EXHIBIT 4.2
[FORM OF INDENTURE SUPPLEMENT]
--------------------------------------------------------------------------------
WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE OF THE
HOUSEHOLD CONSUMER LOAN MASTER NOTE TRUST I,
Issuer
and
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Indenture Trustee, Paying Agent and Securities Intermediary
SERIES 2003-[ ] INDENTURE SUPPLEMENT
Dated as of _________, 2003
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I CREATION OF THE SERIES 2002-[ ] NOTES................................................. 1
Section 1.01 Designation............................................................... 1
ARTICLE II DEFINITIONS.......................................................................... 2
Section 2.01 Definitions............................................................... 2
ARTICLE III SERVICING FEE....................................................................... 14
Section 3.01 Servicing Compensation.................................................... 14
ARTICLE IV RIGHTS OF SERIES 2002-[ ] NOTEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS............................................ 15
Section 4.01 Collections and Allocations............................................... 15
Section 4.02 Determination of Monthly Interest......................................... 17
Section 4.03 Determination of Monthly Principal........................................ 18
Section 4.04 Application of Available Funds on Deposit in the Collection Account....... 18
Section 4.05 Investor Charge-offs...................................................... 21
Section 4.06 Subordinated Principal Collections........................................ 21
Section 4.07 Excess Finance Charge and Administrative Collections...................... 21
Section 4.08 Shared Principal Collections.............................................. 22
Section 4.09 [Reserved]................................................................ 22
Section 4.10 Principal Funding Account................................................. 22
Section 4.11 Reserve Account........................................................... 23
Section 4.12 Determination of LIBOR.................................................... 26
Section 4.13 Investment Instructions................................................... 26
Section 4.14 Exchange of Notes for Transferor Amount................................... 26
ARTICLE V DELIVERY OF SERIES 2002-[ ] NOTES; DISTRIBUTIONS; REPORTS
TO SERIES 2002-[ ] NOTEHOLDERS............................................ 27
Section 5.01 Delivery and Payment for the Series 2002-[ ] Notes........................ 27
Section 5.02 Distributions............................................................. 27
Section 5.03 Reports and Statements to Series 2002-[ ] Noteholders..................... 28
ARTICLE VI SERIES 2002-[ ] AMORTIZATION EVENTS.................................................. 29
Section 6.01 Series 2002-[ ] Amortization Events....................................... 29
ARTICLE VII REDEMPTION OF SERIES 2002-[ ] NOTES; SERIES FINAL
MATURITY; FINAL DISTRIBUTIONS............................................. 30
i
Section 7.01 Optional Redemption of Series 2002-[ ] Notes.............................. 30
Section 7.02 Series Final Maturity..................................................... 31
ARTICLE VIII MISCELLANEOUS PROVISIONS........................................................... 32
Section 8.01 Ratification of Indenture................................................. 32
Section 8.02 Counterparts.............................................................. 32
Section 8.03 Governing Law............................................................. 32
Section 8.04 Transfer of the O/C Amount................................................ 32
Section 8.05 Limitation of Liability................................................... 32
Section 8.06 Perfection of Security Interest........................................... 32
Section 8.07 Transfer Restrictions..................................................... 33
Section 8.08 Notice of Servicing Delegation............................................ 33
Section 8.09 Zero Balance Account Removal.............................................. 33
Section 8.10 Notice of Insolvency Events............................................... 33
EXHIBITS
EXHIBIT A-1 FORM OF CLASS A NOTE
EXHIBIT A-2 FORM OF CLASS B NOTE
EXHIBIT B FORM OF MONTHLY PAYMENT INSTRUCTIONS AND
NOTIFICATION TO THE INDENTURE TRUSTEE
EXHIBIT C FORM OF MONTHLY STATEMENT
EXHIBIT D FORM OF MONTHLY SERVICER'S CERTIFICATE
ii
SERIES 2003-[ ] INDENTURE SUPPLEMENT, dated as of ______, 2003
(the "INDENTURE SUPPLEMENT"), among WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner Trustee of the HOUSEHOLD CONSUMER LOAN
MASTER NOTE TRUST I, a common law trust existing under the laws of the State of
Delaware (herein, the "ISSUER" or the "TRUST"), and ▇▇▇▇▇ FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION, not in its individual capacity, but solely as the
Indenture Trustee (herein, together with its successors in the trusts created
under the Master Indenture referred to below, the "INDENTURE TRUSTEE"), Paying
Agent and the Securities Intermediary under the Master Indenture, dated as of
September 30, 2002 (the "INDENTURE") between the Issuer, and the Indenture
Trustee (the Indenture, together with this Indenture Supplement, the
"AGREEMENT").
The Transferor may direct the Owner Trustee, on behalf of the
Issuer, to issue one or more Series of Notes in accordance with Section 2.12 of
the Indenture. The Transferor has tendered the notice of issuance required by
subsection 2.12(b)(i) of the Indenture and hereby directs the Owner Trustee, on
behalf of the Issuer, to enter into this Indenture Supplement with the Indenture
Trustee as required by Section 2.12 to provide for the issuance, authentication
and delivery of the Class A Notes, Series 2003-[ ] and the issuance,
authentication and delivery of the Class B Notes, Series 2003-[ ] and to specify
the Principal Terms thereof. The Principal Terms of this Series are set forth in
this Indenture Supplement to the Indenture.
ARTICLE I
CREATION OF THE SERIES 2003-[ ] NOTES
Section 1.01 Designation.
(a) There is hereby created a Series of Notes to be
issued pursuant to the Indenture and this Indenture Supplement to be known as
"HOUSEHOLD CONSUMER LOAN MASTER NOTE TRUST I, SERIES 2003-[ ]" or the "SERIES
2003-[ ] NOTES." The Series 2003-[ ] Notes shall be issued in two Classes, the
first of which shall be known as the "CLASS A SERIES 2003-[ ] FLOATING RATE
ASSET BACKED NOTES" and the second of which shall be known as the "CLASS B
SERIES 2003-[ ] FLOATING RATE ASSET BACKED NOTES". The Series 2003-[ ] Notes
shall be due and payable on the Series 2003-[ ] Final Maturity Date.
(b) Series 2003-[ ] shall be a Pool One Series and shall
be in Principal Sharing Group One and Excess Finance Charge Sharing Group One,
and shall not be in a Reallocation Group, Shared Enhancement Group or be
allocated Shared Transferor Principal Collections. Series 2003-[ ] shall not be
subordinated to any other Series. Notwithstanding any provision in the Indenture
or in this Indenture Supplement to the contrary, the first Distribution Date
with respect to Series 2003-[ ] shall be the _______, 2003 Distribution Date,
and the first Due Period shall begin on and include _______, 2003 and end on and
include ________, 2003.
(c) 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, the terms and provisions of this Indenture
Supplement shall be controlling. All capitalized terms not otherwise defined
herein are defined in the Indenture, the Transfer and Servicing Agreement or the
Trust
Agreement. Each capitalized term defined herein shall relate only to the Series
2003-[ ] Notes but not any other Series of Notes issued by the Issuer.
ARTICLE II
DEFINITIONS
Section 2.01 Definitions.
(a) Whenever used in this Indenture Supplement, 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 the masculine as well as the feminine and neuter genders
of such terms.
"Accumulation Period Factor" shall mean, with respect to any
Due Period, a fraction, (a) the numerator of which is equal to the sum of (i)
the initial invested amounts of all Outstanding Series in Principal Sharing
Group One which are not Variable Funding Series, (ii) the Invested Amount of all
Outstanding Variable Funding Series in Principal Sharing Group One which are in
the Revolving Period and (iii) the Invested Amount as of the end of the
Revolving Period for all Outstanding Variable Funding Series in Principal
Sharing Group One which are not in the Revolving Period and (b) the denominator
of which is equal to the sum of (i) the Initial Invested Amount, (ii) the
initial invested amounts of all Outstanding Principal Sharing Group One Series
(other than Series 2003-[ ]) that have controlled accumulation periods or
controlled amortization periods (the length of which may be altered in
accordance with the terms of the related Indenture Supplements) and are not
expected to be in their respective revolving periods as of such Due Period and
(iii) the Invested Amount as of the end of the Revolving Period for all
Outstanding Variable Funding Series in Principal Sharing Group One which are not
expected to be in their revolving periods as of such Due Period; provided,
however, that this definition may be changed at any time if an Officer's
Certificate is delivered indicating that such action will not result in an
Adverse Effect.
"Accumulation Period Length" shall have the meaning assigned
such term in subsection 4.04(e).
"Additional Interest" shall mean, with respect to any
Distribution Date, the Class A Additional Interest and the Class B Additional
Interest for such Distribution Date.
"Adjusted Invested Amount" shall mean, with respect to any
date of determination, an amount equal to the Invested Amount minus the
Principal Funding Account Balance on such date.
"Adjusted Pool One Principal Balance" shall mean an amount
equal to the greater of (a) the sum of (i) the total amount of Principal
Receivables in Pool One as of the close of business on the last day of the
immediately preceding Due Period (or with respect to the first Due Period, the
total amount of Principal Receivables in Pool One as of the Series 2003-[ ]
Cut-off Date) and (ii) the principal amount on deposit in the Special Funding
Account with respect to
2
Pool One as of the close of business on such last day (or with respect to the
first Due Period, the Series 2003-[ ] Cut-off Date) and (b) the sum of the
numerators used to calculate the Investor Percentages for allocations with
respect to Principal Receivables, Finance Charge and Administrative Receivables
or Defaulted Amounts, as applicable, for all Pool One Series outstanding as of
the date as to which such determination is being made; provided, however, that
with respect to any Due Period in which an Addition Date for an Aggregate
Addition or a Removal Date occurs, the amount in clause (a)(i) above shall be
the sum of the amounts for each day in such Due Period computed as follows and
divided by the number of days in such Due Period: (1) the aggregate amount of
Principal Receivables in Pool One as of the close of business on the last day of
the prior Due Period, for each day in the period from and including the first
day of such Due Period to but excluding the related Additional Cut-Off Date or
Removal Date and (2) the aggregate amount of Principal Receivables in Pool One
as of the close of business on the related Additional Cut-off Date or Removal
Date after adjusting for the aggregate amount of Principal Receivables added to
or removed from Pool One on the related Additional Cut-off Date or Removal Date,
as the case may be, for each day in the period from and including the related
Additional Cut-off Date or Removal Date to and including the last day of such
Due Period.
"Administration Fee" shall mean $____________ per annum.
"Available Investor Finance Charge and Administrative
Collections" shall mean, with respect to any Due Period, an amount equal to the
sum of (a) the Investor Finance Charge and Administrative Collections, (b)
Principal Funding Investment Proceeds, if any, with respect to the related
Distribution Date, and (c) amounts, if any, to be withdrawn from the Reserve
Account which will be deposited into the Collection Account on the related
Distribution Date to be treated as Available Investor Finance Charge and
Administrative Collections pursuant to subsections 4.11(b) and (d).
"Available Investor Principal Collections" shall mean, with
respect to any Due Period, an amount equal to the sum of (a) (i) an amount equal
to the Investor Percentage of all Collections of Principal Receivables received
during such Due Period minus (ii) the amount of Subordinated Principal
Collections with respect to such Due Period, (b) any Shared Principal
Collections with respect to other Principal Sharing Group One Series (including
any amounts on deposit in the Special Funding Account with respect to Pool One
that are allocated to Series 2003-[ ] pursuant to the Agreement for application
as Shared Principal Collections), (c) any Refunding Proceeds and (d) any other
amounts which pursuant to Section 4.04 hereof are to be treated as Available
Investor Principal Collections with respect to the related Distribution Date.
