EXHIBIT 4.2
EXECUTION COPY
--------------------------------------------------------------------------------
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I,
Issuer
and
THE BANK OF NEW YORK,
Indenture Trustee, Paying Agent and Securities Intermediary
SERIES ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ SUPPLEMENT
Dated as of March 13, 2003
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I CREATION OF THE SERIES 2003-1 NOTES.....................................................................1
Section 1.01 Designation.......................................................................................1
ARTICLE II DEFINITIONS............................................................................................2
Section 2.01 Definitions.......................................................................................2
ARTICLE III SERVICING FEE........................................................................................16
Section 3.01 Servicing Compensation...........................................................................16
ARTICLE IV RIGHTS OF SERIES 2003-1 NOTEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS....................17
Section 4.01 Collections and Allocations......................................................................17
Section 4.02 Determination of Monthly Interest................................................................18
Section 4.03 Determination of Monthly Principal...............................................................20
Section 4.04 Application of Available Funds on Deposit in the Collection Account..............................20
Section 4.05 Investor Charge-offs.............................................................................23
Section 4.06 Subordinated Principal Collections...............................................................23
Section 4.07 Excess Finance Charge and Administrative Collections.............................................24
Section 4.08 Shared Principal Collections.....................................................................24
Section 4.09 [Reserved].......................................................................................24
Section 4.10 Principal Funding Account........................................................................24
Section 4.11 Reserve Account..................................................................................26
Section 4.12 Determination of LIBOR...........................................................................28
Section 4.13 Investment Instructions..........................................................................29
Section 4.14 Exchange of Notes for Transferor Amount..........................................................29
ARTICLE V DELIVERY OF SERIES 2003-1 NOTES; DISTRIBUTIONS; REPORTS TO SERIES 2003-1 NOTEHOLDERS...................29
Section 5.01 Delivery and Payment for the Series 2003-1 Notes.................................................29
Section 5.02 Distributions....................................................................................30
Section 5.03 Reports and Statements to Series 2003-1 Noteholders..............................................31
ARTICLE VI SERIES 2003-1 AMORTIZATION EVENTS.....................................................................31
Section 6.01 Series 2003-1 Amortization Events................................................................31
ARTICLE VII REDEMPTION OF SERIES 2003-1 NOTES; SERIES FINAL MATURITY; FINAL DISTRIBUTIONS........................33
i
Section 7.01 Optional Redemption of Series 2003-1 Notes.......................................................33
Section 7.02 Series Final Maturity............................................................................33
ARTICLE VIII MISCELLANEOUS PROVISIONS............................................................................34
Section 8.01 Ratification of Indenture........................................................................34
Section 8.02 Counterparts.....................................................................................35
Section 8.03 Governing Law....................................................................................35
Section 8.04 Transfer of the O/C Amount.......................................................................35
Section 8.05 Limitation of Liability..........................................................................35
Section 8.06 Certain Commercial Law Representations and Warranties............................................35
EXHIBITS
EXHIBIT A-1 FORM OF CLASS A NOTE
EXHIBIT A-2 FORM OF CLASS B NOTE
EXHIBIT A-3 FORM OF CLASS C 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 ▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ SUPPLEMENT, dated as of March 13, 2003
(the "Indenture Supplement"), between HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE
TRUST I, a statutory trust existing under the laws of the State of Delaware
(herein, the "Issuer" or the "Trust"), and THE BANK OF NEW YORK, 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 Amended and Restated Master Indenture, dated as of March 13, 2003 (the
"Indenture") between the Issuer and the Indenture Trustee (the Indenture,
together with this Indenture Supplement, the "Agreement").
The Transferor may direct 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 has directed 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 2003-1, the
issuance, authentication and delivery of the Class B Notes, Series 2003-1 and
the issuance, authentication and delivery of the Class C Notes, Series 2003-1
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 2003-1 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 Affinity Credit Card Master Note Trust I, Series 2003-1" or the
"Series 2003-1 Notes." The Series 2003-1 Notes shall be issued in three Classes,
the first of which shall be known as the "Class A Series 2003-1 Floating Rate
Asset Backed Notes", the second of which shall be known as the "Class B Series
2003-1 Floating Rate Asset Backed Notes" and the third of which shall be known
as the "Class C Series 2003-1 Floating Rate Asset Backed Notes". The Series
2003-1 Notes shall be due and payable on the Series 2003-1 Final Maturity Date.
(b) Series 2003-1 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 2003-1 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 2003-1 shall be the April 2003 Distribution Date, and the first Due
Period shall begin on and include March 1, 2003 and end on and include March 31,
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
2003-1 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 2003-1) 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, the Class B Additional
Interest and the Class C 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 2003-1 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 2003-1 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.
"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 (other
than Investor Finance Charge and Administrative Receivables allocated to
Servicer Interchange with respect to such Due Period), (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), (d) and (f).
"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 2003-1 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)(viii) 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,
the Class B Note Interest Rate and the Class C Note Interest Rate for the
Interest Period commencing in such Due Period
3
(weighted based on the Class A Note Principal Balance, the Class B Note
Principal Balance and the Class C Note Principal Balance as of the last day of
the prior Due Period or, for the first Due Period, in each case as of the
Closing Date) 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 (or, in
the case of the first Due Period, as of the Closing Date) and (b) a fraction,
the numerator of which is the product of (i) twelve and (ii) the sum of the
Monthly Servicing Fee and Servicer Interchange for such Due Period 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 (or, in the case of the first Due
Period, as of the Closing Date).
"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
$451,750,000.
"Class A Note Interest Rate" shall mean a per annum rate of
0.12% in excess of LIBOR as determined (i) on March 11, 2003, for the period
from and including the Closing Date through and excluding April 15, 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 $30,000,000.
"Class B Note Interest Rate" shall mean a per annum rate of
0.55% in excess of LIBOR as determined (i) on March 11, 2003, for the period
from and including the Closing Date
4
through and excluding April 15, 2003 and (ii) on the related LIBOR Determination
Date with respect to each Interest Period thereafter.
"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.
"Class C Additional Interest" shall have the meaning specified
in subsection 4.02(c).
"Class C Interest Shortfall" shall have the meaning specified in
subsection 4.02(c).
"Class C Monthly Interest" shall have the meaning specified in
subsection 4.02(c).
