EXHIBIT 4.3
EXECUTION COPY
--------------------------------------------------------------------------------
MASTER SALE AND SERVICING AGREEMENT
among
HOUSEHOLD AUTOMOTIVE TRUST 2001-3,
Issuer,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
HOUSEHOLD FINANCE CORPORATION,
Master Servicer
and
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
Indenture Trustee
Dated as of October 9, 2001
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
ARTICLE I
Definitions
SECTION 1.1. DEFINITIONS................................................................................1
SECTION 1.2. OTHER INTERPRETIVE PROVISIONS.............................................................17
SECTION 1.3. USAGE OF TERMS............................................................................18
SECTION 1.4. CERTAIN REFERENCES........................................................................18
SECTION 1.5. NO RECOURSE...............................................................................18
SECTION 1.6. ACTION BY OR CONSENT OF NOTEHOLDERS.......................................................18
ARTICLE II
Conveyance of Receivables
SECTION 2.1. CONVEYANCE OF RECEIVABLES.................................................................18
SECTION 2.2. FURTHER ENCUMBRANCE OF OWNER TRUST ESTATE.................................................22
ARTICLE III
The Receivables
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER..................................................23
SECTION 3.2. REPURCHASE UPON BREACH....................................................................23
SECTION 3.3. CUSTODY OF RECEIVABLES FILES..............................................................24
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.1. DUTIES OF THE MASTER SERVICER.............................................................25
SECTION 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES...........................26
SECTION 4.3. REALIZATION UPON RECEIVABLES..............................................................28
SECTION 4.4. INSURANCE.................................................................................29
SECTION 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.............................................30
SECTION 4.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF MASTER SERVICER.............................30
SECTION 4.7. REPURCHASE OF RECEIVABLES UPON BREACH OF COVENANT.........................................31
SECTION 4.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY MASTER SERVICER.......................32
SECTION 4.9. MASTER SERVICER'S CERTIFICATE.............................................................32
SECTION 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF MASTER SERVICER TERMINATION EVENT...........32
SECTION 4.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT...................................................33
SECTION 4.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING RECEIVABLES....................34
SECTION 4.13. FIDELITY BOND AND ERRORS AND OMISSIONS POLICY............................................34
ARTICLE V
Trust Accounts; Distributions;
Statements to Certificateholders and Noteholders
SECTION 5.1. ESTABLISHMENT OF TRUST ACCOUNTS...........................................................34
SECTION 5.2. CERTAIN REIMBURSEMENTS TO THE MASTER SERVICER.............................................36
SECTION 5.3. APPLICATION OF COLLECTIONS................................................................36
SECTION 5.4. ADDITIONAL DEPOSITS.......................................................................37
ARTICLE VI
RESERVED
ARTICLE VII
RESERVED
ARTICLE VIII
The Seller
SECTION 8.1. REPRESENTATIONS OF SELLER.................................................................37
SECTION 8.2. CORPORATE EXISTENCE.......................................................................39
SECTION 8.3. LIABILITY OF SELLER; INDEMNITIES..........................................................40
SECTION 8.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SELLER...................41
SECTION 8.5. LIMITATION ON LIABILITY OF SELLER AND OTHERS..............................................41
SECTION 8.6. SELLER MAY OWN CERTIFICATES OR NOTES......................................................42
ARTICLE IX
The Master Servicer
SECTION 9.1. REPRESENTATIONS OF MASTER SERVICER........................................................42
SECTION 9.2. LIABILITY OF MASTER SERVICER; INDEMNITIES.................................................44
ii
SECTION 9.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF THE MASTER SERVICER.......46
SECTION 9.4. LIMITATION ON LIABILITY OF MASTER SERVICER AND OTHERS.....................................46
SECTION 9.5. DELEGATION OF DUTIES......................................................................47
SECTION 9.6. MASTER SERVICER NOT TO RESIGN.............................................................48
SECTION 9.7. SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER AND SUBSERVICERS..........................48
SECTION 9.8. SUCCESSOR SUBSERVICERS....................................................................49
ARTICLE X
Default
SECTION 10.1. MASTER SERVICER TERMINATION EVENT........................................................49
SECTION 10.2. CONSEQUENCES OF A MASTER SERVICER TERMINATION EVENT......................................50
SECTION 10.3. APPOINTMENT OF SUCCESSOR.................................................................52
SECTION 10.4. NOTIFICATION TO NOTEHOLDERS AND CERTIFICATEHOLDERS.......................................53
SECTION 10.5. WAIVER OF PAST DEFAULTS..................................................................53
SECTION 10.6. SUCCESSOR TO MASTER SERVICER.............................................................53
ARTICLE XI
Termination
SECTION 11.1. OPTIONAL PURCHASE OF ALL RECEIVABLES.....................................................53
ARTICLE XII
Administrative Duties of the Master Servicer
SECTION 12.1. ADMINISTRATIVE DUTIES....................................................................54
SECTION 12.2. RECORDS..................................................................................56
SECTION 12.3. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER.....................................56
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.1. AMENDMENTS...............................................................................57
SECTION 13.2. PROTECTION OF TITLE TO TRUST.............................................................58
SECTION 13.3. NOTICES..................................................................................60
SECTION 13.4. ASSIGNMENT...............................................................................60
SECTION 13.5. LIMITATIONS ON RIGHTS OF OTHERS..........................................................60
SECTION 13.6. SEVERABILITY.............................................................................60
iii
SECTION 13.7. SEPARATE COUNTERPARTS....................................................................61
SECTION 13.8. HEADINGS.................................................................................61
SECTION 13.9. GOVERNING LAW............................................................................61
SECTION 13.10. ASSIGNMENT TO INDENTURE TRUSTEE.........................................................61
SECTION 13.11. NONPETITION COVENANTS...................................................................61
SECTION 13.12. LIMITATION OF LIABILITY OF THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE..................62
SECTION 13.13. INDEPENDENCE OF THE MASTER SERVICER.....................................................62
SECTION 13.14. NO JOINT VENTURE........................................................................62
EXHIBITS
Exhibit A - Form of Master Servicer's Certificate
Exhibit B - Form of Transfer Agreement
iv
MASTER SALE AND SERVICING AGREEMENT dated as of October 9,
2001, among HOUSEHOLD AUTOMOTIVE TRUST 2001-3, a Delaware business trust (the
"Issuer" or the "Trust"),
HOUSEHOLD AUTO RECEIVABLES CORPORATION, a Nevada
corporation (the "Seller"), HOUSEHOLD FINANCE CORPORATION, a Delaware
corporation (the "Master Servicer") and ▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, in its capacity as Indenture
Trustee.
WHEREAS the Issuer desires to purchase from time to time
Receivables arising in connection with motor vehicle retail installment sale
contracts originated or acquired by Household Automotive Finance Corporation
("HAFC") or any of its predecessors or Affiliates, including, but not limited
to, Household Bank, f.s.b. ("Household Bank");
WHEREAS the Seller will purchase from time to time Receivables
from HAFC or one or more of its Affiliates, including, but not limited to,
Household Bank, and is willing to sell Receivables to the Issuer;
WHEREAS the Master Servicer is willing to service all such
receivables;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.11.
"Accounting Date" means, with respect to a Distribution Date,
the last day of the Collection Period immediately preceding such Distribution
Date.
"Actuarial Method" means the method of allocating a fixed
level monthly payment on an obligation between principal and interest, pursuant
to which the portion of such payment that is allocated to interest is equal to
the product of (a) 1/12, (b) the fixed annual rate of interest on such
obligation and (c) the outstanding principal balance of such obligation.
"Actuarial Receivable" means a Receivable under which the
portion of the payment allocated to interest and the portion allocable to
principal is determined in accordance with the Actuarial Method.
"Addition Notice" means, with respect to any transfer of
Receivables to the Trust pursuant to Section 2.1 of this Agreement, notice of
the Seller's election to transfer Receivables to the Trust, such notice to
designate the related Transfer Date, and the approximate principal amount of
Receivables to be transferred on such Transfer Date.
"Additional Principal Amount" has the meaning, if any,
assigned to such term in the Series Supplement.
"Administrative Agent" means the Person, if any, specified in
the Note Purchase Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date
of determination, the sum of the Principal Balances for all Receivables (other
than (i) any Receivable that has become a Liquidated Receivable and (ii) any
Receivable that has become a Repurchased Receivable as of the date of
determination).
"Agreement" means this
Master Sale and Servicing Agreement, as
the same may be amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the
aggregate amount advanced under such Receivable toward the purchase price of the
Financed Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service and warranty contracts, other items
customarily financed as part of retail automobile installment sale contracts or
promissory notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the
annual percentage rate of finance charges or service charges, as stated in the
related Contract.
"Basic Documents" has the meaning assigned to such term in the
Series Supplement.
"Business Day" has the meaning assigned to such term in the
Series Supplement.
"Certificate" has the meaning assigned to such term in the
Series Supplement.
"Certificateholder" means the holders of the Certificates.
"Class" means a class of Notes or Certificates, as the context
requires.
2
"Closing Date" has the meaning assigned to such term in the
Series Supplement.
"Collected Funds" means, with respect to any Collection
Period, the amount of funds in the Collection Account representing collections
(including all administrative fees, expenses and charges actually paid by or on
behalf of Obligors, including late fees, payment fees and liquidation fees but
excluding taxes, assessments, credit insurance charges or similar items)
received by the Master Servicer with respect to the Receivables during such
Collection Period, including all Net Liquidation Proceeds collected during such
Collection Period (but excluding any Repurchase Amounts).
"Collection Account" means the collection account designated
in the Series Supplement.
"Collection Period" means, with respect to the first
Distribution Date, the period beginning on the opening of business on the
related Cutoff Date and ending on the close of business on the last day of the
calendar month preceding such Distribution Date. With respect to each subsequent
Distribution Date, the preceding calendar month. Any amount stated "as of the
close of business of the last day of a Collection Period" shall give effect to
all applications of collections on such day.
"Collection Records" means all manually prepared or computer
generated records relating to collection efforts or payment histories with
respect to the Receivables.
"Contract" means a motor vehicle retail installment sale
contract or promissory note.
"Corporate Trust Office" has the meaning assigned to such term
in the Series Supplement.
"Cram Down Loss" means, with respect to a Receivable, if a
court of appropriate jurisdiction in an insolvency proceeding shall have issued
a final order reducing the amount owed on a Receivable or otherwise modifying or
restructuring the scheduled payments to be made on a Receivable, an amount equal
to (i) the excess of the Principal Balance of such Receivable immediately prior
to such order over the Principal Balance of such Receivable as so reduced and/or
(ii) if such court shall have issued an order reducing the effective rate of
interest on such Receivable, the excess of the Principal Balance of such
Receivable immediately prior to such order over the net present value (using as
the discount rate the higher of the APR on such Receivable or the rate of
interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
"Cutoff Date" means, except as otherwise provided in the
Series Supplement, with respect to a Receivable, the date designated in the
related Transfer Agreement as the Cutoff Date for Receivables transferred to the
Trust on such related Transfer Date.
3
"Dealer" means a dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable, directly or indirectly, to
HAFC or one of its Affiliates under a Dealer Agreement or pursuant to a Dealer
Assignment.
"Dealer Agreement" means any agreement between HAFC or one if
its Affiliates and a Dealer relating to the acquisition of Receivables from a
Dealer by HAFC or one of its Affiliates.
"Dealer Assignment" means, with respect to a Receivable, the
executed assignment executed by a Dealer conveying such Receivable to HAFC or
one of its Affiliates.
"Delaware Trustee" has the meaning, if any, assigned to such
term in the Series Supplement.
"Delivery" means, with respect to Trust Account Property:
(1) (a) with respect to bankers' acceptances, commercial
paper, negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Article 9 of the UCC, transfer thereof:
(i) by physical delivery to the Indenture Trustee,
indorsed to, or registered in the name of, the Indenture
Trustee or its nominee or indorsed in blank;
(ii) by the Indenture Trustee continuously
maintaining possession of such instrument; and
(iii) by the Indenture Trustee continuously
indicating by book-entry that such instrument is credited to
the related Trust Account;
(b) with respect to a "certificated security" (as defined in
Article 8 of the UCC), transfer thereof:
(i) by (x) physical delivery of such certificated
security to the Indenture Trustee, provided that if the
certificated security is in registered form, it shall be
indorsed to, or registered in the name of, the Indenture
Trustee or indorsed in blank, and (y) the Indenture Trustee
continuously maintaining possession of such certificated
security; or
(ii) by another Person (not a securities
intermediary) (1) acquiring possession of such certificated
security on behalf of the Indenture Trustee, provided that if
the certificated security is in registered form, it shall be
indorsed to, or registered in the name of, the Indenture
Trustee or indorsed in blank, or (2) having acquired
possession of such certificated security, acknowledging that
it holds such certificated security for the Indenture Trustee,
and, in either such case, continuously maintaining possession
of such certificated security; and
4
by the Indenture Trustee continuously indicating by book-entry that
such certificated security is credited to the related Trust Account;
(c) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book entry regulations,
transfer thereof pursuant to the following procedures, all in
accordance with applicable law, including applicable federal
regulations and Articles 8 and 9 of the UCC:
(i) by (x) book-entry registration of such property
to an appropriate book-entry account maintained with a Federal
Reserve Bank by a securities intermediary that is also a
"depositary" pursuant to applicable federal regulations and
issuance by such securities intermediary of a deposit advice
or other written confirmation of such book-entry registration
to the Indenture Trustee of the purchase by the securities
intermediary on behalf of the Indenture Trustee of such
book-entry security; the making by such securities
intermediary of entries in its books and records identifying
such book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations as belonging
to the Indenture Trustee and continuously indicating that such
securities intermediary holds such book-entry security solely
as agent for the Indenture Trustee or (y) continuous
book-entry registration of such property to a book-entry
account maintained by the Indenture Trustee with a Federal
Reserve Bank; and
(ii) by the Indenture Trustee continuously indicating
by book-entry that such property is credited to the related
Trust Account;
(d) with respect to any asset in the Trust Accounts that is an
"uncertificated security" (as defined in Article 8 of the UCC) and that
is not governed by clause (c) above or clause (e) below:
(i) transfer thereof:
(A) by registration to the Indenture Trustee as the
registered owner thereof, on the books and records of the
issuer thereof; or
(B) by another Person (not a securities intermediary)
(1) becoming the registered owner of the uncertificated
security on behalf of the Indenture Trustee, or (2) having
become the registered owner of the uncertificated security,
acknowledging that it holds such uncertificated security for
the Indenture Trustee; or
(ii) the issuer of the uncertificated security has
agreed that it will comply with instructions originated by the
Indenture Trustee with respect to such uncertificated security
without further consent of the registered owner thereof; and
5
the Indenture Trustee continuously indicating by book-entry that such
uncertificated security is credited to the related Trust Account;
(e) in the case of a security in the custody of or maintained
on the books of a clearing corporation (as defined in Article 8 of the
UCC) or its nominee, transfer thereof by causing:
(i) the relevant clearing corporation to credit such
security to a securities account of the Indenture Trustee at
such clearing corporation; and
(ii) the Indenture Trustee to continuously indicate
by book-entry that such security is credited to the related
Trust Account; or
(f) with respect to a "security entitlement" (as defined in
Article 8 of the UCC) to be transferred to or for the benefit of the
Indenture Trustee and not governed by clauses (c) or (e) above,
transfer thereof by:
(i) a securities intermediary's (A) indicating by
book entry that the underlying "financial asset" (as defined
in Article 8 of the UCC) has been credited to the Indenture
Trustee's "securities account" (as defined in Article 8 of the
UCC), (B) receiving a financial asset from the Indenture
Trustee or acquiring the underlying financial asset for the
Indenture Trustee, and in either case, accepting it for credit
to the Indenture Trustee's securities account, or (C) becoming
obligated under other law, regulation or rule to credit the
underlying financial asset to the Indenture Trustee's
securities account,
(ii) the making by the securities intermediary of
entries on its books and records continuously identifying such
security entitlement as belonging to the Indenture Trustee;
and continuously indicating by book-entry that such securities
entitlement is credited to the Indenture Trustee's securities
account; and
(iii) the Indenture Trustee's continuously indicating
by book-entry that such security entitlement (or all rights
and property of the Indenture Trustee representing such
securities entitlement) is credited to the related Trust
Account; and/or
(2) In the case of any such asset, (i) compliance with such
additional or alternative procedures as are now or may hereafter become
appropriate to effect the complete transfer of ownership of, or control over,
any such Trust Account Property to the Indenture Trustee free and clear of any
adverse claims, consistent with changes in applicable law or regulations or the
interpretation thereof, and (ii) the Indenture Trustee's continuously indicating
by book entry that such asset is credited to the related Trust Account.
6
In each case of delivery contemplated herein, the Indenture
Trustee shall make appropriate notations on its records, and shall cause the
same to be made on the records of its nominees, indicating that securities are
held in trust pursuant to and as provided in this Agreement.
"Depositor" means the Seller in its capacity as Depositor
under the Trust Agreement.
"Determination Date" means, unless otherwise provided in the
Series Supplement, the earlier of the fifth calendar day (or if such day is not
a Business Day, the next preceding Business Day) or the third Business Day
preceding each Distribution Date.
"Distribution Date" means, unless otherwise provided in the
Series Supplement, with respect to each Collection Period, the seventeenth day
of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day.
"Eligibility Criteria" means the criteria set forth in the
Schedule of Eligibility Criteria.
"Eligible Bank" means, except as otherwise provided in the
Series Supplement, any depository institution (which shall initially be the
Indenture Trustee), organized under the laws of the United States of America or
any one of the states thereof or the District of Columbia (or any United States
branch or agency of a foreign bank), which is subject to supervision and
examination by federal or state banking authorities and which at all times (a)
has a net worth in excess of $50,000,000 and (b) has a rating of P-1 from
Moody's, A-1 from Standard & Poor's and F1+ from Fitch, Inc., in each case only
if such Person is a Rating Agency, with respect to short-term deposit
obligations, or such other lower ratings acceptable to the Rating Agency, or
(ii) if such institution has issued long-term unsecured debt obligations, a
rating acceptable to the Rating Agency with respect to long-term unsecured debt
obligations.
"Eligible Deposit Account" means, except as otherwise provided
in the Series Supplement, either (a) a segregated account with an Eligible Bank
or (b) a segregated trust account with the corporate trust department of a
depository institution with corporate trust powers organized under the laws of
the United States of America or any state thereof or the District of Columbia
(or any United States branch or agency of a foreign bank), provided that such
institution also must have a rating of Baa3 or higher from Moody's, a rating of
BBB- or higher from Standard & Poor's and a rating of BBB- or higher from Fitch,
Inc., in each case only if such Person is a Rating Agency, with respect to
long-term deposit obligations, or such other lower ratings acceptable to the
Rating Agency.