"Available Reserve Account Amount" shall mean, with respect to
any Distribution Date, the lesser of (a) the amount on deposit in the Reserve
Account on such date (after taking into account any interest and earnings
retained in the Reserve Account pursuant to subsection 4.11(b) on such date, but
before giving effect to any (i) deposit made or to be made pursuant to
subsection 4.04(a)(ix) to the Reserve Account on such date, or (ii) any
withdrawal made or to be made pursuant to subsection 4.11(d), (e) and (f) from
the Reserve Account with respect to such date) and (b) the Required Reserve
Account Amount.
"Base Rate" shall mean, with respect to any Due Period, the
sum of (a) the product of the weighted average of the Class A Note Interest Rate
and the Class B Note Interest
3
Rate for the Interest Period commencing in such Due Period (weighted based on
the Class A Note Principal Balance and the Class B Note Principal Balance as of
the last day of the prior Due Period) multiplied by a fraction, the numerator of
which is the Note Principal Balance and the denominator of which is the sum of
the Note Principal Balance and the O/C Amount as of the last day of the prior
Due Period and (b) a fraction, the numerator of which is the product of (i)
twelve and (ii) the Monthly Servicing Fee and the denominator of which is the
sum of the Note Principal Balance and the O/C Amount as of the last day of the
prior Due Period.
"Class A Additional Interest" shall have the meaning specified
in subsection 4.02(a).
"Class A Interest Shortfall" shall have the meaning specified
in subsection 4.02(a).
"Class A Monthly Interest" shall have the meaning specified in
subsection 4.02(a).
"Class A Note Initial Principal Balance" shall mean $________.
"Class A Note Interest Rate" shall mean a per annum rate of
____% in excess of LIBOR as determined (i) on ________, 2003, for the period
from and including the Closing Date through and excluding ________, 2003 and
(ii) on the related LIBOR Determination Date with respect to each Interest
Period thereafter.
"Class A Note Principal Balance" shall mean, with respect to
any date, an amount equal to (a) the Class A Note Initial Principal Balance
minus (b) the aggregate amount of any principal payments made to the Class A
Noteholders prior to such date.
"Class A Noteholder" shall mean the Person in whose name a
Class A Note is registered in the Note Register.
"Class A Notes" shall mean any one of the Notes executed by
the Issuer and authenticated by or on behalf of the Indenture Trustee,
substantially in the form of EXHIBIT A-1.
"Class B Additional Interest" shall have the meaning specified
in subsection 4.02(b).
"Class B Interest Shortfall" shall have the meaning specified
in subsection 4.02(b).
"Class B Monthly Interest" shall have the meaning specified in
subsection 4.02(b).
"Class B Note Initial Principal Balance" shall mean $________.
"Class B Note Interest Rate" shall mean a per annum rate of
___% in excess of LIBOR as determined (i) on _______, 2003, for the period from
and including the Closing Date through and excluding _______, 2003 and (ii) on
the related LIBOR Determination Date with respect to each Interest Period
thereafter.
4
"Class B Note Principal Balance" shall mean, with respect to
any date, the Class B Note Initial Principal Balance, minus the aggregate amount
of any principal payments made to the Class B Noteholders prior to such date.
"Class B Noteholder" shall mean the Person in whose name a
Class B Note is registered in the Note Register.
"Class B Notes" shall mean any one of the Notes executed by
the Issuer and authenticated by or on behalf of the Indenture Trustee,
substantially in the form of EXHIBIT A-2.
"Closing Date" shall mean _________, 2003.
"Controlled Accumulation Amount" shall mean for any
Distribution Date with respect to the Controlled Accumulation Period, $________;
provided, however, that if the Accumulation Period Length is determined to be
less than ___ Due Periods pursuant to subsection 4.04(e), the Controlled
Accumulation Amount for each Distribution Date with respect to the Controlled
Accumulation Period will be equal to (a) the product of (i) the sum of the Class
A Note Initial Principal Balance and the Class B Note Initial Principal Balance
and (ii) the Accumulation Period Factor for the Due Period related to each
Distribution Date divided by (b) the Required Accumulation Factor Number.
"Controlled Accumulation Period" shall mean, unless an
Amortization Event shall have occurred prior thereto, the period commencing at
the close of business on ________, 20___ or such later date as is determined in
accordance with subsection 4.04(e) and ending on the first to occur of (a) the
commencement of the Early Amortization Period, (b) the payment in full of the
Note Principal Balance and (c) the Expected Principal Payment Date.
"Controlled Deposit Amount" shall mean, with respect to any
Distribution Date with respect to the Controlled Accumulation Period, an amount
equal to the sum of (a) the Controlled Accumulation Amount for such Distribution
Date and (b) any Deficit Controlled Accumulation Amount for the prior
Distribution Date.
"Covered Amount" shall mean an amount, determined as of each
Distribution Date with respect to any Interest Period during the Controlled
Accumulation Period, equal to the sum of (a) the product of (i) a fraction, the
numerator of which is the actual number of days in such Interest Period and the
denominator of which is 360, times (ii) the Class A Note Interest Rate in effect
with respect to such Interest Period, times (iii) the aggregate amount on
deposit in the Principal Funding Account up to the Class A Note Principal
Balance as of the Record Date preceding such Distribution Date and (b) the
product of (i) a fraction, the numerator of which is the actual number of days
in such Interest Period and the denominator of which is 360, times (ii) the
Class B Note Interest Rate in effect with respect to such Interest Period, times
(iii) the lesser of (A) the aggregate amount on deposit in the Principal Funding
Account in excess of the Class A Note Principal Balance and (B) the Class B Note
Principal Balance, in each case as of the Record Date preceding such
Distribution Date.
"Deficit Controlled Accumulation Amount" shall mean (a) on the
first Distribution Date during the Controlled Accumulation Period, the excess,
if any, of the Controlled Accumulation Amount for such Distribution Date over
the amount deposited in the
5
Principal Funding Account on such Distribution Date and (b) on each subsequent
Distribution Date with respect to the Controlled Accumulation Period, the
excess, if any, of the Controlled Deposit Amount for such subsequent
Distribution Date over the amount deposited into the Principal Funding Account
on such subsequent Distribution Date.
"Distribution Date" shall mean ________, 2003 and the
fifteenth day of each calendar month thereafter, or if such fifteenth day is not
a Business Day, the next succeeding Business Day.
"Early Amortization Period" shall mean the period commencing
on the first day of the Due Period on which an Amortization Event with respect
to Series 2003-[ ] is deemed to have occurred or, if the Servicer is required to
make daily deposits into the Collection Account, on the day such Amortization
Event is deemed to have occurred, and ending upon the earlier to occur of (a)
the payment in full of the Note Principal Balance to the Series 2003-[ ]
Noteholders and (b) the Series 2003-[ ] Final Maturity Date.
"Eligible Investments" shall mean, with respect to funds
allocable to Series 2003-[ ] in the Collection Account, the Principal Funding
Account and the Reserve Account, "Eligible Investments" as defined in the
Indenture, except that (a) all references in such definition to "rating
satisfactory to the Rating Agency" shall mean ratings of not less than "A-1+",
"P-1" and "F1+" (whichever is applicable), unless otherwise specified by the
Rating Agency, and (b) all such investments shall have maturities at the time of
the acquisition thereof occurring no later than the Distribution Date following
such date of acquisition.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Excess Finance Charge and Administrative Collections" shall
have the meaning specified in Section 8.08C of the Master Indenture.
"Excess Finance Charge Sharing Group One" shall mean Series
2003-[ ] and each other Series specified in the related Indenture Supplement to
be included in Excess Finance Charge Sharing Group One.
"Excess O/C Amount" shall mean, with respect to any
Distribution Date, the excess of the O/C Amount (before giving effect to
distributions on such Distribution Date) over the Required O/C Amount as of such
Distribution Date.
"Excess Spread" shall mean with respect to any Due Period, the
annualized percentage equivalent of a fraction, (a) the numerator of which is
equal to (i) Available Investor Finance Charge and Administrative Collections
with respect to such Due Period, plus (ii) any Excess Finance Charge and
Administrative Collections that are allocated to Series 2003-[ ] with respect to
such Due Period, minus (iii) the amounts distributable pursuant to subsection
4.04(a)(i) through (viii) with respect to the related Distribution Date, and (b)
the denominator of which is the sum of the Note Principal Balance and the O/C
Amount as of the last day of the immediately preceding Due Period.
6
"Expected Principal Payment Date" shall mean the ___________,
20 _____ Distribution Date.
"Finance Charge Shortfall" shall have the meaning specified in
Section 4.07.
"Fixed Investor Percentage" shall mean, with respect to any
Due Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, (a) the numerator of which is the Adjusted Invested Amount as of
the close of business on the last day of the Revolving Period and (b) the
denominator of which is the Adjusted Pool One Principal Balance.
"Floating Investor Percentage" shall mean, with respect to any
Due Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, (a) the numerator of which is the Adjusted Invested Amount as of
the close of business on the last day of the preceding Due Period (or with
respect to the first Due Period, the Initial Invested Amount) and (b) the
denominator of which is the Adjusted Pool One Principal Balance.
"Initial O/C Amount" shall mean $_______________.
"Initial Invested Amount" shall mean $_______________.
"Initial Principal Amount" shall mean $______________.
"Interest Period" shall mean, with respect to any Distribution
Date, the period from and including the Distribution Date immediately preceding
such Distribution Date (or, in the case of the first Distribution Date, from the
Closing Date) to but excluding such Distribution Date.
"Interim Note Principal Amount" shall mean as of any
Distribution Date (before giving effect to distributions on such Distribution
Date) (a) the Class A Note Principal Balance plus (b) the Class B Note Principal
Balance minus (c) the Principal Funding Account Balance (before giving effect to
distributions on such Distribution Date), if any, minus (d) the Controlled
Deposit Amount distributed pursuant to Section 4.04(c)(i) for such Distribution
Date.
"Invested Amount" shall mean, as of any date of determination,
an amount equal to the Initial Principal Amount and the Initial O/C Amount minus
(a) the amount of principal previously paid to the Series 2003-[ ] Noteholders
with respect to the Class A Notes and the Class B Notes (including the principal
amount of any Notes purchased by the Transferor) and any reduction in the O/C
Amount pursuant to Section 4.04(b) or (c), and (b) the amount of unreimbursed
Investor Charge-offs and unreimbursed Subordinated Principal Collections.
"Investor Charge-off" shall have the meaning specified in
Section 4.05.
"Investor Defaulted Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the Defaulted Amount
for the related Due Period and (b) the Investor Percentage for such Due Period.
7
"Investor Finance Charge and Administrative Collections" shall
mean, with respect to any Distribution Date, an amount equal to the product of
(a) Investor Percentage for the related Due Period and (b) Collections of
Finance Charge and Administrative Receivables deposited in the Collection
Account for the related Due Period.
"Investor Percentage" shall mean, for any Due Period, (a) with
respect to (i) Finance Charge and Administrative Receivables during any period
other than the Early Amortization Period, (ii) Principal Receivables during the
Revolving Period and (iii) Defaulted Amounts at any time, the Floating Investor
Percentage and (b) with respect to (i) Principal Receivables during any period
other than the Revolving Period and (ii) Finance Charge and Administrative
Receivables during the Early Amortization Period, the Fixed Investor Percentage.