"Class C Note Initial Principal Balance" shall mean $18,250,000.
"Class C Note Interest Rate" shall mean a per annum rate of
1.45% in excess of LIBOR as determined (i) on March 11, 2003, for the period
from and including the Closing Date through and excluding April 15, 2003 and
(ii) on the related LIBOR Determination Date with respect to each Interest
Period thereafter.
"Class C Note Principal Balance" shall mean, with respect to any
date, an amount equal to (a) the Class C Note Initial Principal Balance minus
(b) the aggregate amount of any principal payments made to the Class C
Noteholders prior to such date.
"Class C Noteholder" shall mean the Person in whose name a
Class C Note is registered in the Note Register.
"Class C 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-3.
"Closing Date" shall mean March 13, 2003.
"Controlled Accumulation Amount" shall mean for any Distribution
Date with respect to the Controlled Accumulation Period, $41,666,667; provided,
however, that if the Accumulation Period Length is determined to be less than 12
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, the Class B Note Initial Principal Balance and the Class C
Note
5
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 January 31, 2007 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, (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 and (c) 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 C 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 sum of the Class A
Note Principal Balance and the Class B Note Principal Balance and (B) the Class
C 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 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 April 15, 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 2003-1 is deemed to
6
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 2003-1 Noteholders and (b) the Series
2003-1 Final Maturity Date.
"Eligible Investments" shall mean, with respect to funds
allocable to Series 2003-1 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 "F1+,"
"P-1" and "A-1+" (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.
"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
2003-1 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 2003-1 with respect to
such Due Period, minus (iii) the amounts distributable pursuant to subsection
4.04(a)(i) through (vii) 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 (or, with
respect to the first Due Period, as of the Closing Date).
"Expected Principal Payment Date" shall mean the February 2008
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
7
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 $19,480,519.
"Initial Invested Amount" shall mean $519,480,519.
"Initial Principal Amount" shall mean $500,000,000.
"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 Interest Period, from and
including the Closing Date) to but excluding such Distribution Date.
"Interim Note Principal Amount" shall mean as of any
Distribution Date (with respect to clauses (a), (b), (c) and (d), before giving
effect to distributions on such Distribution Date) (a) the Class A Note
Principal Balance plus (b) the Class B Note Principal Balance plus (c) the Class
C Note Principal Balance minus (d) the Principal Funding Account, if any, minus
(e) the Controlled Deposit Amount deposited 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 of the Series 2003-1 Notes and
the Initial O/C Amount minus (a) the amount of principal previously paid to the
Series 2003-1 Noteholders with respect to the Class A Notes, the Class B Notes
and the Class C 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.
"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 at any time, (ii)
Principal Receivables during the Revolving Period, and (iii) Defaulted Amounts
at any time, the Floating Investor Percentage and (b) with respect to Principal
Receivables during any period other than the Revolving Period, the Fixed
Investor Percentage.
8
"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 (a) March 11, 2003 for the
period from and including the Closing Date through but excluding April 15, 2003
and (b) the second London Business Day prior to the commencement of the second
and each subsequent Interest Period.
"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 Interest" shall mean, with respect to any Distribution
Date, the sum of the Class A Monthly Interest, the Class B Monthly Interest and
the Class C 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 Net 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,
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:
(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;
9
provided further, that with respect to the first Distribution Date, the Monthly
Servicing Fee will equal $198,995.
"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) 13.00% 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);
(b) the lower of (i) the excess of the amounts distributable
pursuant to subsections 4.04(a)(ii), 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 (ii)(1) the product of (I) 7.25% 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); and
(c) the lower of (i) the excess of the amounts distributable
pursuant to subsections 4.04(a)(iii) and 4.04(a)(iv), 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)(iii) and (iv), and (ii)(1) the product of (I) 3.75% 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 clauses (a) and
(b) above with respect to the related Distribution Date).
"Net Servicing Fee Rate" shall mean (i) so long as HFC or an
Affiliate or The Bank of New York is the Servicer, 0.75% per annum and (ii) if
HFC or an Affiliate or The Bank of New York is no longer the Servicer, 2.00% per
annum.
"Note Principal Balance" shall mean, at any time of
determination, the sum of the Class A Note Principal Balance, the Class B Note
Principal Balance and the Class C 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 initially Household Affinity Funding
Corporation III, a Delaware corporation, as initial holder of the Transferor
Certificate.
10
"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 2003-1 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 2003-1 and each
other Series specified in the related Indenture Supplement to be included in
Principal Sharing Group One.
"Rating Agency" shall mean each of Fitch, ▇▇▇▇▇'▇ and Standard &
Poor's.
"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 2003-1 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 2003-1 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.
"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.
11
"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 3.90% of the Interim Note Principal Amount for such Distribution Date but not
less than 3.00% 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 sum
of the Class A Note Principal Balance, the Class B Note Principal Balance and
the Class C 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) 0.50% 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 7% 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 4% 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 3% or greater, but less than 4%, (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 2% or greater, but less than 3% 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 2%. For
purposes of this definition, Excess Spread shall be determined for each month
beginning 15 months prior to the scheduled commencement of the Controlled
Accumulation Period.
12
"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 2003-1" shall mean the Series of Notes for which the
terms are specified in this Indenture Supplement.
"Series 2003-1 Accounts" shall mean the Reserve Account and the
Principal Funding Account.
"Series 2003-1 Amortization Event" shall have the meaning
specified in Section 6.01.
"Series 2003-1 Cut-off Date" shall mean the close of business on
February 28, 2003.
"Series 2003-1 Final Maturity Date" shall mean the earliest to
occur of (a) the February 2010 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 2003-1 Note" shall mean a Class A Note, a Class B Note
or a Class C Note.
"Series 2003-1 Noteholder" shall mean a Class A Noteholder, a
Class B Noteholder or a Class C Noteholder.
"Series 2003-1 Principal Shortfall" shall have the meaning
specified in Section 4.08.
"Series Adjusted Invested Amount" shall mean, with respect to
any Due Period:
(a) during the Revolving Period, the Invested Amount as of
the last day of the immediately preceding Due Period (or, with respect to the
first Due Period, as of the Closing Date);
13
(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, (ii) Servicer Interchange and (iii) any Excess
Finance Charge and Administrative Collections that are allocated to Series
2003-1 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 (or, with respect to
the first Due Period, as of the Closing Date).
