EXHIBIT 10.1
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HOUSEHOLD AFFINITY FUNDING CORPORATION III,
TRANSFEROR,
HOUSEHOLD FINANCE CORPORATION,
SERVICER,
and
HOUSEHOLD AFFINITY CREDIT CARD
MASTER NOTE TRUST I,
ISSUER
FORM OF TRANSFER AND SERVICING AGREEMENT
Dated as of February [*], 2003
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS...........................................................................1
Section 1.01. Definitions....................................................................1
Section 1.02. Other Definitional Provisions.................................................13
ARTICLE II CONVEYANCE OF RECEIVABLES............................................................15
Section 2.01. Conveyance of Receivables.....................................................15
Section 2.02. Acceptance by Owner Trustee...................................................16
Section 2.03. Representations and Warranties of Each Transferor Relating to Such
Transferor....................................................................17
Section 2.04. Representations and Warranties of each Transferor Relating to the
Agreement and Any Participation Interest Supplement and the
Receivables...................................................................18
Section 2.05. Reassignment of Ineligible Receivables........................................19
Section 2.06. Reassignment of Trust Portfolio...............................................20
Section 2.07. Covenants of each Transferor..................................................21
Section 2.08. Covenants of each Transferor with Respect to Receivables Purchase
Agreement.....................................................................22
Section 2.09. Addition of Accounts..........................................................23
Section 2.10. Removal of Accounts and Treatment of Defaulted Receivables....................26
Section 2.11. Account Allocations...........................................................28
Section 2.12. Discount Option...............................................................28
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES..........................................30
Section 3.01. Acceptance of Appointment and Other Matters Relating to the Servicer..........30
Section 3.02. Servicing Compensation........................................................31
Section 3.03. Representations, Warranties and Covenants of the Servicer.....................31
Section 3.04. Reports and Records for the Owner Trustee and the Indenture Trustee...........34
Section 3.05. Annual Certificate of Servicer................................................34
Section 3.06. Annual Servicing Report of Independent Public Accountants; Copies
of Reports Available..........................................................34
Section 3.07. Tax Treatment.................................................................35
Section 3.08. Notices to Household Finance Corporation......................................35
Section 3.09. Adjustments...................................................................35
Section 3.10. Reports to the Commission.....................................................36
ARTICLE IV OTHER MATTERS RELATING TO EACH TRANSFEROR............................................37
Section 4.01. Liability of each Transferor..................................................37
Section 4.02. Merger or Consolidation of, or Assumption of the Obligations of, a
Transferor....................................................................37
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TABLE OF CONTENTS (cont'd.)
Section 4.03. Limitations on Liability of Each Transferor...................................38
Section 4.04. Assumption of the Transferor Obligations......................................38
ARTICLE V OTHER MATTERS RELATING TO THE SERVICER...............................................40
Section 5.01. Liability of the Servicer.....................................................40
Section 5.02. Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer......................................................................40
Section 5.03. Limitation on Liability of the Servicer and Others............................40
Section 5.04. Servicer Indemnification of the Owner Trustee and the Indenture
Trustee.......................................................................41
Section 5.05. Resignation of the Servicer...................................................41
Section 5.06. Access to Certain Documentation and Information Regarding the
Receivables...................................................................41
Section 5.07. Delegation of Duties..........................................................42
Section 5.08. Examination of Records........................................................42
ARTICLE VI INSOLVENCY EVENTS....................................................................43
Section 6.01. Rights upon the Occurrence of an Insolvency Event.............................43
ARTICLE VII SERVICER DEFAULTS....................................................................44
Section 7.01. Servicer Defaults.............................................................44
Section 7.02. Indenture Trustee To Act; Appointment of Successor............................46
Section 7.03. Notification to Noteholders...................................................47
ARTICLE VIII TERMINATION..........................................................................48
Section 8.01. Termination of Agreement......................................................48
ARTICLE IX MISCELLANEOUS PROVISIONS.............................................................49
Section 9.01. Amendment; Waiver of Past Defaults............................................49
Section 9.02. Protection of Right, Title and Interest to Trust..............................50
Section 9.03. Governing Law.................................................................51
Section 9.04. Notices; Payments.............................................................51
