EXHIBIT 10.1
HOUSEHOLD CONSUMER LOAN CORPORATION II,
TRANSFEROR,
HOUSEHOLD FINANCE CORPORATION,
SERVICER,
AND
WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE OF THE
HOUSEHOLD CONSUMER LOAN MASTER NOTE TRUST I,
ISSUER
TRANSFER AND SERVICING AGREEMENT
Dated as of September 30, 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................................................. 1
Section 1.01. Definitions..................................................................... 1
Section 1.02. Other Definitional Provisions................................................... 14
ARTICLE II CONVEYANCE OF RECEIVABLES.................................................................. 15
Section 2.01. Conveyance of Receivables....................................................... 15
Section 2.02. Acceptance by Owner Trustee..................................................... 17
Section 2.03. Representations and Warranties of Each Transferor Relating to Such Transferor... 18
Section 2.04. Representations and Warranties of each Transferor Relating to the Agreement and
Any Participation Interest Supplement and the Receivables....................... 19
Section 2.05. Reassignment of Ineligible Receivables.......................................... 21
Section 2.06. Reassignment of Trust Portfolio................................................. 22
Section 2.07. Covenants of each Transferor.................................................... 23
Section 2.08. Covenants of each Transferor with Respect to Receivables Purchase Agreement..... 24
Section 2.09. Addition of Accounts............................................................ 25
Section 2.10. Removal of Accounts............................................................. 30
Section 2.11. Account Allocations............................................................. 31
Section 2.12. Discount Option................................................................. 32
Section 2.13. Representations and Warranties of the Trust..................................... 32
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES............................................... 33
Section 3.01. Acceptance of Appointment and Other Matters Relating to the Servicer............ 33
Section 3.02. Servicing Compensation.......................................................... 34
Section 3.03. Representations, Warranties and Covenants of the Servicer....................... 35
Section 3.04. Reports and Records for the Owner Trustee and the Indenture Trustee............. 38
Section 3.05. Annual Certificate of Servicer.................................................. 38
Section 3.06. Annual Servicing Report of Independent Public Accountants; Copies of Reports
Available....................................................................... 38
Section 3.07. Tax Treatment................................................................... 39
Section 3.08. Notices to Household Finance Corporation........................................ 40
Section 3.09. Adjustments..................................................................... 40
Section 3.10. Reports to the Commission....................................................... 41
ARTICLE IV OTHER MATTERS RELATING TO EACH TRANSFEROR.................................................. 41
Section 4.01. Liability of each Transferor.................................................... 41
Section 4.02. Merger or Consolidation of, or Assumption of the Obligations of, a Transferor... 41
Section 4.03. Limitations on Liability of Each Transferor..................................... 42
Section 4.04. Assumption of the Transferor Obligations........................................ 42
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ARTICLE V OTHER MATTERS RELATING TO THE SERVICER...................................................... 44
Section 5.01. Liability of the Servicer....................................................... 44
Section 5.02. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer... 44
Section 5.03. Limitation on Liability of the Servicer and Others.............................. 45
Section 5.04. Servicer Indemnification of the Owner Trustee and the Indenture Trustee......... 45
Section 5.05. Resignation of the Servicer..................................................... 46
Section 5.06. Access to Certain Documentation and Information Regarding the Receivables....... 46
Section 5.07. Delegation of Duties............................................................ 47
Section 5.08. Examination of Records.......................................................... 47
ARTICLE VI INSOLVENCY EVENTS.......................................................................... 47
Section 6.01. Rights upon the Occurrence of an Insolvency Event............................... 47
ARTICLE VII SERVICER DEFAULTS......................................................................... 48
Section 7.01. Servicer Defaults............................................................... 48
Section 7.02. Indenture Trustee To Act; Appointment of Successor.............................. 50
Section 7.03. Notification to Noteholders..................................................... 52
ARTICLE VIII TERMINATION.............................................................................. 52
Section 8.01. Termination of Agreement........................................................ 52
ARTICLE IX MISCELLANEOUS PROVISIONS................................................................... 52
Section 9.01. Amendment; Waiver of Past Defaults.............................................. 52
Section 9.02. Protection of Right, Title and Interest to Trust................................ 55
Section 9.03. Governing Law................................................................... 56
Section 9.04. Notices; Payments............................................................... 56
Section 9.05. Severability of Provisions...................................................... 57
Section 9.06. Additional Obligations of the Servicer.......................................... 57
Section 9.07. Further Assurances.............................................................. 57
Section 9.08. No Waiver; Cumulative Remedies.................................................. 57
Section 9.09. Counterparts.................................................................... 57
Section 9.10. Third-Party Beneficiaries....................................................... 57
Section 9.11. Actions by Noteholders.......................................................... 58
Section 9.12. Rule 144A Information........................................................... 58
Section 9.13. Merger and Integration.......................................................... 58
Section 9.14. Headings........................................................................ 58
Section 9.15. Representative Capacity......................................................... 58
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TABLE OF CONTENTS (CONT'D.)
EXHIBITS
EXHIBIT A Form of Assignment of Receivables in Additional Accounts...................... A-1
EXHIBIT B Form of Reassignment of Receivables in Removed Accounts....................... B-1
EXHIBIT C Form of Annual Servicer's Certificate......................................... X-0
XXXXXXX X-0 Form of Opinion of Counsel with Respect to Amendments......................... X-0-0
XXXXXXX X-0 Form of Opinion of Counsel with Respect to Accounts........................... X-0-0
XXXXXXX X-0 Provisions to be Included in Annual Opinion of Counsel........................ D-3-1
SCHEDULES
SCHEDULE 1 List of Accounts.............................................................. I-1
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TRANSFER AND SERVICING AGREEMENT, dated as of September 30,
2002 among HOUSEHOLD CONSUMER LOAN CORPORATION II, a Delaware corporation, as
Transferor; HOUSEHOLD FINANCE CORPORATION, a Delaware corporation, as Servicer;
and WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner
Trustee on behalf of the HOUSEHOLD CONSUMER LOAN MASTER NOTE TRUST I, a common
law trust organized and existing under the laws of the State of Delaware.
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties, the
Noteholders and any Series Enhancer (as defined below) to the extent provided
herein, in the Indenture and in any Indenture Supplement:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement,
the following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such terms.
"Account" shall mean (a) each Initial Account, (b) each
Additional Account (but only from and after the Addition Date with respect
thereto), (c) each Related Account, and (d) each Transferred Account, but shall
exclude (i) any Account that has been closed and terminated in accordance with
the relevant Credit Guidelines and (ii) any Account all the Receivables in which
are (A) after the Removal Date, removed by the Transferor pursuant to Section
2.10, (B) reassigned to the Transferor pursuant to Section 2.05 or (C) assigned
and transferred to the Servicer pursuant to Section 3.03.
"Account Owner" shall mean the relevant Originator or any
other entity which is the issuer of the consumer loan relating to an Account
pursuant to a Credit Agreement and/or a seller of Receivables to the Transferor.
"Addition Date" shall mean (a) with respect to Aggregate
Addition Accounts and New Accounts, the date from and after which such Aggregate
Addition Accounts and New Accounts are to be included as Accounts pursuant to
subsection 2.09(a), (b) or (d), and (b) with respect to Participation Interests,
the date from and after which such Participation Interests are to be included as
assets of the Trust pursuant to subsection 2.09(a) or (b).
"Additional Account" shall mean each New Account and each
Aggregate Addition Account.
"Additional Cut-Off Date" shall mean (a) with respect to
Aggregate Addition Accounts or Participation Interests, the date specified as
such in the notice
delivered with respect thereto pursuant to subsection 2.09(c) and (b) with
respect to New Accounts, the later of the dates on which such New Accounts are
originated or designated pursuant to subsection 2.09(d).
"Additional Transferor" shall have the meaning specified in
subsection 2.09(g).
"Adverse Effect" shall mean, with respect to any action, that
such action will (a) result in the occurrence of an Amortization Event, a
Reinvestment Event or an Event of Default, (b) materially adversely affect the
amount or timing of distributions to be made to the Noteholders of any Series or
Class pursuant to this Agreement, the Indenture or the related Indenture
Supplement or (c) materially and adversely affect the rights and obligations of
any Series Enhancer of any Series or Class pursuant to this Agreement, the
Indenture or the related Indenture Supplement.
"Affiliate" shall mean, 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" shall mean the
power to direct the management and policies of a 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 Addition" shall mean the designation of additional
Eligible Accounts, other than New Accounts, to be included as Accounts or
Participation Interests to be included as Trust Assets pursuant to subsection
2.09(a) or (b).
"Aggregate Addition Account" shall mean each Eligible Account
designated pursuant to subsection 2.09(a) or (b) to be included as an Account
and identified in the computer file or microfiche list delivered to the Owner
Trustee by the Transferor pursuant to Sections 2.01 and 2.09(h).
"Agreement" shall mean this Transfer and Servicing Agreement,
as the same may be amended, supplemented or otherwise modified from time to
time.
"Amortization Event" shall have the meaning specified in the
Indenture.
"Appointment Date" shall have the meaning specified in Section
6.01.
"Assignment" shall have the meaning specified in subsection
2.09(h).
"Authorized Newspaper" shall mean any newspaper or newspapers
of general circulation in the Borough of Manhattan, City of New York, printed in
the English language and customarily published on each business day at such
place, whether or not published on Saturdays, Sundays or holidays.
"Bankruptcy Code" shall mean Title 11 of the United States
Code.
"Bearer Notes" shall have the meaning specified in the
Indenture.
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"Business Day" shall mean any day other than (a) a Saturday or
Sunday or (b) any other day on which national banking associations or state
banking institutions in New York City, New York, Delaware, Illinois, Indiana,
Nevada or any other State in which the principal executive offices of the
Servicer, the Owner Trustee, the Indenture Trustee or other Account Owner, as
the case may be, are located, are authorized or obligated by law, executive
order or governmental decree to be closed or (c) for purposes of any particular
Series, any other day specified in the related Indenture Supplement.
"Class" shall have the meaning specified in the Indenture.
"Closing Date" shall mean, with respect to any Series, the
closing date specified in the related Indenture Supplement.
"Collections" shall mean all payments by or on behalf of
Obligors (including Insurance Proceeds) received in respect of the Receivables,
in the form of cash, checks, wire transfers, electronic transfers, ATM transfers
or any other form of payment in accordance with a Credit Agreement in effect
from time to time and all other amounts specified by this Agreement, the
Indenture or any Indenture Supplement as constituting Collections. As specified
in any Participation Interest Supplement or Indenture Supplement, Collections
shall include amounts received with respect to any related Participation
Interests as specified therein. All Recoveries with respect to Receivables
previously charged-off as uncollectible will be treated as Collections of
Finance Charge and Administrative Receivables.
"Commission" shall mean the Securities and Exchange Commission
and its successors in interest.
"Company" shall mean Household Consumer Loan Corporation II, a
Delaware corporation, and its successors and permitted assigns.
"Controlling Entity" shall have the meaning specified in the
Indenture.
"Corporate Trust Office" shall have the meaning (a) when used
in respect of the Owner Trustee, specified in the Trust Agreement and (b) when
used in respect of the Indenture Trustee, specified in the Indenture.
"Coupon" shall have the meaning specified in the Indenture.
"Credit Agreement" shall mean, with respect to a consumer loan
account, the agreements between an Account Owner and the Obligor governing the
terms and conditions of such account, as such agreements may be amended,
modified or otherwise changed from time to time and as distributed (including
any amendments and revisions thereto) to holders of such account.
"Credit Guidelines" shall mean the respective policies and
procedures of each Originator, the Servicer, and/or any other Account Owner, as
the case may be, as such policies and procedures may be amended from time to
time, (a) relating to the operation of its consumer loan business, which
generally are applicable to its portfolio of
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consumer loan accounts or, in the case of an Account Owner that has only a
portion of its portfolio subject to a Receivables Purchase Agreement, applicable
to such portion of its portfolio, and in each case which are consistent with
prudent practice, including the policies and procedures for determining the
creditworthiness of Obligors and the extension of credit to Obligors, and (b)
relating to the maintenance of consumer loan accounts and collection of
receivables created thereunder.
"Date of Processing" shall mean, with respect to any
transaction or receipt of Collections, the date on which such transaction is
first recorded on the Servicer's computer file of consumer loan accounts
(without regard to the effective date of such recordation).
"Defaulted Amount" shall mean, with respect to any Due Period,
an amount (which shall not be less than zero) equal to (a) the amount of
Principal Receivables which became Defaulted Receivables in such Due Period,
minus (b) the amount of any Defaulted Receivables of which the Transferor or the
Servicer became obligated to accept reassignment or assignment in accordance
with the terms of this Agreement during such Due Period; provided, however,
that, if an Insolvency Event occurs with respect to the Transferor, the amount
of such Defaulted Receivables which are subject to reassignment to the
Transferor in accordance with the terms of this Agreement shall not be added to
the sum so subtracted and, if any of the events described in subsection 7.01(d)
occur with respect to the Servicer, the amount of such Defaulted Receivables
which are subject to reassignment or assignment to the Servicer in accordance
with the terms of this Agreement shall not be added to the sum so subtracted.
"Defaulted Receivables" shall mean, with respect to any Due
Period and any Pool and related Group, all Principal Receivables which are
charged off as uncollectible in such Due Period in accordance with the Credit
Guidelines and the Servicer's customary and usual servicing procedures for
servicing consumer loan accounts. A Principal Receivable shall become a
Defaulted Receivable on the day on which such Principal Receivable is recorded
as charged-off on the Servicer's computer file of consumer loan accounts.
"Discount Option Date" shall mean each date on which a
Discount Percentage designated by the Transferor pursuant to Section 2.12 takes
effect.
"Discount Option Receivable Collections" shall mean on any
Date of Processing occurring after a Discount Option Date occurs, the product of
(a) a fraction the numerator of which is the Discount Option Receivables and the
denominator of which is the sum of the Principal Receivables and the Discount
Option Receivables in each case (for both the numerator and the denominator) at
the end of the preceding Due Period and (b) Collections of Principal Receivables
on such Date of Processing (without giving effect to the provision in the
definition of Principal Receivables).
"Discount Option Receivables" shall have the meaning specified
in Section 2.12. The aggregate amount of Discount Option Receivables outstanding
on any Date of Processing occurring on or after a Discount Option Date shall
equal the sum of
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(a) the aggregate Discount Option Receivables at the end of the prior Date of
Processing (which amount, prior to the Discount Option Date, shall be zero) plus
(b) any new Discount Option Receivables created on such Date of Processing minus
(c) any Discount Option Receivables Collections received on such Date of
Processing. Discount Option Receivables on any Date of Processing shall mean the
product of the amount of any Principal Receivables outstanding on such Date of
Processing (without giving effect to the proviso in the definition of Principal
Receivables) and the Discount Percentage.
"Discount Percentage" shall mean initially 12% or otherwise
the percentages, if any, designated by the Transferor pursuant to Section 2.12.
"Distribution Date" shall mean, with respect to any Series,
the date specified in the applicable Indenture Supplement.
"Document Delivery Date" shall have the meaning specified in
subsection 2.09(h).
"Dollars", "$" or "U.S. $" shall mean United States dollars.
"Due Period" shall have the meaning specified in the
Indenture.
"Eligible Account" shall mean a consumer loan account owned by
an Originator or other Account Owner in the case of the Initial Accounts on the
Initial Cut-Off Date, or an Originator or other Account Owner in the case of
Additional Accounts which, as of the Initial Cut-Off Date with respect to an
Initial Account or as of the Additional Cut-Off Date with respect to an
Additional Account meets the following requirements:
(a) is a consumer loan account in existence and
maintained by an Originator or other Account Owner, as the case may be;
(b) is payable in Dollars;
(c) has an Obligor who has provided, as his most recent
billing address, an address located in the United States or its
territories, possessions or military bases provided, however, that as
of any date of determination, up to 1% of the Principal Receivables
arising under the consumer loan accounts may have account obligors who
have provided as their billing addresses, addresses outside of the
United States;
(d) except as provided below, has an Obligor who has not
been identified by the Servicer in its computer files as being
currently involved in a voluntary or involuntary bankruptcy proceeding;
(e) has not been sold or pledged to any other party
except for any sale to another Account Owner that has either entered
into a Receivables Purchase Agreement or is an Additional Transferor;
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(f) does not have receivables which have been sold or
pledged to any other party other than any Transferor;
(g) with respect to the Initial Accounts, is an account
in existence and maintained by an Originator or other Account Owner as
of the Initial Cut-Off Date, or as of the Additional Cut-Off Date with
respect to Additional Accounts;
(h) except as provided below, does not have any
Receivables that are Defaulted Receivables; and
(i) does not have any Receivables that have been
identified by the Servicer or the relevant Obligor as having been
incurred as a result of fraudulent use.
Eligible Accounts may include Accounts, the Receivables of
which have been charged off, or with respect to which the Servicer believes the
related Obligor is bankrupt, in each case as of the Initial Cut-Off Date, with
respect to the Initial Accounts, and as of the related Additional Cut-Off Date,
with respect to Additional Accounts; provided, that (a) the balance of all
Receivables included in such Accounts is reflected on the books and records of
such Transferor (and is treated for purposes of this Agreement) as "zero" and
(b) drawing privileges (in the case of a revolving consumer loan account) with
respect to all such Accounts have been canceled in accordance with the relevant
Credit Guidelines.
"Eligible Receivable" shall mean each Receivable:
(a) which has arisen in an Eligible Account;
(b) which was created in compliance in all material
respects with the Credit Guidelines and all Requirements of Law
applicable to the institution which owned such Receivable at the time
of its creation and pursuant to a Credit Agreement which complies in
all material respects with all Requirements of Law applicable to the
related Originator or other Account Owner, as the case may be;
(c) with respect to which all material consents,
licenses, approvals or authorizations of, or registrations or
declarations with, any Governmental Authority required to be obtained,
effected or given in connection with the creation of such Receivable or
the execution, delivery and performance by the related Originator or
other Account Owner, as the case may be, of the Credit Agreement
pursuant to which such Receivable was created, have been duly obtained,
effected or given and are in full force and effect;
(d) as to which at the time of the transfer of such
Receivable to the Trust, the Transferor or the Trust will have good and
marketable title thereto and which is free and clear of all Liens
(other than any Lien for municipal or other local taxes if such taxes
are not then due and payable or if the Transferor is then contesting
the validity thereof in good faith by appropriate proceedings and has
set aside on its books adequate reserves with respect thereto);
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(e) which has been the subject of either a valid transfer
and assignment from the Transferor to the Trust of all the Transferor's
right, title and interest therein (including any proceeds thereof), or
the grant of a first priority perfected security interest therein (and
in the proceeds thereof), effective until the termination of the Trust;
(f) which at all times will be the legal, valid and
binding payment obligation of the Obligor thereon enforceable against
such Obligor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity);
(g) which, at the time of transfer to the Trust, has not
been waived or modified except as permitted in accordance with the
Credit Guidelines and which waiver or modification is reflected in the
Servicer's computer file of consumer loan accounts;
(h) which, at the time of transfer to the Trust, is not
subject to any right of rescission, setoff, counterclaim or any other
defense (including defenses arising out of violations of usury laws) of
the Obligor, other than defenses arising out of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights in general;
(i) as to which, at the time of transfer to the Trust,
the related Originator or other Account Owner, as the case may be, has
satisfied all of its obligations required to be satisfied by such time;
(j) as to which, at the time of transfer to the Trust,
none of the Transferor, the related Originator or any other Account
Owner, as the case may be, has taken any action which would impair, or
omitted to take any action the omission of which would impair, the
rights of the Trust or the Noteholders therein; and
(k) which constitutes either an "account", "instruments",
"chattel paper" or a "general intangible" under and as defined in
Article 9 of the UCC as then in effect in the State of Delaware and any
other state where the filing of a financing statement is required to
perfect the Trust's interest in the Receivables and the proceeds
thereof.