"Servicer Interchange" shall mean, for any Due Period, Investor
Finance Charge and Administrative Receivables that is attributable to
Interchange; provided, however, that Servicer Interchange for a Due Period shall
not exceed one-twelfth of the product of (a) the Floating Investor Percentage
for such Due Period, (b) the Servicer Interchange Fee Rate and (c) the total
amount of Principal Receivables as of the close of business on the last day of
the immediately preceding Due Period, excluding the principal portion of
Participation Interests; provided further, 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:
14
(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, however, that with respect to the first Distribution Date,
Servicer Interchange shall not exceed $331,658.
"Servicer Interchange Fee Rate" shall mean (i) so long as HFC or
an Affiliate or The Bank of New York is the Servicer, 1.25% per annum and (ii)
if HFC or an Affiliate or The Bank of New York is no longer the Servicer, 0% per
annum.
"Servicing Fee Rate" shall mean the sum of the Servicer
Interchange Fee Rate and the Net Servicing Fee Rate.
"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 Moneyline Telerate Services Report (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
2003-1 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
15
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 2003-1 Noteholders with respect to any Distribution Date shall
equal the sum of the Monthly Servicing Fee and Servicer Interchange for the
related Due Period. On each Distribution Date, but only if HFC or an Affiliate
or The Bank of New York is the Servicer, Servicer Interchange with respect to
the related Due Period that is on deposit in the Collection Account shall be
withdrawn from the Collection Account and paid to the Servicer in payment of a
portion of the Servicing Fee with respect to such Due Period. In the case of any
insufficiency of Servicer Interchange on deposit in the Collection Account, a
portion of the Servicing Fee with respect to such Due Period will not be paid to
the extent of such insufficiency of Servicer Interchange. The portion of the
Servicing Fee that is not allocable to the Series 2003-1 Noteholders or paid
from Servicer Interchange shall be paid by the holder of the Transferor
Certificate 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 2003-1 Noteholders be liable for the share of
the Servicing Fee to be paid by the holder of the Transferor Certificate or the
noteholders of any other Series.
(b) Interchange. Not later than 1:00 p.m., New York City
time, on each Transfer Date, the Servicer shall notify the Transferor, the Owner
Trustee and the Indenture Trustee of the amount of Interchange to be included as
Collections of Finance Charge and Administrative Receivables. On each
Distribution Date, the Transferor shall cause to be deposited into the
Collection Account, in immediately available funds, the amount of Interchange to
be so included as Collections of Finance Charge and Administrative Receivables
allocable to Series 2003-1 with respect to the preceding Due Period and such
Interchange shall be treated as a portion of Collections of Finance Charge and
Administrative Receivables allocable to Series 2003-1 for all purposes of this
Indenture Supplement, the Indenture and the Transfer and Servicing Agreement.
Notwithstanding the above, if the Transferor shall have delivered to the
Indenture Trustee an Officer's Certificate stating that the Transferor
reasonably believes that such action will not have an Adverse Effect, the
Transferor may, in lieu of causing the deposit of Interchange into the
Collection Account as set forth above, designate Discount Option Receivables
pursuant to Section 2.12 of the Transfer and Servicing Agreement in an amount
approximately equal to the then current Interchange with respect to the
Accounts.
[END OF ARTICLE III]
ARTICLE IV
16
RIGHTS OF SERIES 2003-1 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 2003-1 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 2003-1 Noteholders and to the
O/C Holder. The Servicer shall, prior to the close of business on any Deposit
Date, allocate to the Series 2003-1 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
2003-1 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.
(ii) Allocations of Principal Collections. The
Servicer shall allocate to the Series 2003-1 Noteholders and to the
O/C Holder the following amounts as set forth below:
17
(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 2003-1
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 2003-1 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 2003-1 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 2003-1 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 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.
18
(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 (or, with respect to the first
Interest Period, as of the Closing Date).
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 in
effect with respect to the related Interest Period 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 (or, with respect to the first Interest Period,
as of the Closing Date).
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.
(c) The amount of monthly interest ("Class C Monthly
Interest") distributable from the Collection Account with respect to the Class C
Notes on any Distribution Date shall be an amount equal to the product of (i)
(A) a fraction, the numerator of which is the
19
actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the Class C Note Interest Rate in effect with respect to
the related Interest Period and (ii) the Class C Note Principal Balance as of
the close of business on the last day of the preceding Due Period (or, with
respect to the first Interest Period, as of the Closing Date).
On each Determination Date, the Servicer shall determine the
excess, if any (the "Class C Interest Shortfall"), of (x) the Class C Monthly
Interest for such Distribution Date over (y) the aggregate amount of funds
expected to be paid with respect to such Class C Monthly Interest on the related
Distribution Date. If the Class C Interest Shortfall with respect to any
Distribution Date is greater than zero, on each subsequent Distribution Date
until such Class C Interest Shortfall is fully paid, an additional amount
("Class C 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 C Note Interest Rate in
effect with respect to the related Interest Period and (ii) such Class C
Interest Shortfall (or the portion thereof which has not been paid to the Class
C Noteholders) shall be payable as provided herein with respect to the Class C
Notes. Notwithstanding anything to the contrary herein, Class C Additional
Interest shall be payable or distributed to the Class C Noteholders only to the
extent permitted by applicable law.
Section 4.03 Determination of Monthly Principal.