"Eligible Investments" shall mean, except as otherwise
provided in a Series Supplement, (i) negotiable instruments or securities
represented by instruments in bearer or registered form (or, in the case of
Eligible Investments described in clause (a) of
7
this definition, book-entry securities representing such obligations), or (ii)
securities entitlements (as defined in Article 8 of the UCC) arising from
Delivery of any such negotiable instruments or securities in accordance with the
provisions of clause (1)(f) of the definition of such term, or (iii) in the case
of deposits described below, deposit accounts held in the name of the Indenture
Trustee in trust for the benefit of the Holders of the Securities, subject to
the exclusive custody and control of the Indenture Trustee and for which the
Indenture Trustee has sole signature authority, which evidence or arise out of,
as the case may be:
(a) direct obligations of, or obligations fully guaranteed as
to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
(having original maturities of no more than 365 days) of depositary institutions
or trust companies incorporated under the laws of the United States of America
or any state thereof (or domestic branches of foreign banks) and subject to
supervision and examination by federal or state banking or depositary
institution authorities; PROVIDED, that at the time of the Trust's investment or
contractual commitment to invest therein, the short-term debt rating of such
depository institution or trust company shall be satisfactory to the Rating
Agency, and PROVIDED FURTHER that the "jurisdiction" of such depositary
institution or trust company, for purposes of Article 9 of the UCC, shall be a
state in which Revised Article 9 of the UCC (1999) has become effective and in
which security interests in deposit accounts are subject to Article 9, as in
effect therein;
(c) commercial paper (having original or remaining maturities
of not more than 30 days) having, at the time of the Trust's investment or
contractual commitment to invest therein, a rating satisfactory to the Rating
Agency;
(d) investments in money market funds having, at the time of
the Trust's investment therein, a rating acceptable to the Rating Agency;
(e) demand deposits, time deposits and certificates of deposit
which are fully insured by the FDIC having, at the time of the Trust's
investment therein, a rating satisfactory to the Rating Agency;
(f) bankers' acceptances (having original maturities of no
more than 365 days) issued by a depository institution or trust company referred
to in (b) above;
(g) (x) time deposits (having maturities not later than the
succeeding Distribution Date) other than as referred to in clause (e) above,
with a Person the commercial paper of which has a credit rating satisfactory to
the Rating Agency or (y) notes which are payable on demand issued by Household
Finance Corporation; PROVIDED such notes will constitute Eligible Investments
only if the commercial paper of Household Finance Corporation has, at the time
of the Trust's investment in such notes, a rating satisfactory to the Rating
Agency; or
(h) any other investment of a type or rating that is
acceptable to the Rating Agency.
8
Any of the foregoing Eligible Investments may be purchased by
or through the Indenture Trustee or through any of its Affiliates.
"Eligible Servicer" means Household Finance Corporation or any
Person which at the time of its appointment as Master Servicer, (i) is servicing
a portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, (iv) is qualified and entitled to use, pursuant to a
license or other written agreement, and agrees to maintain the confidentiality
of, the software which the Master Servicer uses in connection with performing
its duties and responsibilities under this Agreement or otherwise has available
software which is adequate to perform its duties and responsibilities under this
Agreement and (v) has a net worth of at least $50,000,000.
"Eligible Subservicer" means Household Automotive Finance
Corporation or any wholly owned subsidiary of Household Finance Corporation or
any Person which at the time of its appointment as Subservicer, (i) is servicing
a portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, and (iv) is qualified and entitled to use, pursuant
to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Master Servicer uses in connection
with performing its duties and responsibilities under this Agreement or
otherwise has available software which is adequate to perform its duties and
responsibilities under this Agreement.
"Financed Vehicle" means a new or used automobile, light duty
truck or van securing an Obligor's indebtedness under the respective Receivable.
"Grant" has the meaning assigned to such term in the
Indenture.
"HAFC" means Household Automotive Finance Corporation.
"Household Bank" means Household Bank, f.s.b., a federal
savings bank. For the avoidance of doubt, Household Bank is an Affiliate of
HAFC.
"Indenture" has the meaning assigned to such term in the
Series Supplement.
"Indenture Trustee" means the Person acting as Indenture
Trustee under the Indenture, its successors in interest and any successor
Indenture Trustee under the Indenture.
9
"Indenture Trustee Fee" means the fees and reasonable
out-of-pocket expenses due to the Indenture Trustee as may be set forth in that
certain fee agreement dated as of the date hereof between the Master Servicer
and the Indenture Trustee.
"Insolvency Event" means, with respect to a specified Person,
(a) the filing of a petition against such Person or the entry of a decree or
order for relief by a court having jurisdiction in the premises in respect of
such Person or any substantial part of its property in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insurance Policy" means, with respect to a Receivable, any
insurance policy (including the insurance policies described in Section 4.4
hereof) benefiting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.
"Interest Period" has the meaning assigned to such term in the
Series Supplement.
"Issuer" means Household Automotive Trust 2001-3, a Delaware
business trust formed under the laws of the State of Delaware.
"Lien" means a security interest, lien, charge, pledge,
equity, or encumbrance of any kind, other than tax liens, mechanics' liens and
any liens that attach to the respective Receivable by operation of law as a
result of any act or omission by the related Obligor, provided that, any
assignment permitted by Section 2.1 hereof and the lien created by this
Agreement or the Indenture shall not be deemed to constitute a Lien.
"Lien Certificate" means, with respect to a Financed Vehicle,
an original certificate of title, certificate of lien or other notification
issued by the Registrar of Titles of the applicable state to a secured party
which indicates that the lien of the secured party on the Financed Vehicle is
recorded on the original certificate of title. In any jurisdiction in which the
original certificate of title is required to be given to the Obligor, the term
"Lien Certificate" shall mean only a certificate or notification issued to a
secured party.
10
"Liquidated Receivable" means, with respect to any Collection
Period, upon the earliest of each of the following to occur, a Receivable as to
which (i) such Receivable has been liquidated by the Master Servicer through the
sale of the Financed Vehicle, (ii) 90 days have elapsed since the Master
Servicer repossessed the Financed Vehicle, (iii) proceeds have been received in
respect of such Receivable which, in the Master Servicer's reasonable judgment,
constitute the final amounts recoverable in respect of such Receivable or (iv)
10% or more of a Scheduled Payment shall have become 150 or more days delinquent
(or, for certain loans originated by an Affiliate of HAFC, 120 or more days
delinquent or, in the case where the Obligor of such Receivable is subject to an
Insolvency Event, 10% or more of a Scheduled Payment shall have become 210 or
more days delinquent). Any Receivable that becomes a Repurchased Receivable on
or before the related Accounting Date shall not be a Liquidated Receivable.
"Managing Agent" means, with respect to any Purchaser Group,
the Person specified as the Managing Agent for such Purchaser Group from time to
time pursuant to the Note Purchase Agreement (including, without limitation,
Schedule I thereto) or any Joinder Agreement thereto or any Assignment and
Acceptance Agreement thereto.
"Majority Purchaser" has the meaning assigned to such term in
the Note Purchase Agreement.
"Master Receivables Purchase Agreement" has the meaning
assigned to such term in the Series Supplement.
"Master Servicer" means Household Finance Corporation, as the
servicer of the Receivables, and each successor Master Servicer pursuant to
Section 10.3.
"Master Servicer Credit Facility" means the credit facility
maintained by the Master Servicer with a Master Servicer Credit Facility Issuer
pursuant to Section 4.2(d).
"Master Servicer Credit Facility Issuer" means a depository
institution or insurance company that qualifies pursuant to Section 4.2(d).
"Master Servicer Termination Event" means an event specified
in Section 10.1.
"Master Servicer's Certificate" means an Officers' Certificate
of the Master Servicer delivered pursuant to Section 4.9, substantially in the
form of Exhibit A hereto.
"Monthly Extension Rate" means, with respect to any Accounting
Date, the fraction, expressed as a percentage, the numerator of which is the
aggregate Principal Balance of Receivables whose payments were extended during
the Collection Period ended on such Accounting Date and the denominator of which
is the Aggregate Principal Balance as of the Accounting Date on which such
Collection Period began.
11
"Monthly Records" means all records and data maintained by the
Master Servicer with respect to the Receivables, including the following with
respect to each Receivable: the account number; the originating Dealer, if any;
Obligor name; Obligor address; Obligor home phone number; Obligor business phone
number; original Principal Balance; original term; Annual Percentage Rate;
current Principal Balance; current remaining term; origination date; first
payment date; final scheduled payment date; next payment due date; date of most
recent payment; new/used classification; collateral description; days currently
delinquent; number of contract extensions (months) to date; amount of Scheduled
Payment; current Insurance Policy expiration date; and past due late charges.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., or its
successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such Receivable (other than
amounts withdrawn or received from any Series Support) net of (i) reasonable
expenses incurred by the Master Servicer in connection with the collection of
such Receivable and the repossession and disposition of the Financed Vehicle and
(ii) amounts that are required to be refunded to the Obligor on such Receivable;
PROVIDED, HOWEVER, that the Net Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero; PROVIDED, FURTHER, THAT, so long
as amounts are not traced to specific Receivables the Master Servicer shall
reasonably estimate, on or prior to each Accounting Date, the amount of Net
Liquidation Proceeds attributable to each Series Trust Estate.
"Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Note Purchase Agreement" has the meaning, if any, assigned to
such term in the Series Supplement.
"Notes" has the meaning assigned to such term in the
Indenture.
"Obligor" on a Receivable means the purchaser or co-purchasers
of the Financed Vehicle and any other Person who owes payments under the
Receivable.
"Officers' Certificate" means a certificate signed by the
chairman of the board, the president, any executive vice president or any vice
president, any treasurer, assistant treasurer, secretary or assistant secretary
of the Seller or the Master Servicer, as appropriate.
"Opinion of Counsel" means an opinion of counsel who may be
counsel to the Master Servicer or the Seller, acceptable to the Indenture
Trustee.
"Other Conveyed Property" means all property conveyed by the
Seller to the Trust pursuant to Section 2.1(a)(ii) through (xii) of this
Agreement.
"Outstanding" has the meaning assigned to such term in the
Indenture.
12
"Outstanding Amount" means the aggregate principal amount of
all Notes which are Outstanding at the date of determination after giving effect
to all distributions of principal on such date of determination.
"Owner Trust Estate" has the meaning assigned to such term in
the Trust Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under
the Trust Agreement, its successors-in-interest or any successor Owner Trustee
under the Trust Agreement.
"Payment Record" means the record maintained by the Master
Servicer for the Trust as provided in Section 4.2(d) hereof.
"Person" means any individual, corporation, limited liability
company, estate, partnership, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in
the definition of "Delivery" above.
"Principal Balance" means, with respect to any Receivable, as
of any date, the Amount Financed minus (i) that portion of all amounts received
on or prior to such date and allocable to principal in accordance with the
Actuarial Method, or the Simple Interest Method, as appropriate, (ii) any Cram
Down Loss in respect of such Receivable, and (iii) the amount of any write-down
of principal of such Receivable on or before such date in accordance with the
servicing practices of the Master Servicer from time to time. The "Principal
Balance" of a Repurchased Receivable or Liquidated Receivable shall be deemed to
be zero.
"Rating Agency" means each nationally recognized statistical
Rating Agency specified in the Series Supplement.
"Realized Losses" means, with respect to any Receivable that
becomes a Liquidated Receivable, the excess of the Principal Balance of such
Liquidated Receivable over Net Liquidation Proceeds to the extent allocable to
principal.
"Receivable" has the meaning assigned to such term in the
Series Supplement.
"Receivable Files" means the documents specified in Section
3.3.
"Receivables Purchase Agreement Supplement" means any
Receivables Purchase Agreement Supplement to any Master Receivables Purchase
Agreement.
13
"Record Date" with respect to each Distribution Date means the
Business Day immediately preceding such Distribution Date, unless otherwise
specified in the Series Supplement.
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Related Documents" has the meaning assigned to such term in
the Series Supplement.
"Repurchase Amount" means, with respect to a Receivable, the
Principal Balance and all accrued and unpaid interest on the Receivable, after
giving effect to the receipt of any moneys collected (from whatever source) on
such Receivable, if any, as of the date of repurchase, provided that, reductions
in the Principal Balance resulting from such Receivable becoming a Liquidated
Receivable shall be disregarded.
"Repurchased Receivable" means a Receivable purchased by the
Master Servicer pursuant to Section 4.7 or repurchased by the Seller pursuant to
Section 3.2 or the Seller or Master Servicer pursuant to Section 11.1(a).
"Schedule of Eligibility Criteria" means the Schedule of
Eligibility Criteria attached as Schedule 1 to the Series Supplement.
"Schedule of Receivables" has the meaning assigned to such
term in the Series Supplement.
"Scheduled Payment" means, with respect to any Collection
Period for any Receivable, the amount set forth in such Receivable as required
to be paid by the Obligor in such Collection Period. If after the Closing Date,
the Obligor's obligation under a Receivable with respect to a Collection Period
has been modified so as to differ from the amount specified in such Receivable
as a result of (i) the order of a court in an insolvency proceeding involving
the Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of
1940, as amended, or (iii) modifications or extensions of the Receivable
permitted by Sections 4.2(b) and (c), the Scheduled Payment with respect to such
Collection Period shall refer to the Obligor's payment obligation with respect
to such Collection Period as so modified.
"Secured Parties" has the meaning assigned to such term in the
Series Supplement.
"Securities" means the Notes and the Certificates.
"Securityholders" means the Noteholders and the
Certificateholders.
"Seller" means
Household Auto Receivables Corporation, a
Nevada corporation, and its successors in interest to the extent permitted
hereunder.
14
"Series" means the Notes and Certificates issued pursuant to
the Series Supplement.
"Series Supplement" means, the Series Supplement, dated as of
the Closing Date, to this Agreement, the Indenture and the Trust Agreement,
among the Master Servicer, the Issuer, the Seller, the Indenture Trustee and the
Owner Trustee, as such agreement may be amended or supplemented from time to
time.
"Series Support" means the rights and benefits provided to the
Indenture Trustee or the Noteholders of any Class pursuant to any letter of
credit, surety bond, cash collateral account, spread account, reserve account,
guaranteed rate agreement, maturity liquidity facility, interest rate swap
agreement, tax protection agreement or other similar arrangement. The
subordination of any Class to another Class shall be deemed to be Series
Support. Notwithstanding that such Series Support may be held by or in favor of
the Indenture Trustee for the benefit of any Class, only those Class(es) to
which such Series Support relates shall have any rights with respect thereto and
all payments thereunder received by the Indenture Trustee shall be distributed
exclusively as prescribed in the Series Supplement relating to such Class.
"Series Trust Estate" has the meaning assigned to such term in
the Series Supplement.
"Service Contract" means, with respect to a Financed Vehicle,
the agreement, if any, financed under the related Receivable that provides for
the repair of such Financed Vehicle.
"Servicing Fee" means, with respect to any Collection Period,
the fee payable to the Master Servicer for services rendered during such
Collection Period, which shall be equal to one-twelfth of the Servicing Fee Rate
multiplied by the Aggregate Principal Balance for such Series Trust Estate
determined as of the Accounting Date immediately preceding such Collection
Period. For the avoidance of doubt, the Servicing Fee does not include any
administrative fees, expenses or charges paid by or behalf of Obligors during
any Collection Period.
"Servicing Fee Rate" means the rate per annum specified in the
Series Supplement.
"Simple Interest Method" means the method of allocating a
fixed level payment on an obligation between principal and interest, pursuant to
which the portion of such payment that is allocated to interest is equal to the
product of the fixed rate of interest on such obligation multiplied by the
period of time (expressed as a fraction of a year, based on the actual number of
days in the calendar month and 365 days in the calendar year) elapsed since the
preceding payment under the obligation was made.
"Simple Interest Receivable" means a Receivable under which
the portion of the payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
15
"Standard & Poor's" means Standard & Poor's Rating Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or its successor.
"Subservicer" means, initially, Household Automotive Finance
Corporation, or any Eligible Subservicer with whom the Master Servicer has
entered into an agreement relating to subservicing the Receivables.
"Support Default" means a default relating to an Insolvency
Event with respect to, or the performance of, a Support Provider.
"Support Provider" means the Person, if any, designated in the
Series Supplement, as providing any Series Support, other than Household Finance
Corporation or any of its Affiliates or the Noteholders of any Class which is
subordinated to any other Class.
"Termination Date" has the meaning assigned to such term in
the Series Supplement.
"Transfer Agreement" means the agreement among the Issuer, the
Seller, the Master Servicer and the Indenture Trustee, substantially in the form
of Exhibit B.
"Transfer Date" means, with respect to Receivables, any date
on which Receivables are to be transferred to a Trust pursuant to this Agreement
and a related Transfer Agreement.
"Trust Account Property" means the Trust Accounts, all amounts
and investments held from time to time in any Trust Account (whether in the form
of deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned to such term in the
Series Supplement.
"Trust Agreement" has the meaning assigned to such term in the
Series Supplement.
"Trust Officer" means, (i) in the case of the Indenture
Trustee, the chairman or vice-chairman of the board of directors, the chairman
or vice-chairman of the executive committee of the board of directors, the
president, any vice president, assistant vice-president or managing director,
the secretary, any assistant secretary or any other officer of the Indenture
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, having direct responsibility for the administration of
this Agreement, and (ii) in the case of the Owner Trustee, any officer in the
corporate trust office of the Owner Trustee or any agent of the Owner Trustee
under a power of attorney with direct responsibility for the administration of
this Agreement or any of the Basic Documents or Related Documents on behalf of
the Owner Trustee.
16
"UCC" means the Uniform Commercial Code as in effect in the
relevant jurisdiction on the date of the Agreement.
SECTION 1.2. OTHER INTERPRETIVE PROVISIONS. (a) Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in the Indenture, the Series Supplement or the Trust Agreement. Cross
referenced definitions may include a Series designation.
(b) All terms defined in this Agreement shall have
the defined meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.
(c) As used in this Agreement, in any instrument
governed hereby and in any certificate or other document made or delivered
pursuant hereto or thereto, accounting terms not defined in this Agreement or in
any such instrument, certificate or other document, and accounting terms partly
defined in this Agreement or in any such instrument, certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles as in effect on the date of
this Agreement or any such instrument, certificate or other document, as
applicable. To the extent that the definitions of accounting terms in this
Agreement or in any such instrument, certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such
instrument, certificate or other document shall control.
(d) Any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein.
(e) Any term defined herein, which is otherwise
defined in the Series Supplement, shall have the meaning specified therefor in
the Series Supplement, whether or not the definition in this Agreement includes
a phrase to the effect that such term may be otherwise defined in the Series
Supplement.
(f) In the event that with respect to the Series
there is no Support Provider, any references herein or in any other of the Basic
Documents to the consent of, or acceptability to, the Support Provider shall be
deemed to be deleted.
(g) In the event that with respect to the Series, the
Indenture and Series Supplement does not provide for the purchase by the
Noteholders of Additional Principal Amounts, any references herein or in any
other Basic Document to Additional Principal Amounts shall be deemed to be
deleted.