"LIBOR" shall mean, for any LIBOR Determination Date, the
London interbank offered rate for one-month United States dollar deposits
determined by the Indenture Trustee for each Interest Period in accordance with
the provisions of Section 4.12.
"LIBOR Determination Date" shall mean for any Interest Period,
two London Business Days before that Interest Period commences; provided that
the LIBOR Determination Date for the first Interest Period will be two London
Business Days before the Closing Date.
"London Business Day" shall mean any Business Day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
"Monthly Administration Fee" shall mean the product of (i)
one-twelfth of the Administration Fee and (ii) the Floating Investor Percentage.
"Monthly Interest" shall mean, with respect to any
Distribution Date, the sum of the Class A Monthly Interest and the Class B
Monthly Interest for such Distribution Date.
"Monthly Principal" shall mean the monthly principal
distributable in respect of the Notes and the O/C Amount as calculated in
accordance with Section 4.03.
"Monthly Servicing Fee" shall mean, for any Distribution Date,
an amount equal to one-twelfth of the product of:
(a) the Servicing Fee Rate;
(b) the Floating Investor Percentage for the related Due
Period; and
(c) the total amount of Principal Receivables as of the
close of business on the last day of the immediately preceding Due Period, or
with respect to the first Due Period, the total amount of Principal Receivables
as of the Closing Date, in either case, excluding the principal portion of
Participation Interests;
provided, however, that with respect to any Due Period in which an Addition Date
for an Aggregate Addition or a Removal Date occurs, the amount in clause (c)
above shall be the sum of the amounts for each day in that Due Period computed
as follows and divided by the number of days in that Due Period:
8
(i) the aggregate amount of Principal Receivables,
excluding the principal portion of participation
interests, as of the close of business on the last
day of the prior Due Period, for each day in the
period from and including the first day of that Due
Period to but excluding the related Additional
Cut-off Date or Removal Date; and
(ii) the aggregate amount of Principal Receivables,
excluding the principal portion of participation
interests, as of the close of business on the related
Additional Cut-off Date or Removal Date after
adjusting for the aggregate amount of Principal
Receivables, excluding the principal portion of
Participation Interests, added to or removed on the
related Additional Cut-off Date or Removal Date, as
the case may be, for each day in the period from and
including the related Additional Cut-off Date or
Removal Date to and including the last day of that
Due Period;
provided, further, that with respect to the first Distribution Date, the Monthly
Servicing Fee will equal $_____________.
"Monthly Subordination Amount" shall mean with respect to any
Due Period an amount equal to the sum of:
(a) the lower of (i) the excess of the amounts
distributable pursuant to subsection 4.04(a)(i) over the Available Investor
Finance Charge and Administrative Collections and Excess Finance Charge and
Administrative Collections allocated with respect thereto pursuant to subsection
4.04(a)(i), and (ii) (1) the product of (I) ____ % and (II) the Initial Invested
Amount minus (2) any principal payments to the O/C Holder and (3) the amount of
unreimbursed Investor Charge-offs (after giving effect to Investor Charge-offs
for the related Due Period) and unreimbursed Subordinated Principal Collections
(as of the previous Distribution Date); and
(b) the lower of (i) the excess of the amounts
distributable pursuant to subsections 4.04(a)(ii) and 4.04(a)(iii), over the
Available Investor Finance Charge and Administrative Collections and Excess
Finance Charge and Administrative Collections allocated with respect thereto
pursuant to subsections 4.04(a)(ii) and (iii), and (ii)(1) the product of (I)
_____% and (II) the Initial Invested Amount minus (2) any principal payments to
the O/C Holder and (3) the amount of unreimbursed Investor Charge-offs (after
giving effect to Investor Charge-offs for the related Due Period) and
unreimbursed Subordinated Principal Collections, (including amounts allocated
pursuant to clause (a) above with respect to the related Distribution Date).
"Note Principal Balance" shall mean, at any time of
determination, the sum of the Class A Note Principal Balance and the Class B
Note Principal Balance.
"O/C Amount" shall mean, with respect to any date, an amount
equal to (a) the Invested Amount minus (b) the Note Principal Balance.
"O/C Holder" shall mean Household Consumer Loan Corporation
II, a Delaware corporation, as holder of the Transferor Certificate.
9
"Plan" shall mean (i) any employee benefit plan (within the
meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) any
plan (within the meaning of Section 4975(e)(1) of the Code) that is subject to
Section 4975 of the Code and (iii) any entity whose underlying assets include
"plan assets" of a plan described in (i) or (ii) by reason of such plan's
investment in the entity.
"Pool One" shall mean the pool of Receivables related to the
Accounts designated as "Pool One Accounts" by the Issuer to the Indenture
Trustee. Initially, the Issuer has designated all Accounts as "Pool One
Accounts".
"Pool One Series" shall mean Series 2003-[ ] and each other
Series which is designated as a Pool One Series in the related Indenture
Supplement.
"Principal Funding Account" shall have the meaning set forth
in subsection 4.10(a).
"Principal Funding Account Balance" shall mean, with respect
to any date of determination, the principal amount, if any, on deposit in the
Principal Funding Account on such date of determination.
"Principal Funding Investment Proceeds" shall mean, with
respect to each Distribution Date, the investment earnings on funds in the
Principal Funding Account (net of investment expenses and losses) for the period
from and including the immediately preceding Distribution Date to but excluding
such Distribution Date.
"Principal Sharing Group One" shall mean Series 2003-[ ] and
each other Series specified in the related Indenture Supplement to be included
in Principal Sharing Group One.
"Rating Agency" shall mean each of Standard & Poor's, ▇▇▇▇▇'▇
and Fitch.
"Reassignment Amount" shall mean, with respect to any
Distribution Date, after giving effect to any deposits and distributions
otherwise to be made on such Distribution Date, the sum of (a) the Note
Principal Balance and the O/C Amount on such Distribution Date, plus (b) Monthly
Interest for such Distribution Date and any Monthly Interest previously due but
not distributed to the Series 2003-[ ] Noteholders, plus (c) the amount of
Additional Interest, if any, for such Distribution Date and any Additional
Interest previously due but not distributed to the Series 2003-[ ] Noteholders
on a prior Distribution Date.
"Reference Banks" shall mean four major banks in the London
interbank market selected by the Servicer.
"Refunding Proceeds" shall mean with respect to any
Distribution Date, any proceeds of the issuance of a new Series of Notes
remitted by the Transferor, with the prior written consent of the Indenture
Trustee at least one Business Day prior to such Distribution Date for deposit
into the Collection Account and application as Available Investor Principal
Collections.
10
"Required Accumulation Factor Number" shall be equal to a
fraction, rounded upwards to the nearest whole number, the numerator of which is
one and the denominator of which is equal to the lowest monthly principal
payment rate (calculated based upon Collections of Principal Receivables for any
Due Period, over the amount of Principal Receivables on the first day of such
Due Period) on the Accounts for the 12 months preceding the date of such
calculation; provided, however, that this definition may be changed at any time
if the Rating Agency Condition is satisfied.
"Required O/C Amount" shall mean, as of the Closing Date, the
Initial O/C Amount and, as of any Distribution Date thereafter, an amount equal
to ___% of the Interim Note Principal Amount for such Distribution Date but not
less than ___% of the Initial Invested Amount; provided that (a) if an
Amortization Event has occurred, the Required O/C Amount for any Distribution
Date shall equal the amount of such requirement immediately preceding such
Amortization Event, (b) in no event shall the Required O/C Amount exceed the
Class A Note Principal Balance and the Class B Note Principal Balance on any
such date, (c) the Required O/C Amount may be reduced at any time to a lesser
amount if (i) the Rating Agency Condition is satisfied and (ii) an Officer's
Certificate of the Transferor has been delivered to the effect that in the
reasonable belief of the Transferor, such reduction will not result in an
Adverse Effect and (d) the Transferor, in its sole discretion may increase the
Required O/C Amount at any time.
"Required Reserve Account Amount" shall mean, with respect to
any Distribution Date on or after the Reserve Account Funding Date, an amount
equal to (a) ___% of the Class A Note Principal Balance or (b) any other amount
designated by the Transferor; provided, however, that if such designation is of
a lesser amount, the Transferor shall (i) provide the Servicer and the Indenture
Trustee with evidence that the Rating Agency Condition shall have been satisfied
and (ii) deliver to the Indenture Trustee an Officer's Certificate indicating
that such designation will not result in an Adverse Effect.
"Required Transferor Amount" shall have the meaning specified
in the Indenture.
"Required Transferor Percentage" shall mean with respect to
Pool One, (a) initially _% or (b) any other percentage designated by the
Transferor; provided, however, that if such designation is of a lesser amount,
the Transferor shall (i) provide the Servicer and the Indenture Trustee with
evidence that the Rating Agency Condition shall have been satisfied and (ii)
deliver to the Indenture Trustee a certificate of an authorized officer to the
effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Transferor, such designation will not have an Adverse
Effect.
"Reserve Account" shall have the meaning specified in
subsection 4.11(a).
"Reserve Account Funding Date" shall mean (a) the third
Distribution Date prior to the scheduled commencement of the Controlled
Accumulation Period if the average Excess Spread for any three consecutive
months is _% or greater, (b) the fourth Distribution Date prior to the scheduled
commencement of the Controlled Accumulation Period if the average Excess Spread
for any three consecutive months is _% or greater, but less than _% (c) the
sixth Distribution Date prior to the scheduled commencement of the Controlled
Accumulation Period if the average Excess Spread for any three consecutive
months is _% or greater, but less than _%
11
and (d) the twelfth Distribution Date prior to the scheduled commencement of the
Controlled Accumulation Period if the average Excess Spread for any three
consecutive months is less than _%. For purposes of this definition, Excess
Spread shall be determined for each month beginning __ months prior to the
scheduled commencement of the Controlled Accumulation Period.
"Reserve Account Surplus" shall mean, as of any Distribution
Date following the Reserve Account Funding Date, the amount, if any, by which
the amount on deposit in the Reserve Account exceeds the Required Reserve
Account Amount.
"Reserve Draw Amount" shall mean, with respect to each
Distribution Date relating to the Controlled Accumulation Period or the first
Distribution Date relating to the Early Amortization Period, the amount, if any,
by which the Principal Funding Investment Proceeds for such Distribution Date
are less than the Covered Amount determined as of such Distribution Date.
"Revolving Period" shall mean the period beginning on the
Closing Date and ending on the earlier of the close of business on the day
immediately preceding the day the Controlled Accumulation Period or the Early
Amortization Period commences.
"Series 2003-[ ]" shall mean the Series of Notes for which the
terms are specified in this Indenture Supplement.
"Series 2003-[ ] Accounts" shall mean the Reserve Account and
the Principal Funding Account.
"Series 2003-[ ] Amortization Event" shall have the meaning
specified in Section 6.01.
"Series 2003-[ ] Cut-off Date" shall mean the commencement of
business on _______ __, 2003.
"Series 2003-[ ] Final Maturity Date" shall mean the earliest
to occur of (a) the ______, 20___ Distribution Date, (b) the Distribution Date
on which the Notes are paid in full, (c) the termination of the Trust pursuant
to Section 11.01 of the Indenture and (d) at the option of the Transferor, the
day on which the right of all Series of Notes to receive payments from the Trust
has terminated.