The amount of monthly principal allocated and made available
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, Excess Finance Charge and Administrative Collections
allocable to Series 2003-1 in accordance with Section 4.07 and Available
Investor Finance Charge and Administrative Collections 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 2003-1 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
20
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) an amount equal to Class C Monthly Interest for
such Distribution Date, plus the amount of any Class C Monthly Interest
previously due but not distributed to Class C Noteholders on a prior
Distribution Date, plus the amount of any Class C Additional Interest
for such Distribution Date, plus the amount of any Class C Additional
Interest, or portion thereof, previously due but not distributed to
Class C Noteholders on a prior Distribution Date, shall be distributed
to the Paying Agent for payment to Class C Noteholders on the applicable
Distribution Date;
(iv) 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 (unless
such amount has been netted against deposits to the Collection Account
in accordance with Section 8.04 of the Indenture);
(v) 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;
(vi) 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;
(vii) upon the occurrence of an Event of Default with
respect to Series 2003-1 and acceleration of the maturity of the Series
2003-1 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 2003-1 Noteholders;
(viii) 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
21
Account Amount over the Available Reserve Account Amount shall be
deposited into the Reserve Account; and
(ix) 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:
(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,
the Class C 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 giving effect to the distribution referred
to in clauses (ii) and (iii) 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 C
Noteholders on such Distribution Date and on each subsequent
Distribution Date until the Class C Note Principal Balance has been paid
in full;
22
(v) after the Class C 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
(vi) 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, second, to the Class B
Noteholders up to the Class B Note Principal Balance and third, to the Class C
Noteholders up to the Class C Note Principal Balance, the amounts deposited into
the Principal Funding Account pursuant to subsection 4.04(c)(i).
(e) The Controlled Accumulation Period is scheduled to
commence on February 1, 2007; provided, however, that, if the Accumulation
Period Length (determined as described below) is less than 12 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 January 2007, 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)(v) 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
23
Amount for the preceding Due Period in accordance with the priority set forth in
clauses (i) through (iv) 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 2003-1 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 2003-1 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 2003-1 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 (viii) 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.
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 2003-1 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 2003-1 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 2003-1
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
Indenture Trustee, for the benefit of the Series 2003-1 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 2003-1 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.
24
The Principal Funding Account shall be under the sole dominion and control of
the Indenture Trustee for the benefit of the Series 2003-1 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 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
25
Trustee, acting at the Servicer's direction given on or before two Business Days
prior to 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
Indenture Trustee, for the benefit of the Series 2003-1 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 2003-1
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 Account shall be under the sole dominion and
control of the Indenture Trustee for the benefit of the Series 2003-1
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)(viii).
(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
26
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 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 or before 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)(viii) 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 Owner Trustee
for distribution in accordance with the Trust Agreement an amount equal to such
Reserve Account Surplus.
27
(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 2003-1 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 2003-1
and acceleration of the maturity of the Series 2003-1 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
2003-1 Noteholders in accordance with Section 5.02 to fund any shortfalls in
amounts owed to such Series 2003-1 Noteholders.
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, the Class B Note
Interest Rate and the Class C 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 2003-1
Noteholder from time to time.
(c) On each LIBOR Determination Date, the Indenture Trustee
shall send to the Servicer by facsimile or electronic transmission, notification
of LIBOR for the following Interest Period. On the March 2003 LIBOR
Determination Date, such notification set LIBOR as 1.27%.
28
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 10:30 a.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 10:30 a.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
10:30 a.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 2003-1 Notes from Series 2003-1 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 2003-1 Notes by delivering a written request to the Indenture Trustee to
do so; provided, however, that the Transferor may only cancel Class A, Class B
and Class C 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 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 2003-1 Notes pursuant to this Section, (a)
the Invested Amount shall be reduced by (i) the aggregate principal amount of
such purchased Series 2003-1 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 2003-1 NOTES;
DISTRIBUTIONS; REPORTS TO SERIES 2003-1 NOTEHOLDERS
Section 5.01 Delivery and Payment for the Series 2003-1 Notes. With
respect to the Series 2003-1 Notes which are in certificated form, the Issuer
shall execute and the Indenture Trustee shall authenticate the Series 2003-1
Notes in accordance with Section 2.03 of the Indenture. The Indenture Trustee
shall deliver those Series 2003-1 Notes to or upon the order of the Trust when
so authenticated.
29
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 each Class C Noteholder of record on the related Record Date
(other than as provided in Section 11.02 of the Indenture) such Class C
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 C
Notes pursuant to this Indenture Supplement.
(f) On each Distribution Date, the Paying Agent shall
distribute to each Class C Noteholder of record on the related Record Date such
Class C 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 C Notes pursuant to this Indenture Supplement.
(g) 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.
(h) 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.
(i) Except as provided in Section 11.02 of the Indenture
with respect to a final distribution, distributions to Series 2003-1 Noteholders
hereunder shall be made by (i) check mailed to each Series 2003-1 Noteholder (at
such Noteholder's address as it appears in the Note Register), except that with
respect to any Series 2003-1 Notes registered in the name of the
30
nominee of a Clearing Agency, such distribution shall be made in immediately
available funds and (ii) without presentation or surrender of any Series 2003-1
Note or the making of any notation thereon.
Section 5.03 Reports and Statements to Series 2003-1 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 2003-1 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 2003-1 Noteholder
by a request in writing to the Servicer.
(d) On or before January 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 2003-1 Noteholder, a statement prepared by
the Servicer containing the information which is required to be contained in the
statement to Series 2003-1 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 2003-1 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.
ARTICLE VI
SERIES 2003-1 AMORTIZATION EVENTS
Section 6.01 Series 2003-1 Amortization Events. If any one of the
following events shall occur with respect to Series 2003-1:
(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
31
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 2003-1 Noteholders and which
continues unremedied and continues to materially and adversely affect the
interests of the Series 2003-1 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 2003-1 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 2003-1 Notes and as a result of which an Adverse Effect occurs with
respect to the Series 2003-1 Noteholders and such Adverse Effect continues for
the designated period; provided, however, that a Series 2003-1 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 2003-1 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, the Class B Note
Principal Balance or the Class C Note Principal Balance shall not be paid in
full on the Expected Principal Payment Date; or
(g) without limiting the foregoing, the occurrence of an
Event of Default with respect to Series 2003-1 and an acceleration of the
maturity of the Series 2003-1 Notes pursuant to Section 5.03 of the Indenture;
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 2003-1 Notes evidencing more than 50%
of the aggregate Outstanding Amount of Series 2003-1 Notes by notice then given
in writing to the Transferor and the Servicer (and to the Indenture Trustee if
given by the Series 2003-1 Noteholders) may declare that an amortization event
(a "Series 2003-1 Amortization Event") has occurred as of the date of such
notice, and, in
32
the case of any event described in subparagraph (c), (e), (f), or (h), a Series
2003-1 Amortization Event shall occur without any notice or other action on the
part of the Indenture Trustee or the Series 2003-1 Noteholders immediately upon
the occurrence of such event.