Section 9.05. Severability of Provisions....................................................52
Section 9.06. Further Assurances............................................................52
Section 9.07. No Waiver; Cumulative Remedies................................................52
Section 9.08. Counterparts..................................................................52
Section 9.09. Third-Party Beneficiaries.....................................................53
Section 9.10. Actions by Noteholders........................................................53
Section 9.11. Rule 144A Information.........................................................53
Section 9.12. Merger and Integration........................................................53
Section 9.13. Headings......................................................................53
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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...............................................C-1
EXHIBIT D-1 Form of Opinion of Counsel with Respect to Amendments.............................D-1-1
EXHIBIT D-2 Form of Opinion of Counsel with Respect to Accounts...............................D-2-1
EXHIBIT D-3 Provisions to be Included in Annual Opinion of Counsel............................D-3-1
SCHEDULES
SCHEDULE 1 List of Accounts....................................................................I-1
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This TRANSFER AND SERVICING AGREEMENT, dated as of February [*], 2003,
among HOUSEHOLD AFFINITY FUNDING CORPORATION III, a Delaware corporation, as
Transferor; HOUSEHOLD FINANCE CORPORATION, a Delaware corporation, as Servicer;
and HOUSEHOLD AFFINITY CREDIT CARD MASTER NOTE TRUST I, a statutory 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 Bank or any other entity which is
the issuer of the revolving credit 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 Automatic Additional Accounts, the date from and after
which such Aggregate Addition Accounts and Automatic Additional 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 Automatic Additional
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 Automatic Additional Accounts, the later of the dates on
which such Automatic Additional 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 adversely affect the rights and obligations of the
Series Enhancer.
"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.
"Affinity Agreement" shall mean (a) a written agreement between
the Bank or other Account Owner, as the case may be, and any merchant pursuant
to which such merchant sells, assigns or otherwise transfers to the Bank or
other Account Owner, as the case may be, certain Credit Agreements between such
merchant and Obligors, including all such merchant's rights and interests in the
Accounts and Receivables arising under such Credit Agreements, or (b) a written
agreement between the Bank or other Account Owner, as the case may be, and any
merchant or co-branding participant establishing private label or co-branded
credit programs pursuant to which the Bank will enter into Credit Agreements
with Obligors.
"Aggregate Addition" shall mean the designation of additional
Eligible Accounts, other than Automatic Additional Accounts, to be included as
Accounts or of 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, with respect to any Series or Class, if and so long
as the Notes of such Series are listed on the Luxembourg Stock Exchange and such
Exchange shall so require, in Luxembourg, printed in any language satisfying the
requirements of such Exchange) and customarily published on each business day at
such place, whether or not published on Saturdays, Sundays or holidays.
"Automatic Additional Accounts" shall mean each MasterCard and
VISA revolving credit 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).
"Bank" shall mean Household Bank (SB), N.A., and its successors
and permitted assigns.
"Bank RPA" shall mean any receivables purchase agreement between
HRAC II and an Account Owner or other Affiliated entity in the future, as such
agreement may be amended from time to time.
"Bankruptcy Code" shall have the meaning specified in subsection
4.02(a)(i)(x).
2
"Bearer Notes" shall have the meaning specified in the
Indenture.
"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, Nevada or any other
State in which the principal executive offices of the Bank, 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 Participation Interests. All
Recoveries with respect to Receivables previously charged-off as uncollectible
will be treated as Collections of Finance Charge and Administrative Receivables.
Collections with respect to any Due Period shall include a portion, calculated
pursuant to subsection 2.07(h), of Interchange paid to the Trust with respect to
such Due Period, to be applied as if such amount were Collections of Finance
Charge and Administrative Receivables for all purposes.
"Commission" shall mean the Securities and Exchange Commission
and its successors in interest.
"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 revolving
credit 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 the Bank, 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 credit business, which generally are
applicable to its portfolio of revolving credit 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 credit accounts and
collection of receivables created thereunder.
3
"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 revolving credit 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 revolving credit 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 revolving credit 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 proviso 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 (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 the percentages, if any,
designated by the Transferor pursuant to Section 2.12 or in any Supplement.
"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.
4
"Due Period" shall have the meaning specified in the Indenture.