"Series 2003-[ ] Note" shall mean a Class A Note or a Class B
Note.
"Series 2003-[ ] Noteholder" shall mean a Class A Noteholder
or a Class B Noteholder.
"Series 2003-[ ] Principal Shortfall" shall have the meaning
specified in Section 4.08.
"Series Adjusted Invested Amount" shall mean, with respect to
any Due Period:
12
(a) during the Revolving Period, the Invested Amount as
of the last day of the immediately preceding Due Period;
(b) during the Controlled Accumulation Period, the amount
specified in clause (a) above as of the close of business on the last day of the
Revolving Period less unreimbursed Investor Charge-offs thereafter; provided,
however, that on any date, at the option of the Transferor (the exercise of such
option to be evidenced by written instructions from the Transferor to the
Servicer and the Indenture Trustee) and upon ten days written notice to the
Rating Agency, such amount may be reduced below the amount specified for the
previous Due Period to an amount not less than the greater of (i) the Adjusted
Invested Amount as of the last day of the immediately preceding Due Period (less
any amounts deposited into the Principal Funding Account since the last day of
the immediately preceding Due Period) and (ii) an amount that, if used as the
numerator of the Fixed Investor Percentage for the remainder of the Controlled
Accumulation Period, would assure that Available Investor Principal Collections
for this Series plus the product of the aggregate amount of the Shared Principal
Collections during each Due Period multiplied by a fraction the numerator of
which is the Invested Amount of this Series and the denominator of which is the
aggregate invested amount of all Series not scheduled to be in their revolving
period during such Due Period would equal at least 125% of the applicable
Controlled Accumulation Amount for such Due Period for so long as the Invested
Amount is greater than zero, assuming for this purpose that (A) the payment rate
with respect to Collections of Principal Receivables remains constant at the
level of the immediately preceding Due Period, (B) the total amount of Principal
Receivables theretofore conveyed to and in the Trust (and the Special Funding
Amount) remains constant at the level existing on the date of such reduction,
(C) no amortization event with respect to any Series will subsequently occur and
(D) no additional Series (other than any Series being issued on the date of such
reduction) will be subsequently issued; and
(c) during any Early Amortization Period, the Invested
Amount as of the last day of the Revolving Period less unreimbursed Investor
Charge-offs thereafter or, if less, the amount last determined pursuant to
clause (b) above during the Controlled Accumulation Period.
"Series Portfolio Yield" shall mean, with respect to any Due
Period, the annualized percentage equivalent of a fraction, (a) the numerator of
which is equal to the sum of (i) Available Investor Finance Charge and
Administrative Collections with respect to such Due Period, plus (ii) any Excess
Finance Charge and Administrative Collections that are allocated to Series
2003-[ ] with respect to such Due Period, such sum to be calculated after
subtracting the Investor Defaulted Amount for such Due Period, and (b) the
denominator of which is the sum of the Note Principal Balance and the O/C Amount
as of the last day of the immediately preceding Due Period.
"Servicing Fee Rate" shall mean 2% per annum or such lesser
percentage as may be specified by the Servicer in an Officer's Certificate filed
with the Indenture Trustee; provided, however, that (a) such Officer's
Certificate shall state that, in the reasonable belief of the Servicer, such
change in percentage will not result in an Adverse Effect and (b) the Servicer
shall have provided written notice of such change to the Rating Agency at least
ten days prior to the date such change is to take effect.
13
"Subordinated Principal Collections" shall mean with respect
to any Due Period, Available Investor Principal Collections applied in
accordance with Section 4.06.
"Telerate Page 3750" shall mean the display page currently so
designated on the Telerate Service (or such other page as may replace that page
in that service for the purpose of displaying comparable rates or prices).
"Variable Funding Series" shall mean any Series, the invested
amount of which may be increased or decreased subject to the satisfaction of
certain conditions specified in the Indenture Supplement related to such Series.
Each capitalized term defined herein shall relate to the
Series 2003-[ ] Notes and no other Series of Notes issued by the Trust, unless
the context otherwise requires. All capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Indenture or
the Transfer and Servicing Agreement. 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 Transfer and Servicing Agreement, the
terms and provisions of this Indenture Supplement shall govern.
The words "HEREOF," "HEREIN" and "HEREUNDER" and words of
similar import when used in this Indenture Supplement shall refer to this
Indenture Supplement as a whole and not to any particular provision of this
Indenture Supplement; references to any Article, subsection, Section or Exhibit
are references to Articles, subsections, Sections and Exhibits in or to this
Indenture Supplement unless otherwise specified; and the term "INCLUDING" means
"INCLUDING WITHOUT LIMITATION."
ARTICLE III
SERVICING FEE
Section 3.01 Servicing Compensation.
(a) Servicing Fee. The share of the Servicing Fee
allocable to the Series 2003-[ ] Noteholders with respect to any Distribution
Date shall equal the Monthly Servicing Fee. The portion of the Servicing Fee
that is not allocable to the Series 2003-[ ] Noteholders shall be paid by the
holders of the Transferor Certificates or the noteholders of other Series (as
provided in the related Indenture Supplements), and in no event shall the Trust,
the Owner Trustee, the Indenture Trustee or the Series 2003-[ ] Noteholders be
liable for the share of the Servicing Fee to be paid by the holders of the
Transferor Certificates or the noteholders of any other Series.
14
ARTICLE IV
RIGHTS OF SERIES 2003-[ ] NOTEHOLDERS
AND ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.01 Collections and Allocations.
(a) Allocations. Collections of Finance Charge and
Administrative Receivables and Principal Receivables and Defaulted Receivables
allocated to Series 2003-[ ] pursuant to Article VIII of the Indenture shall be
allocated and distributed as set forth in this Article.
(b) Payments to the Transferor. The Servicer shall on
Deposit Dates direct the Indenture Trustee to withdraw from the Collection
Account and pay to the Transferor the following amounts:
(i) an amount equal to the Transferor Percentage
for the related Due Period of Collections of Finance Charge and
Administrative Receivables to the extent that such amount is then on
deposit in the Collection Account; and
(ii) (A) if the Transferor Amount (determined
after giving effect to any Principal Receivables transferred
to the Trust on such Deposit Date) exceeds zero, an amount
equal to the Transferor Percentage for the related Due Period
of Collections of Principal Receivables that are then on
deposit in the Collection Account, and
(B) if the Transferor Amount (determined
after giving effect to any Principal Receivables transferred
to the Trust on such Deposit Date) does not exceed zero, the
amount set forth in clause (A) shall be deposited into the
Special Funding Account.
The withdrawals to be made from the Collection Account
pursuant to this subsection 4.01(b) do not apply to deposits into the Collection
Account that do not represent Collections, including payment of the purchase
price for the Receivables or the Notes pursuant to Section 2.06 or 7.01 of the
Transfer and Servicing Agreement or Section 11.04 of the Indenture.
(c) Allocations to the Series 2003-[ ] Noteholders and to
the O/C Holder. The Servicer shall, prior to the close of business on any
Deposit Date, allocate to the Series 2003-[ ] Noteholders and to the O/C Holder
the following amounts as set forth below:
(i) Allocations of Investor Finance Charge and
Administrative Collections. The Servicer shall allocate to the Series
2003-[ ] Noteholders and to the O/C Holder and retain in the Collection
Account for application as provided herein an amount equal to the
product of (A) the Investor Percentage and (B) the aggregate amount of
Collections of Finance Charge and Administrative Receivables deposited
in the Collection Account on such Deposit Date.
15
(ii) Allocations of Principal Collections. The
Servicer shall allocate to the Series 2003-[ ] Noteholders and to the
O/C Holder the following amounts as set forth below:
(A) Allocations During the Revolving Period.
During the Revolving Period an amount equal to the product of
(I) the Investor Percentage and (II) the aggregate amount of
Collections of Principal Receivables deposited in the
Collection Account on such Deposit Date, shall be allocated to
the Series 2003-[ ] Noteholders and retained in the Collection
Account until applied as provided herein.
(B) Allocations During the Controlled
Accumulation Period. During the Controlled Accumulation Period
an amount equal to the product of (I) the Investor Percentage
and (II) the aggregate amount of Collections of Principal
Receivables deposited in the Collection Account on such
Deposit Date shall be allocated to the Series 2003-[ ]
Noteholders and deposited in the Principal Funding Account
until applied as provided herein; provided, however, that if
such Collections with respect to such Due Period exceed the
Controlled Deposit Amount for the related Distribution Date
then such excess shall be first, retained in the Collection
Account for application to reduce the O/C Amount to the
Required O/C Amount, second, if any other Principal Sharing
Series in Principal Sharing Group One is outstanding and in
its amortization period or accumulation period, retained in
the Collection Account for application, to the extent
necessary, as Shared Principal Collections to other Series in
Principal Sharing Group One on the related Distribution Date,
and third paid to the holders of the Transferor Certificates
only if the Transferor Amount on such Deposit Date is greater
than the Required Transferor Amount (after giving effect to
all Principal Receivables transferred to the Trust on such
day) and otherwise shall be deposited in the Special Funding
Account for Pool One.
(C) Allocations During the Early Amortization
Period. During the Early Amortization Period, an amount equal
to the product of (I) the Investor Percentage and (II) the
aggregate amount of Collections of Principal Receivables
deposited in the Collection Account on such Deposit Date,
shall be allocated to the Series 2003-[ ] Noteholders and
retained in the Collection Account until applied as provided
herein; provided, however, that after the date on which an
amount of such Collections equal to the Note Principal Balance
has been deposited into the Collection Account and allocated
to the Series 2003-[ ] Noteholders, the excess over such
amount shall be first, retained in the Collection Account for
application to reduce the O/C Amount to the Required O/C
Amount, second, if any other Principal Sharing Series in
Principal Sharing Group One is outstanding and in its
amortization period or accumulation period, retained in the
Collection Account for application, to the extent necessary,
as Shared Principal Collections on the related Distribution
Date, and third paid to the holders of the Transferor
Certificates only if the Transferor Amount on such date is
greater than the Required Transferor Amount (after giving
effect to all Principal Receivables
16
transferred to the Trust on such day) and otherwise shall be
deposited in the Special Funding Account for Pool One.
Section 4.02 Determination of Monthly Interest.
(a) The amount of monthly interest ("CLASS A MONTHLY
INTEREST") distributable from the Collection Account with respect to the Class A
Notes on any Distribution Date shall be an amount equal to the product of (i)
(A) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, times (B) the Class
A Note Interest Rate in effect with respect to the related Interest Period and
(ii) the Class A Note Principal Balance as of the close of business on the last
day of the preceding Due Period.
On each Determination Date, the Servicer shall determine the
excess, if any (the "CLASS A INTEREST SHORTFALL"), of (x) the Class A Monthly
Interest for such Distribution Date over (y) the aggregate amount of funds
expected to be paid with respect to such Class A Monthly Interest on the related
Distribution Date. If the Class A Interest Shortfall with respect to any
Distribution Date is greater than zero, on each subsequent Distribution Date
until such Class A Interest Shortfall is fully paid, an additional amount
("CLASS A ADDITIONAL INTEREST") equal to the product of (i) (A) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360, times (B) the Class A Note Interest Rate
and (ii) such Class A Interest Shortfall (or the portion thereof which has not
been paid to the Class A Noteholders) shall be payable as provided herein with
respect to the Class A Notes. Notwithstanding anything to the contrary herein,
Class A Additional Interest shall be payable or distributed to the Class A
Noteholders only to the extent permitted by applicable law.