"Eligible Servicer" shall mean the Indenture Trustee or, if
the Indenture Trustee is not acting as Servicer, an entity acceptable to the
Controlling Entities which, at the time of its appointment as Servicer, (a) is
servicing a portfolio of consumer loan accounts, (b) is legally qualified and
has the capacity to service the Accounts, (c) in the sole determination of the
Indenture Trustee, which determination shall be conclusive and binding, has
demonstrated the ability to service professionally and competently a
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portfolio of similar accounts in accordance with high standards of skill and
care, (d) is qualified to use the software that is then being used to service
the Accounts or obtains the right to use or has its own software which is
adequate to perform its duties under this Agreement and (e) has a net worth of
at least $50,000,000 as of the end of its most recent fiscal quarter.
"Event of Default" shall have the meaning specified in the
Indenture.
"FDIA" shall mean the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989 and as further amended from time to time.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any successor.
"Finance Charge and Administrative Receivables" shall mean
with respect to any Pool, all amounts billed to the Obligors on any Account in
respect of (a) all Periodic Finance Charges, (b) annual fees and annual service
charges, (c) Late Fees, (d) Overlimit Fees, (e) Discount Option Receivables and
(f) any other fees or charges with respect to the Accounts designated by the
Transferor at any time and from time to time to be included as Finance Charge
and Administrative Receivables. Finance Charge and Administrative Receivables
shall also include the interest portion of Participation Interests as shall be
determined pursuant to, and only if so provided in, the applicable Participation
Interest Supplement or Indenture Supplement for any Series.
"Fitch" shall mean Fitch, Inc. or its successors.
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Group" shall have the meaning set forth in the Indenture.
"Household Finance Corporation" shall mean Household Finance
Corporation, a Delaware corporation, and its successors and permitted assigns.
"Indenture" shall mean the Master Indenture, dated as of
September 30, 2002 between the Issuer and the Indenture Trustee, as the same may
be amended, supplemented or otherwise modified from time to time.
"Indenture Supplement" shall have the meaning specified in the
Indenture.
"Indenture Trustee" shall mean Xxxxx Fargo Bank Minnesota,
National Association, in its capacity as trustee under the Indenture, its
successors in interest and any successor indenture trustee under the Indenture.
"Ineligible Receivables" shall have the meaning specified in
subsection 2.05(a).
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"Initial Account" shall mean each revolving and closed-end
consumer loan account established pursuant to a Credit Agreement, which account
is identified in the computer file or microfiche list delivered to the Owner
Trustee by the Transferor pursuant to Section 2.01 in respect of the Initial
Issuance Date.
"Initial Cut-Off Date" shall mean September 2, 2002 with
respect to Receivables in revolving consumer loan accounts and September 20,
2002 with respect to Receivables in closed-end consumer loan accounts.
"Initial Issuance Date" shall mean September 30, 2002, the
date the Transferor's Certificate is issued by the Trust to the Transferor
pursuant to the Trust Agreement.
"Insolvency Event" shall have the meaning specified in Section
6.01.
"Insurance Proceeds" shall mean any amounts received pursuant
to the payment of benefits under any credit life insurance policies, credit
disability or unemployment insurance policies covering any Obligor with respect
to Receivables under such Obligor's Account.
"Invested Amount" shall mean, with respect to any Series and
for any date, an amount equal to the invested amount or adjusted invested
amount, as applicable, specified in the related Indenture Supplement.
"Issuer" shall mean the Trust.
"Late Fees" shall have the meaning specified in the Credit
Agreement applicable to each Account for late fees or similar terms.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, equity interest, encumbrance,
lien (statutory or other), preference, participation interest, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever,
including any conditional sale or other title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing and
the filing of any financing statement under the UCC or comparable law of any
jurisdiction to evidence any of the foregoing; provided, however, that any
assignment permitted by subsection 3.06(b) of the Trust Agreement or Section
4.02 of, and the lien created by, this Agreement shall not be deemed to
constitute a Lien.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.02.
"Moody's" shall mean Xxxxx'x Investors Service, Inc., or its
successor.
"New Account" shall mean each revolving and closed-end
consumer loan account established pursuant to a Credit Agreement, which account
is designated pursuant to subsection 2.09(d) to be included as an Account and is
identified in the computer file or microfiche list delivered to the Owner
Trustee by the Transferor pursuant to Section 2.01 and subsection 2.09(h).
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"Note Owner" shall have the meaning specified in the
Indenture.
"Note Register" shall have the meaning specified in the
Indenture.
"Noteholder" or "Holder" shall have the meaning specified in
the Indenture.
"Notices" shall have the meaning specified in subsection
9.04(a).
"Obligor" shall mean, with respect to any Account, the Person
or Persons obligated to make payments with respect to such Account, including
any guarantor thereof.
"Officer's Certificate" shall have the meaning specified in
the Indenture.
"Opinion of Counsel" shall have the meaning specified in the
Indenture.
"Originators" shall mean those parties listed as the Sellers
in the Receivables Purchase Agreement.
"Overlimit Fees" shall have the meaning specified in the
Credit Agreement applicable to each Account for overlimit fees or similar terms
if such fees are provided for with respect to such Account.
"Owner Trustee" shall mean Wilmington Trust Company, in its
capacity as owner trustee under the Trust Agreement, its successors in interest
and any successor owner trustee under the Trust Agreement.
"Participation Interest Supplement" shall mean a supplement to
this Agreement entered into pursuant to subsection 2.09(a)(ii) or (b) in
connection with the conveyance of Participation Interests to the Trust.
"Participation Interests" shall have the meaning specified in
subsection 2.09(a)(ii).
"Paying Agent" shall have the meaning specified in the
Indenture.
"Periodic Finance Charges" shall have the meaning specified in
the Credit Agreement applicable to each Account for finance charges (due to
periodic rate) or any similar term.
"Person" shall mean any legal person, including any
individual, corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental entity or other entity of similar nature.
"Pool" shall have the meaning specified in the Indenture.
10
"Preferred Stock" shall mean the preferred shares of the
Transferor designated as such, with a par value of $1.00 per share and a
liquidation value of $1.00 per share.
"Principal Receivables" shall mean with respect to any Pool
all Receivables other than Finance Charge and Administrative Receivables or
Defaulted Receivables; provided, however, that after a Discount Option Date,
Principal Receivables on any Date of Processing thereafter shall mean Principal
Receivables as otherwise determined pursuant to this definition minus the amount
of any Discount Option Receivables. Principal Receivables shall also include the
principal portion of Participation Interests as shall be determined pursuant to,
and only if so provided in, the applicable Participation Interest Supplement or
Indenture Supplement for any Series. In calculating the aggregate amount of
Principal Receivables on any day, the amount of Principal Receivables shall be
reduced by the aggregate amount of credit balances in the Accounts on such day.
Any Principal Receivables which the Transferor is unable to transfer as provided
in Section 2.11 shall not be included in calculating the amount of Principal
Receivables.
"Rating Agency" shall have the meaning specified in the
Indenture.
"Rating Agency Condition" shall have the meaning specified in
the Indenture.
"Reassignment" shall have the meaning specified in Section
2.10.
"Receivables" shall mean all amounts shown on the Servicer's
records as amounts payable by Obligors on any Account from time to time,
including amounts payable for Principal Receivables and Finance Charge and
Administrative Receivables. Receivables which become Defaulted Receivables will
cease to be included as Receivables as of the day on which they become Defaulted
Receivables. Receivables, where applicable, shall include also the interest and
principal portion of Participation Interests.
"Receivables Purchase Agreement" shall mean the Receivables
Purchase Agreement, dated as of September 30, 2002, between the Originators and
the Transferor, as amended from time to time, and includes any other receivables
purchase agreement, substantially in the form of such agreement entered into
between the Transferor and an Account Owner or other affiliated entity in the
future.
"Recoveries" shall mean all amounts received (net of
out-of-pocket costs of collection) including Insurance Proceeds, which is
reasonably estimated by the Servicer to be attributable to Defaulted
Receivables, including the net proceeds of any sale of such Defaulted
Receivables by the Transferor.
"Registered Notes" shall have the meaning specified in the
Indenture.
"Reinvestment Event" shall have the meaning specified in the
Indenture.
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"Related Account" shall mean an Account with respect to which
a new account number has been issued by the applicable Account Owner or Servicer
or the applicable Transferor under circumstances resulting from a lost or stolen
account number, and not requiring standard application and credit evaluation
procedures under the Credit Guidelines.
"Removal Date" shall have the meaning specified in Section
2.10.
"Removed Accounts" shall have the meaning specified in Section
2.10.
"Required Delivery Date" shall have the meaning specified in
subsection 2.01(c).
"Required Designation Date" shall have the meaning specified
in subsection 2.09(a).
"Required Minimum Principal Balance" shall mean, unless
otherwise provided in an Indenture Supplement relating to a Series having a
Paired Series, with respect to any date and any Pool (a) the sum of the Series
Adjusted Invested Amounts for each Series outstanding on such date in such Pool
plus the Required Transferor Amount on such date, minus (b) the Special Funding
Amount.
"Required Transferor Amount" shall have the meaning specified
in the Indenture.
"Requirements of Law" shall mean any law, treaty, rule or
regulation, or determination of an arbitrator or Governmental Authority, whether
Federal, state or local (including usury laws, the Federal Truth in Lending Act
and Regulation B and Regulation Z of the Board of Governors of the Federal
Reserve System), and, when used with respect to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person.
"Revolving Credit Agreement" shall mean the revolving credit
agreement by and between the Transferor and Household Finance Corporation, dated
as of September 30, 2002, as such agreement may be amended from time to time in
accordance therewith, and any substantially similar agreement entered into
between any lender and the Transferor or any Additional Transferor in the future
in accordance with the provisions hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series" shall have the meaning specified in the Indenture.
"Series Account" shall have the meaning specified in the
Indenture.
"Series Adjusted Invested Amount" shall have the meaning
specified in the related Indenture Supplement.
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"Series Enhancement" shall have the meaning specified in the
Indenture.
"Series Enhancer" shall have the meaning specified in the
Indenture.
"Series Portfolio Yield" shall have the meaning specified in
the related Indenture Supplement.
"Service Transfer" shall have the meaning specified in Section
7.01.
"Servicer" shall mean Household Finance Corporation, in its
capacity as Servicer pursuant to this Agreement and, after any Service Transfer,
the Successor Servicer.
"Servicer Default" shall have the meaning specified in Section
7.01.
"Servicing Fee" shall have the meaning specified in Section
3.02.
"Special Funding Account" shall have the meaning specified in
the Indenture.
"Special Funding Amount" shall have the meaning specified in
the Indenture.
"Standard & Poor's" shall mean Standard & Poor's Ratings
Group, or its successor.
"Successor Servicer" shall have the meaning specified in
subsection 7.02(a).
"Supplemental Certificate" shall have the meaning specified in
the Trust Agreement.
"Tax Opinion" shall have the meaning specified in the
Indenture.
"Termination Notice" shall have the meaning specified in
subsection 7.01(d).
"Transfer Agent and Registrar" shall have the meaning
specified in the Indenture.
"Transfer Restriction Event" shall have the meaning specified
in Section 2.11.
"Transferor" shall mean (a) the Company, a wholly owned
special purpose subsidiary of Household Finance Corporation and incorporated in
the State of Delaware, or its successor or permitted assigns under this
Agreement and (b) any Additional Transferor or Transferors. References to "EACH
TRANSFEROR" shall refer to each entity mentioned in the preceding sentence and
references to "THE TRANSFEROR" shall refer to all of such entities.
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"Transferor Amount" shall have the meaning specified in the
Indenture.
"Transferor Certificate" shall have the meaning specified in
the Trust Agreement.
"Transferor Certificates" shall mean, collectively, the
Transferor Certificate and any outstanding Supplemental Certificates.
"Transferred Account" shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in
accordance with the Credit Guidelines and (ii) such account can be traced or
identified as an account into which an Account has been transferred.
"Trust" shall mean the Household Consumer Loan Master Note
Trust I, acting by and through Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee.
"Trust Agreement" shall mean the Trust Agreement relating to
the Trust, dated as of September 30, 2002, between the Company and the Owner
Trustee, as the same may be amended, supplemented or otherwise modified from
time to time.
"Trust Assets" shall have the meaning specified in Section
2.01.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction.
"Zero Balance Account" shall mean an account which, according
to the Servicer's records, has had a balance of zero for a period of time in
accordance with the Credit Guidelines.
Section 1.02. Other Definitional Provisions.
(a) With respect to any Series, all terms used herein and
not otherwise defined herein shall have meanings ascribed to them in the Trust
Agreement, the Indenture or the related Indenture Supplement, as applicable.
(b) All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or
other document made or delivered pursuant hereto or thereto, accounting terms
not defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles or regulatory
accounting principles, as applicable and as in effect on the date of this
Agreement. To the extent that the definitions of accounting terms in this
Agreement or in any such certificate or other document are inconsistent with the
14
meanings of such terms under generally accepted accounting principles or
regulatory accounting principles in the United States, the definitions contained
in this Agreement or in any such certificate or other document shall control.
(d) Any reference to each Rating Agency shall only apply to
any specific rating agency if such rating agency is then rating any Outstanding
Series.
(e) Unless otherwise specified, references to any amount as on
deposit or outstanding on any particular date shall mean such amount at the
close of business on such day.
(f) The words "HEREOF," "HEREIN" and "HEREUNDER" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; references to any
subsection, Section, Schedule or Exhibit are references to subsections,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "INCLUDING" means "INCLUDING WITHOUT LIMITATION."
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Receivables(a). (a) By execution
of this Agreement, each of the Company and, in the case of Additional Accounts,
the Company or, if applicable, any Additional Transferor does hereby transfer,
assign, set over and otherwise convey to the Owner Trustee on behalf of the
Trust, without recourse except as provided herein, all its right, title and
interest in, to and under the Receivables existing at the close of business on
the Initial Cut-Off Date, in the case of Receivables arising in the Initial
Accounts, and on each Additional Cut-Off Date, in the case of Receivables
arising in the Additional Accounts, and in each case thereafter created from
time to time until the termination of the Trust, all Recoveries allocable to the
Trust as provided herein, all monies due or to become due and all amounts
received or receivable with respect thereto and all proceeds (including
"proceeds" as defined in the UCC) thereof. Such property, together with all
monies and other property credited to the Collection Account, the Series
Accounts and the Special Funding Account (including any subaccounts of such
account), the Preferred Stock of the Transferor, the property conveyed to the
Owner Trustee on behalf of the Trust under any Participation Interest Supplement
and the right to receive Recoveries on the Accounts shall constitute the assets
of the Trust (the "TRUST ASSETS"). The foregoing does not constitute and is not
intended to result in the creation or assumption by the Trust, the Owner
Trustee, the Indenture Trustee or any Noteholder of any obligation of the
Originators or other Account Owner or the Transferor, any Additional Transferor,
the Servicer or any other Person in connection with the Accounts or the
Receivables or under any agreement or instrument relating thereto, including any
obligation to Obligors or insurers. The Obligors shall not be notified in
connection with the creation of the Trust of the transfer, assignment, set-over
and conveyance of the Receivables to the Owner Trustee on behalf of the Trust.
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(b) Each Transferor agrees to record and file, at its own
expense, financing statements (and continuation statements when applicable) with
respect to the Receivables conveyed by such Transferor existing on the Initial
Cut-Off Date and thereafter created meeting the requirements of applicable state
law in such manner and in such jurisdictions as are necessary to perfect, and
maintain the perfection of, the transfer and assignment of its interest in such
Receivables to the Owner Trustee on behalf of the Trust, and to deliver a filed
stamped copy of each such financing statement or other evidence of such filing
to the Owner Trustee as soon as practicable after the first Closing Date, in the
case of Receivables arising in the Initial Accounts, and (if any additional
filing is so necessary) as soon as practicable after the applicable Addition
Date, in the case of Receivables arising in Additional Accounts. The Owner
Trustee shall be under no obligation whatsoever to file such financing or
continuation statements or to make any other filing under the UCC in connection
with such transfer and assignment.
(c) Each Transferor further agrees, at its own expense,
on or prior to (A) the first Closing Date, in the case of the Initial Accounts,
(B) the applicable Addition Date, in the case of Additional Accounts specified
in the Receivable Purchase Agreement, and (C) the applicable Removal Date, in
the case of Removed Accounts specified in the Receivable Purchase Agreement, (i)
to indicate or cause to be indicated in the appropriate computer files that
Receivables created (or reassigned, in the case of Removed Accounts) in
connection with the Accounts have been conveyed to the Owner Trustee on behalf
of the Trust pursuant to this Agreement (or conveyed to each such Transferor or
its designee in accordance with Section 2.10, in the case of Removed Accounts)
by including (or deleting in the case of Removed Accounts) in such computer
files the code that identifies each such Account and (ii) on or prior to (A) the
date that is five Business Days after the Closing Date, in the case of the
Initial Accounts, (B) the date that is five Business Days after the applicable
Addition Date, in the case of designation of Aggregate Addition Accounts, (C)
the Distribution Date on which the Opinion of Counsel is required to be
delivered with respect to the Due Period which includes the applicable Addition
Date, in the case of New Accounts, and (D) the date that is five Business Days
after the applicable Removal Date, in the case of Removed Accounts (any of (A),
(B), (C) or (D), the "Required Delivery Date"), to deliver to the Owner Trustee
a computer file or microfiche list containing a true and complete list of all
such Accounts specifying for each such Account, as of the Initial Cut-Off Date,
in the case of the Initial Accounts, the applicable Additional Cut-Off Date in
the case of Additional Accounts, and the applicable Removal Date in the case of
Removed Accounts, (1) its account number, (2) the aggregate amount outstanding
in such Account, and (3) the aggregate amount of Principal Receivables
outstanding in such Account. Each such file or list, as supplemented, from time
to time, to reflect Additional Accounts and Removed Accounts, shall be marked as
SCHEDULE 1 to this Agreement and is hereby incorporated into and made a part of
this Agreement. Each Transferor further agrees not to alter the code referenced
in this paragraph with respect to any Account during the term of this Agreement
unless and until such Account becomes a Removed Account.
(d) It is the intention of the parties hereto that the
arrangements with respect to the Receivables should constitute a purchase and
sale of such Receivables and not a loan. If the arrangements, however, with
respect to the Receivables hereunder shall
16
be determined to constitute a loan and not a purchase and sale of such
Receivables, it is the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law, and that each Transferor
shall be deemed to have granted and does hereby grant to the Owner Trustee on
behalf of the Trust a first priority perfected security interest in all of such
Transferor's right, title and interest, whether now owned or hereafter acquired,
in, to and under the Receivables and the other Trust Assets conveyed by such
Transferor to secure its obligations hereunder.'
(e) The Transferor does hereby assign to the Issuer any
and all rights of the Transferor pursuant to Section 2.01(f) and (g) of the
Receivables Purchase Agreement, including, without limitation, the powers of
attorney described therein and the rights to exercise such powers of attorney.
The Transferor does hereby grant to the Issuer an irrevocable power of attorney
to transfer legal title to the mortgages and deeds of trust relating to the
Purchased Assets to the Issuer or its assigns from time to time and to the
extent as may be determined in its sole discretion. Such power of attorney is a
power coupled with an interest and may be assigned to, and exercised by, any
assignee of the Issuer or subsequent assignee of such Purchased Assets, or
portion thereof.