(h) In the event that with respect to the Series, the
Indenture and Series Supplement do not provide for an Administrative Agent or
any Managing Agent,
17
any references herein or in any other Basic Document to an Administrative Agent
shall be deemed to be deleted.
SECTION 1.3. USAGE OF TERMS. With respect to all terms used in
this Agreement, the singular includes the plural and the plural includes the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
the terms "include" or "including" mean "include without limitation" or
"including without limitation;" the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and Article, Section, Schedule
and Exhibit references, unless otherwise specified, refer to Articles and
Sections of Schedules and Exhibits to this Agreement.
SECTION 1.4. CERTAIN REFERENCES. All references to the
Principal Balance of a Receivable as of any date of determination shall refer to
the close of business on such day, or as of the first day of an Interest Period
shall refer to the opening of business on such day. All references to the last
day of an Interest Period shall refer to the close of business on such day.
SECTION 1.5. NO RECOURSE. Without limiting the obligations of
the Master Servicer or Seller hereunder, no recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer or
director, as such, of the Master Servicer or Seller, or of any of their
respective Affiliates, predecessors or successors.
SECTION 1.6. ACTION BY OR CONSENT OF NOTEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to the Noteholders of
record as of the Record Date immediately preceding the date on which such action
is to be taken, or consent given, by Noteholders. Solely for the purposes of any
action to be taken, or consented to, by Noteholders, any Note registered in the
name of HAFC or any Affiliate thereof shall be deemed not to be outstanding;
PROVIDED, HOWEVER, that, solely for the purpose of determining whether the
Indenture Trustee is entitled to rely upon any such action or consent, only
Notes which the Trust Officer of the Indenture Trustee actually knows to be so
owned shall be so disregarded.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF RECEIVABLES. (a) Subject to the
conditions set forth in paragraph (b) below, in consideration of the Issuer's
delivery to or upon the order of the Seller on a Transfer Date (which may
include the Closing Date) of
18
the net proceeds of the issuance of Notes or from any Additional Principal
Amount thereunder and the other amounts to be distributed from time to time to
the Seller in accordance with the terms of this Agreement and the Series
Supplement, the Seller shall, from time to time, sell, transfer, assign, set
over and otherwise convey to the Issuer, without recourse (subject to the
obligations set forth herein), all right, title and interest of the Seller in
and to:
(i) each and every Receivable listed on
Schedule A to the related Transfer Agreement and all
monies paid or payable thereon or in respect thereof
after the related Cutoff Date (including amounts due
on or before the Cutoff Date but received by HAFC,
the Seller or the Issuer on or after the Cutoff
Date);
(ii) the security interests in the related
Financed Vehicles granted by Obligors pursuant to the
related Receivables and any other interest of the
Seller in such Financed Vehicles;
(iii) all rights of the Seller against the
Dealers pursuant to Dealer Agreements as a result of
a breach of representation or warranty in the related
Dealer Agreement;
(iv) any proceeds and the right to receive
proceeds with respect to such Receivables repurchased
by a Dealer, pursuant to a Dealer Agreement as a
result of a breach of representation or warranty in
the related Dealer Agreement;
(v) all rights under any Service Contracts
on the related Financed Vehicles:
(vi) any proceeds and the right to receive
proceeds with respect to such Receivables from claims
on any physical damage, credit life or disability
insurance policies, if any, covering the related
Financed Vehicles or Obligors, including rebates of
insurance premiums relating to the Receivables;
(vii) all items contained in the related
Receivables Files with respect to the Receivables;
and any and all other documents that HAFC or
Household Bank, as applicable, keeps on file in
accordance with its customary procedures relating to
the related Receivables, the Obligors or the Financed
Vehicles;
(viii) all funds on deposit from time to
time in the Trust Accounts (including all investments
and proceeds thereof);
(ix) property (including the right to
receive future Net Liquidation Proceeds) that secures
a Receivable and that has been acquired by or on
behalf of the Trust pursuant to liquidation of such
Receivable;
19
(x) all of the Seller's right, title and
interest in its rights and benefits, but none of its
obligations or burdens, under each of the Master
Receivables Purchase Agreements and the Receivables
Purchase Agreement Supplements, including the
delivery requirements, representations and warranties
and the cure and repurchase obligations of HAFC or
Household Bank, as applicable, under each of the
Master Receivables Purchase Agreements and the
related Receivables Purchase Agreement Supplements,
on or after the related Cutoff Date;
(xi) on the initial Transfer Date only, one
share of Class SV Preferred Stock of the Seller; and
(xii) all present and future claims,
demands, causes and chooses in action in respect of
any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary
or involuntary, into cash or other liquid property,
all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and
other forms of obligations and receivables,
instruments and other property which at any time
constitute all or part of or are included in the
proceeds of any of the foregoing.
(b) The Seller shall transfer to the Issuer the
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Transfer Date:
(i) if the Transfer Date is not also the
Closing Date, the Seller shall have provided the
Indenture Trustee and the Owner Trustee with an
Addition Notice not later than five days prior to
such Transfer Date and shall have provided any
information reasonably requested by any of the
foregoing with respect to the related Receivables;
(ii) the Seller shall have delivered to the
Owner Trustee a duly executed Transfer Agreement
which shall include supplements to Schedule A (which
may be in electronic format), listing the Receivables
to be transferred to the Issuer;
(iii) the Master Servicer, on behalf of the
Issuer, shall have delivered to the Indenture Trustee
a supplemental schedule to the Series Supplement
(which may be in electronic format), listing the
Receivables to be pledged to the Indenture Trustee
under the Indenture;
20
(iv) the Seller shall, to the extent
required by Section 4.2, have deposited in the
Collection Account all collections received after the
related Cutoff Date in respect of the Receivables to
be transferred;
(v) as of each Transfer Date, (A) the Seller
shall not be insolvent and shall not become insolvent
as a result of the transfer of Receivables on such
Transfer Date, (B) the Seller shall not intend to
incur or believe that it shall incur debts that would
be beyond its ability to pay as such debts mature,
(C) such transfer shall not have been made with
actual intent to hinder, delay or defraud any Person
and (D) the assets of the Seller shall not constitute
unreasonably small capital to carry out its business
as conducted;
(vi) each of the representations and
warranties made by the Seller pursuant to Section 3.1
with respect to the Receivables to be transferred on
such Transfer Date shall be true and correct as of
the related Transfer Date, and the Seller shall have
performed all obligations to be performed by it
hereunder on or prior to such Transfer Date;
(vii) the Seller shall, at its own expense,
on or prior to the Transfer Date indicate in its
computer files that the Receivables identified in the
Transfer Agreement have been sold to the Trust
pursuant to this Agreement;
(viii) the Seller shall have taken any
action necessary or, if required by the Indenture
Trustee, advisable to obtain and maintain the first
priority perfected ownership interest of the Trust in
the Owner Trust Estate;
(ix) the Issuer shall have taken any action
necessary or, if required by the Indenture Trustee,
advisable to obtain and maintain the first priority
perfected ownership interest of the Indenture
Trustee, for the benefit of the Noteholders, in the
Series Trust Estate;
(x) no selection procedures adverse to the
interests of the Noteholders or any Support Provider
shall have been utilized in selecting the related
Receivables;
(xi) the addition of any such Receivables
shall not result in a material adverse tax
consequence to the Trust or the Noteholders;
(xii) if required by any of the Related
Documents, the Issuer shall simultaneously transfer
to the Indenture Trustee any amounts
21
required to be deposited in the related Trust
Accounts with respect to the Receivables transferred
on such Transfer Date; and
(xiii) the Seller shall have delivered to
the Indenture Trustee an Officers' Certificate
confirming the satisfaction of each condition
precedent specified in this paragraph (b).
The Seller covenants that in the event any of the foregoing
conditions precedent are not satisfied with respect to any Receivable on the
date required as specified above, the Seller will immediately repurchase such
Receivable from the Trust, at a price equal to the Repurchase Amount thereof, in
the manner specified in Section 5.4.
It is the intention of the Seller that the transfer and
assignment contemplated by this Agreement and each related Transfer Agreement
shall constitute a sale of the related Receivables and the related Other
Conveyed Property from the Seller to the Issuer and the beneficial interest in
and title to such property shall not be part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. In the event that, notwithstanding the intent of the Seller, the
transfer and assignment contemplated hereby and thereby is held not to be a
sale, this Agreement and the related Transfer Agreement shall constitute a Grant
of a security interest in the property referred to in this Section 2.1 to the
Issuer.
SECTION 2.2. FURTHER ENCUMBRANCE OF OWNER TRUST ESTATE. (a)
Immediately upon the conveyance to the Trust by the Seller of Receivables and
the related Other Conveyed Property pursuant to Section 2.1, all right, title
and interest of the Seller in and to such Receivables and such Other Conveyed
Property shall terminate, and all such right, title and interest shall vest in
the Issuer, in accordance with the Trust Agreement and Sections 3802 and 3805 of
the Business Trust Statute (as defined in the Trust Agreement).
(b) Immediately upon the vesting of any Receivables
and the related Other Conveyed Property, the Trust shall have the sole right to
pledge or otherwise encumber such property subject to the terms of the Basic
Documents. Pursuant to the Indenture and the Series Supplement, the Trust will
grant a security interest in the Series Trust Estate to secure the repayment of
the Notes. The Certificates shall represent the beneficial ownership interest in
the Receivables and the Other Conveyed Property, and the Certificateholders
shall be entitled to receive distributions with respect thereto as set forth in
the Series Supplement.
(c) The Indenture Trustee shall hold the Series Trust
Estate for the benefit of the Securityholders. Following the payment in full of
the Notes and the release and discharge of the Indenture and the Series
Supplement, all covenants of the Issuer under Article III of the Indenture and
the Series Supplement shall, until payment in full of the Certificates, remain
as covenants of the Issuer for the benefit of the Certificateholders,
enforceable by the Certificateholders to the same extent as such covenants were
enforceable by the Noteholders prior to the discharge of the Indenture. Any
rights of the Indenture Trustee under Article III of the Indenture and the
Series
22
Supplement, following the discharge of the Indenture and the Series Supplement,
shall vest in the Certificateholders.
(d) The Indenture Trustee shall, at such time as
there are no Securities outstanding and all sums due to the Indenture Trustee or
any agent or counsel thereof pursuant to the Indenture as supplemented by the
Series Supplement, have been paid, pursuant to Section 4.1 of the Indenture, and
subject to satisfaction of the conditions set forth therein, release the Lien of
the Series Supplement and the Indenture with respect to the Series Trust Estate.
ARTICLE III
THE RECEIVABLES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER. The
Seller represents and warrants as to the related Receivables that the
representations and warranties set forth on the Schedule of Eligibility Criteria
are, or will be, true and correct as of the respective dates specified in such
Schedule. The Issuer is deemed to have relied on such representations and
warranties in acquiring the related Receivables and the related Securityholders
shall be deemed to rely on such representations and warranties in purchasing the
Notes or any Additional Principal Amounts thereunder. Such representations and
warranties shall survive the sale, transfer and assignment of the Owner Trust
Estate to the Issuer and any pledge of the Series Trust Estate to the Indenture
Trustee pursuant to the Indenture and the Series Supplement.
SECTION 3.2. REPURCHASE UPON BREACH. (a) The Seller, the
Master Servicer, any Trust Officer of the Indenture Trustee, or the Owner
Trustee, as the case may be, shall inform each of the other parties to this
Agreement promptly, in writing, upon the discovery of any breach of the Seller's
representations and warranties made pursuant to Section 3.1; PROVIDED, HOWEVER,
that the failure to give any such notice shall not derogate from any obligations
of the Seller under this Section 3.2. As of the last day of the second (or, if
the Seller so elects, the first, or with respect to any exceptions appearing on
any exception report delivered by the Indenture Trustee, the first) month
following the discovery by the Seller or receipt by the Seller of notice of such
breach (or such longer period not in excess of 120 days, as may be agreed upon
by the Indenture Trustee and the Master Servicer), unless such breach is cured
by such date, the Seller shall have an obligation to repurchase or cause HAFC or
Household Bank, as applicable, to repurchase any Receivable in which the
interests of the Securityholders are materially and adversely affected by any
such breach. In consideration of and simultaneously with the repurchase of the
Receivables, the Seller shall remit, or cause HAFC or Household Bank, as
applicable, to remit, to the Collection Account the Repurchase Amount in the
manner specified in Section 5.4 and the Issuer shall execute such assignments
and other documents reasonably requested by such person in order to effect such
repurchase. The sole remedy of the Issuer, the Owner Trustee, the Indenture
Trustee and the related holders with respect to a breach of representations and
warranties pursuant to Section 3.1 and the agreement contained in this Section
shall be the repurchase of the Receivables pursuant to this Section, subject to
the conditions contained herein or to enforce the
23
obligation of HAFC or Household Bank, as applicable, to the Seller to repurchase
such Receivables pursuant to the Master Receivables Purchase Agreements, as
applicable. Neither the Owner Trustee nor the Indenture Trustee shall have a
duty to conduct any affirmative investigation as to the occurrence of any
conditions requiring the repurchase of any Receivable pursuant to this Section.
(b) Pursuant to Section 2.1 of this Agreement and
pursuant to the related Transfer Agreement, the Seller conveyed to the Trust all
of the Seller's right, title and interest in its rights and benefits, but none
of its obligations or burdens, under the Master Receivables Purchase Agreements
and the related Master Receivables Purchase Agreement Supplements, including the
Seller's rights under the Master Receivables Purchase Agreements and the
delivery requirements, representations and warranties and the cure or repurchase
obligations of HAFC or Household Bank, as applicable, thereunder. The Seller
hereby represents and warrants to the Trust that such assignment is valid,
enforceable and effective to permit the Trust to enforce such obligations of
HAFC and Household Bank under the Master Receivables Purchase Agreements.
SECTION 3.3. CUSTODY OF RECEIVABLES FILES. In connection with
the sale, transfer and assignment of the Receivables to the Trust pursuant to
this Agreement and pursuant to the related Transfer Agreement, the Master
Servicer shall act as custodian for the benefit of the Indenture Trustee of the
following documents or instruments with respect to each Receivable:
(i) The fully executed original of the
Receivable (together with any agreements modifying
the Receivable, including, without limitation, any
extension agreements);
(ii) The original credit application, or a
copy thereof, of each Obligor, fully executed by each
such Obligor on the customary form used by HAFC, an
Affiliate of HAFC, or the related Dealer, as
applicable, or on a form approved by HAFC or an
Affiliate of HAFC, as applicable, for such
application; and
(iii) The original certificate of title
(when received) and otherwise such documents, if any,
that HAFC or an Affiliate of HAFC, as applicable,
keeps on file in accordance with its customary
procedures indicating that the Financed Vehicle is
owned by the Obligor and subject to the interest of
HAFC (or any predecessor corporation to HAFC, or any
Affiliate of HAFC or such predecessor corporation) as
first lienholder or secured party (including any Lien
Certificate received by HAFC or an Affiliate of HAFC,
as applicable), or, if such original certificate of
title has not yet been received, a copy of the
application therefor, showing either HAFC (or any
predecessor corporation to HAFC, or any Affiliate of
HAFC or such predecessor corporation), or a Dealer as
secured party; and
24
(iv) Documents evidencing or relating to any
Insurance Policy, to the extent such documents are
maintained by or on behalf of the Seller, HAFC or an
Affiliate of HAFC.
Notwithstanding the foregoing, the Master Servicer may appoint a Subservicer as
subcustodian, which subcustodian may hold physical possession of some or all of
the Receivable Files. The Indenture Trustee shall have no liability for the acts
or omissions of any such custodian or subcustodian.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. DUTIES OF THE MASTER SERVICER. The Master
Servicer is hereby authorized to act as agent for the Trust (and also on behalf
of the Indenture Trustee and the Noteholders) and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Master Servicer under this Agreement. The Master
Servicer agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicles retail installment sales contracts and, to the extent more
exacting, the degree of skill and attention that the Master Servicer exercises
with respect to all comparable motor vehicle receivables that it services for
itself or others. In performing such duties, so long as Household Finance
Corporation is the Master Servicer, it shall comply with the standard and
customary procedures for servicing all of its comparable motor vehicle
receivables. The Master Servicer's duties shall include, without limitation,
collection and posting of all payments, responding to inquiries of Obligors on
the Receivables, investigating delinquencies, sending payment coupons to
Obligors, reporting any required tax information to Obligors, monitoring the
collateral, accounting for collections and furnishing monthly and annual
statements to the Indenture Trustee and the Noteholders with respect to
distributions, monitoring the status of Insurance Policies with respect to the
Financed Vehicles and performing the other duties specified herein. The Master
Servicer shall also administer and enforce all rights and responsibilities of
the holder of the Receivables provided for in the Dealer Agreements (and
Household Finance Corporation shall make efforts to obtain possession of the
Dealer Agreements, to the extent it is necessary to do so), the Dealer
Assignments, the Master Receivables Purchase Agreements, and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments, the
Master Receivables Purchase Agreements, and Insurance Policies relate to the
Receivables, the Financed Vehicles or the Obligors. To the extent consistent
with the standards, policies and procedures otherwise required hereby, the
Master Servicer shall follow its customary standards, policies, and procedures
and shall have full power and authority, acting alone, to do any and all things
in connection with such managing, servicing, administration and collection that
it may deem necessary or desirable. In performing such duties, the Master
Servicer or any Subservicer may act through agents and independent contractors
provided that the Master Servicer remains responsible for the performance of its
duties under this Agreement. Without limiting the generality of the foregoing,
the Master Servicer is
25
hereby authorized and empowered by the Trust to execute and deliver, on behalf
of the Trust, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments, with
respect to the Receivables and with respect to the Financed Vehicles. The Master
Servicer is hereby authorized to commence, in it's own name or in the name of
the Trust, a legal proceeding to enforce a Receivable pursuant to Section 4.3 or
to commence or participate in any other legal proceeding (including, without
limitation, a bankruptcy proceeding) relating to or involving a Receivable, an
Obligor or a Financed Vehicle. If the Master Servicer commences or participates
in such a legal proceeding in its own name, the Trust shall thereupon be deemed
to have automatically assigned such Receivable to the Master Servicer solely for
purposes of commencing or participating in any such proceeding as a party or
claimant, and the Master Servicer is authorized and empowered by the Trust to
execute and deliver in the Master Servicer's name any notices, demands, claims,
complaints, responses, affidavits or other documents or instruments in
connection with any such proceeding. The Indenture Trustee and the Owner Trustee
shall furnish the Master Servicer with any powers of attorney and other
documents which the Master Servicer may reasonably request and which the Master
Servicer deems necessary or appropriate and take any other steps which the
Master Servicer may deem reasonably necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties under this
Agreement.
SECTION 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS
OF RECEIVABLES. (a) Consistent with the standards, policies and procedures
required by this Agreement, the Master Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, the Master
Receivables Purchase Agreements, the Insurance Policies and the Other Conveyed
Property in such manner as will, in the reasonable judgment of the Master
Servicer, maximize the amount to be received by the Trust with respect thereto.
