tornadoes may affect
prepayments.
NON-PRIME RECEIVABLES WILL INCUR A loan is usually considered non-prime because the
HIGHER LOSSES borrower has limited income, past credit problems (e.g.,
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 automobile installment sales contracts
frequently finance the purchase of used vehicles.
Because the value of a used vehicle is more difficult to
determine, upon sale of a repossessed vehicles, a
greater loss may be incurred.
The added risk presented by non-prime receivables has
been considered in establishing the
overcollateralization and subordination levels
supporting payments on each class of notes. However,
there can be no assurance that the subordination levels
established will be adequate to prevent losses to some
or all of the noteholders.
SECURITY INTERESTS MAY NOT BE In connection with the sale and assignment of the
PERFECTED GIVING OTHERS SUPERIOR receivables to the issuer, security interests in the
RIGHTS TO THE TRUST ASSETS financed vehicles which have been assigned first, by the
subservicer, to the seller, and then by the seller to
the issuer, will be assigned by the issuer to the
indenture trustee. In most states, such an assignment
effectively conveys a security interest without
identifying the successive interest holder on a
vehicle's certificate of title. However, a security
interest in a motor vehicle registered in the states in
which a majority of financed vehicles underlying the
receivables are currently registered may be perfected
only by causing such vehicle's certificate of title to
be amended to note the security interest of the party
receiving the assignment. Such notation of a secured
party's security interest is generally effected in such
states by depositing with the applicable state highway
department, motor vehicle registrar or similar state
authority, the vehicle's certificate of title, an
application containing the name and address of the
secured party, and the necessary registration fees.
Due to the administrative expense and burden in doing
so, the certificates of title for the financed vehicles
will continue to be held by the subservicer. The
certificates of title will not be endorsed or amended to
identify the seller, issuer, owner trustee or indenture
trustee as a secured party. Because this will not be
done, the security interests of the issuer and the
indenture trustee may be defeated through fraud,
forgery,
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
negligence or error and will not be perfected in every
state. If it is determined that another person or entity
has a security interest in a vehicle that is superior to
the interest of the indenture trustee, depending upon
the circumstances, either the seller or the servicer
will be obligated to purchase the related receivable
from the issuer. If the seller or the servicer is not
capable of purchasing any affected receivable and the
overcollateralization and applicable subordination
provisions are not sufficient to ensure payments are
made to noteholders, payments could be delayed or
noteholders may incur a loss.
STATE AND FEDERAL LAW MAY AFFECT State and federal laws and regulations impose
THE ABILITY OF THE ISSUER TO requirements and restrictions relating to the
RECOUP THE FULL AMOUNT DUE ON origination, enforcement and collection of the
THE RECEIVABLES receivables. Violations of these laws and regulations
may limit recoveries of all or part of the principal and
interest due on the receivables.
The Issuer's ability to recoup the full amount due on a
receivable may be affected by violations of provisions
relating to:
- the failure to file financing statements to perfect
the issuer's or indenture trustee's security interest in
the vehicles;
- disclosure of financing terms to the borrower at the
time of origination;
- discrimination in the lending process;
- collection practices of debt collectors;
- use and reporting of information relating to the
borrower's credit experience; and
- the application of federal and state bankruptcy and
insolvency laws.
If a violation of a law or regulation existed at the
time a receivable was assigned to the issuer and that
violation cannot be corrected, the seller will be
obligated to purchase the affected receivable from the
issuer. If the seller is not capable of purchasing any
affected receivable and the overcollateralization or
applicable subordination provisions are not sufficient
to ensure payments are made to noteholders, noteholders
may be subject to delays in receiving payments and/or
losses.
INSOLVENCY OF THE SELLER OR In some circumstances, a bankruptcy of the seller or
SUBSERVICER MAY REDUCE OR DELAY subservicer may delay or reduce payments to noteholders.
PAYMENTS TO NOTEHOLDERS The subservicer will sell the receivables to the seller,
and the seller will in turn transfer the receivables to
the issuer. However, in the event of a bankruptcy of the
subservicer or
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
the seller, a court or bankruptcy trustee could conclude
the subservicer or seller still owns the receivables or
that the seller and subservicer should be considered one
entity for bankruptcy purposes. If a court or bankruptcy
trustee would reach these conclusions, you could
experience delays in payments or a loss on your
investment in the notes as a result of, among other
things:
- an "automatic stay" which prevents secured creditors
from exercising remedies against a debtor in bankruptcy
without permission from the court and provisions of
the U.S. Bankruptcy Code that permit substitution of
collateral in certain circumstances;
- certain tax or government liens on the seller's or
subservicer's property (that arose prior to the
transfer of a receivable to the trust) having a prior
claim on collections before the collections are used
to make payments on the notes; and
- the issuer not having a perfected security interest
in (a) one or more of the vehicles securing the
receivables or (b) any cash collections held by the
subservicer at the time that the subservicer becomes
the subject of a bankruptcy proceeding.
The seller and the subservicer have taken steps in
structuring the transactions described in this
prospectus to minimize the risk that a court would
consolidate the seller with the subservicer for
bankruptcy purposes and conclude that the sale of the
receivables to the seller was not a sale.
Counsel to the seller and the subservicer has advised
that based upon certain facts, assumptions and
qualifications, a court would not order a consolidation
of the seller and subservicer for bankruptcy purposes or
determine that the sale of the receivables to the seller
was actually a pledge rather than a sale.
NO RECOURSE AGAINST THE SELLER, The notes represent debt of the issuer secured primarily
SERVICER OR SUBSERVICER FOR by the receivables. If the payments on the receivables
PAYMENT ON THE NOTES and the other trust assets pledged to secure the notes
are insufficient to pay the notes in full, you have no
rights to obtain payment from the seller, servicer,
subservicer or any of their affiliates. No note will be
insured or guaranteed by the seller, servicer,
subservicer or any other person or entity. Consequently,
the noteholders must rely solely upon payments on the
receivables, recoveries on repossessed vehicles and
funds on deposit in the reserve account, note account
and collection account for repayment.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
GEOGRAPHIC CONCENTRATION OF Adverse economic conditions or other factors
RECEIVABLES MAY ADVERSELY AFFECT particularly affecting any state or region where a high
THE NOTES concentration of receivables is located could adversely
affect the notes. As of May 1, 1999, approximately
14.03% and 13.35% of the receivables (based on the
principal balance and mailing address of the borrowers)
were located in California and Texas, respectively. The
issuer is unable to determine and has no basis to
predict, with respect to any state or region, whether
any such events have occurred or may occur, or to what
extent any such events may affect the receivables or the
repayment of amounts due under the notes. The location
of the receivables by state (based upon borrower
address) is set out in the table beginning on page 20 of
this prospectus.
INSURANCE ON VEHICLES MAY NOT BE At the time the subservicer purchases installment sales
MAINTAINED contracts from dealers it requires that the borrower
obtain an insurance policy naming the subservicer as
beneficiary, and covers the risk of physical damage to
the vehicle. There can be no assurance that the borrower
will maintain the appropriate coverage on the vehicle.
It is not expected that the subservicer will 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
payments on the contract and the overcollateralization
or applicable subordination provisions are not
sufficient to ensure payments are made to noteholders,
noteholders may be subject to a delay in receiving
payments or a loss on their investment in the notes.
LIMITATIONS OF NOTE RATINGS On the closing date at least two nationally recognized
statistical rating organizations will rate the notes.
Ratings address the likelihood that the notes will
receive principal and interest payments in accordance
with the terms of the notes. The ratings depend
primarily on an assessment by the rating agencies of the
credit quality of the receivables and the credit support
provided by the overcollateralization described in this
prospectus. The initial assigned ratings for each class
of Notes are listed on page 7 of this prospectus.
Ratings are not recommendations to purchase, hold or
sell the notes as they do not consider market price or
suitability for particular investors. We cannot assure
you that any rating will continue for any period of time
or that a rating will not be reduced or withdrawn by a
rating agency if, in its judgment, circumstances so
require. A reduction or withdrawal of a rating may have
an adverse effect on the market price or your ability to
resell a note.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
PREPAYMENT OF NOTES AND CHANGE IN Upon the occurrence of an event of default under the
ORDER OF PRIORITY OF PAYMENTS indenture, the indenture trustee may, or if so directed
FOLLOWING AN EVENT OF DEFAULT by noteholders of two-thirds of the outstanding
UNDER THE INDENTURE principal of the notes, will, order the issuer to
immediately repay the notes. If this occurs, the Class A
Notes will first, receive distributions of interest
ratably, without preference or priority, and second,
receive distributions of principal ratably, without
preference or priority.
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;
- certain declared breaches of an agreement relating to
the Series 1999-1 Notes; and
- certain actions relating to an admission or court
declaration of the issuer's insolvency or bankruptcy.
RISKS ASSOCIATED WITH YEAR 2000 The servicer and subservicer are in the process of
COMPLIANCE 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 receivables and could cause a delay in
payments to you.
</TABLE>
13
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Trust from the sale of the notes
offered by this prospectus (the "Series 1999-1 Notes" or the "Notes") will be
used to pay Household Auto Receivables Corporation the purchase price for the
Receivables, to fund the initial deposit in the Reserve Account (as defined
herein) and to obtain the release of a security interest maintained against
certain of the Receivables held in warehouse funding facility prior to the
Closing Date.
THE ISSUER
GENERAL
The Issuer, Household Automotive Trust III, will be a Delaware business
trust formed under the laws of the State of Delaware pursuant to a Trust
Agreement, dated as of June 1, 1999, between the Seller and the Owner Trustee
(the "Trust Agreement") for the purpose of engaging in the transactions
described in this prospectus. The Issuer will not engage in any activity other
than (i) acquiring, holding and managing the Receivables and the other assets of
the Issuer and proceeds therefrom, (ii) issuing notes in private and public
offerings, including the issuance of the Notes, (iii) making payments on the
Notes and (iv) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith.
The Issuer's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company as Owner Trustee, at the address listed below under
"--The Owner Trustee."
THE OWNER TRUSTEE
Wilmington Trust Company, which will be the Owner Trustee under the Trust
Agreement, is a Delaware banking corporation and its principal offices are
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001. The Owner Trustee will perform limited administrative functions
under the Trust Agreement. The Owner Trustee's liability in connection with the
issuance and sale of the Notes is limited solely to the express obligations of
the Owner Trustee set forth in the Trust Agreement and the Master Sale and
Servicing Agreement, to be dated as of June 1, 1999, among the Issuer, the
Seller, the Servicer and the Indenture Trustee (the "Sale and Servicing
Agreement").
THE INDENTURE TRUSTEE
The Chase Manhattan Bank will be the Indenture Trustee under an Indenture,
dated as of June 1, 1999, among the Issuer, the Servicer and The Chase Manhattan
Bank, as indenture trustee. The Chase Manhattan Bank is a New York banking
corporation, the principal offices of which are located at 450 West 33rd Street,
8th Floor, New York, New York 10001.
THE SELLER
Household Auto Receivables Corporation (the "Seller") was incorporated under
the laws of the State of Nevada on March 25, 1998 and is a wholly-owned special
purpose subsidiary of Household Finance Corporation ("HFC"). The Seller was
organized for the limited purposes of engaging in the type of transactions
described herein and other similar transactions and any activities incidental to
and necessary or convenient for the accomplishment of such purposes. Neither
HFC's nor the Seller's board of directors intends to change the business purpose
of the Seller. The Seller's principal executive office
14
<PAGE>
is located at 1111 Town Center Drive, Las Vegas, Nevada 89134. The Seller is not
subject to any legal proceedings.
The Seller has purchased or will purchase non-prime retail installment sales
contracts secured by new and used automobiles, light trucks and vans (the
"Receivables") from Household Automotive Finance Corporation (the
"Subservicer"). The Seller will sell each Receivable to the Issuer at a price
equal to its principal balance. The Receivables will be subserviced by the
Subservicer on behalf of HFC as Servicer. The Servicer will be entitled to the
Servicing Fee and any Supplemental Servicing Fees, on behalf of itself and the
Subservicer.
THE SERVICER
Household Finance Corporation was incorporated in Delaware in 1925, as
successor to an enterprise which traces its origin through the same ownership to
an office established in 1878. HFC will be responsible for acting as the
Servicer for the Receivables. The address of its principal executive office is
2700 Sanders Road, Prospect Heights, Illinois 60070. HFC is a subsidiary of
Household International, Inc. ("Household").
HFC and its subsidiaries offer a diversified range of financial services.
The principal product of HFC's consumer financial services business is the
making or purchasing of cash loans and sales finance contracts, including home
equity loans secured by first and second mortgages, automotive retail
installment sales finance contracts and unsecured credit advances (including
revolving and closed-end personal loans) to middle-income consumers in the
United States. Loans are made through branch lending offices and through direct
marketing efforts. Through banking subsidiaries, HFC also offers both
MasterCard* and VISA* credit cards to residents throughout the United States.
Through its subsidiaries, HFC also purchases and services revolving charge
card accounts originated by merchants. The accounts result from consumer
purchases of goods and services from the originating merchant. Closed-end sales
contracts are also directly originated by an HFC subsidiary.
Where applicable laws permit, HFC offers credit life and credit accident,
health and disability insurance to its customers. Such insurance is generally
written directly by, or reinsured with, one of HFC's insurance affiliates.
HFC also operates a cooperative program with H&R Block Tax Services, Inc.
and certain of its franchises and independent tax preparers to provide loans to
borrowers who are entitled to tax refunds and who electronically file their
income tax returns with the IRS.
As of March 31, 1999, HFC had approximately $43.8 billion in total assets,
approximately $38.0 billion in total liabilities and approximately $5.8 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
Household Automotive Finance Corporation is a Delaware corporation and the
surviving entity in a merger between a subsidiary of Household and ACC Consumer
Finance Corporation ("ACC"). The merger closed on October 21, 1997 and ACC
changed its name to Household Automotive Finance Corporation shortly thereafter.
ACC was the successor to a California corporation also named ACC
- ------------------------
* Master Card and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.
15
<PAGE>
Consumer Finance Corporation which was formerly named American Credit
Corporation. The principal executive offices of the Subservicer are located at
11452 El Camino Real, Suite 400, San Diego, CA 92130.
The Subservicer is an automobile finance company specializing in the
indirect financing of automotive retail installment sales contracts to consumers
with non-prime credit. Through a subsidiary, the Subservicer also offers loans
directly to consumers. The indirect lending program provides automobile dealers
with an alternative source of financing for those consumers who typically do not
qualify for financing under the dealer's traditional financing sources. Under
this program, retail installment sales contracts are purchased by the
Subservicer from originating automobile dealers.
The Subservicer is licensed, where required, to purchase and service retail
installment sales contracts. The Subservicer is not subject to any legal
proceedings which are expected to have a material impact on its business or
financial condition.
THE TRUST ASSETS
GENERAL
The "Trust Assets" consist of the following: (a) the Receivables; (b) all
amounts paid or payable under the Receivables after the Cut-Off Date; (c)
security interests in the financed vehicles granted by the borrowers; (d) an
assignment of the Subservicer's rights against automobile dealers ("Dealers")
under agreements between the Subservicer and the Dealers (the "Dealer
Agreements"); (e) an assignment of the right to receive proceeds from claims on
loss, physical damage, credit life, disability, theft, mechanical breakdown, or
similar insurance policies covering the financed vehicles or the borrowers; (f)
all funds on deposit from time to time in accounts maintained by the Indenture
Trustee pursuant to the Sale and Servicing Agreement (the "Collection Account")
and pursuant to the Indenture (the "Reserve Account"); (g) an assignment of all
rights and benefits under a Master Receivables Purchase Agreement, dated as of
June 1, 1999 between the Seller and the Subservicer and a substantially similar
agreement dated as of November 1, 1998 (collectively, the "Receivables Purchase
Agreement") and all supplements thereto; (h) all documents related to the
Receivables, including the original contracts, documents evidencing insurance,
original credit applications and original certificates of title or copies of
applications therefor, (i) a share of the preferred stock of the Seller (the
"Preferred Stock"); and (j) all proceeds of the foregoing.
The Receivables were originated by Dealers in accordance with the
Subservicer's requirements under agreements with Dealers, 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 under a Dealer Agreement.
All of the Receivables were sold by the Subservicer to the Seller pursuant
to the Receivables Purchase Agreement and by the Seller to the Issuer pursuant
to the Sale and Servicing Agreement. The Receivables were originated by Dealers
and purchased by the Subservicer in the ordinary course of the Subservicer's
business pursuant to its finance programs and underwriting standards. The files
relating to the Receivables will be held by the Subservicer as custodian for the
Indenture Trustee.
ELIGIBILITY CRITERIA
The Receivables were selected according to several criteria, including the
following: each Receivable (i) was originated by a Dealer located in the United
States to a borrower who was a
16
<PAGE>
resident of the United States with a mailing address in the United States, (ii)
has a contractual annual percentage rate ("APR") of not less than 10.5% or more
than 27%, (iii) provides for level monthly payments which provide interest at
the APR and fully amortize the amount financed over an original term no greater
than 72 months, (iv) is not more than 30 days past due as of the Cut-Off Date,
(v) is attributable to the purchase of a new or used automobile, light duty
truck or van, (vi) as of the Cut-Off Date has a remaining term of not more than
72 months and (vii) had an original principal balance of at least $3,000 and not
more than $27,000. No selection procedures adverse to the Noteholders were
utilized in selecting the Receivables to be conveyed to the Issuer.
TERMS OF THE RECEIVABLES
Each Receivable provides for the allocation of payments according to (i) the
simple interest method ("Simple Interest Receivables") or (ii) the "sum of
periodic balances" or "sum of monthly payments" method ("Actuarial
Receivables"). Except as otherwise described, the scheduled payment on each
Receivable is a fixed level monthly payment which will amortize the full amount
of the Receivable over its term assuming, in the case of each Simple Interest
Receivable, that the borrower does not pay any installment before or after its
scheduled due date.
Payments on Simple Interest Receivables will be applied first to interest
accrued through the date immediately preceding the date of payment and then to
unpaid principal. Accordingly, if a borrower pays an installment before its due
date, the portion of the payment allocable to interest for the payment period
will be less than if the payment had been made on the due date, the portion of
the payment applied to reduce the principal balance will be correspondingly
greater, and the principal balance will be amortized more rapidly than
scheduled. Conversely, if a borrower pays an installment after its due date, the
portion of the payment allocable to interest for the payment period will be
greater than if the payment had been made on the due date, the portion of the
payment applied to reduce the principal balance will be correspondingly less,
and the principal balance will be amortized more slowly than scheduled, in which
case a larger portion of the principal balance may be due on the final scheduled
payment date.
An Actuarial Receivable provides for the payment by the borrower of a
specified total amount of payments, payable in monthly installments on the
related due date, which total represents the principal amount financed and
finance charges in an amount calculated on the basis of a stated APR for the
term of such Receivable. Notwithstanding the foregoing, the rate at which such
finance charge accrues and, correspondingly, the amount of each scheduled
payment allocated to reduction of the outstanding principal balance of an
Actuarial Receivable is calculated in accordance with the actuarial method and
all payments (other than partial prepayments) received by the Servicer on or in
respect of the Actuarial Receivables will be allocated pursuant to the Sale and
Servicing Agreement on an actuarial basis. Collections on an Actuarial
Receivable made during a Collection Period will be applied first, to the
scheduled payment on such Actuarial Receivable, and second, to any late fees
accrued with respect to such Actuarial Receivable.
17
<PAGE>
COMPOSITION OF THE RECEIVABLES
Set forth below is a description of the material characteristics of the
Receivables as of the Cut-Off Date:
<TABLE>
<CAPTION>
TOTAL POOL OF RECEIVABLES
-------------------------
<S> <C>
Original Pool Balance.................................................................. $966,830,520.51
Number of Receivables.................................................................. 69,189
Average Principal Balance(1)........................................................... $13,973.76
Range of Principal Balances.......................................................... $3,083.50 to $26,544.98
Average Original Amount Financed(2).................................................... $14,327.08
Range of Original Amounts Financed................................................... $3,083.50 to $26,998.46
Weighted Average APR(3)................................................................ 19.61%
Range of Original APRs............................................................... 12.75% to 27.00%
Weighted Average Original Term(3)...................................................... 63.14 months
Range of Original Terms.............................................................. 20 months to 72 months
Weighted Average Remaining Term(3)..................................................... 60.23 months
Range of Remaining Terms............................................................. 18 months to 72 months
Weighted Average Months of Seasoning(3)................................................ 2.91 months
Range of Months of Seasoning......................................................... 0 months to 22 months
Number of Receivables more than 30 days delinquent..................................... None
</TABLE>
- ------------------------
(1) Pool Balance as of the Cut-Off Date divided by total number of Receivables.
(2) Aggregate amount financed divided by total number of Receivables.
(3) Weighted by Principal Balance as of the Cut-Off Date.
18
<PAGE>
COMPOSITION OF RECEIVABLES BY PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PRINCIPAL NUMBER OF % OF PRINCIPAL % OF POOL BY
BALANCE RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- ----------------------------------------------- ----------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C>
$3,000 to 4,000............................... 71 0.10% $ 257,420.23 0.03%
4,001 to 5,000............................... 186 0.27 850,455.62 0.09
5,001 to 6,000............................... 419 0.61 2,334,309.58 0.24
6,001 to 7,000............................... 817 1.18 5,343,637.14 0.55
7,001 to 8,000............................... 1,467 2.12 11,077,948.93 1.15
8,001 to 9,000............................... 2,524 3.65 21,535,209.26 2.23
9,001 to 10,000............................... 3,915 5.66 37,277,031.61 3.86
10,001 to 11,000............................... 5,454 7.88 57,375,948.59 5.93
11,001 to 12,000............................... 7,059 10.20 81,297,132.55 8.41
12,001 to 13,000............................... 8,648 12.49 108,249,857.50 11.19
13,001 to 14,000............................... 7,771 11.22 104,765,234.80 10.83
14,001 to 15,000............................... 6,052 8.75 87,671,329.38 9.07
15,001 to 16,000............................... 5,168 7.47 80,047,219.18 8.28
16,001 to 17,000............................... 4,377 6.33 72,139,768.10 7.46
17,001 to 18,000............................... 3,968 5.74 69,416,722.61 7.18
18,001 to 19,000............................... 3,527 5.10 65,156,572.46 6.74
19,001 to 20,000............................... 2,683 3.88 52,238,515.89 5.40
20,001 to 21,000............................... 2,025 2.93 41,446,449.43 4.29
21,001 to 22,000............................... 1,525 2.20 32,752,126.26 3.39
22,001 to 23,000............................... 744 1.08 16,717,185.28 1.73
23,001 to 24,000............................... 485 0.70 11,379,822.43 1.18
24,001 to 25,000............................... 231 0.33 5,636,047.91 0.58
25,001 to 26,000............................... 62 0.09 1,575,375.81 0.16
26,001 to 27,000............................... 11 0.02 289,199.96 0.03
----------- ----------- ----------------- ------
Total...................................... 69,189 100.00% $ 966,830,520.51 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
19
<PAGE>
COMPOSITION BY APR OF THE RECEIVABLES
(AS OF CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
APR RANGE RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- ------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
12.00 to 12.99%.................................. 294 0.42% $ 5,172,361.49 0.53%
13.00 to 13.99................................... 73 0.11 1,375,413.60 0.14
14.00 to 14.99................................... 250 0.36 4,461,054.79 0.46
15.00 to 15.99................................... 1,713 2.48 28,660,744.49 2.97
16.00 to 16.99................................... 2,261 3.27 40,067,231.37 4.15
17.00 to 17.99................................... 14,495 20.95 222,782,738.72 23.04
18.00 to 18.99................................... 8,883 12.84 132,970,699.51 13.75
19.00 to 19.99................................... 7,607 10.99 107,732,609.00 11.14
20.00 to 20.99................................... 21,131 30.54 276,086,148.47 28.56
21.00 to 21.99................................... 5,536 8.00 68,775,470.49 7.11
22.00 to 22.99................................... 4,796 6.93 56,681,531.81 5.86
23.00 to 23.99................................... 747 1.08 8,173,122.31 0.85
24.00 to 24.99................................... 1,281 1.86 12,832,942.30 1.33
25.00 to 25.99................................... 107 0.15 951,701.81 0.10
26.00 to 27.00................................... 15 0.02 106,750.35 0.01
----------- ----------- ----------------- ------
Total........................................ 69,189 100.00% $ 966,830,520.51 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
COMPOSITION BY INTEREST ACCRUAL METHOD
(AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
INTEREST ACCRUAL METHOD RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL OUTSTANDING
- ---------------------------------------------- ----------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Actuarial..................................... 3,501 5.06% $ 44,994,120.25 4.65%
Simple Interest............................... 65,688 94.94 921,836,400.26 95.35
----------- ----------- ----------------- ------
Total..................................... 69,189 100.00% $ 966,830,520.51 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
COMPOSITION BY STATE OF RESIDENCE
(AS OF CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
LOCATION OF MAILING ADDRESS OF BORROWER RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- ------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama.......................................... 71 0.10% $ 1,000,040.68 0.10%
Alaska........................................... 4 0.01 61,570.39 0.01
Arizona.......................................... 1,177 1.70 16,010,459.51 1.66
Arkansas......................................... 241 0.35 3,366,431.74 0.35
California....................................... 9,734 14.08 135,585,406.53 14.03
Colorado......................................... 529 0.76 6,879,505.67 0.71
Connecticut...................................... 15 0.02 200,955.46 0.02
Delaware......................................... 422 0.61 5,556,844.67 0.57
District of Columbia............................. 314 0.45 4,471,020.65 0.46
Florida.......................................... 6,743 9.76 96,444,490.16 9.98
Georgia.......................................... 4,434 6.41 60,386,664.86 6.25
Hawaii........................................... 4 0.01 54,368.91 0.01
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
LOCATION OF MAILING ADDRESS OF BORROWER RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- ------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Idaho............................................ 65 0.09 792,873.22 0.08
Illinois......................................... 3,119 4.51 43,960,282.35 4.55
Indiana.......................................... 792 1.14 10,957,677.84 1.13
Iowa............................................. 330 0.48 4,389,118.49 0.45
Kansas........................................... 381 0.55 4,931,820.78 0.51
Kentucky......................................... 1,542 2.23 20,385,102.85 2.11
Louisiana........................................ 1,081 1.56 14,021,286.41 1.45
Maine............................................ 13 0.02 161,491.10 0.02
Maryland......................................... 2,526 3.65 36,119,080.32 3.74
Massachusetts.................................... 138 0.20 1,782,505.20 0.18
Michigan......................................... 1,911 2.76 26,135,581.93 2.70
Minnesota........................................ 733 1.06 9,898,619.88 1.02
Mississippi...................................... 1,060 1.53 14,402,780.80 1.49
Missouri......................................... 1,019 1.47 13,228,815.49 1.37
Montana.......................................... 47 0.07 587,052.99 0.06
Nebraska......................................... 370 0.53 4,817,123.97 0.50
Nevada........................................... 1,136 1.64 15,370,307.74 1.59
New Hampshire.................................... 10 0.01 106,202.38 0.01
New Jersey....................................... 1,241 1.79 16,377,410.74 1.69
New Mexico....................................... 383 0.55 5,258,907.93 0.54
New York......................................... 1,457 2.11 19,146,976.26 1.98
North Carolina................................... 4,210 6.08 61,139,052.73 6.32
North Dakota..................................... 27 0.04 410,991.04 0.04
Ohio............................................. 1,579 2.28 21,275,529.38 2.20
Oklahoma......................................... 881 1.27 11,673,740.94 1.21
Oregon........................................... 162 0.23 2,044,714.54 0.21
Pennsylvania..................................... 2,435 3.52 33,565,731.55 3.47
Rhode Island..................................... 14 0.02 194,989.24 0.02
South Carolina................................... 1,500 2.17 20,453,719.14 2.12
South Dakota..................................... 22 0.03 302,625.42 0.03
Tennessee........................................ 3,433 4.96 47,001,375.83 4.86
Texas............................................ 8,456 12.23 128,973,600.76 13.35
Utah............................................. 279 0.40 3,861,415.51 0.40
Vermont.......................................... 1 0.00 8,637.75 0.00
Virginia......................................... 1,799 2.60 24,804,191.86 2.57
Washington....................................... 441 0.64 5,836,305.67 0.60
West Virginia.................................... 640 0.93 9,033,927.09 0.93
Wisconsin........................................ 249 0.36 3,123,719.63 0.32
Wyoming.......................................... 19 0.03 277,474.53 0.03
----------- ----------- ----------------- ------
Total........................................ 69,189 100.00% $ 966,830,520.51 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
21
<PAGE>
COMPOSITION BY REMAINING TERM OF THE RECEIVABLES (AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
REMAINING TERM RANGE (IN MONTHS) RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL BALANCE
- ------------------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
18 to 23......................................... 173 0.25% $ 1,006,153.82 0.10%
24 to 29......................................... 146 0.21 999,229.35 0.10
30 to 35......................................... 1,223 1.77 9,552,992.42 0.99
36 to 41......................................... 633 0.91 5,755,213.93 0.60
42 to 47......................................... 4,040 5.84 41,494,511.85 4.29
48 to 53......................................... 3,608 5.21 43,913,303.35 4.54
54 to 59......................................... 32,970 47.66 437,166,617.28 45.22
60 to 65......................................... 7,603 10.99 106,811,133.81 11.05
66 to 71......................................... 15,628 22.59 265,438,238.95 27.45
72............................................... 3,165 4.57 54,693,125.75 5.66
----------- ----------- ----------------- ------
Total........................................ 69,189 100.00% $ 966,830,520.51 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
COMPOSITION OF RECEIVABLES BY TYPE OF FINANCED VEHICLE
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL % OF POOL BY
TYPE OF FINANCING RECEIVABLES RECEIVABLES OUTSTANDING PRINCIPAL OUTSTANDING
- ---------------------------------------------- ----------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
New........................................... 13,178 19.05% $ 220,902,147.48 22.85%
Used.......................................... 56,011 80.95 745,928,373.03 77.15
----------- ----------- ----------------- ------
Total..................................... 69,189 100.00% $ 966,830,520.51 100.00%
----------- ----------- ----------------- ------
----------- ----------- ----------------- ------
</TABLE>
THE RESERVE ACCOUNT
An initial deposit of $9,668,305.21 (1% of the Pool Balance as of the
Cut-Off Date) will be placed in an account (the "Reserve Account"). The Reserve
Account will be increased on each Payment Date by the deposit in the Reserve
Account of amounts remaining after payments to Noteholders and any fees then
payable pursuant to the priorities set forth in "Description of the
Notes--Payment Priorities," until the amount on deposit therein equals the
Targeted Reserve Account Balance. Amounts in the Reserve Account on any Payment
Date (after giving effect to all payments to be made to the Servicer and the
Noteholders on such Payment Date) in excess of the Targeted Reserve Account
Balance for such Payment Date will be paid, 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 master servicer other than HFC, and to make
required distributions on the Notes to the extent funds are not otherwise
available, as described herein. See "Description of the Notes-- Payment
Priorities".
THE PREFERRED STOCK
The Trust Assets include one share of preferred stock of the Seller (the
"Preferred Stock"). The Preferred Stock has a par value of $1.00 and is
designated the "Class SV Preferred Stock". Issuance of the Preferred Stock to
the Issuer is intended to prevent the Seller from instituting any of the
Seller's Bankruptcy Initiatives described below and will have no impact on the
bankruptcy remoteness of the Issuer. As discussed in "Risk Factors--Insolvency
of the Seller or Subservicer May Reduce or Delay
22
<PAGE>
Payments to Noteholders", a bankruptcy of the Seller may reduce, delay or
prevent payments to Noteholders. In March 1998, one share of Preferred Stock was
issued to Household Automobile Revolving Trust I. In December 1998, one share of
Preferred Stock was issued to Household Automotive Trust II. Upon formation of
the Issuer, one share of Preferred Stock also will be issued to the Issuer.
Wilmington Trust Company also acts as owner trustee to each of the trusts. As
the Seller sponsors other trusts to issue notes backed by other pools of
automotive retail installment sales contracts, an additional share of Preferred
Stock will be issued to each such trust. Pursuant to the Articles of
Incorporation of the Seller (included as an exhibit to the Registration
Statement of which this prospectus forms a part), the sole rights of the holders
of the Preferred Stock are to (a) vote in the event the Seller desires to:
institute proceedings to be adjudicated insolvent, consent to the institution of
any bankruptcy or insolvency case or petition, make an assignment for the
benefit of creditors, or admit in writing its inability to pay its debts as they
become due (collectively, the "Seller's Bankruptcy Initiatives"), and (b)
receive $1.00 upon liquidation of the Seller. The unanimous affirmative vote of
the holders of the Preferred Stock is required to approve any of the Seller's
Bankruptcy Initiatives. Holders of the Preferred Stock of the Seller have no
other rights, including the right to receive dividends or to vote on any other
matter.
Pursuant to the Issuer's pledge of its interest in the Trust Assets, the
Indenture Trustee has the exclusive authority to vote the interest of the Issuer
in the Preferred Stock. In the Indenture, the Indenture Trustee covenants that
it will not consent to any of the Seller's Bankruptcy Initiatives. The
provisions of Household Automobile Revolving Trust I and the notes issued by
such trust as they relate to the Preferred Stock, the voting rights related
thereto and the covenants with respect to voting of such shares are identical to
the provisions applicable to the Issuer and the Notes. It is expected that each
trust sponsored by the Seller and each series of notes issued by such trusts
will be structured with the same provisions. As a result, regardless of how many
shares of Preferred Stock are outstanding, it is expected that all shares of
Preferred Stock will be voted to prevent the Seller's Bankruptcy Initiatives.
However, because unanimous consent of the holders of the Preferred Stock is
required to approve any of the Seller's Bankruptcy Initiatives, the holders of
the Notes will be able to unilaterally prevent the implementation of the
Seller's Bankruptcy Initiatives.
YIELD AND PREPAYMENT CONSIDERATIONS
All the Receivables are prepayable at any time. If prepayments are received
on the Receivables, the actual weighted average life of the Receivables may be
shorter than the scheduled weighted average life (i.e., the scheduled weighted
average life assumes that payments will be made as scheduled, and that no
prepayments will be made). (For this purpose, the term "prepayments" also
includes liquidations due to default, as well as receipt of proceeds from credit
life, credit disability, and casualty insurance policies.) Weighted average life
means the average amount of time during which each dollar of principal of a
Receivable is outstanding.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social, and other factors, including the fact that a borrower may not
sell or transfer a financed vehicle without the consent of 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 Receivables. 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.
23
<PAGE>
Any reinvestment risks (i.e., that a Noteholder will not be able to reinvest
amounts received in payment on the Notes at interest rates that are greater than
or equal to the applicable Note Rate) resulting from a faster or slower
incidence of prepayment of Receivables will be borne by owners of beneficial
interests in the Notes (the "Note Owners").
The rate of payment of principal of each class of Notes will depend on the
rate of payment (including prepayments) of the Principal Balance of the
Receivables. As a result, final payment of each class of Notes could occur
significantly earlier than the Final Scheduled Payment Date for such class.
Reinvestment risk associated with early payment of the Notes will be borne
exclusively by the Noteholders.
Prepayments on automobile receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus, the Absolute
Prepayment Model ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at the
same rate and that each receivable in each month of its life will either be paid
as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the Receivables.
The table captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" (the "ABS Table") has been prepared on the basis of the
following assumptions: (i) the Receivables prepay in full at the specified
constant percentage of ABS monthly, with no defaults, losses or repurchases;
(ii) each scheduled monthly payment on the Receivables is made on the last day
of each month and each month has 30 days; (iii) the initial principal amount of
each class of Notes are as set forth on the cover page hereof; (iv) interest
accrues during each Interest Period at the following assumed coupon rates: Class
A-1 Notes, 5.07625%; Class A-2 Notes, 5.67400%; Class A-3 Notes, 6.25000%; and
Class A-4 Notes, 6.45000%; (v) payments on the Notes are made on the 17th day of
each month whether or not a Business Day; (vi) the Notes are purchased on the
Closing Date; (vii) the scheduled monthly payment for each Receivable has been
calculated on the basis of the assumed characteristics set forth in the table
below, such that each Receivable will amortize in amounts sufficient to repay
the Principal Balance of such Receivable by its indicated remaining term to
maturity; and (viii) the Seller or the Servicer exercise the option to purchase
the Receivables on the Payment Date on which the Aggregate Note Principal
Balance on the prior Payment Date, minus the decline in the Pool Balance for the
related Collection Period, is less than $66,228,000.
The ABS Table also assumes that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each such pool having the
following characteristics and that the level of scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, gross APR,
original number of scheduled payments and remaining number of scheduled payments
as of
24
<PAGE>
the Cut-Off Date) will be such that each pool will be fully amortized by the end
of its remaining term to maturity.
<TABLE>
<CAPTION>
REMAINING
TERM
AGGREGATE TO MATURITY SEASONING
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- ----------- ----------------- --------- ----------------- -------------------
<S> <C> <C> <C> <C>
1 $ 1,177,621.58 21.269% 21 3
2 12,074,533.02 21.082 33 3
3 54,202,163.79 20.794 45 3
4 561,082,602.81 19.916 57 3
5 338,293,599.31 18.863 69 3
</TABLE>
The ABS Table indicates, based on the assumptions set forth above, the
percentages of the initial principal amount of each class of Notes that would be
outstanding after each of the Payment Dates shown at various percentages of ABS
and the corresponding weighted average lives of such Notes. The actual
characteristics and performance of the Receivables will differ from the
assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivables will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables could produce
slower or faster principal distributions than indicated in the ABS Table at the
various constant percentages of ABS specified, even if the original and
remaining terms to maturity of the Receivables are as assumed. Any difference
between such assumptions and the actual characteristics and performance of the
Receivables, including actual prepayment experience or losses, will affect the
percentages of initial balances outstanding over time and the weighted average
lives of each class of Notes.
25
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE
AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------------ ------------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- ------------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial 100 100 100 100 100 100 100 100
7/17/99 77 70 60 49 100 100 100 100
8/17/99 61 54 44 33 100 100 100 100
9/17/99 54 45 33 18 100 100 100 100
10/17/99 47 37 21 2 100 100 100 100
11/17/99 41 28 9 0 100 100 100 90
12/17/99 34 19 0 0 100 100 98 78
1/17/00 27 11 0 0 100 100 89 66
2/17/00 20 2 0 0 100 100 80 54
3/17/00 13 0 0 0 100 95 71 43
4/17/00 7 0 0 0 100 88 62 32
5/17/00 0 0 0 0 100 81 53 21
6/17/00 0 0 0 0 94 74 44 10
7/17/00 0 0 0 0 89 67 36 0
8/17/00 0 0 0 0 83 60 28 0
9/17/00 0 0 0 0 77 53 20 0
10/17/00 0 0 0 0 72 47 12 0
11/17/00 0 0 0 0 66 40 4 0
12/17/00 0 0 0 0 60 34 0 0
1/17/01 0 0 0 0 54 27 0 0
2/17/01 0 0 0 0 48 21 0 0
3/17/01 0 0 0 0 43 15 0 0
4/17/01 0 0 0 0 37 8 0 0
5/17/01 0 0 0 0 32 2 0 0
6/17/01 0 0 0 0 26 0 0 0
7/17/01 0 0 0 0 21 0 0 0
8/17/01 0 0 0 0 15 0 0 0
9/17/01 0 0 0 0 9 0 0 0
10/17/01 0 0 0 0 4 0 0 0
11/17/01 0 0 0 0 0 0 0 0
12/17/01 0 0 0 0 0 0 0 0
1/17/02 0 0 0 0 0 0 0 0
2/17/02 0 0 0 0 0 0 0 0
3/17/02 0 0 0 0 0 0 0 0
4/17/02 0 0 0 0 0 0 0 0
5/17/02 0 0 0 0 0 0 0 0
6/17/02 0 0 0 0 0 0 0 0
7/17/02 0 0 0 0 0 0 0 0
8/17/02 0 0 0 0 0 0 0 0
9/17/02 0 0 0 0 0 0 0 0
10/17/02 0 0 0 0 0 0 0 0
11/17/02 0 0 0 0 0 0 0 0
12/17/02 0 0 0 0 0 0 0 0
1/17/03 0 0 0 0 0 0 0 0
2/17/03 0 0 0 0 0 0 0 0
3/17/03 0 0 0 0 0 0 0 0
4/17/03 0 0 0 0 0 0 0 0
5/17/03 0 0 0 0 0 0 0 0
6/17/03 0 0 0 0 0 0 0 0
7/17/03 0 0 0 0 0 0 0 0
8/17/03 0 0 0 0 0 0 0 0
9/17/03 0 0 0 0 0 0 0 0
10/17/03 0 0 0 0 0 0 0 0
11/17/03 0 0 0 0 0 0 0 0
12/17/03 0 0 0 0 0 0 0 0
1/17/04 0 0 0 0 0 0 0 0
Weighted Average Life in 0.4 0.3 0.2 0.2 1.7 1.3 1.0 0.7
Years(2)
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES
------------------------------ ------------------------------
PAYMENT DATE 0.5% 1.0% 1.7% 2.5% 0.5% 1.0% 1.7% 2.5%
- ------------------------- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial 100 100 100 100 100 100 100 100
7/17/99 100 100 100 100 100 100 100 100
8/17/99 100 100 100 100 100 100 100 100
9/17/99 100 100 100 100 100 100 100 100
10/17/99 100 100 100 100 100 100 100 100
11/17/99 100 100 100 100 100 100 100 100
12/17/99 100 100 100 100 100 100 100 100
1/17/00 100 100 100 100 100 100 100 100
2/17/00 100 100 100 100 100 100 100 100
3/17/00 100 100 100 100 100 100 100 100
4/17/00 100 100 100 100 100 100 100 100
5/17/00 100 100 100 100 100 100 100 100
6/17/00 100 100 100 100 100 100 100 100
7/17/00 100 100 100 100 100 100 100 100
8/17/00 100 100 100 88 100 100 100 100
9/17/00 100 100 100 77 100 100 100 100
10/17/00 100 100 100 65 100 100 100 100
11/17/00 100 100 100 54 100 100 100 100
12/17/00 100 100 96 44 100 100 100 100
1/17/01 100 100 87 33 100 100 100 100
2/17/01 100 100 78 23 100 100 100 100
3/17/01 100 100 69 13 100 100 100 100
4/17/01 100 100 61 3 100 100 100 100
5/17/01 100 100 53 0 100 100 100 94
6/17/01 100 95 45 0 100 100 100 86
7/17/01 100 88 37 0 100 100 100 78
8/17/01 100 81 29 0 100 100 100 71
9/17/01 100 74 21 0 100 100 100 63
10/17/01 100 67 14 0 100 100 100 56
11/17/01 98 61 7 0 100 100 100 50
12/17/01 91 54 0 0 100 100 100 43
1/17/02 84 47 0 0 100 100 94 0
2/17/02 78 40 0 0 100 100 88 0
3/17/02 71 34 0 0 100 100 82 0
4/17/02 65 27 0 0 100 100 77 0
5/17/02 58 21 0 0 100 100 72 0
6/17/02 52 15 0 0 100 100 66 0
7/17/02 45 9 0 0 100 100 62 0
8/17/02 38 3 0 0 100 100 57 0
9/17/02 32 0 0 0 100 97 52 0
10/17/02 25 0 0 0 100 92 48 0
11/17/02 18 0 0 0 100 87 44 0
12/17/02 12 0 0 0 100 82 40 0
1/17/03 5 0 0 0 100 77 0 0
2/17/03 0 0 0 0 98 72 0 0
3/17/03 0 0 0 0 93 67 0 0
4/17/03 0 0 0 0 88 63 0 0
5/17/03 0 0 0 0 82 58 0 0
6/17/03 0 0 0 0 77 54 0 0
7/17/03 0 0 0 0 71 50 0 0
8/17/03 0 0 0 0 66 46 0 0
9/17/03 0 0 0 0 60 42 0 0
10/17/03 0 0 0 0 55 0 0 0
11/17/03 0 0 0 0 49 0 0 0
12/17/03 0 0 0 0 44 0 0 0
1/17/04 0 0 0 0 0 0 0 0
Weighted Average Life in 3.1 2.6 2.0 1.5 4.3 4.0 3.2 2.4
Years(2)
</TABLE>
- ------------------------------
(1) The percentages in this table have been rounded to nearest whole number.