Section 2.02. Acceptance by Owner Trustee(a). (a) The Owner
Trustee hereby acknowledges its acceptance on behalf of the Trust of all right,
title and interest to the property, now existing and hereafter created and
conveyed pursuant to Section 2.01. The Owner Trustee further acknowledges that,
within five Business Days of the execution and delivery of this Agreement, the
Transferor delivered to the Owner Trustee the computer file or microfiche list
relating to the Initial Accounts described in subsection 2.01(c). The Owner
Trustee shall maintain a copy of SCHEDULE 1, as delivered from time to time, at
the Corporate Trust Office.
(b) The Owner Trustee hereby agrees not to disclose to
any Person any of the account numbers or other information contained in the
computer files or microfiche lists marked as SCHEDULE 1 and delivered to the
Owner Trustee, from time to time, except (i) to a Successor Servicer or as
required by a Requirement of Law applicable to the Owner Trustee, (ii) in
connection with the performance of the Owner Trustee's duties hereunder, (iii)
to the Indenture Trustee in connection with its duties in enforcing the rights
of Noteholders or (iv) to bona fide creditors or potential creditors of any
Account Owner, any Originator or any Transferor for the limited purpose of
enabling any such creditor to identify Receivables or Accounts subject to this
Agreement or the Receivables Purchase Agreement. The Owner Trustee agrees to
take such measures as shall be reasonably requested by any Transferor to protect
and maintain the security and confidentiality of such information and, in
connection therewith, shall allow each Transferor or its duly authorized
representatives to inspect the Owner Trustee's security and confidentiality
arrangements as they specifically relate to the administration of the Trust from
time to time during normal business hours upon prior written notice. The Owner
Trustee shall provide the applicable Transferor with notice five Business Days
prior to disclosure of any information of the type described in this subsection
2.02(b).
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(c) The Owner Trustee shall have no power to create,
assume or incur indebtedness or other liabilities in the name of the Trust other
than as contemplated in this Agreement and the Indenture.
Section 2.03. Representations and Warranties of Each
Transferor Relating to Such Transferor. Each Transferor hereby severally
represents and warrants to the Owner Trustee and the Trust (and agrees that the
Indenture Trustee may conclusively rely on each such representation and warranty
in authenticating the Notes) as of each Closing Date (but only if it was a
Transferor on such date) that:
(a) Organization and Good Standing. Such Transferor is a
corporation validly existing under the laws of the jurisdiction of its
organization or incorporation and has, in all material respects, full power and
authority to own its properties and conduct its business as presently owned or
conducted, and to execute, deliver and perform its obligations under this
Agreement, any Receivables Purchase Agreement to which it is a party and each
applicable Participation Interest Supplement.
(b) Due Qualification. Such Transferor is duly qualified
to do business and is in good standing as a foreign corporation and has obtained
all necessary licenses and approvals, in each jurisdiction in which failure to
so qualify or to obtain such licenses and approvals would (i) render any Credit
Agreement relating to an Account specified in the applicable Receivables
Purchase Agreement with such Transferor or any Receivable conveyed to the Trust
by such Transferor unenforceable by such Transferor or the Trust or (ii) have a
material adverse effect on the Noteholders.
(c) Due Authorization. The execution and delivery of this
Agreement, the applicable Receivables Purchase Agreement and each applicable
Participation Interest Supplement by such Transferor and the order to the Owner
Trustee to have the Notes authenticated and delivered and the consummation by
such Transferor of the transactions provided for in this Agreement, the
applicable Receivables Purchase Agreement and each applicable Participation
Interest Supplement have been duly authorized by such Transferor by all
necessary corporate action on the part of such Transferor.
(d) No Conflict. The execution and delivery by such
Transferor of this Agreement, the applicable Receivables Purchase Agreement and
each applicable Participation Interest Supplement, and the performance of the
transactions contemplated by this Agreement, the applicable Receivables Purchase
Agreement and each applicable Participation Interest Supplement and the
fulfillment of the terms hereof and thereof applicable to such Transferor, will
not conflict with or violate any Requirements of Law applicable to such
Transferor or conflict with, result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or lapse of time or
both) a material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which such Transferor is a party or by
which it or its properties are bound.
(e) No Proceedings. There are no proceedings or
investigations, pending or, to the best knowledge of such Transferor, threatened
against such Transferor
18
before any Governmental Authority (i) asserting the invalidity of this
Agreement, the applicable Receivables Purchase Agreement or any applicable
Participation Interest Supplement, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement, the applicable
Receivables Purchase Agreement or any applicable Participation Interest
Supplement, (iii) seeking any determination or ruling that, in the reasonable
judgment of such Transferor, would materially and adversely affect the
performance by such Transferor of its obligations under this Agreement, the
applicable Receivables Purchase Agreement or any applicable Participation
Interest Supplement, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement, the applicable Receivables Purchase Agreement or any applicable
Participation Interest Supplement or (v) seeking to affect adversely the income
or franchise tax attributes of the Trust under the United States Federal or any
State income or franchise tax systems.
(f) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental Authority
required to be obtained, effected or given by such Transferor in connection with
the execution and delivery by such Transferor of this Agreement, the applicable
Receivables Purchase Agreement and each applicable Participation Interest
Supplement and the performance of the transactions contemplated by this
Agreement, the applicable Receivables Purchase Agreement and each applicable
Participation Interest Supplement by such Transferor have been duly obtained,
effected or given and are in full force and effect.
Section 2.04. Representations and Warranties of each
Transferor Relating to the Agreement and Any Participation Interest Supplement
and the Receivables.
(a) Representations and Warranties. Each Transferor
hereby severally represents and warrants to the Owner Trustee and the Trust as
of the Initial Issuance Date, each Closing Date and, with respect to Additional
Accounts, as of the related Addition Date (but only if, in either case, it was a
Transferor on such date and only with respect to Accounts it has designated on
such date and Receivables arising therein) that:
(i) this Agreement, the applicable Receivables
Purchase Agreement, each applicable Participation Interest Supplement
and, in the case of Additional Accounts, the related Assignment, each
constitutes a legal, valid and binding obligation of such Transferor
enforceable against such Transferor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally from time to time in effect or general
principles of equity;
(ii) as of the Initial Cut-Off Date with respect
to the Initial Accounts and as of the related Additional Cut-Off Date
with respect to Additional Accounts, the portion of SCHEDULE 1 to this
Agreement under such Transferor's name, as supplemented to such date,
is, or will be on the Required Delivery Date in the case of Additional
Accounts, an accurate and complete listing in all material respects of
all the Accounts the Receivables in which were transferred by
19
such Transferor on the first Closing Date or the Addition Date, as the
case may be, and the information contained therein with respect to the
identity of such Accounts and the Receivables existing thereunder is,
or will be on the Required Delivery Date in the case of Additional
Accounts, true and correct in all material respects as of the Initial
Cut-Off Date or such Additional Cut-Off Date, as the case may be;
(iii) on the date each Receivable is conveyed to
the Trust by such Transferor, such Receivable has been conveyed to the
Trust free and clear of any Lien;
(iv) all authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by such Transferor
in connection with the conveyance by such Transferor of Receivables to
the Trust have been duly obtained, effected or given and are in full
force and effect;
(v) either this Agreement or, in the case of
Additional Accounts, the related Assignment constitutes a valid sale,
transfer and assignment to the Trust of all right, title and interest
of such Transferor in the Receivables conveyed to the Trust by such
Transferor and the proceeds thereof and Recoveries identified as
relating to the Receivables conveyed to the Trust by such Transferor
which have become Defaulted Receivables or, if this Agreement or, in
the case of Additional Accounts, the related Assignment does not
constitute a sale of such property, it constitutes a grant of a first
priority perfected "security interest" (as defined in the UCC) in such
property to the Trust, which, in the case of existing Receivables and
the proceeds thereof and said Recoveries, is enforceable upon execution
and delivery of this Agreement, or, with respect to then existing
Receivables in Additional Accounts, as of the applicable Addition Date,
and which will be enforceable with respect to such Receivables
hereafter and thereafter created and the proceeds thereof upon such
creation. Upon the filing of the financing statements and, in the case
of Receivables hereafter created and the proceeds thereof, upon the
creation thereof, the Trust shall have a first priority perfected
security or ownership interest in such property and proceeds;
(vi) on the Initial Cut-Off Date, each Initial
Account specified in SCHEDULE 1 with respect to such Transferor is an
Eligible Account and, on the applicable Additional Cut-Off Date, each
related Additional Account specified in SCHEDULE 1 with respect to such
Transferor is an Eligible Account;
(vii) on the Initial Cut-Off Date, each Receivable
then existing and conveyed to the Trust by such Transferor is an
Eligible Receivable and, on the applicable Additional Cut-Off Date,
each Receivable contained in the related Additional Accounts and
conveyed to the Trust by such Transferor is an Eligible Receivable;
20
(viii) as of the date of the creation of any new
Receivable in an Account specified in the applicable Receivables
Purchase Agreement, such Receivable is an Eligible Receivable;
(ix) no selection procedures believed by such
Transferor to be materially adverse to the interests of the Noteholders
have been used in selecting such Accounts; and
(x) each of the Initial Accounts and Additional
Accounts is a consumer loan account.
(b) Notice of Breach. The representations and warranties
set forth in Section 2.03, this Section 2.04 and subsection 2.09(f) shall
survive the transfers and assignments of the Receivables to the Trust, the
pledge of the Receivables to the Indenture Trustee pursuant to the Indenture,
and the issuance of the Notes. Upon discovery by any Transferor, the Servicer or
the Owner Trustee of a breach of any of the representations and warranties set
forth in Section 2.03, this Section 2.04 or subsection 2.09(f), the party
discovering such breach shall give notice to the other parties, the Indenture
Trustee and each Controlling Entity within three Business Days following such
discovery, provided that the failure to give notice within three Business Days
does not preclude subsequent notice.
Section 2.05. Reassignment of Ineligible Receivables.
(a) Reassignment of Receivables. In the event any
representation or warranty contained in subsection 2.04(a)(ii), (iii), (iv),
(vi), (vii), (viii) or (ix) is not true and correct in any material respect as
of the date specified therein with respect to any Receivable or the related
Account and such breach has a material adverse effect on any Receivable or the
Trust's interest in any Receivable (which determination shall be made without
regard to whether funds are then available pursuant to any Series Enhancement)
unless cured within 60 days (or such longer period, not in excess of 120 days,
as may be agreed to by the Indenture Trustee and the Servicer) after the earlier
to occur of the discovery thereof by the Transferor which conveyed such
Receivables to the Trust or receipt by the Transferor of written notice thereof
given by the Owner Trustee, the Indenture Trustee or the Servicer, then such
Transferor shall accept reassignment of all Receivables in the related Account
("INELIGIBLE RECEIVABLES") on the terms and conditions set forth in paragraph
(b) below.
(b) Price of Reassignment. The Servicer shall deduct the
portion of such Ineligible Receivables reassigned to each Transferor which are
Principal Receivables from the aggregate amount of the Principal Receivables
used to calculate the Transferor Amount. In the event that, following the
exclusion of such Principal Receivables from the calculation of the Transferor
Amount, the Transferor Amount would be less than the Required Transferor Amount,
not later than 1:00 P.M., New York City time, on the first Distribution Date
following the Due Period in which such reassignment obligation arises, the
applicable Transferor shall make a deposit into the Special Funding Account in
immediately available funds in an amount equal to the
21
amount by which the Transferor Amount would be below the Required Transferor
Amount (up to the amount of such Principal Receivables).
Upon reassignment of any Ineligible Receivable, the Trust
shall automatically and without further action be deemed to transfer, assign,
set over and otherwise convey to the applicable Transferor or its designee,
without recourse, representation or warranty, all the right, title and interest
of the Owner Trustee and the Trust in and to such Ineligible Receivable, all
Recoveries related thereto, all monies and amounts due or to become due and all
proceeds thereof and such reassigned Ineligible Receivable shall be treated by
the Owner Trustee and the Trust as collected in full as of the date on which it
was transferred. The obligation of each Transferor to accept reassignment of any
Ineligible Receivables conveyed to the Trust by such Transferor, and to make the
deposits, if any, required to be made to the Special Funding Account as provided
in this Section, shall constitute the sole remedy respecting the event giving
rise to such obligation available to Noteholders (or the Indenture Trustee on
behalf of the Noteholders) or any Series Enhancer. Notwithstanding any other
provision of this subsection 2.05(b), a reassignment of an Ineligible Receivable
in excess of the amount that would cause the Transferor Amount to be less than
the Required Transferor Amount shall not occur if the applicable Transferor
fails to make any deposit required by this subsection 2.05(b) with respect to
such Ineligible Receivable. The Owner Trustee shall execute such documents and
instruments of transfer or assignment and take such other actions as shall
reasonably be requested and provided by the applicable Transferor to effect the
conveyance of such Ineligible Receivables pursuant to this subsection 2.05(b),
but only upon receipt of an Officer's Certificate from such Transferor that
states that all conditions set forth in this Section 2.05 have been satisfied.
Section 2.06. Reassignment of Trust Portfolio. In the event
any representation or warranty of a Transferor set forth in subsection 2.03(a)
or (c) or subsection 2.04(a)(i) or (v) is not true and correct in any material
respect and such breach has a material adverse effect on the Receivables or
Participation Interests conveyed to the Trust by such Transferor or the
availability of the proceeds thereof to the Trust (which determination shall be
made without regard to whether funds are then available pursuant to any Series
Enhancement), then either the Owner Trustee, the Indenture Trustee or the
Holders of Notes evidencing not less than 50% of the aggregate unpaid principal
amount of all Outstanding Notes, by notice then given to such Transferor and the
Servicer (and to the Owner Trustee and Indenture Trustee if given by the
Noteholders), may direct such Transferor to accept a reassignment of the
Receivables and any Participation Interests conveyed to the Trust by such
Transferor if such breach and any material adverse effect caused by such breach
is not cured within 60 days of such notice (or within such longer period, not in
excess of 120 days, as may be specified in such notice), and upon those
conditions such Transferor shall be obligated to accept such reassignment on the
terms set forth below; provided, however, that such Receivables and
Participation Interests will not be reassigned to such Transferor if, on any day
prior to the end of such 60-day or longer period (i) the relevant representation
and warranty shall be true and correct in all material respects as if made on
such day and (ii) such Transferor shall have delivered to the Owner Trustee a
certificate of an authorized officer describing the nature of such
22
breach and the manner in which the relevant representation and warranty has
become true and correct.
The applicable Transferor shall deposit in the Collection
Account in immediately available funds not later than 1:00 P.M., New York City
time, on the first Distribution Date following the Due Period in which such
reassignment obligation arises, in payment for such reassignment, an amount
equal to the sum of the amounts specified therefor with respect to each
Outstanding Series in the related Indenture Supplement. Notwithstanding anything
to the contrary in this Agreement, such amounts shall be distributed to the
Noteholders on such Distribution Date in accordance with the terms of each
Indenture Supplement. If the Owner Trustee or the Indenture Trustee gives notice
directing the applicable Transferor to accept a reassignment of the Receivables
and Participation Interests as provided above, the obligation of such Transferor
to accept such reassignment pursuant to this Section 2.06 and to make the
deposit required to be made to the Collection Account as provided in this
paragraph shall constitute the sole remedy respecting an event of the type
specified in the first sentence of this Section 2.06 available to the
Noteholders (or the Indenture Trustee on behalf of the Noteholders) or any
Series Enhancer. Upon reassignment of the Receivables and Participation
Interests on such Distribution Date, the Trust shall automatically and without
further action be deemed to transfer, assign, set over and otherwise convey to
the applicable Transferor, without recourse, representation or warranty, all of
the right, title and interest of the Owner Trustee and the Trust in and to the
Receivables and Participation Interests, all Recoveries allocable to the Trust,
all monies and amounts due or to become due with respect thereto and all
proceeds thereof. The Owner Trustee shall execute such documents and instruments
of transfer or assignment and take such other actions as shall reasonably be
requested by the applicable Transferor to effect the conveyance of such property
pursuant to this subsection.
Section 2.07. Covenants of each Transferor. Each Transferor
hereby severally covenants that:
(a) Security Interests. Except for the conveyances
hereunder, such Transferor will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on,
any Receivable or Participation Interest conveyed by it to the Trust, whether
now existing or hereafter created, or any interest therein, and such Transferor
shall defend the right, title and interest of the Trust and the Indenture
Trustee in, to and under the Receivables and any Participation Interest, whether
now existing or hereafter created, against all claims of third parties claiming
through or under such Transferor.
(b) Transferor Amount. Except for (i) the conveyances
hereunder, in connection with any transaction permitted by subsection 4.02(a)(i)
and as provided in subsection 2.09(g) of this Agreement or Section 2.12 of the
Indenture or (ii) conveyances with respect to which the Rating Agency Condition
shall have been satisfied and a Tax Opinion shall have been delivered, such
Transferor agrees not to transfer, sell, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in the Transferor
Amount, the Transferor Certificate or any Supplemental
23
Certificate or the Transferor's interest in the Trust and any such attempted
transfer, assignment, exchange, conveyance, pledge, hypothecation, grant or sale
shall be void; provided, however, that nothing in this subsection 2.07(b) shall
prevent the owner of an interest in the Transferor Amount from granting to an
Affiliate a participation interest or other beneficial interest in the rights to
receive cash flows related to the Transferor Amount, if (i) such interest does
not grant such Affiliate any rights hereunder or delegate to such Affiliate any
obligations or duties hereunder, (ii) the transferor of such interest obtains
the prior written consent of such Transferor and (iii) after giving effect to
such transfer, the interest in the Transferor Amount owned directly by such
Transferor represents an undivided ownership interest in one percent (1.0%) or
more of the Trust Assets.
(c) Delivery of Collections or Recoveries. In the event
that such Transferor receives Collections or Recoveries, such Transferor agrees
to pay the Servicer all such Collections and Recoveries as soon as practicable
after receipt thereof.
(d) Notice of Liens. Such Transferor shall notify the
Owner Trustee, the Indenture Trustee and each Series Enhancer promptly after
becoming aware of any Lien on any Receivable or Participation Interest conveyed
by it to the Trust other than the conveyances hereunder and under the applicable
Receivables Purchase Agreement and the Indenture.
(e) Amendment of the Certificate of Incorporation. Such
Transferor will not amend in any material respect its certificate of
incorporation without providing the Rating Agency with notice no later than the
fifth Business Day prior to such amendment (unless the right to such notice is
waived by the Rating Agency) and satisfying the Rating Agency Condition.
(f) Other Indebtedness. Such Transferor shall not incur
any additional debt, unless (i) such debt is incurred pursuant to the Revolving
Credit Agreement or (ii) the Rating Agency and each Controlling Entity is
provided with notice no later than the fifth Business Day prior to the
incurrence of such additional debt (unless the right to such notice is waived by
the Rating Agency and each Controlling Entity) and the Rating Agency Condition
is satisfied with respect to the incurrence of such debt.
Section 2.08. Covenants of each Transferor with Respect to
Receivables Purchase Agreement. Each Transferor, in its capacity as purchaser of
Receivables from the Originators or another Account Owner pursuant to a
Receivables Purchase Agreement, hereby covenants that such Transferor will at
all times enforce the covenants and agreements of the Originators or such other
Account Owner in such Receivables Purchase Agreement to the extent applicable,
including covenants substantially to the effect set forth below:
(a) Periodic Finance Charges. Except (i) as otherwise
required by any Requirements of Law or (ii) as is deemed by an Originator or any
other Account Owner, as the case may be, to be necessary in order for it to
maintain its credit business or a program operated by such credit business on a
competitive basis based on a good faith
24
assessment by it of the nature of the competition with respect to the credit
business or such program, it shall not at any time take any action which would
have the effect of reducing the Series Portfolio Yield to a level that could be
reasonably expected to result in an Adverse Effect with respect to any Series
based on the insufficiency of the Series Portfolio Yield or any similar test.