ARTICLE VII
REDEMPTION OF SERIES 2003-1 NOTES;
SERIES FINAL MATURITY; FINAL DISTRIBUTIONS
Section 7.01 Optional Redemption of Series 2003-1 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, the Class B Note Initial Principal Balance and the
Class C Note Initial Principal Balance, the Servicer shall have the option to
require the Transferor to redeem the Series 2003-1 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 Servicer shall give the Transferor and the Indenture
Trustee at least 30 days prior written notice of the date on which the Servicer
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 2003-1 shall be reduced to
zero and the Series 2003-1 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).
Section 7.02 Series Final Maturity.
(a) The amount to be paid by the Transferor with respect to
Series 2003-1 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, including, without limitation, payments to be
33
made to the Indenture Trustee pursuant to Section 5.05 of the Indenture) 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;
(iii) (x) the Class C Note Principal Balance on such
Distribution Date will be distributed to the Paying Agent for payment to
the Class C Noteholders and (y) an amount equal to the sum of (A) Class
C Monthly Interest for such Distribution Date, (B) any Class C Monthly
Interest previously due but not distributed to the Class C Noteholders
on a prior Distribution Date and (C) the amount of Class C Additional
Interest, if any, for such Distribution Date and any Class C Additional
Interest previously due but not distributed to the Class C Noteholders
on any prior Distribution Date, will be distributed to the Paying Agent
for payment to the Class C Noteholders; and
(iv) 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 2003-1 Noteholders shall be deemed distributed in full to
the Series 2003-1 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.
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.
34
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 2003-1 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
Wilmington Trust Company, not in its individual capacity, but solely in its
capacity as Owner Trustee of the Trust, in no event shall Wilmington Trust
Company 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.
35
Section 8.06 Certain Commercial Law Representations and Warranties.
The Issuer hereby makes the following representations and warranties.
Such representations and warranties shall survive until the termination of this
Indenture Supplement. Such representations and warranties speak of the date that
a security interest in the Receivables is granted to the Indenture Trustee but
shall not be waived by any of the parties to this Indenture Supplement unless
each Rating Agency shall have notified the Transferor, the Administrator, the
Owner Trustee and the Indenture Trustee in writing that such waiver will not
result in a reduction or withdrawal of the rating of any outstanding Series or
Class to which it is a Rating Agency.
(a) The Agreement creates a valid and continuing security interest
(as defined in the applicable UCC) in favor of the Indenture Trustee in the
Receivables described in Section 2.01 of the Agreement or in Section 3(a) of any
Assignment, which security interest is prior to all other liens, and is
enforceable as such against creditors of and purchasers from the Issuer.
(b) The Receivables constitute "accounts" within the meaning of the
applicable UCC.
(c) At the time of its grant of any security interest in the
Receivables pursuant to the Agreement or an Assignment, the Issuer owned and had
good and marketable title to the Receivables free and clear of any lien, claim
or encumbrance of any Person.
(d) The Issuer has caused or will have caused, within ten (10) days
of the initial execution of the Agreement and each Assignment, 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 pursuant to the Agreement or
such Assignment.
(e) Other than the security interest granted to the Indenture
Trustee pursuant to the Agreement or an Assignment, the Issuer has not pledged,
assigned, sold, granted a security interest in, or otherwise conveyed 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 the
Receivables other than any financing statement relating to the security interest
granted to the Indenture Trustee pursuant to the Agreement or an Assignment or
that has been terminated. The Issuer is not aware of any judgment or tax lien
filings against the Issuer.
[SIGNATURE PAGE FOLLOWS]
36
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.
HOUSEHOLD AFFINITY CREDIT CARD
MASTER NOTE TRUST I
By: WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely
as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Financial Services Officer
THE BANK OF NEW YORK,
not in its individual capacity, but solely
as Indenture Trustee, Paying Agent and
Securities Intermediary
By: /s/ ▇▇▇▇▇ ▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇
Title: Assistant Treasurer
37
EXHIBIT A-1
REGISTERED $__________
No. R-___ CUSIP NO. __________
Unless this Class A Note is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Household
Affinity Credit Card Master Note Trust I or its agent for registration of
transfer, exchange or payment, and any note issued is registered in the name of
CEDE & CO. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to CEDE & CO. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, CEDE & CO., has an interest herein.
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, SERIES 2003-1
FORM OF CLASS A SERIES 2003-1 FLOATING RATE ASSET BACKED NOTE
Household Affinity Credit Card Master Note Trust I (herein referred to
as the "Issuer" or the "Trust"), a Delaware statutory trust governed by a Trust
Agreement, dated as of February 14, 2003, for value received, hereby promises to
pay to CEDE & CO., or registered assigns, subject to the following provisions,
the principal sum of $451,750,000, on the Series 2003-1 Final Maturity Date,
except as otherwise provided below or in the Indenture. The Issuer will pay
interest on the unpaid principal amount of this Note at the Class A Note
Interest Rate on each Distribution Date until the principal amount of this Note
is paid in full. Interest on this Note will accrue for each Distribution Date
from and including the most recent Distribution Date on which interest has been
paid to but excluding such Distribution Date or, for the initial Distribution
Date, from and including the Closing Date to but excluding such Distribution
Date. Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed. Principal of this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Indenture Trustee, by manual signature, this Note shall not be
entitled to any benefit under the Indenture or the Indenture Supplement referred
to on the reverse hereof, or be valid for any purpose.
A-1-1
IN WITNESS WHEREOF, the Issuer has caused this Class A Note to be duly
executed.
HOUSEHOLD AFFINITY CREDIT CARD MASTER
NOTE TRUST I,
Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By:
-----------------------------------
Name:
Title:
Dated: [.]