(2) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment on a Note by the number of years from the
date of the issuance of the Note to the related Payment Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal
amount of the Notes.
26
<PAGE>
THE AUTOMOBILE FINANCING BUSINESS OF THE SUBSERVICER
GENERAL
The Subservicer purchases retail installment sales contracts of non-prime
borrowers from a network of automobile Dealers. Through a subsidiary, it also
originates contracts directly with borrowers. No direct originations are
included in the Receivables. Approximately 95% of the Dealers are franchisees of
major automobile manufacturers. The retail installment sales contracts are
secured by new or used automobiles, light duty trucks and vans. The
Subservicer's customers typically have limited credit history or past credit
problems including bankruptcy, chargeoffs or other derogatory credit events, and
are unable to obtain automobile financing from more traditional sources. The
retail installment sales contracts typically bear a higher annual percentage
rate than charged by a traditional source of financing.
APPLICATION PROCESSING AND PURCHASING CRITERIA
The Subservicer markets it services to Dealers under several different
programs and uses a tiered pricing structure designed to price loans according
to the borrower's credit characteristics. Programs exist for borrowers with
limited credit histories and for borrowers who have been the subject of a
bankruptcy that was discharged within the last five years. In addition, multiple
programs are offered that provide more favorable rates and terms to borrowers
meeting progressively more stringent credit criteria. The criteria examined
include length of employment, length at current residence, income, length of
credit history, credit bureau score, the ratio of required monthly debt payments
to monthly gross income and the ratio of proposed monthly payment on the auto
contract to monthly gross income.
For new vehicles, the Subservicer will finance up to 110% of the Dealer's
invoice price, plus taxes, license fees, insurance, any dealer handling or
documentation charges, and the cost of any service contract. For used vehicles,
the Subservicer will finance up to 115% of the value quoted in industry-accepted
used car guides (such as the Kelly Wholesale Blue Book), plus the same additions
as for new vehicles. In each case, the total amount financed may not exceed 150%
of the invoice or wholesale value as quoted in the used car guide. The maximum
amount financed will not exceed $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 higher credit profiles, no downpayment is required while other
programs require a minimum downpayment of $1,000. The value of a trade-in
vehicle (as determined by reference to industry accepted used car guides) may be
applied to the downpayment; however manufacturer rebates may not be applied
toward the required downpayment.
The Subservicer's application processing is conducted in seven regional
credit centers which focus solely on underwriting customer applications
forwarded by Dealers, typically by facsimile. Upon receipt of an application a
credit officer reviews the application and obtains a credit history from a
credit reporting bureau. A conditional underwriting decision is made either by
an automated decision model for applications meeting certain criteria, or by the
credit officer after evaluating the application, credit bureau data, and whether
the application meets the criteria under the Subservicer's policy guidelines and
its proprietary credit scoring model. Despite certain deficiencies that may
exist in a borrower's credit history, the credit scoring model is predictive of
future delinquency and credit loss based on statistical modelling of the
Subservicer's historical portfolio. Additional factors considered that may
offset past credit deficiencies include the borrower's residence stability,
employment stability, income
27
<PAGE>
level relative to expenses and past performance on automobile-related debt. Upon
conditional approval, the Dealer forwards a funding package to a centralized
funding facility. The funding package includes the application, contract, title
transfer, customer agreement to provide insurance, and other information
necessary to fund the contract.
Among other things, the contract must be fully amortizing, provide for level
payments over the term of the contract, grant a first priority security interest
in the financed vehicle to 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.
FUNDING PACKAGE COMPLETION, VERIFICATION AND FUNDING
After receiving an approval from one of the Subservicer's regional credit
centers and compiling a set of documents the Dealers believe to be consistent
with the Subservicer's documentation requirements, the Dealers 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 borrower's agreement to
obtain insurance on the vehicle, 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 with a borrower
that is deemed by the Subservicer to be 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.
A funding package may be returned if it does not comply with the terms of
the initial approval or if the Subservicer discovers 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 not in compliance 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 at 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 quarterly basis, a report is prepared which summarizes (by
credit processor and credit officer) policy exceptions, processing errors,
documentation deficiencies and credit decisions which the Subservicer's quality
control manager considers overly aggressive.
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
28
<PAGE>
collateral, collection reporting and credit performance monitoring. Servicing
for all contracts, whether owned or sold in an asset-backed security, is
performed in accordance with policies and procedures established by the
Subservicer in consultation with the Servicer, from time to time. In accordance
with these policies and procedures and reasonable commercial practice,
appropriate action may be taken in the discretion of the Subservicer, 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 no more than two months in any contract in a consecutive twelve
month period.
A Receivable is considered contractually delinquent if less than 90% of the
required payment due from the borrower has been received by the Subservicer.
Generally, contracts that are in excess of 31 days delinquent may be extended
once during a six month period after the borrower makes, in one or more
payments, at least 90% of one required payment in either the current or prior
month. If partial payments are aggregated, all such payments must be made within
a 30 day period. When a contract is extended, it is no longer considered
delinquent. Under the Subservicer's current policies, a contract will generally
be charged-off upon the earlier of: (i) the elapse of 90 days since the financed
vehicle was repossessed, (ii) a good faith determination that all amounts
expected to be recovered have been received, (iii) if the financed vehicle has
not been repossessed, the date on which at least 10% of a scheduled payment
becomes 150 or more days delinquent, or in the case of a borrower who is subject
to bankruptcy proceedings, 210 or more days delinquent or (iv) the date on which
the financed vehicle has been sold and the proceeds received. See
"--Repossession" below for discussion of how the amount to be charged-off upon
repossession of a financed vehicle is determined.
The delinquency and charge-off policies and collection practices discussed
herein may change over time in accordance with the business judgment of 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. A simultaneous electronic data transfer of borrower payment
data is made to the Subservicer for posting to computerized records.
The Subservicer's collection process is based on a strategy of closely
monitoring contracts and maintaining 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
believes that its proactive collection process, including the early
identification of payment problems, reduces its repossession rates and loss
levels.
In support of its collection efforts, the Subservicer maintains a collection
software package with customized features designed for high-intensity collection
operations, which includes a high-penetration autodialer. With the aid of the
autodialer, the Subservicer attempts to contact each borrower whose account
becomes past due.
Although the Subservicer emphasizes 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
29
<PAGE>
uses the Western Union Quick Collection Service to collect borrowers' payments
and to reduce the incidence of bad checks.
REPOSSESSION
The Subservicer repossesses a vehicle when resolution of a delinquency is
not likely (generally 80 days delinquent) or when it believes that 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 (where
neither the borrower nor the vehicle can be located) to supplement its own
efforts in locating vehicles. When a vehicle is repossessed, it generally is
sold through a public auction within 60 days of repossession. 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 contract, less the proceeds
from the sale of the vehicle.
If a contract becomes 150 days delinquent (other than accounts 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 (which is based upon wholesale used car values published by
nationally recognized firms) and any expected recoveries under any insurance. If
a contract becomes 150 days delinquent (or 210 days delinquent in the case of a
bankrupt borrower) and 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 (i) from the borrower's insurance policies or service
contracts, (ii) from Dealers under a breach of the Dealer Agreements or (iii)
from deficiency balances recovered from borrowers, are treated as loss
adjustments in the period when these recoveries are received.
INSURANCE
The Subservicer requires that physical damage insurance policies be
maintained by the borrowers naming the Subservicer (or any predecessor to the
Subservicer or any subsidiary thereof), as the loss payee.
The Subservicer maintains fidelity bond coverage insuring against losses
through wrongdoing of its officers, employees and agents.
DELINQUENCY AND LOSS INFORMATION
Set forth below is certain information concerning the Subservicer's
delinquency and loss experience with respect to its servicing portfolio of
retail installment sale contracts for new and used automobiles, light duty
trucks and vans acquired pursuant to its finance programs. Delinquency is
recognized on a contractual basis only. Installment payments must equal or
exceed 90% of the
30
<PAGE>
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. With respect to changes to the Subservicer's charge-off
policies, in the fourth quarter of 1997 the Subservicer began charging off
non-securitized contracts at the earlier of: (a) the date a contract becomes 150
days delinquent and (b) 90 days after a vehicle has been repossessed if it
remains unsold. Prior to that change (and continuing for all contracts
securitized prior to 1998), contracts were charged off (a) at 120 days
delinquent and (b) 60 days after a vehicle was repossessed if it remained
unsold. The impact of these changes did not have a material impact on the
delinquency and loss experience as reported for year-end 1997 and 1998 and for
the three months ended March 31, 1999. In footnote 4 to the table, the amount of
the impact on the delinquency ratios for such periods is reported. It is also
not expected that the change in the charge-off policy will have a material
impact on the delinquency or loss rates in the future.
If adjustments were made for the growth of the portfolio, loss and
delinquency as percentages of Receivables serviced for each period would be
higher than those shown. The tables below present all retail installment sales
contract data for contracts purchased by the Subservicer, including contracts
managed in states which are not represented in the pool consisting of the
Receivables. Following the merger in which Household acquired ACC (see "The
Subservicer"), the Subservicer assumed management and servicing responsibilities
for a portfolio of automotive retail installment sales contracts purchased or
acquired by another Household subsidiary. None of the contracts held by such
entity are included in the Receivables or the performance results presented in
the following tables.
31
<PAGE>
HISTORICAL DELINQUENCY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------
1994 1995 1996 1997(4) 1998(4)
---------------------- ---------------------- ---------------------- ---------------------- ----------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS
--------- ----------- --------- ----------- --------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Principal
Outstanding.... 42,837 100% 117,539 100% 251,751 100% 607,802 100% 1,593,434
Delinquencies
(1)(2)
31-60 Days..... 1,014 2.37% 3,218 2.74% 8,297 3.30% 23,784 3.91% 65,220
61-90 Days..... 247 0.58% 1,171 1.00% 2,847 1.13% 8,498 1.40% 21,607
Over 90 Days... 133 0.31% 607 0.52% 1,515 0.60% 3,939 0.65% 13,155
Subtotal..... 1,394 3.25% 4,996 4.25% 12,659 5.03% 36,221 5.96% 99,982
Repossession on
hand (3)....... 261 0.61% 861 0.73% 2,241 0.89% 6,495 1.07% 17,746
Total
Delinquencies
and
Repossession on
hand........... 1,655 3.86% 5,857 4.98% 14,900 5.92% 42,716 7.03% 117,728
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------------
1999(4)
-----------------------
PERCENT DOLLARS PERCENT
----------- ---------- -----------
<S> <C> <C> <C>
Principal
Outstanding.... 100% 1,901,548 100%
Delinquencies
(1)(2)
31-60 Days..... 4.09% 49,186 2.59%
61-90 Days..... 1.36% 18,361 0.97%
Over 90 Days... 0.83% 13,498 0.71%
Subtotal..... 6.27% 81,045 4.26%
Repossession on
hand (3)....... 1.11% 19,829 1.04%
Total
Delinquencies
and
Repossession on
hand........... 7.39% 100,874 5.30%
</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
0.5% of outstanding principal for each period presented.
(3) Amounts shown represent the expected net realizable value for repossessed
vehicles that have not been sold.
(4) In October 1997, the Subservicer implemented changes to its charge-off
policy for owned receivables. The former policy for owned receivables was to
charge-off at 120 days past due. For repossessed vehicles for which the
account was not yet 120 days past due, charge-off occurred at 60 days after
the repossession date. The revised policy for owned receivables is to
charge-off at 150 days past due, or for repossessed vehicles for which the
account is not yet 150 days past due, the charge-off occurs at 90 days after
the repossession date. The impact of this change increased the December 31,
1997, December 31, 1998 and March 31, 1999 delinquency ratios by
approximately .01%, .03% and .09%, respectively.
32
<PAGE>
HISTORICAL NET LOSS EXPERIENCE
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------- MARCH 31,
1994 1995 1996 1997(3) 1998(3) 1999(3)
--------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Principal outstanding.................. $ 42,837 $ 117,539 $ 251,751 $ 607,802 $ 1,593,434 $ 1,901,548
Average principal amount outstanding... $ 19,099 $ 79,304 $ 178,316 $ 411,194 $ 1,051,007 $ 1,736,488
Number of contracts outstanding........ 3,951 10,935 23,145 53,856 130,382 154,575
Average number of contracts
outstanding.......................... 1,750 7,340 16,515 36,964 88,616 141,590
Number of repossessions................ 61 520 1,530 3,686 8,499 3,269
Number of repossessions as a percent of
average number of contracts
outstanding (1)...................... 3.48% 7.08% 9.26% 9.97% 9.59% 9.23%
Net losses (2)......................... $ 262 $ 3,042 $ 7,918 $ 23,700 $ 53,469 $ 22,701
Net losses as a percent of average
principal amount outstanding
(1)(2)............................... 1.37% 3.84% 4.44% 5.76% 5.09% 5.23%
</TABLE>
- ------------------------
(1) Annualized.
(2) 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.
(3) In October 1997, the Subservicer implemented changes to its charge-off
policy for owned receivables. The former policy for owned receivables was to
charge-off at 120 days past due. For repossessed vehicles for which the
account was not yet 120 days past due, charge-off occurred at 60 days after
the repossession date. The revised policy for owned receivables is to
charge-off at 150 days past due, or for repossessed vehicles for which the
account is not yet 150 days past due, the charge-off occurs at 90 days after
the repossession date. The impact of this change decreased the December 31,
1997, December 31, 1998 and March 31, 1999 charge-off ratios by
approximately .01%, .04% and .10%, respectively.
The Seller expects that the delinquency, loss and repossession experience
for the Receivables will be generally consistent with the information provided
in the above tables. However, as the 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 such increases cannot be estimated. There is no assurance that
delinquency, credit loss and repossession experience with respect to automobile,
light duty truck, and van installment sale contracts in the future, or the
experience of the Issuer with respect to the Receivables, will be similar to
that set forth above. Losses and delinquencies are affected by, among other
things, general and regional economic conditions and the supply of and demand
for automobiles, light duty trucks and vans.
33
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture. The base
indenture and a form of the Series 1999-1 Supplement to such indenture have been
filed as exhibits to the Registration Statement of which this prospectus is a
part. Such base indenture as supplemented by the Series 1999-1 Supplement is
referred to as the "Indenture". The following summary describes certain terms of
the Notes and the Indenture.
The Notes will be issued only in fully registered form, in denominations of
$100,000 and integral multiples of $1,000 in excess thereof. The Notes will be
secured by the Trust Assets pledged by the Issuer to the Indenture Trustee
pursuant to the Indenture. Replacement Notes, if issued, will be transferable
and exchangeable at the corporate trust office of the Indenture Trustee. See "--
Registration of the Notes" below. No service charge will be made for any
registration, exchange or transfer of Notes, but the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge.
PAYMENTS OF INTEREST
Interest on each class of Notes will be payable monthly on the seventeenth
day of each month or, if such day is not a Business Day, on the next succeeding
Business Day (each, a "Payment Date"), commencing on July 19, 1999, in an amount
equal to interest accrued during the related Interest Period (as defined below)
at the applicable Note Rate on the outstanding principal balance for the related
class of Notes. The per annum rate of interest accruing on each class of Notes
is referred to as the "Note Rate" for the respective classes of Notes. The Note
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 such Payment Date (each such period,
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 such Payment Date shall bear interest, to the extent permitted by applicable
law, at the related Note Rate until paid. Failure to pay interest in full on any
Payment Date after expiration of the applicable grace period is an Event of
Default under the Indenture.
On each Payment Date, Available Funds remaining after making the
distributions referred to in items (i) and (ii) under "Description of the Notes
- -- Payment Priorities" will be allocated pro rata to the Class A Interest
Distributable Amount of each of the Class A-1, Class A-2, Class A-3 and Class
A-4 Notes.
If the Notes are accelerated following the occurrence of an Event of
Default, interest payments will be allocated to the Notes in the priority
described in "-- Events of Default; Rights Upon Event of Default; Distributions
following Acceleration."
34
<PAGE>
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
such 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.
If the Notes are accelerated following the occurrence of an Event of
Default, principal payments will be allocated to the Notes in the priority
described in "-- Events of Default; Rights Upon Event of Default; Distributions
following Acceleration."
OVERCOLLATERALIZATION AMOUNT
As of any date, the "Overcollateralization Amount" is equal to the
difference between the Pool Balance and the Aggregate Note Principal Balance. As
of Closing Date, the Overcollateralization Amount will be equal to
$304,550,520.51 or 31.50% of the Pool Balance as of the Cut-Off-Date. The
Overcollateralization Amount 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:
(i) from the Available Funds, to the Servicer, any Supplemental
Servicing Fees for the related Collection Period and if HFC is no longer
acting as master servicer, the Servicing Fee for the related Collection
Period;
(ii) from the Available Funds, to the Indenture Trustee and the Owner
Trustee, any accrued and unpaid trustees' fees (in each case, to the extent
such fees have not been previously paid by the Servicer);
(iii) from the Available Funds, to the holders of the Class A Notes, the
Class A Interest Distributable Amount;
(iv) 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 in "sequential pay" fashion, 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;
35
<PAGE>
(v) from the Available Funds, to the Reserve Account, the Reserve
Account Deposit Amount, if necessary, required to increase the amount
therein to its then required level;
(vi) from the Available Funds, if HFC is acting as the master servicer,
the Servicing Fee for the related Collection Period; and
(vii) any remainder to the Seller.
Amounts on deposit in the Reserve Account on any Payment Date (after giving
effect to all distributions made on such Payment Date and the related Payment
Date) in excess of the Targeted Reserve Account Balance for such Payment Date
may be released first, to the Servicer for any Servicing Fees and Supplemental
Servicing Fees then due, and any remainder to the Seller.
The terms used in this description of Payment Priorities on the Series
1999-1 Notes are defined as follows:
"ADDITIONAL CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means with respect to
any Payment 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 Trustee during the immediately preceding
Collection Period and (y) Excess Interest with respect to such 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 such date.
"AGGREGATE OPTIMAL NOTE PRINCIPAL BALANCE" means, with respect to any
Payment Date, the excess, if any, of (x) the Pool Balance as of the end of the
prior Collection Period over (y) the Targeted Overcollateralization Amount for
such Payment Date.
"AMOUNT FINANCED" means, with respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the financed vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service, car club and warranty contracts, other items
customarily financed as part of retail automobile installment sale contracts or
promissory notes and related costs.
"AVAILABLE FUNDS" means, with respect to any Collection Period, the sum of
(i) the Collected Funds for such Collection Period, (ii) all Purchase Amounts
deposited in the Collection Account during such Collection Period, (iii) income
on investments held in the Collection Account, (iv) the proceeds of any
liquidation of the assets of the Trust, (v) the lesser of (a) the excess of the
aggregate amount determined under items (i)-(iv) of the Payment Priorities set
forth beginning on page 35, over the amount on deposit in the Collection Account
and (b) the Reserve Account Balance; provided that with respect to any Payment
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 Payment 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 $4,834,152.60.
"CLASS A DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date and
each class of Class A Notes, the sum of (i) the related Class A Interest
Distributable Amount and (ii) the Class A Principal Distributable Amount.
36
<PAGE>
"CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date and each class of Class A Notes, the sum of: (i) excess of (a) the related
Class A Interest Distributable Amount for the preceding Payment Date, over (b)
the amount actually paid as interest to the Noteholders on such preceding
Payment Date, PLUS (ii) interest on such excess, to the extent permitted by law,
at a rate per annum equal to the related Class A Note Rate from such preceding
Payment Date to but excluding the current Payment Date.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date and each class of Class A Notes, an amount equal to the sum of: (i) the
aggregate amount of interest accrued on the Class A Notes at the related Class A
Note Rate from and including the preceding Payment Date (or, in the case of the
initial Payment Date, from and including the Closing Date) to but excluding the
current Payment Date PLUS (ii) the related Class A Interest Carryover Shortfall
for the current Payment Date.
"CLASS A MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, (i) with respect to
any Payment Date prior to the Payment Date on which the principal balance of the
Class A-1 Notes is reduced to zero, 100% of the Principal Distributable Amount,
(ii) with respect to the Payment Date on which the principal balance of the
Class A-1 Notes is reduced to zero, 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 Payment 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 Payment
Date), (iii) with respect to 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 (x) 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
Payment Date.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to 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 such preceding
Payment Date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, the sum of: (i) the Class A Monthly Principal Distributable Amount for
such Payment Date, (ii) the Additional Class A Principal Distributable Amount,
if any, for such Payment Date, and (iii) the Class A Principal Carryover
Shortfall for such Payment 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 Payment Date, the Class A
Principal Distributable Amount will include the amount, to the extent of the
remaining Available Funds, necessary (after giving effect to other amounts
having a higher payment priority on such Payment Date) to reduce the outstanding
principal amount of the Class A Notes to zero.
"COLLECTED FUNDS" means, with respect to 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 Receivables during such Collection
Period, including all Net Liquidation Proceeds collected during such Collection
Period (but excluding any Purchase Amounts).
"COLLECTION PERIOD" means, as to any Payment Date other than the first
Payment Date, the calendar month preceding the month in which such Payment Date
occurs, and in the case of the first Payment Date, the period from the Cut-Off
Date through June 30, 1999.
37
<PAGE>
"CRAM DOWN LOSS" means, with respect to a Receivable if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on such Receivable or otherwise modifying or
restructuring the scheduled payments to be made on such Receivable, an amount
equal to (i) the excess of the Principal Balance of such Receivable immediately
prior to such order over the Principal Balance of such Receivable as so reduced
and/or (ii) if such court shall have issued an order reducing the effective rate
of interest on such Receivable, the excess of the Principal Balance of such
Receivable immediately prior to such order over the net present value (using as
the discount rate the higher of the APR on such Receivable or the rate of
interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A Cram Down Loss shall be deemed to
have occurred on the date of issuance of such order.
"DETERMINATION DATE" means, with respect to any Payment Date, the earlier of
the fifth calendar day or the third Business Day prior to such Payment Date.
"EXCESS INTEREST" means with respect to a Payment Date the excess of (i)
interest collections on the Receivables during the preceding Collection Period
over (ii) amounts payable on such Payment Date pursuant to clauses (i) through
(iii) of "Payment Priorities".
"LIQUIDATED RECEIVABLE" means, a Receivable as to which (i) 90 days have
elapsed since the financed vehicle was repossessed, (ii) the Servicer has
determined in good faith that all amounts it expects to recover have been
received, (iii) 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 (iv) the financed vehicle
has been sold and the proceeds received.
"MAXIMUM RESERVE ACCOUNT DEPOSIT AMOUNT" for any Payment Date is equal to
that portion of Collected Funds representing interest collections on the
Receivables and Net Liquidation Proceeds for the related Collection Period less
the sum of: the Servicing Fee paid to any master servicer other than HFC, the
fees due to the Indenture Trustee, and Owner Trustee, to the extent not paid by
the Servicer, the Class A Interest Distributable Amount, the aggregate Principal
Balances of all Receivables which became Liquidated Receivables during such
Collection Period, plus the aggregate amount of Cram Down Losses during such
Collection Period.
"NET LIQUIDATION PROCEEDS" means, with respect to Liquidated Receivables,
(i) proceeds from the disposition of the underlying financed vehicle securing
the Liquidated Receivables, less the Servicer's reasonable out-of-pocket costs,
including repossession and resale expenses not already deducted from such
proceeds, and any amounts required by law to be remitted to the borrower, (ii)
any insurance proceeds, or (iii) other monies received from the borrower or
otherwise.
"POOL BALANCE" means, as of any date of determination, the aggregate
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 Payment Date, the
amount remaining in the Collection Account after the payment of the amounts
listed in (i) through (iii) of "Payment Priorities", MINUS the Reserve Account
Deposit Amount for such Payment Date.
"PRINCIPAL BALANCE" means, with respect to any Receivable, as of any date,
the Amount Financed minus (a) that portion of all amounts received on or prior
to such date and allocable to principal in accordance with the terms of the
Receivable, and (b) any Cram Down Loss in respect of such Receivable. The
"Principal Balance" of a Liquidated Receivable or a Purchased Receivable shall
be zero.
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"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date the
lesser of (A) the Principal Amount Available and (B) the excess, if any, of (i)
the Aggregate Note Principal Balance immediately prior to such Payment Date over
(ii) the Aggregate Optimal Note Principal Balance for such Payment Date.
"PURCHASE AMOUNT" means, with respect to a Receivable, the Principal Balance
as of the date such Receivable is purchased from the Issuer by the Seller or the
Servicer.
"PURCHASED RECEIVABLE" means, a Receivable that is repurchased by the Seller
or the Servicer as a result of a breach of a representation or warranty with
respect to such Receivable.
"RESERVE ACCOUNT DEPOSIT AMOUNT" means, with respect to any Payment Date,
the lesser of: (x) the Maximum Reserve Account Deposit Amount for such Payment
Date and (y) the Reserve Account Shortfall Amount for such Payment Date.
"RESERVE ACCOUNT SHORTFALL AMOUNT" means, with respect to any Payment Date,
the excess of: (x) the Targeted Reserve Account Balance for such Payment Date
over (y) the amount on deposit in the Reserve Account as of the beginning of
such Payment Date.
"TARGETED CREDIT ENHANCEMENT AMOUNT" means, with respect to any Payment
Date, 37.50% of the outstanding Pool Balance as of the end of the related
Collection Period.
"TARGETED OVERCOLLATERALIZATION AMOUNT" means, with respect to any Payment
Date, the excess (but not less than zero), if any, of: (i) the Targeted Credit
Enhancement Amount over (ii) the Targeted Reserve Account Balance.
"TARGETED RESERVE ACCOUNT BALANCE" means, with respect to any Payment Date,
the lesser of: (i) the greater of (a) 3.0% of the outstanding Pool Balance as of
the end of the related Collection Period, and (b) $19,336,610.41 (2.0% of the
Pool Balance as of the Cut-Off Date) and (ii) the Aggregate Note Principal
Balance.
MATURITY DATES; OPTIONAL REDEMPTION
Each class of Notes will mature on the earlier of the date such class of
Notes is paid in full or the respective scheduled maturity date for such class.
The "Class A-1 Scheduled Maturity Date" is July 17, 2000, the "Class A-2
Scheduled Maturity Date" is May 17, 2002, the "Class A-3 Scheduled Maturity
Date" is June 17, 2003 and the "Class A-4 Scheduled Maturity Date" is April 17,
2006. The Payment Date occurring on April 17, 2006 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. See
"-- Events of Default; Rights Upon Event of Default; Distributions following
Acceleration" herein. In addition, the Issuer will pay the Notes in full on the
Payment Date following exercise by the Seller or the Servicer of the option to
purchase the Receivables from the Issuer. This will cause a redemption of the
Notes. Such 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
$66,228,000 (10% 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 thereon through the day preceding the
call date.
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REPORTS TO NOTEHOLDERS
Concurrently with each distribution to the Noteholders, the Indenture
Trustee will prepare and forward to each Noteholder a statement setting forth
certain information with respect to the related Payment Date, including the
following:
(i) the amount of the distribution allocable to interest on or with
respect to each class of the Notes;
(ii) the amount of the distribution allocable to principal with respect
to each class of the Notes;
(iii) the aggregate outstanding principal amount for each class of
Notes, in each case, after giving effect to all payments reported under (ii)
above on such date;
(iv) the Class A Interest Carryover Shortfall and the Class A Principal
Carryover Shortfall, if any, and the change in such amounts from the
preceding statement;
(v) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period; and
(vi) the Targeted Reserve Account Balance and the amount on deposit in
the Reserve Account at the end of such Payment Date.
The information furnished pursuant to (i) through (iv) above shall be
expressed as a dollar amount per $1,000 in face amount of Notes.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT; DISTRIBUTIONS FOLLOWING
ACCELERATION
With respect to the Notes, an "Event of Default" under the Indenture will
have occurred at any time when any one of the following events occurs: (i) a
default in the payment of any interest on any Note when the same becomes due and
payable, and such default continues for a period of five days; (ii) a default in
the payment of the outstanding principal balance of a Class of Notes on the
scheduled maturity date of such Class, and such default continues for a period
of five days; (iii) default in the observance or performance of any covenant or
agreement of the Issuer made in the Indenture, or any representation or warranty
of the Issuer made in the Indenture or in any certificate or other writing
delivered pursuant to the Indenture proving to have been incorrect in any
material respect as of the time when made which has a material adverse effect on
Note Owners, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such representation or warranty
was incorrect is not eliminated or otherwise cured, for a period of 60 days
after notice is given to the Issuer by the Indenture Trustee or to the Issuer
and the Indenture Trustee by the Holders of at least 25% in principal amount of
the Notes then outstanding, specifying such default or incorrect representation
or warranty; (iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial part of
the Trust Assets in an involuntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust Assets,
or ordering the winding-up or liquidation of the Issuer's affairs, and such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (v) the commencement by the Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent by
the Issuer to the appointment or taking possession by a receiver, liquidator,
assignee,
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custodian, trustee, sequestrator or similar official of the Issuer or for any
substantial part of the Trust Assets, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer generally
to pay its debts as such debts become due, or the taking of any action by the
Issuer in furtherance of any of the foregoing. The amount of principal required
to be paid to Noteholders on any Payment Date will be limited to amounts
available to be deposited in the Collection Account. 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 such class of Notes.
If there is an Event of Default due to late payment or nonpayment of
interest or principal on a Note, interest will continue to accrue on such
principal and the overdue interest at the applicable interest rate on such Note
until such overdue principal and interest is paid. If an Event of Default should
occur and be continuing with respect to the Notes, the Indenture Trustee may,
and at the direction of Noteholders representing at least 66 2/3% of the
aggregate outstanding principal amount of the Notes shall, declare the principal
of such Notes to be immediately due and payable. Such declaration may, under
certain circumstances, be rescinded by the holders of a majority in principal
amount of the Notes then outstanding.
If the Notes are due and payable following an Event of Default with respect
thereto, the Indenture Trustee may institute proceedings to collect amounts due
or foreclose on property comprising Trust Assets or exercise remedies as a
secured party. If the Indenture Trustee determines that the Receivables will not
provide sufficient funds for the payment of principal and interest on the Notes
as such payments would become due, any sale, liquidation or other disposition of
the Trust Assets for an amount less than the amounts due on the Notes will not
occur without the consent of Holders of 66 2/3% of the outstanding principal
amount of the Notes. If the Indenture Trustee has not made a determination that
a sale or liquidation of the Trust Assets 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 to such sale,
liquidation or disposition.
If the Notes are accelerated following the occurrence of an Event of
Default, after payment of the amounts specified in items (i) and (ii) under
"Description of the Notes--Payment Priorities," all Available Funds, all amounts
on deposit in the Reserve Account and the proceeds of any sale, liquidation or
other 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; 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.
If an Event of Default occurs and is continuing with respect to the Notes,
the Indenture Trustee will be under no obligation to exercise any of the rights
or powers under the Indenture at the request or direction of any of the Holders
of the Notes, if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with such request. Subject to the provisions for
indemnification and certain limitations contained in the Indenture, the Holders
of a majority in principal amount of the outstanding Notes will have the right
to direct the time, method and place of conducting any proceeding or any remedy
available to the Indenture Trustee, and the Holders of a majority in principal
amount of the Notes then outstanding may, in certain cases, waive any default
with respect thereto, except a default in the payment of principal or interest
or a default in respect of a covenant or provision of the Indenture that cannot
be modified without the waiver or consent of all the Holders of the outstanding
Notes. No Holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given the
Indenture Trustee written notice of a continuing Event of
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Default, (ii) the Holders of not less than 25% of the aggregate principal
balance of all outstanding Notes have made written request to the Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee, (iii)
such Holder or Holders have offered the Indenture Trustee reasonable indemnity
against costs, expenses and liabilities to be incurred in complying with the
request, (iv) the Indenture Trustee has for 60 days failed to institute such
proceeding and (v) no direction inconsistent with such written request has been
given to the Indenture Trustee during the 60-day period by the Holders of a
majority of the aggregate principal balance of all outstanding Notes. In
addition, the Indenture Trustee and the Note Owners, by accepting a beneficial
interest in the Notes, will covenant that they will not at any time institute
against the Issuer or the Seller, or join in any institution against the Issuer
or the Seller of, any bankruptcy, reorganization or other proceeding under any
federal or state bankruptcy or similar law. With respect to the Issuer, neither
the Indenture Trustee nor the Owner Trustee in its individual capacity, nor any
Holder representing an ownership interest in the Issuer nor any of their
respective owners, beneficiaries, agents, officers, directors, employees,
affiliates, successors or assigns will, in the absence of an express agreement
to the contrary, be personally liable for the payment of the principal of or
interest on the Notes or for the agreements of the Issuer contained in the
Indenture.
CERTAIN COVENANTS
The Indenture provides that the Issuer may not consolidate with or merge
into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes the
Issuer's obligation to make due and punctual payments upon the Notes and the
performance or observance of any agreement and covenant of the Issuer under the
Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Issuer has been advised
that the ratings of the Notes then in effect would not be reduced or withdrawn
by any Rating Agency as a result of such merger or consolidation, (v) any action
that is necessary to maintain the lien and security interest created by the
Indenture is taken and (vi) the Issuer has received an opinion of counsel to the
effect that such consolidation or merger would have no material adverse tax
consequence to the Issuer or to any Noteholder or holders of the Certificates.
The Issuer will not, among other things, (i) except as expressly permitted by
the Indenture, sell, transfer, exchange or otherwise dispose of any of the
assets of the Issuer, (ii) claim any credit on or make any deduction from the
principal and interest payable in respect of the Notes (other than amounts
withheld under the Internal Revenue Code of 1986, as amended (the "Code") or
applicable state law) or assert any claim against any present or former holder
of Notes because of the payment of taxes levied or assessed upon the Issuer,
(iii) permit the validity or effectiveness of the Indenture to be impaired or
permit any person to be released from any covenants or obligations with respect
to the Notes under the Indenture except as may be expressly permitted thereby or
(iv) permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon or
burden the assets of the Issuer or any part thereof, or any interest therein or
the proceeds thereof. The Issuer may not engage in any activity other than as
specified under the Trust Agreement.
ANNUAL COMPLIANCE STATEMENT
The Issuer will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the Indenture.
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SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing the
Notes upon the delivery to the Indenture Trustee for cancellation of all the
Notes or, with certain limitations, upon deposit with the Indenture Trustee of
funds sufficient for the payment in full of all the Notes.
MODIFICATION OF INDENTURE
With the consent of the holders of a majority of outstanding principal
balance of each class of Notes affected thereby and upon confirmation that the
ratings of the Notes then in effect would not be reduced or withdrawn by any
Rating Agency, the Issuer and the Indenture Trustee may amend the Indenture to
add provisions to, change in any manner or eliminate any provisions of, the
Indenture, or modify (except as provided below) in any manner the rights of the
Noteholders. However, without the consent of the Holder of each outstanding Note
affected thereby, no amendment will: (i) change the due date of any installment
of principal of or interest on any Note or reduce the principal amount thereof,
the interest rate specified thereon or the redemption price with respect thereto
or change any place of payment where or the coin or currency in which any Note
or any interest thereon is payable; (ii) impair the right to institute suit for
the enforcement of certain provisions of the Indenture regarding payment; (iii)
reduce the percentage of the aggregate principal balance of the outstanding
Notes, which is required to approve any supplemental indenture, waive compliance
with certain provisions of the Indenture or waive certain defaults thereunder
and their consequences as provided for in the Indenture; (iv) modify or alter
the provisions of the Indenture regarding the voting of Notes held by the
Issuer, the Seller or an affiliate of any of them; (v) decrease the percentage
of the aggregate outstanding principal balance of Notes required to amend the
sections of the Indenture which specify the applicable percentage of aggregate
outstanding principal balance of the Notes necessary to amend the Indenture or
certain other related agreements; (vi) modify any of the provisions of the
Indenture in such manner as to affect the calculation of the amount of any
payment of interest or principal due on any Note (including the calculation of
any of the individual components of such calculation); or (vii) permit the
creation of any lien ranking prior to or, except as otherwise contemplated by
the Indenture, on a parity with the lien of the Indenture with respect to any of
the collateral for the Notes or, except when the full amount required to pay the
Notes in full has been deposited or is held in trust, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security afforded by the lien of the Indenture.
The Issuer and the Indenture Trustee may also amend the Indenture without
obtaining the consent of the Noteholders, for the purpose of, among other
things, to cure any ambiguity or to correct or supplement any provision in the
Indenture that may be inconsistent with any other provision therein.
CERTAIN MATTERS REGARDING THE INDENTURE TRUSTEE AND THE ISSUER
Neither the Issuer, the Indenture Trustee nor any director, officer or
employee of the Issuer or the Indenture Trustee will be under any liability to
the Issuer or the related Noteholders for any action taken or for refraining
from the taking of any action in good faith pursuant to the Indenture or for
errors in judgment; provided, however, that none of the Indenture Trustee, the
Issuer and any director, officer or employee thereof will be protected against
any liability which would otherwise be imposed by reason of willful malfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under the Indenture. Subject to certain
limitations set forth in the Indenture, the Indenture Trustee and any director,
officer, employee or agent of the Indenture Trustee shall be indemnified by the
Servicer and held harmless against any loss, liability or expense
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incurred in connection with investigating, preparing to defend or defending any
legal action, commenced or threatened, relating to the Indenture other than any
loss, liability or expense incurred by reason of willful malfeasance, bad faith
or negligence in the performance of its duties under such Indenture or by reason
of reckless disregard of its obligations and duties under the Indenture. All
persons into which the Indenture Trustee may be merged or with which it may be
consolidated or any person resulting from such merger or consolidation shall be
the successor of the Indenture Trustee under each Indenture.
LIMITATION ON LIABILITY OF THE INDENTURE TRUSTEE
The Indenture Trustee makes no representations as to the validity or
sufficiency of the Indenture, the Notes or of the Trust Assets or related
documents. If no Event of Default has occurred, the Indenture Trustee is
required to perform only those duties specifically required of it under the
Indenture. Upon receipt of the various certificates, statements, reports or
other instruments required to be furnished to it, the Indenture Trustee is
required to examine them to determine whether they are in the form required by
the Indenture; however, the Indenture Trustee will not be responsible for the
accuracy or content of any such documents furnished by it.