(b) Credit Agreements and Guidelines. Subject to
compliance with all Requirements of Law and paragraph (a) above, the Servicer or
an Originator (or other Account Owner if such Originator is not the Account
Owner) may change the terms and provisions of the applicable Credit Agreements
or the applicable Credit Guidelines of the Servicer or such Originator (or other
Account Owner if such Originator is not the Account Owner) in any respect
(including the calculation of the amount or the timing of charge-offs and the
Periodic Finance Charges to be assessed thereon). Notwithstanding the above,
unless required by Requirements of Law or as permitted by paragraph (a) above,
the Servicer or an Originator (or other Account Owner if such Originator is not
the Account Owner) will not take any action unless (i) at the time of such
action, the Servicer or such Originator (or other Account Owner if such
Originator is not the Account Owner) reasonably believes that such action will
not cause an Adverse Effect, and (ii) such change is made applicable to the
comparable segment of the consumer loan accounts owned by such Originator (or
other Account Owner if such Originator is not the Account Owner) or serviced by
the Servicer which have characteristics the same as, or substantially similar
to, the Accounts that are the subject of such change, except as otherwise
restricted by an endorsement, sponsorship, or other agreement between such
Originator (or other Account Owner if such Originator is not the Account Owner)
and an unrelated third party or by the terms of the Credit Agreements.
Section 2.09. Addition of Accounts.
(a) Required Aggregate Additions.
(i) Required Additional Accounts. If, as of the
close of business on the last Business Day of any calendar month, the
aggregate amount of the Principal Receivables is less than the Required
Minimum Principal Balance (as adjusted for any Series having a Paired
Series as described in the Indenture Supplement for such Series) on
such date, the Transferor shall on or prior to the close of business on
the last Business Day of the next succeeding Due Period (the "REQUIRED
DESIGNATION DATE"), unless the aggregate amount of the Principal
Receivables exceeds the Required Minimum Principal Balance as of the
close of business on any day after the last Business Day of such
calendar month and prior to the Required Designation Date, effect the
addition of Eligible Accounts to be included as Accounts as of the
Required Designation Date or any earlier date in a sufficient amount
(or such lesser amount as shall represent all Eligible Accounts
constituting consumer loan accounts then available to the Transferor
under the Receivables Purchase Agreement) such that, after giving
effect to such addition and the addition by each other Transferor, the
aggregate amount of the Principal Receivables is at least equal to the
Required Minimum Principal Balance on such date.
25
(ii) Optional Participation Interests. In lieu
of, or in addition to, causing the designation of Additional Accounts
pursuant to clause (i) above, the Transferor may (but shall not be
required), subject to the conditions specified in paragraph (c) below,
convey to the Trust participations (including 100% participations)
representing undivided interests in a pool of assets primarily
consisting of consumer loan receivables and any interests in any of the
foregoing, including securities representing or backed by such
receivables and collections, together with all earnings, revenue,
dividends, distributions, income, issues and profits thereon
("PARTICIPATION INTERESTS"). The addition of Participation Interests in
the Trust pursuant to this paragraph (a) or paragraph (b) below shall
be effected by a Participation Interest Supplement, dated the
applicable Addition Date.
(iii) Any Additional Accounts or Participation
Interests designated to be included as Trust Assets pursuant to clauses
(i) or (ii) above may only be so included if the applicable conditions
specified in paragraph (c) below have been satisfied.
(b) Permitted Aggregate Additions. Each Transferor may
from time to time, in its sole discretion, subject to the conditions specified
in paragraph (c) below, voluntarily cause the designation of additional Eligible
Accounts to be included as Accounts or Participation Interests to be included as
Trust Assets, in either case as of the applicable Addition Date.
(c) Conditions to Aggregate Additions. On the Addition
Date with respect to any Aggregate Additions, the Trust shall acquire the
Receivables in such Aggregate Addition Accounts (and such Aggregate Addition
Accounts shall be deemed to be Accounts for purposes of this Agreement) or shall
acquire such Participation Interests existing as of the close of business on the
applicable Additional Cut-Off Date, subject to the satisfaction of the following
conditions:
(i) on or before the fifth Business Day
immediately preceding the Addition Date, the applicable Transferor
shall have given the Owner Trustee, the Indenture Trustee, the
Servicer, each Controlling Entity and each Rating Agency notice (unless
such notice requirement is otherwise waived by the Rating Agency) that
the Aggregate Addition Accounts or Participation Interests will be
included and specifying the applicable Addition Date, the Additional
Cut-Off Date and the Pool or Pools to which such addition will be made;
(ii) as of the applicable Additional Cut-Off
Date, such Aggregate Addition Accounts shall be Eligible Accounts;
(iii) on or before the Required Delivery Date, the
applicable Transferor shall have delivered to the Owner Trustee and the
Indenture Trustee copies of UCC-1 financing statements covering such
Aggregate Addition Accounts or Participation Interests, if necessary to
perfect the Owner Trustee's
26
and the Trust's interest in the Receivables arising therein and a
schedule of such Aggregate Addition Accounts;
(iv) to the extent required by Section 8.04 of
the Indenture, such Transferor shall have deposited in the Collection
Account all Collections with respect to such Aggregate Addition
Accounts or Participation Interests since the Additional Cut-Off Date;
(v) as of each of the Additional Cut-Off Date
and the Addition Date, no Insolvency Event with respect to the related
Originator or any other Account Owner, as applicable, or such
Transferor shall have occurred nor shall the transfer to the Trust of
the Receivables arising in the Aggregate Addition Accounts or of the
Participation Interests have been made in contemplation of the
occurrence thereof;
(vi) solely with respect to Aggregate Additions
designated pursuant to subsection 2.09(b), the Rating Agency Condition
shall have been satisfied;
(vii) such Transferor shall have delivered to the
Owner Trustee, each Controlling Entity and the Indenture Trustee an
Officer's Certificate, dated the Addition Date, confirming, to the
extent applicable, the items set forth in clauses (ii) through (vi)
above;
(viii) the addition to the Trust of the Receivables
arising in the Aggregate Addition Accounts or of the Participation
Interests will not result in an Adverse Effect and, in the case of
Aggregate Additions, such Transferor shall have delivered to the Owner
Trustee, each Controlling Entity and the Indenture Trustee an Officer's
Certificate, dated the Addition Date, stating that such Transferor
reasonably believes that the addition to the Trust of the Receivables
arising in the Aggregate Addition Accounts or of the Participation
Interests will not have an Adverse Effect; and
(ix) such Transferor shall have delivered to the
Owner Trustee, the Indenture Trustee, each Controlling Entity and each
Rating Agency an Opinion of Counsel, dated the Addition Date, in
accordance with subsection 9.02(d)(ii) or (iv), as applicable.
(d) New Accounts. (i) Each Transferor may from time to
time, at its sole discretion, subject to the conditions specified in
paragraph (e) below, voluntarily designate newly originated Eligible
Accounts to be included as New Accounts. For purposes of this
paragraph, Eligible Accounts shall be deemed to include only consumer
loan accounts (a) originated or underwritten by an Originator or any
other Affiliate of the ultimate parent of such Originator and (b) which
are of the same nature as those included as Initial Accounts or which
have previously been included in any Aggregate Addition if the
Assignment related to
27
such Aggregate Addition expressly provides that such type of consumer
loan account is permitted to be designated as a New Account.
(ii) The number of New Accounts designated with
respect to any of the three consecutive Due Periods commencing in
January, April, July and October of each calendar year shall not exceed
15% of the number of Accounts as of the first day of the calendar year
during which such Due Periods commence (or the Initial Cut-Off Date, in
the case of 2002) and the number of New Accounts designated during any
such calendar year shall not exceed 20% of the number of Accounts as of
the first day of such calendar year (or the Initial Cut-Off Date, in
the case of 2002); provided, however, New Accounts may be designated in
excess of such 15% and 20% limitations if the Rating Agency Condition
is satisfied with respect to such designation.
(e) Conditions to Addition of New Accounts. On the
Addition Date with respect to any New Accounts, the Trust shall acquire the
Receivables in such New Accounts (and such New Accounts shall be deemed to be
Accounts for purposes of this Agreement) as of the close of business on the
applicable Addition Date, subject to the satisfaction of the following
conditions:
(i) the New Accounts shall all be Eligible
Accounts;
(ii) on or before the Required Delivery Date, the
applicable Transferor shall have delivered to the Owner Trustee and
Indenture Trustee copies of UCC-1 financing statements covering such
New Accounts, if necessary to perfect the Owner Trustee's, the Trust's
and the Indenture Trustee's interest in the Receivables arising therein
and a schedule of such New Accounts;
(iii) to the extent required by Section 8.04 of
the Indenture, the applicable Transferor shall have deposited in the
Collection Account all Collections with respect to such New Accounts
since the Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date
and the Addition Date, no Insolvency Event with respect to the related
Originator or any other Account Owner, as applicable, or such
Transferor shall have occurred nor shall the transfer to the Trust of
the Receivables arising in the New Accounts have been made in
contemplation of the occurrence thereof;
(v) such Transferor shall have delivered to the
Owner Trustee, each Controlling Entity and the Indenture Trustee an
Officer's Certificate, dated the Addition Date, confirming, to the
extent applicable, the items set forth in clauses (i) through (iv)
above;
(vi) the addition of the Receivables arising in
the New Accounts to the Trust will not result in an Adverse Effect and
such Transferor shall have delivered to the Owner Trustee, each
Controlling Entity and the Indenture Trustee an Officer's Certificate,
dated the Addition Date, stating that
28
such Transferor reasonably believes that the addition to the Trust of
the Receivables arising in the New Accounts will not have an Adverse
Effect;
(vii) with respect to each Distribution Date
following a Due Period ending in March, June, September, and December,
such Transferor shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency, an Opinion of Counsel substantially in
the form of EXHIBIT D-2 with respect to the New Accounts, if any,
included as Accounts during the three consecutive Due Periods ending
prior to such Distribution Date. The opinion delivery requirement set
forth in the immediately preceding sentence may be modified provided
that the Rating Agency Condition is satisfied; and
(viii) on or before the fifth Business Day
preceding the Addition Date, the applicable Transferor shall have given
each Rating Agency notice specifying the Pool or Pools to which such
New Accounts will be added.
(f) Representations and Warranties. Each Transferor
conveying Additional Accounts or Participation Interests hereby represents and
warrants to the Owner Trustee and the Trust, as of the related Addition Date, as
to the matters set forth in clauses (v) and (viii) of subsection 2.09(c) above
and that, in the case of Additional Accounts, the list delivered pursuant to
subsection 2.09(h) is, as of the applicable Additional Cut-Off Date, true and
complete in all material respects.
(g) Additional Transferors. The Transferor may designate
Affiliates of the Transferor to be included as Transferors ("ADDITIONAL
TRANSFERORS") under this Agreement in an amendment hereto pursuant to subsection
9.01(a) and, in connection with such designation, the Transferor shall (i)
surrender the Transferor Certificate to the Owner Trustee in exchange for a
newly issued Transferor Certificate modified to reflect such Additional
Transferor's interest in the Transferor Certificate or (ii) if the Transferor
Certificate is uncertificated, direct the Indenture Trustee to make the
appropriate entries in its books and records to reflect such Additional
Transferor's interest in the Transferor Certificate; provided, however, that
prior to any such designation and exchange the conditions set forth in clauses
(iii) and (v) of subsection 3.06(b) of the Trust Agreement shall have been
satisfied with respect thereto.
(h) Delivery of Documents. In the case of the designation
of Additional Accounts, the Transferor designating such Accounts shall deliver
to the Indenture Trustee and the Owner Trustee (i) the computer file or
microfiche list required to be delivered pursuant to Section 2.01 with respect
to such Additional Accounts on the date such file or list is required to be
delivered pursuant to Section 2.01 (the "DOCUMENT DELIVERY DATE") and (ii) a
duly executed, written Assignment (including an acceptance by the Trust),
substantially in the form of EXHIBIT A (the "ASSIGNMENT"), on the Document
Delivery Date.
29
Section 2.10. Removal of Accounts.
On any day of any Due Period each Transferor shall have the
right to (x) designate Zero Balance Accounts, and randomly chosen removed
accounts from the Trust and (y) require the reassignment to it or its designee
of all the Owner Trustee's and the Trust's right, title and interest in, to and
under the Receivables then existing and thereafter created, all Recoveries
related thereto after the Removal Date, all monies due or to become due and all
amounts received or receivable with respect thereto and all proceeds thereof in
or with respect to the Accounts (the "REMOVED ACCOUNTS") (unless otherwise set
forth in the applicable Indenture Supplement) and designated for removal by the
Transferor, upon satisfaction of the conditions in clauses (a) through (e)
below; provided, however, that the conditions listed in clauses (d) and (e)
below need not be satisfied if the Removed Accounts are Zero Balance Accounts:
(a) on or before the fifth Business Day immediately
preceding the Removal Date, such Transferor shall have given written notice to
the Owner Trustee, the Indenture Trustee, the Servicer, the Rating Agency, and
each Controlling Entity (unless such notice requirement is otherwise waived) of
such removal and specifying the date for removal of the Removed Accounts (the
"REMOVAL DATE");
(b) on or prior to the date that is five Business Days
after the Removal Date, such Transferor shall amend SCHEDULE 1 by delivering to
the Owner Trustee a computer file or microfiche list containing a true and
complete list of the Removed Accounts specifying for each such Account, as of
the Removal Date is given, its account number, the aggregate amount outstanding
in such Account and the aggregate amount of Principal Receivables outstanding in
such Account;
(c) such Transferor shall have represented and warranted,
as of the Removal Date, that the list of Removed Accounts delivered pursuant to
paragraph (b) above, as of the Removal Date, is true and complete in all
material respects;
(d) the Rating Agency Condition shall have been satisfied
with respect to the removal of the Removed Accounts; and
(e) such Transferor shall have delivered to the Owner
Trustee, each Controlling Entity and the Indenture Trustee an Officer's
Certificate, dated the Removal Date, to the effect that such Transferor
reasonably believes that (A) such removal will not have an Adverse Effect and
(B) no selection procedures believed by such Transferor to be materially adverse
to the interests of the Noteholders have been used in selecting the Removed
Accounts.
Upon satisfaction of the above conditions, the Owner Trustee
shall execute and deliver to such Transferor a written reassignment in
substantially the form of EXHIBIT B (the "REASSIGNMENT") and shall, without
further action, be deemed to transfer, assign, set over and otherwise convey to
such Transferor or its designee, effective as of the Removal Date, without
recourse, representation or warranty, all the right, title and interest of the
Owner Trustee and the Trust in and to the Receivables arising in the
30
Removed Accounts, all Recoveries related thereto, all monies due and to become
due and all amounts received or receivable with respect thereto after the
Removal Date and all proceeds thereof and any Insurance Proceeds relating
thereto. The Owner Trustee may conclusively rely on the Officer's Certificate
delivered pursuant to this Section 2.10 and shall have no duty to make inquiries
with regard to the matters set forth therein and shall incur no liability in so
relying.
In addition to the foregoing, on the date when any Receivable
in an Account becomes a Defaulted Receivable, the Trust shall automatically and
without further action or consideration be deemed to transfer, set over and
otherwise convey to the Transferor with respect to such Account, without
recourse, representation or warranty, all right, title and interest of the Owner
Trustee and the Trust in and to the Defaulted Receivables in such Account, all
monies and amounts due or to become due with respect thereto, all proceeds
thereof and any Insurance Proceeds relating thereto; provided, that Recoveries
of such Account shall be applied as provided herein.
Section 2.11. Account Allocations. In the event that any
Transferor is unable for any reason to transfer Receivables to the Trust in
accordance with the provisions of this Agreement, including by reason of the
application of the provisions of Section 6.01 or any order of any Governmental
Authority (a "TRANSFER RESTRICTION EVENT"), then, (a) such Transferor and the
Servicer agree (except as prohibited by any such order) to allocate and pay to
the Trust, after the date of such inability, all Collections, including
Collections of Receivables transferred to the Trust prior to the occurrence of
such Transfer Restriction Event, and all amounts which would have constituted
Collections but for such Transferor's inability to transfer Receivables (up to
an aggregate amount equal to the aggregate outstanding balance as of the date
such Transfer Restriction Event occurred of the Receivables transferred to the
Trust by such Transferor), (b) such Transferor and the Servicer agree that such
amounts will be applied as Collections in accordance with Article VIII of the
Indenture and the terms of each Indenture Supplement and (c) for so long as the
allocation and application of all Collections and all amounts that would have
constituted Collections are made in accordance with clauses (a) and (b) above,
Principal Receivables and all amounts which would have constituted Principal
Receivables but for such Transferor's inability to transfer Receivables to the
Trust, which are charged off as uncollectible in accordance with this Agreement
shall continue to be allocated in accordance with Article VIII of the Indenture
and the terms of each Indenture Supplement. For the purpose of the immediately
preceding sentence, such Transferor and the Servicer shall treat the first
received Collections with respect to the Accounts as allocable to the Trust
until the Trust shall have been allocated and paid Collections in an amount
equal to the aggregate amount of Principal Receivables in the Trust as of the
date of the occurrence of such Transfer Restriction Event. If such Transferor
and the Servicer are unable pursuant to any Requirements of Law to allocate
Collections as described above, such Transferor and the Servicer agree that,
after the occurrence of such Transfer Restriction Event, payments on each
Account with respect to the principal balance of such Account shall be allocated
first to the oldest principal balance of such Account and shall have such
payments applied as Collections in accordance with Article VIII of the Indenture
and the terms of each Indenture Supplement. The parties hereto agree that
Finance Charge and Administrative
31
Receivables, whenever created, accrued in respect of Principal Receivables which
have been conveyed to the Trust shall continue to be a part of the Trust
notwithstanding any cessation of the transfer of additional Principal
Receivables to the Trust and Collections with respect thereto shall continue to
be allocated and paid in accordance with Article VIII of the Indenture and the
terms of each Indenture Supplement.
Section 2.12. Discount Option. (a) The Transferor shall have
the option to designate at any time and from time to time, a percentage or
percentages, which may be a fixed percentage or a variable percentage based on a
formula (the "DISCOUNT PERCENTAGE"), of all or any specified portion of
Principal Receivables existing on and after a Discount Option Date to be treated
as Finance Charge and Administrative Receivables ("DISCOUNT OPTION
RECEIVABLES"). The Transferor shall also have the option of increasing, reducing
or withdrawing the Discount Percentage, at any time and from time to time;
provided that the Discount Percentage shall be reduced or withdrawn on the date
which the Transferor shall deliver to the Indenture Trustee, each Controlling
Entity and the Owner Trustee an Officer's Certificate to the effect that, in the
reasonable belief of the Transferor, the continued discounting of Principal
Receivables would have an adverse regulatory implication with respect to the
Transferor, the related Originator or other Account Owner. The Transferor shall
provide to the Servicer, the Owner Trustee, the Indenture Trustee, each
Controlling Entity and the Rating Agency 30 days' prior written notice of a
Discount Option Date unless so designated on the initial Closing Date and such
designation shall become effective on a Discount Option Date only if, (i) the
Transferor delivers an Officer's Certificate to the Indenture Trustee to the
effect that such designation, in the reasonable belief of the Transferor, would
not cause an Adverse Effect and (ii) the Rating Agency Condition shall have been
satisfied with respect to such designation.
(b) Discount Option Receivable Collections shall be treated as
Collections of Finance Charge and Administrative Receivables.