"Eligible Account" shall mean a revolving credit account owned
by the Bank in the case of the Initial Accounts on the Initial Cut-Off Date, or
the Bank 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 revolving credit account in existence and
maintained by the Bank or other Account Owner, as the case may be;
(b) is payable in Dollars;
(c) has an Obligor who has provided, as his or her
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 revolving credit
accounts in the trust, calculated by number of 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 identified as an account with
respect to which (i) the related card, if any, has been lost or stolen
or (ii) the related account number has been stolen;
(f) 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;
(g) does not have receivables which have been sold
or pledged by the Bank or any other Account Owner, as the case may be,
to any other party other than any Transferor pursuant to a Receivables
Purchase Agreement;
(h) with respect to the Initial Accounts, is an
account in existence and maintained by the Bank or other Account Owner
as of the Initial Cut-Off Date, or as of the Additional Cut-Off Date
with respect to Additional Accounts;
(i) except as provided below, does not have any
Receivables that are Defaulted Receivables; and
(j) 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 of any related credit card, if
any, or related account number.
[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) charging privileges with respect to all such Accounts have been canceled in
accordance with the relevant Credit Guidelines.]
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"Eligible Receivable" shall mean each Receivable, including,
where applicable, the underlying receivable:
(a) which has arisen in an Eligible Account;
(b) which was created in compliance in all material
respects with 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 Bank 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 Bank 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 itself is, and the underlying
receivables are, 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);
(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 revolving credit 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 Bank or other Account Owner, as the case may be, has
satisfied all of its obligations required to be satisfied by such time;
6
(j) as to which, at the time of transfer to the
Trust, none of the Transferor, the Bank 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 an "account" 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 which, at the time of its
appointment as Servicer, (a) is servicing a portfolio of revolving credit
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 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 Rate Finance Charges, (b) cash advance fees, (c)
annual membership fees and annual service charges, (d) Late Fees, (e) Overlimit
Fees, (f) Discount Option Receivables and (g) 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.
"Funding" shall mean Household Affinity Funding Corporation III,
a Delaware corporation, and its successors and permitted assigns.
"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.
"HRAC II" shall mean Household Receivables Acquisition Company
II, a Delaware corporation, and its successors and permitted assigns.
7
"HRAC II RPA" shall mean the Second Amended and Restated
Receivables Purchase Agreement, dated as of July 1, 2002, between the Bank and
HRAC II, as amended from time to time, and includes any other receivables
purchase agreement, substantially in the form of such agreement entered into
between HRAC II and an Account Owner or other Affiliated entity in the future.
"Indenture" shall mean the Master Indenture, dated as of
February [*], 2003, 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 The Bank of New York, a New York
banking corporation, 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).
"Initial Account" shall mean each MasterCard/(R)//1/ revolving
credit account established pursuant to a Credit Agreement between the Bank and
any Obligor, which account is identified in the computer file or microfiche list
delivered to the Owner Trustee by the Transferor pursuant to Section 2.01 on the
Initial Issuance Date.
"Initial Cut-Off Date" shall mean February [*], 2003.
"Initial Issuance Date" shall mean February [*], 2003, 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.
"Interchange" shall mean interchange fees (net of expenses)
payable to the Bank or any other Account Owner, in its capacity as credit
issuer, through MasterCard or VISA or any similar entity or organization with
respect to any type of revolving credit accounts included as Accounts (except as
otherwise provided in the initial Assignment with respect to any such type of
Accounts), in connection with Obligor charges for goods or services with respect
to the Accounts, as calculated pursuant to the related Indenture Supplement for
any Series. Any reference in this Agreement, the Indenture or any Indenture
Supplement to Interchange shall refer to only the fractional undivided interest
in the interchange fees that are transferred by the Bank or an Account Owner to
a Transferor pursuant to a Receivables Purchase Agreement, which fractional
undivided interest may be less than a 100% interest therein.
"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.
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/1/ MasterCard is a registered trademark of MasterCard International
Incorporated.
8
"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.
"MasterCard" shall mean MasterCard International Incorporated,
and its successors in interest.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.02.
"Moody's" shall mean Xxxxx'x Investors Service, Inc., or its
successor.
"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, but excluding any merchant.
"Officer's Certificate" shall have the meaning specified in the
Indenture.
"Opinion of Counsel" shall have the meaning specified in the
Indenture.
"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.
9
"Periodic Rate 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.
"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.
"Quarter" shall mean the three consecutive Due Periods
commencing January, April, July and October of each calendar year.