Consistent with the foregoing, the Master Servicer may, if it determines in its
reasonable judgment that such action would maximize the amount to be received by
the Trust, arrange for the sale by the Trust of Liquidated Receivables with
respect to which the related Financed Vehicle has been sold, and the net
proceeds of such sale shall be included in Net Liquidation Proceeds. The Master
Servicer is authorized in its discretion to waive any prepayment charge, late
payment charge or any other similar fees that may be collected in the ordinary
course of servicing any Receivable.
(b) The Master Servicer may at any time agree to a
modification or amendment of a Receivable in order to (i) change the Obligor's
regular due date to a date within 30 days of when such due date occurs;
PROVIDED, HOWEVER, that no modification of a Receivable in connection with a due
date change pursuant to this clause (i) shall be considered an extension for
purposes of Section 4.2(c) below and therefore shall not be subject to the
restrictions on extensions, modifications or amendments specified in Section
4.2(c) below or (ii) re-amortize the Scheduled Payments on the Receivable
following a partial prepayment of principal; PROVIDED, HOWEVER, that no
re-
26
amortization permitted by this clause (ii) shall extend the maturity date of any
Receivable.
(c) The Master Servicer may grant payment extensions
on, or other modifications or amendments to, a Receivable in accordance with its
customary procedures if the Master Servicer believes in good faith that such
extension, modification or amendment is necessary to avoid a default on such
Receivable, will maximize the amount to be received with respect to such
Receivable, and is otherwise in the best interests of the Trust; PROVIDED,
HOWEVER, that unless otherwise specified in any Series Supplement:
(i) The aggregate period of all extensions
on a Receivable shall not exceed six months;
PROVIDED, HOWEVER, that not more than three months
can be in any consecutive twelve month period;
(ii) In no event may a Receivable be
extended by the Master Servicer beyond the Collection
Period immediately preceding the Final Scheduled
Distribution Date of the Notes with respect to the
related Series; and
(iii) The average Monthly Extension Rate for
any three consecutive calendar months shall not
exceed 4%.
(d) Except as otherwise provided below, the Master
Servicer shall deposit collections in immediately available funds on or with
respect to Receivables into the Collection Account as promptly as possible after
the date of processing of such collections, but in no event later than the
second Business Day following the date of processing. Subject to the express
terms the Series Supplement, but notwithstanding anything else in this Agreement
to the contrary, for so long as (i) Household Finance Corporation remains the
Master Servicer and maintains a commercial paper rating of not less than A-1 by
Standard & Poor's, P-1 by Moody's and F1+ by Fitch, Inc. (or such other rating
as shall be satisfactory to such Rating Agency), in each case only if such
Person is a Rating Agency, and for five Business Days following any reduction of
any such rating or (ii) a Master Servicer Credit Facility is maintained in
effect by the Master Servicer in form and substance acceptable to the Rating
Agency (such acceptability to be evidenced in writing by the Rating Agency to
the effect that failure to make the aforementioned deposit on the basis of the
maintenance of the Master Servicer Credit Facility will not adversely affect the
then current rating of the Notes) issued by a depository institution or
insurance company having a rating on its (A) short-term obligations of at least
P-1 by Moody's, A-1 by Standard & Poor's and F1+ by Fitch, Inc. (or such other
rating as shall be satisfactory to such Rating Agency), in each case only if
such Person is a Rating Agency, and (B) long term obligations of at least A2 by
Moody's, A by Standard & Poor's, and A by Fitch, Inc., in each case only if such
Person is a Rating Agency, the Master Servicer shall not be required to make
deposits of collections on or with respect to Receivables as provided in the
preceding sentence, but may make one or more deposits of Collected Funds with
respect to the Series Trust Estate with respect to a Collection Period into the
Collection Account in immediately available funds not later than 1:00 P.M.,
27
Central time, on the Business Day immediately preceding the related Distribution
Date. In the event that a Master Servicer Credit Facility is maintained, the
Master Servicer shall within two Business Days of the date of processing of
collections on or with respect to Receivables notify the Indenture Trustee and
the Master Servicer Credit Facility Issuer in writing of the amounts that would
otherwise be deposited in the Collection Account and the Master Servicer shall
establish and maintain for the Trust a Payment Record in which the payments on
or with respect to the Receivables shall be credited and the Master Servicer
shall notify the Indenture Trustee and the Master Servicer Credit Facility
Issuer in writing as promptly as practicable (but in any event prior to the
Determination Date for the following Distribution Date) of the amounts so
credited on or with respect to the Receivables that are to be included in
Collected Funds for the related Distribution Date and of the amounts so credited
which will constitute a part of Collected Funds for the second following
Distribution Date. The Payment Record shall be made available for inspection
during normal business hours of the Master Servicer upon request of the
Indenture Trustee, or any Master Servicer Credit Facility Issuer. The Master
Servicer shall give written notice to the Indenture Trustee if it is required to
deposit funds in accordance with the first sentence of this paragraph.
SECTION 4.3. REALIZATION UPON RECEIVABLES. (a) Consistent with
the standards, policies and procedures required by this Agreement, the Master
Servicer shall use its best efforts to repossess (or otherwise comparably
convert the ownership of) and liquidate any Financed Vehicle securing a
Receivable with respect to which the Master Servicer has determined that
payments thereunder are not likely to be resumed, as soon as is practicable
after default on such Receivable but in no event later than the date on which
10% or more of a Scheduled Payment has become 150 days delinquent (other than in
the case of Financed Vehicles where neither the Financed Vehicle nor the Obligor
can be physically located by the Master Servicer (using procedures consistent
with the standards, policies and procedures of the Master Servicer required by
this Agreement) and other than in the case of an Obligor who is subject to a
bankruptcy proceeding); PROVIDED, HOWEVER, that the Master Servicer may elect
not to repossess a Financed Vehicle within such time period if in its good faith
judgment it determines that the proceeds ultimately recoverable with respect to
such Receivable would be increased by forbearance. The Master Servicer is
authorized to follow such customary practices and procedures as it shall deem
necessary or advisable, consistent with the standard of care required by Section
4.1, which practices and procedures may include reasonable efforts to realize
upon any recourse to Dealers, the sale of the related Financed Vehicle at public
or private sale, the submission of claims under an Insurance Policy and other
actions, including, without limitation, entering into settlements with Obligors,
by the Master Servicer in order to realize upon such a Receivable. The foregoing
is subject to the provision that, in any case in which the Financed Vehicle
shall have suffered damage, the Master Servicer shall not expend funds in
connection with any repair or towards the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
shall increase the proceeds of liquidation of the related Receivable by an
amount greater than the amount of such expenses. The Master Servicer shall be
entitled to recover all reasonable expenses incurred by it in the course of
repossessing and liquidating a Financed Vehicle but only from the liquidation
proceeds of the vehicle or under the related Dealer Agreement. The Master
Servicer shall recover such reasonable
28
expenses based on the information contained in the Master Servicer's Certificate
delivered on the related Determination Date. The Master Servicer shall pay on
behalf of the Trust any personal property taxes assessed on repossessed Financed
Vehicles. The Master Servicer shall be entitled to reimbursement of any such tax
from Net Liquidation Proceeds with respect to such Receivable.
(b) If the Master Servicer elects to commence a legal
proceeding to enforce a Dealer Agreement or Dealer Assignment, the act of
commencement shall be deemed to be an automatic assignment from the Trust to the
Master Servicer of the rights under such Dealer Agreement and Dealer Assignment
for purposes of collection only. If, HOWEVER, in any enforcement suit or legal
proceeding it is held that the Master Servicer may not enforce a Dealer
Agreement or Dealer Assignment on the grounds that it is not a real party in
interest or a Person entitled to enforce the Dealer Agreement or Dealer
Assignment, the Owner Trustee, at the Master Servicer's written direction and
expense, or the Seller, at the Seller's expense, shall take such steps as the
Master Servicer deems reasonably necessary to enforce the Dealer Agreement or
Dealer Assignment, including bringing suit in its name or the name of the Seller
or of the Trust and the Owner Trustee for the benefit of the Securityholders.
All amounts recovered shall be remitted directly by the Master Servicer as
provided in Section 4.2(d).
(c) The Master Servicer agrees that prior to
delivering any repossessed Finance Vehicle for sale to any dealer, it shall make
such filings and effect such notices as are necessary under Section 9-324(1) of
the UCC to preserve the Trust's ownership interest (or security interest, as the
case may be) in such repossessed Financed Vehicle.
SECTION 4.4. INSURANCE. (a) The Master Servicer shall require,
in accordance with its customary servicing policies and procedures, that each
Financed Vehicle be insured by the related Obligor under an insurance policy
covering physical loss and damage to the related Financed Vehicle and shall
monitor the status of such physical loss and damage insurance coverage
thereafter, in accordance with its customary servicing procedures. Each
Receivable requires the Obligor to obtain such physical loss and damage
insurance, naming HAFC or an Affiliate of HAFC, as applicable, and its
successors and assigns as loss payee, and with respect to liability coverage,
additional insureds, and permits the holder of such Receivable to obtain
physical loss and damage insurance at the expense of the Obligor if the Obligor
fails to maintain such insurance. If the Master Servicer shall determine that an
Obligor has failed to obtain or maintain a physical loss and damage Insurance
Policy covering the related Financed Vehicle which satisfies the conditions set
forth in the related Eligibility Criteria (including, without limitation, during
the repossession of such Financed Vehicle) the Master Servicer shall be diligent
in carrying out its customary servicing procedures to enforce the rights of the
holder of the Receivable under the Receivable to require the Obligor to obtain
such physical loss and damage insurance in accordance with its customary
servicing policies and procedures.
(b) The Master Servicer may ▇▇▇ to enforce or collect
upon the Insurance Policies, in its own name, if possible, or as agent of the
Trust. If the Master
29
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy to the Master Servicer for
purposes of collection only. If, HOWEVER, in any enforcement suit or legal
proceeding it is held that the Master Servicer may not enforce an Insurance
Policy on the grounds that it is not a real party in interest or a holder
entitled to enforce the Insurance Policy, the Owner Trustee, at the Master
Servicer's written direction and expense, or the Seller, at the Seller's
expense, shall take such steps as the Master Servicer deems reasonably necessary
to enforce such Insurance Policy, including bringing suit in its name or the
name of the Trust and the Owner Trustee for the benefit of the Noteholders.
SECTION 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
Consistent with the policies and procedures required by this Agreement, the
Master Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the security interest created by each Receivable in the
related Financed Vehicle on behalf of the Trust as the Indenture Trustee shall
reasonably request, including, but not limited to, obtaining the execution by
the Obligors and the recording, registering, filing, re-recording, re-filing,
and re-registering of all security agreements, financing statements and
continuation statements as are necessary to maintain the security interest
granted by the Obligors under the respective Receivables. The Owner Trustee, on
behalf of the Trust, hereby authorizes the Master Servicer, and the Master
Servicer agrees, to take any and all steps necessary to re-perfect such security
interest on behalf of the Trust as necessary because of the relocation of a
Financed Vehicle or for any other reason. In the event that the assignment of a
Receivable to the Trust is insufficient, without a notation on the related
Financed Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the state in which the Financed
Vehicle is located, to perfect a security interest in the related Financed
Vehicle in favor of the Trust, HAFC hereby agrees that the designation of HAFC
or any Affiliate of HAFC as the secured party on the certificate of title is in
its capacity as agent of the Trust for such limited purpose.
SECTION 4.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF
MASTER SERVICER. By its execution and delivery of this Agreement, the Master
Servicer makes the following representations, warranties and covenants on which
the Issuer relies in accepting the Receivables, on which the Indenture Trustee
relies in authenticating the Notes, on which the Noteholders rely on in
purchasing the Notes and any Additional Principal Amount thereunder on which the
Owner Trustee relies in executing the Certificates.
The Master Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle
securing each Receivable shall not be released in
whole or in part from the security interest granted
by the Receivable, except upon payment in full of the
Receivable or as otherwise contemplated herein;
30
(ii) NO IMPAIRMENT. The Master Servicer
shall do nothing to impair the rights of the Trust or
the Noteholders in the Receivables, the Dealer
Agreements, the Dealer Assignments, the Master
Receivables Purchase Agreements, the Insurance
Policies or the Other Conveyed Property;
(iii) NO AMENDMENTS. The Master Servicer
shall not extend or otherwise amend the terms of any
Receivable, except in accordance with Section 4.2;
(iv) RESTRICTIONS ON LIENS. The Master
Servicer shall not (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist,
or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the
creation, incurrence or existence of any Lien or
restriction on transferability of the Receivables
except for the Lien in favor of the Indenture Trustee
for the benefit of the Noteholders, and the
restrictions on transferability imposed by this
Agreement or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing
statement which names HAFC, the Master Servicer or
any Affiliate thereof as a debtor, or sign any
security agreement authorizing any secured party
thereunder to file such financing statement, with
respect to the Receivables, except in each case any
such instrument solely securing the rights and
preserving the Lien in favor of the Indenture
Trustee;
(v) SERVICING OF RECEIVABLES. The Master
Servicer shall service the Receivables as required by
the terms of this Agreement and in material
compliance with its standard and customary procedures
for servicing all its other comparable motor vehicle
receivables and in compliance with applicable law;
and
(vi) The Master Servicer shall notify the
Indenture Trustee of any relocation of the Master
Servicer's principal office set forth in Section 13.3
hereof and all Receivables Files shall be maintained
by the Master Servicer in the United States.
SECTION 4.7. REPURCHASE OF RECEIVABLES UPON BREACH OF
COVENANT. Upon discovery by any of the Master Servicer, the Seller, a Trust
Officer of the Owner Trustee or of the Indenture Trustee of a breach of any of
the covenants set forth in Sections 4.5 or 4.6, the party discovering such
breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that
the failure to give any such notice shall not affect any obligation of the
Master Servicer under this Section 4.7. As of the second Accounting Date
following its discovery or receipt of notice of any breach of any covenant set
forth in Sections 4.5 or 4.6 which materially and adversely affects the
interests of the Securityholders in any Receivable (including any Liquidated
Receivable) (or, at the Master Servicer's election, the first Accounting Date so
following) or the related
31
Financed Vehicle, the Master Servicer shall, unless such breach shall have been
cured in all material respects, repurchase from the Trust the Receivable
affected by such breach and, on the date specified in Section 5.4, the Master
Servicer shall pay the related Repurchase Amount and deposit such Repurchase
Amounts into the Collection Account. It is understood and agreed that the
obligation of the Master Servicer to repurchase any Receivable (including any
Liquidated Receivable) with respect to which such a breach has occurred and is
continuing shall, if such obligation is fulfilled, constitute the sole remedy
against the Master Servicer for such breach;
SECTION 4.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES
BY MASTER SERVICER. So as long as: (i) the Master Servicer is not required in
accordance with Section 4.2(d) hereof to make deposits of collections with
respect to a Collection Period into the Collection Account until the Business
Day immediately preceding the related Distribution Date and (ii) the Master
Servicer's Certificate delivered with respect to such Distribution Date
indicates that Available Funds with respect to such Distribution Date are
sufficient to make the distributions required to be made on such Distribution
Date in respect of the Servicing Fee (and all other distributions required to be
made on such Distribution Date having a higher priority than the distribution of
the Servicing Fee), the Master Servicer shall be entitled to retain out of
amounts otherwise to be deposited in the Collection Account with respect to a
Collection Period, the Servicing Fee for such Collection Period. The Master
Servicer shall be required to pay all expenses incurred by it in connection with
its activities under this Agreement (including taxes imposed on the Master
Servicer, expenses incurred in connection with distributions and reports made by
the Master Servicer to Securityholders, all fees and expenses of the Owner
Trustee or the Indenture Trustee), except taxes levied or assessed against the
Trust, and claims against the Trust in respect of indemnification, which taxes
and claims in respect of indemnification against the Trust are expressly stated
to be for the account of Household Finance Corporation. The Master Servicer
shall be liable for the fees, charges and expenses of the Owner Trustee, the
Indenture Trustee, any Subservicer and their respective agents.
SECTION 4.9. MASTER SERVICER'S CERTIFICATE. No later than
10:00 a.m. Central time on each Determination Date, the Master Servicer shall
deliver (or at the option of the Master Servicer cause to be delivered via
access to an Affiliate's web-site address or otherwise) to the Indenture Trustee
and the Owner Trustee, a Master Servicer's Certificate executed by a responsible
officer or agent of the Master Servicer containing among other things, all
information necessary to enable the Indenture Trustee to make the distributions
with respect to such Distribution Date pursuant to the Series Supplement. In
addition to the information set forth in the preceding sentence, the Master
Servicer's Certificate shall also contain the information required by the Series
Supplement.
SECTION 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF
MASTER SERVICER TERMINATION EVENT. (a) The Master Servicer shall deliver or
cause to be delivered to the Indenture Trustee and the Owner Trustee on or
before April 30 (or 120 days after the end of the Master Servicer's fiscal year,
if other than December 31) of each year, beginning on April 30 in the calendar
year succeeding the Closing Date, an Officer's Certificate signed by any
responsible officer of the Master Servicer, or such
32
Eligible Subservicer who is performing the servicing duties of the Master
Servicer, dated as of December 31 (or other applicable date) of the immediately
preceding year, stating that (i) a review of the activities of the Master
Servicer, or such Eligible Subservicer who is performing the servicing duties of
the Master Servicer, during the preceding 12-month period (or such shorter
period since the Closing Date) and of its performance under this Agreement has
been made under such officer's supervision, and (ii) to such officer's
knowledge, based on such review, the Master Servicer, or such Eligible
Subservicer who is performing the servicing duties of the Master Servicer, has
in all material respects fulfilled all its obligations under this Agreement
throughout such period, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof.
(b) The Master Servicer, or such Eligible Subservicer who is
performing the servicing duties of the Master Servicer, shall deliver to the
Indenture Trustee and the Owner Trustee, and, in the event that such notice is
delivered by the Subservicer, to the Master Servicer, promptly after having
obtained knowledge thereof, but in no event later than two (2) Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Master Servicer
Termination Event under Section 10.1(a). The Seller or the Master Servicer shall
deliver to the Indenture Trustee, the Owner Trustee, the Master Servicer or the
Seller (as applicable) promptly after having obtained knowledge thereof, but in
no event later than two (2) Business Days thereafter, written notice in an
Officer's Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Master Servicer Termination Event under any other
clause of Section 10.1.