A-1-2
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Notes described in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Indenture Trustee
By:
-----------------------------------
Authorized Signatory
A-1-3
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, SERIES 2003-1
CLASS A SERIES 2003-1 FLOATING RATE ASSET BACKED NOTE
Summary of Terms and Conditions
This Class A Note is one of a duly authorized issue of Notes of the
Issuer, designated as Household Affinity Credit Card Master Note Trust I, Series
2003-1 (the "Notes"), issued under an Amended and Restated Master Indenture,
dated as of March 13, 2003 (the "Master Indenture"), between the Issuer and The
Bank of New York, as indenture trustee (the "Indenture Trustee"), paying agent
and securities intermediary, as supplemented by the Indenture Supplement, dated
as of March 13, 2003 (the "Indenture Supplement"), and representing the right to
receive certain payments from the Issuer. The term "Indenture," unless the
context otherwise requires, refers to the Master Indenture as supplemented by
the Indenture Supplement. The Notes are subject to all of the terms of the
Indenture. All terms used in this Note that are defined in the Indenture shall
have the meanings assigned to them in or pursuant to the Indenture. In the event
of any conflict or inconsistency between the Indenture and this Note, the
Indenture shall control.
The Noteholder, by its acceptance of this Note, agrees that it will look
solely to the property of the Trust allocated to the payment of this Note for
payment hereunder and that the Indenture Trustee is not liable to the
Noteholders for any amount payable under the Note or the Indenture or, except as
expressly provided in the Indenture, subject to any liability under the
Indenture.
This Note does not purport to summarize the Indenture and reference is
made to the Indenture for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Indenture Trustee.
The Class A Note Initial Principal Balance is $451,750,000. The Class A
Note Principal Balance will be determined from time to time by the Indenture
Trustee in accordance with the Indenture.
Payments of principal of the Notes shall be payable in accordance with
the provisions of the Indenture.
Subject to the terms and conditions of the Indenture, the Transferor
may, from time to time, direct the Trust, to issue one or more new Series of
Notes.
On each Distribution Date, the Paying Agent shall distribute to each
Class A Noteholder of record on the related Record Date (except for the final
distribution in respect of this Class A Note) 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 and principal on the Class A Notes
pursuant to the Indenture Supplement. Except as provided in the Indenture with
respect to a final distribution, distributions to Series 2003-1 Noteholders
shall be made by (i) check mailed to each Series 2003-1 Noteholder (at such
Noteholder's address as it appears in the Note Register), except that with
respect to any Series 2003-1 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 2003-1 Note or the
making of any notation thereon. Final payment of this Class A Note will be made
only upon presentation and surrender of this Class A Note at the office or
agency specified in the notice of final distribution delivered by the Indenture
Trustee to the Series 2003-1 Noteholders in accordance with the Indenture.
A-1-4
On any day occurring on or after the date on which the outstanding
principal balance of the Series 2003-1 Notes is reduced to 10% or less of the
initial outstanding principal balance of the Series 2003-1 Notes, the Transferor
shall have the option to redeem the Series 2003-1 Notes, 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.
This Class A Note does not represent an obligation of, or an interest
in, the Transferor, Household Finance Corporation, Household Receivables
Acquisition Company II, Household Affinity Funding Corporation II, Household
Bank (SB), National Association or any Affiliate of any of them and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency or instrumentality.
Each Noteholder, by accepting a Note, hereby covenants and agrees that
it will not at any time institute against the Issuer or the Transferor, or join
in instituting against the Issuer or the Transferor, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law.
Except as otherwise provided in the Indenture Supplement, the Class A
Notes are issuable only in minimum denominations of $1,000 and integral
multiples of $1,000. The transfer of this Class A Note shall be registered in
the Note Register upon surrender of this Class A Note for registration of
transfer at any office or agency maintained by the Transfer Agent and Registrar
accompanied by a written instrument of transfer, in a form satisfactory to the
Indenture Trustee or the Transfer Agent and Registrar, duly executed by the
Class A Noteholder or such Class A Noteholder's attorney, and duly authorized in
writing with such signature guaranteed, and thereupon one or more new Class A
Notes in any authorized denominations of like aggregate principal amount will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, Class A Notes are exchangeable for new Class A Notes in any
authorized denominations and of like aggregate principal amount, upon surrender
of such Notes to be exchanged at the office or agency of the Transfer Agent and
Registrar. No service charge may be imposed for any such exchange but the Issuer
or Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Issuer, the Transferor, the Indenture Trustee and any agent of the
Issuer, Transferor or the Indenture Trustee shall treat the person in whose name
this Class A Note is registered as the owner hereof for all purposes, and
neither the Issuer, the Transferor, the Indenture Trustee nor any agent of the
Issuer, Transferor or the Indenture Trustee shall be affected by notice to the
contrary.
THIS CLASS A NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-1-5
ASSIGNMENT
Social Security or other identifying number of assignee _______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________
(name and address of assignee)
the within note and all rights thereunder, and hereby irrevocably constitutes
and appoints ____________________, attorney, to transfer said note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated: __________
---------------------/1/
Signature Guaranteed:
---------------------
----------
/1/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within note in every
particular, without alteration, enlargement or any change whatsoever.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
REGISTERED $__________
No. R-__ CUSIP NO. __________
Unless this Class B Note is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Household
Affinity Credit Card Master Note Trust I or its agent for registration of
transfer, exchange or payment, and any note issued is registered in the name
CEDE & CO. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to CEDE & CO. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, CEDE & CO., has an interest herein.
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, SERIES 2003-1
FORM OF CLASS B SERIES 2003-1 FLOATING RATE ASSET BACKED NOTE
Household Affinity Credit Card Master Note Trust I (herein referred to
as the "Issuer" or the "Trust"), a Delaware statutory trust governed by a Trust
Agreement, dated as of February 14, 2003, for value received, hereby promises to
pay to CEDE & CO., or registered assigns, subject to the following provisions,
the principal sum of $30,000,000, on the Series 2003-1 Final Maturity Date,
except as otherwise provided below or in the Indenture. The Issuer will pay
interest on the unpaid principal amount of this Note at the Class B Note
Interest Rate on each Distribution Date until the principal amount of this Note
is paid in full. Interest on this Note will accrue for each Distribution Date
from and including the most recent Distribution Date on which interest has been
paid to but excluding such Distribution Date or, for the initial Distribution
Date, from and including the Closing Date to but excluding such Distribution
Date. Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed. Principal of this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Indenture Trustee, by manual signature, this Note shall not be
entitled to any benefit under the Indenture or the Indenture Supplement referred
to on the reverse hereof, or be valid for any purpose.
A-2-1
IN WITNESS WHEREOF, the Issuer has caused this Class B Note to be duly
executed.