(b) The amount of monthly interest ("CLASS B MONTHLY
INTEREST") distributable from the Collection Account with respect to the Class B
Notes on any Distribution Date shall be an amount equal to the product of (i)
(A) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, times (B) the Class
B Note Interest Rate in effect with respect to the related Interest Period and
(ii) the Class B Note Principal Balance as of the close of business on the last
day of the preceding Due Period.
On each Determination Date, the Servicer shall determine the
excess, if any (the "CLASS B INTEREST SHORTFALL"), of (x) the Class B Monthly
Interest for such Distribution Date over (y) the aggregate amount of funds
expected to be paid with respect to such Class B Monthly Interest on the related
Distribution Date. If the Class B Interest Shortfall with respect to any
Distribution Date is greater than zero, on each subsequent Distribution Date
until such Class B Interest Shortfall is fully paid, an additional amount
("CLASS B ADDITIONAL INTEREST") equal to the product of (i) (A) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360, times (B) the Class B Note Interest Rate in
effect with respect to the related Interest Period and (ii) such Class B
Interest Shortfall (or the portion thereof which has not been paid to the Class
B Noteholders) shall be payable as provided herein with respect to the Class B
Notes. Notwithstanding anything to the contrary herein, Class B Additional
Interest shall be payable or distributed to the Class B Noteholders only to the
extent permitted by applicable law.
17
Section 4.03 Determination of Monthly Principal. The amount of
monthly principal distributable from the Collection Account with respect to the
Notes and the O/C Amount on each Distribution Date (the "MONTHLY PRINCIPAL"),
beginning with the Distribution Date in the month following the month in which
the Controlled Accumulation Period or, if earlier, the Early Amortization
Period, begins, shall be equal to the least of (a) the Available Investor
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date, (b) for each Distribution Date with respect to the Controlled
Accumulation Period, the sum of the Controlled Deposit Amount for such
Distribution Date and the Excess O/C Amount for the related Due Period and (c)
the Adjusted Invested Amount for such Distribution Date (after taking into
account any adjustments to be made on such Distribution Date pursuant to
Sections 4.05 and 4.06).
Section 4.04 Application of Available Funds on Deposit in the
Collection Account. The Servicer shall apply, or shall cause the Indenture
Trustee to apply by written instruction to the Indenture Trustee, on each
Distribution Date, Available Investor Finance Charge and Administrative
Collections and Excess Finance Charge and Administrative Collections allocable
to Series 2003-[ ] in accordance with Section 4.07 and Available Investor
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date to make the following distributions:
(a) On each Distribution Date, an amount equal to the
Available Investor Finance Charge and Administrative Collections and Excess
Finance Charge and Administrative Collections allocable to Series 2003-[ ] in
accordance with Section 4.07 with respect to such Distribution Date will be
distributed or deposited in the following priority:
(i) an amount equal to Class A Monthly Interest
for such Distribution Date, plus the amount of any Class A Monthly
Interest, or portion thereof, previously due but not distributed to
Class A Noteholders on a prior Distribution Date, plus the amount of
any Class A Additional Interest for such Distribution Date, plus the
amount of any Class A Additional Interest, or portion thereof,
previously due but not distributed to Class A Noteholders on a prior
Distribution Date, shall be distributed to the Paying Agent for payment
to Class A Noteholders on such Distribution Date;
(ii) an amount equal to Class B Monthly Interest
for such Distribution Date, plus the amount of any Class B Monthly
Interest previously due but not distributed to Class B Noteholders on a
prior Distribution Date, plus the amount of any Class B Additional
Interest for such Distribution Date, plus the amount of any Class B
Additional Interest, or portion thereof, previously due but not
distributed to Class B Noteholders on a prior Distribution Date, shall
be distributed to the Paying Agent for payment to Class B Noteholders
on the applicable Distribution Date;
(iii) (A) if HFC or an Affiliate of HFC is no
longer the Servicer, an amount equal to the Monthly Servicing Fee for
such Distribution Date, plus the amount of any Monthly Servicing Fee,
or portion thereof, previously due but not distributed to such Servicer
on a prior Distribution Date, shall be distributed to such Servicer and
(B) if HFC or an Affiliate of HFC is no longer the Administrator, an
amount equal to the Monthly Administration Fee for such Distribution
Date, plus the amount of any Monthly
18
Administration Fee, or portion thereof, previously due but not
distributed to such Administrator on a prior Distribution Date, shall
be distributed to such Administrator;
(iv) an amount equal to the Investor Defaulted
Amount for such Distribution Date shall be treated as a portion of
Available Investor Principal Collections for such Distribution Date;
(v) an amount equal to the sum of the aggregate
amount of Investor Charge-offs and the amount of Subordinated Principal
Collections which have not been previously reimbursed shall be treated
as a portion of Available Investor Principal Collections for such
Distribution Date;
(vi) upon the occurrence of an Event of Default
with respect to Series 2003-[ ] and acceleration of the maturity of the
Series 2003-[ ] Notes pursuant to Section 5.03 of the Indenture, the
balance, if any, up to the outstanding Note Principal Balance shall be
treated as a portion of Available Investor Principal Collections for
such Distribution Date for distribution to the Series 2003-[ ]
Noteholders;
(vii) if HFC or an Affiliate of HFC is the
Servicer, an amount equal to the Monthly Servicing Fee for such
Distribution Date that has not been paid to the Servicer and any
Monthly Servicing Fee, or portion thereof, due but not paid to the
Servicer on a prior Distribution Date shall be paid to the Servicer
(unless such amount has been netted against deposits to the Collection
Account in accordance with Section 8.04 of the Indenture);
(viii) if HFC or an Affiliate of HFC is the
Administrator, an amount equal to the Monthly Administration Fee for
such Distribution Date and any Monthly Administration Fee due but not
paid to the Administrator on a prior Distribution Date shall be paid to
the Administrator (unless such amount has been netted against deposits
to the Collection Account in accordance with Section 8.04 of the
Indenture);
(ix) on each Distribution Date from and after the
Reserve Account Funding Date, but prior to the date on which the
Reserve Account terminates as described in Section 4.11(f), an amount
equal to the excess, if any, of the Required Reserve Account Amount
over the Available Reserve Account Amount shall be deposited into the
Reserve Account; and
(x) the balance, if any, will constitute a
portion of Excess Finance Charge and Administrative Collections for
such Distribution Date and will be available for allocation to other
Series in Excess Finance Charge Sharing Group One or to the Transferor,
as set forth in Section 8.08C of the Indenture.
(b) On each Distribution Date with respect to the
Revolving Period, an amount equal to the Available Investor Principal
Collections deposited in the Collection Account for the related Due Period shall
be distributed in the following order of priority:
19
(i) an amount equal to the excess, if any, of
the O/C Amount over the Required O/C Amount shall be paid to the
Transferor, for reduction of the O/C Amount, to the extent that the
Transferor Amount exceeds zero; and
(ii) the balance of such Available Investor
Principal Collections shall be treated as Shared Principal Collections
with respect to Principal Sharing Group One and applied in accordance
with Section 8.05 of the Indenture.
(c) On each Distribution Date with respect to the
Controlled Accumulation Period or the Early Amortization Period, an amount equal
to the Available Investor Principal Collections deposited in the Collection
Account for the related Due Period shall be distributed or deposited in the
following order of priority:
(i) during the Controlled Accumulation Period
and prior to the payment in full of the Class A Notes, the Class B
Notes and the O/C Amount an amount equal to the Monthly Principal for
such Distribution Date shall be first, deposited into the Principal
Funding Account in an amount not to exceed the Controlled Deposit
Amount and second, an amount not to exceed the Excess O/C Amount shall
be distributed to the O/C Holder for reduction of the O/C Amount;
(ii) during the Early Amortization Period, an
amount equal to the Monthly Principal for such Distribution Date shall
be distributed to the Paying Agent for payment to the Class A
Noteholders on such Distribution Date and on each subsequent
Distribution Date until the Class A Note Principal Balance has been
paid in full;
(iii) after giving effect to the distribution
referred to in clause (ii) above, during the Early Amortization Period,
an amount equal to the Monthly Principal remaining, if any, shall be
distributed to the Paying Agent for payment to the Class B Noteholders
on such Distribution Date and on each subsequent Distribution Date
until the Class B Note Principal Balance has been paid in full;
(iv) after the Class B Note Principal Balance has
been reduced to zero, during the Early Amortization Period, an amount
equal to the Monthly Principal remaining, if any, shall be distributed
to the O/C Holder, for reduction of the O/C Amount, on such
Distribution Date and on each subsequent Distribution Date until the
O/C Amount has been paid in full; and
(v) the balance of such Available Investor
Principal Collections shall be treated as Shared Principal Collections
with respect to Principal Sharing Group One and applied in accordance
with Section 8.05 of the Indenture.
(d) On the earlier to occur of (i) the first Distribution
Date with respect to the Early Amortization Period and (ii) the Expected
Principal Payment Date, the Indenture Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Principal Funding
Account and distribute to the Paying Agent for payment first, to the Class A
Noteholders up to the Class A Note Principal Balance and second, to the Class B
Noteholders up to the Class B Note Principal Balance, the amounts deposited into
the Principal Funding Account pursuant to subsection 4.04(c)(i).
20
(e) The Controlled Accumulation Period is scheduled to
commence on ________, 20____ provided, however, that, if the Accumulation Period
Length (determined as described below) is less than __ Due Periods, the date on
which the Controlled Accumulation Period actually commences will be delayed to
the first Business Day of the Due Period that is the number of whole Due Periods
prior to the Expected Principal Payment Date at least equal to the Accumulation
Period Length and, as a result, the number of Due Periods in the Controlled
Accumulation Period will at least equal the Accumulation Period Length. On the
Determination Date beginning in ________, 20____, and each Determination Date
thereafter until the Controlled Accumulation Period begins, the Servicer will
determine the "ACCUMULATION PERIOD LENGTH" which will equal the number of whole
Due Periods such that the sum of the Accumulation Period Factors for each Due
Period during such period will be equal to or greater than the Required
Accumulation Factor Number; provided, however, that the Accumulation Period
Length will not be determined to be less than one Due Period; provided, further,
however, that the determination of the Accumulation Period Length may be changed
at any time if an Officer's Certificate is delivered indicating that such action
will not result in an Adverse Effect.
Section 4.05 Investor Charge-offs. On each Determination Date, the
Servicer shall calculate the Investor Defaulted Amount, if any, for the related
Distribution Date. If, on any Distribution Date, the Investor Defaulted Amount
for such Distribution Date exceeds the amount available therefor pursuant to
Section 4.04(a)(iv) with respect to such Due Period, the Invested Amount will be
reduced by the amount of such excess, but not by more than the Investor
Defaulted Amount for such Distribution Date (such reduction, an "INVESTOR
CHARGE-OFF").
Section 4.06 Subordinated Principal Collections. On each
Distribution Date, the Servicer shall apply, or shall cause the Indenture
Trustee to withdraw from the Collection Account and apply, Subordinated
Principal Collections with respect to such Distribution Date, in an amount equal
to the lesser of the (a) Investor Percentage of all Collections of Principal
Receivables received during the preceding Due Period and (b) the Monthly
Subordination Amount for the preceding Due Period in accordance with the
priority set forth in clauses (i) through (iii) of Section 4.04(a). On each
Distribution Date, the Invested Amount shall be reduced by the amount of
Subordinated Principal Collections for such Distribution Date.