Section 2.13. Representations and Warranties of the Trust. The
Owner Trustee, acting on behalf of the Trust, hereby represents and warrants on
behalf of the Trust to the Transferor that:
(a) the Trust has been and will be managed in such a
manner that it would not be substantively consolidated in the trust estate of
any Originator in the event of a bankruptcy or insolvency of such Originator;
(b) the Trust is not involved and will not become
involved in the day-to-day management of any Originator;
(c) the Trust has not and will not engage in transactions
with any Originator other than those which have been conducted on an
arm's-length basis;
(d) the Trust has maintained and will maintain its assets
separately from the assets of each Originator (including through the maintenance
of a separate bank account);
32
(e) the Trust will maintain a separate business office
from each Originator;
(f) the Trust has not and will not guarantee the
obligations of, or advance funds to, or accept funds from, any Originator for
the payment of expenses, except by means of capital contributions or pursuant to
contractual documents indicating the consideration for the receipt of such
funds;
(g) the Trust has conducted and will conduct all business
correspondence and other communications in its own name;
(h) the Trust has not and will not act as an agent of any
Originator in any capacity; and
(i) there are no agreements or understandings between any
Originator, Household Finance Corporation, the Transferor and the Trust relevant
to the transfer to the Trust of the Receivables, except as set forth in the
Transaction Documents.
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.01. Acceptance of Appointment and Other Matters
Relating to the Servicer.
(a) Household Finance Corporation agrees to act as the
Servicer under this Agreement and the Noteholders by their acceptance of Notes
consent to Household Finance Corporation acting as Servicer.
(b) As agent for each Transferor, the Owner Trustee and
the Trust, the Servicer shall service and administer the Receivables and any
Participation Interests, shall collect and deposit into the Collection Account
amounts received under the Receivables and any Participation Interests and shall
charge-off as uncollectible Receivables, all in accordance with its customary
and usual servicing procedures for servicing consumer loan receivables
comparable to the Receivables and in accordance with the Credit Guidelines. As
agent for each Transferor, the Owner Trustee and the Trust, the Servicer shall
have full power and authority, acting alone or through any party properly
designated by it hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable; provided,
however, that subject to the rights of the Owner Trustee, the Indenture Trustee,
each Controlling Entity and the Noteholders hereunder, the Company shall have
the absolute right to direct the Servicer with respect to any power conferred on
the Servicer hereunder in accordance with any such direction. Without limiting
the generality of the foregoing and subject to Section 7.01, the Servicer or its
designee is hereby authorized and empowered, unless such power is revoked by the
Indenture Trustee on account of the occurrence of a Servicer Default pursuant to
Section 7.01, (i) to instruct the Owner
33
Trustee or the Indenture Trustee to make withdrawals and payments from the
Collection Account, the Special Funding Account and any Series Account, as set
forth in this Agreement, the Indenture or any Indenture Supplement, (ii) to take
any action required or permitted under any Series Enhancement, as set forth in
this Agreement, the Indenture or any Indenture Supplement, (iii) 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, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable Requirements of Law, to commence collection
proceedings with respect to such Receivables and (iv) to make any filings,
reports, notices, applications and registrations with, and to seek any consents
or authorizations from, the Commission and any state securities authority on
behalf of the Trust as may be necessary or advisable to comply with any Federal
or state securities or reporting requirements or other laws or regulations. Each
of the Owner Trustee and the Indenture Trustee shall furnish the Servicer with
any documents in such Person's possession reasonably necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder.
(c) The Servicer shall not, and no Successor Servicer
shall, be obligated to use separate servicing procedures, offices, employees or
accounts for servicing the Receivables from the procedures, offices, employees
and accounts used by the Servicer or such Successor Servicer, as the case may
be, in connection with servicing other consumer loan receivables.
(d) The Servicer shall comply with and perform its
servicing obligations with respect to the Accounts and Receivables in accordance
with the Credit Agreements relating to the Accounts and the Credit Guidelines
except insofar as any failure to so comply or perform would not materially and
adversely affect the Trust or the Noteholders.
(e) The Servicer shall pay out of its own funds, without
reimbursement, all expenses incurred in connection with the Trust and the
servicing activities hereunder including expenses related to enforcement of the
Receivables, fees and disbursements of the Owner Trustee and the Indenture
Trustee (including the reasonable fees and expenses of its outside counsel) and
independent accountants and all other fees and expenses, including the costs of
filing UCC continuation statements, and the costs and expenses relating to
obtaining and maintaining the listing of any Notes on any stock exchange, where
applicable. The Transferor shall pay out of its own funds, without
reimbursement, the costs and expenses relating to any stamp, documentary,
excise, property (whether on real, personal or intangible property) or any
similar tax levied on the Trust or the Trust's assets that are not expressly
stated in this Agreement to be payable by the Trust or the Transferor (other
than federal, state, local and foreign income and franchise taxes, if any, or
any interest or penalties with respect thereto, assessed on the Trust).
Section 3.02. Servicing Compensation. As full compensation for
its servicing activities hereunder and as reimbursement for any expense incurred
by it in
34
connection therewith, the Servicer shall be entitled to receive a servicing fee
(the "SERVICING FEE") with respect to each Monthly Period, payable monthly on
the related Distribution Date, in an amount equal to one-twelfth of the product
of (a) the weighted average of the Servicing Fee Rates with respect to each
Outstanding Series (based upon the Servicing Fee Rate for each Series) and (b)
the Invested Amount (or such other amount as specified in the related Indenture
Supplement) of such Series, in each case as of the last day of the prior Due
Period prior to the termination of the Trust pursuant to Section 8.01 of the
Trust Agreement. The share of the Servicing Fee allocable to a particular Series
with respect to any Due Period (the "MONTHLY SERVICING FEE") will each be
determined in accordance with the relevant Indenture Supplement. The portion of
the Servicing Fee with respect to any Due Period not so allocated to any
particular Series shall be paid by the Holders of the Transferor Certificates on
the related Distribution Date and in no event shall the Trust, the Owner
Trustee, the Indenture Trustee, the Noteholders of any Series, or any Series
Enhancer be liable for the share of the Servicing Fee with respect to any Due
Period to be paid by the Holders of the Transferor Certificates.
Section 3.03. Representations, Warranties and Covenants of the
Servicer. Household Finance Corporation, as initial Servicer, hereby makes, and
any Successor Servicer by its appointment hereunder shall make, with respect to
itself, on each Closing Date (and on the date of any such appointment), the
following representations, warranties and covenants on which the Owner Trustee
and the Indenture Trustee shall be deemed to have relied in accepting the
Receivables in trust and in entering into the Indenture:
(a) Organization and Good Standing the Servicer is a
corporation validly existing under the laws of the jurisdiction of its
organization or incorporation and has, in all material respects, full
power and authority to own its properties and conduct its credit
servicing business as presently owned or conducted, and to execute,
deliver and perform its obligations under this Agreement;
(b) Due Qualification the Servicer is duly qualified to
do business and is in good standing as a foreign corporation or other
foreign entity (or is exempt from such requirements) and has obtained
all necessary licenses and approvals in each jurisdiction in which the
servicing of the Receivables and any Participation Interests as
required by this Agreement requires such qualification except where the
failure to so qualify or obtain licenses or approvals would not have a
material adverse effect on its ability to perform its obligations as
Servicer under this Agreement;
(c) Due Authorization the execution, delivery, and
performance of this Agreement and the other agreements and instruments
executed or to be executed by the Servicer as contemplated hereby, have
been duly authorized by the Servicer by all necessary action on the
part of the Servicer;
(d) Binding Obligation this Agreement constitutes a
legal, valid and binding obligation of the Servicer, enforceable in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy,
35
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally from time to time in effect or by general
principles of equity;
(e) No Conflict the execution and delivery of this
Agreement by the Servicer, and the performance of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
and thereof applicable to the Servicer, will not conflict with, violate
or result in any breach of any of the material terms and provisions of,
or constitute (with or without notice or lapse of time or both) a
material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which the Servicer is a party or
by which it or its properties are bound;
(f) No Violation the execution and delivery of this
Agreement by the Servicer, the performance of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
and thereof applicable to the Servicer will not conflict with or
violate any Requirements of Law applicable to the Servicer;
(g) No Proceedings there are no proceedings or
investigations pending or, to the best knowledge of the Servicer,
threatened against the Servicer before any Governmental Authority
seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or seeking any determination or ruling
that, in the reasonable judgment of the Servicer, would materially and
adversely affect the performance by the Servicer of its obligations
under this Agreement;
(h) Compliance with Requirements of Law the Servicer
shall duly satisfy all obligations on its part to be fulfilled under or
in connection with each Receivable and the related Account, if any,
will maintain in effect all qualifications required under Requirements
of Law in order to service properly each Receivable and the related
Account, if any, and will comply in all material respects with all
other Requirements of Law in connection with servicing each Receivable
and the related Account the failure to comply with which would have an
Adverse Effect;
(i) No Rescission or Cancellation the Servicer shall not
permit any rescission or cancellation of any Receivable except in
accordance with the Credit Guidelines or as ordered by a court of
competent jurisdiction or other Governmental Authority;
(j) Protection of Rights the Servicer shall take no
action which, nor omit to take any action the omission of which, would
impair the rights of the Trust, the Owner Trustee, the Indenture
Trustee or the Noteholders in any Receivable or the related Account or
any Participation Interest, if any, nor shall it reschedule, revise or
defer payments due on any Receivable except in accordance with the
Credit Guidelines;
36
(k) All Consents all authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Servicer in
connection with the execution and delivery of this Agreement by the
Servicer and the performance of the transactions contemplated by this
Agreement by the Servicer, have been duly obtained, effected or given
and are in full force and effect; and
(l) Changes to Credit Guidelines subject to compliance
with all Requirements of Law, the Servicer may change the terms and
provisions of the applicable Credit Guidelines of the Servicer in any
respect (including the calculation of the amount or the timing of
charge-offs and the Periodic Finance Charges to be assessed thereon).
Notwithstanding the above, unless required by Requirements of Law, the
Servicer will not take any action unless (i) at the time of such
action, the Servicer reasonably believes that such action will not
cause an Amortization Event, Reinvestment Event or Event of Default to
occur, and (ii) such change is made applicable to the comparable
segment of the consumer loan accounts owned by the related Originator
(or other Account Owner if such Originator is not the Account Owner)
which have characteristics the same as, or substantially similar to,
the Accounts that are the subject of such change, except as otherwise
restricted by an endorsement, sponsorship, or other agreement between
such Originator (or other Account Owner if such Originator is not the
Account Owner) and an unrelated third party or by the terms of the
Credit Agreements.
In the event any of the representations, warranties or
covenants of the Servicer contained in subsection 3.03(h), (i) or (j) with
respect to any Receivable or the related Account is breached, and such breach
has a material adverse effect on such Receivable (which determination shall be
made without regard to whether funds are then available to any Noteholders
pursuant to any Series Enhancement) and is not cured within 60 days (or such
longer period, not in excess of 120 days, as may be agreed to by the Indenture
Trustee and the Transferor) of the earlier to occur of the discovery of such
event by the Servicer, or receipt by the Servicer of notice of such event given
by the Indenture Trustee or the Transferor, all Receivables in the Account or
Accounts to which such event relates shall be assigned and transferred to the
Servicer on the terms and conditions set forth below.
The Servicer shall effect such assignment by making a deposit
into the Collection Account in immediately available funds on the Distribution
Date following the Due Period in which such assignment obligation arises in an
amount equal to the amount of such Receivables.
Upon each such reassignment or assignment to the Servicer, the
Trust shall automatically and without further action be deemed to sell,
transfer, assign, set over and otherwise convey to the Servicer, without
recourse, representation or warranty, all right, title and interest of the Owner
Trustee and the Trust in and to such Receivables, all Recoveries related
thereto, all monies due or to become due and all amounts received or receivable
with respect thereto and all proceeds thereof. The Owner Trustee shall
37
execute such documents and instruments of transfer or assignment and take such
other actions as shall be reasonably requested by the Servicer to effect the
conveyance of any such Receivables pursuant to this Section but only upon
receipt of an Officer's Certificate of the Servicer that states that all
conditions set forth in this section have been satisfied. The obligation of the
Servicer to accept reassignment or assignment of such Receivables, and to make
the deposits, if any, required to be made to the Collection Account as provided
in the preceding paragraph, shall constitute the sole remedy respecting the
event giving rise to such obligation available to Noteholders (or the Indenture
Trustee on behalf of Noteholders) or any Series Enhancer, except as provided in
Section 5.04.
Section 3.04. Reports and Records for the Owner Trustee and
the Indenture Trustee.
(a) Daily Records. On each Business Day, the Servicer
shall make or cause to be made available at the office of the Servicer for
inspection by the Owner Trustee and the Indenture Trustee upon request a record
setting forth (i) the Collections in respect of Principal Receivables and in
respect of Finance Charge and Administrative Receivables processed by the
Servicer on the second preceding Business Day in respect of each Account and
(ii) the amount of Receivables as of the close of business on the second
preceding Business Day in each Account. The Servicer shall, at all times,
maintain its computer files with respect to the Accounts in such a manner so
that the Accounts may be specifically identified and shall make available to the
Owner Trustee and the Indenture Trustee at the office of the Servicer on any
Business Day any report necessary to make such identification. The Indenture
Trustee shall be under no obligation to make any inspection related thereto. The
Owner Trustee and the Indenture Trustee shall enter into such reasonable
confidentiality agreements as the Servicer shall deem necessary to protect its
interests and as are reasonably acceptable in form and substance to the Owner
Trustee and the Indenture Trustee.
(b) Monthly Servicer's Certificate. Not later than the
second Business Day preceding each Distribution Date, the Servicer shall, with
respect to each Outstanding Series, deliver to the Owner Trustee, the Indenture
Trustee, each Controlling Entity and each Rating Agency a certificate of an
Authorized Officer in substantially the form set forth in the related Indenture
Supplement.
Section 3.05. Annual Certificate of Servicer. The Servicer
shall deliver to the Owner Trustee, the Indenture Trustee, each Controlling
Entity and each Rating Agency on or before March 31 of each calendar year,
beginning with March 31, 2003, an Officer's Certificate substantially in the
form of EXHIBIT C.
Section 3.06. Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available.
(a) On or before March 31 of each calendar year,
beginning with March 31, 2003, the Servicer shall cause a firm of nationally
recognized independent public accountants (who may also render other services to
the Servicer or the Transferor) to furnish a report (addressed to the Owner
Trustee) to the Owner Trustee, the Indenture
38
Trustee, the Servicer, each Controlling Entity and each Rating Agency to the
effect that they have applied certain procedures agreed upon with the Servicer
and examined certain documents and records relating to the servicing of Accounts
under this Agreement, the Indenture and each Indenture Supplement and that, on
the basis of such agreed-upon procedures, nothing has come to the attention of
such accountants that caused them to believe that the servicing (including the
allocation of Collections) has not been conducted in compliance with the terms
and conditions as set forth in Article III and Section 5.08 of this Agreement
and the applicable provisions of the Indenture and each Indenture 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 set forth
the agreed-upon procedures performed. In the event such firm requires the
Indenture Trustee to agree to the procedures performed by such firm, the
Servicer shall direct the Indenture Trustee in writing to so agree; it being
understood and agreed that the Indenture Trustee will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and the
Indenture Trustee shall not make any independent inquiry or investigation as to,
and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
(b) On or before March 31 of each calendar year,
beginning with March 31, 2003, the Servicer shall cause a firm of nationally
recognized independent public accountants (who may also render other services to
the Servicer or the Transferor) to furnish a report (addressed to the Owner
Trustee) to the Owner Trustee, the Indenture Trustee, the Servicer, each
Controlling Entity and each Rating Agency to the effect that they have applied
certain procedures agreed upon with the Servicer to compare the mathematical
calculations of certain amounts set forth in the Servicer's certificates
delivered pursuant to subsection 3.04(b) during the period covered by such
report with the Servicer's computer reports that were the source of such amounts
and that on the basis of such agreed-upon procedures and 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 set forth the
agreed-upon procedures performed. In the event such firm requires the Indenture
Trustee to agree to the procedures performed by such firm, the Servicer shall
direct the Indenture Trustee in writing to so agree; it being understood and
agreed that the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Indenture
Trustee shall not make any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.
(c) A copy of each certificate and report provided
pursuant to subsection 3.04(b), or Section 3.05 or 3.06 may be obtained by any
Noteholder or Note Owner by a request in writing to the Owner Trustee addressed
to the Corporate Trust Office.
Section 3.07. Tax Treatment. Unless otherwise specified in the
Indenture or an Indenture Supplement with respect to a particular Series, the
Transferor has entered into this Agreement, and the Notes will be issued, with
the intention that, for federal, state and local income and franchise tax
purposes, (i) the Notes of each Series which are
39
characterized as indebtedness at the time of their issuance will qualify as
indebtedness secured by the Receivables and (ii) the Trust shall not be treated
as an association (or publicly traded partnership) taxable as a corporation. The
Transferor, by entering into this Agreement, and each Noteholder, by the
acceptance of any such Note (and each Note Owner, by its acceptance of an
interest in the applicable Note), agree to treat such Notes for federal, state
and local income and franchise tax purposes as indebtedness of the Transferor.
Each Holder of such Note agrees that it will cause any Note Owner acquiring an
interest in a Note through it to comply with this Agreement as to treatment of
such Note as indebtedness under applicable tax law, as described in this Section
3.07. The parties hereto agree that they will not, under any circumstances, and
at any time, make an election on IRS Form 8832 or otherwise, to classify the
Trust as an association taxable as a corporation for federal, state or any other
applicable tax purpose and, except as required by Section 6.13 of the Indenture,
shall not file tax returns or obtain any federal employer identification number
for the Trust but shall treat the Trust as a security device or disregarded
entity for such purposes. The provisions of this Agreement shall be construed in
furtherance of the foregoing intended tax treatment.
Section 3.08. Notices to Household Finance Corporation. In the
event that Household Finance Corporation is no longer acting as Servicer, any
Successor Servicer shall deliver or make available to Household Finance
Corporation each certificate and report required to be provided thereafter
pursuant to subsection 3.04(b) and Sections 3.05 and 3.06.
Section 3.09. Adjustments. (a) If the Servicer adjusts
downward the amount of any Receivable without receiving Collections therefor or
charging off such amount as uncollectible, then, in any such case, the amount of
Principal Receivables used to calculate the Transferor Amount, and (unless
otherwise specified) any other amount required herein or in the Indenture or any
Indenture Supplement to be calculated by reference to the amount of Principal
Receivables, will be reduced by the amount of the adjustment. Any adjustment
required pursuant to the preceding sentence shall be made on or prior to the end
of the Due Period in which such adjustment obligation arises. In the event that,
following the exclusion of such Principal Receivables from the calculation of
the Transferor Amount, the Transferor Amount would be less than the Required
Transferor Amount, not later than 1:00 p.m., New York City time, on the
Distribution Date following the Due Period in which such adjustment obligation
arises, the Transferor shall make a deposit into the Special Funding Account in
immediately available funds in an amount equal to the amount by which the
Transferor Amount would be less than the Required Transferor Amount, due to
adjustments with respect to Receivables conveyed by such Transferor (up to the
amount of such Principal Receivables).
(b) If (i) the Servicer makes a deposit into the
Collection Account in respect of a Collection of a Receivable and such
Collection was received by the Servicer in the form of a check which is not
honored for any reason or (ii) the Servicer makes a mistake with respect to the
amount of any Collection and deposits an amount that is less than or more than
the actual amount of such Collection, the Servicer shall appropriately adjust
the amount subsequently deposited into the Collection Account to reflect such
dishonored check or mistake. Any Receivable in respect of which a dishonored
check is
40
received shall be deemed not to have been paid. Notwithstanding the first two
sentences of this paragraph, adjustments made pursuant to this Section shall not
require any change in any report previously delivered pursuant to subsection
3.04(a).