HOUSEHOLD AFFINITY CREDIT CARD MASTER
NOTE TRUST I,
Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee of the Trust
By:
-----------------------------------
Name:
Title:
Dated: [.]
A-3-2
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Notes described in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Indenture Trustee
By:
-----------------------------------
Authorized Signatory
A-3-3
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, SERIES 2003-1
CLASS B SERIES 2003-1 FLOATING RATE ASSET BACKED NOTE
Summary of Terms and Conditions
This Class B Note is one of a duly authorized issue of Notes of the
Issuer, designated as Household Affinity Credit Card Master Note Trust I, Series
2003-1 the "Notes"), issued under an Amended and Restated Master Indenture,
dated as of March 13, 2003 (the "Master Indenture"), between the Issuer and The
Bank of New York, as indenture trustee (the "Indenture Trustee"), as
supplemented by the Indenture Supplement, dated as of March 13, 2003 (the
"Indenture Supplement"), and representing the right to receive certain payments
from the Issuer. The term "Indenture," unless the context otherwise requires,
refers to the Master Indenture as supplemented by the Indenture Supplement. The
Notes are subject to all of the terms of the Indenture. All terms used in this
Note that are defined in the Indenture shall have the meanings assigned to them
in or pursuant to the Indenture. In the event of any conflict or inconsistency
between the Indenture and this Note, the Indenture shall control.
The Noteholder, by its acceptance of this Note, agrees that it will look
solely to the property of the Trust allocated to the payment of this Note for
payment hereunder and that the Indenture Trustee is not liable to the
Noteholders for any amount payable under the Note or the Indenture or, except as
expressly provided in the Indenture, subject to any liability under the
Indenture.
This Note does not purport to summarize the Indenture and reference is
made to the Indenture for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Indenture Trustee.
The Class B Note Initial Principal Balance is $30,000,000. The Class B
Note Principal Balance will be determined from time to time by the Indenture
Trustee in accordance with the Indenture.
Payments of principal of the Notes shall be payable in accordance with
the provisions of the Indenture.
Subject to the terms and conditions of the Indenture, the Transferor
may, from time to time, direct the Trust, to issue one or more new Series of
Notes.
On each Distribution Date, the Paying Agent shall distribute to each
Class B Noteholder of record on the related Record Date (except for the final
distribution in respect of this Class B Note) 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 and principal on the Class B Notes
pursuant to the Indenture Supplement. Except as provided in the Indenture with
respect to a final distribution, distributions to Series 2003-1 Noteholders
shall be made by (i) check mailed to each Series 2003-1 Noteholder (at such
Noteholder's address as it appears in the Note Register), except that with
respect to any Series 2003-1 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 2003-1 Note or the
making of any notation thereon. Final payment of this Class B Note will be made
only upon presentation and surrender of this Class B Note at the office or
agency specified in the notice of final distribution delivered by the Indenture
Trustee to the Series 2003-1 Noteholders in accordance with the Indenture.
A-3-4
On any day occurring on or after the date on which the outstanding
principal balance of the Series 2003-1 Notes is reduced to 10% or less of the
initial outstanding principal balance of the Series 2003-1 Notes, the Transferor
shall have the option to redeem the Series 2003-1 Notes, 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.
This Class B Note does not represent an obligation of, or an interest
in, the Transferor, Household Finance Corporation, Household Receivables
Acquisition Company II, Household Affinity Funding Corporation II, Household
Bank (SB), National Association or any Affiliate of any of them and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency or instrumentality.
Each Noteholder, by accepting a Note, hereby covenants and agrees that
it will not at any time institute against the Issuer or the Transferor, or join
in instituting against the Issuer or the Transferor, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law.
Except as otherwise provided in the Indenture Supplement, the Class B
Notes are issuable only in minimum denominations of $1,000 and integral
multiples of $1,000. The transfer of this Class B Note shall be registered in
the Note Register upon surrender of this Class B Note for registration of
transfer at any office or agency maintained by the Transfer Agent and Registrar
accompanied by a written instrument of transfer, in a form satisfactory to the
Indenture Trustee or the Transfer Agent and Registrar, duly executed by the
Class B Noteholder or such Class B Noteholder's attorney, and duly authorized in
writing with such signature guaranteed, and thereupon one or more new Class B
Notes in any authorized denominations of like aggregate principal amount will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, Class B Notes are exchangeable for new Class B Notes in any
authorized denominations and of like aggregate principal amount, upon surrender
of such Notes to be exchanged at the office or agency of the Transfer Agent and
Registrar. No service charge may be imposed for any such exchange but the Issuer
or Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Issuer, the Transferor, the Indenture Trustee and any agent of the
Issuer, Transferor or the Indenture Trustee shall treat the person in whose name
this Class B Note is registered as the owner hereof for all purposes, and
neither the Issuer, the Transferor, the Indenture Trustee nor any agent of the
Issuer, Transferor or the Indenture Trustee shall be affected by notice to the
contrary.
THIS CLASS B NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-3-5
ASSIGNMENT
Social Security or other identifying number of assignee _______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________
(name and address of assignee)
the within note and all rights thereunder, and hereby irrevocably constitutes
and appoints ____________________, attorney, to transfer said note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated: ________
---------------------/2/
Signature Guaranteed:
---------------------
----------
/2/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within note in every
particular, without alteration, enlargement or any change whatsoever.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
REGISTERED $__________
No. R-__ CUSIP NO. __________
Unless this Class C Note is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Household
Affinity Credit Card Master Note Trust I or its agent for registration of
transfer, exchange or payment, and any note issued is registered in the name
CEDE & CO. or in such other name as is requested by an authorized representative
of DTC (and any payment is made to CEDE & CO. or to such other entity as is
requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, CEDE & CO., has an interest herein.