"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. Unless the context otherwise
requires (whether or not there is a specific reference to the underlying
receivable), any reference in this Agreement, the Indenture or any Indenture
Supplement to a Receivable (including any Principal Receivable, Finance Charge
and Administrative Receivable or Defaulted Receivable) and any Collections
thereon or other amounts recoverable with respect thereto (including any
Insurance Proceeds or Recoveries with respect thereto) shall refer to only the
fractional undivided interest in the amounts paid or payable by Obligors on the
Accounts that are transferred by the Bank or an Account Owner to a Transferor
pursuant to a Receivables Purchase Agreement, which undivided interest may be
less than a 100% undivided interest therein. Any reference in this Agreement,
the Indenture or any Indenture Supplement to the "underlying receivable" with
respect to a Receivable shall refer to the receivable in which such Receivable
represents an undivided interest.
"Receivables Purchase Agreement" shall mean the HRAC II RPA, the
Bank RPA, the Transferor RPA or the Sale Agreement, as applicable.
10
"Recoveries" shall mean all amounts received (net of expenses)
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.
"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
credit card or 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 February [*], 2003, 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.
"Sale Agreement" shall mean the Sale Agreement, dated as of
February [*], 2003, between Household Affinity Funding Corporation II and the
Transferor, as amended from time to time, and includes any other sale agreement,
substantially in the form of such agreement entered into between Household
Affinity Funding Corporation II and the Transferor in the future.
"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.
11
"Series Adjusted Invested Amount" shall have the meaning
specified in the related Indenture Supplement.
"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) Funding, a special purpose
subsidiary 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.
"Transferor Amount" shall have the meaning specified in the
Indenture.
"Transferor RPA" shall mean the Receivables Purchase Agreement,
dated as of February [*], 2003, between HRAC II 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 Transferor and
an Account Owner or other Affiliated entity in the future.
"Transferor Certificate" shall have the meaning specified in the
Trust Agreement.
12
"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 Affinity Credit Card Master
Note Trust I, a Delaware statutory trust.
"Trust Agreement" shall mean the Trust Agreement relating to the
Trust, dated as of February [*], 2003, between Funding and Wilmington Trust
Company, 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.
"VISA" shall mean VISA USA, Inc., and its successors in
interest.
"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
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) The agreements, representations and warranties of
Funding and Household Finance Corporation in this Agreement in each of their
respective capacities as Transferor and Servicer shall be deemed to be the
agreements, representations and warranties of Funding and Household Finance
Corporation solely in each such capacity for so long as Funding and Household
Finance Corporation act in each such capacity under this Agreement.
(e) Any reference to each Rating Agency shall only apply to
any specific rating agency if such rating agency is then rating any outstanding
Series.
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(f) 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.
(g) 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."
[END OF ARTICLE I]
14
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Receivables. (a) By execution of
this Agreement, each of Funding and, in the case of Additional Accounts, Funding
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 Interchange and 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 attributed to Obligor charges for merchandise and services in 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 Bank 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, merchant
banks, merchants clearance systems, VISA, MasterCard 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.
(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 file
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 Receivables Purchase Agreement with such Transferor, and (C) the applicable
Removal Date, in the case of Removed Accounts specified in the Receivables
Purchase Agreement with such Transferor, (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
15
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 Additional Date, in the case of Automatic Additional
Accounts, and (D) except for Zero Balance Accounts, the date that is five
Business Days after the applicable Removal Date, in the case of Removed Accounts
(and 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) If the arrangements with respect to the Receivables
hereunder shall 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.
Section 2.02. Acceptance by Owner Trustee.
(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, 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, the
Bank, HRAC II 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 Agreements. 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).
16
(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 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
17
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 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 and, on such date, any related underlying
receivable is free and clear of all Liens;
(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 and Interchange
identified as relating to the Receivables
18
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 and Interchange, 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;
(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 is a consumer
revolving credit 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 and to the Indenture Trustee
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 (i) 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 (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, or (ii) it is so provided in subsection 2.07(a) with
respect to any
19
Receivables conveyed to the Trust by such Transferor, 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 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
Interchange and 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
20
delivered to the Owner Trustee a certificate of an authorized officer describing
the nature of such 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, the Indenture Trustee or the
Noteholders give 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 Interchange and
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) Receivables Not To Be Evidenced by Promissory Notes.