The Indenture Trustee may be held liable for its own negligent action or
failure to act, or for its own misconduct; provided, however, the Indenture
Trustee will not be personally liable with respect to any action taken, suffered
or omitted to be taken by it in good faith in accordance with the direction of
the required percentage of the Noteholders in an Event of Default. The Indenture
Trustee is not required to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties under the Indenture,
or in the exercise of any of its rights or powers, if it has reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
RESIGNATION OF INDENTURE TRUSTEE
The Indenture Trustee may, upon written notice to the Seller and the Issuer,
resign at any time, in which event the Servicer will be obligated to use its
best efforts to appoint a successor Indenture Trustee. If no successor Indenture
Trustee has been appointed and has accepted the appointment within 60 days after
giving such notice of resignation, the resigning Indenture Trustee or the Issuer
may petition any court of competent jurisdiction for appointment of a successor
Indenture Trustee. The Indenture Trustee may also be removed at any time by the
Servicer. In addition, the Issuer may, and at the request of a majority of the
Noteholders shall remove the Indenture Trustee (i) if the Indenture Trustee
ceases to be eligible to continue as such under the Indenture, (ii) if the
Indenture Trustee becomes insolvent or (iii) the Indenture Trustee's long-term
debt ratings are lower than "BBB" or its equivalent by either Rating Agency. Any
resignation or removal of the Indenture Trustee and appointment of a successor
Indenture Trustee will not become effective until acceptance of the appointment
by the successor Indenture Trustee.
REGISTRATION OF THE NOTES
Purchasers of Notes ("Note Owners") may hold their Notes through the
Depository Trust Company ("DTC") (in the United States) or Cedel Bank, societe
anonyme ("Cedel") or the Euroclear System ("Euroclear") (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
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The Notes will initially be issued in global form and registered in the name
of CEDE & Co., the nominee of DTC. All references in this prospectus to
"Holders" or "Noteholders" shall refer to CEDE & Co., unless the context clearly
requires otherwise. Cedel and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Cedel's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC. Citibank will act as depositary for Cedel and Morgan
will act as depositary for Euroclear (in such capacities, individually the
"Depositary" and collectively the "Depositaries").
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC accepts securities for deposit from its participating organizations
("Participants") and facilitates the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks and trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures. No person
acquiring a beneficial ownership interest in any Note will be entitled to
receive such Note in fully registered certificated form (a "Replacement Note")
except in the limited circumstances described herein.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participants on such business day. Cash received in Cedel or Euroclear as
a result of sales of securities by or through a Cedel Participant or Euroclear
Participant to a Participant will be received with value on the DTC settlement
date but will be available in the relevant Cedel or Euroclear cash account only
as of the business day following settlement in DTC. For information with respect
to tax documentation procedures relating to the Notes, see "Material Federal
Income Tax Consequences" and "Global Clearance, Settlement and Tax Documentation
Procedures" in Appendix A hereto.
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Note Owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of Notes may do so only through Participants or
indirect participants (unless and until Replacement Notes, as defined below, are
issued). In addition, Note Owners will receive all distributions of principal
of, and interest on, the Notes from the Indenture Trustee through DTC and
Participants. Note Owners will not receive or be entitled to receive
certificates representing their respective interests in the Notes, except under
the limited circumstances described below.
Note Owners will not be Noteholders as that term is used in the Indenture.
Note Owners are only permitted to exercise the rights of Noteholders indirectly
through Participants and DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Notes and is required
to receive and transmit distributions of principal of, and interest on, the
Notes. Participants and indirect participants with whom Note Owners have
accounts with respect to Notes are similarly required to make book-entry
transfers and receive and transmit such distributions on behalf of their
respective Note Owners. Accordingly, although Note Owners will not possess
certificates, the Rules provide a mechanism by which Note Owners will receive
distributions and will be able to transfer their interests.
DTC has advised the Issuer and the Indenture Trustee that, unless and until
Replacement Notes are issued, DTC will take any action permitted to be taken by
a Noteholder under the Indenture only at the direction of one or more
Participants to whose DTC accounts the Notes are credited. DTC may take actions,
at the direction of the related Participants, with respect to some Notes which
conflict with actions taken with respect to other Notes.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of indirect participants and certain banks, the ability of holders of
beneficial interests in the Notes to pledge such Notes to persons or entities
that do not participate in the DTC system, or otherwise take actions in respect
of such Notes, may be limited due to the lack of a definitive certificate for
such Notes.
Unless and until Replacement Notes are issued, Note Owners who are not
Participants may transfer ownership of Notes only through Participants and
indirect participants by instructing such Participants and indirect participants
to transfer Notes, by book-entry transfer, through DTC for the account of the
purchasers of such Notes, which account is maintained with their respective
Participants. Under the Rules and in accordance with DTC's normal procedures,
transfers of ownership of Notes will be executed through DTC and the accounts of
the respective Participants at DTC will be debited and credited. Similarly, the
Participants and indirect participants will make debits or credits, as the case
may be, on their records on behalf of the selling and purchasing Note Owners.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 38
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also
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available to others, such as banks, brokers dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"Material Federal Income Tax Consequences". Cedel or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Noteholder under the Indenture on behalf of a Cedel Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other
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members of the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to security
holders, book-entry deliveries, and settlement of trades within DTC, continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to properly perform its services is also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information and the provision of
services, including telecommunications and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant; and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In additional, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Replacement Notes will be issued in registered form to Note Owners, or their
nominees, rather than to DTC, only if (i) DTC or the Issuer advises the
Indenture Trustee in writing that DTC is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Notes and the Issuer or the Indenture Trustee is unable to locate a qualified
successor, (ii) the Issuer, at its sole option and with the consent of the
Indenture Trustee, elects to terminate the book-entry system through DTC or
(iii) after the occurrence of a Servicer Termination Event, DTC, at the
direction of Noteholders evidencing not less than 51% of the then outstanding
principal balance of each Class, advises the Indenture Trustee in writing that
the continuation of a book-entry system through DTC (or a successor thereto) to
the exclusion of any physical certificates being issued to Note Owners is no
longer in the best interests of Note Owners. Upon issuance of Replacement Notes
to Note Owners, such Notes will be transferable directly (and not exclusively on
a book-entry basis) and registered holders will deal directly with the Indenture
Trustee with respect to transfers, notices and distributions.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes certain terms of the Sale and Servicing
Agreement, the Indenture and the Trust Agreement (collectively, the "Trust
Documents"). Copies of the Trust Documents are filed as exhibits to the
Registration Statement of which this Prospectus is a part. Copies may be
obtained by the Note Owners upon request in writing to the Servicer, at its
address set forth under "The Servicer".
SALE AND ASSIGNMENT OF RECEIVABLES.
The Seller has entered into a Sale and Servicing Agreement with the Issuer,
the Servicer and the Indenture Trustee pursuant to which the Seller, on or prior
to the Closing Date, will have sold and assigned to the Issuer, without
recourse, its entire interest in and to the Receivables, including its security
interest in the financed vehicles securing the Receivables and its right to
receive all payments on, or proceeds with respect to the Receivables to the
extent paid or payable after the Cut-Off Date. Pursuant to the Sale and
Servicing Agreement, the Seller agreed that, upon the occurrence of a breach of
a representation or warranty under the Trust Documents with respect to any of
the Receivables, the Issuer will be entitled to require the Seller to repurchase
such Receivables from the Issuer. Such rights
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of the Issuer under the Sale and Servicing Agreement will constitute part of the
property of the Issuer and may be enforced directly by the Owner Trustee. In
addition, the Issuer will pledge such rights to the Indenture Trustee as
collateral for the Notes, and such rights may be enforced directly by the
Indenture Trustee.
Each Receivable transferred by the Seller to the Issuer will be identified
in a schedule appearing as an exhibit to the Sale and Servicing Agreement (the
"Schedule of Receivables").
REPRESENTATION AND WARRANTIES; REPURCHASE OBLIGATION
In connection with the sale of the Receivables, the security interests in
the financed vehicles securing the Receivables have been assigned by the
Subservicer to the Seller, by the Seller to the Issuer and by the Issuer to the
Indenture Trustee. The Sale and Servicing Agreement provides that if the Seller
breaches certain representations and warranties relating to the Receivables and
the financed vehicles in a manner that materially and adversely affects any
Receivable or the interests of the Noteholders or the interests of the Issuer,
the Seller shall, unless such breach shall have been cured in all material
respects, repurchase such Receivable from the Issuer. The Seller shall be
obligated to repurchase such Receivable if its breach under the Sale and
Servicing Agreement is not cured by the last day of the second calendar month
following the discovery by or notice to the Seller of the breach.
The representations and warranties made by the Seller under the Sale and
Servicing Agreement state that each Receivable: (a) was originated by a properly
licensed Dealer in the ordinary course of business, purchased by the Subservicer
pursuant to a Dealer Agreement, sold to the Seller pursuant to the Receivables
Purchase Agreement, assigned to the Issuer pursuant to the Sale and Servicing
Agreement and assigned by the Issuer to the Indenture Trustee pursuant to the
Indenture, (b) assignment was valid and made pursuant to the respective
agreements upon customary and enforceable terms, (c) is fully amortizing with
level monthly payments, (d) was originated and sold to the Seller without fraud
or material misrepresentation on the part of the Dealer or the borrower, (e) was
originated in material compliance with all applicable laws and regulations
relating to the Receivable and all applicable laws and regulations were complied
with in writing any insurance policies with respect thereto, and such Receivable
and any such insurance policies continue to be in compliance with applicable
laws and regulations, (f) was originated in the United States and complied at
the time of purchase with the Subservicer's then current underwriting and
funding policies, (g) is a valid, legal and binding obligation of the borrower,
enforceable in accordance with its terms subject to certain exceptions related
to bankruptcy, insolvency or the Relief Act, (h) is not due from any
governmental body, (i) had an original maturity of at least 18 months and not
more than 72 months, an original balance between $3,000 and $27,000, an original
APR between 10.5% and 27%, was not more than 30 days past due, as to which no
funds have been advanced by any party to maintain the contract as current and no
provision of which has been waived, altered or modified since origination, (j)
as to which the information on the Schedule of Receivables is true and correct
in all material respects, (k) with respect to which the Subservicer's and the
Servicer's records reflect to successive assignments or pledge from the
Subservicer to the Seller, from the Seller to the Issuer and by the Issuer to
the Indenture Trustee, (l) will be accurately reflected in any list of
Receivables provided by the Subservicer, (m) constitutes chattel paper under the
UCC, (n) is documented by only one original executed contract, (o) with respect
to which the related file contains the executed original contract, evidence of
physical damage insurance coverage, the original lien certificate naming the
Subservicer or any predecessor or affiliate as first lienholder and an original
credit application, (p) has not been satisfied, subordinated or rescinded and
the related financed vehicle has not been released from the lien, (q) was not
originated in, or subject to laws of a jurisdiction, the laws of which make it
unlawful, void or voidable to sell, transfer or assign the Receivable and the
Receivable is not subject to any agreement restricting or conditioning the
assignment thereof, (r) has not been sold, transferred, assigned or pledged
other than as described in this prospectus and no other person holds any right
to
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receive any proceeds with respect to such Receivable, any related insurance
policy or related Dealer Agreement, (s) which creates a valid, binding and
enforceable first priority security interest in favor of the Subservicer in the
financed vehicle, which security interest is prior to all other liens and
security interests (other than those for taxes, labor or material for a vehicle)
and as to which no such prior liens exist, (t) as to which all filings required
to give the Indenture Trustee a first priority perfected lien on, or ownership
interest in, the Receivable and the proceeds thereof have been made, (u) as to
which, the Subservicer, or any predecessor or affiliate thereof, has not
conveyed any interest thereto to any person that would impair the rights of the
Indenture Trustee thereto, (v) is not assumable, (w) is not subject to recision,
set off, counterclaim or defense and as to which no such right has been asserted
or threatened with respect thereto, (x) as to which no event has occurred
permitting acceleration and no condition exists or event has occurred and is
continuing that would with notice, lapse of time or both would constitute a
default, breach, violation or event permitting acceleration, nor any waiver of a
default, breach, violation or other event permitting acceleration, and with
respect to which the financed vehicle has not been repossessed, (y) at the time
of origination was covered by comprehensive, collision, loss and damage
insurance naming the Subservicer, its successors and assigns as loss payee, (z)
with respect to which the lien certificate names, or will name, the Subservicer
(or any predecessor or affiliate thereof) as the original secured party and all
required filings and recordings required to name such entity as the original
secured party have been made, (aa) as to which no selection procedures adverse
to the Noteholder were utilized.
The Sale and Servicing Agreement also provides that if the Servicer breaches
certain of its servicing obligations under the Sale and Servicing Agreement
(including, but not limited to its obligation to ensure that a perfected
security interest is maintained in favor of the Subservicer (or any predecessor
of the Subservicer or any subsidiary thereof) in the related financed vehicles)
or certain other covenants with regard to the Servicer, the Servicer shall,
unless such breach shall have been cured in all material respects, purchase such
Receivable from the Issuer. The obligation to purchase the affected Receivables
arises only if a breach materially and adversely affects any Receivable or the
interests of the Noteholders or the interests of the Issuer. The Servicer shall
be obligated to repurchase such Receivable if a breach under the Sale and
Servicing Agreement is not cured by the last day of the second calendar month
following the discovery by or notice to the Servicer of the breach.
In addition to the warranty that it will maintain the Subservicer's
perfected security interest in the financed vehicles, the Servicer represented
and warranted in the Sale and Servicing Agreement that it (a) will do nothing to
impair the rights of the Issuer or Noteholders in the Receivables, Dealer
Agreements, the Receivables Purchase Agreement, any insurance policies related
to a Receivable or any other Trust Asset, (b) will not create or allow to exist
any lien or restriction on transfer of the Receivables except for the lien in
favor of the Indenture Trustee, or sign or file under the UCC of any
jurisdiction any financing statement or security agreement naming the
Subservicer, the Servicer or any affiliate thereof as debtor or authorizing any
such filing, (c) will not extend or amend any Receivable other than as specified
in the Sale and Servicing Agreement, (d) will service the Receivables in
compliance with the Sale and Servicing Agreement and in material compliance with
its standard and customary procedures for servicing and (e) will notify the
Indenture Trustee of any change in its principal offices and will maintain the
files relating to the Receivables in the United States.
PAYMENTS ON RECEIVABLES; DEPOSITS TO COLLECTION ACCOUNT
The Indenture Trustee will establish and maintain a separate trust account
(the "Collection Account") for the benefit of the Noteholders and the Issuer.
The Collection Account will be an Eligible Account (as defined herein). Except
as otherwise described herein and subject to the investment provision described
in the following paragraphs, within two Business Days following receipt by the
Servicer or the Subservicer of amounts representing Collected Funds, the
Servicer will cause such amounts to be deposited in the Collection Account. A
"Business Day" is a day other than a Saturday,
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Sunday or other day on which commercial banks located in the States of Illinois,
California and New York are authorized or obligated to be closed. Amounts
deposited in the Collection Account may be invested in Eligible Investments
maturing so that funds will be available for distribution no later than the
close of business on the day prior to the related Payment Date. On the
Determination Date, the Servicer will notify the Indenture Trustee and the
Issuer of the amount of such deposit to be included in the Available Funds for
the related Payment Date. Notwithstanding the foregoing, for as long as HFC
remains the Servicer under the Sale and Servicing Agreement and maintains a
commercial paper rating of at least P-1 from Moody's Investor's Service, Inc.
("Moody's") and A-1 from Standard & Poor's (A Division of The McGraw-Hill
Companies) ("Standard & Poor's"), which is currently the case, 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 such
collections until the related Payment Date. So long as such ratings are
maintained, the Servicer will, on or prior to each Payment Date, make deposits
in an amount equal to Collected Funds for the related Collection Period. Moody's
and Standard & Poor's are referred to collectively as the "Rating Agencies."
"Eligible Investments" shall mean negotiable instruments or securities which
evidence: (a) direct obligations of, or obligations fully guaranteed as to
timely payment by, the United States of America, (b) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking or depository institution authorities; provided the short-term debt
rating of such depository institution or trust company shall be in the highest
rating category of the Rating Agencies, (c) commercial paper having, at the time
of the Issuer's investment or a contractual commitment to invest, a rating in
the highest rating category of the Rating Agencies, (d) demand deposits, time
deposits and certificates of deposit which are fully insured by the FDIC having,
at the time of the Issuer's investment therein, a rating in the highest rating
category of the Rating Agencies, (e) bankers' acceptances issued by any
depository institution or trust company described in (b) above, (f) money market
funds having, at the time of the Issuer's investment therein, a rating in the
highest rating category of the Rating Agencies, (g) time deposits, other than as
referred to in (d) above (having maturities not later than the succeeding
Payment Date), with an entity, the commercial paper of such entity having a
credit rating in the highest rating category of the Rating Agencies, (h) demand
notes of HFC for so long as HFC commercial paper has, at the time of the
Issuer's investment thereof, a rating in the highest rating category of the
Rating Agencies and (i) any other investment acceptable to the Rating Agencies.
At any time that the commercial paper issued by HFC does not satisfy the
rating requirements specified above, HFC may continue to hold collections prior
to distribution as described above so long as HFC causes to be maintained an
irrevocable letter of credit or surety bond or other credit enhancement
instrument in form and substance satisfactory to each Rating Agency (a "Servicer
Credit Facility"), issued by a depository institution or insurance company
having a rating on its (i) short-term obligations of at least P-1 and long-term
obligations of at least A2 by Moody's and (ii) short-term obligations of A-1 and
long-term obligations of A by Standard & Poor's or other ratings if approved by
the Rating Agencies and providing that the Indenture Trustee may draw thereon in
the event that HFC, as Servicer, fails to make any deposit or payment required
under the Sale and Servicing Agreement.
An "Eligible Account" is an account that is either (i) a segregated account
with a depository institution organized under the laws of the United States or
any of the states thereof, which depository at the time of any deposit therein
has a net worth in excess of $50,000,000 and long-term debt rating acceptable to
the Rating Agencies or a short-term deposit obligation rating acceptable to the
Rating Agencies, or (ii) a segregated trust account with the corporate trust
department of a depository organized under the laws of the United States or any
one of the states thereof, and acting as a trustee for funds deposited in such
account, so long as any of the unsecured, unguaranteed senior debt securities of
such depository shall have a long-term debt rating acceptable to the Rating
Agencies.
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The Servicer will have the revocable power to withdraw funds from the
Collection Account and to instruct the Indenture Trustee to make withdrawals and
payments from the Collection Account for the purpose of carrying out its duties
under the Sale and Servicing Agreement and the Indenture.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments called for
under the Receivables and will, consistent with the Sale and Servicing
Agreement, follow such collection procedures as it follows from time to time
with respect to motor vehicle retail installment sales contracts in its
servicing portfolio which are comparable to the Receivables. 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
Receivables.
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 any such
arrangement is consistent with the Servicer's policies with respect to
comparable retail installment sales contracts held in its portfolio.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
As long as HFC is the master servicer it will receive, or be entitled to
retain a servicing fee on behalf of itself and the Subservicer, after making
payments on the Notes and making required deposits in the Reserve Account. Such
fee will be paid monthly in arrears in the amount of 3.00% per annum of the Pool
Balance as of the beginning of the related Collection Period (the "Servicing
Fee"). If HFC is no longer the master servicer, the Servicing Fee will be paid
the successor master servicer prior to any distributions on the Notes and making
required deposits in the Reserve Account. The Servicer is also entitled to
retain all administrative fees, expenses and charges paid on behalf of
borrowers, including late fees, prepayment fees and liquidation fees (the
"Supplemental Servicing Fees").
The Servicer will pay certain ongoing expenses associated with the Issuer
and the Notes, and incurred by it in connection with its responsibilities under
the Sale and Servicing Agreement, including, without limitation, payment of the
fees and disbursements of the Indenture Trustee and the Owner Trustee. In
addition, the Servicer will be entitled to reimbursement for certain expenses
incurred by it in connection with its servicing duties, such right of
reimbursement being prior to the rights of Noteholders to payments of principal
and interest.
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement provides for delivery on or before April 30
in each year, to the Owner Trustee, the Indenture Trustee and the Rating
Agencies of an annual statement signed by an officer of the Servicer or of the
Subservicer to the effect that the Servicer or the Subservicer has fulfilled the
material obligations of the Servicer under the Sale and Servicing Agreement
throughout the preceding calendar year, except as specified in such statement.
On or before April 30 of each year, the Servicer will furnish a report
prepared by a firm of independent certified public accountants to the Owner
Trustee, the Indenture Trustee and the Rating Agencies to the effect that such
accountants have examined certain documents and the records relating to
servicing of the Receivables (including the Sale and Servicing Agreement) and
compared mathematical calculations for monthly servicing reports selected by
such accountants with the Servicer's computer reports, and such examination, has
disclosed no items of noncompliance with the provision of the Sale and Servicing
Agreement or variations in the results of such calculations which, in the
opinion of the firm, are material, except for such items of non-compliance as
shall be referred to in the report.
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CERTAIN MATTERS REGARDING THE SERVICER AND THE SELLER
The Sale and Servicing Agreement provides that the Servicer may not resign
from its obligations and duties thereunder, except in connection with a
permitted transfer of servicing, unless (i) such duties and obligations are no
longer permissible under applicable law or are in conflict by reason of
applicable law with any other activities of a type and nature presently carried
on by it or (ii) upon the satisfaction of the following conditions: (a) the
Servicer has delivered an executed assumption agreement in form satisfactory to
the Indenture Trustee, assigning its obligations and duties to an entity as to
which the Rating Agencies have confirmed that such assumption will not result in
a lowering of the then current ratings of the Notes, and (b) the successor meets
the eligibility requirements specified in the Sale and Servicing Agreement. No
such resignation will become effective until the Indenture Trustee or a
successor master servicer has assumed the Servicer's obligations and duties
under the Sale and Servicing Agreement.
The Servicer may perform any of its duties and obligations under the Sale
and Servicing Agreement through one or more subservicers or delegates, which may
be affiliates of the Servicer. Notwithstanding any such arrangement, the
Servicer will remain liable and obligated to the Issuer, the Indenture Trustee,
and the Noteholders for the Servicer's duties and obligations under the Sale and
Servicing Agreement, as if the Servicer itself were performing such duties and
obligations. It is expected that so long as HFC is the master servicer, the
Subservicer will subservice the Receivables on behalf of HFC.
The Sale and Servicing Agreement will also provide that neither the
Servicer, the Seller, nor any director, officer, employee or agent of the
Servicer or the Seller will be under any liability to the Issuer, the Indenture
Trustee or any Noteholders for any action taken or for refraining from the
taking of any action in good faith pursuant to the Sale and Servicing Agreement,
or for errors in judgment; provided, however, that neither the Servicer, the
Seller nor any such person will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties thereunder. In addition, the Sale and Servicing Agreement provides
that neither the Servicer nor the Seller will be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
respective duties under the Sale and Servicing Agreement and which in its
opinion may involve it in any expense or liability.
Any corporation into which the Servicer or the Seller may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer or the Seller shall be a party, or any
corporation succeeding to the business of the Servicer or the Seller shall be
the successor of the Servicer or the Seller under the Sale and Servicing
Agreement.
SERVICER TERMINATION EVENT
"Servicer Termination Event" under the Sale and Servicing Agreement will
consist of the occurrence and continuance of any of the following: (i) any
failure by the Servicer to deliver to the Trustee for distribution to the
Noteholders any required payment, which failure continues unremedied for five
days after written notice is received by the Servicer from the Indenture Trustee
or after discovery of such failure by a responsible officer of the Servicer;
(ii) any failure by the Servicer duly to observe or perform in any material
respect certain material covenants and agreements set forth in the Sale and
Servicing Agreement which failure continues unremedied for 60 days after written
notice of such failure is given; (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings with respect to the Servicer or certain actions by the Servicer
indicating its insolvency, inability to pay its obligations or initiating a
reorganization under bankruptcy laws; and (iv) the material breach of certain of
the Servicer's representations or warranties and the Servicer's failure to cure
such breach within 60 days after notice thereof.
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Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (i) above, for five Business Days and (ii) above, for a period
of 60 days, shall not constitute a Servicer Termination Event if such delay or
failure could not be prevented by the exercise of reasonable diligence by the
Servicer and such delay or failure was caused by an act of God or other similar
occurrence. Upon the occurrence of any such event the Servicer shall not be
relieved from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of the Sale and Servicing Agreement and the
Servicer shall provide the Seller prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.
RIGHTS UPON SERVICER TERMINATION EVENT
If a Servicer Termination Event under the Sale and Servicing Agreement
remains unremedied, the Indenture Trustee may terminate all the rights and
obligations of the Servicer under such Agreement, whereupon the Indenture
Trustee or such other successor servicer as shall have been appointed by the
Indenture Trustee will succeed to all the responsibilities, duties, and
liabilities of the Servicer under such Agreement. Any such successor master
servicer will succeed to all the responsibilities, duties, and liabilities of
the Servicer under the Sale and Servicing Agreement and will be entitled to
similar compensation arrangements. There is no assurance that the succession of
a successor servicer will not result in a material disruption in the performance
of the duties of the master servicer.
AMENDMENT
The Sale and Servicing Agreement may be amended by the Seller, the Servicer,
the Owner Trustee and the Indenture Trustee, but without the consent of the
Noteholders, provided that such action shall not adversely affect in any
material respect the interests of any Noteholder. The Seller, the Servicer and
the Indenture Trustee may also amend the Sale and Servicing Agreement with the
consent of Noteholders holding a majority of the principal amount of the Notes
outstanding to add, change or eliminate any provisions of such Agreement;
provided that such action will not (i) reduce in any manner the amount of, or
delay the timing of, collections on Receivables or payments that are required to
be made for the benefit of the Noteholders without the consent of holders of all
the outstanding Notes; (ii) change the manner of calculating the interest of any
Noteholder without the consent of holders of all the outstanding Notes; (iii)
adversely affect any rating of the Notes by the Rating Agencies without the
consent of not less than a majority of the outstanding principal balance of the
Notes; or (iv) reduce the aforesaid percentage of the Noteholders required to
consent to any such amendment without the consent of the holders of all Notes
outstanding.
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DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The Receivables transferred to the Issuer by the Seller were acquired by the
Seller from the Subservicer pursuant to the Master Receivables Purchase
Agreement, dated as of June 1, 1999 entered into by and between the Seller, as
purchaser of the Receivables, and the Subservicer, as seller of the Receivables
or pursuant to a substantially similar agreement dated as of November 1, 1998
(collectively, the "Receivables Purchase Agreement"). The Receivables Purchase
Agreement is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Pursuant to the Sale and Servicing Agreement, the
Receivables were transferred by the Seller to the Issuer, and the Seller
assigned its rights in, to and under the Receivables Purchase Agreement with
respect to such balances to the Issuer. The following summary describes the
material terms of the Receivables Purchase Agreement.
SALE OF RECEIVABLES
Pursuant to the Receivables Purchase Agreement, the Subservicer sold to the
Seller all its right, title and interest in and to all of the Receivables. The
purchase price of the Receivables was not less than the principal amount thereof
as of the time of sale, plus the present value of the anticipated excess spread
discounted to account for uncertainty in future performance of the Receivables.
In connection with such sale of the Receivables to the Seller, the
Subservicer has indicated in its computer files that the Receivables have been
sold to the Seller and that such Receivables have been further sold or
transferred by the Seller to the Issuer. In addition, the Subservicer has
provided to the Seller a computer file or a microfiche list containing a true
and complete list showing each Receivable, identified by account number and by
total outstanding balance on the date the Receivable was sold to the Seller. In
its capacity as Subservicer, the Subservicer has retained possession of the
records and agreements relating to the Receivables. Such records and agreements
are not segregated by the Subservicer from other documents and agreements
relating to other receivables and are not stamped or marked to reflect the sale
or transfer of the Receivables to the Seller. However, the computer records of
the Subservicer are or will be marked to evidence such sale or transfer. The
Subservicer has filed a UCC financing statement meeting the requirements of
applicable state law and in each of the jurisdictions in which such filings are
required in order to maintain the lien priority with respect to the Receivables.
See "Risk Factors--Security Interests May Not Be Perfected Giving Others
Superior Rights to the Trust Assets" and "Certain Legal Aspects of the
Receivables".
REPRESENTATIONS AND WARRANTIES
In the Receivables Purchase Agreement, the Subservicer represented and
warranted to the Seller to the effect, among other things, that (a) the
Receivables Purchase Agreement constitutes a legal, valid and binding obligation
of the Subservicer, (b) each Receivable satisfied certain eligibility criteria,
(c) the assignment pursuant to the Receivables Purchase Agreement constitutes a
valid sale to the Seller of all right, title and interest of the Subservicer in
and to the Receivables, the security interests in the financed vehicles, and in
the proceeds thereof or, if held not to constitute a sale, constitutes a grant
of a security interest in the Receivables, (d) the assignment pursuant to the
Receivables Purchase Agreement constitutes a valid sale to the Seller of all
right, title and interest in and to any related service contracts on financed
vehicles and rights against Dealers pursuant to Dealer Agreements, and (e) the
assignment pursuant to the Receivables Purchase Agreement constitutes a valid
sale to the Seller of all right, title and interest in and to any physical
damage, credit life or disability insurance policies covering financed vehicles
or borrowers. If the breach of any of the
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representations and warranties described in this paragraph results in the
obligation of the Seller under the Sale and Servicing Agreement to accept
retransfer of the Receivables, either the Seller, or at the Seller's election,
the Subservicer, will repurchase the affected Receivables for an amount equal to
the unpaid principal balance thereof, plus accrued and unpaid finance charges
from the last date billed through the end of the current Collection Period.
AMENDMENTS
The Receivables Purchase Agreement may be amended by the Seller and the
Subservicer without the consent of the Noteholders. However, as certified by the
Seller, no such amendment may adversely affect in any material respect the
interests of any Noteholder.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
SECURITY INTERESTS IN VEHICLES
In all the states in which the Receivables have been originated, retail
installment sale contracts such as the Receivables evidence the credit sale of
automobiles, light duty trucks and vans by Dealers to borrowers. The Receivables
also constitute personal property security agreements and include grants of
security interests in the financed vehicles under the Uniform Commercial Code
(the "UCC").
Perfection of security interests in the financed vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In the states in which a majority of the Receivables have
been originated, a security interest in a vehicle generally may be perfected
only by causing such vehicle's certificate of title to be amended to note the
security interest of the secured party. Such notation of a secured party's
security interest is generally effected in such states by depositing with the
applicable state highway department, motor vehicles registrar, or similar
authority along with any necessary registration fees, the vehicle's certificate
of title and an application containing the name and address of the secured
party.
Pursuant to the Receivables Purchase Agreement, the Subservicer will assign
its security interest in the financed vehicles securing the receivables to the
Seller. Pursuant to the Sale and Servicing Agreement, the Seller will then
assign such security interests to the Issuer. However, because of the
administrative burden and expense, the Subservicer, the Servicer, the Seller,
the Indenture Trustee and the Owner Trustee will not amend any certificate of
title to identify the Issuer as the new secured party on the certificates of
title relating to the financed vehicles. Also, the Subservicer, as agent for the
Servicer, may continue to hold any certificates of title relating to the
financed vehicles in its possession. See "Description of the Trust
Documents--Sale and Assignment of Receivables."
In most states, assignments such as those under the Receivables Purchase
Agreement and the Sale and Servicing Agreement are an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds thereby to the assignor's rights as secured
party. In the absence of fraud or forgery by the vehicle owner, the Subservicer,
or the Servicer, or administrative error by state or local agencies, the
notation of the Subservicer's (or any predecessor of the Subservicer's or any
subsidiary's) lien on the certificates of title and, if applicable, the
Subservicer's or the Servicer's possession of the certificate of title will be
sufficient to protect the Issuer against the rights of subsequent purchasers of
a financed vehicle or subsequent lenders who take a security interest in a
financed vehicle. If there are any financed vehicles as to which a perfected
security interest is not obtained, the Issuer's security interest will be
subordinate to, among others, subsequent purchasers of the financed vehicles and
holders of perfected security interests. Such
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a failure, however, would constitute a breach of the Seller's warranties under
the Sale and Servicing Agreement and would create an obligation of the Seller to
purchase the related Receivable unless the breach is cured. See "Description of
the Trust Documents--Sale and Assignment of Receivables." By not identifying the
Issuer as the secured party on the certificate of title, the security interest
of the Issuer in the financed vehicle could be defeated through fraud or
negligence.
Under Texas law, unless the borrower has notice of the assignment of its
retail installment sales contract, or any outstanding balance thereunder,
payment by the borrower to the holder last known to such borrower will be
binding upon all subsequent holders or assignees of the retail installment sales
contract. By not notifying the borrower of the assignment of the retail
installment sales contract to the Issuer, the Issuer would not have a cause of
action against the borrower for any payments made by the borrower to the holder
or assignee last known to such borrower.
Under the laws of most states, the perfected security interest in a vehicle
continues for four months after a vehicle is moved to a state other than the
state in which it is initially registered and thereafter until the vehicle owner
re-registers the vehicle in the new state. A majority of states generally
require a surrender of a certificate of title to re-register a vehicle;
accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle, or, in the case of vehicles registered in
states providing for the notation of a security interest on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In other states
that do not require a certificate of title for registration of a motor vehicle
or in cases of fraud on the part of the borrower, re-registration could defeat
perfection. In the ordinary course of servicing receivables, the Subservicer
takes steps to effect re-perfection upon receipt of notice of re-registration or
information from the borrower as to relocation. Similarly, when a borrower sells
a vehicle, the Subservicer must surrender possession of the certificate of title
or will receive notice as a result of its security interest noted thereon and
accordingly will have an opportunity to require satisfaction of the related
Receivable before release of the security interest. Under the Sale and Servicing
Agreement, the Servicer is obligated to take appropriate steps, at the
Servicer's expense, to maintain perfection of security interests in the financed
vehicles.
Under the laws of most states, liens for repairs performed on, and for
storage of, a motor vehicle and liens for certain unpaid taxes take priority
over even a perfected security interest in a financed vehicle. The Code also
grants priority to certain federal tax liens over the lien of a secured party.
The laws of certain states, and federal law permit the confiscation of motor
vehicles under certain circumstances if used in unlawful activities, which may
result in the loss of a secured party's perfected security interest in the
confiscated motor vehicle. The Seller will represent to the Issuer in the Sale
and Servicing Agreement that each security interest in a financed vehicle is or
will be prior to all other present liens (other than tax liens and liens that
arise by operation of law) upon, and security interests in, such financed
vehicle. However, liens for repairs or taxes, or the confiscation of a financed
vehicle, could arise or occur at any time during the term of a Receivable. No
notice will be given to the Indenture Trustee in the event such a lien arises or
confiscation occurs.
REPOSSESSION
In the event of a default by vehicle purchasers, the holder of the retail
installment sales contract has all the remedies of a secured party under the UCC
of the state in which enforcement is to take place, except where specifically
limited by other laws. In states other than Louisiana and Wisconsin,
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(i) the UCC remedies of a secured party include the right to repossession by
self-help means, unless such means would constitute a breach of the peace; (ii)
unless a vehicle is voluntarily surrendered, self-help repossession is the
method that will be employed by the Subservicer in the majority of instances in
which a default occurs and is accomplished by retaking possession of the
financed vehicle; and (iii) in cases where the borrower objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order. In Louisiana and
Wisconsin, unless the vehicle is voluntarily surrendered or abandoned, judicial
means must be employed in order to seize the vehicle. In certain states under
certain circumstances after the vehicle has been repossessed, the borrower may
reinstate the contract by paying the delinquent installments on the contract and
other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the borrower, some jurisdictions require that the
borrower be notified of the default and be given a time period within which the
borrower may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The UCC and other state laws require the secured party to provide the
borrower with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
some states the borrower has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the collateral
for disposition and arranging for sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some other states, by payment of delinquent installments
or the unpaid balance. Repossessed vehicles are generally resold by the
Subservicer through automobile auctions which are attended principally by
automotive dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be applied
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness of the borrower on the Receivable. While some states impose
prohibitions or limitations on deficiency judgments, if the net proceeds from
resale do not cover the full amount of the indebtedness a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
Additionally, under Texas law, in order for a creditor in a secured transaction
to sue for a deficiency, the lender must first comply with those provisions of
the UCC which govern disposition of collateral and then dispose of the
collateral in a commercially reasonable manner. Any deficiency judgment would be
a personal judgment against the borrower for the shortfall, and a defaulting
borrower can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any other holder of any subordinate lien with
respect to the vehicle who has notified the lender within the specified time
period or, if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the borrower.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, state adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and state motor vehicle
retail installment sales acts, retail installment sales acts and other similar
laws. Also, state laws may impose finance charge ceilings and other restrictions
on consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements may impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect an assignee's (such as the Issuer's) ability
to enforce retail installment sales contracts such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, state statutes or the common law in certain
states, has the effect of subjecting a seller (and certain related lenders and
their assignees, such as the Issuer) in a consumer credit transaction and any
assignee of the seller to all claims and defenses which the borrower in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the borrower under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the borrower. The Receivables will be subject to the
requirements of the FTC Rule. Accordingly, the Indenture Trustee, as holder of
the Receivables, will be subject to any claims or defense that the purchaser of
the financed vehicle may assert against the seller of the financed vehicle. Such
claims are limited to a maximum liability equal to the amounts theretofore paid
by the borrower on the Receivable.
Under most state motor vehicle dealer licensing laws, sellers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale.
Furthermore, the Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new and
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if an
odometer disclosure statement was not provided to the purchaser of the related
financed vehicle, the borrower may be able to assert a defense against the
seller of the vehicle.
Courts have imposed general equitable principles on secured parties pursuing
repossession of collateral or litigation involving deficiency balances. These
equitable principles may have the effect of relieving a borrower from some or
all of the legal consequences of a default.
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In several cases, borrowers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
The Seller will warrant under the Sale and Servicing Agreement, that each
Receivable complies with all requirements of law in all material respects.
Accordingly, if a borrower has a claim against the Issuer for violation of any
law and such claim materially and adversely affects the Issuer's interest in a
Receivable, such violation would constitute a breach of warranty under the Sale
and Servicing Agreement and would create an obligation of the Seller to
repurchase the Receivable unless the breach is cured. See "Description of the
Trust Documents--Sale and Assignment of the Receivables."
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940. Under the terms of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"),
a borrower who enters military service after the origination of such borrower's
Receivable (including a borrower who was in reserve status and is called to
active duty after origination of the Receivable), may not be charged interest
(including fees and charges) above an annual rate of 6% during the period of
such borrower's active duty status, unless a court orders otherwise upon
application of the lender. The Relief Act applies to borrowers who are members
of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard,
and officers of the U.S. Public Health Service assigned to duty with the
military. Because the Relief Act applies to borrowers who enter military service
(including reservists who are called to active duty) after origination of the
related Receivable, no information can be provided as to the number of
Receivables that may be effected by the Relief Act. Application of the Relief
Act would adversely affect, for an indeterminate period of time, the ability of
the Servicer to collect full amounts of interest on certain of the Receivables.
Any shortfall in interest collections resulting from the application of the
Relief Act or similar legislation or regulations, which would not be recoverable
from the related Receivables, would result in a reduction of the amounts
distributable to the holders of the Notes. In addition, the Relief Act imposes
limitations that would impair the ability of the Servicer to foreclose on an
affected Receivable during the borrower's period of active duty status, and,
under certain circumstances, during an additional three month period thereafter.
Thus, in the event that the Relief Act or similar legislation or regulations
applies to any Receivable which goes into default, there may be delays in
payment and losses on the Notes in connection therewith. Any other interest
shortfalls, deferrals or forgiveness of payments on the Receivables resulting
from similar legislation or regulations may result in delays in payments or
losses to Noteholders.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the United States Bankruptcy Code
and similar applicable state laws, may interfere with or affect the ability of a
lender to realize upon collateral or enforce a deficiency judgment. For example,
in a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent
a lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
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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. Certain holders, including insurance companies, tax-exempt
organizations, financial institutions or broker dealers, taxpayers subject to
the alternative minimum tax, and holders that will hold the 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 ISSUER
Dewey Ballantine LLP ("Tax Counsel") is of the opinion that, assuming the
parties will comply with the terms of the Trust Agreement and related documents,
the Issuer will not be an association (or publicly traded partnership) taxable
as a corporation for federal income tax purposes.
If the Issuer were taxable as a corporation for federal income tax purposes,
the Issuer would be subject to corporate income tax on its taxable income. The
Issuer's taxable income would include all its income on the Receivables,
possibly reduced by its interest expense on the Notes. Any such corporate income
tax could materially reduce cash available to make payments on the Notes.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE 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 pursuant to which they are issued rather than
merely upon the form of the transaction or the manner in which the instruments
are labeled. The Internal Revenue Service ("IRS") and the courts have set forth
various factors to be taken into account in determining, for federal income tax
purposes, whether or not an instrument constitutes indebtedness and whether a
transfer of property is a sale because the transferor has relinquished
substantial incidents of ownership in the property or whether such transfer is a
borrowing secured by the property. On the basis of its analysis of such factors
as applied to the facts and its analysis of the economic substance of the
contemplated transaction, 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 Receivables, nor as an equity interest in the Issuer 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 Issuer will report to
Noteholders of record and the IRS in respect of the interest paid and original
issue discount, if any, accrued on the Notes to the extent required by law.