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, SERIES 2003-1
FORM OF CLASS C SERIES 2003-1 FLOATING RATE ASSET BACKED NOTE
Household Affinity Credit Card Master Note Trust I (herein referred to
as the "Issuer" or the "Trust"), a Delaware statutory trust governed by a Trust
Agreement, dated as of February 14, 2003, for value received, hereby promises to
pay to CEDE & CO., or registered assigns, subject to the following provisions,
the principal sum of $18,250,000, on the Series 2003-1 Final Maturity Date,
except as otherwise provided below or in the Indenture. The Issuer will pay
interest on the unpaid principal amount of this Note at the Class C Note
Interest Rate on each Distribution Date until the principal amount of this Note
is paid in full. Interest on this Note will accrue for each Distribution Date
from and including the most recent Distribution Date on which interest has been
paid to but excluding such Distribution Date or, for the initial Distribution
Date, from and including the Closing Date to but excluding such Distribution
Date. Interest will be computed on the basis of a 360-day year and the actual
number of days elapsed. Principal of this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Indenture Trustee, by manual signature, this Note shall not be
entitled to any benefit under the Indenture or the Indenture Supplement referred
to on the reverse hereof, or be valid for any purpose.
A-3-1
IN WITNESS WHEREOF, the Issuer has caused this Class C Note to be duly
executed.
HOUSEHOLD AFFINITY CREDIT CARD MASTER
NOTE TRUST I,
Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee of the Trust
By:
-----------------------------------
Name:
Title:
Dated: [.]
A-3-2
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class C Notes described in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Indenture Trustee
By:
-----------------------------------
Authorized Signatory
A-3-3
HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, SERIES 2003-1
CLASS C SERIES 2003-1 FLOATING RATE ASSET BACKED NOTE
Summary of Terms and Conditions
This Class C Note is one of a duly authorized issue of Notes of the
Issuer, designated as Household Affinity Credit Card Master Note Trust I, Series
2003-1 the "Notes"), issued under an Amended and Restated Master Indenture,
dated as of March 13, 2003 (the "Master Indenture"), between the Issuer and The
Bank of New York, as indenture trustee (the "Indenture Trustee"), as
supplemented by the Indenture Supplement, dated as of March 13, 2003 (the
"Indenture Supplement"), and representing the right to receive certain payments
from the Issuer. The term "Indenture," unless the context otherwise requires,
refers to the Master Indenture as supplemented by the Indenture Supplement. The
Notes are subject to all of the terms of the Indenture. All terms used in this
Note that are defined in the Indenture shall have the meanings assigned to them
in or pursuant to the Indenture. In the event of any conflict or inconsistency
between the Indenture and this Note, the Indenture shall control.
The Noteholder, by its acceptance of this Note, agrees that it will look
solely to the property of the Trust allocated to the payment of this Note for
payment hereunder and that the Indenture Trustee is not liable to the
Noteholders for any amount payable under the Note or the Indenture or, except as
expressly provided in the Indenture, subject to any liability under the
Indenture.
This Note does not purport to summarize the Indenture and reference is
made to the Indenture for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Indenture Trustee.
The Class C Note Initial Principal Balance is $18,250,000. The Class C
Note Principal Balance will be determined from time to time by the Indenture
Trustee in accordance with the Indenture.
Payments of principal of the Notes shall be payable in accordance with
the provisions of the Indenture.
Subject to the terms and conditions of the Indenture, the Transferor
may, from time to time, direct the Trust, to issue one or more new Series of
Notes.
On each Distribution Date, the Paying Agent shall distribute to each
Class C Noteholder of record on the related Record Date (except for the final
distribution in respect of this Class C Note) such Class C 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 and principal on the Class C Notes
pursuant to the Indenture Supplement. Except as provided in the Indenture with
respect to a final distribution, distributions to Series 2003-1 Noteholders
shall be made by (i) check mailed to each Series 2003-1 Noteholder (at such
Noteholder's address as it appears in the Note Register), except that with
respect to any Series 2003-1 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 2003-1 Note or the
making of any notation thereon. Final payment of this Class C Note will be made
only upon presentation and surrender of this Class C Note at the office or
agency specified in the notice of final distribution delivered by the Indenture
Trustee to the Series 2003-1 Noteholders in accordance with the Indenture.
A-3-4
On any day occurring on or after the date on which the outstanding
principal balance of the Series 2003-1 Notes is reduced to 10% or less of the
initial outstanding principal balance of the Series 2003-1 Notes, the Transferor
shall have the option to redeem the Series 2003-1 Notes, 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.
This Class C Note does not represent an obligation of, or an interest
in, the Transferor, Household Finance Corporation, Household Receivables
Acquisition Company II, Household Affinity Funding Corporation II, Household
Bank (SB), National Association or any Affiliate of any of them and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency or instrumentality.
Each Noteholder, by accepting a Note, hereby covenants and agrees that
it will not at any time institute against the Issuer or the Transferor, or join
in instituting against the Issuer or the Transferor, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law.
Except as otherwise provided in the Indenture Supplement, the Class C
Notes are issuable only in minimum denominations of $1,000 and integral
multiples of $1,000. The transfer of this Class C Note shall be registered in
the Note Register upon surrender of this Class C Note for registration of
transfer at any office or agency maintained by the Transfer Agent and Registrar
accompanied by a written instrument of transfer, in a form satisfactory to the
Indenture Trustee or the Transfer Agent and Registrar, duly executed by the
Class C Noteholder or such Class C Noteholder's attorney, and duly authorized in
writing with such signature guaranteed, and thereupon one or more new Class C
Notes in any authorized denominations of like aggregate principal amount will be
issued to the designated transferee or transferees.
As provided in the Indenture and subject to certain limitations therein
set forth, Class C Notes are exchangeable for new Class C Notes in any
authorized denominations and of like aggregate principal amount, upon surrender
of such Notes to be exchanged at the office or agency of the Transfer Agent and
Registrar. No service charge may be imposed for any such exchange but the Issuer
or Transfer Agent and Registrar may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
therewith.
The Issuer, the Transferor, the Indenture Trustee and any agent of the
Issuer, Transferor or the Indenture Trustee shall treat the person in whose name
this Class C Note is registered as the owner hereof for all purposes, and
neither the Issuer, the Transferor, the Indenture Trustee nor any agent of the
Issuer, Transferor or the Indenture Trustee shall be affected by notice to the
contrary.
THIS CLASS C NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-3-5
ASSIGNMENT
Social Security or other identifying number of assignee _______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________
(name and address of assignee)
the within note and all rights thereunder, and hereby irrevocably constitutes
and appoints ____________________, attorney, to transfer said note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated: ________
---------------------/3/
Signature Guaranteed:
----------------------
----------
/3/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within note in every
particular, without alteration, enlargement or any change whatsoever.
A-3-6