Section 3.10. Reports to the Commission. The Servicer shall,
on behalf of the Trust, cause to be filed with the Commission any periodic
reports required to be filed under the provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission thereunder.
The Transferor shall, at its own expense, cooperate in any reasonable request of
the Servicer in connection with such filings.
ARTICLE IV
OTHER MATTERS RELATING TO EACH TRANSFEROR
Section 4.01. Liability of each Transferor. Each Transferor
shall be severally, and not jointly, liable for all obligations, covenants,
representations and warranties of such Transferor arising under or related to
this Agreement. Except as provided in the preceding sentence, each Transferor
shall be liable only to the extent of the obligations specifically undertaken by
it in its capacity as a Transferor.
Section 4.02. Merger or Consolidation of, or Assumption of the
Obligations of, a Transferor.
(a) No Transferor shall dissolve, liquidate, consolidate
with or merge into any other corporation or convey, transfer or sell its
properties and assets substantially as an entirety to any Person unless:
(i) (x) the corporation formed by such
consolidation or into which such Transferor is merged or the Person
which acquires by conveyance, transfer or sale the properties and
assets of the Transferor substantially as an entirety shall be, if such
Transferor is not the surviving entity, organized and existing under
the laws of the United States of America or any State or the District
of Columbia, and shall be a savings association, a national banking
association, a bank or other entity which is not eligible to be a
debtor in a case under the Bankruptcy Code or is a special purpose
corporation whose powers and activities are limited to substantially
the same degree as provided in the certificate of incorporation of the
Company and, if such Transferor is not the surviving entity, shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Owner Trustee and the Indenture Trustee, in form
reasonably satisfactory to the Owner Trustee and the Indenture Trustee,
the performance of every covenant and obligation of such Transferor
hereunder; and (y) such Transferor or the surviving entity, as the case
may be, has delivered to the Owner Trustee, the Controlling Entity and
the Indenture Trustee (with a copy to each Rating Agency) an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale and such
supplemental agreement comply with this Section, that such supplemental
41
agreement is a valid and binding obligation of such surviving entity
enforceable against such surviving entity in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally from time to time in effect or general
principles of equity, and that all conditions precedent herein provided
for relating to such transaction have been complied with; and
(ii) the Rating Agency Condition shall have been
satisfied with respect to such consolidation, merger, conveyance or
transfer.
(b) Except as permitted by subsection 2.07(b), the
obligations, rights or any part thereof of each Transferor hereunder shall not
be assignable nor shall any Person succeed to such obligations or rights of any
Transferor hereunder except (i) for conveyances, mergers, consolidations,
assumptions, sales or transfers in accordance with the provisions of the
foregoing paragraph and (ii) for conveyances, mergers, consolidations,
assumptions, sales or transfers to other entities (1) which such Transferor and
the Servicer determine will not result in an Adverse Effect, (2) which meet the
requirements of clause (ii) of the preceding paragraph and (3) for which such
purchaser, transferee, pledgee or entity shall expressly assume, in an agreement
supplemental hereto, executed and delivered to the Owner Trustee and the
Indenture Trustee in writing in form satisfactory to the Owner Trustee and the
Indenture Trustee, the performance of every covenant and obligation of such
Transferor thereby conveyed.
Section 4.03. Limitations on Liability of Each Transferor.
Subject to Section 4.01, no Transferor nor any of the directors, officers,
employees, incorporators or agents of any Transferor acting in such capacities
shall be under any liability to the Trust, the Owner Trustee, the Indenture
Trustee, the Noteholders, any Series Enhancer, any other Transferor 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, it being expressly
understood that such liability is expressly waived and released as a condition
of, and consideration for, the execution of this Agreement, the Indenture and
any Indenture Supplement and the issuance of the Notes; provided, however, that
this provision shall not protect any Transferor or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. Each Transferor and any director,
officer, employee or agent of such Transferor may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than such Transferor) respecting any matters arising hereunder.
Section 4.04. Assumption of the Transferor Obligations.
Notwithstanding the provisions of Section 4.02, each Transferor may assign,
convey and transfer its interests in the Transferor Amount, which may include
all, but not less than all, of the Transferor's interest in the Transaction
Documents and its remaining interest in the Accounts and Receivables
(collectively, the "ASSIGNED ASSETS"), together with all servicing functions and
other obligations under this Agreement or relating to the
42
transactions contemplated hereby (collectively, the "ASSUMED OBLIGATIONS"), to
other entities (such entity or entities, the "ASSUMING ENTITY"), which may be
entities that are not affiliated with such Transferor, and such Transferor may
assign, convey and transfer the Assigned Assets and the Assumed Obligations to
such Assuming Entity, without the consent or approval of the Holders of the
Notes, upon satisfaction of the following conditions:
(a) such Assuming Entity, such Transferor and the Trust
shall have entered into an assumption agreement (the "ASSUMPTION
AGREEMENT") providing for the Assuming Entity to assume the Assumed
Obligations, including the obligation under this Agreement to transfer
the Receivables arising under the Accounts to the Trust, and such
Transferor shall have delivered to the Owner Trustee, each Controlling
Entity and the Indenture Trustee an Officer's Certificate and an
Opinion of Counsel each stating that such transfer and assumption
comply with this Section, that such Assumption Agreement is a valid and
binding obligation of such Assuming Entity enforceable against such
Assuming Entity in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or other
similar laws affecting creditors' rights generally or creditors of
national banking associations, from time to time, in effect and except
as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity), and that all
conditions precedent herein provided for relating to such transaction
have been complied with;
(b) such Transferor or such Assuming Entity shall have
delivered to the Owner Trustee and the Indenture Trustee copies of
UCC-1 financing statements covering such Accounts to perfect the Owner
Trustee's and the Trust's interest and the Indenture Trustee's interest
in the Receivables arising herein;
(c) if such Assuming Entity shall be eligible to be a
debtor in a case under the Bankruptcy Code, such Transferor shall have
delivered to each Controlling Entity and the Rating Agency (with a copy
to the Servicer and the Indenture Trustee) notice of such transfer and
assumption, and that each Controlling Entity has given its consent and
each Rating Agency that has rated an Outstanding Series of Notes
confirms in writing that such transfer will not result in a reduction
or withdrawal of its rating of any Class of any Outstanding Series of
Notes and a copy of such written confirmation shall be delivered to the
Owner Trustee, each Controlling Entity and the Indenture Trustee or, if
such Assuming Entity shall not be eligible to be a debtor under the
Bankruptcy Code, such Transferor shall have delivered to the Rating
Agency notice of such transfer and assumption and such notice shall be
delivered to the Owner Trustee and Indenture Trustee;
(d) the Owner Trustee, each Controlling Entity and the
Indenture Trustee shall have received an Opinion of Counsel to the
effect that (i) the transfer of such Receivables by such Assuming
Entity shall constitute either a sale of, or the granting of a security
interest in, such Receivables by such Assuming Entity to
43
the Trust, and (ii) the condition specified in clause (b) shall have
been satisfied, and (iii) if such Assuming Entity shall be subject to
the FDIA, the interest of the Trust in such Receivables should not be
subject to reclamation or recovery by the FDIC if the FDIC were to
become the receiver or conservator of such Assuming Entity; and
(e) the Indenture Trustee shall have received a Tax
Opinion.
Upon any such transfer to and assumption by an Assuming Entity, the Transferor
shall surrender Transferor Certificate to the Transfer Agent and Registrar for
registration of transfer and the Owner Trustee shall issue a new Transferor
Certificate in the name of such Assuming Entity and any non-assigning
Transferor. Notwithstanding such assumption, such assigning Transferor shall
continue to be liable for all representations and warranties and covenants made
by it and all obligations performed or to be performed by it in its capacity as
Transferor prior to such transfer.
Notwithstanding the provisions of this Section 4.04 to the
contrary, any Transferor may transfer, from time to time, Assigned Assets to any
other Transferor upon the satisfaction of subsections (a) and (b), above. Such
Transferor shall promptly provide notice to the Rating Agency indicating the
occurrence of any such transfer.
ARTICLE V
OTHER MATTERS RELATING TO THE SERVICER
Section 5.01. Liability of the Servicer. The Servicer shall be
liable under this Article only to the extent of the obligations specifically
undertaken by the Servicer in its capacity as Servicer.
Section 5.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
into any other corporation or convey, transfer or sell its properties and assets
substantially as an entirety to any Person, unless:
(a) (i) the corporation formed by such consolidation or
into which the Servicer is merged or the Person which acquires by
conveyance, transfer or sale the properties and assets of the Servicer
substantially as an entirety shall be, if the Servicer is not the
surviving entity, a corporation or a national banking association
organized and existing under the laws of the United States of America
or any State or the District of Columbia, and, if the Servicer is not
the surviving entity, such corporation shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Owner
Trustee, each Controlling Entity and the Indenture Trustee, in form
satisfactory to the Owner Trustee, each Controlling Entity and the
Indenture Trustee, the performance of every covenant and obligation of
the Servicer hereunder;
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(ii) the Servicer has delivered to the Owner
Trustee, each Controlling Entity and the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale comply with this
Section and that all conditions precedent herein provided for relating
to such transaction have been complied with;
(iii) the Servicer shall have given the Rating
Agencies notice of such consolidation, merger or transfer or assets;
and
(b) the corporation formed by such consolidation or into
which the Servicer is merged or the Person which acquires by conveyance
or transfer the properties and assets of the Servicer substantially as
an entirety shall be an Eligible Servicer.
Section 5.03. Limitation on Liability of the Servicer and
Others. Except as provided in Section 5.04, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer in its capacity as
Servicer shall be under any liability to the Trust, the Owner Trustee, the
Indenture Trustee, the Noteholders, any Series Enhancer or any other Person for
any action taken or for refraining from the taking of any action in good faith
in its capacity as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer or any such Person against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than the Servicer) respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties as Servicer in accordance with this
Agreement and which in its reasonable judgment may involve it in any expense or
liability. The Servicer may, in its sole discretion, undertake any such legal
action which it may deem necessary or desirable for the benefit of the
Noteholders with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Noteholders hereunder.
Section 5.04. Servicer Indemnification of the Owner Trustee
and the Indenture Trustee. The Servicer shall indemnify and hold harmless the
Owner Trustee and the Indenture Trustee and any trustees predecessor thereto
(including the Indenture Trustee in its capacity as Transfer Agent and Registrar
or as Paying Agent) and their respective directors, officers, employees and
agents from and against any and all loss, liability, claim, action, suit, cost,
expense, damage or injury of any kind or nature whatsoever suffered or sustained
by reason of (a) any acts or omissions of the Servicer with respect to the Trust
pursuant to this Agreement or (b) the administration by the Owner Trustee of the
Trust and the administration by the Indenture Trustee of the Indenture and
Indenture Supplement (in the case of clause (a) or (b), other than such as may
arise from the negligence or willful misconduct of the Owner Trustee or the
Indenture Trustee, as applicable), including any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any action, proceeding or claim. Indemnification pursuant to
this Section shall not be payable
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from the Trust Assets. The Servicer's obligations under this Section 5.04 shall
survive the termination of this Agreement or the Trust or the earlier removal or
resignation of the Owner Trustee or the Indenture Trustee, as applicable.
Section 5.05. Resignation of the Servicer. The Servicer shall
not resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law or (b) upon the assumption, by an agreement
supplemental hereto, executed and delivered to the Owner Trustee, each
Controlling Entity and the Indenture Trustee, in form satisfactory to the Owner
Trustee, each Controlling Entity and the Indenture Trustee, of the obligations
and duties of the Servicer hereunder by any of its Affiliates that is a direct
or indirect wholly owned subsidiary of the ultimate parent of the Servicer or by
any other entity the appointment of which shall have satisfied the Rating Agency
Condition and, in either case, qualifies as an Eligible Servicer. Any
determination permitting the resignation of the Servicer shall be evidenced as
to clause (a) above by an Opinion of Counsel to such effect delivered to the
Owner Trustee, each Controlling Entity and the Indenture Trustee. No resignation
shall become effective until the Indenture Trustee or a Successor Servicer shall
have assumed the responsibilities and obligations of the Servicer in accordance
with Section 7.02 hereof. If within 120 days of the date of the determination
that the Servicer may no longer act as Servicer under clause (a) above the
Indenture Trustee is unable to appoint a Successor Servicer, the Indenture
Trustee shall serve as Successor Servicer. 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 Servicer hereunder. The Indenture Trustee
shall give prompt notice to each Rating Agency and each Series Enhancer upon the
appointment of a Successor Servicer. Notwithstanding anything in this Agreement
to the contrary, Household Finance Corporation may assign part or all of its
obligations and duties as Servicer under this Agreement to an Affiliate of
Household Finance Corporation so long as Household Finance Corporation shall
have fully guaranteed the performance of such obligations and duties under this
Agreement.
Section 5.06. Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Owner Trustee or
the Indenture Trustee, as applicable, access to the documentation regarding the
Accounts and the Receivables in such cases where the Owner Trustee or the
Indenture Trustee, as applicable, is required in connection with the enforcement
of the rights of Noteholders or by applicable statutes or regulations to review
such documentation, such access being afforded without charge but only (a) upon
reasonable request, (b) during normal business hours, (c) subject to the
Servicer's normal security and confidentiality procedures and (d) at reasonably
accessible offices in the continental United States designated by the Servicer.
Nothing in this Section shall derogate from the obligation of the Transferor,
the Owner Trustee, the Indenture Trustee and the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors and
the failure of the Servicer to provide access as provided in this Section as a
result of such obligation shall not constitute a breach of this Section.
46
Section 5.07. Delegation of Duties. In the ordinary course of
business, the Servicer may at any time delegate its duties hereunder with
respect to the Accounts and the Receivables to any Person that agrees to conduct
such duties in accordance with the Credit Guidelines and this Agreement. Such
delegation shall not relieve the Servicer of its liability and responsibility
with respect to such duties, and shall not constitute a resignation within the
meaning of Section 5.05.
Section 5.08. Examination of Records. Each Transferor and the
Servicer shall indicate generally in their computer files or other records that
the Receivables arising in the Accounts have been conveyed to the Owner Trustee,
on behalf of the Trust, pursuant to this Agreement. Each Transferor and the
Servicer shall, prior to the sale or transfer to a third party of any
receivable, examine its computer records and other records to determine that
such receivable is not, and does not include, a Receivable.
ARTICLE VI
INSOLVENCY EVENTS
Section 6.01. Rights upon the Occurrence of an Insolvency
Event. If any Transferor shall consent or fail to object to the appointment of a
bankruptcy trustee or conservator, receiver, liquidator or similar official in
any bankruptcy proceeding or other insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to any
Transferor or of or relating to all or substantially all of such Transferor's
property, or the commencement of an action seeking a decree or order of a court
or agency or supervisory authority having jurisdiction in the premises for the
appointment of a bankruptcy trustee or conservator, receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up, insolvency, bankruptcy,
reorganization, conservatorship, receivership or liquidation of such entity's
affairs, or notwithstanding an objection by such Transferor any such action
shall have remained undischarged or unstayed for a period of 60 days or upon
entry of any order or decree providing for such relief; or such Transferor shall
admit in writing its inability to pay its debts generally as they become due,
file, or consent or fail to object (or object without dismissal of any such
filing within 30 days of such filing) to the filing of, a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization,
receivership or conservatorship or similar statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations (any
such act or occurrence with respect to any Person being an "INSOLVENCY EVENT"),
such Transferor shall on the day any such Insolvency Event occurs (the
"APPOINTMENT DATE"), immediately cease to transfer Principal Receivables to the
Owner Trustee or the Trust and shall promptly give notice to the Indenture
Trustee and the Owner Trustee thereof. Notwithstanding any cessation of the
transfer to the Owner Trustee or the Trust of additional Principal Receivables,
Principal Receivables transferred to the Trust prior to the occurrence of such
Insolvency Event, Collections in respect of such Principal Receivables and
Finance Charge and Administrative Receivables (whenever created) accrued in
respect of such Principal Receivables shall continue to be a part of the Trust
Assets and shall be allocated and distributed to
47
Noteholders in accordance with the terms of the Indenture and each Indenture
Supplement.
ARTICLE VII
SERVICER DEFAULTS
Section 7.01. Servicer Defaults. If any one of the following
events (a "SERVICER DEFAULT") shall occur and be continuing:
(a) any failure by the Servicer to make any payment,
transfer or deposit or to give instructions or to give notice to the
Indenture Trustee to make such payment, transfer or deposit on or
before the date occurring five Business Days after the date such
payment, transfer or deposit or such instruction or notice is required
to be made or given, as the case may be, under the terms of this
Agreement, the Indenture or any Indenture Supplement;
(b) failure on the part of the Servicer duly to observe
or perform in any material respect any other covenants or agreements of
the Servicer set forth in this Agreement which has an Adverse Effect
and which continues unremedied for a period of 60 days after the date
on which notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Owner Trustee or the
Indenture Trustee, or to the Servicer, the Owner Trustee and the
Indenture Trustee by Holders of Notes evidencing not less than 10% of
the aggregate unpaid principal amount of all Notes (or, with respect to
any such failure that does not relate to all Series, 10% of the
aggregate unpaid principal amount of all Series to which such failure
relates); or the Servicer shall assign or delegate its duties under
this Agreement, except as permitted by Sections 5.02 and 5.07;
(c) any representation, warranty or certification made by
the Servicer in this Agreement or in any certificate delivered pursuant
to this Agreement shall prove to have been incorrect when made, which
has an Adverse Effect on the rights of the Noteholders of any Series
(which determination shall be made without regard to whether funds are
then available pursuant to any Series Enhancement) and which Adverse
Effect continues for a period of 60 days after the date on which notice
thereof, requiring the same to be remedied, shall have been given to
the Servicer by the Owner Trustee or the Indenture Trustee, or to the
Servicer, the Owner Trustee and the Indenture Trustee by the Holders of
Notes evidencing not less than 10% of the aggregate unpaid principal
amount of all Notes (or, with respect to any such representation,
warranty or certification that does not relate to all Series, 10% of
the aggregate unpaid principal amount of all Series to which such
representation, warranty or certification relates); or
(d) the Servicer shall consent to the appointment of a
bankruptcy trustee, conservator, receiver, liquidator or similar
official in any bankruptcy proceeding or other insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Servicer or of or relating to
48
all or substantially all its property, or a decree or order of a court
or agency or supervisory authority having jurisdiction in the premises
for the appointment of a bankruptcy trustee, conservator, receiver,
liquidator or similar official in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or the winding-up or liquidation of its affairs, shall
have been entered against the Servicer; or the Servicer shall admit in
writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make any assignment for the
benefit of its creditors or voluntarily suspend payment of its
obligations;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied, any of the Indenture Trustee, any Controlling
Entity or the Holders of Notes evidencing more than 50% of the aggregate unpaid
principal amount of all Outstanding Notes, by notice then given to the Servicer
and the Owner Trustee (and to the Indenture Trustee if given by the Noteholders)
(a "TERMINATION NOTICE"), may terminate all but not less than all the rights and
obligations of the Servicer as Servicer under this Agreement; provided, however,
if within 60 days of receipt of a Termination Notice the Indenture Trustee does
not receive any bids from Eligible Servicers in accordance with subsection
7.02(c) to act as a Successor Servicer and receives an Officer's Certificate of
the Servicer to the effect that the Servicer cannot in good faith cure the
Servicer Default which gave rise to the Termination Notice, the Indenture
Trustee shall grant a right of first refusal to the Transferor which would
permit the Transferor at its option to acquire the Notes on the Distribution
Date in the next calendar month.