SECTION 4.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The
Master Servicer shall cause a firm of nationally recognized independent
certified public accountants (the "Independent Accountants"), who may also
render other services to the Master Servicer or to the Seller, to deliver to the
Indenture Trustee and the Owner Trustee on or before April 30 (or 120 days after
the end of the Master Servicer's fiscal year, if other than December 31) of each
year, beginning on April 30 in the calendar year succeeding the Closing Date
with respect to the twelve months (or shorter applicable period) ended the
immediately preceding December 31 (or other applicable date), a report to the
effect that they have examined certain documents and records relating to the
servicing of Receivables under this Agreement and the Series Supplement,
compared the information contained in the Master Servicer's Certificates
delivered pursuant to Section 4.9 during the period covered by such report with
such documents and records and that, on the basis of such examination, such
accountants are of the opinion that the servicing has been conducted in
compliance with the terms and conditions as set forth in Articles IV and V of
this Agreement and the applicable provisions of the Series Supplement, except
for such exceptions as they believe to be immaterial and such other exceptions
as shall be set forth in such statement. Such report shall acknowledge that the
Indenture Trustee shall be a "non-participating party" with respect to such
report, or words to similar effect. The Indenture Trustee shall have no duty to
make any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency of such procedures.
33
(b) On or before April 30 of each calendar year, beginning
with April 30 in the calendar year succeeding the Closing Date, the Master
Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Master Servicer or the
Seller) to furnish a report to the Indenture Trustee, the Master Servicer and to
the effect that they have compared the mathematical calculations of each amount
set forth in the Master Servicer's Certificates delivered pursuant to Section
4.9 during the period covered by such report with the Master Servicer's computer
reports which were the source of such amounts and that on the basis of such
comparison, such accountants are of the opinion that such amounts are in
agreement, except for such exceptions as they believe to be immaterial and such
other exceptions as shall be set forth in such statement. Such report shall
acknowledge that the Indenture Trustee shall be a "non-participating party" with
respect to such report, or words to similar effect. The Indenture Trustee shall
have no duty to make any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency of such
procedures.
SECTION 4.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Master Servicer shall provide to representatives of
the Indenture Trustee and the Owner Trustee reasonable access to the
documentation regarding the Receivables. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section shall derogate from the obligation of
the Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Master Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
SECTION 4.13. FIDELITY BOND AND ERRORS AND OMISSIONS POLICY.
The Master Servicer or such Eligible Subservicer that is performing the
servicing duties of the Master Servicer, has obtained, and shall continue to
maintain in full force and effect, a Fidelity Bond and Errors and Omissions
Policy of a type and in such amount as is customary for servicers engaged in the
business of servicing automobile receivables.
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
SECTION 5.1. ESTABLISHMENT OF TRUST ACCOUNTS. (a) (i) The
Indenture Trustee shall establish and maintain the Series Trust Accounts
required to be established and maintained pursuant to the Series Supplement, and
such Series Trust Accounts shall be subject to the sole dominion and control of
the Indenture Trustee for the benefit of the Noteholders.
(ii) No Trust Account shall be maintained
with an institution other than the Indenture Trustee unless such institution
agrees in writing to the provisions of this Section 5.1 as if such institution
were the Indenture Trustee, except that the
34
Indenture Trustee shall continue to be the "entitlement holder" of the related
Trust Account.
(iii) With respect to any Trust Account
Property held from time to time in any Trust Account, the Indenture Trustee
agrees that (A) such Trust Account Property shall at all times be credited in
the Indenture Trustee's books and records to the relevant Trust Account, (B) any
Eligible Investment constituting a deposit account shall be, except as otherwise
provided herein, subject to the exclusive custody and control of the Indenture
Trustee, and, if the Indenture Trustee is not the depositary bank with which
such deposit account is maintained, the Indenture Trustee shall be the
depositary bank's customer with respect thereto, and (C) any Eligible Investment
other than a deposit account shall be held, pending maturity or disposition by
the Indenture Trustee, in accordance with the relevant terms of the definition
of "Delivery." The Indenture Trustee acknowledges and agrees that each item of
property (whether investment property, financial asset, security, instrument,
cash or any other type of property) credited to a Trust Account shall be treated
as a "financial asset" within the meaning of Article 8 of the UCC.
(b) Except as otherwise provided in the Series
Supplement, funds on deposit in the Series Trust Accounts (collectively, the
"Trust Accounts") shall be invested by the Indenture Trustee (or any custodian
with respect to funds on deposit in any such account) in Eligible Investments
selected in writing by the Master Servicer (pursuant to standing instructions or
otherwise) which absent any instruction shall be the investments specified in
clause (d) of the definition of Eligible Investments set forth herein. Funds on
deposit in any Trust Account shall be invested in Eligible Investments that will
mature so that such funds will be available at the close of business on the
Business Day immediately preceding the following Distribution Date. Funds
deposited in a Trust Account on the day immediately preceding a Distribution
Date and representing the proceeds of Eligible Investments are not required to
be invested overnight. All Eligible Investments will be held to maturity.
(c) All investment earnings of monies deposited in
the Trust Accounts shall be deposited (or caused to be deposited) by the
Indenture Trustee in the Collection Account no later than the close of business
on the Business Day immediately preceding the related Distribution Date, and any
loss resulting from such investments shall be charged to the Collection Account.
The Master Servicer will not direct the Indenture Trustee to make any investment
of any funds held in any of the Trust Accounts unless the security interest
granted and perfected in such account will continue to be perfected in such
investment, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee, to make any such
investment, if necessary, the Master Servicer shall deliver to the Indenture
Trustee an Opinion of Counsel to such effect.
(d) The Indenture Trustee shall not in any way be
held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's negligence or bad faith or its
failure to make payments on such Eligible
35
Investments issued by the Indenture Trustee in its commercial capacity as
principal obligor and not as Indenture Trustee in accordance with their terms.
(e) If (i) the Master Servicer shall have failed to
give investment directions for any funds on deposit in the Trust Accounts to the
Indenture Trustee by 2:00 p.m. Eastern Time (or such other time as may be agreed
by the Issuer and the Indenture Trustee) on any Business Day; or (ii) an Event
of Default shall have occurred and be continuing, the Indenture Trustee shall,
to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments in accordance with paragraph (b)
above; PROVIDED that, if following an Event of Default amounts are to be
distributed to Securityholders other than on a Distribution Date, investments
shall mature on the Business Day preceding any such proposed date of
distribution.
(f) The Indenture Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof and all such funds, investments, proceeds
and income shall be part of the Series Trust Estate. Except as otherwise
provided herein, the Trust Accounts shall be under the sole dominion and control
of the Indenture Trustee for the benefit of the related Noteholders. If, at any
time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the
Indenture Trustee (or the Master Servicer on its behalf) shall within five
Business Days (or such longer period as to which each Rating Agency may consent)
establish a new Trust Account as an Eligible Deposit Account and shall transfer
any cash and/or any investments to such new Trust Account. In connection with
the foregoing, the Master Servicer agrees that, in the event that any of the
Trust Accounts are not accounts with the Indenture Trustee, the Master Servicer
shall notify the Indenture Trustee in writing promptly upon any of such Trust
Accounts ceasing to be an Eligible Deposit Account. The Master Servicer may net
against any deposits required to be made to the Collection Account on the
Business Day before any Determination Date amounts that the Seller, as
Certificateholder or otherwise, is entitled to receive as distributions from the
Collection Account on the related Distribution Date.
SECTION 5.2. CERTAIN REIMBURSEMENTS TO THE MASTER SERVICER.
The Master Servicer shall be entitled to withhold from amounts otherwise
required to be remitted to the Collection Account with respect to a Collection
Period an amount in respect of funds deposited with respect to prior Collection
Periods in the Collection Account but later determined by the Master Servicer to
have resulted from mistaken deposits or postings or checks returned for
insufficient funds; PROVIDED, THAT, such withholding may be made only following
certification by the Master Servicer of such amounts and the provision of such
information to the Indenture Trustee as may be necessary in the opinion of the
Indenture Trustee to verify the accuracy of such certification.
SECTION 5.3. APPLICATION OF COLLECTIONS. All collections for
the Collection Period shall be applied by the Master Servicer as follows: with
respect to each Simple Interest Receivable (other than a Repurchased
Receivable), payments by or on behalf of the Obligor, (other than amounts, if
any, collected with respect to administrative fees, including late fees,
prepayment fees and liquidation fees collected on the
36
Receivable) shall be applied to interest and principal in accordance with the
Simple Interest Method. With respect to each Actuarial Receivable, (other than a
Repurchased Receivable), payments by or on behalf of the Obligor, (other than
amounts, if any, collected with respect to administrative fees, including late
fees, prepayment fees and liquidation fees collected on the Receivable) shall be
applied to interest and principal in accordance with the Actuarial Method.
SECTION 5.4. ADDITIONAL DEPOSITS. HAFC, Household Bank and the
Seller, as applicable, shall deposit or cause to be deposited in the Collection
Account on the Business Day preceding the Determination Date following the date
on which such obligations are due the aggregate Repurchase Amount with respect
to Repurchased Receivables.
ARTICLE VI
RESERVED
ARTICLE VII
RESERVED
ARTICLE VIII
THE SELLER
SECTION 8.1. REPRESENTATIONS OF SELLER. The Seller makes the
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables and on which the Noteholders are deemed to have relied
on in the purchasing of Notes and any Additional Principal Amount and on which
each Support Provider shall be deemed to have relied on providing the Series
Support. Except as otherwise specifically provided, the representations speak as
of the Closing Date and as of each Transfer Date and shall survive each sale of
the Receivables to the Issuer and each pledge thereof to the Indenture Trustee
pursuant to the Indenture and the Series Supplement.
(a) REPRESENTATIONS IN TRANSFER AGREEMENT. The
representations and warranties set forth on the Schedule of Eligibility Criteria
attached as Schedule I to the Series Supplement are true and correct with
respect to the Receivables included in the Series Trust Estate.
(b) ORGANIZATION AND GOOD STANDING. The Seller has
been duly organized and is validly existing as a corporation in good standing
under the laws of the State of Nevada, with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is currently conducted, and had at all relevant times, and now
has, power, authority and legal right to acquire, own and sell the Owner Trust
Estate transferred to the Trust.
37
(c) DUE QUALIFICATION. The Seller is duly qualified
to do business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals in all jurisdictions where the failure to do so
would materially and adversely affect Seller's ability to transfer the
Receivables and the Other Conveyed Property to the Trust pursuant to this
Agreement, or the validity or enforceability of the Receivables or to perform
Seller's obligations hereunder and under the Related Documents to which the
Seller is a party.
(d) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and the Related Documents to
which it is a party and to carry out its terms and their terms, respectively;
the Seller has full power and authority to sell and assign the Owner Trust
Estate to be sold and assigned to and deposited with the Trust by it and has
duly authorized such sale and assignment to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement and the
Related Documents to which the Seller is a party have been duly authorized by
the Seller by all necessary corporate action.
(e) VALID SALE, BINDING OBLIGATIONS. This Agreement
and each related Transfer Agreement effects a valid sale, transfer and
assignment of the Owner Trust Estate, enforceable against the Seller and
creditors of and purchasers from the Seller; and this Agreement and the Related
Documents to which the Seller is a party, when duly executed and delivered,
shall constitute legal, valid and binding obligations of the Seller enforceable
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the Related Documents and the
fulfillment of the terms of this Agreement and the Related Documents shall not
conflict with, result in any breach of any of the terms and provisions of or
constitute (with or without notice, lapse of time or both) a material default
under the certificate of incorporation or by-laws of the Seller, or any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Seller is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or regulation applicable to
the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or any of its properties.
(g) NO PROCEEDINGS. There are no proceedings or
investigations pending or, to the Seller's knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the Seller or
its properties (A) asserting the invalidity of this Agreement or any of the
Related Documents, (B) seeking to prevent the issuance of any Securities or the
consummation of any of the transactions contemplated by this
38
Agreement or any of the Related Documents, (C) seeking any determination or
ruling that might materially and adversely affect the performance by the Seller
of its obligations under, or the validity or enforceability of, this Agreement
or any of the Related Documents, or (D) seeking to adversely affect the federal
income tax or other federal, state or local tax attributes of the Securities.
(h) APPROVALS. All approvals, authorizations,
consents, orders or other actions of any person, corporation or other
organization, or of any court, governmental agency or body or official, required
in connection with the execution and delivery by the Seller of this Agreement
and the other Related Documents to which it is a party, and the consummation of
the transactions contemplated hereby and thereby have been or will be taken or
obtained on or prior to the Closing Date and each Transfer Date.
(i) NO CONSENTS. The Seller is not required to obtain
the consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery, performance,
validity or enforceability of this Agreement which has not already been
obtained.
(j) CHIEF EXECUTIVE OFFICE. The chief executive
office of the Seller is at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 8.2. CORPORATE EXISTENCE. (a) During the term of this
Agreement, the Seller will keep in full force and effect its existence, rights
and franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Related Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller
shall observe the applicable legal requirements for the recognition of the
Seller as a legal entity separate and apart from its Affiliates, including as
follows:
(i) the Seller shall not engage in any other
business other than as provided in Article THIRD of
Seller's Articles of Incorporation;
(ii) the Seller shall maintain corporate
records and books of account separate from those of
its Affiliates;
(iii) except as otherwise provided in this
Agreement, the Seller shall not commingle its assets
and funds with those of its Affiliates;
(iv) the Seller shall hold such appropriate
meetings of its Board of Directors as are necessary
to authorize all the Seller's corporate actions
required by law to be authorized by the Board of
Directors, shall keep minutes of such meetings and of
meetings of
39
its stockholder(s) and observe all other customary
corporate formalities (and any successor Seller not a
corporation shall observe similar procedures in
accordance with its governing documents and
applicable law);
(v) the Seller shall at all times hold
itself out to the public under the Seller's own name
as a legal entity separate and distinct from its
Affiliates;
(vi) the Seller shall not become involved in
the day-to-day management of any other Person;
(vii) the Seller shall not guarantee any
other Person's obligations or advance funds to any
other Person for the payment of expenses or
otherwise;
(viii) the Seller shall not act as an agent
of any other Person in any capacity;
(ix) the Seller shall not dissolve or
liquidate, in whole or in part; and
(x) all transactions and dealings between
the Seller and its Affiliates will be conducted on an
arm's-length basis.
(c) During the term of this Agreement, the Seller
will comply with the limitations on its business and activities, as set forth in
its Certificates of Incorporation, and will not incur indebtedness other than
pursuant to or as expressly permitted by the Related Documents.
SECTION 8.3. LIABILITY OF SELLER; INDEMNITIES. The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken under this Agreement by the Seller and the
representations made by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold
harmless the Issuer, the Owner Trustee, the Delaware Trustee and the Indenture
Trustee from and against any taxes that may at any time be asserted against any
such Person with respect to the transactions contemplated in this Agreement and
any of the Basic Documents (except any income taxes arising out of fees paid to
the Delaware Trustee, the Owner Trustee, the Indenture Trustee and except any
taxes to which the Delaware Trustee, the Owner Trustee or the Indenture Trustee
may otherwise be subject to), including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but, in the
case of the Issuer, not including any taxes asserted with respect to federal or
other income taxes arising out of distributions on the Certificates and the
Notes) and costs and expenses in defending against the same.
40
(b) The Seller shall indemnify, defend and hold
harmless the Issuer, the Delaware Trustee, the Owner Trustee and the Indenture
Trustee against any loss, liability or expense incurred by reason of (i) the
Seller's willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with the
offering and sale of the Notes.
(c) The Seller shall indemnify, defend and hold
harmless the Delaware Trustee, the Owner Trustee and the Indenture Trustee and
their respective officers, directors, employees and agents from and against any
and all costs, expenses, losses, claims, damages and liabilities arising out of,
or incurred in connection with, the acceptance or performance of the trusts and
duties set forth herein and in the Basic Documents, except to the extent that
such cost, expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Person seeking indemnification.
Indemnification under this Section shall survive the
resignation or removal of the Delaware Trustee, the Owner Trustee or the
Indenture Trustee and the termination of this Agreement or the Indenture or the
Trust Agreement, as applicable, and shall include reasonable fees and expenses
of counsel and other expenses of litigation. If the Seller shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Seller, without
interest.
SECTION 8.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
(x) has a certificate of incorporation containing provisions relating to
limitations on business and other matters substantially identical to those
contained in the Seller's certificate of incorporation and (y) executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement and the other Related Documents shall be the successor to the Seller
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement, provided, however, that written
confirmation shall be received by each Rating Agency rating the Notes that the
then current rating of the Notes will not be withdrawn, downgraded or suspended
as a result of any action described in this Section 8.4.
SECTION 8.5. LIMITATION ON LIABILITY OF SELLER AND OTHERS. (a)
The Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the written advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising under any Basic Document. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this
41
Agreement, and that in its opinion may involve it in any expense or liability.
Except as provided in Section 8.3 hereof, neither the Seller nor any of the
directors, officers, employees or agents of the Seller acting in such capacities
shall be under any liability to the Trust, the Securityholders, any Support
Provider or any other Person for any action taken or for refraining from the
taking of any action in good faith in such capacities pursuant to this
Agreement; provided, however, that this provision shall not protect the Seller
or any such person against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
(b) All obligations of the Seller under this Agreement
(including, but not limited to, repurchase and indemnification obligations) and
under any of the Related Documents shall be limited in recourse to property, if
any, which the Seller may hold from time to time, not subject to any Lien.
SECTION 8.6. SELLER MAY OWN CERTIFICATES OR NOTES. The Seller
and any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would have
if it were not the Seller or an Affiliate thereof, except as expressly provided
herein or in any Basic Document. Notes or Certificates so owned by the Seller or
such Affiliate shall have an equal and proportionate benefit under the
provisions of the Basic Documents, without preference, priority, or distinction
as among all of the Notes or Certificates; PROVIDED, HOWEVER, except in the
event that all outstanding Notes and Certificates are owned by the Seller and/or
any Affiliates thereof, that any Notes or Certificates owned by the Seller or
any Affiliate thereof, during the time such Notes or Certificates are owned by
them, shall be without voting rights for any purpose set forth in the Basic
Documents. The Seller shall notify the Owner Trustee and the Indenture Trustee
promptly after it or any of its Affiliates become the owner or pledgee of a
Certificate or a Note.
ARTICLE IX
THE MASTER SERVICER
SECTION 9.1. REPRESENTATIONS OF MASTER SERVICER. The Master
Servicer makes the following representations on which the Issuer is deemed to
have relied in acquiring the Owner Trust Estate, on which the Noteholders are
deemed to have relied on in the purchasing of Notes and any Additional Principal
Amount, and on which Support Provider shall be deemed to have relied in
providing the Series Support. The representations speak as of the execution and
delivery of this Agreement, the Closing Date and as of each Transfer Date and
shall survive the sale of the Owner Trust Estate to the Issuer and the pledge of
the Series Trust Estate to the Indenture Trustee pursuant to the Indenture.