Section 4.07 Excess Finance Charge and Administrative Collections.
Subject to Section 8.08C of the Indenture, Excess Finance Charge and
Administrative Collections with respect to the Excess Finance Charge Sharing
Series in Excess Finance Charge Sharing Group One for any Distribution Date will
be allocated to Series 2003-[ ] in an amount equal to the product of (a) the
aggregate amount of Excess Finance Charge and Administrative Collections with
respect to all the Excess Finance Charge Sharing Series in Excess Finance Charge
Sharing Group One for such Distribution Date and (b) a fraction, the numerator
of which is the Finance Charge Shortfall for Series 2003-[ ] for such
Distribution Date and the denominator of which is the aggregate amount of
Finance Charge Shortfalls for all the Excess Finance Charge Sharing Series in
Excess Finance Charge Sharing Group One for such Distribution Date. The "FINANCE
CHARGE SHORTFALL" for Series 2003-[ ] for any Distribution Date will be equal to
the excess, if any, of (a) the full amount required to be paid, without
duplication, pursuant to subsections 4.04(a)(i) through (ix) on such
Distribution Date over (b) the Available Investor Finance Charge and
Administrative Collections with respect to the Due Period related to such
Distribution Date.
21
Section 4.08 Shared Principal Collections. Subject to Section 8.05
of the Indenture, Shared Principal Collections with respect to the Series in
Principal Sharing Group One for any Distribution Date will be allocated to
Series 2003-[ ] in an amount equal to the product of (a) the aggregate amount of
Shared Principal Collections with respect to all Principal Sharing Series in
Principal Sharing Group One for such Distribution Date and (b) a fraction, the
numerator of which is the Series 2003-[ ] Principal Shortfall for such
Distribution Date and the denominator of which is the aggregate amount of
Principal Shortfalls for all the Series which are Principal Sharing Series in
Principal Sharing Group One for such Distribution Date. The "SERIES 2003-[ ]
PRINCIPAL SHORTFALL" will be equal to (a) for any Distribution Date with respect
to the Revolving Period, zero, (b) for any Distribution Date with respect to the
Controlled Accumulation Period, the excess, if any, of the Controlled Deposit
Amount for such Distribution Date and the Excess O/C Amount with respect to the
Due Period related to such Distribution Date over the amount of Available
Investor Principal Collections for such Distribution Date (excluding any portion
thereof attributable to Shared Principal Collections), and (c) for any
Distribution Date with respect to the Early Amortization Period, the excess, if
any, of the Adjusted Invested Amount over the amount of Available Investor
Principal Collections for the Due Period related to such Distribution Date
(excluding any portion thereof attributable to Shared Principal Collections).
Section 4.09 [Reserved].
Section 4.10 Principal Funding Account.
(a) The Indenture Trustee shall establish and maintain
with an Eligible Institution, which may be the Indenture Trustee, in the name of
the Trust, on behalf of the Trust, for the benefit of the Series 2003-[ ]
Noteholders, a segregated trust account with the corporate trust department of
such Eligible Institution (the "PRINCIPAL FUNDING ACCOUNT"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Series 2003-[ ] Noteholders. The Indenture Trustee shall possess
all right, title and interest in all funds on deposit from time to time in the
Principal Funding Account and in all proceeds thereof. The Principal Funding
Account shall be under the sole dominion and control of the Indenture Trustee
for the benefit of the Series 2003-[ ] Noteholders. If at any time the
institution holding the Principal Funding Account ceases to be an Eligible
Institution, the Transferor shall notify the Indenture Trustee, and the
Indenture Trustee upon being notified (or the Servicer on its behalf) shall,
within 10 Business Days, (or such longer period as to which the Rating Agency
has consented) establish a new Principal Funding Account meeting the conditions
specified above with an Eligible Institution, and shall transfer any cash or any
investments to such new Principal Funding Account. The Indenture Trustee, at the
direction of the Servicer, shall (i) make withdrawals from the Principal Funding
Account from time to time, in the amounts and for the purposes set forth in this
Indenture Supplement, and (ii) on each Distribution Date (from and after the
commencement of the Controlled Accumulation Period) prior to the termination of
the Principal Funding Account, make deposits into the Principal Funding Account
in the amounts specified in, and otherwise in accordance with, subsection
4.04(c)(i).
(b) Funds on deposit in the Principal Funding Account
shall be invested at the direction of the Servicer by the Indenture Trustee in
Eligible Investments. Funds on deposit in the Principal Funding Account on any
Distribution Date, after giving effect to any withdrawals from the Principal
Funding Account on such Distribution Date, shall be invested in such
22
investments that will mature so that such funds will be available for withdrawal
on or prior to the following Distribution Date. The Indenture Trustee shall:
(i) hold each Eligible Investment that
constitutes investment property through a Securities Intermediary,
which Securities Intermediary shall agree with the Indenture Trustee
that (A) such investment property at all times shall be credited to a
securities account of the Indenture Trustee, (B) all property credited
to such securities account shall be treated as a financial asset, (C)
such Securities Intermediary shall treat the Indenture Trustee as
entitled to exercise the rights that comprise each financial asset
credited to such securities account, (D) such Securities Intermediary
shall comply with entitlement orders originated by the Indenture
Trustee without the further consent of any other person or entity, (E)
such Securities Intermediary shall not agree with any person or entity
other than the Indenture Trustee to comply with entitlement orders
originated by any person or entity other than the Indenture Trustee,
(F) such securities account and all property credited thereto shall not
be subject to any lien, security interest, right of set-off, or
encumbrance in favor of such Securities Intermediary or anyone claiming
through such Securities Intermediary (other than the Indenture
Trustee), and (G) such agreement between such Securities Intermediary
and the Indenture Trustee shall be governed by the laws of the State of
New York; and
(ii) maintain possession of each other Eligible
Investment not described in clause (i) above;
provided, that no Eligible Investment shall be disposed of prior to its maturity
date. Terms used in clause (i) above that are defined in the New York UCC and
not otherwise defined herein shall have the meaning set forth in the New York
UCC.
On each Distribution Date with respect to the Controlled
Accumulation Period and on the first Distribution Date with respect to the Early
Amortization Period, the Indenture Trustee, acting at the Servicer's direction
given on or before such Distribution Date, shall transfer from the Principal
Funding Account to the Collection Account the Principal Funding Investment
Proceeds on deposit in the Principal Funding Account for application as
Available Investor Finance Charge and Administrative Collections for such
Distribution Date.
Principal Funding Investment Proceeds (including reinvested
interest) shall not be considered part of the amounts on deposit in the
Principal Funding Account for purposes of this Indenture Supplement.
Section 4.11 Reserve Account.
(a) The Indenture Trustee shall establish and maintain
with an Eligible Institution, which may be the Indenture Trustee in the name of
the Trust, on behalf of the Trust, for the benefit of the Series 2003-[ ]
Noteholders, a segregated trust account with the corporate trust department of
such Eligible Institution (the "RESERVE ACCOUNT"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Series 2003-[ ] Noteholders. The Indenture Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Reserve
Account and in all proceeds thereof. The Reserve
23
Account shall be under the sole dominion and control of the Indenture Trustee
for the benefit of the Series 2003-[ ] Noteholders. If at any time the
institution holding the Reserve Account ceases to be an Eligible Institution,
the Transferor shall notify the Indenture Trustee, and the Indenture Trustee
upon being notified (or the Servicer on its behalf) shall, within 10 Business
Days (or such longer period as to which the Rating Agency has consented),
establish a new Reserve Account meeting the conditions specified above with an
Eligible Institution, and shall transfer any cash or any investments to such new
Reserve Account. The Indenture Trustee, at the direction of the Servicer, shall
(i) make withdrawals from the Reserve Account from time to time in an amount up
to the Available Reserve Account Amount at such time, for the purposes set forth
in this Indenture Supplement, and (ii) on each Distribution Date (from and after
the Reserve Account Funding Date) prior to termination of the Reserve Account,
make a deposit into the Reserve Account in the amount specified in, and
otherwise in accordance with, subsection 4.04(a)(ix).
(b) Funds on deposit in the Reserve Account shall be
invested at the direction of the Servicer by the Indenture Trustee in Eligible
Investments. Funds on deposit in the Reserve Account on any Distribution Date,
after giving effect to any withdrawals from the Reserve Account on such
Distribution Date, shall be invested in such investments that will mature so
that such funds will be available for withdrawal on or prior to the following
Distribution Date. The Indenture Trustee shall:
(i) hold each Eligible Investment that
constitutes investment property through a Securities Intermediary,
which Securities Intermediary shall agree with the Indenture Trustee
that (A) such investment property at all times shall be credited to a
securities account of the Indenture Trustee, (B) all property credited
to such securities account shall be treated as a financial asset, (C)
such Securities Intermediary shall treat the Indenture Trustee as
entitled to exercise the rights that comprise each financial asset
credited to such securities account, (D) such Securities Intermediary
shall comply with entitlement orders originated by the Indenture
Trustee without the further consent of any other person or entity, (E)
such Securities Intermediary shall not agree with any person or entity
other than the Indenture Trustee to comply with entitlement orders
originated by any person or entity other than the Indenture Trustee,
(F) such securities account and all property credited thereto shall not
be subject to any lien, security interest, right of set-off, or
encumbrance in favor of such Securities Intermediary or anyone claiming
through such Securities Intermediary (other than the Indenture
Trustee), and (G) such agreement between such Securities Intermediary
and the Indenture Trustee shall be governed by the laws of the State of
New York; and
(ii) maintain possession of each other Eligible
Investment not described in clause (i) above;
provided, that no Eligible Investment shall be disposed of prior to its maturity
date. Terms used in clause (i) above that are defined in the New York UCC and
not otherwise defined herein shall have the meaning set forth in the New York
UCC.
On each Distribution Date, all interest and earnings (net of
losses and investment expenses) accrued since the preceding Distribution Date on
funds on deposit in the Reserve
24
Account shall be retained in the Reserve Account to the extent that the
Available Reserve Account Amount is less than the Required Reserve Account
Amount, and the balance, if any, shall be deposited into the Collection Account
and included in Available Investor Finance Charge and Administrative Collections
for such Distribution Date. For purposes of determining the availability of
funds or the balance in the Reserve Account for any reason under this Indenture
Supplement, except as otherwise provided in the preceding sentence, investment
earnings on such funds shall be deemed not to be available or on deposit.
(c) On or before each Distribution Date with respect to
the Controlled Accumulation Period and on the first Distribution Date with
respect to the Early Amortization Period, the Servicer shall calculate the
Reserve Draw Amount; provided, however, that such amount will be reduced to the
extent that funds otherwise would be available for deposit in the Reserve
Account under Section 4.04(a)(ix) with respect to such Distribution Date.
(d) In the event that for any Distribution Date the
Reserve Draw Amount is greater than zero, the Reserve Draw Amount, up to the
Available Reserve Account Amount, shall be withdrawn from the Reserve Account on
such Distribution Date by the Indenture Trustee (acting in accordance with the
instructions of the Servicer) and deposited into the Collection Account for
application as Available Investor Finance Charge and Administrative Collections
for such Distribution Date.
(e) In the event that the Reserve Account Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Reserve Account with respect to such Distribution Date, is greater than
zero, the Indenture Trustee, acting in accordance with the instructions of the
Servicer, shall withdraw from the Reserve Account and pay to the holder of the
interest of the Transferor Certificate an amount equal to such Reserve Account
Surplus.