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Although, as described above, it is the opinion of Tax Counsel that, for
federal income tax purposes, the Notes will be characterized as debt, such
opinion is not binding on the IRS and thus no assurance can be given that such a
characterization will prevail. If the IRS successfully asserted that one or more
of the 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 Issuer 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. 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 ("OID") other than possibly OID within a DE MINIMIS
exception and that accordingly the provisions of sections 1271 through 1273 and
1275 of the Internal Revenue Code of 1986, as amended (the "Code"), generally
will not apply to the Notes. OID will be considered DE MINIMIS if it is less
than 0.25% of the principal amount of 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 such
Note (including certain nontaxable dispositions such as a gift), or receives a
principal payment, any gain upon such sale or other disposition will be
recognized, or the amount of such principal payment will be treated, as ordinary
income to the extent of any "market discount" accrued for the period that such
purchaser holds the Note. Such holder may instead elect to include market
discount in income as it accrues with respect to all debt instruments acquired
in the year of acquisition of the 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 such purchaser acquired the Note. In general, market discount on a Note
will be treated as accruing over the term of such Note in the ratio of interest
for the current period over the sum of such current interest and the expected
amount of all remaining interest payments, or at the election of the holder,
under a constant yield method. At the request of a holder of 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 such indebtedness until the
corresponding amount of market discount is included in income.
Notwithstanding the above rules, 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
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and, when each such distribution is received, capital gain equal to the discount
allocated to such distribution will be recognized.
MARKET PREMIUM. A subsequent purchaser who buys a Note for more than its
principal amount generally will be considered to have purchased the Note at a
premium. Such holder may amortize such premium, using a constant yield method,
over the remaining term of the Note and, except as future regulations may
otherwise provide, may apply such amortized amounts to reduce the amount of
interest reportable with respect to such Note over the period from the purchase
date to the date of maturity of the Note. The amortization of such premium on an
obligation that provides for partial principal payments prior to maturity should
be governed by the methods for accrual of market discount on such an obligation
(described above). A holder that elects to amortize premium must reduce his tax
basis in the related obligation by the amount of the aggregate deductions (or
interest offsets) allowable for amortization of premium. If a debt instrument
purchased at a premium is redeemed in full prior to its maturity, a purchaser
who has elected to amortize premium should be entitled to a deduction for any
remaining unamortized premium in the taxable year of redemption.
SALE OR REDEMPTION OF 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 such Holder's adjusted basis in the Note. Such adjusted basis
generally will equal the cost of the Note to the seller, increased by any
original issue discount included in the seller's gross income in respect of the
Note (and by any market discount which the taxpayer elected to include in income
or was required to include in income), and reduced by payments other than
payments of qualified stated interest in respect of the Note received by the
seller and by any amortized premium. Similarly, a holder who receives a payment
other than a payment of qualified stated interest in respect of a Note, either
on the date on which such payment is scheduled to be made or as a prepayment,
will recognize gain equal to the excess, if any, of the amount of the payment
over his adjusted basis in the Note allocable thereto. A Noteholder who receives
a final payment which is less than his adjusted basis in the Note will generally
recognize a loss in the amount of the shortfall on the last day of his taxable
year. Generally, any such gain or loss realized by an investor who holds a Note
as a "capital asset" within the meaning of Code Section 1221 should be capital
gain or loss, except as described above in respect of market discount and except
that a loss attributable to accrued but unpaid interest may be an ordinary loss.
TAXATION OF CERTAIN FOREIGN INVESTORS. Interest payments (including OID, if
any) on the Notes made to a Noteholder who is a nonresident alien individual,
foreign corporation or other non-United States person (a "foreign person")
generally will be "portfolio interest" which is not subject to United States tax
if such payments are not effectively connected with the conduct of a trade or
business in the United States by such foreign person and if the Trust (or other
person who would otherwise be required to withhold tax from such payments) is
provided with an appropriate statement that the beneficial owner of the 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 Code at a rate of 31% if
recipients of such distributions fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed by
the IRS on a recipient of distributions that is required to supply information
but that does not do so in the proper manner.
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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 with respect to the various state and local tax
consequences of an investment in the Notes.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974 ("ERISA")
and Section 4975 of the Code prohibit a pension, profit sharing, or other
employee benefit plan from engaging in certain transactions involving "plan
assets" with persons that are "parties in interest" under ERISA or "disqualified
persons" under the Code with respect to the plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons. Title I of ERISA also requires that
fiduciaries of plans subject to ERISA make investments that are prudent,
diversified (except if prudent not to do so) and in accordance with governing
plan documents. Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a plan is considered
to be a fiduciary of such plan (subject to certain exceptions not here
relevant).
In addition to the matters described below, purchasers of Notes that are
insurance companies should consult with their counsel with respect to the United
States Supreme Court case interpreting the fiduciary responsibility rules of
ERISA, JOHN HANCOCK MUTUAL LIFE INSURANCE CO. V. HARRIS TRUST AND SAVINGS BANK,
510 U.S. 86 (1993). In JOHN HANCOCK, the Supreme Court ruled that assets held in
an insurance company's general account may be deemed to be "plan assets" for
ERISA purposes under certain circumstances. Prospective purchasers should
determine whether the decision affects their ability to make purchases of the
Notes.
Certain transactions involving the Issuer might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Issuer were
deemed to be "plan assets" of an employee benefit plan subject to ERISA or the
Code, or an individual retirement account (an "IRA"), or any entity whose
underlying assets are deemed to be assets of an employee benefit plan or an IRA
by reason of such employee benefit plan's or such IRA's investment in such
entity (each a "Benefit Plan"). Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of the Issuer
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the Code only if the Benefit Plan acquired an "equity interest" in the Issuer
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. The Seller
believes that the Notes should be treated as indebtedness without substantial
equity features for purposes of the Plan Assets Regulation. This determination
is based in part upon the traditional debt features of the Notes, including the
reasonable expectation of purchasers of such Notes that the Notes will be repaid
when due, as well as the absence of conversion rights, warrants and other
typical equity features. The debt treatment of the Notes for ERISA purposes
could change if the Issuer incurred losses. However, without regard to whether
the Notes are treated as an equity interest for such purposes, the acquisition
or holding of Notes by or on behalf of a Benefit Plan could be considered to
give rise to a prohibited transaction if the Issuer, or any of its respective
affiliates is or becomes a
64
<PAGE>
party in interest or a disqualified person with respect to such Benefit Plan. In
such case, certain exemptions from the prohibited transaction rules could be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a Note. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 95-60, regarding investments by insurance
company general accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 96-23, regarding transactions by "in-house asset
managers"; and PTCE 84-14, regarding transactions by "qualified professional
asset managers." Each investor using the assets of a Benefit Plan which acquires
the Notes, or to whom the Notes are transferred, will be deemed to have
represented that the acquisition and continued holding of the Notes, whichever
applies, will be covered by a Department of Labor class exemption.
Employee plans that are government plans (as defined in Section 3(32) or
ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not
subject to ERISA. Accordingly, the assets of such plans may be invested in Notes
without regard to the ERISA considerations discussed herein. However,
governmental plans may be subject to comparable federal, state and local law
restrictions, and church plans may be subject to other prohibited transaction
restrictions under the Code.
Any Benefit Plan fiduciary considering the purchase of a Note should consult
with its counsel with respect to the potential applicability of ERISA and the
Code to such investment. Moreover, each Benefit Plan fiduciary should determine
whether, under the general fiduciary standards of investment prudence and
diversification, an investment in the Notes is appropriate for the Benefit Plan,
taking into account the overall investment policy of the Benefit Plan and the
composition of the Benefit Plan's investment portfolio.
The sale of Notes to a Benefit Plan is in no respect a representation by the
Issuer or the Underwriters that this investment meets all relevant legal
requirements with respect to investments by Benefit Plans generally or any
particular Benefit Plan or that this investment is appropriate for Benefit Plans
generally or any particular Benefit Plan.
65
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated June , 1999 (the "Underwriting Agreement") among the Seller, HFC and the
Underwriters named below (the "Underwriters"), the Seller has agreed to sell to
the Underwriters and each of the Underwriters has agreed to purchase, the
principal amount of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITERS NOTES NOTES NOTES NOTES
- -------------------------------------------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
J.P. Morgan Securities Inc..............................
Chase Securities Inc. ..................................
Credit Suisse First Boston Corporation..................
Salomon Smith Barney Inc. ..............................
</TABLE>
The Underwriters propose to offer the Notes in part directly to purchasers
at the initial public offering prices set forth on the cover page of this
Prospectus and in part to certain securities dealers at such prices less
concessions not to exceed %, %, % and % of the respective
Security Balance of the Class A-1, Class A-2, Class A-3 and Class A-4, Notes.
The Underwriters may allow, and such dealers may reallow, concessions not to
exceed % of the respective Security Balance of each class of the Notes to
certain brokers and dealers.
The Seller and HFC have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
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. Such
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Seller by John W. Blenke, Vice President-Corporate Law and Assistant Secretary
of Household International, Inc., the parent company of HFC, HAFC and the
Seller, and by Dewey Ballantine LLP, New York, New York, special counsel to the
Seller. Certain legal matters will also be passed upon for the Underwriters by
Dewey Ballantine LLP. As of the date of this Prospectus, Mr. Blenke is a
full-time employee and an officer of Household International, Inc. and
beneficially owns, and holds options to purchase, shares of Common Stock of
Household International, Inc.
66
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
ACC.............................................................................. 15
ABS.............................................................................. 24
ABS Table........................................................................ 24
Actuarial Receivables............................................................ 17
Additional Class A Principal Distributable Amount................................ 36
Aggregate Note Principal Balance................................................. 36
Aggregate Optimal Note Principal Balance......................................... 36
Amount Financed.................................................................. 36
APR.............................................................................. 17
Available Funds.................................................................. 36
Benefit Plan..................................................................... 64
Business Day..................................................................... 50
Cedel............................................................................ 44
Cedel Participants............................................................... 46
Class A Distributable Amount..................................................... 36
Class A Interest Carryover Shortfall............................................. 37
Class A Interest Distributable Amount............................................ 37
Class A Monthly Principal Distributable Amount................................... 37
Class A Principal Carryover Shortfall............................................ 37
Class A Principal Distributable Amount........................................... 37
Class A-1 Notes.................................................................. 1
Class A-1 Scheduled Maturity Date................................................ 39
Class A-2 Notes.................................................................. 1
Class A-2 Scheduled Maturity Date................................................ 39
Class A-3 Notes.................................................................. 1
Class A-3 Scheduled Maturity Date................................................ 39
Class A-4 Notes.................................................................. 1
Class A-4 Scheduled Maturity Date................................................ 39
Closing Date..................................................................... 5
Code............................................................................. 42
Collected Funds.................................................................. 37
Collection Account............................................................... 16, 50
Collection Period................................................................ 37
Cooperative...................................................................... 47
Cram Down Loss................................................................... 38
Cut-Off Date..................................................................... 5
Dealer Agreements................................................................ 16
Dealers.......................................................................... 16
Depositaries..................................................................... 45
Depositary....................................................................... 45
Determination Date............................................................... 5, 38
DTC.............................................................................. 44, A-1
Eligible Account................................................................. 51
Eligible Investments............................................................. 51
ERISA............................................................................ 64
Euroclear........................................................................ 44
</TABLE>
67
<PAGE>
<TABLE>
<S> <C>
Euroclear Operator............................................................... 47
Euroclear Participants........................................................... 47
Event of Default................................................................. 40
Excess Interest.................................................................. 38
Final Scheduled Payment Date..................................................... 39
FTC Rule......................................................................... 59
Global Securities................................................................ A-1
HFC.............................................................................. 14
Holders.......................................................................... 45
Household........................................................................ 15
Indenture........................................................................ 34
Indenture Trustee................................................................ 4, 14
Indirect Participants............................................................ 45
Industry......................................................................... 48
Interest Period.................................................................. 34
IRA.............................................................................. 64
IRS.............................................................................. 61
Issuer........................................................................... 4, 14
Liquidated Receivable............................................................ 38
Maximum Reserve Account Deposit Amount........................................... 38
Moody's.......................................................................... 51
Net Liquidation Proceeds......................................................... 45
Noteholders...................................................................... 44
Note Owners...................................................................... 24, 44
Note Rate........................................................................ 34
Notes............................................................................ 14
OID.............................................................................. 62
Overcollateralization Amount..................................................... 35
Owner Trustee.................................................................... 4, 14
Participants..................................................................... 45
Payment Date..................................................................... 5, 34
Plan Asset Regulation............................................................ 64
Pool Balance..................................................................... 38
Preferred Stock.................................................................. 16, 22
Principal Amount Available....................................................... 38
Principal Balance................................................................ 38
Principal Distributable Amount................................................... 39
Purchase Amount.................................................................. 39
Purchased Receivable............................................................. 39
PTCE............................................................................. 65
Rating Agencies.................................................................. 51
Receivables...................................................................... 15
Receivables Purchase Agreement................................................... 16, 55
Record Date...................................................................... 5
Relief Act....................................................................... 60
Replacement Note................................................................. 45
Reserve Account.................................................................. 16, 22
Reserve Account Deposit Amount................................................... 39
Reserve Account Shortfall Amount................................................. 39
</TABLE>
68
<PAGE>
<TABLE>
<S> <C>
Rules............................................................................ 45
Sale and Servicing Agreement..................................................... 14
Schedule of Receivables.......................................................... 48
Seller........................................................................... 4, 14
Seller's Bankruptcy Initiatives.................................................. 23
Series 1999-1 Notes.............................................................. 14
Servicer......................................................................... 4, 15
Servicer Credit Facility......................................................... 51
Servicer Termination Event....................................................... 53
Servicing Fee.................................................................... 52
Simple Interest Receivables...................................................... 17
Standard & Poor's................................................................ 51
Subservicer...................................................................... 4, 15
Systems.......................................................................... 47
Supplemental Servicing Fees...................................................... 52
Targeted Credit Enhancement Amount............................................... 39
Targeted Overcollateralization Amount............................................ 39
Targeted Reserve Account Balance................................................. 39
Tax Counsel...................................................................... 61
Terms and Conditions............................................................. 47
Trust Agreement.................................................................. 14
Trust Assets..................................................................... 16
Trust Documents.................................................................. 48
UCC.............................................................................. 56
Underwriters..................................................................... 66
Underwriting Agreement........................................................... 66
</TABLE>
69
<PAGE>
APPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Series 1999-1 Notes will be
available only in book-entry form (the "Global Securities"). Investors in the
Global Securities may hold such Global Securities through any of The Depository
Trust Company ("DTC"), Cedel or Euroclear. The Global Securities will be
tradeable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
CEDE & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior asset backed issues. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
A-1
<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last Payment Date to and excluding the
settlement date, on the basis of (i) the actual number of days in such accrual
period and a year assumed to consist of 360 days. For transactions settling on
the 31st of the month, payment will include interest accrued to and excluding
the first day of the following month. Payment will then be made by the
respective Depositary of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear
A-2
<PAGE>
through a Cedel Participant or Euroclear Participant at least one business day
prior to settlement. In these cases, Cedel or Euroclear will instruct the
respective Depositary, as appropriate, to deliver the Global Securities to the
DTC Participant's account against payment. Payment will include interest accrued
on the Global Securities from and including the last Payment Date to and
excluding the settlement date on the basis of (i) the actual number of days in
such accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. The payment will then be
reflected in the account of the Cedel Participant or Euroclear Participant the
following day, and receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would be backed-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
Cedel Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debt in anticipation of receipt of
the sale proceeds in its account, the back-valuation will extinguish any
overdraft incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
A-3
<PAGE>
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are Note Owners residing in a country that
has a tax treaty with the United States can obtain an exemption or reduced tax
rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption
or Reduced Rate Certificate). If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by the Note Owners or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Note Owner of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or (iii) an estate the income of
which is includible in gross income for United States tax purposes, regardless
of its source or (iv) a trust other than a "foreign trust" as defined in Section
7701(a)(31) of the Internal Revenue Code of 1986 as amended. The term "Non-U.S.
Person" means any person who is not a U.S. Person. The prospectus does not deal
with all aspects of U.S. federal income tax withholding that may be relevant to
foreign holders of the Notes. This summary does not deal with all aspects of
U.S. Federal income tax withholding that may be relevant to foreign holders of
the Global Securities. Investors are advised to consult their own tax advisors
for specific tax advice concerning their holding and disposing of the Global
Securities.
A-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Household Automotive Trust III
We have audited the accompanying balance sheet of Household Automotive Trust
III as of June 3, 1999. This financial statement is the responsibility of the
Issuer'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 III as
of June 3, 1999, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
June 3, 1999
F-1
<PAGE>
HOUSEHOLD AUTOMOTIVE TRUST III
BALANCE SHEET
JUNE 3, 1999
ASSETS
<TABLE>
<S> <C>
Cash............................................................................ $1,000
----------
Total Assets.................................................................... $1,000
----------
----------
</TABLE>
LIABILITIES AND TRUST PRINCIPAL
<TABLE>
<S> <C>
Intererst in the Issuer......................................................... $1,000
----------
Total liabilities and trust principal........................................... $1,000
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
HOUSEHOLD AUTOMOTIVE TRUST III
NOTES TO FINANCIAL STATEMENT
1. NATURE OF OPERATIONS:
Household Automotive Trust III (the "Issuer"), was formed in the State of
Delaware on June 2, 1999. The Issuer has been inactive since that date.
The Issuer 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 $1,000, a 100%
beneficial ownership interest in the Issuer.
F-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE MAY HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANY PERSON TO PROVIDE YOU
WITH ANY OTHER INFORMATION. THE INFORMATION IN THIS DOCUMENT SPEAKS ONLY AS OF
ITS DATE, AND MAY NOT BE ACCURATE AT ANY TIME AFTER ITS DATE. THIS DOCUMENT IS
NOT AN OFFER TO SELL THE NOTES, AND IT IS NOT SOLICITING AN OFFER TO BUY THE
NOTES IN ANY CASE WHERE THE OFFER OR SALE IS NOT PERMITTED.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Where You Can Find More Information............. 2
Prospectus Summary.............................. 4
Risk Factors.................................... 8
Use of Proceeds................................. 14
The Issuer...................................... 14
The Seller...................................... 14
The Servicer.................................... 15
The Subservicer................................. 15
The Trust Assets................................ 16
Yield and Prepayment Considerations............. 23
The Automobile Financing Business of the
Subservicer................................... 27
Description of the Notes........................ 34
Description of the Trust Documents.............. 48
Description of the Receivables Purchase
Agreement..................................... 55
Certain Legal Aspects of the Receivables........ 56
Material Federal Income Tax Consequences........ 61
State and Local Tax Considerations.............. 64
ERISA Considerations............................ 64
Underwriting.................................... 66
Legal Matters................................... 66
Index of Defined Terms.......................... 67
Global Clearance, Settlement and Tax
Documentation Procedures...................... A-1
Financial Information........................... F-1
</TABLE>
UNTIL , 1999 ALL DEALERS THAT EFFECT TRANSACTIONS IN THE NOTES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$147,000,000
Class A-1 Notes
$180,220,000
Class A-2 Notes
$156,010,000
Class A-3 Notes
$179,050,000
Class A-4 Notes
HOUSEHOLD AUTOMOTIVE
TRUST III
SERIES 1999-1
HOUSEHOLD
FINANCE
CORPORATION
Servicer
PROSPECTUS
J.P. Morgan & Co.
Chase Securities Inc.
Credit Suisse First Boston
Salomon Smith Barney
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses (other
than underwriting discounts and commissions) to be incurred by Household Auto
Receivables Corporation in connection with the issuance and distribution of the
Notes.
<TABLE>
<S> <C>
SEC Filing Fee................................................. $184,113.84*
Trustee's Fees and Expenses.................................... 10,000.00
Legal Fees and Expenses........................................ 75,000.00
Accounting Fees and Expenses................................... 75,000.00
Printing and Engraving Expenses................................ 75,000.00
Blue Sky Qualification and Legal Investment Fees and
Expenses..................................................... 10,000.00
Rating Agency Fees............................................. 300,000.00
Miscellaneous.................................................. 886.16
----------
Total.................................................... $730,000.00
----------
----------
</TABLE>
- ------------------------
* Actual.
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<S> <C> <C>
1+ -- Form of Underwriting Agreement.
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, the Servicer and the Indenture Trustee.
4.3+ -- Form of Series 1999-1 Supplement to the Indenture and the Trust Agreement.
4.4+ -- Form of Master Sale and Servicing Agreement among the Seller, the Servicer, the
Issuer, and the Indenture Trustee, including exhibits thereto.
4.5+ -- Form of Master Receivables Purchase Agreement between HAFC and the Seller
5+ -- Opinion of John W. Blenke, Esq., Vice President-Corporate Law and Assistant
Secretary of Household International, Inc.
8+ -- Opinion of Dewey Ballantine LLP with respect to tax matters.
23.1+ -- Consents of John W. Blenke and Dewey Ballantine LLP are included in opinions filed
as Exhibits 5 and 8 hereto, respectively.
23.2+ -- Consent of Arthur Andersen LLP.
24 -- Powers of Attorney (Previously filed).
25.1+ -- Statement of eligibility and qualification of the Indenture Trustee.
</TABLE>
- ------------------------
+ Filed herewith.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Household Auto
Receivables Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Prospect Heights, State of
Illinois, on the 3rd day of June, 1999.
<TABLE>
<S> <C> <C>
HOUSEHOLD AUTO RECEIVABLES CORPORATION
By: *
-----------------------------------------
Rellen M. Stewart
PRESIDENT
</TABLE>
The Registrant reasonably believes that the security ratings to be assigned
to the securities registered hereunder will make the securities "investment
grade securities" pursuant to Transaction Requirement B.2 of Form S-3, prior to
the sale of such securities.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on the 3rd day of June, 1999.
SIGNATURE TITLE
- ------------------------------ ---------------------------
* President (Principal
- ------------------------------ Executive Officer) and
(Rellen M. Stewart) Director
Senior Vice President,
* Treasurer and Director
- ------------------------------ (Principal Financial
(Edgar Ancona) Officer)
* Vice President, Secretary
- ------------------------------ and Director
(John W. Blenke)
* Vice President, Assistant
- ------------------------------ Treasurer and Director
(Steven H. Smith)
* Vice President and
- ------------------------------ Controller (Principal
(Steven L. McDonald) Accounting Officer)
<TABLE>
<S> <C> <C> <C>
*By: /s/ PATRICK D.
SCHWARTZ
-------------------------
(Patrick D. Schwartz)
ATTORNEY-IN-FACT
</TABLE>
II-2
<PAGE>
DRAFT OF JUNE 1, 1999
HOUSEHOLD AUTOMOTIVE TRUST III
SERIES 1999-1
$___________ ____% Class A-1 Notes
$___________ ____% Class A-2 Notes
$___________ ____% Class A-3 Notes
$___________ ____% Class A-4 Notes
UNDERWRITING AGREEMENT
J.P. MORGAN SECURITIES INC.
As Representative of the Underwriters
60 Wall Street
New York, New York 10260 June __, 1999
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 1999-1 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 1999-1 NOTES").
The Series 1999-1 Notes are to be issued by Household Automotive Trust III (the
"TRUST") pursuant to an Indenture, dated as of June 1, 1999, as supplemented by
a Series 1999-1 Supplement (the "INDENTURE") by and among HFC, the Master
Servicer, the Trust and The Chase Manhattan Bank, a New York Banking
Corporation, as indenture trustee (the "INDENTURE TRUSTEE"). In addition to the
Series 1999-1 Notes, the Trust will also issue the Series 1999-1 Certificates
(the "SERIES 1999-1 CERTIFICATES") pursuant to a Trust Agreement, dated as of
June 1, 1999, between the Seller and the Owner Trustee as supplemented by a
Series 1999-1 Supplement (the "TRUST AGREEMENT"). The Series 1999-1 Notes and
the Series 1999-1 Certificates are referred to herein collectively as the
"SERIES 1999-1 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 May 1, 1999 (the "CUT-OFF DATE").
<PAGE>
As used herein, the term "SELLER AGREEMENTS" means the Master Sale and
Servicing Agreement dated as of June 1, 1999 among the Trust, the Seller, the
Master Servicer and The Chase Manhattan Bank, as trustee (the "MASTER SALE AND
SERVICING AGREEMENT"), the Master Receivables Purchase Agreement dated as of
June 1, 1999 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 1999-1 Notes are being purchased by the Underwriters named
in Schedule 1 hereto, and the Underwriters are purchasing, severally, only the
Series 1999-1 Notes set forth opposite their names in Schedule 1, except that
the amounts purchased by the Underwriters may change in accordance with
Section 10 of this Agreement. J.P. Morgan Securities Inc. is acting as
representative of the Underwriters and in such capacity, is hereinafter referred
to as the "REPRESENTATIVE."
The offering of the Series 1999-1 Notes will be made by the
Underwriters and the Household Entities understand that the Underwriters propose
to make a public offering of the Series 1999-1 Notes for settlement on ________,
1999, as the Underwriters deem advisable.
None of the Series 1999-1 Certificates are being purchased by the
Underwriters hereby.
Defined terms used herein and not otherwise defined shall have their
respective meanings as set forth in Section 2.01 of the Series 1999-1 Supplement
dated as of June 1, 1999 among the Master Servicer, the Trust, the Seller, the
Indenture Trustee and Wilmington Trust Company, as Owner Trustee (the
"SERIES 1999-1 SUPPLEMENT").
Section 2. REPRESENTATIONS AND WARRANTIES.
A. HAFC and the Seller, individually, represent and warrant to, and
agree with, the Underwriters as set forth in this Section 2(A). Certain terms
used in this Section 2(A) are defined in the second paragraph of subsection
2(A)(i) below.
(i) The Seller meets the requirements for use of
Form S-3 under the Securities Act of 1933, as amended (the "ACT"), and
has filed with the United States Securities and Exchange Commission
(the "COMMISSION") a registration statement (Registration No.
333-76439), relating to the Series 1999-1 Notes, on such Form S-3 for
the registration under the Act of the Series 1999-1 Notes. The Seller
may have filed one or more amendments thereto, each of which has
previously been furnished to you. The Seller will next file with the
Commission either, (A) prior to the effectiveness of such registration
statement, a further
2
<PAGE>
amendment thereto (including the form of final prospectus) or, (B)
after effectiveness of such registration statement, a final prospectus
in accordance with Rules 430A and 424(b)(1) or (4). In the case of
clause (B), the Seller has included in such registration statement, as
amended at the Effective Date, all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be
included in the prospectuses with respect to the Series 1999-1 Notes
and the offering thereof. As filed, such amendment and form of final
prospectus, or such final prospectus, shall include all Rule 430A
Information and, except to the extent the Underwriters shall agree in
writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent
not completed at the Execution Time, shall contain only such specific
additional information and other changes as the Seller has advised
you, prior to the Execution Time, will be included or made therein.
The terms which follow, when used in this Agreement, shall have the meanings
indicated. The term "EFFECTIVE DATE" shall mean each date that the Registration
Statement and any post-effective amendment or amendments thereto became or
become effective under the Act. "EXECUTION TIME" shall mean the date and time
that this Agreement is executed and delivered by the parties hereto.
"PROSPECTUS" shall mean the prospectus relating to the Series 1999-1 Notes that
is first filed with the Commission pursuant to Rule 424(b) and any prospectuses
subsequently filed pursuant to Rule 424 or, if no filing pursuant to Rule 424(b)
is required, shall mean the form of final prospectus included in the
Registration Statement at the Effective Date. "REGISTRATION STATEMENT" shall
mean the registration statement referred to in the preceding paragraph and any
registration statement required to be filed under the Act or rules thereunder,
including amendments, all documents incorporated or deemed to be incorporated by
reference therein, exhibits and financial statements, in the form in which it
has or shall become effective and, in the event that any post-effective
amendment thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as amended or supplemented
pursuant to the Act or rules thereunder or the Exchange Act or rules thereunder.
Such term shall include Rule 430A Information deemed to be included therein at
the Effective Date as provided by Rule 430A. "RULE 424" and "RULE 430A" refer
to such rules under the Act. "RULE 430A INFORMATION" means information with
respect to the Series 1999-1 Notes and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A. The "RULES AND REGULATIONS" shall mean the rules and regulations of
the Commission. All references in this Agreement to financial statements and
schedules and other information which is "contained," included" or "stated" in
the Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any document under the Exchange Act which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.
(ii) On the Effective Date, the Registration
Statement did or will
3
<PAGE>
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 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
4
<PAGE>
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 1999-1
Securities and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
necessary action or proceedings and will not conflict with or
constitute a breach of, or default under, or, other than as
contemplated in the Registration Statement, result in the creation or
imposition of any lien, charge or encumbrance 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 1999-1
Securities and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
necessary action or proceedings and will not conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or,
other than as contemplated by the Registration Statement, assets of
HAFC pursuant to, any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which HAFC is a party or by which
it may be bound, or to which any of the property or assets of HAFC is
subject, nor will such action result in any violation of the
provisions of the charter or by-laws of HAFC or any applicable law,
administrative regulation or administrative or court decree, except
where any such conflict, breach, default, encumbrance or violation
would not have a material adverse effect on the transactions
contemplated by this Agreement.
(vii) Each Seller Agreement has been, or when
executed and delivered, will have been, duly executed and delivered by
the Seller; and each Seller Agreement constitutes, or, when executed
and delivered, will constitute, legal, valid and binding instruments
enforceable against the Seller in accordance with their respective
terms, subject as to enforceability (A) to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally, (B) to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law) and (C) with respect to rights of indemnity under this
Agreement, to limitations of public policy under
5
<PAGE>
applicable securities laws.
(viii) Each HAFC Agreement has been, or, when
executed and delivered, will have been duly executed and delivered by
HAFC; and each Seller Agreement constitutes, or, when executed and
delivered, will constitute, legal, valid and binding instruments
enforceable against HAFC in accordance with their respective terms,
subject as to the enforceability (A) to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting
creditors' rights generally, (B) to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law) and (C) with respect to rights of indemnity under this
Agreement, to limitations of public policy under applicable securities
law.
(ix) HAFC has authorized the conveyance of the
Receivables to the Seller; the Seller has authorized the conveyance of
the Receivables to the Trust; and the Seller has directed the Trust to
issue and sell the Series 1999-1 Securities.
(x) Each of HAFC and the Seller is solvent and
will not become insolvent after giving effect to the transactions
contemplated by this Agreement and the other Series 1999-1 Related
Documents. The Seller has no indebtedness to any Person other than
pursuant to this Agreement and the Series 1999-1 Related Documents.
Each of the Issuer, HAFC and the Seller, after giving effect to the
transactions contemplated by this Agreement and the other Series
1999-1 Related Documents, will have an adequate amount of capital to
conduct its business in the foreseeable future.
(xi) Any taxes, fees and other governmental charges
in connection with the execution, delivery and performance of any
Seller Agreement, the Indenture and the Securities shall have been
paid or will be paid by the Seller at or prior to the Closing Date.
(xii) The Series 1999-1 Notes have been duly and
validly authorized, and, when validly executed, authenticated, issued
and delivered in accordance with the Indenture and as provided herein
will conform in all material respects to the description thereof
contained in the Prospectus and will be validly issued and outstanding
and entitled to the benefits of the Indenture.
(xiii) There are no legal or governmental proceedings
pending, or to the knowledge of HAFC or the Seller threatened, to
which HAFC or the Seller is a party or of which any property of any of
them is the subject, other than proceedings which are not reasonably
expected, individually or in the aggregate, to have a material adverse
effect on the shareholder's equity or consolidated financial position
of such person and its subsidiaries taken as a whole, or which would
have a material adverse effect upon the consummation of this
Agreement.
(xiv) Arthur Andersen LLP is an independent public
accountant with
6
<PAGE>
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 1999-1 Notes, or the consummation
by HAFC or the Seller of the other transactions contemplated by this
Agreement, the Master Receivables Purchase Agreement, the Master Sale
and Servicing Agreement, the Trust Agreement or the Indenture, except
for (A) the registration under the Act of the Series 1999-1 Notes,
(B) such consents, approvals, authorizations, orders, registrations,
qualifications, licenses or permits as have been obtained or as may be
required under state securities or Blue Sky laws in connection with
the purchase of the Series 1999-1 Notes and the subsequent
distribution of the Series 1999-1 Notes by the Underwriters or
(C) where the failure to obtain such consents, approvals,
authorizations, orders, registrations, filings, qualifications,
licenses or permits would not have a material adverse effect on the
business or consolidated financial condition of HAFC and its
subsidiaries taken as a whole or the Seller or the transactions
contemplated by such agreements.
(xvi) (a) HAFC has the power and authority to sell
the Receivables to the Trust, and (b) following the conveyance of the
Receivables to the Trust pursuant to the Master Sale and Servicing
Agreement, the Trust will own the Receivables free and clear of any
lien, mortgage, pledge, charge, encumbrance, adverse claim or other
security interest (collectively, "LIENS") other than Liens created by
the Master Sale and Servicing Agreement.
(xvii) As of the 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
7
<PAGE>
HAFC set forth in the HAFC Agreements or of the Seller set forth in
the Seller Agreements will be true and correct in all material
respects.
(xxi) Since the respective dates as of which
information is given in the Prospectus, (x) there has not been any
material adverse change in or affecting the general affairs, business,
management, financial condition, stockholder's equity, results of
operations, regulatory situation or business prospects of HAFC and
(y) HAFC has not entered into any transaction or agreement (whether or
not in the ordinary course of business) material to HAFC that, in
either case, would reasonably be expected to materially adversely
affect the interests of the holders of the Series 1999-1 Notes,
otherwise than as set forth or contemplated in the Prospectus.
B. HFC represents, warrants and agrees with the Underwriters, that:
(i) HFC is a corporation duly organized and
validly existing and in good standing under the laws of its
jurisdiction of incorporation. HFC has all requisite power and
authority to own its properties and conduct its business as presently
conducted and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction which requires
such qualification, except where the failure to have such power and
authority or to be so qualified would not have a material adverse
effect on the business or consolidated financial condition of HFC and
its subsidiaries taken as a whole.
(ii) HFC is not in violation of its certificate of
incorporation or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which HFC is a party or by which it may be bound, or to
which any of the property or assets of HFC is subject except where any
such violation or default would not have a material adverse effect on
the transactions contemplated by this Agreement.
(iii) The execution, delivery and performance by HFC
of the HFC Agreements, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary action or proceedings and will not conflict with or
constitute a breach of, or default under, or result in 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.
8
<PAGE>
(iv) Each HFC Agreement has been, or, when executed
and delivered, will have been, duly executed and delivered by HFC; and
each HFC Agreement constitutes, or, when executed and delivered, will
constitute, legal, valid and binding instruments enforceable against
HFC in accordance with their respective terms, subject as to
enforceability (A) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors'
rights generally, (B) to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law) and
(C) with respect to rights of indemnity under this Agreement to
limitations of public policy under applicable securities laws.
(v) HFC will, upon request by any Underwriter,
provide to such Underwriter complete and correct copies of all reports
filed by it with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), during 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 1999-1 Notes, (B) such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses or permits as
have been obtained or as may be required under state securities or
Blue Sky laws in connection with the purchase of the Series 1999-1
Notes and the subsequent distribution of the Series 1999-1 Notes by
the Underwriters or (C) where the failure to obtain such consents,
approvals, authorizations, orders, registrations, filings,
qualifications, licenses or permits would not have a material adverse
effect on the business or consolidated financial condition of HFC and
its subsidiaries taken as a whole or the transactions contemplated by
such agreements.
(viii) Arthur Andersen LLP is an independent public
accountant with respect to HFC as required by the Act and the Rules
and Regulations.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS.
Each Underwriter severally, and not jointly, represents and warrants to, and
agrees with the other Underwriters, HAFC, the Seller and HFC that:
9
<PAGE>
(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 1999-1 Notes to any prospective investor.
(b) Such Underwriter shall provide the Seller no later than one
Business Day after any Collateral Term Sheet is delivered to a prospective
investor, or in the case of any Structural Term Sheets and Computational
Materials no later than one Business Day before the date on which the Prospectus
is required to be filed pursuant to Rule 424, all such Derived Information
delivered to a prospective investor by it during the period commencing on the
Effective Date and ending on the date the Prospectus is filed with the
Commission. Such Underwriter shall deliver to the Seller a hard copy and, in a
mutually agreed upon format, a disk or electronic transmission of such Derived
Information.
(c) Assuming the accuracy of the Seller-Provider Information used in
the preparation of Derived Information, the Derived Information, delivered by
such Underwriter, as of the date thereof, is accurate in all material respects,
taking into account the assumptions set forth in such Derived Information, but
without making any representations as to the appropriateness of such
assumptions.
(d) Each Underwriter acknowledges that none of HAFC, the Seller or
HFC will be deemed to have breached any representation and warranty or to have
failed to satisfy any other agreement contained herein, to the extent any such
breach or failure on the part of such party resulted solely from an
Underwriter's breach of the representation and warranty set forth in subsection
(a), (b) or (c) above, PROVIDED, HOWEVER, that the rights and obligations
otherwise available to an Underwriter pursuant to Section 10 and 11 hereof are
not limited solely as a result of an Underwriter's breach of the representation
and warranty set forth in subsection (a) above.
(e) For purposes of this Agreement, "DERIVED INFORMATION" means the
type of information defined as Collateral Term Sheets, Structural Term Sheets or
Computational Materials (as such terms are interpreted in the No-Action
Letters). The terms "COLLATERAL TERM SHEET" and "STRUCTURAL TERM SHEET" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA LETTER") of Cleary, Gottlieb, Steen & Hamilton on behalf of the Public
Securities Association (which letter, and the Commission staff's response
thereto, were publicly available February 17, 1995), and with respect to
"Collateral Term Sheet" includes any subsequent Collateral Term Sheet that
reflects a substantive change in the information presented. The term
"COMPUTATIONAL MATERIALS" has the meaning assigned to it in the May 17, 1994
letter (the "Kidder Letter" and together with the PSA Letter, the "No-Action
Letters") of Brown & Wood on behalf of Kidder, Peabody & Co., Inc. (which
letter, and the Commission staff's response thereto, were publicly available May
20, 1994). "SELLER-PROVIDED INFORMATION" means the information contained on any
computer tape furnished to the Underwriters by the Seller concerning the assets
comprising the Issuer.
[(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
10
<PAGE>
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:
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.
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 1999-1 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 1999-1 Notes to the Underwriters, and the Underwriters agree to
purchase the Series 1999-1 Notes on the date of issuance thereof. The purchase
prices for the Series 1999-1 Notes shall be as set forth on Schedule 1 hereto.
Section 5. DELIVERY AND PAYMENT. Payment of the purchase price
for, and delivery of, any Series 1999-1 Notes to be purchased by the
Underwriters shall be made at the office of Dewey Ballantine LLP, 1301 Avenue of
the Americas, New York, New York, or at such other place as shall be agreed upon
by the Representative and the Household Entities, at 10:00 a.m. New York City
time on June___, 1999 (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 1999-1 Notes so to be
delivered shall be represented by one or more global Series 1999-1 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 1999-1 Notes available
for inspection, checking and packaging by the Representative in New York, New
York, not later than 12:00 P.M. New York City time on the business day prior to
the Closing Date.
Section 6. OFFERING BY UNDERWRITERS.
(a) It is understood that the Underwriters propose to offer the
Series 1999-1 Notes for sale to the public as set forth in the Prospectus.
(b) Each Underwriter represents and agrees that (i) it has not
offered or sold and, prior to the expiry of six months from the Closing Date,
will not offer or sell any Series 1999-1 Notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Series 1999-1 Notes in, from
or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on, and will only issue or pass on, in the United Kingdom any document
received by it in connection with the issue of the Series 1999-1 Notes, to a
person who is of a kind described in the Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or to a person to
whom such document may otherwise lawfully be issued, distributed or passed on.
Section 7. COVENANTS OF THE HOUSEHOLD ENTITIES. The Household
Entities, covenant with the Underwriters as follows:
A. The Seller will use its best efforts to cause the Registration
Statement and any amendment thereto, if not effective at the Execution Time, to
become effective. If the Registration Statement 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
1999-1 Notes for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Seller will not file any amendment of the
Registration Statement or supplement to the Prospectus to which the Underwriters
reasonably object. The Seller will use its best efforts to prevent the issuance
of any such stop order and if issued, to obtain as soon as possible the
withdrawal thereof.
B. If, at any time when a Prospectus relating to the Series 1999-1
Notes is required to
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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 1999-1
Notes, (iii) any expenses (including reasonable fees and disbursements of
counsel not to exceed $10,000) incurred by the Underwriters in connection with
qualification of the Series 1999-1 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 1999-1 Notes, (vi) the fees and expenses of the Owner Trustee and any
agent of the Owner Trustee and the fees and disbursements of counsel for the
Owner Trustee in connection with the Indenture, the Trust Agreement and the
Series 1999-1 Notes, and (vii) the cost of delivering the Series 1999-1 Notes to
the offices of the Underwriters, insured to the satisfaction of the Underwriters
(it being understood that, except as provided in this paragraph (E) and in
Sections 9 and 10 hereof, each Underwriter will pay its own expenses, including
the expense of preparing, printing and reproducing this Agreement, the fees and
expenses of counsel for the Underwriters, any transfer taxes on resale of any of
the Series 1999-1 Notes by it and advertising expenses connected with any offers
that the Underwriters may make).