(i) ORGANIZATION AND GOOD STANDING. The
Master Servicer has been duly organized and is
validly existing and in good standing under the laws
of its jurisdiction of organization, with power,
authority and legal right to own its properties and
to
42
conduct its business as such properties are currently
owned and such business is currently conducted, and
had at all relevant times, and now has, power,
authority and legal right to enter into and perform
its obligations under this Agreement and the other
Related Documents to which it is a party;
(ii) DUE QUALIFICATION. The Master Servicer
is duly qualified to do business as a foreign
corporation in good standing and has obtained all
necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of
property or the conduct of its business (including
the servicing of the Receivables as required by this
Agreement) requires or shall require such
qualification; except where the failure to qualify or
obtain licenses or approvals would not have a
material adverse effect on its ability to perform its
obligations as Master Servicer under this Agreement
and the other Related Documents to which it is a
party;
(iii) POWER AND AUTHORITY. The Master
Servicer has the power and authority to execute and
deliver this Agreement and the Related Documents to
which it is a party and to carry out its terms and
their terms, respectively, and the execution,
delivery and performance of this Agreement and the
Related Documents to which the Master Servicer is a
party have been duly authorized by the Master
Servicer by all necessary corporate action;
(iv) BINDING OBLIGATION. This Agreement and
the Related Documents to which the Master Servicer is
a party shall constitute legal, valid and binding
obligations of the Master Servicer enforceable in
accordance with their respective terms, except as
enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights
generally and by equitable limitations on the
availability of specific remedies, regardless of
whether such enforceability is considered in a
proceeding in equity or at law;
(v) NO VIOLATION. The consummation of the
transactions contemplated by this Agreement and the
Related Documents to which the Master Servicer is a
party, and the fulfillment of the terms of this
Agreement and the Related Documents to which the
Master Servicer is a party, shall not conflict with,
result in any breach of any of the terms and
provisions of, or constitute (with or without notice
or lapse of time) a material default under, the
articles of incorporation or bylaws of the Master
Servicer, or any indenture, agreement, mortgage, deed
of trust or other instrument to which the Master
Servicer is a party or by which it is bound, or
result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any
such indenture, agreement,
43
mortgage, deed of trust or other instrument, or
violate any law, order, rule or regulation
applicable to the Master Servicer of any court or of
any federal or state regulatory body, administrative
agency or other governmental instrumentality having
jurisdiction over the Master Servicer or any of its
properties, or any way materially adversely affect
the interest of the Noteholders or the Trust in any
Receivable or affect the Master Servicer's ability
to perform its obligations under this Agreement;
(vi) NO PROCEEDINGS. There are no
proceedings or investigations pending or, to the
Master Servicer's knowledge, threatened against the
Master Servicer, before any court, regulatory body,
administrative agency or other tribunal or
governmental instrumentality having jurisdiction over
the Master Servicer or its properties (A) asserting
the invalidity of this Agreement or any of the
Related Documents, (B) seeking to prevent the
issuance of the Securities or the consummation of any
of the transactions contemplated by this Agreement or
any of the Related Documents, or (C) seeking any
determination or ruling that might materially and
adversely affect the performance by the Master
Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the
Related Documents or (D) seeking to adversely affect
the federal income tax or other federal, state or
local tax attributes of the Securities;
(vii) APPROVALS. All approvals,
authorizations, consents, orders or other actions of
any person, corporation or other organization, or of
any court, governmental agency or body or official,
required in connection with the execution and
delivery by the Master Servicer of this Agreement and
the consummation of the transactions contemplated
hereby have been or will be taken or obtained on or
prior to the Closing Date.
(viii) NO CONSENTS. The Master Servicer is
not required to obtain the consent of any other party
or any consent, license, approval or authorization,
or registration or declaration with, any governmental
authority, bureau or agency in connection with the
execution, delivery, performance, validity or
enforceability of this Agreement which has not
already been obtained.
(ix) CHIEF EXECUTIVE OFFICE. The chief
executive office of the Master Servicer is located at
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 9.2. LIABILITY OF MASTER SERVICER; INDEMNITIES. (a)
The Master Servicer (in its capacity as such) shall be liable hereunder only to
the extent of the
44
obligations in this Agreement specifically undertaken by the Master Servicer and
the representations made by the Master Servicer.
(b) The Master Servicer shall defend, indemnify and
hold harmless the Trust, the Indenture Trustee, the Owner Trustee, each Support
Provider and their respective officers, directors, agents and employees, from
and against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation arising out of or resulting from the use, ownership or operation of,
or lien on, any Financed Vehicle.
(c) The Master Servicer (when the Master Servicer is
Household Finance Corporation or an Affiliate of Household Finance Corporation)
shall indemnify, defend and hold harmless the Trust, the Indenture Trustee, the
Owner Trustee, each Support Provider and their respective officers, directors,
agents and employees and from and against any taxes that may at any time be
asserted against any of such parties with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, tangible or intangible personal property, privilege or license taxes
(but not including any federal or other income taxes, including franchise taxes
asserted with respect to, and as of the date of, the sale of the Receivables and
the Other Conveyed Property to the Trust or the issuance and original sale of
the Notes) and costs and expenses in defending against the same, except to the
extent that such costs, expenses, losses, damages, claims and liabilities arise
out of the negligence or willful misconduct of such parties.
(d) The Master Servicer (when the Master Servicer is
not Household Finance Corporation) shall indemnify, defend and hold harmless the
Trust, the Indenture Trustee, the Owner Trustee, the Delaware Trustee, each
Support Provider and their respective officers, directors, agents and employees
from and against any taxes with respect to the sale of Receivables in connection
with servicing hereunder that may at any time be asserted against any of such
parties with respect to the transactions contemplated in this Agreement,
including, without limitation, any sales, gross receipts, tangible or intangible
personal property, privilege or license taxes (but not including any federal or
other income taxes, including franchise taxes asserted with respect to, and as
of the date of, the sale of the Owner Trust Estate to the Trust or the issuance
and original sale of the Securities) and costs and expenses in defending against
the same, except to the extent that such costs, expenses, losses, damages,
claims and liabilities arise out of the negligence or willful misconduct of such
parties.
(e) The Master Servicer shall indemnify, defend and
hold harmless the Trust, the Indenture Trustee, the Owner Trustee, the Delaware
Trustee, each Support Provider and their respective officers, directors, agents
and employees from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss, claim,
damage, or liability arose out of, or was imposed upon the Trust, the Owner
Trustee or the Indenture Trustee, and each Support Provider by reason of the
breach of this Agreement by the Master Servicer, the negligence, misfeasance, or
bad faith of the Master Servicer in the performance of its duties under this
Agreement or the Series Supplement or by reason of reckless disregard of its
45
obligations and duties under this Agreement or the Series Supplement, except to
the extent that such costs, expenses, losses, damages, claims, and liabilities
arise out of the negligence or willful misconduct of the Person seeking
indemnification.
(f) The Master Servicer (when the Master Servicer is
Household Finance Corporation or an Affiliate of Household Finance Corporation)
shall indemnify, defend and hold harmless the Trust, the Indenture Trustee, the
Owner Trustee, the Delaware Trustee, each Support Provider and their respective
officers, directors, agents and employees from and against any loss, liability
or expense incurred by reason of the violation by Master Servicer of federal or
state securities laws in connection with the registration or the sale of the
Securities, except to the extent that such costs, expenses, losses, damages,
claims, and liabilities arise out of the negligence or willful misconduct of
such parties.
(g) Indemnification under this Article shall survive
the termination of this Agreement and will survive the early resignation or
removal of any of the parties hereto and shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Master Servicer has made any indemnity payments pursuant to this Article and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts collected to the Master Servicer, without
interest. Notwithstanding any other provision of this Agreement, the obligations
of the Master Servicer shall not terminate or be deemed released upon the
resignation or termination of Household Finance Corporation as the Master
Servicer and shall survive any termination of this Agreement.
SECTION 9.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF THE MASTER SERVICER. (a) Any Person (i) into which the Master
Servicer may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Master Servicer shall be a party, (iii) which
acquires by conveyance, transfer, or lease substantially all of the assets of
the Master Servicer, or (iv) succeeding to the business of the Master Servicer,
in any of the foregoing cases shall execute an agreement of assumption to
perform every obligation of the Master Servicer under this Agreement and each
Related Document and, whether or not such assumption agreement is executed,
shall be the successor to the Master Servicer under this Agreement and each
Related Document without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement or the Series Supplement,
anything in this Agreement or the Series Supplement to the contrary
notwithstanding. Notwithstanding the foregoing, the initial Master Servicer
shall not merge or consolidate with any other Person or permit any other Person
to become a successor to the Master Servicer's business, unless the Master
Servicer shall have delivered to the Owner Trustee, and the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section 9.3(a) and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with.
SECTION 9.4. LIMITATION ON LIABILITY OF MASTER SERVICER AND
OTHERS. (a) Neither the Master Servicer, the Indenture Trustee nor any of the
directors or officers
46
or employees or agents of any such Persons shall be under any liability to the
Trust, except as provided in this Agreement and each Related Document, for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or a Related Document; PROVIDED, HOWEVER, that this provision shall
not protect the Master Servicer, the Indenture Trustee or any such Persons
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence (excluding errors in judgment) in the
performance of duties (including negligence with respect to the Master
Servicer's indemnification obligations hereunder), by reason of reckless
disregard of obligations and duties under this Agreement and each Related
Document or any violation of law by the Master Servicer, the Indenture Trustee
or such person, as the case may be; PROVIDED, FURTHER, that this provision shall
not affect any liability to indemnify the Indenture Trustee, the Delaware
Trustee or the Owner Trustee for costs, taxes, expenses, claims, liabilities,
losses or damages paid by the Indenture Trustee, the Delaware Trustee or the
Owner Trustee, in their individual capacities. The Master Servicer, the
Indenture Trustee and any director, officer, employee or agent of such Persons
may rely in good faith on the written advice of counsel or on any document of
any kind prima facie properly executed and submitted by any Person pertaining to
any matters arising under this Agreement. The Indenture Trustee shall not be
required to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if the repayment of such funds or adequate written
indemnity against such risk or liability is not reasonably assured to it in
writing prior to the expenditure of risk of such funds or incurrence of
financial liability.
(b) Notwithstanding anything herein to the contrary,
the Indenture Trustee shall not be liable for any obligation of the Master
Servicer contained in this Agreement or any Related Document, and the Owner
Trustee, the Delaware Trustee, the Seller and the Noteholders shall look only to
the Master Servicer to perform such obligations.
(c) The parties expressly acknowledge and consent to
the initial Indenture Trustee acting in the potential dual capacity of successor
Master Servicer and in the capacity as Indenture Trustee. Such Indenture Trustee
may, in such dual or other capacity, discharge its separate functions fully,
without hindrance or regard to conflict of interest principles, duty of loyalty
principles or other breach of fiduciary duties to the extent that any such
conflict or breach arises from the performance by such Indenture Trustee of
express duties set forth in this Agreement in any of such capacities, all of
which defenses, claims or assertions are hereby expressly waived by the other
parties hereto and the Noteholders except in the case of negligence or willful
misconduct by such Indenture Trustee.
SECTION 9.5. DELEGATION OF DUTIES. In the ordinary course of
business, the Master Servicer and the Subservicer, provided it is HAFC, at any
time may delegate any of their duties hereunder to any Person, including any of
their Affiliates, who agrees to conduct such duties in accordance with standards
employed by the Master Servicer or such Subservicer in compliance with Section
4.1. Such delegation shall not relieve the
47
Master Servicer of its liabilities and responsibilities with respect to such
duties and shall not constitute a resignation within the meaning of Section 9.6.
SECTION 9.6. MASTER SERVICER NOT TO RESIGN. Subject to the
provisions of Section 9.3, the Master Servicer shall not resign from the
obligations and duties hereby imposed on it except (i) upon determination that
the performance of its obligations or duties hereunder are no longer permissible
under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it or its subsidiaries or Affiliates,
the other activities of the Master Servicer so causing such a conflict being of
a type and nature carried on by the Master Servicer or its subsidiaries or
Affiliates at the date of this Agreement or (ii) upon satisfaction of the
following conditions: (a) the Master Servicer has proposed a successor servicer
to the Indenture Trustee in writing and such proposed successor servicer is
reasonably acceptable to the Indenture Trustee and the Administrative Agent,
where one exists, or otherwise, the Managing Agents; (b) such proposed successor
servicer has agreed in writing to assume the obligations of Master Servicer
hereunder and under each Basic Document to which it is a party and (c) the
Master Servicer has delivered to the Indenture Trustee an Opinion of Counsel to
the effect that all conditions precedent to the resignation of the Master
Servicer and the appointment of and acceptance by the proposed successor
servicer have been satisfied; PROVIDED, HOWEVER, that, in the case of clause (i)
above, no such resignation by the Master Servicer shall become effective until
the Indenture Trustee shall have assumed the Master Servicer's responsibilities
and obligations hereunder or the Indenture Trustee shall have designated a
successor servicer in accordance with Section 10.3 which shall have assumed such
responsibilities and obligations. Any such resignation shall not relieve the
Master Servicer of responsibility for any of the obligations specified in
Sections 10.1 and 10.3 as obligations that survive the resignation or
termination of the Master Servicer. Any such determination permitting the
resignation of the Master Servicer pursuant to clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee.
SECTION 9.7. SUBSERVICING AGREEMENTS BETWEEN MASTER SERVICER
AND SUBSERVICERS. The Master Servicer initially appoints HAFC to subservice the
Receivables. From time to time after the Closing Date, the Master Servicer may
enter into a subservicing agreement with any Person other than HAFC which is an
Eligible Subservicer and is in compliance with the laws of each state necessary
to enable it to perform the obligations of the Master Servicer pursuant to this
Agreement. Any such subservicing agreement shall be consistent with and not
violate the provisions of this Agreement. The Master Servicer shall not be
relieved of its obligations under this Agreement and each Basic Document to
which it is a party notwithstanding any agreement relating to subservicing and
the Master Servicer shall be obligated to the same extent and under the same
terms and conditions as if it alone were servicing and administering the
Receivables. For purposes of this Agreement and each Related Document, the
Master Servicer shall be deemed to have received payments on Receivables when
any Subservicer has received such payments. The Issuer shall have no liability
to the Master Servicer except for payment of the Servicing Fee and reimbursement
of repossession and liquidation expenses. The Issuer shall have no obligation to
indemnify the Master Servicer for costs or expenses, except with respect to
48
the preceding sentence. The parties hereto acknowledge that with respect to
statements or certificates required to be delivered by the Master Servicer in
accordance with this Agreement and the Series Supplement, including, but not
limited to, Sections 4.9, 4.10 and 4.11 hereof, that a statement or certificate
delivered by a subservicer shall be sufficient to discharge the Master
Servicer's obligation to deliver such certificate or statement.
SECTION 9.8. SUCCESSOR SUBSERVICERS. The Master Servicer may
terminate any Subservicer and either directly service the related Receivables
itself or enter into an agreement with a successor Subservicer that is an
Eligible Subservicer. Neither of the Owner Trustee nor the Indenture Trustee
shall have a duty or obligation to monitor or supervise the performance of any
Subservicer.
ARTICLE X
DEFAULT
SECTION 10.1. MASTER SERVICER TERMINATION EVENT. For purposes
of this Agreement, each of the following shall constitute a "Master Servicer
Termination Event":
(a) Any failure by the Master Servicer to deliver, or
cause to be delivered, to the Indenture Trustee for distribution pursuant to the
terms of this Agreement, any proceeds or payment required to be so delivered
under the terms of this Agreement (including deposits of the Repurchase Amount
pursuant to Section 4.7) that continues unremedied for a period of three
Business Days after written notice is received by the Master Servicer from the
Indenture Trustee or after discovery of such failure by a responsible Officer of
the Master Servicer (but in no event later than three Business Days after the
Master Servicer is required to make such delivery or deposit);
(b) Failure on the part of the Master Servicer duly
to observe or perform any other covenants or agreements of the Master Servicer
set forth in this Agreement or the Basic Documents, which failure (i) materially
and adversely affects the rights of Noteholders (determined without regard to
the availability of funds under any Series Support) and (ii) continues
unremedied for a period of 60 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Master Servicer by the Indenture Trustee;
(c) The entry of a decree or order for relief by a
court or regulatory authority having jurisdiction in respect of the Master
Servicer in an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future, federal bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Master
Servicer or of any substantial part of its property or ordering the winding up
or liquidation of the affairs of the Master Servicer or the commencement of an
involuntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or another present
49
or future federal or state bankruptcy, insolvency or similar law and such case
is not dismissed within 60 days; or
(d) The commencement by the Master Servicer of a
voluntary case under the federal bankruptcy laws, as now or hereafter in effect,
or any other present or future, federal or state, bankruptcy, insolvency or
similar law, or the consent by the Master Servicer to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Master Servicer or of any
substantial part of its property or the making by the Master Servicer of an
assignment for the benefit of creditors or the failure by the Master Servicer
generally to pay its debts as such debts become due or the taking of corporate
action by the Master Servicer in furtherance of any of the foregoing; or
(e) Any representation, warranty or certification of
the Master Servicer made in this Agreement or any Basic Document or any
certificate, report or other writing delivered pursuant hereto or thereto shall
prove to be incorrect in any material respect as of the time when the same shall
have been made, and the incorrectness of such representation, warranty or
statement has a material adverse effect on the interests of the Indenture
Trustee in the Series Trust Estate and, within 60 days after written notice
thereof shall have been given to the Master Servicer by the Indenture Trustee,
the circumstances or condition in respect of which such representation, warranty
or statement was incorrect shall not have been eliminated or otherwise cured; or
Notwithstanding the foregoing, a delay in or failure of
performance under Section 10.1(a) for a period of five Business Days or under
Section 10.1(b) for a period of 60 days, shall not constitute a Master Servicer
Termination Event if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Master Servicer and such delay or
failure was caused by an act of God, acts of declared or undeclared war,
terrorism, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or similar causes. The
preceding sentence shall not relieve the Master Servicer from using its best
efforts to perform its obligations in a timely manner in accordance with the
terms of this Agreement, and the Master Servicer shall provide the Indenture
Trustee and the Seller with an Officers' Certificate giving prompt notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations.
SECTION 10.2. CONSEQUENCES OF A MASTER SERVICER TERMINATION
EVENT. If a Master Servicer Termination Event shall occur and be continuing, the
Indenture Trustee (to the extent a Trust Officer of the Indenture Trustee has
actual knowledge or has received notice thereof), by notice given in writing to
the Master Servicer may and shall at the direction of the Administrative Agent,
where one exists, or otherwise, the Managing Agents, terminate all of the rights
and obligations of the Master Servicer under this Agreement and the other Basic
Documents to which it is a party. On or after the receipt by the Master Servicer
of such written notice, all authority, power, obligations and responsibilities
of the Master Servicer under this Agreement, whether with respect to the Notes
or the Other Conveyed Property or otherwise, automatically shall pass to, be
vested in, and become obligations and responsibilities, of the Indenture Trustee
(or such other
50
successor Master Servicer appointed by the Indenture Trustee pursuant to Section
10.3); PROVIDED, HOWEVER, that the successor Master Servicer shall (i) have no
liability with respect to any obligation which was required to be performed by
the terminated Master Servicer prior to the date that the successor Master
Servicer becomes the Master Servicer or any claim of a third party based on any
alleged action or inaction of the terminated Master Servicer, (ii) no obligation
to perform any repurchase or advancing obligations, if any, of the terminated
Master Servicer, (iii) no obligation to pay any of the fees and expenses of any
other party involved in this transaction not expressly assumed by the Master
Servicer and (iv) no liability or obligation with respect to any Master Servicer
indemnification obligations of any prior master servicer including the original
master servicer.