The price for the Notes shall be equal to the sum of the
amounts specified therefor with respect to each Outstanding Series in the
related Indenture Supplement. The Transferor shall notify the Indenture Trustee
prior to the Record Date for the Distribution Date of the acquisition if it is
exercising such right of first refusal. If the Transferor exercises such right
of first refusal, the Transferor shall deposit the price into the Collection
Account not later than 1:00 p.m., New York City time, on such Distribution Date
in immediately available funds. The price shall be allocated and distributed to
Noteholders in accordance with the terms of the Indenture and each Indenture
Supplement.
After receipt by the Servicer of a Termination Notice, and on
the date that a Successor Servicer is appointed by the Indenture Trustee
pursuant to Section 7.02, all authority and power of the Servicer under this
Agreement shall pass to and be vested in the Successor Servicer (a "SERVICE
TRANSFER"); and, without limitation, the Indenture Trustee is hereby authorized
and empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to execute or
deliver such documents or instruments, and to do and accomplish all other acts
or things necessary or appropriate to effect the purposes of such Service
Transfer. The Servicer agrees to cooperate with the Indenture Trustee and such
Successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer to conduct
49
servicing hereunder, including the transfer to such Successor Servicer of all
authority of the Servicer to service the Receivables provided for under this
Agreement, including all authority over all Collections which shall on the date
of transfer be held by the Servicer for deposit, or which have been deposited by
the Servicer, in the Collection Account, or which shall thereafter be received
with respect to the Receivables, and in assisting the Successor Servicer. The
Servicer shall within 20 Business Days transfer its electronic records relating
to the Receivables to the Successor Servicer in such electronic form as the
Successor Servicer may reasonably request and shall promptly transfer to the
Successor Servicer all other records, correspondence and documents necessary for
the continued servicing of the Receivables in the manner and at such times as
the Successor Servicer shall reasonably request. To the extent that compliance
with this Section shall require the Servicer to disclose to the Successor
Servicer information of any kind which the Servicer deems to be confidential,
the Successor Servicer shall be required to enter into such customary licensing
and confidentiality agreements as the Servicer shall deem reasonably necessary
to protect its interests. The Servicer shall pay to the Indenture Trustee and
any Successor Servicer the reasonable transition expenses incurred by such
person and the agents in connection with any transition of Servicing.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in paragraph (a) above for a period of 10 Business Days
after the applicable grace period or under paragraph (b) or (c) above for a
period of 60 Business Days after the applicable grace period, shall not
constitute a Servicer Default if such delay or failure could not be prevented by
the exercise of reasonable diligence by the Servicer and such delay or failure
was caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion or sabotage, epidemics, landslides, lightning,
fire, hurricanes, earthquakes, floods or similar causes. The preceding sentence
shall not relieve the Servicer from using all commercially reasonable efforts to
perform its obligations in a timely manner in accordance with the terms of this
Agreement and the Servicer shall provide the Indenture Trustee, Owner Trustee,
each Transferor and any Series Enhancer with an Officer's Certificate giving
prompt notice of such failure or delay by it, together with a description of its
efforts so to perform its obligations.
Section 7.02. Indenture Trustee To Act; Appointment of
Successor.
(a) On and after the receipt by the Servicer of a
Termination Notice pursuant to Section 7.01, the Servicer shall continue to
perform all servicing functions under this Agreement until the date specified in
the Termination Notice or otherwise specified by the Indenture Trustee or until
a date mutually agreed upon by the Servicer and the Indenture Trustee. The
Indenture Trustee shall as promptly as possible after the giving of a
Termination Notice appoint an Eligible Servicer acceptable to each Controlling
Entity as a successor servicer (the "SUCCESSOR SERVICER"), and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Indenture Trustee and each Controlling Entity. In the event
that a Successor Servicer has not been appointed or has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may delegate any of its servicing
obligations to an Affiliate or agent in accordance with
50
subsection 3.01(b) and Section 5.07. Notwithstanding the foregoing, the
Indenture Trustee shall, if it is legally unable so to act, petition at the
expense of the Servicer a court of competent jurisdiction to appoint any
established institution qualifying as an Eligible Servicer as the Successor
Servicer hereunder. The Indenture Trustee shall give prompt notice to each
Rating Agency and each Series Enhancer upon the appointment of a Successor
Servicer.
(b) Upon its appointment, the Successor Servicer shall be
the successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer; provided, however, if Xxxxx Fargo
Bank Minnesota, National Association is the Successor Servicer, it shall have
(i) no liability with respect to any obligation which was required to be
performed by the predecessor Servicer prior to the date that the Successor
Servicer becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the predecessor Servicer and (ii) no liability or
obligation with respect to any Servicer indemnification obligations of any prior
Servicer including the original Servicer.
(c) In connection with any Termination Notice, the
Indenture Trustee will review any bids which it obtains from Eligible Servicers
and shall be permitted to appoint any Eligible Servicer with the consent of each
Controlling Entity submitting such a bid as a Successor Servicer for servicing
compensation not in excess of the aggregate Monthly Servicing Fees for all
Series plus the sum of the amounts with respect to each Series and with respect
to each Distribution Date equal to any Collections of Finance Charge and
Administrative Receivables allocable to Noteholders of such Series which are
payable to the holders of the Transferor Certificates after payment of all
amounts owing to the Noteholders of such Series with respect to such
Distribution Date or required to be deposited in the applicable Series Accounts
with respect to such Distribution Date and any amounts required to be paid to
any Series Enhancer for such Series with respect to such Distribution Date
pursuant to the terms of any Enhancement Agreement; provided, however, that the
Holders of the Transferor Certificates shall be responsible for payment of the
Transferor's portion of such aggregate Monthly Servicing Fees and all other such
amounts, including any amount of reasonable transition expenses not paid by the
Servicer pursuant to subsection 7.01, in excess of such aggregate Monthly
Servicing Fees. Each Holder of the Transferor's Certificates agrees that, if
Household Finance Corporation (or any Successor Servicer) is terminated as
Servicer hereunder, the portion of the Collections in respect of Finance Charge
and Administrative Receivables that the Transferor is entitled to receive
pursuant to this Agreement, the Indenture or any Indenture Supplement shall be
reduced by an amount sufficient to pay the Transferor's share of the
compensation of the Successor Servicer.
(d) All authority and power granted to the Servicer under
this Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 8.01 of the Trust Agreement, and shall pass to and be
vested in the Transferor and, without limitation, the Transferor is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all
51
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Servicer agrees to cooperate with the Transferor in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing of the Receivables. The Servicer shall transfer its electronic
records relating to the Receivables to the Transferor or its designee in such
electronic form as it may reasonably request and shall transfer all other
records, correspondence and documents to it in the manner and at such times as
it shall reasonably request. To the extent that compliance with this Section
shall require the Servicer to disclose to the Transferor information of any kind
which the Servicer deems to be confidential, the Transferor shall be required to
enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interests.
Section 7.03. Notification to Noteholders. Within five
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give notice thereof to the Owner Trustee, the Indenture Trustee,
each Rating Agency, and each Series Enhancer and the Indenture Trustee shall
give notice to the Noteholders. Upon any termination or appointment of a
Successor Servicer pursuant to this Article, the Indenture Trustee shall give
prompt notice thereof to the Noteholders.
ARTICLE VIII
TERMINATION
Section 8.01. Termination of Agreement. This Agreement and the
respective obligations and responsibilities of the Trust, the Owner Trustee, the
Transferor and the Servicer under this Agreement shall terminate, except with
respect to the duties described in Section 5.04, on the Trust Termination Date.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Amendment; Waiver of Past Defaults.
(a) This Agreement may be amended by the parties hereto
from time to time prior to, or in connection with, the issuance of the first
Series of Notes hereunder without the requirement of any consents or the
satisfaction of any conditions set forth below. This Agreement may be amended
from time to time by the Servicer, the Transferor and the Owner Trustee, by a
written instrument signed by each of them, without the consent of the Indenture
Trustee or any of the Noteholders, provided that (i) the Transferor shall have
delivered to the Indenture Trustee and the Owner Trustee an Officer's
Certificate, dated the date of any such Amendment, stating that the Transferor
reasonably believes that such amendment will not have an Adverse Effect and (ii)
the Rating Agency Condition shall have been satisfied with respect to any such
amendment; provided, however, the Servicer, the Transferor and the Owner Trustee
may enter into
52
one or more amendments, without the consent of the Indenture Trustee, any
Controlling Entity or the Holders of any Notes or prior notice to the Rating
Agencies (provided that a final amendment to this Agreement signed by the
parties hereto shall be delivered to each Rating Agency and each Controlling
Entity within 10 days of its execution) in order to (A) cure any ambiguity, to
correct or supplement any provision herein or in any amendment hereto that may
be inconsistent with any other provision herein or in any amendment hereto, (B)
to make any other provisions with respect to matters or questions arising under
this Agreement or in any amendment hereto or (C) qualify for sale treatment
under generally accepted accounting principles; provided, that such amendment
shall not have an Adverse Effect and, in the case of clause (C), the Transferor
shall have delivered a Tax Opinion to the Indenture Trustee with respect to such
amendment. Additionally, notwithstanding the preceding sentence, this Agreement
will be amended by the Servicer and the Owner Trustee at the direction of the
Transferor without the consent of the Indenture Trustee or any of the
Noteholders or Series Enhancers to add, modify or eliminate such provisions as
may be necessary or advisable in order to enable all or a portion of the Trust
(i) to qualify as, and to permit an election to be made to cause the Trust to be
treated as, a "financial asset securitization investment trust" as described in
the provisions of Section 860L of the Code, and (ii) to avoid the imposition of
state or local income or franchise taxes imposed on the Trust's property or its
income; provided, however, that (i) the Transferor delivers to the Indenture
Trustee, each Controlling Entity and the Owner Trustee an Officer's Certificate
to the effect that the proposed amendments meet the requirements set forth in
this subsection, (ii) each Rating Agency will have notified the Transferor, the
Servicer, the Indenture Trustee and the Owner Trustee in writing that the
amendment will not result in a reduction or withdrawal of the rating of any
Outstanding Series or Class as to which it is a Rating Agency and (iii) such
amendment does not affect the rights, duties or obligations of the Indenture
Trustee or the Owner Trustee hereunder. The amendments which the Transferor may
make without the consent of Noteholders or Series Enhancers pursuant to the
preceding sentence may include, without limitation, the addition of a sale of
Receivables.
(b) This Agreement may also be amended from time to time
by the Servicer, the Transferor and the Owner Trustee, with the consent of the
Holders of the Outstanding Notes evidencing not less than 66-2/3% of the
aggregate unpaid principal amount of the Outstanding Notes of all affected
Series for which the Transferor has not delivered an Officer's Certificate
stating that there is no Adverse Effect, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of or delay the timing of any distributions (changes in Amortization
Events or Reinvestment Events that decrease the likelihood of the occurrence
thereof shall not be considered delays in the timing of distributions for
purposes of this clause) to be made to Noteholders or deposits of amounts to be
so distributed or the amount available under any Series Enhancement without the
consent of each affected Holder of Outstanding Notes, (ii) change the definition
of or the manner of calculating the interest of any Noteholder without the
consent of each affected Holder of Outstanding Notes, (iii) reduce the aforesaid
percentage required to consent to any such amendment without the consent of each
Holder of Outstanding Notes or (iv) adversely affect the rating of any Series or
53
Class by each Rating Agency without the consent of the Holders of Outstanding
Notes of such Series or Class evidencing not less than 66-2/3% of the aggregate
unpaid principal amount of the Outstanding Notes of such Series or Class.
(c) Promptly after the execution of any such amendment or
consent (other than an amendment pursuant to paragraph (a)), the Owner Trustee
shall furnish notification of the substance of such amendment to the Indenture
Trustee and each Noteholder, and the Servicer shall furnish notification of the
substance of such amendment to each Rating Agency and each Series Enhancer.
(d) It shall not be necessary for the consent of
Noteholders under this Section 9.01 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such
reasonable requirements as the Indenture Trustee may prescribe.
(e) Notwithstanding anything in this Section 9.01 to the
contrary, no amendment may be made to this Agreement or any Participation
Interest Supplement which would adversely affect in any material respect the
interests of any Series Enhancer without the consent of such Series Enhancer.
(f) Any Indenture Supplement executed in accordance with
the provisions of Article X of the Indenture shall not be considered an
amendment of this Agreement for the purposes of this Section 9.01.
(g) The Holders of Outstanding Notes evidencing more than
66-2/3% of the aggregate unpaid principal amount of the Outstanding Notes of
each Series or, with respect to any Series with two or more Classes, of each
Class (or, with respect to any default that does not relate to all Series,
66-2/3% of the aggregate unpaid principal amount of the Outstanding Notes of
each Series to which such default relates or, with respect to any such Series
with two or more Classes, of each Class) may, on behalf of all Noteholders,
waive any default by the Transferor or the 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.
(h) The Owner Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Owner Trustee's rights, duties
or immunities under this Agreement or otherwise. In connection with the
execution of any amendment hereunder, the Owner Trustee shall be entitled to
receive the Opinion of Counsel described in subsection 9.02(d).
54
Section 9.02. Protection of Right, Title and Interest to
Trust.
(a) The Transferor shall cause this Agreement, all
amendments and supplements hereto and all financing statements and continuation
statements and any other necessary documents covering the Indenture Trustee's
and the Owner Trustee's right, title and interest to the Trust to be promptly
recorded, registered and filed, and at all times to be kept recorded, registered
and filed, all in such manner and in such places as may be required by law fully
to preserve and protect the right, title and interest of the Indenture Trustee,
Noteholders and the Owner Trustee hereunder to all property comprising the
Trust. The Transferor shall deliver to the Owner Trustee and Indenture Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Servicer shall cooperate fully with the
Transferor in connection with the obligations set forth above and will execute
any and all documents reasonably required to fulfill the intent of this
paragraph.
(b) Within 30 days after any Transferor makes any change
in its name, identity or corporate structure which would make any financing
statement or continuation statement filed in accordance with paragraph (a)
seriously misleading within the meaning of Section 9-506 (or any comparable
provision) of the UCC, such Transferor shall give the Owner Trustee and the
Indenture Trustee notice of any such change and shall file such financing
statements or amendments as may be necessary to continue the perfection of the
Owner Trustee's and the Trust's security interest or ownership interest in the
Receivables and the proceeds thereof.
(c) Each Transferor shall give the Owner Trustee, each
Controlling Entity and the Indenture Trustee prompt notice of any relocation of
its chief executive office or any change in the jurisdiction of its organization
and whether, as a result of such relocation or 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
file such financing statements or amendments as may be necessary to perfect or
to continue the perfection of the Owner Trustee's and the Trust's security
interest in the Receivables and the proceeds thereof. Each Transferor shall at
all times maintain its chief executive offices within the United States and
shall at all times be organized under the laws of a jurisdiction located within
the United States.
(d) The Transferor shall deliver to the Owner Trustee,
each Controlling Entity and the Indenture Trustee (i) upon the execution and
delivery of each amendment of this Agreement, an Opinion of Counsel to the
effect specified in EXHIBIT D-1; (ii) on each date specified in subsection
2.09(c)(ix) with respect to Aggregate Additions to be designated as Accounts, an
Opinion of Counsel substantially in the form of EXHIBIT D-2, (iii) on each date
specified in subsection 2.09(e)(vii), with respect to any New Accounts included
as Accounts, an Opinion of Counsel substantially in the form of EXHIBIT D-2,
(iv) on each Addition Date on which any Participation Interests are to be
included in the Trust pursuant to subsection 2.09(a) or (b), an Opinion of
Counsel covering the same substantive legal issues addressed by EXHIBITS D-1 and
D-2 but conformed to the extent appropriate to relate to Participation
Interests; and (v) on or
55
before April 30 of each year, beginning with April 30, 2003, an Opinion of
Counsel substantially in the form of EXHIBIT D-3.
Section 9.03. 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 OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 9.04. Notices; Payments.
(a) All demands, notices, instructions, directions and
communications (collectively, "NOTICES") under this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered at,
mailed by registered mail, return receipt requested, or sent by facsimile
transmission (i) in the case of the Transferor, to Household Consumer Loan
Corporation II, 0000 Xxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, Attention:
President (facsimile no. (000) 000-0000), (ii) in the case of the Originators,
to 0000 Xxxxxxx Xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000 Attention: Director-Asset
Securitization, (iii) in the case of the Servicer, to Household Finance
Corporation, at 0000 Xxxxxxx Xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, Attention:
Treasurer (facsimile no. (000) 000-0000), with copies to Household International
at 0000 Xxxxxxx Xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000, Attention: General
Counsel's Office, Securities and Funding Unit (facsimile no. (000) 000-0000),
(iv) in the case of the Owner Trustee, to Wilmington Trust Company, at Xxxxxx
Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000, Attention:
Corporate Trust Administration (facsimile no. (000) 000-0000, (v) in the case of
Fitch, to Fitch, Inc., Xxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000, Attention:
ABS Surveillance (facsimile no. (000) 000-0000), (vi) in the case of Moody's, to
Xxxxx'x Investors Service Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention:
ABS Monitoring Group (facsimile no. (000) 000-0000), (vii) in the case of
Standard & Poor's, to Standard & Poor's Ratings Group, 00 Xxxxx Xxxxxx, Xxx
Xxxx, XX 00000, (facsimile no. (000) 000-0000), and (viii) to any other Person
as specified in the Indenture or any Indenture Supplement; or, as to each party,
at such other address or facsimile number as shall be designated by such party
in a written notice to each other party.
(b) Any Notice required or permitted to be given to a
Holder of Registered Notes shall be given by first-class mail, postage prepaid,
at the address of such Holder as shown in the Note Register. No Notice shall be
required to be mailed to a Holder of Bearer Notes or Coupons but shall be given
as provided below. Any Notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Noteholder receives such Notice. In addition, (a) if and so long as any
Series or Class is listed on the Luxembourg Stock Exchange and such Exchange
shall so require, any Notice to Noteholders shall be published in an Authorized
Newspaper of general circulation in Luxembourg within the time period prescribed
in this Agreement and (b) in the case of any Series or Class with respect to
which any Bearer Notes are outstanding, any Notice required or permitted to be
given to
56
Noteholders of such Series or Class shall be published in an Authorized
Newspaper within the time period prescribed in this Agreement.
Section 9.05. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no way
affect the validity or enforceability of the remaining provisions or of the
Notes or the rights of the Noteholders.
Section 9.06. Additional Obligations of the Servicer. The
Servicer further agrees to perform all duties of the Servicer as described in
the Indenture and any Indenture Supplement.
Section 9.07. Further Assurances. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Owner Trustee, any Controlling Entity and the Indenture Trustee more fully to
effect the purposes of this Agreement, including the execution of any financing
statements or continuation statements relating to the Receivables for filing
under the provisions of the UCC of any applicable jurisdiction.
Section 9.08. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Owner Trustee, the
Indenture Trustee, any Controlling Entity or the Noteholders, any right, remedy,
power or privilege under this Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
under this Agreement preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided under this Agreement are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
Section 9.09. Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Section 9.10. Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the Indenture
Trustee, the Owner Trustee, the Noteholders, any Series Enhancer and their
respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, no other Person will have any right or obligation
hereunder.
57
Section 9.11. Actions by Noteholders.
(a) Wherever in this Agreement a provision is made that
an action may be taken or a Notice given by Noteholders, such action or Notice
may be taken or given by any Noteholder, unless such provision requires a
specific percentage of Noteholders.