F. The Seller will take all reasonable actions requested by the
Underwriters to arrange for the qualification of the Series 1999-1 Notes 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 1999-1 Notes and will arrange for the determination of the legality of
the Series 1999-1 Notes for purchase by institutional investors.
G. For so long as the Series 1999-1 Notes are outstanding, the
Household Entities will furnish to the Underwriters (i) as soon as practicable
after the end of each fiscal year of the Trust, all documents required to be
distributed to Noteholders under the Master Sale and Servicing Agreement or the
Indenture and (ii) as soon as practicable after filing, any other information
concerning the Household Entities filed with any government or regulatory
authority which is otherwise publicly available, as the Underwriters may
reasonably request.
H. To apply the net proceeds from the sale of the Series 1999-1
Notes in the manner set forth in the Prospectus.
I. If, between the date hereof or, if earlier, the dates as of which
information is given in the Prospectus and the Closing Date, to the knowledge of
the Seller, there shall have been any material change, or any development
involving a prospective material change in or affecting the general affairs,
management, financial position, shareholders' equity or results of operations of
any of the Household Entities, the Seller will give prompt written notice
thereof to the Underwriters.
J. The Seller, during the period when the Prospectus is required to
be delivered under the Act or the Exchange Act, will file all documents required
to be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange
Act within the time periods required by the Act and the Rules and Regulations
thereunder.
K. To the extent, if any, that the ratings provided with respect to
the Series 1999-1 Notes by the Rating Agency that initially rate the Series
1999-1 Notes are conditional upon the furnishing of documents or the taking of
any other actions by the Seller or HAFC, the Seller shall use its best efforts
to furnish or cause to be furnished such documents and take any such other
actions.
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 1999-1 Notes are outstanding, the
Household Entities shall furnish to the Underwriters as soon as such statements
are furnished to the Trustee: (i) the annual statement as to compliance of the
Master Servicer delivered to the Trustee pursuant to Section 4.10(a) of the
Master Sale and Servicing Agreement, and (ii) the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to
Section 4.11(a) of the Master Sale and Servicing Agreement with respect to the
Master Servicer.
Section 8. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the
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Underwriters to purchase the Series 1999-1 Notes on the Closing Date pursuant to
this Agreement are subject to (i) the material accuracy of the representations
and warranties on the part of the Household Entities herein contained as of the
Execution Time, (ii) the material accuracy of the statements of officers of the
Household Entities made pursuant hereto, (iii) the performance by the Household
Entities of all of their respective obligations hereunder, and the performance
by the Household Entities of all of their respective obligations under the
Seller Agreements, HAFC Agreements and the HFC Agreements and (iv) the following
conditions as of the Closing Date:
A. If the Registration Statement has not become effective prior to
the Execution Time, unless the Underwriters agree in writing to a later time,
the Registration Statement shall have become effective not later than 12:00 Noon
New York City time on the business day following the day on which the public
offering price was determined; if filing of the Prospectus, or any supplement
thereto, is required pursuant to Rule 424(b), the Prospectus shall have been
filed in the manner and within the time period required by Rule 424(b); and no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
threatened.
B. Each of the Household Entities shall have delivered a
certificate, dated the Closing Date signed by its President or any Vice
President and its principal financial or principal accounting officer or its
Treasurer or any Assistant Treasurer or its Secretary or any Assistant Secretary
to the effect that the signers of such certificate, on behalf of the named
Household Entity, have carefully examined Series 1999-1 Related Documents, the
Prospectus (and any supplements thereto) and the Registration Statement, stating
that:
(i) the representations and warranties of such
Household Entity in this Agreement are true and correct in all
material respects at and as of the date of such certificate as if made
on and as of such date (except to the extent they expressly relate to
an earlier date);
(ii) such Household Entity has complied, in all
material respects, with all the agreements and satisfied, in all
material respects, all the conditions on its part to be performed or
satisfied at or prior to the date of such certificate;
(iii) nothing has come to the attention of such
Household Entity that would lead it to believe that the Registration
Statement contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and
(iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted. or, to the knowledge of the signor,
threatened.
C. John Blenke, Vice President - Corporate Law and Assistant
Secretary of Household International, Inc., shall have delivered a favorable
opinion with respect to clauses (i)
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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 1999-1
Notes have been duly authorized and, when executed and authenticated
in accordance with the terms of the Indenture and delivered to and
paid for by the Underwriters pursuant to this Agreement, will be
validly issued and outstanding, entitled to the benefits of the
Indenture, enforceable in accordance with their terms subject, as to
enforceability (A) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors'
rights generally and the rights and remedies of creditors of thrifts,
savings institutions or national banking associations and (B) to
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law);
(iv) neither the execution nor the delivery of the
Underwriting Agreement, the Master Receivables Purchase Agreement, the
Trust Agreement, the Indenture, the Master Sale and Servicing
Agreement or the Series 1999-1 Supplement nor the issuance or delivery
of the Series 1999-1 Notes, nor the consummation of any of the
transactions contemplated herein or therein, nor the fulfillment of
the terms of the Series 1999-1 Notes, the Underwriting Agreement, the
Master Receivables Purchase Agreement, the Trust Agreement, the
Indenture, the Master Sale and Servicing Agreement or the
Series 1999-1 Supplement will
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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 1999-1
Notes, the Master Receivables Purchase Agreement, the Trust Agreement,
the Indenture, the Master Sale and Servicing Agreement or the Series
1999-1 Supplement or any of the transactions contemplated herein or
therein or with respect to the Household Entities which, in the case
of any such action, suit or proceeding with respect to any of them,
would have a material adverse effect on the Noteholders or the Trust
or upon the ability of any of the Household Entities to perform their
obligations under any of such agreements, and there is no material
contract, franchise or document relating to the Trust or property
conveyed to the Trust which is not disclosed in the Registration
Statement or Prospectus; and the statements included in the
Registration Statement and Prospectus describing statutes (other than
those relating to tax and ERISA matters), legal proceedings, contracts
and other documents fairly summarize the matters therein described;
(vi) the Registration Statement has become
effective under the Act; any required filing of the Prospectus or any
supplement thereto pursuant to Rule 424 has been made in the manner
and within the time period required by Rule 424; to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement 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 or omitted to state any material fact
required to be stated therein or necessary to
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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 1999-1 Supplement, except (A) such consents, approvals,
authorizations, orders, registrations, filings, qualifications,
licenses or permits as have been made or obtained or as may be
required under the State securities or blue sky laws of any
jurisdiction in connection. with the purchase of the Series 1999-1
Notes by the Underwriters and the subsequent distribution of the
Series 1999-1 Notes by the Underwriters or (B) where the failure to
have such consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses or permits would not have a material
adverse effect on the Trust's interests in the Receivables or the
transactions contemplated by such agreements;
(ix) the Series 1999-1 Notes, the Underwriting
Agreement, the Master Receivables Purchase Agreement, the Trust
Agreement, the Master Sale and Servicing Agreement and the Indenture
conform in all material respects to the descriptions thereof contained
in the Registration Statement and the Prospectus;
(x) the Indenture has been duly qualified under
the Trust Indenture Act of 1939 and the Issuer is not required to be
registered under the Investment Company Act of 1940;
(xi) the statements in the Prospectus under the
captions "Summary of Terms -- Tax Status," "Summary of Terms -- ERISA
Considerations," "ERISA Considerations" and "Material Federal Income
Tax Consequences," "Certain Legal Aspects of the Receivables" to the
extent that they constitute matters of law or legal conclusions with
respect thereto, have been reviewed by counsel and represent a fair
and accurate summary of the matters addressed therein, under existing
law and the assumptions stated therein.
(xii) no other filings or other actions, with
respect to the Indenture Trustee's interest in the Receivables, are
necessary to perfect the interest of the Indenture Trustee in the
Receivables, and proceeds thereof, against third parties, except that
appropriate continuation statements must be filed in accordance with
the applicable state's requirements, which is presently at least every
five years;
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and
(xiii) the conditions to the use of a registration
statement on Form S-3 under the Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the
Registration Statement and the Prospectus. There are no contracts or
documents which are required to be filed as exhibits to the
Registration Statement pursuant to the Act or the Rules and
Regulations thereunder which have not been filed.
In rendering such opinion, counsel may rely (A) as to matters
involving the application of the law of any jurisdiction other than, in the case
of John W. Blenke, the laws of the State of Illinois, and in the case of Dewey
Ballantine 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 1999-1 Notes, the Underwriting Agreement, the
Series 1999-1 Supplement, the Registration Statement, the Prospectus and such
other related matters as the Underwriters may reasonably require and the
Household Entities shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass on such matters. In
giving their opinion, Dewey Ballantine LLP may rely (i) as to matters of
California, Illinois, Nevada and Delaware law (other than Delaware corporation
law) upon the opinions of counsel delivered pursuant to subsection (C) above,
(ii) as to matters involving the application of laws of any jurisdiction other
than the State of New York, the United States Federal laws or the corporation
law of the State of Delaware, to the extent deemed proper and specified in such
opinion, upon the opinion of other counsel of good standing believed to be
reliable, and (iii) as to matters of fact, to the extent deemed proper and as
stated therein on certificates of responsible officers of the Trust. Household
Entities and public officials.
E. Counsel to the Indenture Trustee shall have delivered a favorable
opinion, dated the Closing Date, and satisfactory in form and substance to the
Underwriters and counsel for the Underwriters, the Household Entities and their
counsel, to the effect that:
(i) The Indenture Trustee has been duly incorporated and is validly
existing as a banking corporation in good standing under the laws of the
United States of America.
(ii) The Indenture Trustee has full corporate trust power and
authority to enter into and perform its obligations under the Indenture,
including, but not limited to, its obligation to serve in the capacity of
the Indenture Trustee and to execute, issue, countersign and deliver the
Series 1999-1 Notes.
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(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 1999-1 Notes have been duly authorized, executed and
authenticated by the Indenture Trustee on the date hereof on behalf of the
Trust in accordance with the Indenture.
(v) The execution, delivery and performance of the Indenture and the
Series 1999-1 Notes by the Indenture Trustee will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the property or assets of the Indenture Trustee
pursuant to the terms of the articles of association or the by-laws of the
Indenture Trustee or any statute, rule, regulation 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 1999-1 Notes.
F. Counsel to the Owner Trustee shall have delivered a favorable
opinion, dated the Closing Date and satisfactory in form and substance to the
Underwriters and counsel for the Underwriters, the Household Entities and their
counsel, to the effect that:
(i) The Owner Trustee has been duly incorporated and is validly
existing as a banking corporation in good standing under the laws of the
United States of America.
(ii) The Owner Trustee has full corporate trust power and authority to
enter into and perform its obligations under the Trust Agreement, as the
case may be, including, but not limited to, its obligation to serve in the
capacity of Owner Trustee and to execute, issue, countersign and deliver
the Note.
(iii) The Trust Agreement has been duly authorized, executed and
delivered by the Owner Trustee and constitutes a legal, valid and binding
obligation of the Owner Trustee enforceable against the Owner Trustee, in
accordance with its terms, except that as to enforceability such
enforcement may (A) be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and (B) be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
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(iv) The execution, delivery and performance of the Trust Agreement by
the Owner Trustee will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Owner Trustee pursuant to the terms of the
articles of association or the by-laws of the Owner Trustee or any statute,
rule, regulation or order of any governmental agency or body, or any court
having jurisdiction over the Owner Trustee or its property or assets or any
agreement or instrument known to such counsel, to which the Owner Trustee
is a party or by which the Owner Trustee or any of its respective property
or assets is bound.
(v) No authorization, approval, consent or order of, or filing with,
any state or federal court or governmental agency or authority is necessary
in connection with the execution, delivery and performance by the Owner
Trustee of the Trust Agreement and the Note, as applicable.
G. Wilmington Trust Company ("WLT") shall have furnished to the
Underwriters and the Household Entities a certificate of WLT, signed by one or
more duly authorized officers of WLT, dated the Closing Date, as to the due
authorization, execution and delivery of the Trust Agreement by WLT and the
acceptance by the Owner Trustee of the trusts created thereby and the due
execution and such other matters as the Underwriters and the Household Entities
shall reasonably request.
H. The Chase Manhattan Bank ("CHASE") shall have furnished to the
Underwriters and the Household Entities a certificate of Chase, signed by one or
more duly authorized officers of Chase, dated the Closing Date, as to the due
authorization, execution and delivery of the Indenture and the Master Sale and
Servicing Agreement by Chase and the acceptance by the Indenture Trustee of the
trusts created thereby and the due execution and delivery of the Series 1999-1
Notes by the Indenture Trustee under the Indenture and such other matters as the
Underwriters shall reasonably request.
I. The [Class A-1 Notes] shall have been rated "[A-1]" or its
equivalent, and the [Class A-2 Notes, Class A-3 Notes and 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 1999-1 Notes as set forth in Section I above.
K. The Underwriters shall have received from Dewey Ballantine LLP,
counsel to the Household Entities, a favorable opinion, dated the Closing Date
and satisfactory in form and substance to the Underwriters and counsel for the
Underwriters, as to true sale matters relating to the transaction, and the
Underwriters shall be addressees of any opinions of counsel supplied to the
rating organizations relating to the Series 1999-1 Notes.
L. All proceedings in connection with the transactions contemplated
by this Agreement, and all documents incident hereto, shall be reasonably
satisfactory in form and
21
<PAGE>
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 respectively as of the date of this
Agreement and the date of the Closing Date, in form and substance satisfactory
to the Underwriters and counsel for the Underwriters.
If any condition specified in this Section 8 shall not have been
fulfilled when and as required to be fulfilled, (i) this Agreement may be
terminated by the Representative by notice to both of the Household Entities at
any time at or prior to the Closing Date, and such termination shall be without
liability of any party to any other party except as provided in 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
1999-1 Notes provided for herein is not consummated because any condition to the
Underwriter's obligations set forth in Section 8 hereof is not satisfied,
because of any termination pursuant to Section 12 hereof or because of any
refusal, inability or failure on the part of the Indenture Trustee or the
Household Entities to perform any agreement herein or comply with any provision
hereof other than by reason of a default by the Underwriters, the Household
Entities, jointly and severally, will reimburse the Underwriters upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by it in connection with the proposed
purchase and Sale of the Series 1999-1 Notes.
Section 10. INDEMNIFICATION.
A. The Household Entities jointly and severally agree to indemnify
and hold harmless the Underwriters and each person, if any, who controls the
Underwriters within the meaning of the Act or the Exchange Act, from and against
any and all loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of the Series 1999-1 Notes),
to which the Underwriters or any such controlling person may become subject,
under the Act or the Exchange Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein
22
<PAGE>
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 or breach of Section
3(b), 3(c) or 3(f) 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 1999-1 Notes
which are the subject thereof and was not sent or given a copy of the
appropriate Prospectus (or the appropriate Prospectus as amended or
supplemented) (the term Prospectus as used in this clause shall not include
documents incorporated by reference thereto), if required by law, at or prior to
the written confirmation of the sale of such Series 1999-1 Notes (unless such
Prospectus is amended or supplemented after the Prospectus has been delivered
pursuant to Rule 424(b)) to such person and the untrue statement contained in or
omission from such preliminary prospectus was corrected in the appropriate
Prospectus (or the appropriate Prospectus as amended or supplemented).
The foregoing indemnity agreement is in addition to any liability
which a Household Entity may otherwise have to the Underwriters or any
controlling person of any of the Underwriters.
B. Each of the Underwriters agrees to severally and not jointly
indemnify and hold harmless the Household Entities, the directors and the
officers of the Household Entities who signed the Registration Statement, and
each person, if any, who controls any Household Entity within the meaning of the
Act or the Exchange Act against any and all loss, claim, damage or liability, or
any action in respect thereof, to which a Household Entity or any such director,
officer or controlling person thereof may become subject, under the Act or the
Exchange Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Underwriter Information (as
defined below), (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, or (iii) breach of Section 3(a), 3(b), 3(c) or 3(f) hereof, 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
23
<PAGE>
Information means the information set forth under the caption "Underwriting" in
the Prospectus.
The foregoing indemnity agreement is in addition to any liability
which the Underwriters may otherwise have to any Household Entity or any such
director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this
Section 10 of notice of any claim or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 10, promptly notify the indemnifying party
in writing of the claim or the commencement of that action; provided, however,
that the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent it has
been materially prejudiced by such failure; and PROVIDED, FURTHER, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party, unless such indemnified party reasonably objects to such assumption on
the ground that there may be legal defenses available to it which are different
from or in addition to those available to such indemnifying party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, except to the extent provided in the next
following paragraph, the indemnifying party shall not be liable to the
indemnified party under this Section 10 for any fees and expenses of counsel
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified
24
<PAGE>
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 Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Household Entities on the one hand and the Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations.
The relative benefits of the Underwriters and the Household Entities
shall be deemed to be in such proportion so that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the public
offering price appearing on the cover page of the Prospectus.
25
<PAGE>
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 1999-1 Notes purchased by such Underwriter hereunder. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
E. The Underwriters severally confirm that the information set forth
(i) in the Prospectus relating to market making, (ii) set forth under the
caption "Underwriting" in the Prospectus, and (iii) provided in response to
Section 3(b) hereof, 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
1999-1 Notes shall fail at the Closing Date to purchase the Series 1999-1 Notes
which it is obligated to purchase hereunder (the "DEFAULTED SECURITIES"), then
the non-defaulting Underwriter shall have the right, within 24 hours thereafter,
to make arrangements to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Underwriter have not completed such arrangements within
such 24-hour period, then:
(i) if the aggregate principal amount of Defaulted
Securities does not
26
<PAGE>
exceed 10% of the aggregate principal amount of the Series 1999-1
Notes to be purchased pursuant to this Agreement, the non-defaulting
Underwriter shall be obligated to purchase the full amount thereof, or
(ii) if the aggregate principal amount of Defaulted
Securities exceeds 10% of the aggregate principal amount of the Series
1999-1 Notes to be purchased pursuant to this Agreement, this
Agreement shall terminate, without any liability on the part of any
non- defaulting Underwriter.
No action taken pursuant to this Section shall relieve the defaulting
Underwriter from the liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by an Underwriter as set forth in this
Section, each of the Underwriters and the Seller shall have the right to
postpone the Closing Date for a period not exceeding five Business Days in order
that any required changes in the Registration Statement or Prospectus or in any
other documents or arrangements may be effected.
Section 12. TERMINATION. This Agreement shall be subject to
termination in the absolute discretion of the Representative, by notice given to
the Seller and HAFC prior to delivery of and payment for the Series 1999-1 Notes
if prior to such time (i) trading in securities generally on the New York Stock
Exchange or the National Association of Securities Dealers National Market
System shall have been suspended or limited, or minimum prices shall have been
established on such 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 1999-1 Notes. Upon such notice being given, the parties to this
Agreement shall (except for any liability arising before or in relation to such
termination) be released and discharged from their respective obligations under
this Agreement.
Section 13. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Household Entities
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Representative or
controlling person of the Representative, or by or on behalf of the Household
Entities or any officers, directors or controlling persons and shall survive
delivery of any certificates to the Representative or any controlling person.
Section 14. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication to the
Underwriters at J.P. Morgan Securities Inc., 60 Wall Street, New York, New York
10260, attention: ____________, Fax: (212) ________; if sent to any Household
Entity to 2700 Sanders Road, Prospect Heights, Illinois 60070, attention of
General Counsel, Fax: (847) 564-6366.
27
<PAGE>
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 1999-1 Notes from the
Representative shall be deemed to be a successor by reason merely of such
purchase.
SECTION 16. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH
SUCH LAWS WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 17. COUNTERPARTS. This Agreement may be executed in
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.
28
<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:
J.P. MORGAN SECURITIES INC.
Acting on its own behalf and as Representative of the
Underwriters referred to in the foregoing Agreement
By:
---------------------------------
Name:
Title: Authorized Signatory
29
<PAGE>
[Underwriting Agreement]
30
<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>
J.P. Morgan Securities Inc. % % % %
[Name of Underwriter] % % % %
[Name of Underwriter] % % % %
[Name of Underwriter] % % % %
</TABLE>
Notional Principal Amount
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
<S> <C> <C> <C> <C>
J.P. Morgan Securities Inc. $ $ $ $
[Name of Underwriter]
[Name of Underwriter]
[Name of Underwriter]
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>
J.P. Morgan Securities Inc. $ $ $ $
[Name of Underwriter]
[Name of Underwriter]
[Name of Underwriter]
Total $ $ $ $
</TABLE>
<PAGE>
DRAFT OF MAY 28, 1999
TRUST AGREEMENT
between
HOUSEHOLD AUTO RECEIVABLES CORPORATION
and
WILMINGTON TRUST COMPANY
Owner Trustee
Dated as of June 1, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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 . . . . . . . . . . . . . . . 7
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 . . . . . . . . . . . . . . .10
Section 3.4. Registration of Transfer and Exchange of Certificates. . . .10
Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. . . . . .11
Section 3.6. Persons Deemed Certificateholders. . . . . . . . . . . . . .12
Section 3.7. Access to List of Certificateholders' Names and Addresses. .12
Section 3.8. Maintenance of Office or Agency. . . . . . . . . . . . . . .12
Section 3.9. ERISA Restrictions . . . . . . . . . . . . . . . . . . . . .13
Section 3.10. Securities Matters . . . . . . . . . . . . . . . . . . . . .13
Section 3.11. Distributions. . . . . . . . . . . . . . . . . . . . . . . .13
Section 3.12. Paying Agent . . . . . . . . . . . . . . . . . . . . . . . .13
ARTICLE IV VOTING RIGHTS AND OTHER ACTIONS . . . . . . . . . . . . . . . . . .13
Section 4.1. Prior Notice to Holders with Respect to Certain Matters. . .13
Section 4.2. Action by Certificateholders with Respect to Certain
Matters . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 4.3. Action by Certificateholders with Respect to Bankruptcy. . .14
</TABLE>
(i)
<PAGE>
<TABLE>
Page
----
<S> <C>
Section 4.4. Restrictions on Certificateholders' Power. . . . . . . . . .15
Section 4.5. Majority Control . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE V CERTAIN DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 5.1. Accounting and Records to the Noteholders,
Certificate-holders, the Internal Revenue Service
and Others . . . . . . . . . . . . . . . . . . . . . . . .16
Section 5.2. Signature on Returns; Tax Matters Partner. . . . . . . . . .16
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE . . . . . . . . . . . . . . .16
Section 6.1. General Authority. . . . . . . . . . . . . . . . . . . . . .16
Section 6.2. General Duties . . . . . . . . . . . . . . . . . . . . . . .17
Section 6.3. Action upon Instruction. . . . . . . . . . . . . . . . . . .17
Section 6.4. No Duties Except as Specified in this Agreement
or in Instructions. . . . . . . . . . . . . . . . . . . .18
Section 6.5. No Action Except under Specified Documents or
Instructions. . . . . . . . . . . . . . . . . . . . . . .19
Section 6.6. Restrictions . . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE VII CONCERNING THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . .19
Section 7.1. Acceptance of Trusts and Duties. . . . . . . . . . . . . . .19
Section 7.2. Furnishing of Documents. . . . . . . . . . . . . . . . . . .21
Section 7.3. Representations and Warranties . . . . . . . . . . . . . . .21
Section 7.4. Reliance; Advice of Counsel. . . . . . . . . . . . . . . . .21
Section 7.5. Not Acting in Individual Capacity. . . . . . . . . . . . . .22
Section 7.6. Owner Trustee Not Liable for Certificates or Receivables . .22
Section 7.7. Owner Trustee May Own Certificates and Notes . . . . . . . .22
Section 7.8. Payments from Owner Trust Estate . . . . . . . . . . . . . .23
Section 7.9. Doing Business in Other Jurisdictions. . . . . . . . . . . .23
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE . . . . . . . . . . . . . . . . . .23
Section 8.1. Owner Trustee's Fees and Expenses. . . . . . . . . . . . . .23
Section 8.2. Indemnification. . . . . . . . . . . . . . . . . . . . . . .23
Section 8.3. Payments to the Owner Trustee. . . . . . . . . . . . . . . .24
Section 8.4. Non-recourse Obligations . . . . . . . . . . . . . . . . . .24
ARTICLE IX TERMINATION OF TRUST AGREEMENT. . . . . . . . . . . . . . . . . . .24
Section 9.1. Termination of Trust Agreement . . . . . . . . . . . . . . .24
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES . . . . . . .26
Section 10.1. Eligibility Requirements for Owner Trustee . . . . . . . . .26
Section 10.2. Resignation or Removal of Owner Trustee. . . . . . . . . . .26
Section 10.3. Successor Owner Trustee. . . . . . . . . . . . . . . . . . .27
Section 10.4. Merger or Consolidation of Owner Trustee . . . . . . . . . .28
Section 10.5. Appointment of Co-Trustee or Separate Trustee. . . . . . . .28
</TABLE>
(ii)
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<TABLE>
Page
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ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 11.1. Supplements and Amendments . . . . . . . . . . . . . . . . .29
Section 11.2. No Legal Title to Owner Trust Estate in
Certificateholders. . . . . . . . . . . . . . . . . . . .30
Section 11.3. Limitations on Rights of Others. . . . . . . . . . . . . . .30
Section 11.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 11.5. Severability . . . . . . . . . . . . . . . . . . . . . . . .31
Section 11.6. Separate Counterparts. . . . . . . . . . . . . . . . . . . .31
Section 11.7. Assignments; Series Support Provider . . . . . . . . . . . .31
Section 11.8. Covenants of the Depositor . . . . . . . . . . . . . . . . .31
Section 11.9. No Petition. . . . . . . . . . . . . . . . . . . . . . . . .31
Section 11.10. No Recourse. . . . . . . . . . . . . . . . . . . . . . . . .32
Section 11.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 11.12. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . .32
Section 11.13. Master Servicer. . . . . . . . . . . . . . . . . . . . . . .32
</TABLE>
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
(iii)
<PAGE>
TRUST AGREEMENT dated as of June 1, 1999 between HOUSEHOLD AUTO
RECEIVABLES CORPORATION, a Nevada corporation (the "Depositor"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Owner Trustee (the "Owner
Trustee").
ARTICLE I
DEFINITIONS
Section 1.1. CAPITALIZED TERMS. For all purposes of this
Agreement, the following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time.
"Benefit Plan" shall have the meaning assigned to such term in
Section 3.9.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 DEL. CODE Section 3801 et seq. as the same may be amended
from time to time.
"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 The Chase Manhattan Bank.
"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
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, or at such other address as the Owner
Trustee may designate by notice to the Certificateholders and the Depositor, or
the principal corporate trust office of any successor Owner Trustee (the address
of which the successor owner trustee will notify the Certificateholders and the
Depositor).
<PAGE>
"Depositor" shall mean Household Auto Receivables Corporation in its
capacity as Depositor hereunder.
"ERISA" shall have the meaning assigned to such term in
Section 3.9.
"Expenses" shall have the meaning assigned to such term in
Section 8.2.
"Holder" or "Certificateholder" shall mean 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 Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under this Agreement, and any successor Owner Trustee hereunder.
"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 Trustee
pursuant to Section 1.02 of the Series 1999-1 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.
Section 1.2. 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
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herein, Series means only the Series of Notes and Series of Certificates with
respect to which the Trust is the Issuer and only such Series Trust Estates
included in the Owner Trust Estate.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any Certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any Certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles as in effect on the
date of this Agreement or any such certificate or other document, as
applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate or other
document shall control.
(d) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
Section 1.3. 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.
Section 1.4. 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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<PAGE>
ARTICLE II
ORGANIZATION
Section 2.1. NAME. There is hereby formed a trust to be
known as "Household Automotive Trust III", 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.
Section 2.2. 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.
Section 2.3. 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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<PAGE>
(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.
Section 2.4. 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.
Section 2.5. 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
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.
Section 2.6. 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 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.
Section 2.7. 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.
Section 2.8. 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 a
5
<PAGE>
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.
Section 2.9. 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 New York. Payments will be received by the
Certificate Paying Agent on behalf of the Trust in New York and payments will
be made by the Trust from New York. 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.
Section 2.10. 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
6
<PAGE>
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.
Section 2.11. 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
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<PAGE>
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.
Section 2.12. 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 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
8
<PAGE>
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.
Section 2.13. 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
Section 3.1. 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 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.
9
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Section 3.2. 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.
Section 3.3. 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 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.
Section 3.4. 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
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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 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.
Section 3.5. 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
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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.
Section 3.6. 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.
Section 3.7. 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 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.
Section 3.8. MAINTENANCE OF OFFICE OR AGENCY. The Owner
Trustee or the Certificate Registrar shall maintain in Wilmington, Delaware,
an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or
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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.
Section 3.9. 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.
Section 3.10. 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 Trust Agreement and shall promptly
notify the party delivering the same if such certificate does not so conform.
Section 3.11. 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.
Section 3.12. 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 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
Section 4.1. 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
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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.
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.
Section 4.2. 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.
Section 4.3. 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
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any proceeding or other actions contemplated by Section 2.13(d) hereof relating
to the Trust without the prior written consent of _____________ and of all the
Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
Section 4.4. 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 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.
Section 4.5. 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.
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ARTICLE V
CERTAIN DUTIES
Section 5.1. 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.
Section 5.2. 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
Section 6.1. 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
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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.
Section 6.2. 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.
Section 6.3. 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.
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(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 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.
Section 6.4. 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
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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.
Section 6.5. 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.
Section 6.6. 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.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1. 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;
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(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, 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
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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.
Section 7.2. 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.
Section 7.3. 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.
(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.
Section 7.4. 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.
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(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.
Section 7.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as
provided in this Article VII, in accepting the trusts hereby created
Wilmington Trust Company acts solely as Owner Trustee hereunder and not in
its individual capacity and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document or, with respect to Certificates, any Series Supplement or any
Series Related Document shall look only to the Owner Trust Estate for payment
or satisfaction thereof.
Section 7.6. 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.
Section 7.7. 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
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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.
Section 7.8. 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. Wilmington Trust Company, or any
successor thereto, in its individual capacity, shall not be liable for any
amounts payable under this Agreement or any of the Basic Documents or, with
respect to Certificates, any Series Supplement or any Series Related Document
to which the Trust or the Owner Trustee is a party.
Section 7.9. DOING BUSINESS IN OTHER JURISDICTIONS.
Notwithstanding anything contained to the contrary, neither Wilmington Trust
Company or any successor thereto, nor the Owner Trustee shall be required to
take any action in any jurisdiction other than in the State of Delaware if
the taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the
consent or approval or authorization or order of or the giving of notice to,
or the registration with or the taking of any other action in respect of, any
state or other governmental authority or agency of any jurisdiction other
than the State of Delaware; (ii) result in any fee, tax or other governmental
charge under the laws of the State of Delaware becoming payable by Wilmington
Trust Company (or any successor thereto); or (iii) subject Wilmington Trust
Company (or any successor thereto) to personal jurisdiction in any
jurisdiction other than the State of Delaware for causes of action arising
from acts unrelated to the consummation of the transactions by Wilmington
Trust Company (or any successor thereto) or the Owner Trustee, as the case
may be, contemplated hereby.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1. 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.
Section 8.2. 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
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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.
Section 8.3. 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.
Section 8.4. 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 TRUST AGREEMENT
Section 9.1. TERMINATION OF TRUST 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
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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 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.
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(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.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1. 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.
Section 10.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The
Owner Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Depositor (or in the event
that the 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
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be appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Depositor may remove the Owner Trustee.
If the Depositor shall remove the Owner Trustee under the authority of the
immediately preceding sentence, the Depositor shall promptly appoint a successor
Owner Trustee, meeting the qualifications set forth in Section 10.1 herein, by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the outgoing Owner Trustee so removed, one copy to any Series
Support Provider and one copy to the successor Owner Trustee and payment of all
fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
Section 10.3. 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.
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Section 10.4. 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 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.
Section 10.5. 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;
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(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Master Servicer and the Owner Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Master Servicer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1. 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
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manner the rights of the Securityholders; PROVIDED, HOWEVER, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
payments received that are required to be distributed on any Security without
the consent of the related Securityholder, or (ii) reduce the aforesaid
percentage of Securities the Holder of which are required to consent to any such
amendment, without the consent of the Holders of all such Certificates then
outstanding or cause any material adverse tax consequences to any
Certificateholders or Noteholders.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe. Promptly after the execution
of any amendment to the Certificate of Trust, the Owner Trustee shall cause the
filing of such amendment with the Secretary of State.
(c) The Owner Trustee shall not be required to enter into any
amendment to this Agreement which adversely affects its own rights, duties or
immunities under this Agreement.
Section 11.2. 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.
Section 11.3. 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.
Section 11.4. 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
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mail, in each case return receipt requested, and shall be deemed to have been
duly given upon receipt, if to the Owner Trustee, addressed to the Corporate
Trust Office; if to the Depositor, addressed to Household Auto Receivables
Corporation, 1111 Town Center Drive, Las Vegas, Nevada 89134, with a copy to
Household Finance Corporation, 2700 Sanders Road, Prospect Heights, Illinois
60070, Attn: Treasurer; if to any Series Support Provider, at the address of
such Series Support Provider as set forth in the related Series Supplement; or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
Section 11.5. 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.
Section 11.6. 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.
Section 11.7. 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.
Section 11.8. 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.
Section 11.9. 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
31
<PAGE>
this Agreement, hereby covenants and agrees that they will not at any time
institute against the Depositor, or join in any institution against the
Depositor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, this Agreement, any of the Basic Documents, any
Series Supplement or any Series Related Documents.
Section 11.10. 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.
Section 11.11. 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.
Section 11.12. 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.
Section 11.13. 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.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
WILMINGTON TRUST COMPANY
Owner Trustee
By:
----------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION
Depositor
By:
----------------------------------
Name:
Title:
Acknowledged and Agreed:
HOUSEHOLD FINANCE CORPORATION
Master Servicer
By:
----------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
not in its individual capacity
but solely as Certificate Paying Agent
By:
----------------------------
Name:
Title:
[Signature Page for Trust Agreement]
<PAGE>
EXHIBIT A
[FORM OF SERIES 1999-1 TRUST CERTIFICATE]
NUMBER
HOUSEHOLD AUTOMOTIVE TRUST III
SERIES 1999-1 CERTIFICATE
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS SERIES 1999-1 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND
SUCH STATE SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY
BE MADE UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION
3.4 OF THE TRUST AGREEMENT PERTAINING TO THE HOUSEHOLD AUTOMOTIVE TRUST III
(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 1999-1 CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS.
---------------------------------
SERIES 1999-1 CERTIFICATE
evidencing a beneficial ownership interest in the assets of the Trust relating
to the Series 1999-1 Trust Estate, which includes a pool of motor vehicle retail
installment sale contracts sold to the Trust by Household Auto Receivables
Corporation.
(This Series 1999-1 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 III (the
A-1
<PAGE>
"Trust") formed by Household Auto Receivables Corporation, a Nevada corporation
(the "Depositor") and the Series 1999-1 Trust Estate.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY
not in its individual
capacity but solely as
Owner Trustee
by Authenticating Agent
--------------------------------------------------------
by
-----------------------------------------------------------------------------
Household Automotive Trust III (the "Trust"), was created pursuant
to a Trust Agreement dated as of June 1, 1999 (the "Trust Agreement"), between
the Depositor and Wilmington Trust Company, as owner trustee (the "Owner
Trustee") as supplemented by a Series 1999-1 Supplement dated as of June 1, 1999
(the "Series 1999-1 Supplement"). A summary of certain of the pertinent
provisions of the Trust Agreement and Series 1999-1 Supplement is set forth
below. To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Trust Agreement and the Series
1999-1 Supplement.
This certificate is one of the duly authorized certificates of Trust
of Household Automotive Trust III designated as Series 1999-1 Certificates.
This Series 1999-1 Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement and the Series 1999-1
Supplement, to which Trust Agreement the holder of this Series 1999-1
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust consists of the Series 1999-1 Trust Estate
which includes a pool of motor vehicle retail installment sale contracts (the
"Receivables"), all monies due thereunder on or after specified Cutoff Dates,
security interests in the vehicles financed thereby, certain bank accounts and
the proceeds thereof, proceeds from claims on certain insurance policies and
certain other rights under the Trust Agreement and the Master Sale and Servicing
Agreement and each related Transfer Agreement, all right, to and interest of,
the Depositor in and to the Master Receivables Purchase Agreement dated as of
June 1, 1999 between Household Automotive Finance Corporation and the Depositor
and each Receivables Purchase Agreement Supplement and all proceeds of the
foregoing.
Series 1999-1 Notes have been issued pursuant to an Indenture dated
as of June 1, 1999 (the "Indenture"), among the Trust, Household Finance
Corporation, as Master Servicer and The Chase Manhattan Bank, as Trustee and the
Series 1999-1 Supplement.
Under the Series 1999-1 Supplement, there will be distributed on the
17th day of each month or, if such 17th day is not a Business Day, the next
Business Day (the
A-2
<PAGE>
"Distribution Date"), commencing on July 19, 1999, to the Person in whose name
this Series 1999-1 Certificate is registered at the close of business on the
Business Day preceding such Distribution Date (the "Record Date") such Series
1999-1 Certificateholder's fractional undivided interest in any amount to be
distributed to Series 1999-1 Certificateholders on such Distribution Date.
The holder of this Series 1999-1 Certificate acknowledges and agrees
that its rights to receive distributions in respect of this Series 1999-1
Certificate are subordinated to the rights of the Series 1999-1 Noteholders as
described in the Master Sale and Servicing Agreement, the Indenture, the Trust
Agreement and the Series 1999-1 Supplement, as applicable.
Distributions on this Series 1999-1 Certificate will be made as
provided in the Trust Agreement by the Owner Trustee by wire transfer or check
mailed to the Series 1999-1 Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the making
of any notation hereon. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Series 1999-1
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
1999-1 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
1999-1 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 1999-1 Certificate shall not entitle the holder hereof to any
benefit under the Trust Agreement or the Master Sale and Servicing Agreement or
be valid for any purpose.
THIS SERIES 1999-1 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 1999-1 Certificate to be
duly executed.
HOUSEHOLD AUTOMOTIVE TRUST III
By: WILMINGTON TRUST COMPANY not in its
individual capacity but solely as Owner
Trustee
Dated: By:
------------------------------
By:
------------------------------
Name:
Title:
A-4
<PAGE>
(Reverse of Certificate)
The Series 1999-1 Certificates do not represent an obligation of, or
an interest in, the Depositor, the Master Servicer, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein or in
the Trust Agreement, the Indenture, the Basic Documents or any Series Related
Documents. In addition, this Series 1999-1 Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections with respect to the Receivables, as more specifically set
forth herein and in the Master Sale and Servicing Agreement. A copy of each of
the Master Sale and Servicing Agreement, the Trust Agreement and the Series
1999-1 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 1999-1 Certificateholder upon written request.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Series 1999-1 Certificate is
registrable in the Certificate Register upon surrender of this Series 1999-1
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 1999-1 Certificates in authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee. The initial Certificate Registrar appointed under the Trust
Agreement is Wilmington Trust Company.
The Certificates are issuable as registered Certificates in any
Percentage Interest not to exceed 100%. As provided in the Trust Agreement and
subject to certain limitations therein set forth, Series 1999-1 Certificates are
exchangeable for new Series 1999-1 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 1999-1 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 1999-1 Certificates may not be acquired by (a) an
employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to
the provisions of Title I of ERISA, (b) a plan described in Section 4975(e) (1)
of the Code or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each,
A-5
<PAGE>
a "Benefit Plan"). By accepting and holding this Series 1999-1 Certificate, the
Holder hereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
The recitals contained herein shall be taken as the statements of
the Depositor or the Master Servicer, as the case may be, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes
no representations as to the validity or sufficiency of this Series 1999-1
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 1999-1 Certificate shall not entitle the holder hereof to
any benefit under the Trust Agreement or the Master Sale and Servicing Agreement
or be valid for any purpose.