Notwithstanding anything contained in this Agreement to the
contrary, the initial Indenture Trustee as successor Master Servicer, is
authorized to accept and rely on all of the accounting, records (including
computer records) and work of the prior Master Servicer relating to the
Receivables (collectively, the "PREDECESSOR SERVICER WORK PRODUCT") without any
audit or other examination thereof, and such Indenture Trustee shall have no
duty, responsibility, obligation or liability for the acts and omissions of the
prior Master Servicer. If any error, inaccuracy, omission or incorrect or
non-standard practice or procedure (collectively, "ERRORS") exist in any
Predecessor Servicer Work Product and such Errors make it materially more
difficult to service or should cause or materially contribute to such Indenture
Trustee making or continuing any Errors (collectively, "CONTINUED ERRORS"), such
Indenture Trustee shall have no duty, responsibility, obligation or liability
for such Continued Errors; PROVIDED, HOWEVER, that such Indenture Trustee agrees
to use its best efforts to prevent further Continued Errors. In the event that
such Indenture Trustee becomes aware of Errors or Continued Errors, such
Indenture Trustee shall, with the prior consent of the Noteholders representing
66-2/3% of the outstanding Notes, use its best efforts to reconstruct and
reconcile such data as is commercially reasonable to correct such Errors and
Continued Errors and to prevent future Continued Errors.
The successor Master Servicer is authorized and empowered by
this Agreement to execute and deliver, on behalf of the terminated Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Owner Trust Estate and related
documents to show the Trust as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Master Servicer agrees to cooperate
with the successor Master Servicer in effecting the termination of the
responsibilities and rights of the terminated Master Servicer under this
Agreement, including, without limitation, the transfer to the successor Master
Servicer for administration by it of all cash amounts that shall at the time be
held by the terminated Master Servicer for deposit, or have been deposited by
the terminated Master Servicer, in a Trust Account and the delivery to the
successor Master Servicer of all Receivable Files, Monthly Records and
Collection Records and a computer tape in readable form as of the most recent
Business Day containing all information necessary to enable the successor Master
Servicer to service the Owner Trust Estate. If requested by the Indenture
Trustee,
51
the successor Master Servicer shall direct the Obligors to make all payments
under the Receivables directly to the successor Master Servicer (in which event
the successor Master Servicer shall process such payments in accordance with
Section 4.2(d)). The terminated Master Servicer shall grant the Indenture
Trustee and the successor Master Servicer reasonable access to the terminated
Master Servicer's premises at the terminated Master Servicer's expense.
SECTION 10.3. APPOINTMENT OF SUCCESSOR. (a) On and after the
time the Master Servicer receives a notice of termination pursuant to Section
10.2 or upon the resignation of the Master Servicer pursuant to Section 9.6, the
Master Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in such termination notice or until such
resignation becomes effective or until a date mutually agreed upon by the Master
Servicer and the Indenture Trustee. The Indenture Trustee shall as promptly as
possible after such termination or resignation appoint an Eligible Servicer as a
successor servicer (the "Successor Master Servicer"), and such Successor Master
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Indenture Trustee. In the event that a Successor Master
Servicer has not been appointed or has not accepted its appointment at the time
when the Master Servicer ceases to act as Master Servicer, the Indenture Trustee
without further action shall automatically be appointed the Successor Master
Servicer. The Indenture Trustee may delegate any of its servicing obligations to
an Affiliate or agent in accordance with Section 9.5. Notwithstanding the
foregoing, the Indenture Trustee shall, if it is legally unable so to act,
petition a court of competent jurisdiction to appoint any established
institution qualifying as an Eligible Servicer as the Successor Master Servicer
hereunder. The Indenture Trustee or the Successor Master Servicer, as the case
may be, shall be the successor in all respects to the Master Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating thereto placed on the Master Servicer by the terms and provisions of
this Agreement, except as otherwise stated herein. The Indenture Trustee or the
Successor Master Servicer, as the case may be, shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Successor Master Servicer shall be subject to termination under
Section 10.2 upon the occurrence of any Master Servicer Termination Event
applicable to it as Master Servicer.
(b) Subject to Section 9.6, no provision of this
Agreement shall be construed as relieving the Indenture Trustee of its
obligation to succeed as successor Master Servicer upon the termination of the
Master Servicer pursuant to Section 10.2 or the resignation of the Master
Servicer pursuant to Section 9.6.
(c) Any Successor Master Servicer shall be entitled
to such compensation (whether payable out of the Collection Account or
otherwise) equal to the compensation the Master Servicer would have been
entitled to under this Agreement if the Master Servicer had not resigned or been
terminated hereunder. In addition, any Successor Master Servicer shall be
entitled to reasonable transition expenses incurred in acting as Successor
Master Servicer payable by the outgoing Master Servicer, and to the extent such
transition expenses have not been paid by the outgoing Master Servicer, such
52
Successor Master Servicer shall be entitled to reimbursement for such reasonable
expenses pursuant to the Series Supplement.
SECTION 10.4. NOTIFICATION TO NOTEHOLDERS AND
CERTIFICATEHOLDERS. Upon any termination of, or appointment of a successor to,
the Master Servicer the Indenture Trustee shall give prompt written notice
thereof to each Noteholder.
SECTION 10.5. WAIVER OF PAST DEFAULTS. A majority of the
Noteholders may, on behalf of all Securityholders, waive any default by the
Seller or the Master Servicer in the performance of their obligations hereunder
and its consequences, except the failure to make any distributions required to
be made to Noteholders or to make any required deposits of any amounts to be so
distributed. Upon any such waiver of a past default, such default shall cease to
exist, and any default arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon except to the
extent expressly so waived.
SECTION 10.6. SUCCESSOR TO MASTER SERVICER. (a) The Indenture
Trustee, in its capacity as successor to the Master Servicer, shall perform such
duties and only such duties as are specifically set forth in this Agreement and
each Related Document with respect to the assumption of any servicing duties and
no implied covenants or obligations shall be read into this Agreement against
the Indenture Trustee.
(b) In the absence of bad faith or negligence on its
part, the Indenture TRUSTEE may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and conforming to
the requirements of this Agreement and the Series Supplement; but in the case of
any such certificates or opinions, which by any provision hereof are
specifically required to be furnished to the Indenture Trustee, the Indenture
TRUSTEE shall be under a duty to examine the same and to determine whether or
not they conform to the requirements of this Agreement and the Series
Supplement.
(c) The Indenture Trustee shall have no liability for
any actions taken or omitted by the terminated Master Servicer.
ARTICLE XI
TERMINATION
SECTION 11.1. OPTIONAL PURCHASE OF ALL RECEIVABLES. (a) To the
extent and under the circumstances provided in the Series Supplement, the Master
Servicer and the Seller each shall have the option to effect a "clean-up"
redemption or purchase of the Owner Trust Estate.
(b) Upon any sale of the assets included in the
Series Trust Estate permitted by the Series Supplement, the Master Servicer
shall instruct the Indenture
53
Trustee to deposit the proceeds from such sale after all payments and reserves
therefrom (including the expenses of such sale) have been made in the Collection
Account.
(c) Notice of any termination of the Trust shall be
given by the Master Servicer to the Owner Trustee and the Indenture Trustee as
soon as practicable after the Master Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the
Indenture, the payment in full of the principal of and interest on the Notes,
the satisfaction of all payment obligations under the Basic Documents,
termination of any Series Support (as provided therein), the Certificateholders
will succeed to the rights of the Noteholders hereunder and the Owner Trustee
will succeed to the rights of, and assume the obligations of, the Indenture
Trustee pursuant to this Agreement.
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE MASTER SERVICER
SECTION 12.1. ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Master
Servicer shall perform all its duties and the duties of the Issuer under the
Indenture. In addition, the Master Servicer shall consult with the Owner Trustee
as the Master Servicer deems appropriate regarding the duties of the Issuer
under the Indenture. The Master Servicer shall monitor the performance of the
Issuer and shall advise the Owner Trustee when action is necessary to comply
with the Issuer's duties under the Indenture. The Master Servicer shall prepare
for execution by the Issuer or shall cause the preparation by other appropriate
Persons of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer to prepare, file or deliver
pursuant to the Indenture. In furtherance of the foregoing, the Master Servicer
shall take all necessary action that is the duty of the Issuer to take pursuant
to the Indenture, including, without limitation, pursuant to Sections 2.7, 3.3,
3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 7.3, 8.3, 9.2, 9.3, 11.1 and 11.15 of the
Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Master
Servicer set forth in this Agreement or any of the
Related Documents, the Master Servicer shall perform
such calculations and shall prepare for execution by
the Issuer or the Owner Trustee, or shall cause the
preparation by other appropriate Persons of all such
documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of
the Issuer or the Owner Trustee, to prepare, file or
deliver pursuant to this Agreement or any of the
Related Documents or under state and federal tax and
securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is
the duty of the Issuer to take pursuant to this
Agreement
54
or any of the Basic Documents, including, without
limitation, pursuant to Sections 2.6 and 2.11 of the
Trust Agreement. In accordance with the directions of
the Issuer or the Owner Trustee, the Master Servicer
shall administer, perform or supervise the
performance of such other activities in connection
with the Owner Trust Estate (including the Related
Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within
the capability of the Master Servicer.
(ii) Notwithstanding anything in this
Agreement or any of the Basic Documents to the
contrary, the Master Servicer shall be responsible
for promptly notifying the Owner Trustee and the
Indenture Trustee in the event that any withholding
tax is imposed on the Issuer's payments (or
allocations of income) to a Certificateholder as
contemplated by this Agreement. Any such notice shall
be in writing and specify the amount of any
withholding tax required to be withheld by the Owner
Trustee or the Indenture Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this
Agreement or the Basic Documents to the contrary, the
Master Servicer shall be responsible for performance
of the duties of the Issuer or the Seller set forth
in Section 5.1(a), (b), (c) and (d) of the Trust
Agreement with respect to, among other things,
accounting and reports to Owners (as defined in the
Trust Agreement); PROVIDED, HOWEVER, that once
prepared by the Master Servicer, the Depositor shall
retain responsibility under Section 5.1(b) of the
Trust Agreement for the distribution of the Schedule
K-1s necessary to enable each Certificateholder to
prepare its federal and state income tax returns.
(iv) The Master Servicer shall perform the
duties of the Depositor specified in Section 10.2 of
the Trust Agreement required to be performed in
connection with the resignation or removal of the
Owner Trustee, and any other duties expressly
required to be performed by the Master Servicer under
this Agreement or any of the Related Documents.
(v) The Master Servicer, on behalf of the
Seller, shall direct the Issuer to request the tender
of all or a portion of the Notes in accordance with
the Indenture or the Series Supplement.
(vi) In carrying out the foregoing duties or
any of its other obligations under this Agreement,
the Master Servicer may enter into transactions with
or otherwise deal with any of its Affiliates;
PROVIDED, HOWEVER, that the terms of any such
transactions or dealings shall be in accordance with
any directions received from
55
the Issuer and shall be, in the Master Servicer's
opinion, no less favorable to the Issuer in any
material respect.
(c) TAX MATTERS. The Master Servicer shall prepare
and file, or cause to be prepared and filed, on behalf of the Seller, all tax
returns, tax elections, financial statements and such annual or other reports of
the Issuer as are necessary for preparation of tax reports as provided in
Article V of the Trust Agreement, including without limitation forms 1099 and
1066. All tax returns will be signed by the Seller.
(d) NON-MINISTERIAL MATTERS. With respect to matters
that in the reasonable judgment of the Master Servicer are non-ministerial, the
Master Servicer shall not take any action pursuant to this Article XII unless
within a reasonable time before the taking of such action, the Master Servicer
shall have notified the Owner Trustee and the Indenture Trustee of the proposed
action and the Owner Trustee and the Indenture Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include:
(A) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or
against the Issuer (other than in connection with the
collection of the Receivables);
(B) the appointment of successor Note Registrars, successor Note
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the consent to the assignment by the Note
Registrar, Note Paying Agent or Indenture Trustee of its
obligations under the Indenture; and
(C) the removal of the Indenture Trustee.
(e) EXCEPTIONS. Notwithstanding anything to the
contrary in this Agreement, except as expressly provided herein or in the other
Basic Documents, the Master Servicer, in its capacity hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Noteholders or
Certificateholders under the Basic Documents, (2) sell any Trust Property
pursuant to the Series Supplement, (3) take any other action that the Issuer
directs the Master Servicer not to take on its behalf or (4) in connection with
its duties hereunder assume any indemnification obligation of any other Person.
(f) Neither the Indenture Trustee nor any successor
Master Servicer shall be responsible for any obligations or duties of a
predecessor Master Servicer under Section 12.1.
SECTION 12.2. RECORDS. The Master Servicer shall maintain
appropriate books of account and records relating to services performed under
this Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Indenture Trustee at any time during normal
business hours.
SECTION 12.3. ADDITIONAL INFORMATION TO BE FURNISHED TO THE
ISSUER. The Master Servicer shall furnish to the Issuer and the Indenture
Trustee, from time to
56
time such additional information regarding the Owner Trust Estate as the Issuer
and the Indenture Trustee shall reasonably request.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. AMENDMENTS. (a) This Agreement may be amended by
the parties hereto at any time when no Securities are outstanding without the
requirement of any consents or the satisfaction of any conditions set forth
below.
(b) Except as otherwise provided in the Series
Supplement, this Agreement may be amended from time to time by the parties
hereto, by a written instrument signed by each of the parties hereto, without
the consent of any of the Securityholders, provided that (i) an Opinion of
Counsel for the Seller (which Opinion of Counsel may, as to factual matters,
rely upon Officers' Certificates of the Seller or the Master Servicer) is
addressed and delivered to the Indenture Trustee, dated the date of any such
amendment, to the effect that the conditions precedent to any such amendment,
including those of Section 13.2(h) hereof, have been satisfied and (ii) the
Seller shall have delivered to the Indenture Trustee, an Officer's Certificate
dated the date of any such amendment, stating that the Seller reasonably
believes that such amendment will not have a material adverse effect on the
rights of the Noteholders.
(c) Except as otherwise provided in the Series
Supplement, subject to Section 13.2(h) hereof, this Agreement may also be
amended from time to time by the Master Servicer, the Seller and the Indenture
Trustee, with the prior written consent of the Administrative Agent, where one
exists, acting at the direction of the Majority Purchasers, or otherwise the
Majority Purchasers, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Securityholders; provided, however,
that no such amendment shall (i) reduce in any manner the amount of or delay the
timing of any distributions to be made to Securityholders without the consent of
each affected Securityholder or deposits of amounts to be so distributed or the
amount available under any Series Support, (ii) change the definition of or the
manner of calculating the interest of any Securityholder without the consent of
each affected Securityholder, or (iii) reduce the aforesaid percentage of
Noteholders required to consent to any such amendment.
Promptly after the execution of any such amendment or
supplement, the Indenture Trustee shall furnish written notification of the
substance of such amendment or supplement to each Securityholder.
It shall not be necessary for the consent of
Certificateholders or Noteholders pursuant to this Section to approve the
particular form of any amendment, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by
57
Noteholders or Certificateholders shall be subject to such reasonable
requirements as the Indenture Trustee or the Owner Trustee, as applicable, may
prescribe, including the establishment of record dates.
The Owner Trustee and the Indenture Trustee may, but shall not
be obligated to, enter into any amendment which affects the Issuer's, the Owner
Trustee's or the Indenture Trustee's, as applicable, own rights, duties or
immunities under this Agreement or otherwise.
Prior to the execution of any amendment to this Agreement, the
Indenture Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and that all conditions precedent to the execution and
delivery of such amendment have been satisfied.
SECTION 13.2. PROTECTION OF TITLE TO TRUST. (a) The Seller
shall execute and file such financing statements and cause to be executed and
filed such continuation statements, all in such manner and in such places as may
be required by law fully to preserve, maintain and protect the interest of the
Issuer in the Owner Trust Estate.
(b) Neither the Seller nor the Master Servicer shall
change its name, identity or corporate structure in any manner that would, could
or might make any financing statement or continuation statement filed in
accordance with paragraph (a) above seriously misleading within the meaning of
Sections 9-503(a)(4) and 9-507 of the UCC, unless it shall have given the Owner
Trustee and the Indenture Trustee at least thirty days' prior written notice
thereof and shall have promptly filed appropriate amendments to all previously
filed financing statements or continuation statements.
(c) Each of the Seller and the Master Servicer shall
have an obligation to give the Owner Trustee and the Indenture Trustee prompt
notice of any change in its state of incorporation if, as a result of such
change, the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of any
new financing statement and shall promptly file any such amendment. The Master
Servicer shall at all times maintain each office from which it shall service
Receivables, and its principal executive office, within the United States of
America.
(d) The Master Servicer shall maintain accounts and
records as to each Receivable accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Receivable, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Master Servicer shall maintain or cause to be
maintained, a computer system so that, from and after the time of sale under
this Agreement and each Transfer Agreement of the Receivables to the Issuer,
such master computer records
58
(including any backup archives) that refer to a Receivable shall indicate
clearly the interest of the Trust in such Receivable and that such Receivable is
owned by the Trust and such Receivable has been pledged pursuant to the
Indenture. Indication of the Trust's interest in a Receivable shall be deleted
from or modified on such computer systems when, and only when, the related
Receivable shall have been paid in full, repurchased by HAFC or the Seller or
otherwise disposed of by the Issuer.
(f) If at any time the Seller, HAFC or its Affiliates
shall propose to sell, grant a security interest in or otherwise transfer any
interest in automotive receivables to any prospective purchaser, lender or other
transferee, the Master Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or printouts (including any restored
from backup archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been sold and is
owned by the Trust unless such Receivable has been paid in full, been
repurchased by HAFC or the Seller or has otherwise been disposed of by the
Issuer.
(g) Upon request, the Master Servicer shall furnish
or cause to be furnished to, the Owner Trustee or to the Indenture Trustee,
within five Business Days, a list of all Receivables (by contract number) then
held as part of the Series Trust Estate, together with a reconciliation of such
list to the Schedule of Receivables and to each of the Master Servicer's
Certificates furnished before such request indicating removal of Receivables
from the Series Trust Estate. The Indenture Trustee shall hold any such list and
Schedule of Receivables for examination by interested parties during normal
business hours at the Corporate Trust Office upon reasonable notice by such
Persons of their desire to conduct an examination.
(h) The Master Servicer shall deliver to the Owner
Trustee and the Indenture Trustee:
(1) simultaneously with the execution and delivery of the
Agreement and, if required pursuant to Section 13.1, of each amendment,
an Opinion of Counsel stating that, in the opinion of such Counsel, in
form and substance reasonably satisfactory to the addressees of such
Opinion, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the Indenture
Trustee in the Receivables then held as part of the Series Trust
Estate, or (B) no such action shall be necessary to preserve and
protect such interest or (C) any action which is necessary to preserve
and protect such interest during the following 12-month period; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year following the Closing Date dated
as of a date during such 90-day period, stating that, in the opinion of
such counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the Indenture
Trustee in the Series Trust Estate or (B) no such action shall be
necessary to preserve and protect such interest.