(f) Upon the earliest to occur of (i) the termination of
the Trust pursuant to Article VIII of the Trust Agreement, (ii) if the
Controlled Accumulation Period has not commenced, the first Distribution Date
relating to the Early Amortization Period and (iii) if the Controlled
Accumulation Period has commenced, the earlier of the first Distribution Date
with respect to the Early Amortization Period and the Expected Principal Payment
Date, the Indenture Trustee, acting in accordance with the instructions of the
Servicer, after the prior payment of all amounts owing to the Series 2003-[ ]
Noteholders that are payable from the Reserve Account as provided herein, shall
withdraw from the Reserve Account and pay first, to the O/C Holder for reduction
of the O/C Amount until reduced to zero and second, to the Transferor, all
amounts, if any, on deposit in the Reserve Account and the Reserve Account shall
be deemed to have terminated for purposes of this Indenture Supplement;
provided, however, that following the occurrence of an Event of Default with
respect to Series 2003-[ ] and acceleration of the maturity of the Series 2003-[
] Notes pursuant to Section 5.03 of the Indenture, the Servicer shall withdraw
from the Reserve Account all amounts on deposit therein and the Indenture
Trustee or the Servicer shall deposit such amounts in the Collection Account for
distribution to the Series 2003-[ ] Noteholders in accordance with Section 5.02
to fund any shortfalls in amounts owed to such Series 2003-[ ] Noteholders.
25
Section 4.12 Determination of LIBOR.
(a) On each LIBOR Determination Date, the Indenture
Trustee shall determine LIBOR on the basis of the rate for deposits in United
States dollars for a one-month period which appears on Telerate Page 3750 as of
11:00 a.m., London time, on such date. If such rate does not appear on Telerate
Page 3750, the rate for that LIBOR Determination Date shall be determined on the
basis of the rates at which deposits in United States dollars are offered by the
Reference Banks at approximately 11:00 a.m., London time, on that day to prime
banks in the London interbank market for a one-month period. The Indenture
Trustee shall request the principal London office of each of the Reference Banks
to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that LIBOR Determination Date shall be the arithmetic
mean of the quotations. If fewer than two quotations are provided as requested,
the rate for that LIBOR Determination Date will be the arithmetic mean of the
rates quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a one-month period.
(b) The Class A Note Interest Rate and Class B Note
Interest Rate applicable to the then current and the immediately preceding
Interest Periods may be obtained by telephoning the Indenture Trustee at its
Corporate Trust Office or such other address and telephone number as shall be
designated by the Indenture Trustee for such purpose by prior written notice by
the Indenture Trustee to each Series 2003-[ ] Noteholder from time to time.
(c) On each LIBOR Determination Date, the Indenture
Trustee shall send to the Servicer and the Administrator by facsimile
transmission, notification of LIBOR for the following Interest Period.
Section 4.13 Investment Instructions. Any investment instructions
required to be given to the Indenture Trustee pursuant to the terms hereof must
be given to the Indenture Trustee no later than 12:00 p.m. (New York City time)
on the date such investment is to be made. In the event the Indenture Trustee
receives such investment instruction later than such time, the Indenture Trustee
may, but shall have no obligation to, make such investment. In the event the
Indenture Trustee is unable to make an investment required in an investment
instruction received by the Indenture Trustee after 12:00 p.m. (New York City
time) on such day, such investment shall be made by the Indenture Trustee on the
next succeeding Business Day. In no event shall the Indenture Trustee be liable
for any investment not made pursuant to investment instructions received after
12:00 p.m. (New York City time) on the day such investment is requested to be
made.
Section 4.14 Exchange of Notes for Transferor Amount. If the
Transferor purchases Series 2003-[ ] Notes from Series 2003-[ ] Noteholders, the
Transferor may, on any Distribution Date (after giving effect to all required
allocations and payments on such Distribution Date), cancel such purchased
Series 2003-[ ] Notes by delivering a written request to the Indenture Trustee
to do so; provided, however, that the Transferor may only cancel Class A and
Class B Notes it has purchased if the Rating Agency Condition has been satisfied
and a credit enhancement deficiency will not result. The Transferor may in
connection with such cancellation reduce a portion of the O/C Amount and may
(but shall not be required to) cancel
26
such portion of the O/C Amount; provided that the reduction in the O/C Amount
resulting from such cancellation may not result in the O/C Amount being less
than the Required O/C Amount. As a result of any cancellation of Series 2003-[ ]
Notes pursuant to this Section, (a) the Invested Amount shall be reduced by (i)
the aggregate principal amount of such purchased Series 2003-[ ] Notes and (ii)
the reduction in the O/C Amount and (b) the Transferor Amount shall be increased
in an amount equal to such reduction in the Invested Amount.
ARTICLE V
DELIVERY OF SERIES 2003-[ ] NOTES;
DISTRIBUTIONS; REPORTS TO SERIES 2003-[ ] NOTEHOLDERS
Section 5.01 Delivery and Payment for the Series 2003-[ ] Notes.
With respect to the Series 2003-[ ] Notes which are in certificated form, the
Issuer shall execute and the Indenture Trustee shall authenticate the Series
2003-[ ] Notes in accordance with Section 2.03 of the Indenture. The Indenture
Trustee shall deliver those Series 2003-[ ] Notes to or upon the order of the
Trust when so authenticated.
Section 5.02 Distributions.
(a) On each Distribution Date, the Paying Agent shall
distribute to each Class A Noteholder of record on the related Record Date
(other than as provided in Section 11.02 of the Indenture) such Class A
Noteholder's pro rata share of the amounts held by the Paying Agent that are
allocated and available on such Distribution Date to pay interest on the Class A
Notes pursuant to this Indenture Supplement.
(b) On each Distribution Date, the Paying Agent shall
distribute to each Class A Noteholder of record on the related Record Date such
Class A Noteholder's pro rata share of the amounts held by the Paying Agent that
are allocated and available on such Distribution Date to pay principal of the
Class A Notes pursuant to this Indenture Supplement.
(c) On each Distribution Date, the Paying Agent shall
distribute to each Class B Noteholder of record on the related Record Date
(other than as provided in Section 11.02 of the Indenture) such Class B
Noteholder's pro rata share of the amounts held by the Paying Agent that are
allocated and available on such Distribution Date to pay interest on the Class B
Notes pursuant to this Indenture Supplement.
(d) On each Distribution Date, the Paying Agent shall
distribute to each Class B Noteholder of record on the related Record Date such
Class B Noteholder's pro rata share of the amounts held by the Paying Agent that
are allocated and available on such Distribution Date to pay principal of the
Class B Notes pursuant to this Indenture Supplement.
(e) On each Distribution Date, the Paying Agent shall
distribute to the O/C Holder, in immediately available funds, the amounts held
by the Paying Agent that are allocated and available on such Distribution Date
to reduce the O/C Amount pursuant to this Indenture Supplement.
27
(f) The distributions to be made pursuant to this Section
5.02 are subject to the provisions of Sections 2.06, 6.01 and 7.01 of the
Transfer and Servicing Agreement, Section 11.02 of the Indenture and Section
7.01 of this Indenture Supplement.
(g) Except as provided in Section 11.02 of the Indenture
with respect to a final distribution, distributions to Series 2003-[ ]
Noteholders hereunder shall be made by (i) check mailed to each Series 2003-[ ]
Noteholder (at such Noteholder's address as it appears in the Note Register),
except that with respect to any Series 2003-[ ] Notes registered in the name of
the nominee of a Clearing Agency, such distribution shall be made in immediately
available funds and (ii) without presentation or surrender of any Series 2003-[
] Note or the making of any notation thereon.
Section 5.03 Reports and Statements to Series 2003-[ ]
Noteholders.
(a) On each Distribution Date, the Paying Agent, on
behalf of the Indenture Trustee, shall, provided the Servicer has delivered a
statement substantially in the form of EXHIBIT C, forward to each Series 2003-[
] Noteholder such statement substantially in the form of EXHIBIT C prepared by
the Servicer.
(b) Not later than the second Business Day preceding each
Distribution Date, the Servicer shall deliver to the Owner Trustee, the
Indenture Trustee, the Paying Agent and each Rating Agency (i) a statement
substantially in the form of EXHIBIT C prepared by the Servicer and (ii) a
certificate of an Authorized Officer substantially in the form of EXHIBIT D;
provided that the Servicer may amend the form of EXHIBIT C and EXHIBIT D, from
time to time.
(c) A copy of each statement or certificate provided
pursuant to paragraph (a) or (b) may be obtained by any Series 2003-[ ]
Noteholder by a request in writing to the Servicer.
(d) On or before March 31 of each calendar year,
beginning with calendar year 2004, the Paying Agent, on behalf of the Indenture
Trustee, shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Series 2003-[ ] Noteholder, a statement
prepared by the Servicer containing the information which is required to be
contained in the statement to Series 2003-[ ] Noteholders, as set forth in
paragraph (a) above, aggregated for such calendar year together with other
information as is required to be provided by an issuer of indebtedness under the
Code. Such obligation of the Paying Agent shall be deemed to have been satisfied
to the extent that substantially comparable information shall be provided by the
Paying Agent pursuant to any requirements of the Code as from time to time in
effect.
(e) On or before March 31 of each calendar year,
beginning with calendar year 2004, the Paying Agent, on behalf of the Indenture
Trustee, shall forward to each Series 2003-[ ] Noteholder copies of each
certificate and report furnished to the Indenture Trustee pursuant to Section
3.05 or 3.06 of the Transfer and Servicing Agreement.
28
ARTICLE VI
SERIES 2003-[ ] AMORTIZATION EVENTS
Section 6.01 Series 2003-[ ] Amortization Events. If any one of
the following events shall occur with respect to Series 2003-[ ]:
(a) failure on the part of the Transferor (i) to make any
payment or deposit required by the terms of the Transfer and Servicing
Agreement, the Indenture or this Indenture Supplement on or before the date
occurring five Business Days after the date such payment or deposit is required
to be made therein or herein or (ii) duly to observe or perform in any material
respect any other covenants or agreements of the Transferor set forth in the
Transfer and Servicing Agreement, the Indenture or this Indenture Supplement,
which failure has an Adverse Effect on the Series 2003-[ ] Noteholders and which
continues unremedied and continues to materially and adversely affect the
interests of the Series 2003-[ ] Noteholders for a period of 60 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Transferor by the Indenture Trustee, or to the
Transferor and the Indenture Trustee by any Holder of the Series 2003-[ ] Notes;
(b) any representation or warranty made by the Transferor
in the Transfer and Servicing Agreement, or any information contained in a
computer file or microfiche list required to be delivered by the Transferor
pursuant to Section 2.01 or subsection 2.09(h) of the Transfer and Servicing
Agreement shall prove to have been incorrect in any material respect when made
or when delivered, which continues to be incorrect in any material respect for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Transferor by
the Indenture Trustee, or to the Transferor and the Indenture Trustee by any
Holder of the Series 2003-[ ] Notes and as a result of which an Adverse Effect
occurs with respect to the Series 2003-[ ] Noteholders and such Adverse Effect
continues for the designated period; provided, however, that a Series 2003-[ ]
Amortization Event pursuant to this subsection 6.01(b) shall not be deemed to
have occurred hereunder if the Transferor has accepted reassignment of the
related Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Transfer and Servicing
Agreement;
(c) a failure by the Transferor to convey Receivables in
Additional Accounts or Participation Interests to the Trust within five Business
Days after the day on which it is required to convey such Receivables or
Participation Interests pursuant to subsection 2.09(a) of the Transfer and
Servicing Agreement;
(d) any Servicer Default shall occur which has an Adverse
Effect on the Series 2003-[ ] Noteholders;
(e) the average Series Portfolio Yield for any three
consecutive Due Periods is reduced to a rate which is less than the average of
the Base Rates for such period;
(f) the Class A Note Principal Balance or the Class B
Note Principal Balance shall not be paid in full on the Expected Principal
Payment Date;
29
(g) without limiting the foregoing, the occurrence of an
Event of Default with respect to Series 2003-[ ] and an acceleration of the
maturity of the Series 2003-[ ] Notes pursuant to Section 5.03 of the Indenture;
or
(h) the bankruptcy or insolvency of any other receivables
seller;
then, in the case of any event described in subparagraph (a), (b) or (d) after
the applicable grace period, if any, set forth in such subparagraphs, either the
Indenture Trustee or the Holders of Series 2003-[ ] Notes evidencing more than
50% of the aggregate Outstanding Amount of Series 2003-[ ] Notes by notice then
given in writing to the Transferor and the Servicer (and to the Indenture
Trustee if given by the Series 2003-[ ] Noteholders) may declare that an
amortization event (a "SERIES 2003-[ ] AMORTIZATION EVENT") has occurred as of
the date of such notice, and, in the case of any event described in subparagraph
(c), (e), (f), (g) or (h), a Series 2003-[ ] Amortization Event shall occur
without any notice or other action on the part of the Indenture Trustee or the
Series 2003-[ ] Noteholders immediately upon the occurrence of such event.