A-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>
DRAFT OF MAY 28, 1999
------------------------------------------------------------------------
HOUSEHOLD AUTOMOTIVE TRUST III
Issuer
INDENTURE
Dated as of June 1, 1999
HOUSEHOLD FINANCE CORPORATION
Master Servicer
THE CHASE MANHATTAN BANK
Trustee
------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
ARTICLE I. Definitions and Incorporation by Reference1
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
SECTION 2.1 Form; Amount Limited; Issuable in Series. . . . . . . . . . . . .7
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. . . . . . . . . . . 11
SECTION 2.6 Persons Deemed Owner. . . . . . . . . . . . . . . . . . . . . . 12
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. . . . . . . . . . . . . . . . . . . . . . . . 14
ECTION 2.11 Notices to Clearing Agency. . . . . . . . . . . . . . . . . . . 15
SECTION 2.12 Definitive Notes. . . . . . . . . . . . . . . . . . . . . . . . 15
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. . . . . . . . . . . . . 17
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. . . . . . 20
SECTION 3.8 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.9 Annual Statement as to Compliance . . . . . . . . . . . . . . . 22
SECTION 3.10 Issuer May Consolidate, Etc. Only on Certain Terms. . . . . . . 22
SECTION 3.11 Successor or Transferee . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.12 No Other Business . . . . . . . . . . . . . . . . . . . . . . . 24
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. . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.18 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.19 Notice of Events of Default . . . . . . . . . . . . . . . . . . 26
SECTION 3.20 Further Instruments and Acts. . . . . . . . . . . . . . . . . . 26
SECTION 3.21 Amendments of Master Sale and Servicing Agreement and
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . 26
i
<PAGE>
SECTION 3.22 Income Tax Characterization . . . . . . . . . . . . . . . . . . 26
ARTICLE IV. Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . 26
SECTION 4.2 Application of Trust Money. . . . . . . . . . . . . . . . . . . 27
SECTION 4.3 Repayment of Monies Held by Note Paying Agent . . . . . . . . . 27
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. . . . . . . . . . . . . . . . . . . . . . . . . . 30
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. . . . . . . . . . . . . . . . . 31
SECTION 5.8 Control by Noteholders. . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.9 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.10 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.11 Waiver of Stay or Extension Laws. . . . . . . . . . . . . . . . 32
SECTION 5.12 Action on Notes . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.13 Performance and Enforcement of Certain Obligations. . . . . . . 33
ARTICLE VI. The Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.3 Individual Rights of Trustee. . . . . . . . . . . . . . . . . . 37
SECTION 6.4 Trustee's Disclaimer. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.5 Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . 37
SECTION 6.7 Compensation and Indemnity. . . . . . . . . . . . . . . . . . . 37
SECTION 6.8 Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . 38
SECTION 6.9 Successor Trustee by Merger . . . . . . . . . . . . . . . . . . 39
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee . . . . . . . . . 40
SECTION 6.11 Eligibility: Disqualification . . . . . . . . . . . . . . . . . 41
SECTION 6.12 Preferential Collection of Claims Against Issuer. . . . . . . . 41
SECTION 6.13 Representations and Warranties of the Trustee . . . . . . . . . 41
SECTION 6.14 Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.15 No Consent to Certain Acts of Seller. . . . . . . . . . . . . . 42
ARTICLE VII. Noteholders' Lists and Reports. . . . . . . . . . . . . . . . . . . . 42
SECTION 7.1 Issuer To Furnish To Trustee Names and Addresses of Noteholders 42
SECTION 7.2 Preservation of Information; Communications to Noteholders. . . 43
SECTION 7.3 Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.4 Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . . 44
ii
<PAGE>
ARTICLE VIII. Accounts, Disbursements and Releases . . . . . . . . . . . . . . . . 44
SECTION 8.1 Collection of Money . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.2 Release of Trust Property . . . . . . . . . . . . . . . . . . . 44
SECTION 8.3 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX. Amendments; Series Supplements . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.1 Amendments Without Consent of Noteholders . . . . . . . . . . . 45
SECTION 9.2 Amendments With Consent of Noteholders. . . . . . . . . . . . . 46
SECTION 9.3 Supplements Authorizing a Series of Notes . . . . . . . . . . . 48
SECTION 9.4 Execution of Series Supplements . . . . . . . . . . . . . . . . 48
SECTION 9.5 Effect of Series Supplement . . . . . . . . . . . . . . . . . . 48
SECTION 9.6 Conformity With Trust Indenture Act . . . . . . . . . . . . . . 48
SECTION 9.7 Reference in Notes to Series Supplements. . . . . . . . . . . . 48
ARTICLE X. Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XI. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.1 Compliance Certificates and Opinions, etc.. . . . . . . . . . . 49
SECTION 11.2 Form of Documents Delivered to Trustee. . . . . . . . . . . . . 51
SECTION 11.3 Acts of Noteholders . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 11.4 Notices, etc., to Trustee, Issuer and Rating Agencies . . . . . 52
SECTION 11.5 Notices to Noteholders; Waiver. . . . . . . . . . . . . . . . . 52
SECTION 11.6 Alternate Payment and Notice Provisions . . . . . . . . . . . . 53
SECTION 11.7 Conflict with Trust Indenture Act . . . . . . . . . . . . . . . 53
SECTION 11.8 Effect of Headings and Table of Contents. . . . . . . . . . . . 54
SECTION 11.9 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.10 Separability. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.11 Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.12 Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.15 Recording of Indenture. . . . . . . . . . . . . . . . . . . . . 54
SECTION 11.16 Trust Obligation. . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11.17 No Petition . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11.18 Limited Recourse. . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11.19 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 11.20 Limitation of Liability . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
iii
<PAGE>
INDENTURE dated as of June 1, 1999, between HOUSEHOLD AUTOMOTIVE
TRUST III, a Delaware business trust (the "Issuer"), HOUSEHOLD FINANCE
CORPORATION, a Delaware corporation (the "Master Servicer") and THE CHASE
MANHATTAN BANK, 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
Section 1.1 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.
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"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered which office at date of the execution of this Agreement is located
at 450 West 33rd Street, 8th Floor, New York, New York 10001, Attention:
Structured Finance Services or at such other address as the Trustee may
designate from time to time by notice to the Noteholders, the Master Servicer
and the Issuer, or the principal corporate trust office of any successor Trustee
(the address of which the successor Trustee will notify the Noteholders and the
Issuer).
"Default" means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.12.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means, with respect to any corporation, the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, Executive Vice President, any Vice President, the Secretary, 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.
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"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"Independent" means, when used with respect to any specified
Person, that the person (a) is in fact independent of the Issuer, any other
obligor upon the Notes, the Seller and any Affiliate of any of the foregoing
persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller or
any Affiliate of any of the foregoing Persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the 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 June 1, 1999, 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.
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"Note Owner" means, with respect to a Book-Entry Note, the person
who is the owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency, or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Paying Agent" means the Trustee or any other Person that
meets the eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make payments to and distributions from the Master
Collection Account and the Series 1999-1 Note 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;
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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 June 1,
1999 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, The Chase Manhattan Bank, 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 Chase Manhattan Bank.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"Unregistered Note" means a Note which is not being offered for
sale hereunder pursuant to a Registration Statement.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Master Sale and Servicing
Agreement or the Trust Agreement.
Section 1.2 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.
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"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by
the TIA, or defined by Commission rule have the meaning assigned to them by such
definitions.
Section 1.3 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.
Section 1.4 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.
Section 1.5 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
Section 2.1 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.
Section 2.2 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 that such individuals or any of them have ceased to hold such
offices prior to the
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authentication and delivery of such Notes or did not hold such offices at the
date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture and the related Series Supplement, and upon
satisfaction of all the conditions set forth in the related Series Supplement,
the Trustee shall, upon receipt of an Issuer Order and an Officer's Certificate
prepared and delivered by the Master Servicer that all conditions precedent for
such issuance have been satisfied, deliver Notes of the related Series
(including Notes of any Class or Tranche within such Series.)
The Notes of a Series shall be issuable in the denominations
specified in the related Series Supplement.
No Note shall be entitled to any benefit under this Indenture or
any Series Supplement or be valid or obligatory for any purpose, unless there
appears attached to such Note a certificate of authentication substantially in
the form provided for herein executed by the Trustee by the manual signature of
one of its authorized signatories, and such certificate attached to any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
Section 2.3 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).
Section 2.4 REGISTRATION; REGISTRATION OF TRANSFER AND
EXCHANGE. (a) The Issuer shall cause to be kept a register (the "Note
Register") in which, subject to such reasonable regulations as it may
prescribe, the Issuer shall provide for the registration of Notes and
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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 an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents
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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.
Any Noteholder using the assets of (i) an employee benefit plan
(as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code
of 1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity to purchase the Notes, or
to whom the Notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the Notes will be covered by a U.S.
Department of Labor Class Exemption.
(b) 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 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
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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.
Section 2.5 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.
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
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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.
Section 2.6 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.
Section 2.7 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.
(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
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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.
Section 2.8 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.
Section 2.9 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.
Section 2.10 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;
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(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.
Section 2.11 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 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.
Section 2.12 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
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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.
Section 2.13 FINAL DISTRIBUTION.
(a) The Master Servicer shall give the Trustee at least 15
days prior notice of the Distribution Date on which the Noteholders of any
Series or Class may surrender their Notes for payment of the final distribution
on and cancellation of such Notes. Not later than the fifth day of the month in
which the final distribution in respect of such Series or Class is payable to
Noteholders, the Trustee shall provide notice to the Noteholders of such Series
or Class specifying (i) the date upon which final payment of such Series or
Class will be made upon presentation and surrender of Notes (if required) of
such Series or Class at the office or offices therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such payment date is not applicable, payments being made only upon
presentation and surrender of such Notes at the office or offices therein
specified. The Trustee shall give such notice to the Registrar and the Note
Paying Agent at the time such notice is given to Noteholders.
(b) Notwithstanding a final distribution to the Noteholders
of any Series or Class, except as otherwise provided in this paragraph, all
funds then on deposit in the Master Collection Account and any Series Trust
Account allocated to such Noteholders shall continue to be held in trust for the
benefit of such Noteholders, and the Note Paying Agent or the Trustee shall pay
such funds to such Noteholders upon surrender of their Notes. In the event that
all such Noteholders shall not surrender their Notes for cancellation within six
months after the date specified in the notice from the Trustee described in
paragraph (a), the Trustee shall give a second notice to the remaining such
Noteholders to surrender their Notes for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all such Notes shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining such Noteholders concerning surrender of their Notes, and
the cost thereof shall be paid out of the funds in the account held for the
benefit of such Noteholders. The Trustee and the Note Paying Agent shall upon
written request pay to the related Issuer any moneys held by them for the
payment of principal or interest that remains unclaimed for two years. After
payment to the related Issuers, Noteholders entitled to the money must look to
the related Issuers
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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
Section 3.1 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.
Section 3.2 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.
Section 3.3 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
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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.
The Trust hereby appoints The Chase Manhattan Bank as Certificate
Paying Agent to make payments to Certificateholders on behalf of the Issuer in
accordance with the provisions of the Certificates, this Agreement and the Trust
Agreement, and The Chase Manhattan Bank hereby accepts such appointment (subject
to removal in the event it not longer serves as Trustee pursuant to Section 6.8)
and further agrees that it will be bound by the provisions of the Trust
Agreement relating to the Certificate Paying Agent and will:
(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;
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(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.
Section 3.4 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.
Section 3.5 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 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;
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(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.
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 this Section; PROVIDED that, such
designation shall not be deemed to create a duty in the Trustee to monitor the
compliance of the Master Servicer with respect to its duties under this Section
3.5 or the adequacy of any financing statement, continuation statement or other
instrument prepared by the Master Servicer.
Section 3.6 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 2000 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
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.
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Section 3.7 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. The Master Servicer
hereby agrees to service the Receivables in each Series Trust Estate in the
manner set forth in the Master Sale and Servicing Agreement, this Indenture and
each Series Supplement and to perform its duties as may be set forth in the
Master Sale and Servicing Agreement, this Indenture and in each Series
Supplement.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents, all
Series Related Documents and in the instruments and agreements included in the
related Series Trust Estate, including, but not limited, to preparing (or
causing to be prepared) and filing (or causing to be filed) all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture, the related Series Supplement and the Master Sale and Servicing
Agreement in accordance with and within the time periods provided for herein and
therein. Except as otherwise expressly provided therein, the Issuer shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the consent of the Trustee.
(d) If a Responsible Officer of the Owner Trustee shall have
actual knowledge of the occurrence of a Master Servicer Termination Event under
the Master Sale and Servicing Agreement, the Issuer shall promptly notify the
Trustee 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.
Section 3.8 NEGATIVE COVENANTS. So long as any Notes are
Outstanding, the Issuer shall not:
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(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.
Section 3.9 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, 1999), and otherwise in compliance with the
requirements of TIA Section 314(a)(4) an Officer's Certificate stating, as to
the Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture and each Series Supplement throughout
such year, or, if there has been a default in the compliance of any such
condition or covenant, specifying each such default known to such
Authorized Officer and the nature and status thereof.
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Section 3.10 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
(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
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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).
Section 3.11 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 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 III 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
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upon the delivery of written notice to the Trustee stating that Household
Automotive Trust III is to be so released.
Section 3.12 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.
Section 3.13 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.
Section 3.14 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.
Section 3.15 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.
Section 3.16 CAPITAL EXPENDITURES. The Issuer shall not
make any expenditure (by long-term or operating lease or otherwise) for
capital assets (either realty or personally).
Section 3.17 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.
Section 3.18 RESTRICTED PAYMENTS. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether
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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.
Section 3.19 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.
Section 3.20 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.
Section 3.21 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.
Section 3.22 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.
ARTICLE IV.
SATISFACTION AND DISCHARGE
Section 4.1 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
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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 for cancellation when due on the Final Scheduled
Distribution Date or tender date (if Notes shall have been called
for redemption or tender pursuant to the related Series
Supplement, as the case may be; and
(B) the Issuer has paid or caused to be paid all other
amounts owing to all Holders.
Section 4.2 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
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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.
Section 4.3 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
Section 5.1 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.
Section 5.2 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 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.
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(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
(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.
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(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.
Section 5.3 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 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
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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.
Section 5.4 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.
Section 5.5 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.
Section 5.6 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.
Section 5.7 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.
Section 5.8 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
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(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.
Section 5.9 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.
Section 5.10 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 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.
Section 5.11 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
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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.
Section 5.12 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.
Section 5.13 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.
(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.
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ARTICLE VI.
THE TRUSTEE
Section 6.1 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:
(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.
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(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
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 The Chase Manhattan Bank, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.
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Section 6.2 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
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
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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 1999-1 Reserve Account and the Series
1999-1 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.
Section 6.3 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.
Section 6.4 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.
Section 6.5 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
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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.
Section 6.6 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.
Section 6.7 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.
(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
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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.
Section 6.8 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 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.
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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.
Section 6.9 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 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.
Section 6.10 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
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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 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
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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.
Section 6.11 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.
Section 6.12 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.
Section 6.13 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 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
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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.
Section 6.14 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.
Section 6.15 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
Section 7.1 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.
Section 7.2 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 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).
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Section 7.3 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 to file the same with the Commission, copies of the annual
reports and copies of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) which the Issuer
may be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA Section 313(c)) such summaries
of any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be
required by rules and 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.
Section 7.4 REPORTS BY TRUSTEE. If required by TIA
Section 313(a), within 60 days after each March 31 beginning with March 31,
2000 the Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders
shall be filed by the Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Trustee if and
when the Notes are listed on any stock exchange.
ARTICLE VIII.
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.1 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
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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.
Section 8.2 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.
Section 8.3 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 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.
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ARTICLE IX.
AMENDMENTS; SERIES SUPPLEMENTS
Section 9.1 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 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.
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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.
Section 9.2 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;
(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";
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(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 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.
Section 9.3 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
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Opinion of Counsel as to which Series Supplements relate to which Series, or to
this Indenture (and thus all Series) as a whole.
Section 9.4 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.
Section 9.5 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.
Section 9.6 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.
Section 9.7 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.
ARTICLE X.
RESERVED
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ARTICLE XI.
MISCELLANEOUS
Section 11.1 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 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.
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(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.
(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.
Section 11.2 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,
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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.
Section 11.3 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
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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.
Section 11.4 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 III, in care of Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, DE 19890-0001 Attention: Corporate Trust
Administration, or at any other address previously furnished in writing to the
Trustee by Issuer. The Issuer shall promptly transmit any notice received by it
from the Noteholders to the Trustee.
Notices required to be given to the Rating Agencies by the
Issuer, the Trustee or the Owner Trustee shall be in writing, personally
delivered, delivered by overnight courier or first class or via facsimile to (i)
in the case of Moody's, 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.
Section 11.5 NOTICES TO NOTEHOLDERS; WAIVER. Where this
Indenture or any Series Supplement provides for notice to Noteholders of any
event, such notice shall be
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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.
Section 11.6 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 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.
Section 11.7 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.
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Section 11.8 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.
Section 11.9 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.
Section 11.10 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.
Section 11.11 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.
Section 11.12 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.
Section 11.13 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.
Section 11.14 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.
Section 11.15 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.
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Section 11.16 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.
Section 11.17 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.
Section 11.18 LIMITED RECOURSE.
(a) Notwithstanding anything in the Series 1999-1 Related
Documents to the contrary, the Series 1991-1 Notes constitute limited recourse
obligations of the Issuer and are limited in recourse to the Series 1999-1 Trust
Estate. The Trustee, by entering into this Indenture and the related Series
1999-1 Supplement, and each Series 1999-1 Noteholder agree that recourse for the
Series 1999-1 Notes is limited to the Series 1999-1 Trust Estate and, if the
Series 1999-1 Trust Estate shall prove to be insufficient to pay amounts due
under the Series 1999-1, shall have no claim against the assets of the Issuer or
the Seller other than the Series 1999-1 Trust Estate.
(b) If, notwithstanding paragraph (a) above, the Series
1999-1 Noteholders are deemed to have any interest in any asset of the Seller
other than the Seller's interest in the Series 1999-1 Trust Estate, including
any interest in assets of the Seller pledged to secure debt obligations of the
Seller other than the Series 1999-1 Notes, the Trustee, by entering into this
Indenture and the related Series 1999-1 Supplement, and each Series 1999-1
Noteholder agree that any such interest is subordinate to the claims of the
holders of any such debt obligations, and the Series 1999-1 Noteholders shall
have no
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rights in such assets until such other debt obligations are indefeasibly paid in
full. The agreement of the Trustee and the Series 1999-1 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.
Section 11.19 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.
Section 11.20 LIMITATION OF LIABILITY. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Issuer under the Trust
Agreement, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein
made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but
is made and intended for the purpose for binding only the Issuer, (c) nothing
herein contained shall be construed as creating any liability on Wilmington
Trust Company individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to this Agreement and by any person claiming
by, through or under them and (d) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Issuer or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaking by the
Issuer under this Agreement or any related documents.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Issuer, the Master Servicer 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 III
By: WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee
By:
---------------------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION.
as Master Servicer
By:
---------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Trustee
By:
---------------------------------------------
Name:
Title:
[Signature Page for the Indenture]
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DRAFT OF MAY 28, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOUSEHOLD FINANCE CORPORATION,
as the Master Servicer,
together with
HOUSEHOLD AUTOMOTIVE TRUST III,
as Issuer,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Seller,
THE CHASE MANHATTAN BANK,
as Indenture Trustee
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SERIES 1999-1 SUPPLEMENT
Dated as of June 1, 1999
to the
INDENTURE
Dated as of June 1, 1999
MASTER SALE AND SERVICING AGREEMENT
Dated as of June 1, 1999
and to the
TRUST AGREEMENT
Dated as of June 1, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I CREATION OF THE SERIES 1999-1 NOTES. . . . . . . . . . . . . . . . . 1
SECTION 1.01. Designation. . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Pledge of Series 1999-1 Trust Estate.. . . . . . . . . . . . 1
SECTION 1.03. Payments and Computations. . . . . . . . . . . . . . . . . . 3
SECTION 1.04. Denominations. . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III DISTRIBUTIONS AND STATEMENTS TO SERIES 1999-1 NOTEHOLDERS;
SERIES SPECIFIC COVENANTS . . . . . . . . . . . . . . . . . . .10
SECTION 3.01. Series 1999-1 Trust Accounts.. . . . . . . . . . . . . . . .10
SECTION 3.02. Reserve Account. . . . . . . . . . . . . . . . . . . . . . .11
SECTION 3.03. Distributions. . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 3.04. Statements to Noteholders. . . . . . . . . . . . . . . . . .13
SECTION 3.05. Reporting Requirements.. . . . . . . . . . . . . . . . . . .14
SECTION 3.06. Compliance With Withholding Requirements.. . . . . . . . . .14
SECTION 3.07. Special Covenants and Acknowledgements.. . . . . . . . . . .14
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.. . . . . . . . . . . . . . . .16
SECTION 4.03. Remedies.. . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 4.04. Priorities.. . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE V PREPAYMENT AND REDEMPTION. . . . . . . . . . . . . . . . . . . . . .18
SECTION 5.01. Optional "Clean-Up" Redemption.. . . . . . . . . . . . . . .18
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 6.01. Ratification of Basic Documents. . . . . . . . . . . . . . .19
SECTION 6.02. Counterparts.. . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 6.03. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 6.04. Amendments Without Consent of Noteholders. . . . . . . . . .19
SECTION 6.05. Amendments With Consent of the Series 1999-1 Noteholders.. .21
SECTION 6.06. Authority to Register Notes and File Reports.. . . . . . . .22
</TABLE>
Schedule I Schedule of Eligibility Criteria
Schedule II Schedule of Receivables
Exhibit A Form of Master Servicer's Certificate
<PAGE>
This Series 1999-1 Supplement, dated as of June 1, 1999, is by and
among Household Finance Corporation, a Delaware corporation, as master servicer
(the "MASTER SERVICER"), Household Automotive Trust III, a Delaware business
trust, as Issuer (the "ISSUER"), Household Auto Receivables Corporation, a
Nevada corporation, as Seller ("SELLER"), The Chase Manhattan Bank, a New York
banking corporation ("CHASE"), as trustee for the Noteholders (the "INDENTURE
TRUSTEE") and Wilmington Trust Company, a Delaware banking corporation, as owner
trustee (the "OWNER TRUSTEE") for the Certificateholders.
RECITALS
This Series 1999-1 Supplement, is executed and delivered by the
parties hereto pursuant to Section 9.3 of the Indenture dated as of June 1, 1999
(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 June 1, 1999 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 1999-1 Supplement shall
govern with respect to Series 1999-1.
Article I
CREATION OF THE SERIES 1999-1 NOTES
Section 1.01. DESIGNATION.
(a) There is hereby created a Series of Notes to be issued pursuant
to the Indenture and this Series 1999-1 Supplement to be known as "Household
Automotive Trust III, Series 1999-1 Notes" (as used herein, the "SERIES
1999-NOTES"). The Series 1999-1 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 1999-1 Supplement to be known as
the "Household Automotive Trust III, Series 1999-1 Certificates."
Section 1.02. PLEDGE OF SERIES 1999-1 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
1999-1 Receivable on the Schedule of Receivables 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
<PAGE>
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 1999-1 Receivables and any other interest of
the Issuer in the related Financed Vehicles; (c) all rights of HAFC against
Dealers pursuant to Dealer Agreements or Dealer Assignments related to such
Series 1999-1 Receivables; (d) any proceeds and the right to receive proceeds
with respect to such Series 1999-1 Receivables repurchased by a Dealer, pursuant
to a Dealer Agreement as a result of a breach of representation or warranty in
the related Dealer Agreement; (e) all rights under any Service Contracts on the
related Financed Vehicles; (f) any proceeds and the right to receive proceeds
with respect to such Series 1999-1 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 1999-1 Receivables; (g) all funds on deposit from time to time in
the Series 1999-1 Trust Accounts (including all investments and proceeds thereof
from time to time allocable to the Series 1999-1 Reserve Account, but excluding
all investments and proceeds thereof allocable to the other Series 1999-1 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 1999-1 Receivables and that
has been acquired by or on behalf of the Issuer pursuant to liquidation of such
Series 1999-1 Receivables; (j) all items contained in the Receivable Files with
respect to such Series 1999-1 Receivables and any and all other documents that
the Master Servicer or HAFC keeps on file in accordance with its customary
procedures relating to such Series 1999-1 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 1999-1 (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 chooses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, into cash or other liquid property,
all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of obligations
and receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of any of the foregoing
(collectively, the "Series 1999-1 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 1999-1
Supplement in accordance with the provisions of the Indenture and this Series
1999-1 Supplement and agrees to perform its duties required in the Indenture and
in this Series 1999-1 Supplement in accordance with the provisions hereof and of
2
<PAGE>
the Indenture to the best of its ability to the end that the interests of such
parties, recognizing the priorities of their respective interests may be
adequately and effectively protected.
Section 1.03. PAYMENTS AND COMPUTATIONS.
All amounts to be paid or deposited by any Person hereunder shall be
paid or deposited in accordance with the terms hereof no later than 12:00 noon
(New York City time) on the day when due in immediately available funds.
Section 1.04. DENOMINATIONS.
The Notes of each Class will be issued in denominations of $100,000
and integral multiples of $1,000 in excess thereof, except for one Note of each
Class which may be issued in a denomination other than an integral multiple of
$1,000.
Article II
DEFINITIONS
Section 2.01. DEFINITIONS.
(a) Whenever used in this Series 1999-1 Supplement and when used in
the Series 1999-1 Related Documents with respect to the Series 1999-1 Notes or
the Series 1999-1 Certificates, the following words and phrases shall have the
following meanings, and the definitions of such terms are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms. Unless otherwise defined
in this Series 1999-1 Supplement, terms defined in the Basic Documents are used
herein as therein defined. A term used herein preceded by the designation
"Series 1999-1" but not defined herein, shall have the meaning specified for
such term in the Basic Documents as such term relates to Series 1999-1.
"Aggregate Note Principal Balance" means, as of any date, the
aggregate outstanding principal amount of all the Notes on such date.
"Aggregate Optimal Note Principal Balance" means, with respect to any
Distribution Date, the excess, if any, of (x) the Pool Balance as of the close
of business on the last day of the prior Collection Period over (y) the Targeted
Overcollateralization Amount for such Distribution Date.
"Available Funds" means, with respect to any Collection Period, and
the related Distribution Date, the sum of (i) the Collected Funds for such
Collection Period, (ii) investment earnings realized on the Series 1999-1 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.
3
<PAGE>
"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 1999-1 Receivables, as of the
Accounting Date immediately preceding such Collection Period.
"Basic Documents" means the Master Sale and Servicing Agreement, the
Indenture, the Trust Agreement, the Master Receivables Purchase Agreement, and
other documents and certificates delivered therewith or pursuant thereto in
connection with Series 1999-1.
"Book Entry Notes" means any beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 of the Indenture.
"Certificateholders" means the holders of Series 1999-1 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
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
4
<PAGE>
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 and (ii) the Class A Principal Carryover
Shortfall for such Distribution Date; PROVIDED, HOWEVER, that (x) the sum of
clauses (i) and (ii) shall not exceed the outstanding principal amount of the
Class A Notes, and (y) on the Final Scheduled Distribution Date, the Class A
Principal Distributable Amount will include the amount, to the extent of the
remaining Available Funds, necessary (after giving effect to other amounts
having a higher payment priority on such Distribution Date) to reduce the
outstanding principal amount of the Class A Notes to zero.
"Class A-1 Noteholders" means the Holders of the Class A-1 Notes.
"Class A-1 Scheduled Maturity Date" means with respect to the Class
A-1 Notes, ____________.
"Class A-2 Noteholders" means the Holders of the Class A-2 Notes.
"Class A-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
5
<PAGE>
Collection Period, including all Net Liquidation Proceeds collected during such
Collection Period (but excluding any Purchase Amounts).
"Cutoff Date" means May 1, 1999.
"Definitive Notes" means the Notes that have been certificated and
fully registered in accordance with Section 2.12 of the Indenture.
"Distribution Date" means, with respect to each Collection Period, the
seventeenth day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing on July 19,
1999.
"Eligibility Criteria" means the criteria for eligibility for Eligible
Receivables set forth on Schedule I hereto.
"Eligible Receivable" or "Series 1999-1 Eligible Receivable" means a
Series 1999-1 Receivable that satisfies the Eligibility Criteria set forth in
Schedule I hereto.
"Event of Default" shall have the meaning assigned to such term in
Section 4.01.
"Final Scheduled Distribution Date" means ____________.
"HAFC " means Household Automotive Finance Corporation.
"HFC" means Household Finance Corporation.
"Indenture" means the indenture dated as of June 1, 1999 among the
Issuer, the Master Servicer and The Chase Manhattan Bank, as indenture trustee,
as supplemented by the Series 1999-1 Supplement.
"Initial Reserve Account Deposit" means [1]% of the Pool Balance as of
the Cutoff Date.
"Interest Period" means, with respect to any Distribution Date, the
period from and including the prior Distribution Date (or, in the case of the
first Distribution Date, from and including the Series 1999-1 Closing Date)
through (and including) the day preceding such Distribution Date.
"Master Servicer's Certificate" means, with respect to Series 1999-1,
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
6
<PAGE>
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 any
period shorter than a complete 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.
"Original Pool Balance" means the aggregate of the Principal Balance
of the Receivables as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity.
"Pledge" means the Grant by the Issuer hereunder to the Indenture
Trustee for the benefit of the Holders of Notes in accordance with Section 1.02
hereof in and to specified Pledged Property related thereto.
"Pledged Property" means, with respect to the Series 1999-1 Trust
Estate, each Series 1999-1 Receivable, together with all associated property and
rights with respect thereto described in the definition of Series 1999-1 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 1999-1 Note 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)
7
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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 1999-1 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 III, Series 1999-1, at the
Indenture Trustee, ABA No. 021000021.
"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 1999-1 Trust
Estate attached hereto as Schedule II.
"Series 1999-1 Certificates" means the Certificates (as defined in the
Trust Agreement).
"Series 1999-1 Closing Date" means June __, 1999.
"Series 1999-1 Collected Funds" means, with respect to a date of
determination, the amount of Collected Funds with respect to the Collection
Period immediately preceding such date of determination, including all Net
Liquidation Proceeds collected during the related Collection Period (but
excluding any Purchase Amounts).
8
<PAGE>
"Series 1999-1 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 III, Series 1999-1, at the Indenture Trustee, ABA No.
021000021.
"Series 1999-1 Eligible Investments" means, with respect to funds in
the Series 1999-1 Collection Account and Reserve Account, "Eligible Investments"
as defined in the Master Sale and Servicing Agreement, except that (i) all
references in such definition to "rating satisfactory to the Rating Agency" or
words of similar import shall mean ratings of not less than "A-1+" by Standard &
Poor's and "P-1" by Moody's (whichever is applicable)(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 1999-1 Note 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 III, Series 1999-1 at the Indenture Trustee, ABA No. 021000021.
"Series 1999-1 Receivables" means each Receivable listed on the
Schedule of Receivables, which (a) has not been released from the Series 1999-1
Trust Estate as provided herein or in the Indenture and (b) is not a Liquidated
Receivable.
"Series 1999-1 Related Documents" means the Basic Documents, this
Series 1999-1 Supplement, each Receivables Purchase Agreement Supplement related
to the Series 1999-1 Trust Estate, each Transfer Agreement related to the Series
1999-1 Trust Estate, the Series 1999-1 Notes, the Series 1999-1 Certificates and
other documents and certificates delivered in connection therewith.
"Series 1999-1 Reserve Account" means the Reserve Account.
"Series 1999-1 Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to the Holders of the Series 1999-1 Notes.
"Series 1999-1 Securities" means the Series 1999-1 Notes and the
Series 1999-1 Certificates.
"Series 1999-1 Supplement" means this Series 1999-1 Supplement to the
Indenture and the Trust Agreement.
"Series 1999-1 Support" means, with respect to the Series 1999-1
Notes, the Series 1999-1 Certificates.
"Series 1999-1 Trust Accounts" means the Series 1999-1 Collection
Account, the Series 1999-1 Reserve Account, and the Series 1999-1 Note Account.
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"Series 1999-1 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 1999-1 Receivables during such Collection Period, and
(ii) the net realized investment earnings of funds on deposit in the Series
1999-1 Collection Account or on deposit in the Master Collection Account and
allocable to the investment of Available Funds with respect to Series 1999-1.
"Targeted Credit Enhancement Amount" means, with respect to any
Distribution Date, [44.50]% of the Pool Balance as of the of last day of the
related Collection Period.
"Targeted Overcollateralization Amount" means, with respect to any
Distribution Date, the excess (but not less than zero), if any, of: (i) the
Targeted Credit Enhancement Amount over (ii) the Targeted Reserve Account
Balance.
"Targeted Reserve Account Balance" means, with respect to any
Distribution Date, the lesser of: (i) the greater of (a) [3.0]% of the
outstanding Pool Balance as of the end of the related Collection Period, and (b)
$_______ ([2.0]% of the Pool Balance as of the Cutoff Date) and (ii) the
Aggregate Note Principal Balance.
"Trust" means the Issuer.
"Trust Agreement" means the Trust Agreement dated as of June 1, 1999
between the Seller and the Owner Trustee, as supplemented by the Series 1999-1
Supplement.
Article III
DISTRIBUTIONS AND STATEMENTS TO
SERIES 1999-1 NOTEHOLDERS; SERIES SPECIFIC COVENANTS
Section 3.01. SERIES 1999-1 TRUST ACCOUNTS.
(a) The Indenture Trustee, for the benefit of the Holders of the
Series 1999-1 Securities, shall establish and maintain an account (the "SERIES
1999-1 COLLECTION ACCOUNT") as a segregated trust account in the Indenture
Trustee's corporate trust department, identified as the "Collection Account for
Household Automotive Trust III, in trust for the registered Holders of the
Series 1999-1 Securities." The Indenture Trustee shall make or permit
withdrawals from the Series 1999-1 Collection Account only as provided in this
Series 1999-1 Supplement. Notwithstanding anything in the Series 1999-1 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 1999-1 Collection
Account without any prior deposit into the Master Collection Account.
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(b) The Indenture Trustee for the benefit of the Holders of the
Series 1999-1 Notes shall establish and maintain an account (the "SERIES 1999-1
RESERVE ACCOUNT") as a segregated trust account in the Indenture Trustee's
corporate trust department, identified as the "Series 1999-1 Reserve Account for
Household Automotive Trust III, in trust for the registered Holders of the
Series 1999-1 Notes." The Indenture Trustee shall make or permit withdrawals
from the Reserve Account only as provided in this Series 1999-1 Supplement. On
the Series 1999-1 Closing Date, the Series 1999-1 Reserve Account will be funded
with the Initial Reserve Account Deposit.
(c) The Indenture Trustee, for the benefit of the Holders of Series
1999-1 Notes, shall establish and maintain an account (the "SERIES 1999-1 NOTE
ACCOUNT") as a segregated trust account in the Indenture Trustee's corporate
trust department, identified as the "Note Account for Household Automotive Trust
III, in trust for the registered Holders of the Series 1999-1 Notes." The
Indenture Trustee shall make or permit withdrawals from the Series 1999-1 Note
Account only as provided in this Series 1999-1 Supplement.
(d) On each Distribution Date, the Indenture Trustee shall transfer
Available Funds for such Distribution Date from the Series 1999-1 Collection
Account and from the Series 1999-1 Reserve Account, if applicable, to the Series
1999-1 Note Account.
(e) In the event that any Series 1999-1 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 1999-1 Trust Account except as provided in
this Series 1999-1 Supplement. Except as specifically provided in this Series
1999-1 Supplement, funds in the Series 1999-1 Trust Accounts shall not be
commingled with any other moneys. All moneys deposited from time to time in
each of the Series 1999-1 Trust Accounts shall be invested and reinvested by the
Indenture Trustee in Series 1999-1 Eligible Investments selected in writing by
the Master Servicer (pursuant to standing instructions or otherwise) which,
absent any instruction shall be the investments specified in clause (d) of the
definition of Eligible Investment. The provisions of Section 5.1 of the Master
Sale and Servicing Agreement shall apply to the investment of funds in the
Series 1999-1 Trust Accounts to the same extent as they apply to the Master
Collection Account.
Section 3.02. RESERVE ACCOUNT.
On the earlier of (x) the maturity date of the Series 1999-1 Notes
(whether by acceleration or otherwise) or (y) the Final Scheduled Distribution
Date, the amount on deposit in the Reserve Account shall be withdrawn from the
Reserve Account and distributed in accordance with Section 4.04.
Section 3.03. DISTRIBUTIONS.
(a) On each Distribution Date, the Indenture Trustee shall (based
solely on the information contained in the Master Servicer's Certificate
delivered with respect to such Distribution Date) distribute the following
amounts from Available Funds with respect to such Distribution Date, and in the
following order of priority:
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(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 (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 1999-1 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 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
1999-1 Reserve Account an amount up to the amount of such deficiency and
distribute such amount as a component of Available Funds.
(c) Each Series 1999-1 Certificateholder by its acceptance of its
Certificate will be deemed to have consented to the provisions of paragraph (a)
above relating to the priority of distributions, and will be further deemed to
have acknowledged that no property rights in any amount 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 1999-1
Certificateholder, by acceptance of its Certificate, further
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specifically acknowledges that it has no right to or interest in any monies at
any time held in the Series 1999-1 Reserve Account, such monies being held in
trust for the benefit of the Series 1999-1 Noteholders.
(d) In the event that the Series 1999-1 Collection Account is
maintained with an institution other than the Indenture Trustee, the Master
Servicer shall instruct and cause such institution to transfer the amounts to be
withdrawn therefrom in accordance with Section 3.03(b) to the Indenture Trustee
for distribution pursuant to Section 3.03(a) one Business Day Prior to the
related Distribution Date.
(e) Unless Definitive Notes are issued pursuant to Section 2.12 of
the Indenture, with respect to Notes registered on the related Record Date in
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 1999-1 Notes or the making of any notation thereon.
(f) If not theretofore paid in full, all amounts outstanding with
respect to the Class A-1 Notes shall be due and payable on the Class A-1
Scheduled Maturity Date, 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.
Section 3.04. 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
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(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.
Section 3.05. 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,
2000, 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.
Section 3.06. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.
Notwithstanding any other provisions of this Series 1999-1 Supplement
or the Indenture to the contrary, the Indenture Trustee, shall comply with all
Federal withholding requirements respecting payments (or advances thereof) to
the Noteholders as may be applicable to instruments constituting indebtedness
for Federal income tax purposes. Any amounts so withheld shall be treated as
having been paid to the applicable Noteholders for all purposes of the
Indenture. In no event shall the consent of any Noteholder be required for any
such withholding.
Section 3.07. SPECIAL COVENANTS AND ACKNOWLEDGEMENTS.
With respect to the Series 1999-1 Notes, the Issuer hereby represents
and warrants, as of the Series 1999-1 Closing Date:
(i) VALID PLEDGE. It is the intention of the Issuer that
each pledge herein contemplated constitutes the Grant of a perfected,
first priority security interest in all Pledged Property to the
Indenture Trustee for the benefit of the Series 1999-1 Noteholders.
(ii) GOVERNMENTAL AUTHORIZATION. Other than the filing of
the financing statements required hereunder, no authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance by the Issuer of this Series
1999-1 Supplement, the Indenture, and each Series 1999-1 Related
Document to which it is a party.
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Section 3.08. TAX CHARACTERIZATION.
It is the intent of the parties hereto that, for all Federal, state,
local and foreign taxes, the Series 1999-1 Notes will be evidence of
indebtedness. To the extent permitted by law, the parties hereto, and each
owner of a beneficial interest in the Series 1999-1 Notes by acceptance of such
interest, agrees to treat the Series 1999-1 Notes for purposes of all Federal,
state, local and foreign taxes as indebtedness secured by the Series 1999-1
Trust Estate.
Article IV
EVENTS OF DEFAULT; REMEDIES
Section 4.01. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for
a period of five calendar days; or
(ii) [default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable, and such default shall continue for a period of five calendar
days]; or
(iii) default in the observance or performance of any
covenant or agreement of the Issuer made in the Series 1999-1 Related
Documents (other than a covenant or agreement, a default in the
observance or performance of which is elsewhere in this Section
specifically dealt with), or any representation or warranty of the
Issuer made in the Series 1999-1 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
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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.
Section 4.02. RIGHTS UPON EVENT OF DEFAULT.
(a) If an Event of Default shall have occurred and be continuing,
the Indenture Trustee in its discretion may, or if so requested in writing by
Holders holding Notes representing at least 66 2/3% of the Outstanding Amount of
the Notes 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.
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No such rescission shall affect any subsequent default or impair any right
consequent thereto.
Section 4.03. REMEDIES.
If an Event of Default shall have occurred and be continuing, the
Indenture Trustee, subject to Section 11.17 of the Indenture, may exercise any
of the remedies specified in Article V of the Indenture and, in addition, may do
one or more of the following.
(i) institute Proceedings in its own name and as trustee of
an express trust for the collection of all amounts then payable on the
Notes or under the Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of the Indenture with respect to the
Trust Property;
(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
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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.
Section 4.04. PRIORITIES.
(a) On and after the maturity date of the Series 1999-1 Notes (by
acceleration or otherwise) all Available Funds, all amounts on deposit in the
Reserve Account withdrawn in accordance with Section 3.02 and any proceeds of
the liquidation of all or any portion of the Series 1999-1 Trust Estate pursuant
to Section 4.03(iv), shall be applied by the Indenture Trustee on the related
Distribution Date in the following order of priority:
First: amounts due and owing and required to be distributed
to the Master Servicer, the Owner Trustee and the Indenture Trustee,
respectively, pursuant to priorities (i) and (ii) of Section 3.03
hereof and not previously distributed, in the order of such priorities
and without preference or priority of any kind within such priorities;
Second: to Class A Noteholders for amounts due and unpaid on
the Class A Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class A Notes for interest;
Third: to the Class A Noteholders for amounts due and unpaid
on the Class A Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class A Notes for principal;
Fourth: to the Servicer for any Servicing Fees and
Supplemental Servicing Fees then due;
Fifth: to the Series 1999-1 Certificateholders, any remaining
Available Funds.
(b) The Indenture Trustee may fix a record date and distribution
date for any payment to Series 1999-1 Noteholders pursuant to this Section 4.04.
At least 15 days before such record date, the Indenture Trustee shall mail to
the Noteholders a notice that states the record date, the Distribution Date and
the amount to be paid.