59
Each Opinion of Counsel referred to in clause (1) or (2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
SECTION 13.3. NOTICES. All demands, notices and communications
upon or to the Seller, the Master Servicer, the Owner Trustee, or any other
Person entitled to receive a notice, the Indenture Trustee shall be in writing,
personally delivered, or mailed by certified mail, sent by confirmed telecopier
transmission, or at the consent of the receiving party by electronic mail, and
shall be deemed to have been duly given upon receipt at the address specified in
the Series Supplement. Any notice required or permitted to be mailed to a
Noteholder or Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register or
Note Register, as applicable. Any notice so mailed within the time prescribed in
the Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder or Noteholder shall receive such notice.
SECTION 13.4. ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 8.4 and 9.3 and as provided in
the provisions of this Agreement concerning the resignation of the Master
Servicer, this Agreement may not be assigned by the Seller or the Master
Servicer without the prior written consent of the Owner Trustee, the Indenture
Trustee and the Administrative Agent, where one exists, or otherwise, the
Managing Agents. In the event that a successor Issuer is formed as permitted by
the Series Supplement, such Issuer shall succeed to all of the rights and
obligations of the predecessor Issuer hereunder; and all references to the
Issuer hereunder shall thereafter be deemed to be references to such successor
Issuer.
SECTION 13.5. LIMITATIONS ON RIGHTS OF OTHERS. The provisions
of this Agreement are solely for the benefit of the parties hereto and for the
benefit of the Certificateholders (including the Seller), the Indenture Trustee,
the Delaware Trustee, the Owner Trustee, any Support Provider and the Secured
Parties, as third-party beneficiaries. Each Support Provider shall be entitled
to rely upon and directly enforce such provisions of this Agreement and the
Series Supplement so long as no default with respect to such Support Provider
shall have occurred and be continuing. Nothing in this Agreement or in the
Series Supplement, whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Owner Trust
Estate or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 13.6. SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
60
SECTION 13.7. SEPARATE COUNTERPARTS. This Agreement and each
Transfer Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 13.8. HEADINGS. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 13.9. GOVERNING LAW. THIS AGREEMENT AND EACH TRANSFER
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW
YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
SECTION 13.10. ASSIGNMENT TO INDENTURE TRUSTEE. The Seller
hereby acknowledges and consents to any mortgage, pledge, assignment and grant
of a security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture, as supplemented by the Series Supplement for the benefit of the
Secured Parties of all right, title and interest of the Issuer in, to and under
the applicable Series Trust Estate.
SECTION 13.11. NONPETITION COVENANTS. (a) Notwithstanding any
prior termination of this Agreement or the Series Supplement, none of the Master
Servicer, the Seller, the Administrative Agent, any Managing Agent or any
Secured Party shall, prior to the date which is one year and one day after the
termination of this Agreement and the payment in full of all obligations of the
Issuer under the Basic Documents, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this
Agreement or the Series Supplement, none of the Master Servicer, any Managing
Agent, the Administrative Agent or any Secured Party shall, prior to the date
that is one year and one day after the termination of this Agreement and each
and every
Master Sale and Servicing Agreement or similar agreement of the
Seller, acquiesce to, petition or otherwise invoke or cause the Seller to invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against the Seller under any federal or state bankruptcy,
insolvency or similar law, appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or other similar official of the Seller or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Seller.
61
SECTION 13.12. LIMITATION OF LIABILITY OF THE OWNER TRUSTEE
AND THE INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the
contrary, this Agreement and the Series Supplement have been countersigned by
the Owner Trustee not in its individual capacity but solely in its capacity as
Owner Trustee of the Issuer and in no event shall the Owner Trustee in its
individual capacity or, except as expressly provided in the Trust Agreement, as
Owner Trustee have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all purposes
of this Agreement and the Series Supplement, in the performance of its duties or
obligations hereunder or in the performance of any duties or obligations of the
Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the
benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the
contrary, this Agreement has been executed and delivered by the Person acting as
the Indenture Trustee not in its individual capacity but solely as Indenture
Trustee and in no event shall such Person have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.
SECTION 13.13. INDEPENDENCE OF THE MASTER SERVICER. For all
purposes of this Agreement, the Master Servicer shall be an independent
contractor and shall not be subject to the supervision of the Issuer or the
Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement or the Series Supplement, the Master Servicer shall have no authority
to act for or represent the Issuer or the Owner Trustee in any way and shall not
otherwise be deemed an agent of the Issuer or the Owner Trustee.
SECTION 13.14. NO JOINT VENTURE. Nothing contained in this
Agreement or the Series Supplement (i) shall constitute the Master Servicer and
either of the Issuer or the Owner Trustee as members of any partnership, joint
venture, association, syndicate, unincorporated business or other separate
entity, (ii) shall be construed to impose any liability as such on any of them
or (iii) shall be deemed to confer on any of them any express, implied or
apparent authority to incur any obligation or liability on behalf of the others.
62
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and the year first above written.
HOUSEHOLD AUTOMOTIVE TRUST 2001-3
by U.S. Bank Trust National Association,
not in its individual capacity but
solely as Owner Trustee on behalf of the
Trust,
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Title: Vice President
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Seller,
by /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and
Assistant Treasurer
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer,
by /s/ ▇. ▇. ▇▇▇▇, ▇▇.
-----------------------------------
Name: ▇. ▇. ▇▇▇▇, ▇▇.
Title: Vice President and
Treasurer
▇▇▇▇▇ FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Indenture Trustee,
by /s/ ▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Assistant Vice President
[Signature Page for Master Sale & Servicing Agreement]
EXHIBIT A
FORM OF MASTER SERVICER'S CERTIFICATE
EXHIBIT A
FORM OF MASTER SERVICER'S CERTIFICATE
MASTER SERVICER'S CERTIFICATE
(Delivered pursuant to Section 4.9
of the
Master Sale and Servicing Agreement)
HOUSEHOLD FINANCE CORPORATION,
Master Servicer
HOUSEHOLD AUTO RECEIVABLES CORPORATION
HOUSEHOLD AUTOMOTIVE TRUST Series 2001-3
Class A Notes
1. This Certificate relates to the Distribution Date occurring on
2. Series 2001-3 Information
(a) The amount of Collected Funds with respect to the Collection
Period was equal to
(b) The amount of Available Funds with respect to the Collection
Period was equal to
(c) The Liquidated Receivables for the Collection Period was equal
to
(d) Net Liquidation Proceeds for the Collection Period was equal
to
(e) The principal balance of Series 2001-3 Receivables at the
beginning
of the Collection Period was equal to
(f) The principal balance of Series 2001-3 Receivables on the last
day of the Collection Period was equal to
(g) The aggregate outstanding balance of the Series 2001-3
Receivables which were one payment delinquent as of the close
of business on the last day of the Collection Period with
respect to such Distribution Date was equal to
(h) The aggregate outstanding balance of the Series 2001-3
Receivables which were two payments delinquent as of the close
of business on the last day of the Collection Period with
respect to such Distribution Date was equal to
(i) The aggregate outstanding balance of the Series 2001-3
Receivables which were three or more payments delinquent as of
the close of business on the last day of the Collection Period
with respect to such Distribution Date was equal to
(j) The Servicing Fee paid on the Distribution Date was equal to
(k) The Principal Distributable Amount for the Distribution Date
was equal to
(l) The Principal Amount Available for the Distribution Date was
equal to
(m) The Aggregate Note Principal Balance was equal to
(n) The Aggregate Optimal Note Principal Balance was equal to
(o) The Targeted Credit Enhancement Amount was equal to
(p) The Targeted Credit Enhancement Amount as a percentage of the
Pool
Balance on the Distribution Date was equal to
(q) The Targeted Reserve Account Balance was equal to
(r) The Reserve Account Deposit Amount for the Distribution Date
(s) The Maximum Reserve Account Deposit Amount for the
Distribution Date
(t) The Reserve Account Shortfall for the Distribution Date
(u) The amount on deposit in the Reserve Account after
distributions was equal to
(v) The amount on deposit in the Reserve Account as a percentage
of the Pool Balance on the Distribution Date was equal to
(w) The Targeted Overcollateralization Amount was equal to
(x) The ending overcollateralization was equal to
(y) The ending overcollateralization as a percentage of the Pool
Balance on the Distribution Date was equal to
(z) The Weighted Average Coupon (WAC) was equal to
(aa) The Weighted Average Remaining Maturity (WAM) was equal to
3. NOTEHOLDER INFORMATION
(a) CLASS A-1
A. Information Regarding Distributions
1. Total Distribution per $1,000
2. Principal Distribution per $1,000
3. Interest Distribution per $1,000
B. Calculation of Class A-1 Interest Due
1. Class A-1 related Note Rate
2. Class A-1 principal balance - beginning of
period
3. Accrual convention
4. Days in Interest Period
5. Class A-1 interest due
6. Class A-1 interest paid
7. Class A Interest Carryover Shortfall with
respect to Class A-1
8. Class A-1 unpaid interest with respect to
the Distribution Date
C. Calculation of Class A-1 principal balance
1. Class A-1 principal balance - beginning of
period
2. Class A-1 principal - amount due
3. Class A-1 principal - amount paid
4. Class A-1 principal balance - end of period
5. Class A Principal Carryover Shortfall with
respect to Class A-1
6. Class A-1 unpaid principal with respect to
the Distribution Date
7. Class A-1 Notes as a percentage of the total
Notes outstanding on the Distribution Date
8. Class A-1 Notes as a percentage of the Pool
Balance on the Distribution Date
(b) CLASS A-2
A. Information Regarding Distributions
1. Total Distribution per $1,000
2. Principal Distribution per $1,000
3. Interest Distribution per $1,000
B. Calculation of Class A-2 Interest Due
1. Class A-2 related Note Rate
2. Class A-2 principal balance - beginning of
period
3. Accrual convention
4. Days in Interest Period
5. Class A-2 interest due
6. Class A-2 interest paid
7. Class A Interest Carryover Shortfall with
respect to Class A-2
8. Class A-2 unpaid interest with respect to
the Distribution Date
C. Calculation of Class A-2 principal balance
1. Class A-2 principal balance - beginning of
period
2. Class A-2 principal - amount due
3. Class A-2 principal - amount paid
4. Class A-2 principal balance - end of period
5. Class A Principal Carryover Shortfall with
respect to Class A-2
6. Class A-2 unpaid principal with respect to
the Distribution Date
7. Class A-2 Notes as a percentage of the total
Notes outstanding on the Distribution Date
8. Class A-2 Notes as a percentage of the Pool
Balance on the Distribution Date
9. Class A-1 and A-2 Notes as a percentage of
the Pool Balance on the Distribution Date
(c) CLASS A-3
A. Information Regarding Distributions
1. Total Distribution per $1,000
2. Principal Distribution per $1,000
3. Interest Distribution per $1,000
B. Calculation of Class A-3 Interest Due
1. Class A-3 related Note Rate
2. Class A-3 principal balance - beginning of
period
3. Accrual convention
4. Class A-3 interest due
5. Class A-3 interest paid
6. Class A Interest Carryover Shortfall with
respect to Class A-3
7. Class A-3 unpaid interest with respect to
the Distribution Date
C. Calculation of Class A-3 principal balance
1. Class A-3 principal balance - beginning of
period
2. Class A-3 principal - amount due
3. Class A-3 principal - amount paid
4. Class A-3 principal balance - end of period
5. Class A Principal Carryover Shortfall with
respect to Class A-3
6. Class A-3 unpaid principal with respect to
the Distribution Date
7. Class A-3 Notes as a percentage of the total
Notes outstanding on the Distribution Date
8. Class A-3 Notes as a percentage of the Pool
Balance on the Distribution Date
9. Class ▇-▇, ▇-▇ ▇▇▇ ▇-▇ Notes as a percentage
of the Pool Balance on the Distribution Date
(d) CLASS A-4
A. Information Regarding Distributions
1. Total Distribution per $1,000
2. Principal Distribution per $1,000
3. Interest Distribution per $1,000
B. Calculation of Class A-4 Interest Due
1. Class A-4 related Note Rate
2. Class A-4 principal balance - beginning of
period
3. Accrual convention
4. Class A-4 interest due
5. Class A-4 interest paid
6. Class A Interest Carryover Shortfall with
respect to Class A-4
7. Class A-4 unpaid interest with respect to
the Distribution Date
C. Calculation of Class A-4 principal balance
1. Class A-4 principal balance - beginning of
period
2. Class A-4 principal - amount due
3. Class A-4 principal - amount paid
4. Class A-4 principal balance - end of period
5. Class A Principal Carryover Shortfall with
respect to Class A-4
6. Class A-4 unpaid principal with respect to
the Distribution Date
7. Class A-4. Notes as a percentage of the
total Notes outstanding on the Distribution
Date
8. Class A-4 Notes as a percentage of the Pool
Balance on the Distribution Date
9. Class ▇-▇, ▇-▇, ▇-▇ and A-4 Notes as a
percentage of the Pool Balance on the
Distribution Date
EXHIBIT B
FORM OF TRANSFER AGREEMENT
TRANSFER No. _____________ of Receivables pursuant to the
Master Sale and Servicing Agreement dated as of October 9, 2001 (the "Sale and
Servicing Agreement"), among ____________________________, a Delaware business
trust (the "Issuer" or the "Trust"),
HOUSEHOLD AUTO RECEIVABLES CORPORATION, a
Nevada corporation (the "Seller"), HOUSEHOLD FINANCE CORPORATION, a Delaware
corporation (the "Master Servicer"), and ▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association in its capacity as Indenture Trustee
(the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the
Seller wishes to convey the Receivables to the Issuer; and
WHEREAS, the Issuer is willing to accept such conveyance
subject to the terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Master Servicer
and the Indenture Trustee hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein shall
have the meanings ascribed to them in the Sale and Servicing Agreement unless
otherwise defined herein.
"Cutoff Date" shall mean, with respect to the Receivables
conveyed hereby, _______________, ____.
"Transfer Date" shall mean. with respect to the Receivables
conveyed hereby, _____________, ____.
2. LIST OF RECEIVABLES. Annexed hereto is Schedule A
listing the Receivables that constitute the Receivables to be conveyed pursuant
to the Sale and Servicing Agreement and this Agreement on the Transfer Date.
3. CONVEYANCE OF RECEIVABLES. The Seller does hereby
sell, transfer, assign, set over and otherwise convey to the Issuer, without
recourse (except as expressly PROVIDED in the Sale and Servicing Agreement), all
right, title and interest of the Seller in and to:
(a) each and every Receivable listed on Schedule A and all
monies paid or payable thereon or in respect thereof on or after the
related Cutoff Date (including amounts due on or before the related
Cutoff Date but received by the Seller on or after such date);
2
(b) the security interests in the related Financed Vehicles
granted by Obligors pursuant to such Receivables and any other interest
of the Seller in such Financed Vehicles;
(c) all rights of the Seller against Dealers pursuant to
Dealer Agreements, Dealer Assignments related to such Receivables;
(d) any proceeds and the right to receive proceeds with
respect to such Receivables repurchased by a Dealer, pursuant to a
Dealer Agreement as a result of a breach of representation or warranty
in the related Dealer Agreement;
(e) all rights under any Service Contracts on the related
Financed Vehicles;
(f) any proceeds and the right to receive proceeds with
respect to Receivables from claims on any physical damage, credit life
or disability insurance policies, if any, covering the related Financed
Vehicles or Obligors, including rebates of insurance premiums relating
to the Receivables;
(g) all items contained in the Receivables Files with respect
to such Receivables and any and all other documents that HAFC on or
Household Bank, as applicable, keeps on file in accordance with its
customary procedures relating to the related Receivables, the related
Financed Vehicles or Obligors;
(h) all funds on deposit from time to time in the Trust
Accounts (including all investments and proceeds thereof);
(i) property (including the right to receive future Net
Liquidation Proceeds) that secures each related Receivable and that has
been acquired by or on behalf of the Seller pursuant to liquidation of
such Receivable;
(j) all of Sellers right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Master
Receivables Purchase Agreement and the Receivables Purchase Agreement
Supplements, including the delivery requirements, representations and
warranties and the cure and repurchase obligations of HAFC or Household
Bank, as applicable, under the Master Receivables Purchase Agreement
and related Receivables Purchase Agreement Supplements, on or after the
related Cutoff Date;
(k) on the initial Transfer Date only, one share of Class SV
Preferred Stock of the Seller; and
(l) all present and future claims, demands, causes and chooses
in action in respect of any or all of the foregoing and all payments on
or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
3
proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller hereby represents and warrants to the Issuer as of the Transfer Date
that:
(a) Each of its representations set forth in Sections 3.1 and
8.1 of the Sale and Servicing Agreement are true and correct as if made
on the Transfer Date, except if specified to be true as of an earlier
date, in which case, such representations and warranties are true as of
such earlier date.
(b) The aggregate of the Principal Balances of the Receivables
listed on [the supplement to] Schedule A annexed hereto and conveyed to
the Issuer pursuant to this Agreement is as of the Cutoff Date
$____________.
5. CONDITIONS PRECEDENT. The obligation of the Issuer to
acquire the Receivables hereunder is subject to the satisfaction, on or prior to
the Transfer Date, of the following conditions precedent:
REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by the Seller in Section 4 of this Agreement shall
be true and correct as of the Transfer Date.
SALE AND SERVICING AGREEMENT CONDITIONS. Each of the
conditions set forth in Section 2.1(b) to the Sale and Servicing
Agreement shall have been satisfied.
ADDITIONAL INFORMATION. The Seller shall have delivered to the
Issuer such information as was reasonably requested by the Issuer to
satisfy itself as to the accuracy of the representations and warranties
set forth in Section 4 of this Agreement.
6. RATIFICATION OF AGREEMENT. As supplemented by this
Agreement, the Sale and Servicing Agreement is in all respects ratified and
confirmed and the Sale and Servicing Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.
7. COUNTERPARTS. This Agreement may be executed in two
or more counterparts (and by different parties in separate counterparts), each
of which shall be an original but all of which together shall constitute one and
the same instrument.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
4
IN WITNESS WHEREOF, the Issuer, the Seller and the Master
Servicer have caused this Agreement to be duly executed and delivered by their
respective duly authorized officers as of day and the year first above written.
[ISSUER]
by U.S. Bank Trust National Association,
not in its individual capacity but
solely as Owner Trustee on behalf of the
Trust,
by
----------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
Seller,
by
----------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION, Master
Servicer,
by
----------------------------------
Name:
Title:
Acknowledged and Accepted:
▇▇▇▇▇ FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
not in its individual
capacity but solely as
Indenture Trustee
by
------------------------------------------
Name:
Title:
5