ARTICLE VII
REDEMPTION OF SERIES 2003-[ ] NOTES;
SERIES FINAL MATURITY; FINAL DISTRIBUTIONS
Section 7.01 Optional Redemption of Series 2003-[ ] Notes.
(a) On any day occurring on or after the date on which
the Note Principal Balance is reduced to 10% or less of the sum of the Class A
Note Initial Principal Balance and the Class B Note Initial Principal Balance
the Transferor shall have the option to redeem the Series 2003-[ ] Notes and the
O/C Amount, at a purchase price equal to (i) if such day is a Distribution Date,
the Reassignment Amount for such Distribution Date or (ii) if such day is not a
Distribution Date, the Reassignment Amount for the Distribution Date following
such day.
(b) The Transferor shall give the Servicer and the
Indenture Trustee at least 30 days' prior written notice of the date on which
the Transferor intends to exercise such optional redemption. Not later than 1:00
p.m., New York City time, on such day the Transferor shall deposit into the
Principal Funding Account in immediately available funds the excess of the
Reassignment Amount (less the O/C Amount) over the amount, if any, on deposit in
the Principal Funding Account. The remaining Reassignment Amount shall be
distributed to the O/C Holder for reduction of the O/C Amount. Such redemption
option is subject to payment in full of the Reassignment Amount. Following such
deposit into the Principal Funding Account and such distribution to the O/C
Holder in accordance with the foregoing, the Invested Amount for Series 2003-[ ]
shall be reduced to zero and the Series 2003-[ ] Noteholders shall have no
further interest in or claim against the Trust. The Reassignment Amount shall be
distributed as set forth in subsection 7.02(a).
30
Section 7.02 Series Final Maturity.
(a) The amount to be paid by the Transferor with respect
to Series 2003-[ ] in connection with (i) a reassignment of Receivables to the
Transferor pursuant to Section 2.06 of the Transfer and Servicing Agreement or
(ii) an Optional Redemption of the Notes pursuant to Section 7.01, shall be the
Reassignment Amount for the first Distribution Date following the Due Period in
which the reassignment obligation arises under the Transfer and Servicing
Agreement. With respect to the Reassignment Amount deposited into the Collection
Account pursuant to Section 7.01 herein or Section 2.06 of the Transfer and
Servicing Agreement or the proceeds from any Foreclosure Remedy pursuant to
Section 5.05 of the Indenture, the Indenture Trustee shall, in accordance with
the written direction of the Servicer, not later than 1:00 p.m. New York City
time, on the related Distribution Date, make deposits or distributions of the
following amounts (in the priority set forth below and, in each case after
giving effect to any deposits and distributions otherwise to be made on such
date) in immediately available funds:
(i) (x) the Class A Note Principal Balance on
such Distribution Date will be distributed to the Paying Agent for
payment to the Class A Noteholders and (y) an amount equal to the sum
of (A) Class A Monthly Interest for such Distribution Date, (B) any
Class A Monthly Interest previously due but not distributed to the
Class A Noteholders on a prior Distribution Date and (C) the amount of
Class A Additional Interest, if any, for such Distribution Date and any
Class A Additional Interest previously due but not distributed to the
Class A Noteholders on any prior Distribution Date, will be distributed
to the Paying Agent for payment to the Class A Noteholders;
(ii) (x) the Class B Note Principal Balance on
such Distribution Date will be distributed to the Paying Agent for
payment to the Class B Noteholders and (y) an amount equal to the sum
of (A) Class B Monthly Interest for such Distribution Date, (B) any
Class B Monthly Interest previously due but not distributed to the
Class B Noteholders on a prior Distribution Date and (C) the amount of
Class B Additional Interest, if any, for such Distribution Date and any
Class B Additional Interest previously due but not distributed to the
Class B Noteholders on any prior Distribution Date, will be distributed
to the Paying Agent for payment to the Class B Noteholders; and
(iii) the O/C Amount on such Distribution Date
will be distributed to the Paying Agent for payment to the O/C Holder.
(b) Notwithstanding anything to the contrary in this
Indenture Supplement, the Indenture or the Transfer and Servicing Agreement, all
amounts distributed to the Paying Agent pursuant to subsection 7.02(a) for
payment to the Series 2003-[ ] Noteholders shall be deemed distributed in full
to the Series 2003-[ ] Noteholders on the date on which such funds are
distributed to the Paying Agent pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 11.02 of the Indenture.
31
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Ratification of Indenture. As supplemented by this
Indenture Supplement, the Indenture is in all respects ratified and confirmed
and the Indenture as so supplemented by this Indenture Supplement shall be read,
taken and construed as one and the same instrument.
Section 8.02 Counterparts. This Indenture Supplement 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 shall
constitute one and the same instrument.
Section 8.03 Governing Law. THIS INDENTURE SUPPLEMENT 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 8.04 Transfer of the O/C Amount. Notwithstanding anything
to the contrary in this Indenture Supplement, no interest in the O/C Amount may
be directly or indirectly sold, assigned, pledged, hypothecated, exchanged,
participated or otherwise transferred (other than in connection with the
transfer upon initial issuance to the Indenture Trustee as security for the
Series 2003-[ ] Notes) except to a Person who is a "United States person" for
United States federal income tax purposes and only upon the prior delivery of a
Tax Opinion to the Indenture Trustee, and any such transfer in violation of
these requirements shall be null and void ab initio.
Section 8.05 Limitation of Liability. Notwithstanding any other
provision herein or elsewhere, this Agreement has been executed and delivered by
_________________, not in its individual capacity, but solely in its capacity as
Owner Trustee of the Trust, in no event shall _________________ in its
individual capacity have any liability in respect of the representations,
warranties, or obligations of the Trust hereunder or under any other document,
as to all of which recourse shall be had solely to the assets of the Trust, and
for all purposes of this Agreement and each other document, the Owner Trustee
(as such or in its individual capacity) shall be subject to, and entitled to the
benefits of, the terms and provisions of the Trust Agreement.
Section 8.06 Perfection of Security Interest.
(a) The Issuer hereby represents and warrants, as of the
closing date, that:
(i) this Agreement creates a valid and
continuing security interest (as defined in the applicable UCC) in the
Receivables in favor of the Indenture Trustee on behalf of the Holders
of the Notes including the Series 2003-[ ] Noteholders, which security
interest is prior to all other liens, and is enforceable as such as
against creditors of and purchasers from the Issuer;
(ii) the Receivables constitute "accounts",
"instruments", "chattel paper" or "general intangibles" within the
meaning of the applicable UCC;
32
(iii) the Issuer owns and has good and marketable
title to the Receivables free and clear of any lien, claim or
encumbrance of any Person;
(iv) the Issuer has caused or will have caused,
within ten days, the filing of all appropriate financing statements in
the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the security interest in the
Receivables granted to the Indenture Trustee on behalf of the Holders
of the Notes including the Series 2003-[ ] Noteholders hereunder;
(v) other than the security interest granted to
the Indenture Trustee, pursuant to this Agreement, the Issuer has not
pledged, assigned, sold, granted a security interest in, or otherwise
conveyed any of the Receivables. The Issuer has not authorized the
filing of and is not aware of any financing statements against the
Issuer that include a description of collateral covering the
Receivables other than any financing statement relating to the security
interest granted to the Indenture Trustee hereunder. The Issuer is not
aware of any judgment or tax lien filings against the Issuer.
(b) The Indenture Trustee may not waive a breach of any
of the foregoing representations unless prior to such waiver (1) it has notified
Standard & Poor's Rating Service ("S&P") of its intention to waive such breach
and S&P has informed the Indenture Trustee, and the Indenture Trustee has
informed the Series 2003-[ ] Noteholders, as to whether such waiver will result
in a downgrade of the Series 2003-[ ] Notes and (2) the Indenture Trustee has
subsequently received the unanimous consent of the Series 2003-[ ] Noteholders
to such waiver.
Section 8.07 Transfer Restrictions. Each purchaser or transferee
of a Note that is a Plan or a person acting on behalf of or investing the assets
of a Plan shall be deemed to represent that its purchase and continued holding
of the Note will be covered by a U.S. Department of Labor prohibited transaction
class exemption.
Section 8.08 Notice of Servicing Delegation. To the extent that
the Servicer delegates any of its servicing duties pursuant to Section 5.07 of
the Transfer and Servicing Agreement, other than to an affiliate thereof, the
Issuer shall provide, or cause to be provided written notice to Standard &
Poor's of such a delegation of servicing duties by the Servicer.
Section 8.09 Zero Balance Account Removal. To the extent that a
Zero Balance Account, having a zero balance for less than 180 consecutive days,
is the subject of a removal pursuant to Section 2.10 of the Transfer and
Servicing Agreement, the Issuer shall provide, or cause to be provided, written
notice of such removal to Standard & Poor's.
Section 8.10 Notice of Insolvency Events. To the extent that an
Insolvency Event shall occur with respect to (a) the Transferor, as specified in
Section 6.01 of the Transfer and Servicing Agreement, or (b) the Sellers, as
specified in Section 8.02 of the Transferor RPA, the Issuer shall provide, or
cause to be provided, written notice of such occurrence to Standard & Poor's.
[SIGNATURE PAGE FOLLOWS]
33
IN WITNESS WHEREOF, the undersigned have caused this Indenture
Supplement to be duly executed and delivered by their respective duly authorized
officers on the day and year first above written.
______________________________,
not in its individual capacity, but solely as Owner
Trustee on behalf of the HOUSEHOLD CONSUMER LOAN
MASTER NOTE TRUST I
By:_____________________________________
Name:
Title:
_______________________________,
not in its individual capacity, but solely as
Indenture Trustee and Securities Intermediary
By:_____________________________________
Name:
Title:
34