Article V
PREPAYMENT AND REDEMPTION
Section 5.01. 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 1999-1 Closing Date, the
Master Servicer and the Seller on behalf of the Issuer, shall each have the
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option to redeem the outstanding Series 1999-1 Notes at a redemption price (the
"REDEMPTION PRICE") which is not less than the then Aggregate Note Principal
Balance, plus all accrued and unpaid interest thereon and all fees and other
amounts owing to the Indenture Trustee, the Owner Trustee and the Master
Servicer (if other than HFC) under the Series 1999-1 Related Documents. The
Master Servicer and the Seller, on behalf of the Issuer, shall give the Master
Servicer (if other than HFC), the Indenture Trustee, and the Owner Trustee at
least 10 days' irrevocable prior written notice of the date on which the Master
Servicer or the Seller, as applicable intends to exercise such option to
purchase. Not later than 12:00 P.M., New York City time, on such Distribution
Date, the Master Servicer or the Seller, as applicable, shall deposit such
amount in the Collection Account in immediately available funds for distribution
pursuant to Section 3.03 against the presentment of the Notes for cancellation.
Such purchase option is subject to payment in full of the Redemption Price.
Article VI
MISCELLANEOUS
Section 6.01. RATIFICATION OF BASIC DOCUMENTS.
Each of the Basic Documents, and to the extent appropriate, as
supplemented by this Series 1999-1 Supplement, is in all respects ratified and
confirmed and each of the Basic Documents, as so supplemented by this Series
1999-1 Supplement shall be read, taken and construed as one and the same
instrument.
Section 6.02. COUNTERPARTS.
This Series 1999-1 Supplement may be executed in one or more
counterparts, each of which so executed shall be deemed to be an original, but
all of which shall together constitute but one and the same instrument.
Section 6.03. GOVERNING LAW.
THIS SERIES 1999-1 SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 6.04. AMENDMENTS WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of the Noteholders but with prior written
notice to the Rating Agencies, as evidenced to the Indenture Trustee and the
Issuer, when authorized by an Issuer Order, at any time and from time to time,
the parties hereto may enter into one or more amendments hereto, in form
satisfactory to the Indenture Trustee and the Owner Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property
at any time subject to the lien of the Indenture as supplemented by
this Series 1999-1
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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 1999-1
Supplement, or to subject to the lien of the Indenture as supplemented
by this Series 1999-1 Supplement additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Noteholders, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee, if any;
(v) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or to make any other provisions with respect to matters or
questions arising under the Indenture, the Trust Agreement or in this
Series 1999-1 Supplement; provided that such action shall not
adversely affect the interests of the Series 1999-1 Noteholders;
(vi) to evidence and provide for the acceptance of the
appointment hereunder and under the Indenture by a successor indenture
trustee with respect to the Notes and to add to or change any of the
provisions of the Indenture or of this Series 1999-1 Supplement as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one indenture trustee, pursuant to the
requirements of Article VI of the Indenture; or
(vii) to modify, eliminate or add to the provisions of the
Indenture or of this Series 1999-1 Supplement to such extent as shall
be necessary to effect the qualification of the Indenture under the
TIA or under any similar federal statute hereafter enacted and to add
to the Indenture such other provisions as may 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 1999-1 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 1999-1 Supplement of modifying in any manner the rights of the
Series 1999-1 Noteholders under the Indenture or under this Series 1999-1
Supplement; provided, however,
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that such action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Series 1999-1 Noteholder.
Section 6.05. AMENDMENTS WITH CONSENT OF THE SERIES 1999-1
NOTEHOLDERS.
Except as otherwise provided herein, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order provided by the Master Servicer,
also may, upon satisfaction of the Rating Agency Condition and with the consent
of the Holders of not less than a majority of the Outstanding Amount of each
Class of affected Series 1999-1 Notes, by Act of such Holders delivered to the
Issuer and the Indenture Trustee, enter into an amendment hereto for the purpose
of adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Series 1999-1 Supplement or of modifying in any manner the
rights of the Series 1999-1 Noteholders under the Indenture or under this Series
1999-1 Supplement; provided, however, that no such amendment shall, without the
consent of the Holder of each Outstanding Series 1999-1 Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Series 1999-1 Note, or reduce the
principal amount thereof, the interest rate thereon, change the
provision of the Indenture relating to the application of collections
on, or the proceeds of the sale of, all or any portion of any Series
1999-1 Trust Estate to payment of principal of or interest on the
Series 1999-1 Notes, or change any place of payment where, or the coin
or currency in which, any Series 1999-1 Note or the interest thereon
is payable;
(ii) impair the right to institute suit for the enforcement
of the provisions of the Indenture requiring the application of funds
available therefor, as provided in Article V of the Indenture, to the
payment of any such amount due on the Series 1999-1 Notes on or after
the respective due dates thereof;
(iii) reduce the percentage of the Outstanding Amount of the
Series 1999-1 Notes, the consent of the Holders of which is required
for this Series 1999-1 Supplement, or the consent of the Holders of
which is required for any waiver of compliance with certain provisions
of the Indenture or certain defaults hereunder and their consequences
provided for in the Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(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 1999-1 Trust Estate pursuant to Section 5.4 of
the Indenture;
(vi) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional
provisions of the Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Series
1999-1 Note affected thereby;
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(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 1999-1 Note on any
Distribution Date (including the calculation of any of the individual
components of such calculation) or to affect the rights of the Holders
of Series 1999-1 Notes to the benefit of any provisions for the
mandatory redemption of the Series 1999-1 Notes contained herein; or
(viii) permit the creation of any lien ranking prior to or on
a parity with the lien of the Indenture with respect to any part of
the a Series 1999-1 Trust Estate or, except as otherwise permitted or
contemplated herein or the Series 1999-1 Related Documents, terminate
the lien of the Indenture on any property at any time subject hereto
or deprive the Holder of any Series 1999-1 Note of the security
provided by the lien of the Indenture.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of an amendment to this Series 1999-1
Supplement, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture Trustee
of an amendment to this Series 1999-1 Supplement, the Indenture Trustee shall
mail to the Series 1999-1 Noteholders a notice setting forth in general terms
the substance hereof. Any failure of the Indenture Trustee to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any amendment to the Series 1999-1 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 1999-1 Notes, each
owner of a beneficial interest in a Note shall be deemed to have agreed that
prior to the date which is one year and one day after the termination of the
Indenture, such Person shall not acquiesce, petition or otherwise invoke or
cause the Issuer or the Seller to invoke the process of any governmental
authority for the purpose of commencing or sustaining a case against the Seller
or Issuer under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of or for the Issuer or the Seller or any substantial
part of its property or ordering the winding-up or liquidation of the affairs of
the Issuer or the Seller.
Section 6.06. 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
22
<PAGE>
periodic basis, such documents as may be required by rules and regulations
prescribed by such authorities.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Series 1999-1
Supplement to be fully executed by their respective officers as of the day and
year first above written.
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By
-----------------------------------
Name:
Title:
HOUSEHOLD AUTOMOTIVE TRUST III,
as Issuer
By WILMINGTON TRUST COMPANY
Not in its individual capacity but solely
as Owner Trustee
By
-----------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION
By
-----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By
-----------------------------------
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
as Owner Trustee
By
-----------------------------------
Name:
Title:
<PAGE>
Schedule I
Eligibility Criteria
"ELIGIBLE RECEIVABLE" means a Series 1999-1 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
November 1, 1998, that is substantially the same as the Master Receivables
Purchase Agreement (the "Trust II Receivables Purchase Agreement"), (y) by the
Issuer pursuant to the Master Sale and Servicing Agreement; and each
Series 1999-1 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
II 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 1999-1
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 1999-1 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 1999-1 Receivable and
the sale of the Financed Vehicle evidenced by each Series 1999-1 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 18 months but
not more than 72 months, (ii) had an original Amount Financed of at least $3,000
and not more than $27,000, (iii) had an Annual Percentage Rate of at least
10.50% and not more than 27%, (iv) was not more than 30 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 1999-1 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
1999-1 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
1999-1 Receivable to be clearly and unambiguously marked to show that such
Series 1999-1 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 II 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 1999-1 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 1999-1 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 1999-1 Receivable has not been
released from the lien of such Series 1999-1 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 1999-1 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 1999-1 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, (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 1999-1 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 1999-1 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 1999-1 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
1999-1 Receivable or otherwise to impair the rights of the Trustee, the
Noteholders or the Certificateholders in such Series 1999-1 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 1999-1 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 1999-1 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 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
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 1999-1 Closing Date and will show, HAFC (or any predecessor or Affiliate
of HAFC) named as the original secured party under such Series 1999-1 Receivable
and, accordingly, HAFC will be the holder of a first priority security interest
in such Financed Vehicle. With respect to each Series 1999-1 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 1999-1 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 1999-1
Receivable; and
(z) as to which no selection procedures adverse to the Noteholders
or the Certificateholder have been utilized in selecting such Series 1999-1
Receivable from all other similar Receivables originated by HAFC or any
predecessor or Affiliate of HAFC.
SCH-I-5
<PAGE>
Schedule II
Schedule of Receivables on File in Electronic Form
at Dewey Ballantine
<PAGE>
Exhibit A
Form of Master Servicer's Certificate
<PAGE>
DRAFT OF MAY 28, 1999
- --------------------------------------------------------------------------------
MASTER SALE AND SERVICING AGREEMENT
among
HOUSEHOLD AUTOMOTIVE TRUST III,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
HOUSEHOLD FINANCE CORPORATION,
Master Servicer
and
THE CHASE MANHATTAN BANK,
Trustee
Dated as of June 1, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
<S> <C>
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Interpretive Provisions. . . . . . . . . . . . . . . . . .19
SECTION 1.3. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . . .19
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. . . . . . . . . . . . . . . . . . . .20
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. . . . . . . . . .31
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. . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 4.9. Master Servicer's Certificate. . . . . . . . . . . . . . . . . .34
SECTION 4.10. Annual Statement as to Compliance, Notice of Master Servicer
Termination Event . . . . . . . . . . . . . . . . . . . . . .34
SECTION 4.11. Annual Independent Accountants' Report. . . . . . . . . . . . .35
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables . . . . . . . . . . . . . . . . . . . . . . . . .35
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 . . . . . . . . . . . . . . . . . . .38
SECTION 5.4. Additional Deposits. . . . . . . . . . . . . . . . . . . . . . .38
SECTION 5.5. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE VI
RESERVED
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
SECTION 8.1. Representations of Seller. . . . . . . . . . . . . . . . . . . .39
SECTION 8.2. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . .41
SECTION 8.3. Liability of Seller; Indemnities . . . . . . . . . . . . . . . .42
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. . . . . . . . . . . . . . . . . . . . . . . . . .43
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 . . . . . . . . . . . . . . .44
SECTION 9.2. Liability of Master Servicer; Indemnities. . . . . . . . . . . .47
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations
of the Master Servicer. . . . . . . . . . . . . . . . . . . .48
SECTION 9.4. Limitation on Liability of Master Servicer and Others. . . . . .49
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 9.8. Successor Sub-Servicers. . . . . . . . . . . . . . . . . . . . .51
ARTICLE X
Default
SECTION 10.1. Master Servicer Termination Event . . . . . . . . . . . . . . .51
SECTION 10.2. Consequences of a Master Servicer Termination Event . . . . . .53
SECTION 10.3. Appointment of Successor. . . . . . . . . . . . . . . . . . . .53
SECTION 10.4. Notification to Noteholders and Certificateholders. . . . . . .55
SECTION 10.5. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . .55
SECTION 10.6. Successor to Master Servicer. . . . . . . . . . . . . . . . . .55
ARTICLE XI
Termination
SECTION 11.1. Optional Purchase of All Receivables. . . . . . . . . . . . . .55
ARTICLE XII
Administrative Duties of the Master Servicer
SECTION 12.1. Administrative Duties.. . . . . . . . . . . . . . . . . . . . .56
SECTION 12.2. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 12.3. Additional Information to be Furnished to the Issuer. . . . . .59
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 13.2. Protection of Title to Trust. . . . . . . . . . . . . . . . . .60
SECTION 13.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 13.4. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 13.5. Limitations on Rights of Others . . . . . . . . . . . . . . . .63
SECTION 13.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 13.7. Separate Counterparts . . . . . . . . . . . . . . . . . . . . .63
SECTION 13.8. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 13.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 13.10. Assignment to Trustee. . . . . . . . . . . . . . . . . . . . .63
SECTION 13.11. Nonpetition Covenants. . . . . . . . . . . . . . . . . . . . .63
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 13.12. Limitation of Liability of Owner Trustee . . . . . . . . . . .64
SECTION 13.13. Independence of the Master Servicer. . . . . . . . . . . . . .64
SECTION 13.14. No Joint Venture . . . . . . . . . . . . . . . . . . . . . . .65
</TABLE>
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
iv
<PAGE>
MASTER SALE AND SERVICING AGREEMENT dated as of June 1, 1999, among
HOUSEHOLD AUTOMOTIVE TRUST III, 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 THE CHASE MANHATTAN BANK, 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
Section 1.1. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.11.
"Accounting Date" means, with respect to a Distribution Date, the last
day of the Collection Period immediately preceding such Distribution Date.
"Actuarial Method" means the method of allocating a fixed level
monthly payment on an obligation between principal and interest, pursuant to
which the portion of such payment that is allocated to interest is equal to the
product of (a) 1/12, (b) the fixed annual rate of interest on such obligation
and (c) the outstanding principal balance of such obligation.
"Actuarial Receivable" means a Receivable under which the portion of
the payment allocated to interest and the portion allocable to principal is
determined in accordance with the Actuarial Method.
"Addition Notice" means, with respect to any transfer of Receivables
to the Trust pursuant to Section 2.1 of this Agreement, notice of the Seller's
election to transfer Receivables to the Trust, such notice to designate the
related Transfer Date, the
<PAGE>
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 the preceding Collection
Period.
"Basic Documents" means this Agreement, the Certificate of Trust, the
Trust Agreement, the Indenture, the Master Receivables Purchase Agreement and
other documents and certificates delivered in connection therewith.
"Business Day" means a day other than a Saturday, a Sunday or other
day on which commercial banks located in the states of Illinois, 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.
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"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 Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, and
(ii) with respect to the Trustee, the principal corporate trust office of The
Chase Manhattan Bank, which at the time of execution of this agreement is 450
West 33rd Street, New York, New York, 10001, Attention: Structured Finance
Services.
"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
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interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Cutoff Date" means, with respect to a Receivable and (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) a Series Closing Date, 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
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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 appropriate book-entry account
maintained with a Federal Reserve Bank by a
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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 records of its nominees, indicating that such securities are held in
trust pursuant to and as provided in this Agreement.
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(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 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;
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(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.
"Depositor" shall mean the Seller in its capacity as Depositor under
the Trust Agreement.
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"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:
(a) direct obligations of, or obligations fully guaranteed as to
timely payment by, the United States of America;
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(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 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
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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[, together with all accessions thereto,] 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, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
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"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 III, 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,
except in the case of a repossessed Financed Vehicle, 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 Agreement" means the Master Receivables
Purchase Agreement between the Seller and HAFC, dated as of June 1, 1999,
pursuant to which the Seller acquired the Receivables, as such agreement may be
amended or supplemented from time to time.
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"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.
"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.
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"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by the chairman of
the board, the president, any executive vice president or any vice president,
any treasurer, assistant treasurer, secretary or assistant secretary of the
Seller or the Master Servicer, as appropriate.
"Opinion of Counsel" means an opinion of counsel who may be counsel to
the Master Servicer or the Seller, acceptable to the Trustee.
""Other Conveyed Property" means all property conveyed by the Seller
to the Trust pursuant to Section 2.1(a)(ii) through (x) of this Agreement.
"Outstanding" has the meaning assigned to such term in the Indenture.
"Outstanding Amount" means, with respect to any Series, the aggregate
principal amount of all Notes of such Series which are Outstanding at the date
of determination after giving effect to all distributions of principal on such
date of determination.
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its
successors-in-interest or any successor Owner Trustee under the Trust Agreement.
"Payment Record" means the record maintained by the Master Servicer
for the Trust as provided in Section 4.2(d) hereof.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Principal Balance" means, with respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the Actuarial
Method, or the Simple Interest Method, as appropriate, and (ii) any Cram Down
Loss in respect of such Receivable. The "Principal Balance" of a Repurchased
Receivable or Liquidated Receivable shall be deemed to be zero.
"Rating Agency" means, with respect to any outstanding Series or
Class, each Rating Agency specified in the Series Supplement.
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"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 the 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).
"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.
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"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
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
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such Series Support relates shall have any rights with respect thereto and all
payments thereunder received by the Trustee shall be distributed exclusively as
prescribed in the Series Supplement relating to such Series or Class.
"Series Support Provider" means the Person, if any, designated in the
related Series Supplement, as providing any Series Support, other than Household
or any of its Affiliates or the Noteholders of any Series or Class which is
subordinated to another Class or Series.
"Series Trust Accounts" has the meaning with respect to each Series
specified in the related Series Supplement.
"Series Termination Date" has the meaning with respect to each Series
specified in the related Series Supplement.
"Series Trust Estate" has the meaning with respect to each Series
specified in the related Series Supplement.
"Service Contract" means, with respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of such Financed Vehicle.
"Servicing Fee Rate" means 3% per annum unless otherwise specified in
a Series Supplement with respect to the related Series Trust Estate.
"Simple Interest Method" means the method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
the fixed rate of interest on such obligation multiplied by the period of time
(expressed as a fraction of a year, based on the actual number of days in the
calendar month and 365 days in the calendar year) elapsed since the preceding
payment under the obligation was made.
"Simple Interest Receivable" means a Receivable under which the
portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Standard & Poor's" means Standard & Poor's, 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
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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 June 1, 1999,
between the Seller and the Owner Trustee, as supplemented by the Series 1999-1
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 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 The Chase Manhattan Bank.
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"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.
Section 1.2. OTHER INTERPRETIVE PROVISIONS. (a) Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in the Indenture, 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.
(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.
Section 1.3. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural includes the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing,
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lithography, and other means of reproducing words in a visible form; references
to agreements and other contractual instruments include all subsequent
amendments thereto or changes therein entered into in accordance with their
respective terms and not prohibited by this Agreement; references to Persons
include their permitted successors and assigns; the terms "include" or
"including" mean "include without limitation" or "including without limitation;"
the words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision, and Article, Section, Schedule and Exhibit references, unless
otherwise specified, refer to Articles and Sections of Schedules and Exhibits to
this Agreement.
Section 1.4. CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of any date of determination shall refer to the
close of business on such day, or as of the first day of an Interest Period
shall refer to the opening of business on such day. All references to the
last day of an Interest Period shall refer to the close of business on such
day.
Section 1.5. NO RECOURSE. Without limiting the obligations of
the Master Servicer or Seller hereunder, no recourse may be taken, directly
or indirectly, under this Agreement or any certificate or other writing
delivered in connection herewith or therewith, against any stockholder,
officer or director, as such, of the Master Servicer or Seller, or of any of
their respective Affiliates, predecessors or successors.
Section 1.6. ACTION BY OR CONSENT OF NOTEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to the Noteholders of
record as of the Record Date immediately preceding the date on which such
action is to be taken, or consent given, by Noteholders. Solely for the
purposes of any action to be taken, or consented to, by Noteholders, any Note
registered in the name of HAFC or any Affiliate thereof shall be deemed not
to be outstanding; PROVIDED, HOWEVER, that, solely for the purpose of
determining whether the 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.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1. CONVEYANCE OF RECEIVABLES. (a) Subject to the
conditions set forth in paragraph (b) below, in consideration of the Issuer's
delivery to or upon the order of the Seller on 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:
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(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 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 Agreement and the
Receivables Purchase Agreement Supplements, including the
delivery
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requirements, representations and warranties and the cure and
repurchase obligations of HAFC under each of the Master
Receivables Purchase Agreement 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
chooses in action in respect of any or all of the foregoing and
all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or
involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all
or part of or are included in the proceeds of any of the
foregoing.
(b) The Seller shall transfer to the Issuer the Receivables
and the other property and rights related thereto described in paragraph (a)
above only upon the satisfaction of each of the following conditions on or prior
to the 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 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
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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;
(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
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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.
Section 2.2. 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 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
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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
Section 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller
represents and warrants as to the related Receivables that the representations
and warranties set forth on the Schedule of Eligibility Criteria 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.
Section 3.2. 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 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 Agreement. 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,
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title and interest in its rights and benefits, but none of its obligations or
burdens, under the Master Receivables Purchase Agreement and the related
Receivables Purchase Agreement Supplement, including the Seller's rights under
the Master Receivables Purchase Agreement and the delivery requirements,
representations and warranties and the cure or repurchase obligations of HAFC
thereunder. The Seller hereby represents and warrants to the Trust that such
assignment is valid, enforceable and effective to permit the Trust to enforce
such obligations of HAFC under the Master Receivables Purchase Agreement.
Section 3.3. 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 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.
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ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1. DUTIES OF THE MASTER SERVICER. The Master Servicer
is hereby authorized to act as agent for the Trust (and also on behalf of the
Trustee and the Noteholders) and in such capacity shall manage, service,
administer and make collections on the Receivables, and perform the other
actions required by the Master Servicer under this Agreement. The Master
Servicer agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicles retail installment sales contracts and, to the extent more
exacting, the degree of skill and attention that the Master Servicer
exercises with respect to all comparable motor vehicle receivables that it
services for itself or others. In performing such duties, so long as
Household is the Master Servicer, it shall comply with the standard and
customary procedures for servicing all of its comparable motor vehicle
receivables. The Master Servicer's duties shall include, without limitation,
collection and posting of all payments, responding to inquiries of Obligors
on the Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting any required tax information to Obligors, monitoring the
collateral, accounting for collections and furnishing monthly and annual
statements to the 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, Deal 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 any Receivable or waive the
right to collect the unpaid balance of any Receivable from the Obligor. The
Master Servicer is hereby authorized to commence, in it's own name or in the
name of the Trust, a legal proceeding to enforce a Receivable pursuant to
Section 4.3 or to commence or participate in any other legal proceeding
(including, without limitation, a bankruptcy proceeding) relating to or
involving a Receivable, an Obligor or a Financed Vehicle. If the Master
Servicer commences or participates in such a legal proceeding in its own
name, the Trust shall
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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.
Section 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Master Servicer shall make reasonable efforts
to collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable 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, 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
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Final Scheduled Distribution Date of the Notes with respect to
the related Series; and
(iii) As of any Determination Date the number of
Receivables included in a Series Trust Estate the term of which
have been extended during the preceding 12-month period shall
not exceed [8]% of the number of Receivables in such Series
Trust Estate at the beginning of the preceding 12-month period.
(d) Except as otherwise provided below, the Master Servicer
shall deposit collections on or with respect to Receivables into the Master
Collection Account as promptly as possible after the date of processing of such
collections, but in no event later than the second Business Day following the
date of processing. Subject to the express terms of any Series Supplement, but
notwithstanding anything else in this Agreement to the contrary, for so long as
(i) Household remains the Master Servicer and maintains a commercial paper
rating of not less than A-1 by Standard & Poor's and P-1 by Moody's (or such
other rating below A-1 or P-1, as the case may be, which is satisfactory to the
Rating Agency) and for five Business Days following any reduction of any such
rating or (ii) a Master Servicer Credit Facility is maintained in effect by the
Master Servicer acceptable in form and substance to the Rating Agency (such
acceptability to be evidenced in writing by the Rating Agency to the effect that
failure to make the aforementioned deposit on the basis of the maintenance of
the Master Servicer Credit Facility will not adversely affect the then current
rating of the Notes), issued by a depository institution or insurance having a
rating on its (A) short-term obligations of at least P-1 by Moody's and A-1 by
Standard & Poor's and (B) long term obligations of at least A2 by Moody's and A
by Standard & Poor's or other ratings approved by the Rating Agency, the Master
Servicer shall not be required to make deposits of collections on or with
respect to Receivables as provided in the preceding sentence, but may make one
or more deposits of such collections with respect to a Collection Period into
the Master Collection Account in immediately available funds not later than 1:00
P.M., Central time, on the Business Day immediately preceding the related
Distribution Date. In the event that a Master Servicer Credit Facility is
maintained, the Master Servicer shall within two Business Days of the date of
processing of collections on or with respect to Receivables notify the Trustee
and the Master Servicer Credit Facility Issuer in writing of the amounts that
would otherwise be deposited in the Collection Account. The Master Servicer
shall establish and maintain for the Trust a Payment Record in which the
payments on or with respect to the Receivables shall be credited and the Master
Servicer shall notify the Trustee and the Master Servicer Credit Facility Issuer
in writing as promptly as practicable (but in any event prior to the
Determination Date for the following Distribution Date) of the amounts so
credited on or with respect to the Receivables that are to be included in
Collected Funds for the related Distribution Date and of the amounts so credited
which will constitute a part of Collected Funds for the second following
Distribution Date. The Payment Record shall be made available for inspection
during normal business hours of the Master Servicer upon request of the Trustee,
or any Master Servicer Credit Facility Issuer. The Master Servicer shall give
written notice to the
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Trustee if it is required to deposit funds in accordance with the first sentence
of this paragraph.
Section 4.3. REALIZATION UPON RECEIVABLES. (a) Consistent with
the standards, policies and procedures required by this Agreement, the Master
Servicer shall use its best efforts to repossess (or otherwise comparably
convert the ownership of) and liquidate any Financed Vehicle securing a
Receivable with respect to which the Master Servicer has determined that
payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
10% or more of a Scheduled Payment has become 120 days delinquent (other than
in the case of Financed Vehicles where neither the Financed Vehicle nor the
Obligor can be physically located by the Master Servicer (using procedures
consistent with the standards, policies and procedures of the Master Servicer
required by this Agreement) and other than in the case of an Obligor who is
subject to a bankruptcy proceeding); PROVIDED, HOWEVER, that the Master
Servicer may elect not to repossess a Financed Vehicle within such time
period if in its good faith judgment it determines that the proceeds
ultimately recoverable with respect to such Receivable would be increased by
forbearance. The Master Servicer is authorized to follow such customary
practices and procedures as it shall deem necessary or advisable, consistent
with the standard of care required by Section 4.1, which practices and
procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private sale,
the submission of claims under an Insurance Policy and other actions,
including, without limitation, entering into settlements with Obligors, by
the Master Servicer in order to realize upon such a Receivable. The
foregoing is subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Master Servicer shall not expend
funds in connection with any repair or towards the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. The Master
Servicer shall be entitled to recover all reasonable expenses incurred by it
in the course of repossessing and liquidating a Financed Vehicle but only
from the liquidation proceeds of the vehicle or under the related Dealer
Agreement. The Master Servicer shall recover such reasonable expenses based
on the information contained in the Master Servicer's Certificate delivered
on the related Determination Date. The Master Servicer shall pay on behalf
of the Trust any personal property taxes assessed on repossessed Financed
Vehicles. The Master Servicer shall be entitled to reimbursement of any such
tax from Net Liquidation Proceeds with respect to such Receivable.
(b) If the Master Servicer elects to commence a legal
proceeding to enforce a Dealer Agreement 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
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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.
Section 4.4. INSURANCE. (a) The Master Servicer shall require,
in accordance with its customary servicing policies and procedures, that each
Financed Vehicle be insured by the related Obligor under an insurance policy
covering physical loss and damage to the related Financed Vehicle and shall
monitor the status of such physical loss and damage insurance coverage
thereafter, in accordance with its customary servicing procedures. Each
Receivable requires the Obligor to obtain such physical loss and damage
insurance, naming HAFC 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 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.
Section 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
Consistent with the policies and procedures required by this Agreement, the
Master Servicer shall take such steps on behalf of the Trust as are necessary
to maintain perfection of the security interest
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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 of HAFC, a predecessor company to HAFC, or any Affiliate of any of the
foregoing as the secured party on the certificate of title is in its capacity as
agent of the Trust for such limited purpose.
Section 4.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF MASTER
SERVICER. By its execution and delivery of this Agreement, the Master
Servicer makes the following representations, warranties and covenants on
which the 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
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
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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) 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.
Section 4.7. 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 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;
Section 4.8. 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
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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.
Section 4.9. MASTER SERVICER'S CERTIFICATE. No later than 10:00
a.m. Central time on each Determination Date, the Master Servicer shall
deliver, 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.
Section 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF MASTER
SERVICER TERMINATION EVENT. (a) The Master Servicer shall deliver or cause
to be delivered to the 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, 2000, 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
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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.
Section 4.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The
Master Servicer shall cause a firm of nationally recognized independent
certified public accountants (the "Independent Accountants"), who may also
render other services to the Master Servicer or to the Seller, to deliver to
the 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, 2000, 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.
(b) On or before April 30 of each calendar year, beginning
with April 30, 2000, 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.
Section 4.12. 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
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and during normal business hours. Nothing in this Section shall derogate from
the obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the Master
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.
Section 4.13. FIDELITY BOND AND ERRORS AND OMISSIONS POLICY. The
Master Servicer or such Eligible 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.
Section 4.14. 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
Section 5.1. ESTABLISHMENT OF TRUST ACCOUNTS. (a) (i) Except
as otherwise provided with respect to a Series in the related Series
Supplement, the Master Servicer, 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 Master Servicer shall
establish and maintain the Series Trust Accounts required to be established and
maintained pursuant to the related Series Supplement.
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(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.
(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,
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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.
Section 5.2. CERTAIN REIMBURSEMENTS TO THE MASTER SERVICER. The
Master Servicer shall be entitled to withhold from amounts otherwise required
to be remitted to the Master Collection Account with respect to a Collection
Period an amount in respect of funds deposited with respect to prior
Collection Periods in the Master Collection Account but later determined by
the Master Servicer to have resulted from mistaken deposits or postings or
checks returned for insufficient funds; PROVIDED, THAT, such withholding may
be made only following certification by the Master Servicer of such amounts
and the provision of such information to the Trustee, as may be necessary in
the opinion of the Trustee to verify the accuracy of such certification.
Section 5.3. APPLICATION OF COLLECTIONS. All collections for the
Collection Period shall be applied by the Master Servicer as follows:
With respect to each Simple Interest Receivable (other than a
Repurchased Receivable), payments by or on behalf of the Obligor, (other than
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.
Section 5.4. 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
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Date following the date on which such obligations are due the aggregate
Repurchase Amount with respect to Repurchased Receivables.
Section 5.5. 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
ARTICLE VIII
THE SELLER
Section 8.1. 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,
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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 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,
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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.
(j) CHIEF EXECUTIVE OFFICE. The chief executive office of
the Seller is at 1111 Town Center Drive, Las Vegas, Nevada 89134.
Section 8.2. CORPORATE EXISTENCE. (a) During the term of this
Agreement, the Seller will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of
its incorporation and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
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;
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(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 or the Series
Related Documents with respect to each Series.
Section 8.3. LIABILITY OF SELLER; INDEMNITIES. The Seller shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken under this Agreement by the Seller and the
representations made by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the
Issuer, the 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
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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.
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.
Section 8.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER. Any Person (a) into which the Seller may be merged
or consolidated, (b) which may result from any merger or consolidation to
which the Seller shall be a party or (c) which may succeed to the properties
and assets of the Seller substantially as a whole, which Person in any of the
foregoing cases (x) has 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.
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Section 8.5. LIMITATION ON LIABILITY OF SELLER AND OTHERS. (a)
The Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the written advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting
any matters arising under any Basic Document. The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action that shall
not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability. Except as provided in
Section 8.3 hereof, neither the Seller nor any of the directors, officers,
employees or agents of the Seller acting in such capacities shall be under
any liability to the Trust, the Securityholders, any 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.
Section 8.6. SELLER MAY OWN CERTIFICATES OR NOTES. The Seller
and any Affiliate thereof may in its individual or any other capacity become
the owner or pledgee of Certificates or Notes with the same rights as it
would have if it were not the Seller or an Affiliate thereof, except as
expressly provided herein or in any Basic Document. Notes or Certificates so
owned by the Seller or such Affiliate shall have an equal and proportionate
benefit under the provisions of the Basic Documents, without preference,
priority, or distinction as among all of the Notes or Certificates; PROVIDED,
HOWEVER, 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
Section 9.1. 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
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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;
(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
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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 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
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governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of
this Agreement which has not already been obtained.
(ix) CHIEF EXECUTIVE OFFICE. The chief executive office
of the Master Servicer is located at 2700 Sanders Road,
Prospect Heights, Illinois 60070.
Section 9.2. LIABILITY OF MASTER SERVICER; INDEMNITIES. (a) The
Master Servicer (in its capacity as such) shall be liable hereunder only to
the extent of the obligations in this Agreement specifically undertaken by
the Master Servicer and the representations made by the Master Servicer.
(b) The Master Servicer shall defend, indemnify and hold
harmless the Trust, the 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 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
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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 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.
Section 9.3. 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
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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.
Section 9.4. 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 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 The
Chase Manhattan Bank acting in the potential dual capacity of successor Master
Servicer and in the capacity as Trustee. The Chase Manhattan Bank 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 The Chase Manhattan Bank 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 The Chase Manhattan Bank.
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Section 9.5. 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.
Section 9.6. MASTER SERVICER NOT TO RESIGN. Subject to the
provisions of Section 9.3, the Master Servicer shall not resign from the
obligations and duties hereby imposed on it except (i) upon determination
that the performance of its obligations or duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it or its subsidiaries
or Affiliates, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer or its
subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Master Servicer has
proposed a successor servicer to the Trustee in writing and such proposed
successor servicer is reasonably acceptable to the Trustee; (b) the Rating
Agency shall have delivered a letter to the Trustee stating that the
appointment of such proposed successor servicer as Master Servicer hereunder
will satisfy the Rating Agency Condition; and (c) such proposed successor
servicer has agreed in writing to assume the obligations of Master Servicer
hereunder and under each relevant Basic Document and Series Related Document
and (d) the Master Servicer has delivered to the Trustee an Opinion of
Counsel to the effect that all conditions precedent to the resignation of the
Master Servicer and the appointment of 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.
Section 9.7. 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.
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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. 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.
Section 9.8. 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 Owner Trustee or the Trustee
shall have no duty or obligation to monitor or supervise the performance of
any Sub-Servicer.
ARTICLE X
DEFAULT
Section 10.1. MASTER SERVICER TERMINATION EVENT. For purposes of
this Agreement, each of the following shall constitute a "Master Servicer
Termination Event", 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,
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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 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.
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Section 10.2. 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
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.
Section 10.3. APPOINTMENT OF SUCCESSOR. (a) On and after the
time the Master Servicer receives a notice of termination pursuant to Section
10.2 or upon the resignation of the Master Servicer pursuant to Section 9.6,
the Master Servicer shall continue to
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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 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.
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Section 10.4. 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.
Section 10.5. 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.
Section 10.6. 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
Section 11.1. 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
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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.
(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
Section 12.1. ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Master
Servicer shall perform all its duties and the duties of the Issuer under the
Indenture. In addition, the Master Servicer shall consult with the Owner
Trustee as the Master Servicer deems appropriate regarding the duties of the
Issuer under the Indenture. The Master Servicer shall monitor the performance
of the Issuer and shall advise the Owner Trustee when action is necessary to
comply with the Issuer's duties under the Indenture. The Master Servicer shall
prepare for execution by the Issuer or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare, file
or deliver pursuant to the Indenture. In furtherance of the foregoing, the
Master Servicer shall take all necessary action that is the duty of the Issuer
to take pursuant to the Indenture, including, without limitation, pursuant to
Sections 2.7, 3.4, 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
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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 (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.
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(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 the Issuer and shall be, in the Master
Servicer's opinion, no less favorable to the Issuer in any
material respect.
(c) TAX MATTERS. The Master Servicer shall prepare and file,
on behalf of the Seller, all tax returns, tax elections, financial statements
and such annual or other reports of the Issuer as are necessary for preparation
of tax reports as provided in Article V of the Trust Agreement, including
without limitation forms 1099 and 1066. All tax returns will be signed by the
Seller.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in
the reasonable judgment of the Master Servicer are non-ministerial, the Master
Servicer shall not take any action pursuant to this Article XII unless within a
reasonable time before the taking of such action, the Master Servicer shall have
notified the Owner Trustee and the Trustee of the proposed action and the Owner
Trustee and the Trustee shall not have withheld consent or provided an
alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:
(A) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the
Receivables);
(B) the appointment of successor Note Registrars, successor 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 1999-1 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.
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(f) The Trustee shall not be responsible for any obligations
or duties of the Master Servicer under Section 12.1.
Section 12.2. RECORDS. The Master Servicer shall maintain
appropriate books of account and records relating to services performed under
this Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Trustee at any time during normal business
hours.
Section 12.3. 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
Section 13.1. 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
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<PAGE>
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.
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 or rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and
that all conditions precedent to the execution and delivery of such amendment
have been satisfied.
Section 13.2. 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
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<PAGE>
its principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment. The Master Servicer shall
at all times maintain each office from which it shall service Receivables, and
its principal executive office, within the United States of America.
(d) The Master Servicer shall maintain accounts and records
as to each Receivable accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Master Collection
Account in respect of such Receivable.
(e) The Master Servicer shall maintain or cause to be
maintained, a computer system so that, from and after the time of sale under
this Agreement and each Transfer Agreement of the Receivables to the Issuer,
such master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Trust in such Receivable
and that such Receivable is owned by the Trust and to which Series Trust Estate
such Receivable has been pledged pursuant to the Indenture. Indication of the
Trust's interest in a Receivable shall be deleted from or modified on such
computer systems when, and only when, the related Receivable shall have been
paid in full or repurchased by HAFC or the Seller.
(f) If at any time the Seller or HAFC shall propose to sell,
grant a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the Master
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust unless such Receivable has been paid in full or repurchased by HAFC or the
Seller.
(g) With respect to any Series Trust Estate, upon request,
the Master Servicer shall furnish or cause to be furnished to the related Series
Support Provider (only in the event that there is a Series Support Provider with
respect to such Series), the Owner Trustee or to the Trustee, within five
Business Days, a list of all Receivables (by contract number) then held as part
of the related Series Trust Estate, together with a reconciliation of such list
to the related Schedule of Receivables and to each of the Master Servicer's
Certificates furnished before such request indicating removal of Receivables
from the related Series Trust Estate. The Trustee shall hold any such list and
Schedule of Receivables for examination by interested parties during normal
business hours at the Corporate Trust Office upon reasonable notice by such
Persons of their desire to conduct an examination.
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(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 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 2000, 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.
Section 13.3. 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 # (302) 651-8882, (d) in the case of
the Trustee at the Corporate Trust Office, Telecopier # (212) 946-8191, (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.
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Section 13.4. 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
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.
Section 13.5. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of
this Agreement are solely for the benefit of the parties hereto and for the
benefit of the Certificateholders (including the Seller), the 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.
Section 13.6. SEVERABILITY. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Section 13.7. SEPARATE COUNTERPARTS. This Agreement and each
Transfer Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 13.8. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 13.9. GOVERNING LAW. THIS AGREEMENT AND EACH TRANSFER
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
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Section 13.10. 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.
Section 13.11. 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.
Section 13.12. LIMITATION OF LIABILITY OF OWNER TRUSTEE.
Notwithstanding anything contained herein to the contrary, this Agreement and
each Series Supplement has been countersigned by Wilmington Trust Company not
in its individual capacity but solely in its capacity as Owner Trustee of the
Issuer and in no event shall Wilmington Trust Company in its individual
capacity or, except as expressly provided in the Trust Agreement, as Owner
Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all
purposes of this Agreement and each Series Supplement, in the performance of
its duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to,
and entitled to the benefits of, the terms and provisions of Articles VI, VII
and VIII of the Trust Agreement.
Section 13.13. 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
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<PAGE>
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.
Section 13.14. 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, 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.
65
<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 III
by Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee on behalf of
the Trust,
by
---------------------------------------------
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
by
---------------------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
by
---------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
not in its individual capacity but solely as
Trustee,
by
---------------------------------------------
Name: Thomas J. Provenzano
Title: Vice President
[Signature Page for Master Sale and Servicing Agreement]
66
<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 __________, 1999 (the "Sale and Servicing
Agreement"), among HOUSEHOLD AUTOMOTIVE TRUST III, 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 THE CHASE MANHATTAN BANK, 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, _______________, 1999.
"Transfer Date" shall mean. with respect to the Receivables conveyed
hereby, _____________, 1999.
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.
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:
B-2
<PAGE>
ORGANIZATION AND GOOD STANDING. The Seller has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Nevada, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the
Receivables and the Other Conveyed Property transferred to the Trust.
DUE QUALIFICATION. The Seller is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect Seller's ability to transfer the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, or the validity or enforceability of the Receivables and the
Other Conveyed Property or to perform Seller's obligations hereunder and
under the Seller's Basic Documents.
POWER AND AUTHORITY. The Seller has the power and authority to
execute and deliver this Agreement and its Basic Documents and to carry out
its terms and their terms, respectively; the Seller has full power and
authority to sell and assign the Receivables and the Other Conveyed
Property to be sold and assigned to and deposited with the Trust by it and
has duly authorized such sale and assignment to the Trust by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and the Seller's Basic Documents have been duly authorized by the
Seller by all necessary corporate action.
VALID SALE, BINDING OBLIGATIONS. This Agreement effects a valid sale,
transfer and assignment of the Receivables and the Other Conveyed Property,
enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement and the Seller's Basic Documents, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of the Seller enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
NO VIOLATION. The consummation of the transactions contemplated by
this Agreement and the Basic Documents and the fulfillment of the terms of
this Agreement and the Basic Documents shall not conflict with, result in
any breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the certificate of
incorporation or by-laws of the Seller, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party
or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or regulation
applicable to the Seller of
B-3
<PAGE>
any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Seller
or any of its properties.