(b) Any Notice, request, authorization, direction,
consent, waiver or other act by the Holder of a Note shall bind such Holder and
every subsequent Holder of such Note and of any Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or omitted to be done by the Owner Trustee, the
Transferor or the Servicer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 9.12. Rule 144A Information. For so long as any of the
Notes of any Series or Class are "restricted securities" within the meaning of
Rule 144(a)(3) under the Securities Act, each of the Transferor, the Owner
Trustee, the Indenture Trustee, the Servicer and any Series Enhancer agree to
cooperate with each other to provide to any Noteholders of such Series or Class
and to any prospective purchaser of Notes designated by such Noteholder, upon
the request of such Noteholder or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securities Act.
Section 9.13. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 9.14. Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 9.15. Representative Capacity. It is expressly
understood and agreed by and between the parties hereto that this Agreement is
executed and delivered by Wilmington Trust Company, not it its individual
capacity but solely as Owner Trustee under the Trust Agreement in the exercise
of the power and authority conferred and vested in it as such Owner Trustee. In
no event shall Wilmington Trust Company in its individual capacity have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder, as to all of which recourse shall be had
solely to the assets of the Issuer.
58
IN WITNESS WHEREOF, the Transferor, the Servicer and the Owner
Trustee have caused this Transfer and Servicing Agreement to be duly executed by
their respective officers as of the day and year first above written.
HOUSEHOLD CONSUMER LOAN
CORPORATION II,
Transferor
By: /s/ X. X. Xxxxx
-------------------------
Name: X. X. Xxxxx
Title: Vice President and Treasurer
HOUSEHOLD FINANCE CORPORATION,
Servicer
By: /s/ X. X. Xxxx, Xx.
------------------------------------
Name: X. X. Xxxx, Xx.
Title: Vice President and Treasurer
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee on behalf of the
HOUSEHOLD CONSUMER LOAN MASTER NOTE
TRUST I
By: /s/ Xxxxxx X. MacKelan
------------------------------------
Name: Xxxxxx X. MacKelan
Title: Vice President
Acknowledged and Accepted:
By: XXXXX FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity but solely
as Indenture Trustee
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxx Xxxxxx
Title: Assistant Vice President
59
EXHIBIT A
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Section 2.09 of
the Transfer and Servicing Agreement)
ASSIGNMENT No. _________ OF RECEIVABLES IN ADDITIONAL
ACCOUNTS, dated as of ____________,(1) by and among HOUSEHOLD CONSUMER LOAN
CORPORATION II, a Delaware corporation, as Transferor (the "TRANSFEROR"),
HOUSEHOLD FINANCE CORPORATION, a Delaware corporation, as Servicer (the
"SERVICER"), and WILMINGTON TRUST COMPANY, not in its individual capacity but
solely as owner trustee (the "OWNER TRUSTEE") of the HOUSEHOLD CONSUMER LOAN
MASTER NOTE TRUST I (the "TRUST"), a Delaware common law trust, pursuant to the
Transfer and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS the Transferor, the Servicer and the Owner Trustee are
parties to the Transfer and Servicing Agreement dated as of September 30, 2002
(the "AGREEMENT");
WHEREAS, pursuant to the Agreement, the Transferor wishes to
designate Additional Accounts to be included as Accounts and to convey the
Receivables of such Additional Accounts, whether now existing or hereafter
created, to the Owner Trustee on behalf of the Trust; and
WHEREAS the Owner Trustee on behalf of the Trust is willing to
accept such designation and conveyance subject to the terms and conditions
hereof;
NOW, THEREFORE, the Transferor, the Servicer and the Owner
Trustee hereby agree as follows:
1. Defined Terms. All capitalized terms used herein
shall have the meanings ascribed to them in the Agreement unless otherwise
defined herein.
"ADDITION DATE" shall mean, with respect to the Additional
Accounts designated hereby, __________, ____.
"ADDITIONAL CUT-OFF DATE" shall mean, with respect to the
Additional Accounts designated hereby, __________, ____.
2. Designation of Additional Accounts. On or before the
Document Delivery Date, the Transferor will deliver to the Owner Trustee a
computer file, microfiche list or printed list containing a true and complete
schedule identifying all
-------------
(1) To be dated as of the applicable Addition Date.
A-1
Additional Accounts designated hereby (the "ADDITIONAL ACCOUNTS") specifying for
each such Account, as of the Additional Cut-Off Date, its account number, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account, which computer file,
microfiche list or printed list shall be marked as SCHEDULE 1 to this Assignment
and shall supplement SCHEDULE 1 to the Agreement.
3. Conveyance of Receivables. (a) The Transferor does
hereby sell, transfer, assign, set over and otherwise convey, without recourse
except as set forth in the Transfer and Servicing Agreement, to the Owner
Trustee on behalf of the Trust, all its right, title and interest in, to and
under the Receivables of such Additional Accounts existing on the Additional
Cut-Off Date and thereafter created from time to time until the termination of
the Trust, all Recoveries related thereto, all monies due or to become due and
all amounts received or receivable with respect thereto and all proceeds
(including "proceeds" as defined in the UCC) thereof. The foregoing does not
constitute and is not intended to result in the creation or assumption by the
Trust, the Owner Trustee, the Indenture Trustee, any Noteholders or any Series
Enhancer of any obligation of the Servicer, the Transferor or any other Person
in connection with the Accounts, the Receivables or under any agreement or
instrument relating thereto, including any obligation to Obligors or insurers.
(b) The Transferor agrees to record and file, at its own
expense, financing statements (and continuation statements when applicable) with
respect to the Receivables existing on the Additional Cut-Off Date and
thereafter created in Additional Accounts, meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect, and maintain perfection of, the sale and assignment of its interest
in such Receivables to the Owner Trustee on behalf of the Trust, and to deliver
a file-stamped copy of each such financing statement or other evidence of such
filing to the Owner Trustee on or prior to the Addition Date. The Owner Trustee
shall be under no obligation whatsoever to file such financing or continuation
statements or to make any other filing under the UCC in connection with such
sale and assignment.
(c) In connection with such sale, the Transferor further
agrees, at its own expense, on or prior to the date of this Assignment, to
indicate in the appropriate computer files that Receivables created in
connection with the Additional Accounts and designated hereby have been conveyed
to the Owner Trustee on behalf of the Trust pursuant to the Agreement and this
Assignment.
(d) The Transferor does hereby grant to the Owner Trustee
on behalf of the Trust a security interest in all of its right, title and
interest, whether now owned or hereafter acquired, in and to the Receivables of
the Additional Accounts existing on the Additional Cut-Off Date and thereafter
created from time to time until the termination of the Trust, all Recoveries
related thereto, all monies due or to become due and all amounts received or
receivable with respect thereto and all "proceeds" (including "proceeds" as
defined in the UCC) thereof. This Assignment constitutes a security agreement
under the UCC.
A-2
4. Acceptance by Owner Trustee on behalf of the Trust.
The Owner Trustee on behalf of the Trust hereby acknowledges its acceptance of
all right, title and interest to the property, now existing and hereafter
created, conveyed to the Owner Trustee on behalf of the Trust pursuant to
Section 3 of this Assignment. The Trust further acknowledges that, prior to or
simultaneously with the execution and delivery of this Assignment, the
Transferor delivered to the Owner Trustee the computer file, microfiche list or
printed list described in Section 2 of this Assignment.
5. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Owner Trustee on behalf of the
Trust, as of the date of this Assignment and as of the Addition Date that:
(a) Legal Valid and Binding Obligation. This Assignment
constitutes a legal, valid and binding obligation of the Transferor enforceable
against the Transferor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity);
(b) Eligibility of Accounts. As of the Additional Cut-Off
Date, each Additional Account designated hereby is an Eligible Account;
(c) Insolvency. As of each of the Additional Cut-Off Date
and the Addition Date, no Insolvency Event with respect to the Transferor has
occurred and the transfer by the Transferor of Receivables arising in the
Additional Accounts to the Trust has not been made in contemplation of the
occurrence thereof;
(d) Amortization Event; Event of Default. The Transferor
reasonably believes that (A) the addition of the Receivables arising in the
Additional Accounts will not, based on the facts known to the Transferor, then
or thereafter cause an Amortization Event or Event of Default to occur with
respect to any Series and (B) no selection procedure was utilized by the
Transferor which would result in the selection of Additional Accounts (from
among the available Eligible Accounts available to the Transferor) that would be
materially adverse to the interests of the Noteholders of any Series as of the
Addition Date;
(e) Security Interest. This Assignment constitutes a
valid sale, transfer and assignment to the Trust of all right, title and
interest, whether now owned or hereafter acquired, of the Transferor in the
Receivables existing on the Additional Cut-Off Date and thereafter created in
the Additional Accounts, all Recoveries related thereto, all monies due or to
become due and all amounts received or receivable with respect thereto and the
"proceeds" (including "proceeds" as defined in the UCC) thereof, or, if this
Assignment does not constitute a sale of such property, it constitutes a grant
of a "security interest" (as defined in the UCC) in such property to the Owner
Trustee on behalf of the Trust, which, in the case of existing Receivables and
the proceeds thereof, is enforceable upon execution and delivery of this
Assignment, and which will be
A-3
enforceable with respect to such Receivables hereafter created and the proceeds
thereof upon such creation. Upon the filing of the financing statements
described in Section 3 of this Assignment and, in the case of the Receivables
hereafter created and the proceeds thereof, upon the creation thereof, the Trust
shall have a first priority perfected security or ownership interest in such
property;
(f) No Conflict. The execution and delivery by the
Transferor of this Assignment, the performance of the transactions contemplated
by this Assignment and the fulfillment of the terms hereof applicable to the
Transferor, will not conflict with or violate any Requirements of Law applicable
to the Transferor or conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which the Transferor is a party or by which
it or its properties are bound;
(g) No Proceedings. There are no proceedings or
investigations, pending or, to the best knowledge of the Transferor, threatened
against the Transferor before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality (i) asserting the invalidity
of this Assignment, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Assignment, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Transferor, would materially and
adversely affect the performance by the Transferor of its obligations under this
Assignment or (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Assignment; and
(h) All Consents. All authorizations, consents, orders or
approvals of any court or other governmental authority required to be obtained
by the Transferor in connection with the execution and delivery of this
Assignment by the Transferor and the performance of the transactions
contemplated by this Assignment by the Transferor, have been obtained.
6. Ratification of Agreement. As supplemented by this
Assignment, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Assignment shall be read, taken and
construed as one and the same instrument.
7. Counterparts. This Assignment may be executed in two
or more counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-4
IN WITNESS WHEREOF, the Transferor, the Servicer and the Owner
Trustee have caused this Assignment to be duly executed by their respective
officers as of the day and year first above written.
HOUSEHOLD CONSUMER LOAN
CORPORATION II,
Transferor
By:__________________________________
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
Servicer
By:__________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee on behalf of
the
HOUSEHOLD CONSUMER LOAN MASTER NOTE
TRUST I, Issuer
By:__________________________________
Name:
Title:
A-5
EXHIBIT B
FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED ACCOUNTS
(As required by Section 2.10 of
the Transfer and Servicing Agreement)
REASSIGNMENT No. ___________ OF RECEIVABLES dated as of
___________,(1) by and among HOUSEHOLD CONSUMER LOAN CORPORATION II, a Delaware
corporation, as Transferor (the "TRANSFEROR"), HOUSEHOLD FINANCE CORPORATION, a
Delaware corporation, as Servicer and WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as owner trustee (the "OWNER TRUSTEE") of the
HOUSEHOLD CONSUMER LOAN MASTER NOTE TRUST I, (the "TRUST"), a Delaware common
law trust, pursuant to the Transfer and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS the Transferor, the Servicer and the Owner Trustee are
parties to the Transfer and Servicing Agreement dated as of September 30, 2002
(the "AGREEMENT");
WHEREAS pursuant to the Agreement, an Originator wishes to
remove from the Trust all Receivables owned by the Owner Trustee on behalf of
the Trust in certain designated Accounts and to cause the Owner Trustee on
behalf of the Trust to reconvey the Receivables of such Removed Accounts,
whether now existing or hereafter created to the Transferor; and
WHEREAS the Owner Trustee on behalf of the Trust is willing to
accept such designation and to reconvey the Receivables in the Removed Accounts
subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trust hereby agree as
follows:
1. Defined Terms. All terms defined in the Agreement and
used herein shall have such defined meanings when used herein, unless otherwise
defined herein.
"REMOVAL DATE" shall mean, with respect to the Removed
Accounts designated hereby, __________, ____.
"REMOVAL NOTICE DATE" shall mean, with respect to the Removed
Accounts, __________, ____.
------------
(1) To be dated as of the Removal Date.
B-1
2. Designation of Removed Accounts. On or prior to the
date that is five Business Days after the Removal Date, the Transferor will
deliver to the Owner Trustee a computer file, microfiche list or printed list
containing a true and complete schedule identifying all Accounts (the "REMOVED
ACCOUNTS") the Receivables of which are being removed from the Trust, specifying
for each such Account, as of the Removal Notice Date, its account number, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables in such Account, which computer file, microfiche list or
printed list shall be marked as Schedule 1 of this Reassignment and shall
supplement Schedule 1 to the Agreement.
3. Conveyance of Receivables. (a) The Owner Trustee on
behalf of the Trust does hereby transfer, assign, set over and otherwise convey
to the Transferor, without recourse, on and after the Removal Date, all right,
title and interest of the Owner Trustee and the Trust in, to and under the
Receivables existing at the close of business on the Removal Notice Date and
thereafter created from time to time in the Removed Accounts designated hereby,
all Recoveries related thereto, all monies due or to become due and all amounts
received or receivable with respect thereto and all proceeds thereof.
(b) In connection with such transfer, the Owner Trustee
agrees to execute and deliver to the Transferor on or prior to the date this
Reassignment is delivered, applicable termination statements prepared by the
Transferor with respect to the Receivables existing at the close of business on
the Removal Notice Date and thereafter created from time to time in the Removed
Accounts reassigned hereby and the proceeds thereof evidencing the release by
the Owner Trustee and the Trust of its interest in the Receivables in the
Removed Accounts, and meeting the requirements of applicable state law, in such
manner and such jurisdictions as are necessary to terminate such interest.
4. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Owner Trustee and the Trust as
of the Removal Date:
(a) Legal Valid and Binding Obligation. This
Reassignment constitutes a legal, valid and binding obligation of the
Transferor enforceable against the Transferor, in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity); and
(b) Amortization Event; Event of Default. The
Transferor reasonably believes that (A) the removal of the Receivables
existing in the Removed Accounts will not, based on the facts known to
the Transferor, then or thereafter cause an Amortization Event or Event
of Default to occur with respect to any Series and (B) no selection
procedure was utilized by the Transferor which would result in a
selection of Removed Accounts that would be materially adverse to the
interests of the Noteholders of any Series as of the Removal Date.
B-2
(c) List of Removed Accounts. The list of
Removed Accounts delivered pursuant to subsection 2.10(b) of the
Agreement, as of the Removal Notice Date, is true and complete in all
material respects.
5. Ratification of Agreement. As supplemented by this
Reassignment, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Reassignment shall be read, taken and
construed as one and the same instrument.
6. Counterparts. This Reassignment may be executed in
two or more counterparts, and by different parties on separate counterparts,
each of which shall be an original, but all of which shall constitute one and
the same instrument.
7. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
B-3
IN WITNESS WHEREOF, the Transferor, the Servicer and the Owner
Trustee have caused this Reassignment to be duly executed by their respective
officers as of the day and year first above written.
HOUSEHOLD CONSUMER LOAN CORPORATION II,
Transferor
By:____________________________________
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
Servicer
By:____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee on behalf of
the
HOUSEHOLD CONSUMER LOAN MASTER NOTE
TRUST I, Issuer
By:____________________________________
Name:
Title:
B-4
EXHIBIT C
FORM OF ANNUAL SERVICER'S CERTIFICATE
(To be delivered on or before March 31 of
each calendar year beginning with 2003,
pursuant to Section 3.05 of the Transfer and
Servicing Agreement referred to below)
HOUSEHOLD CONSUMER LOAN MASTER NOTE TRUST I
The undersigned, a duly authorized representative of Household
Finance Corporation, as Servicer ("HOUSEHOLD FINANCE CORPORATION"), pursuant to
the Transfer and Servicing Agreement, dated as of September 30, 2002 (the
"AGREEMENT"), among Household Consumer Loan Corporation II, as transferor,
Household Finance Corporation, and Household Consumer Loan Master Note Trust I,
does hereby certify that:
1. Household Finance Corporation is, as of the date
hereof, the Servicer under the Agreement. Capitalized terms used in this
Certificate have their respective meanings as set forth in the Agreement.
2. The undersigned is an Authorized Officer who is duly
authorized pursuant to the Agreement to execute and deliver this Certificate to
the Trust.
3. A review of the activities of the Servicer during the
year ended December 31, ____, and of its performance under the Agreement was
conducted under my supervision.
4. Based on such review, the Servicer has, to the best
of my knowledge, performed in all material respects its obligations under the
Agreement throughout such year and no default in the performance of such
obligations has occurred or is continuing except as set forth in paragraph 5
below.
5. The following is a description of each default in the
performance of the Servicer's obligations under the provisions of the Agreement
known to me to have been made by the Servicer during the year ended December 31,
_____ which sets forth in detail (i) the nature of each such default, (ii) the
action taken by the Servicer, if any, to remedy each such default and (iii) the
current status of each such default: [If applicable, insert "None."]
C-1
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate this ____ day of _____________, 20___.
HOUSEHOLD FINANCE CORPORATION,
By______________________________
Name:
Title:
X-0
XXXXXXX X-0
FORM OF OPINION OF COUNSEL
WITH RESPECT TO AMENDMENTS
Provisions to be included in
Opinion of Counsel to be delivered pursuant
to Section 9.02(d)(i) of the Transfer and
Servicing Agreement
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in the
Opinions Of Counsel delivered on any applicable Closing Date.
The Amendment has been entered into in accordance with the
terms and provisions of Section 9.01 of the Transfer and Servicing Agreement.
X-0-0
XXXXXXX X-0
FORM OF OPINION OF COUNSEL
WITH RESPECT TO ACCOUNTS
Provisions to be included in
Opinion of Counsel to be
delivered pursuant to
subsection 9.02(d)(ii) or (iii) of the
Transfer and Servicing Agreement
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in the
Opinions of Counsel delivered on any applicable Closing Date.
1. The Supplemental Conveyance creates in favor of the
Transferor a security interest in the rights of the Account Owner in such
Additional Receivables and the proceeds thereof.
2. To the extent that the transfer of Additional
Receivables by the Transferor to the Owner Trustee pursuant to the Assignment
does not constitute an absolute assignment by the Transferor to the Owner
Trustee of such Additional Receivables or the proceeds thereof, the Assignment
creates in favor of the Owner Trustee a security interest in the rights of the
Transferor in such Additional Receivables and the proceeds thereof.
3. The security interests described in paragraphs 1 and
2 above are perfected and of first priority.
X-0-0
XXXXXXX X-0
PROVISIONS TO BE INCLUDED IN
ANNUAL OPINION OF COUNSEL
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in the
Opinions of Counsel delivered on any applicable Closing Date. Unless otherwise
indicated, all capitalized terms used herein shall have the meanings ascribed to
them in the Transfer and Servicing Agreement and in the Assignment.
1. The Transfer and Servicing Agreement, together with
the Assignments, create in favor of the Owner Trustee a security interest in the
relevant Transferor's rights in the Receivables identified in Schedule 1 to the
Transfer and Servicing Agreement. Such security interest is perfected and of
first priority.
D-3-1
SCHEDULE 1
List of Accounts
[Original list delivered to Owner Trustee]
1-1