NO PROCEEDINGS. There are no proceedings or investigations pending
or, to the Seller's knowledge, threatened against the Seller, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties (A) asserting the invalidity of this Agreement or any of the
Basic Documents, (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by this Agreement
or any of the Basic Documents, (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or
any of the Basic Documents, or (D) seeking to adversely affect the federal
income tax or other federal, state or local tax attributes of the
Securities.
APPROVALS. All approvals, authorizations, consents, order or other
actions of any person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with the
execution and delivery by the Seller of this Agreement and the consummation
of the transactions contemplated hereby have been or will be taken or
obtained on or prior to the Transfer Date.
NO CONSENTS. The Seller is not required to obtain the consent of any
other party or any consent, license, approval or authorization, or
registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement which has not already been obtained.
CHIEF EXECUTIVE OFFICE. The chief executive office of the Seller is
at 1111 Town Center Drive, Las Vegas, Nevada 89134.
PRINCIPAL BALANCE. The aggregate Principal Balance of the Receivables
listed on the supplement to Schedule A annexed hereto and conveyed to the
Issuer pursuant to this Agreement as of the Cutoff Date is $____________.
5. CONDITIONS PRECEDENT. The obligation of the Issuer to acquire
the Receivables hereunder is subject to the satisfaction, on or prior to the
Transfer Date, of the following conditions precedent:
REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Seller in Section 4 of this Agreement and in Section
3.1 of the Sale and Servicing Agreement shall be true and correct as of the
date of this Agreement and as of the Transfer Date.
B-4
<PAGE>
SALE AND SERVICING AGREEMENT CONDITIONS. Each of the conditions set
forth in Section 2.1(b) to the Sale and Servicing Agreement shall have been
satisfied.
ADDITIONAL INFORMATION. The Seller shall have delivered to the Issuer
such information as was reasonably requested by the Issuer to satisfy
itself as to (i) the accuracy of the representations and warranties set
forth in Section 4 of this Agreement and in Section 6.1 of the Sale and
Servicing Agreement and (ii) the satisfaction of the conditions set forth
in this Section 5.
6. RATIFICATION OF AGREEMENT. As supplemented by this Agreement,
the Sale and Servicing Agreement is in all respects ratified and confirmed and
the Sale and Servicing Agreement as so supplemented by this Agreement shall be
read, taken and construed as one and the same instrument.
7. COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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 III
by Wilmington Trust Company, 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:
THE CHASE MANHATTAN BANK,
not in its individual
capacity but solely as Trustee
by
-------------------------
Name:
Title:
<PAGE>
EXHIBIT C
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: The Chase Manhattan Bank
Re: Sale and Servicing Agreement (the "Servicing Agreement, dated as
of __________, 1999 between Household Auto Receivables Corporation
(the "SELLER"), Household Automotive Trust III (the "TRUST"),
Household Finance Corporation individually and in its capacity as
Servicer (the "SERVICER"), and The Chase Manhattan Bank, 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
The Chase Manhattan Bank
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
C-2
<PAGE>
EXHIBIT D
TRUSTEE'S ACKNOWLEDGEMENT
The Chase Manhattan Bank (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 III, 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, The Chase Manhattan Bank has caused this
acknowledgement to be executed by its duly authorized officer as of this
___________________.
THE CHASE MANHATTAN BANK, as Trustee
by
---------------------------------------------
Name:
Title:
<PAGE>
DRAFT OF MAY 28, 1999
MASTER RECEIVABLES PURCHASE AGREEMENT
BETWEEN
HOUSEHOLD AUTOMOTIVE FINANCE CORPORATION
SELLER
AND
HOUSEHOLD AUTO RECEIVABLES CORPORATION
PURCHASER
DATED AS OF
JUNE 1, 1999
<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 . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY . .3
SECTION 2.1 Purchase. . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . .5
SECTION 3.1 Representations and Warranties of Seller. . . . . . .5
SECTION 3.2 Representations and Warranties of HARC. . . . . . . .6
ARTICLE IV COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 4.1 Seller's Covenants. . . . . . . . . . . . . . . . . .8
ARTICLE V REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 5.1 Repurchase of Receivables Upon Breach of Warranty . .9
SECTION 5.2 Reassignment of Repurchased Receivables . . . . . . .9
SECTION 5.3 Waivers . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.1 Liability of Seller . . . . . . . . . . . . . . . . 10
SECTION 6.2 Amendment . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . . 10
SECTION 6.4 Notices . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . 11
SECTION 6.9 No Waiver; Cumulative Remedies. . . . . . . . . . . 12
SECTION 6.10 Counterparts. . . . . . . . . . . . . . . . . . . . 12
SECTION 6.11 Binding Effect; Third-Party Beneficiaries . . . . . 12
SECTION 6.12 Merger and Integration. . . . . . . . . . . . . . . 12
SECTION 6.13 Heading . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.14 Schedules and Exhibits. . . . . . . . . . . . . . . 12
SECTION 6.15 Survival of Representations and Warranties. . . . . 12
SECTION 6.16 Nonpetition Covenant. . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE>
EXHIBITS
EXHIBIT A Form of Purchase Agreement Supplement
SCHEDULE A Schedule of Receivables
ii
<PAGE>
MASTER RECEIVABLES PURCHASE AGREEMENT
THIS MASTER RECEIVABLES PURCHASE AGREEMENT, dated as of June 1, 1999,
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
Section 1.1 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 June 1, 1999, by and among
Household Automotive Trust III, as Issuer, HARC, as Seller, Household Finance
Corporation, as Master Servicer, and The Chase Manhattan Bank, as Trustee.
Section 1.2 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 June __, 1999.
"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 Receivables Purchase Agreement Supplement.
"Other Conveyed Property" means all money, instruments, rights and
other property that are subject or intended to be subject to the lien and
security interest of the
<PAGE>
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 each Receivables Purchase Agreement Supplement as
Schedule A.
"Receivables Purchase Agreement Supplement" means the agreement
between HARC and the Seller, substantially in the form of Exhibit A hereto.
"Repurchase Event" means a determination pursuant to Section 3.2 of
the Master Sale and Servicing Agreement that HARC is required to repurchase a
Receivable.
"Schedule of Receivables" means the schedule of Receivables sold and
transferred pursuant to this Agreement and the related Receivables Purchase
Agreement Supplement which is attached as Schedule A to the related Receivables
Purchase Agreement Supplement.
Section 1.3 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.
Section 1.4 CERTAIN REFERENCES. All references to the Principal
Balance of a Receivable as of any date of determination shall refer to the
close of business on such day, or as of the first day of 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.
Section 1.5 NO RECOURSE. Without limiting the obligations of
Seller hereunder, no recourse may be taken, directly or indirectly, under
this Agreement or any certificate or
2
<PAGE>
other writing delivered in connection herewith or therewith, against any
stockholder, officer or director, as such, of Seller, or of any predecessor or
successor of Seller.
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
Section 2.1 PURCHASE.
(a) By execution of this Agreement and subject to the terms and
conditions of this Agreement and simultaneously with the execution and delivery
of the related Receivables Purchase Agreement Supplement, the Seller shall sell,
transfer, assign, and otherwise convey to HARC (collectively, the "Conveyance")
without recourse (but without limitation of its obligations in this Agreement),
and HARC shall purchase, all right, title and interest of Seller in and to:
(i) each and every Receivable listed on Schedule A to the related
Receivables Purchase Agreement Supplement and all monies paid or payable
thereon or in respect thereof on or after the related Cutoff Date
(including amounts due on or before the related Cutoff Date but received by
the Seller on or after such date);
(ii) the security interests in the related Financed Vehicles
granted by Obligors pursuant to such Receivables and any other interest of
the Seller in such Financed Vehicles;
(iii) all rights of the Seller against Dealers pursuant to Dealer
Agreements 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 not be part of Seller's estate in
the event of the insolvency of Seller or a conservatorship,
4
<PAGE>
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
Section 3.1 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 unenforceable by the Seller, HARC or
the Trust and (ii) have a material adverse effect on the Noteholders.
5
<PAGE>
(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.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF HARC. HARC makes
the following representations and warranties, on which Seller relies in
selling, assigning, transferring and conveying the Receivables and the Other
Conveyed Property to HARC hereunder. Such representations are made as of the
execution and delivery of this Agreement and as to Receivables and Other
Conveyed Property conveyed thereunder, as of the execution
6
<PAGE>
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, 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
7
<PAGE>
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
Section 4.1 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 to the extent such amounts are payable to HARC
as soon as practicable after receipt thereof.
8
<PAGE>
(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
Section 5.1 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 Recivable under the Master Sale and Servicing Agreement.
Section 5.2 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
9
<PAGE>
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.
Section 5.3 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
Section 6.1 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.
Section 6.2 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.
Section 6.3 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 REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
Section 6.4 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
10
<PAGE>
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.
Section 6.5 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.
Section 6.6 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.
Section 6.7 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.
Section 6.8 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.
11
<PAGE>
Section 6.9 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.
Section 6.10 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.
Section 6.11 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.
Section 6.12 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.
Section 6.13 HEADING. The headings are for purposes of
reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 6.14 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.
Section 6.15 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.
Section 6.16 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 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]
12
<PAGE>
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]
13
<PAGE>
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 ______, 1999, 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:
A-1
<PAGE>
(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 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.
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
<PAGE>
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>
June 3, 1999
Household Auto Receivables Corporation Exhibits 5 and 23.1
1111 Town Center Drive
Las Vegas, Nevada 89134
Gentlemen:
I am a Vice President-Corporate Law and Assistant Secretary of Household
International, Inc., a Delaware corporation ("Household"), the ultimate
parent corporation of Household Finance Corporation (the "Master Servicer"),
Household Auto Receivables Corporation (the "Seller"), Household Automotive
Finance Corporation ("HAFC"). Pursuant to your request I am providing this
opinion to you in connection with the issuance of the Household Automotive
Trust III, Series 1999-1 Notes (as defined herein), issued pursuant to a
Trust Agreement (the "Trust Agreement"), dated as of June 1, 1999, between
the Seller and Wilmington Trust Company, as Owner Trustee (the "Owner
Trustee"). The Trust Agreement creates Household Automotive Trust III (the
"Issuer"), a statutory business trust established under the laws of the State
of Delaware.
Pursuant to a supplement to be dated as of June 1, 1999 among the Master
Servicer, the Issuer, the Seller, the Trustee (as defined below), and the
Owner Trustee (the "Series 1999-1 Supplement"), the Seller proposes to direct
the Owner Trustee to issue the Series 1999-1 Notes (the "Notes"). The Series
1999-1 Supplement supplements the terms of the Trust Agreement and an
Indenture (the "Indenture"), dated as of June 1, 1999 among the Issuer, the
Master Servicer and The Chase Manhattan Bank, as Trustee. The terms of the
Indenture are governed by the laws of the State of New York.
In connection with the issuance of the Notes, the HAFC has entered into a
Master Receivables Purchase Agreement with the Seller, dated as of June 1,
1999 (the "Purchase Agreement"), which as supplemented by Receivables
Purchase Agreement Supplements thereto, provides for the sale and transfer
from time to time of certain retail installment sales contracts secured by
new and used automobile and light trucks (the "Receivables") from the HAFC to
the Seller. In connection with each such transfer, the Seller
<PAGE>
Household Auto Receivables Corporation
June 3, 1999
Page 2
intends to transfer the Receivables to the Issuer pursuant to the terms of
the Master Sale and Servicing Agreement (the "Sale and Servicing Agreement"),
dated as of June 1, 1999 among the Issuer, the Seller, the Master Servicer,
and The Chase Manhattan Bank, as supplemented from time to time by certain
Transfer Agreements.
I refer to the Registration Statement, as amended, on Form S-3 (File No.
333-76439) (the "Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of
1933, as amended (the "Act"), pertaining to the Notes. Terms used herein
that are not defined herein shall have the meanings ascribed thereto in the
Registration Statement.
The Registration Statement relates to a financing program which involves
the sale by HAFC to the Seller and the assignment by the Seller to the Issuer
of the Receivables acquired by HAFC from automotive dealers. The Receivables
and certain other assets of the Issuer will be pledged by the Issuer to the
Trustee pursuant to the Indenture. The Notes will be debt of the Issuer and
will be offered pursuant to the Registration Statement. The Notes shall be
issued in seven classes under the Indenture as set forth in the Registration
Statement.
I am, or attorneys under my supervision are, familiar with the
proceedings to date with respect to the proposed offering and sale to the
public of the Notes and have examined such records, documents and matters of
law and satisfied myself as to such matters of fact as I have considered
relevant for the purposes of this opinion.
Based on the foregoing, it is my opinion that the Notes will be fully
paid and non-assessable, legally and validly issued and will be legal and
binding obligations of the Issuer, entitled to the benefits of the Indenture
and the Series 1999-1 Supplement when the following has occurred:
1) the Registration Statement shall have been declared effective by
the Commission under the Act,
2) the Indenture, the Trust Agreement, the Sale and Servicing
Agreement and the Series 1999-1 Supplement each shall be duly executed and
delivered by the parties thereto,
3) the Notes shall have been duly authenticated by the Indenture
Trustee in accordance with the Indenture, and
<PAGE>
Household Auto Receivables Corporation
June 3, 1999
Page 3
delivered by the Seller in accordance with the Underwriting Agreement
among HFC, the Seller, HAFC and the Underwriters named therein (the
"Underwriting Agreement"), and
4) the Seller shall have received the agreed purchase price for the
Notes in accordance with the Underwriting Agreement.
In giving the opinions expressed herein, I express no opinion other than
as to the laws of the State of Illinois, the general corporation laws of the
States of Delaware and New York and the Federal laws of the United States.
As to matters of New York law, I have conferred with attorneys employed by
Household who are licensed to practice law in the State of New York.
I do not find it necessary for the purposes of this opinion, and
accordingly do not purport to cover herein, the application of the "Blue Sky"
or securities laws of the various states to sale of the Notes.
I hereby consent to the use of my name and my opinion in the Prospectus
filed pursuant to Rule 430A or 424 of Regulation C of the Act, in connection
with the Registration Statement, including any references to my opinions set
forth in the documents incorporated by reference therein, and to the filing
of this consent as an exhibit to the Registration Statement. In giving such
consent I do not admit that I am in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
John W. Blenke
Vice President-Corporate Law
and Assistant Secretary
<PAGE>
[Letterhead of Dewey Ballantine LLP]
June 3, 1999
Household Finance Corporation
Household Auto Receivables Corporation
2700 Sanders Road
Prospect Heights, Illinois 60070
Re: Automobile Receivables Backed Notes, Series 1999-1
--------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Household Finance Corporation (the
"Servicer") and Household Auto Receivables Corporation (the "Registrant") in
connection with the preparation and filing of a registration statement on
Form S-3 (Registration No. 333-76439) (the "Registration Statement") filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Act"), in respect of Automobile Receivables Backed
Notes (the "Notes") which Household Automobile Trust III (the "Issuer") plans
to offer.
In addition, it is our opinion that:
- the Issuer will not be treated as an association (or publicly traded
partnership) taxable as a corporation for federal income tax purposes;
- the Notes will be characterized as indebtedness for federal income
tax purposes; and
- subject to the assumptions and limitations described therein, the
discussion under the heading "Material Federal Income Tax Consequences"
in the prospectus contained in the Registration Statement sets forth
all the material federal income tax consequences to the original
purchasers of the Notes of any series and is accurate in all material
respects.
We hereby consent to the filing of this letter as an Exhibit to Form S-3
and to the reference to Dewey B allantine LLP in the Registration Statement
under the heading "Material Federal Income Tax Consequences."
Very truly yours,
DEWEY BALLANTINE LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
report dated June 3, 1999 on Household Automotive Trust III in this
registration statement on Form S-3.
Arthur Andersen LLP
June 3, 1999
Chicago, Illinois
<PAGE>
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
HOUSEHOLD AUTOMOTIVE TRUST III
(Exact name of obligor as specified in its charter)
DELAWARE NOT APPLICABLE
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
111 TOWN CENTER DRIVE
LAS VEGAS, NE 89134
(Address of principal executive offices) (Zip Code)
-------------------------------------------
Series 1999-1
(Title of the indenture securities)
-----------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank.)
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank.)
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
(On July 14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving corporation,
was renamed The Chase Manhattan Bank.)
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 2nd day of June, 1999.
THE CHASE MANHATTAN BANK
By /s/ Kimberly K. Costa
-----------------------------------
Kimberly K. Costa
Vice President
-3-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the
Certificates of Amendment dated February 17, 1969, August 31,
1977, December 31, 1980, September 9, 1982, February 28, 1985,
December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection
with Registration Statement No. 33-50010, which is incorporated
by reference. On July 14, 1996, in connection with the merger of
Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was
renamed The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4)
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On
July 14, 1996, in connection with the merger of Chemical Bank
and The Chase Manhattan Bank (National Association), Chemical
Bank, the surviving corporation, was renamed The Chase Manhattan
Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising
or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 2nd day of June, 1999.
THE CHASE MANHATTAN BANK
By _____________________
Kimberly K. Costa
Vice President
-4-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1998,
in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of
the Federal Reserve Act.
DOLLAR AMOUNTS
<TABLE>
<CAPTION>
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .................................... $ 13,915
Interest-bearing balances ............................ 7,805
Securities:
Held to maturity securities ............................... 1,429
Available for sale securities ............................. 56,327
Federal funds sold and securities purchased under
agreements to resell ................................. 21,733
Loans and lease financing receivables:
Loans and leases, net of unearned income ............. $131,095
Less: Allowance for loan and lease losses ............ 2,711
Less: Allocated transfer risk reserve ................ 0
--------
Loans and leases, net of unearned income,
allowance, and reserve ............................... 128,384
Trading Assets ............................................ 48,949
Premises and fixed assets (including capitalized
leases) .............................................. 3,095
Other real estate owned ................................... 239
Investments in unconsolidated subsidiaries and
associated companies ................................. 199
Customers' liability to this bank on acceptances
outstanding .......................................... 1,209
Intangible assets ......................................... 2,081
Other assets .............................................. 11,352
--------
TOTAL ASSETS .............................................. $296,717
--------
--------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits
In domestic offices ........................................................ $105,879
Noninterest-bearing ........................................................ $ 39,175
Interest-bearing ........................................................... 66,704
---------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's ..................................................... 79,294
Noninterest-bearing ............................................................. $ 4,082
Interest-bearing ........................................................... 75,212
Federal funds purchased and securities sold under agreements to repurchase ...... 32,546
Demand notes issued to the U.S. Treasury ........................................ 629
Trading liabilities ............................................................. 36,807
Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
With a remaining maturity of one year or less .............................. 4,478
With a remaining maturity of more than one year through three years ........ 213
With a remaining maturity of more than three years ....................... 115
Bank's liability on acceptances executed and outstanding ........................ 1,209
Subordinated notes and debentures ............................................... 5,408
Other liabilities ............................................................... 10,855
TOTAL LIABILITIES ............................................................... 277,433
--------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................... 0
Common stock .................................................................... 1,211
Surplus (exclude all surplus related to preferred stock) ....................... 11,016
Undivided profits and capital reserves .......................................... 6,762
Net unrealized holding gains (losses) on available-for-sale securities........... 279
Cumulative foreign currency translation adjustments ............................. 16
TOTAL EQUITY CAPITAL ............................................................ 19,284
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ............................................ $296,717
--------
--------
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-6-
<PAGE>
Exhibit #4
BY-LAWS
THE CHASE MANHATTAN BANK
As Amended by the Board of Directors effective June 1, 1999
Office of the Secretary
270 Park Avenue, 35th floor
New York, NY 10017
<PAGE>
CONTENTS
SUBJECT
<TABLE>
<CAPTION>
<S> <C>
ARTICLE
I MEETINGS OF STOCKHOLDERS
Section 1.01 Annual Meeting
Section 1.02 Special Meetings
Section 1.03 Quorum
II BOARD OF DIRECTORS
Section 2.01 Number
Section 2.02 Vacancies
Section 2.03 Annual Meeting
Section 2.04 Regular Meetings
Section 2.05 Special Meetings
Section 2.06 Quorum
Section 2.07 Rules and Regulations
Section 2.08 Compensation
III COMMITTEES
Section 3.01 Executive Committee
Section 3.02 Examining Committee
Section 3.03 Other Committees
IV OFFICERS AND AGENTS
Section 4.01 Officers
Section 4.02 Clerks and Agents
Section 4.03 Term of Office
Section 4.04 Chairman of the Board
Section 4.05 Chief Executive Officer
Section 4.06 President
Section 4.07 Vice Chairman of the Board
Section 4.08 Chief Financial Officer
Section 4.09 Controller
Section 4.10 Secretary
Section 4.11 General Auditor
Section 4.12 Powers and Duties of Other Officers
Section 4.13 Fidelity Bonds
V CORPORATE SEAL
VI FISCAL YEAR
VII INDEMNIFICATION
Section 7.01 Right to Indemnification
Section 7.02 Contracts and Funding
Section 7.03 Employee Benefit Plans
Section 7.04 Indemnification Not Exclusive Right
Section 7.05 Advancement of Expenses; Procedures
VIII BY-LAWS
Section 8.01 Inspection
Section 8.02 Amendments
Section 8.03 Construction
</TABLE>
<PAGE>
BY-LAWS
OF
THE CHASE MANHATTAN BANK
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1.01. Annual Meeting. The annual meeting of stockholders of
The Chase Manhattan Bank (herein called the Bank), shall be held in the
Borough of Manhattan, City of New York, State of New York, within the first
four months of each calendar year, on such date and at such time and place as
the Board of Directors (herein called the Board), may determine, for the
election of directors and the transaction of such other business as may
properly come before the meeting. Notice of such meeting, stating the purpose
or purposes thereof and the time when and the place where it is to be held
and signed by the Chairman of the Board (herein called the Chairman), the
Chief Executive Officer, the President, a Vice Chairman of the Board or the
Secretary or an Assistant Corporate Secretary of the Bank, shall be served by
personal delivery upon each stockholder of record entitled to vote at such
meeting not less than 10 nor more than 50 days before said meeting.
SECTION 1.02. Special Meetings. A special meeting of the
stockholders may be called at any time by the Board, the Chairman, the Chief
Executive Officer, the President, or a Vice Chairman of the Board, or upon
the request in writing of the holders of record of not less than 40% of the
outstanding capital stock. Notice of any special meeting, stating the time,
place and purpose or purposes thereof, shall be given by personal delivery to
the stockholders in the manner provided in Section 1.01 for the giving of
notice of annual meetings of stockholders. In the case of any meeting of
stockholders, annual or special, called for a purpose requiring other or
further notice, such notice shall be given as required by law.
SECTION 1.03. Quorum. A majority of the outstanding common stock,
represented in person or by proxy, shall constitute a quorum at any meeting
of stockholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held as
adjourned, without further notice.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Number. The business and affairs of the Bank shall be
managed by or under the direction of a Board of Directors, of such number as
may be fixed from time to time by resolution adopted by the Board, but in no
event less than 7 or more than 25, selected, organized and continued in
accordance with the provisions of the New York Banking Law. Each director
hereafter elected shall hold office until the next annual meeting of the
stockholders and until his successor is elected and has qualified, or until
his death or until he shall resign or shall have been removed.
SECTION 2.02. Vacancies. In case of any increase in the number of
directors, the additional director or directors, and in case of any vacancy
in the board due to death, resignation, removal, disqualification or any
other cause, the successors to fill the vacancies, not exceeding one-third of
the entire Board, shall be elected by a majority of the directors then in
office.
SECTION 2.03. Annual Meeting. An annual meeting of the directors
shall be held each year, without notice, immediately following the annual
meeting of stockholders. The time and place of such meeting shall be
designated by the Board. At such meeting, the directors shall, after
qualifying, elect from their own number a Chairman of the Board, a Chief
Executive Officer, a President and one or more Vice Chairmen of the Board,
and shall elect or appoint such other officers authorized by these By-laws as
they may deem desirable, and appoint the Committees specified in Article III
hereof. The directors may also elect to serve at the pleasure of the Board,
one or more Honorary Directors, not members of the Board. Honorary Directors
of the Board shall be paid such compensation or such fees for attendance at
meetings of the Board, and meetings of other committees of the Board, as the
Board shall determine from time to time.
<PAGE>
SECTION 2.04. Regular Meetings. The Board shall hold a regular
meeting without notice at the principal office of the Bank on the third
Tuesday in each month, with such exceptions as shall be determined by the
Board, at such time as shall be determined by the Board, unless another time
or place, within or without the State, shall be fixed by resolution of the
Board. Should the day appointed for a regular meeting fall on a legal
holiday, the meeting shall be held at the same time on the preceding day or
on such other day as the Board may order.
SECTION 2.05. Special Meetings. Special meetings of the Board shall
be held whenever called by the Chairman, the Chief Executive Officer, the
President, a Vice Chairman of the Board, the Secretary or a majority of the
directors at the time in office. A notice shall be given as hereinafter in
this Section provided of each such special meeting, in which shall be stated
the time and place of such meeting, but, except as otherwise expressly
provided by law or by these By-laws, the purposes thereof need not be stated
in such notice. Except as otherwise provided by law, notice of each such
meeting shall be mailed to each director, addressed to him at his residence
or usual place of business, at least two (2) days before the day on which
such meeting is to be held, or shall be sent addressed to him at such place
by telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than noon of the calendar day
before the day on which such meeting is to be held. At any regular or special
meeting of the Board, or any committee thereof, one or more Board or
committee members may participate in such meeting by means of a conference
telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. This type
of participation shall constitute presence in person at the meeting. Notice
of any meeting of the Board shall not, however, be required to be given to
any director who submits a signed waiver of notice whether before or after
the meeting, or if he shall be present at such meeting; and any meeting of
the Board shall be a legal meeting without any notice thereof having been
given if all the directors of the Bank then in office shall be present
thereat.
SECTION 2.06. Quorum. One-third of the members of the entire Board,
or the next highest integer in the event of a fraction, shall constitute a
quorum, but if less than a quorum be present, a majority of those present may
adjourn any meeting from time to time and the meeting may be held as
adjourned without further notice.
SECTION 2.07. Rules and Regulations. The Board may adopt such rules
and regulations for the conduct of its meetings and the management of the
affairs of the Bank as it may deem proper, not inconsistent with the laws of
the State of New York or these By-laws.
SECTION 2.08. Compensation. Directors shall be entitled to receive
from the Bank such fees for attendance at meetings of the Board or of any
committee, or both, as the Board from time to time shall determine. The Board
may also likewise provide that the Bank shall reimburse each such director or
member of such committee for any expenses paid by him on account of his
attendance at any such meeting. Nothing in this Section contained shall be
construed to preclude any director from serving the Bank in any other
capacity and receiving compensation therefor.
ARTICLE III
COMMITTEES
SECTION 3.01. Executive Committee. The Board, by resolution adopted
by a majority of the entire Board, shall appoint an Executive Committee
which, when the Board is not in session, shall have and may exercise all the
powers of the Board that lawfully may be delegated including, without
limitation, the power and authority to declare dividends. The Executive
Committee shall consist of such number of directors as the Board shall from
time to time determine, but not less than five and one of whom shall be
designated by the Board as Chairman thereof, as follows: (a) the Chairman of
the Board, the Chief Executive Officer, the President, the Vice Chairmen of
the Board; and (b) such other directors, none of whom shall be an officer of
the Bank, as shall be appointed to serve at the pleasure of the Board. The
Board, by resolution adopted by a majority of the entire Board, may designate
one or more directors as alternate members of the Executive Committee and the
manner and circumstances in which such alternate members shall replace or act
in the place of absent or disqualified members of the Executive Committee.
The attendance of one-third of the members of the Committee or their
substitutes, or the next highest integer in the event of a fraction, at any
meeting shall constitute a quorum, and the act of a majority of those present
at a meeting thereof at which a quorum is present shall be the act of the
Committee. All acts done and powers conferred by the Committee from time to
time shall be deemed to be, and
<PAGE>
may be certified as being done or conferred under authority of the Board. The
Committee shall fix its own rules and procedures, and the minutes of the
meetings of the Committee shall be submitted at the next regular meeting of
the Board at which a quorum is present, or if impracticable at the next such
subsequent meeting. The Committee shall hold meetings "On Call" and such
meetings may be called by the Chairman of the Executive Committee, the
Chairman of the Board, the Chief Executive Officer, the President, a Vice
Chairman of the Board, or the Secretary. Notice of each such meeting of the
Committee shall be given by mail, telegraph, cable, wireless or other form of
recorded communication or be delivered personally or by telephone to each
member of the Committee not later than the day before the day on which such
meeting is to be held. Notice of any such meeting need not be given to any
member of the Committee who submits a signed waiver of notice whether before
or after the meeting, or if he shall be present at such meeting; and any
meeting of the Committee shall be a legal meeting without any notice thereof
having been given, if all the members of the Committee shall be present
thereat. In the case of any meeting, in the absence of the Chairman of the
Executive Committee, such member as shall be designated by the Chairman of
the Executive Committee or the Executive Committee shall act as Chairman of
the meeting.
SECTION 3.02. Examining Committee. The Board, by resolution adopted
by a majority of the entire Board, shall appoint an Examining Committee
composed of not less than three of its members, none of whom shall be an
officer of the Bank, to hold office at its pleasure and one of whom shall be
designated by the Board as chairman thereof. The Committee shall make such
examination into the affairs of the Bank and its loans and discounts and make
such reports in writing thereof as may be directed by the Board or required
by the Banking Law. The attendance of one-third of the members of the
Committee, or the next highest integer in the event of a fraction, at any
meeting shall constitute a quorum, and the act of a majority of those present
at a meeting thereof at which a quorum is present shall be the act of the
Committee.
SECTION 3.03. Other Committees. The Board, by resolution adopted by
a majority of the entire Board, may appoint, from time to time, such other
committees composed of not less than three of its members for such purposes
and with such duties and powers as the Board may determine. The attendance of
one-third of the members of such other committees, or the next highest
integer in the event of a fraction, at any meeting shall constitute a quorum,
and the act of a majority of those present at a meeting thereof at which a
quorum is present shall be the act of such other committees.
ARTICLE IV
OFFICERS AND AGENTS
SECTION 4.01. Officers. The officers of the Bank shall be (a) a
Chairman of the Board, a Chief Executive Officer, a President and one or more
Vice Chairmen of the Board, each of whom must be a director and shall be
elected by the Board; (b) a Chief Financial Officer, a Controller, a
Secretary and a General Auditor, each of whom shall be elected by the Board;
and (c) may include a Chief Credit Officer, a Chief Administrative Officer, a
Chief Technology Officer, one or more Group Executives and such other
officers as may from time to time be elected by the Board or under its
authority, or appointed by the Chairman, the Chief Executive Officer, the
President or a Vice Chairman of the Board.
SECTION 4.02. Clerks and Agents. The Board may elect and dismiss, or
the Chairman, the Chief Executive Officer, the President or a Vice Chairman
of the Board may appoint and dismiss and delegate to any other officers
authority to appoint and dismiss, such clerks, agents and employees as may be
deemed advisable for the prompt and orderly transaction of the Bank's
business, and may prescribe, or authorize the appointing officers to
prescribe, their respective duties, subject to the provisions of these
By-laws.
SECTION 4.03. Term of Office. The officers designated in Section
4.01(a) shall be elected by the Board at its annual meeting. The officers
designated in Section 4.01(b) may be elected at the annual or any other
meeting of the Board. The officers designated in Section 4.01(c) may be
elected at the annual or any other meeting of the Board or appointed at any
time by the designated proper officers. Any vacancy occurring in any office
designated in Section 4.01(a) may be filled at any regular or special meeting
of the Board. The officers elected pursuant to Section 4.01(a) shall each
hold office for the term of one year and until their successors are elected,
unless sooner disqualified or removed by a vote of two-thirds of the whole
Board. The officers elected by the Board pursuant to Section 4.01(b) of these
By-laws shall hold office at the pleasure of the Board. All other officers,
clerks, agents and employees elected by the Board, or appointed by the
Chairman, the Chief Executive Officer, the President or a Vice Chairman of
the Board, or under their authority, shall hold their respective offices at
the pleasure of the Board or officers elected pursuant to Section 4.01(a).
<PAGE>
SECTION 4.04. Chairman of the Board. The Chairman shall preside at
all meetings of the stockholders and at all meetings of the Board. The
Chairman of the Board shall have the same power to perform any act on behalf
of the Bank and to sign for the Bank as is prescribed in these By-laws for
the Chief Executive Officer. He shall perform such other duties as from time
to time may be prescribed by the Board.
SECTION 4.05. Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the Bank and shall have, subject to
the control of the Board and the Chairman, general supervision and direction
of the policies and operations of the Bank and of its several officers other
than the Chairman. In the absence of the Chairman, he shall preside at all
meetings of the stockholders and at all meetings of the Board. He shall have
the power to execute any document or perform any act on behalf of the Bank,
including without limitation the power to sign checks, orders, contracts,
leases, notes, drafts and other documents and instruments in connection with
the business of the Bank, and together with the Secretary or an Assistant
Corporate Secretary execute conveyances of real estate and other documents
and instruments to which the seal of the Bank may be affixed. He shall
perform such other duties as from time to time may be prescribed by the Board.
SECTION 4.06. President. The President shall, subject to the
direction and control of the Board, the Chairman and the Chief Executive
Officer, participate in the supervision of the policies and operations of the
Bank. In general, the President shall perform all duties incident to the
office of President, and such other duties as from time to time may be
prescribed by the Board, the Chairman, or the Chief Executive Officer. In the
absence of the Chairman or the Chief Executive Officer, the President shall
preside at meetings of stockholders and of the Board. The President shall
have the same power to sign for the Bank as is prescribed in these By-laws
for the Chief Executive Officer.
SECTION 4.07. Vice Chairman of the Board. The Vice Chairman of the
Board, or if there be more than one, then each of them, shall, subject to the
direction and control of the Board, the Chairman and the Chief Executive
Officer, participate in the supervision of the policies and operations of the
Bank, and shall have such other duties as may be prescribed from time to time
by the Board, the Chairman or the Chief Executive Officer. In the absence of
the Chairman, the Chief Executive Officer and the President, a Vice Chairman,
as designated by the Chairman or the Board, shall preside at meetings of the
stockholders and of the Board. Each Vice Chairman shall have the same power
to sign for the Bank as is prescribed in these By-laws for the Chief
Executive Officer.
SECTION 4.08. Chief Financial Officer. The Chief Financial Officer
shall have such powers and perform such duties as the Board, the Chairman,
the Chief Executive Officer, the President, or a Vice Chairman of the Board
may from time to time prescribe, which duties may include, without
limitation, responsibility for strategic planning, corporate finance,
control, tax and auditing activities, and shall perform such other duties as
may be prescribed by these By-laws.
SECTION 4.09. Controller. The Controller shall exercise general
supervision of the accounting departments of the Bank. He shall be
responsible to the Chief Financial Officer and shall render reports from time
to time relating to the general financial condition of the Bank. He shall
render such other reports and perform such other duties as from time to time
may be prescribed by the Chief Financial Officer, a Vice Chairman of the
Board, the President, the Chief Executive Officer or the Chairman.
SECTION 4.10. Secretary. The Secretary shall:
(a) record all the proceedings of the meetings of the
stockholders, the Board and the Executive Committee in one or more books kept
for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these By-laws or as required by law;
(c) be custodian of the seal of the Bank; and he may see that
such seal or a facsimile thereof is affixed to any documents the execution of
which on behalf of the Bank is duly authorized and may attest such seal when
so affixed; and
(d) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be prescribed by the
Board, the Chairman, the Chief Executive Officer, the President, or a Vice
Chairman of the Board.
<PAGE>
SECTION 4.11. General Auditor. The General Auditor shall exercise
general supervision of the Auditing Division. He shall audit the affairs of
the Bank and its subsidiaries, including appraisal of the soundness and
adequacy of internal controls and operating procedures and shall ascertain
the extent of compliance with policies and procedures of the Bank. He shall
be responsible to the Board and shall make such audits and prepare such
regular reports as the Board, its Examining Committee, the Chairman or the
Chief Executive Officer may, from time to time, require or as in his judgment
are necessary in the performance of his duties.
SECTION 4.12. Powers and Duties of Other Officers. The powers and
duties of all other officers of the Bank shall be those usually pertaining to
their respective offices, subject to the direction and control of the Board
and as otherwise provided in these By-laws.
SECTION 4.13. Fidelity Bonds. The Board, in its discretion, may
require any or all officers, agents, clerks and employees of the Bank to give
bonds covering the faithful performance of their duties or may obtain
insurance covering the same, in either case in form and amount approved by
the Board, the premiums thereon to be paid by the Bank.
ARTICLE V
CORPORATE SEAL
The corporate seal of the Bank shall be in the form of a circle and
shall bear the full name of the Bank and the words "Corporate Seal New York"
together with the logo of The Chase Manhattan Corporation.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Bank shall be the calendar year.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Right to Indemnification. The Bank shall to the
fullest extent permitted by applicable law as then in effect indemnify any
person (the "Indemnitee") who was or is involved in any manner (including,
without limitation, as a party or a witness), or is threatened to be made so
involved, in any threatened, pending or completed investigation, claim,
action, suit or proceeding, whether civil, administrative or investigative
(including, without limitation, any action, suit or proceeding by or in the
right of the Bank to procure a judgment in its favor) (a "Proceeding") by
reason of the fact that he is or was a director, officer, employee or agent
of the Bank, or is or was serving at the request of the Bank as a director,
officer or employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against all expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such Proceeding. Such
indemnification shall be a contract right and shall include the right to
receive payment in advance of any expenses incurred by the Indemnitee in
connection with such Proceeding, consistent with the provisions of applicable
law as then in effect.
SECTION 7.02. Contracts and Funding. The Bank may enter into
contracts with any director, officer, employee or agent of the Bank in
furtherance of the provisions of this Article VII and may create a trust
fund, grant a security interest or use other means (including, without
limitation, a letter of credit) to ensure the payment of such amounts as may
be necessary to effect indemnification as provided in this Article VII.
SECTION 7.03. Employee Benefit Plans. For purposes of this Article
VII, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person
with respect to any employee benefit plan; and references to "serving at the
request of the Bank" shall include any service as a director, officer,
employee, or agent of the Bank which imposes duties on, or involves services
by, such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who acted in
good faith and in a manner he reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a
<PAGE>
manner not opposed to the best interests of a corporation.
SECTION 7.04. Indemnification Not Exclusive Right. The right of
indemnification and advancement of expenses provided in this Article VII
shall not be exclusive of any other rights to which a person seeking
indemnification may otherwise be entitled, under any statute, by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office. The provisions of this Article VII shall inure to
the benefit of the heirs and legal representatives of any person entitled to
indemnity under this Article VII and shall be applicable to Proceedings
commenced or continuing after the adoption of this Article VII whether
arising from acts or omissions occurring before or after such adoption.
SECTION 7.05. Advancement of Expenses; Procedures. In furtherance,
but not in limitation, of the foregoing provisions, the following procedures
and remedies shall apply with respect to advancement of expenses and the
right to indemnification under this Article VII:
(a) Advancement of Expenses. All reasonable expenses incurred
by or on behalf of the Indemnitee in connection with any Proceeding shall be
advanced to the Indemnitee by the Bank within twenty (20) days after the
receipt by the Bank of a statement or statements from the Indemnitee
requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the expenses incurred by the Indemnitee and, if
required by law at the time of such advance, shall include or be accompanied
by an undertaking by or on behalf of the Indemnitee to repay the amounts
advanced if, and to the extent, it should ultimately be determined that the
Indemnitee is not entitled to be indemnified against such expenses.
(b) Written Request for Indemnification. To obtain
indemnification under this Article VII, an Indemnitee shall submit to the
Secretary of the Bank a written request, including such documentation and
information as is reasonably available to the Indemnitee and reasonably
necessary to determine whether and to what extent the Indemnitee is entitled
to indemnification (the "Supporting Documentation"). The determination of the
Indemnitee's entitlement to indemnification shall be made within a reasonable
time after receipt by the Bank of the written request for indemnification
together with the Supporting Documentation. The Secretary of the Bank shall,
promptly upon receipt of such a request for indemnification, advise the Board
in writing that the Indemnitee has requested indemnification.
(c) Procedure for Determination. The Indemnitee's entitlement
to indemnification under this Article VII shall be determined (i) by the
Board by a majority vote of a quorum (as defined in Article II of these
By-laws) consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders, but only if a majority of
the disinterested directors, if they constitute a quorum of the Board,
presents the issue of entitlement to indemnification to the stockholders for
their determination.
ARTICLE VIII
BY-LAWS
SECTION 8.01. Inspection. A copy of the By-laws shall at all times
be kept in a convenient place at the principal office of the Bank, and shall
be open for inspection by stockholders during banking hours.
SECTION 8.02. Amendments. Except as otherwise specifically provided
by statute, these By-laws may be added to, amended, altered or repealed at
any meeting of the Board by vote of a majority of the entire Board, provided
that written notice of any such proposed action shall be given to each
director prior to such meeting, or that notice of such addition, amendment,
alteration or repeal shall have been given at the preceding meeting of the
Board.
SECTION 8.03. Construction. The masculine gender, where appearing in
these By-laws, shall be deemed to include the feminine gender.