Except in connection with its enforcement or collection of an Account, such
Transferor will take no action to cause any Receivable conveyed by it to the
Trust to be evidenced by any instrument (as defined in the UCC) and if any such
Receivable (or any underlying receivable) is so evidenced it shall be deemed to
be an Ineligible Receivable in accordance with Section 2.05(a) and shall be
reassigned to such Transferor in accordance with Section 2.05(b).
(b) 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 any underlying 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.
(c) Transferor Amount. Except for (i) the conveyances
hereunder, in connection with any transaction permitted by subsection 4.02(a)(i)
or Section 4.04 or 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 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,
21
that nothing in this subsection 2.07(c) 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 two percent (2.0%) or more of the Trust Assets.
(d) 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.
(e) 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 on the underlying 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.
(f) 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.
(g) 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 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 the Rating Agency
Condition is satisfied with respect to the incurrence of such debt.
(h) Interchange. Subject to Section 8.04 of the Indenture,
with respect to any Distribution Date, on or prior to the immediately preceding
Transfer Date, the Servicer shall notify the Transferor of the amount of
Interchange required to be included as Collections of Finance Charge and
Administrative Receivables with respect to such Due Period, which amount for any
Series shall be specified in the related Indenture Supplement. Not later than
1:00 p.m., New York City time, on the related Distribution Date, the Transferor
shall cause to be deposited into the Collection Account, in immediately
available funds, the amount of Interchange to be so included as Collections of
Finance Charge and Administrative Receivables with respect to such Due Period.
Section 2.08. Covenants of each Transferor with Respect to
Receivables Purchase Agreement. Each Transferor, in its capacity as purchaser of
Receivables from HRAC II, the Bank, 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 HRAC II, the Bank 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 Rate Finance Charges. (i) Except (A) as
otherwise required by any Requirements of Law or (B) as is deemed by the Bank 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 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
22
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 the Bank
(or other Account Owner if the Bank 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 the Bank (or other Account Owner if the
Bank is not the Account Owner) in any respect (including the calculation of the
amount or the timing of charge-offs and the Periodic Rate 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 the Bank (or other
Account Owner if the Bank is not the Account Owner) will not take any action
unless (i) at the time of such action, the Servicer or the Bank (or other
Account Owner if the Bank 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 revolving credit accounts owned by
the Bank (or other Account Owner if the Bank 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 the Bank (or other Account Owner if the Bank 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
revolving credit 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.
(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
revolving credit 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 and entered into pursuant to subsection 9.01(a).
23
(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 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 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 HRAC II, the Bank
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 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 and the
24
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 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) Automatic Additional Accounts. (i) Each Transferor may
from time to time, at its sole discretion, subject to the conditions specified
in paragraph (e) below, voluntarily designate Eligible Accounts to be included
as Automatic Additional Accounts. For purposes of this paragraph, Eligible
Accounts shall be deemed to include only revolving credit accounts (a)
originated or underwritten by the Bank or any other Affiliate of the ultimate
parent of the Bank 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 such Aggregate Addition expressly provides
that such type of revolving credit account is permitted to be designated as an
Automatic Additional Account.
(ii) The number of Automatic Additional 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 2003) and the
number of Automatic Additional 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 2003)[; provided,
however, Automatic Additional 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 Automatic Additional Accounts.
On the Addition Date with respect to any Automatic Additional Accounts, the
Trust shall acquire the Receivables in such Automatic Additional Accounts (and
such Automatic Additional 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 Automatic Additional 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
Automatic Additional 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 Automatic Additional
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 Automatic
Additional 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 Bank 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 Automatic Additional Accounts have been made in contemplation of
the occurrence thereof;
25
(v) such Transferor shall have delivered to the
Owner Trustee 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
Automatic Additional Accounts to the Trust will not result in an Adverse
Effect and such Transferor shall have delivered to the Owner Trustee 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 Automatic Additional
Accounts will not have an Adverse Effect;
(vii) on or before the first Distribution Date
following the end of a Quarter in which Automatic Additional Accounts
are designated to the Trust, 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
Receivables in such Automatic Additional Accounts. 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
Automatic Additional 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 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.
Section 2.10. Removal of Accounts and Treatment of Defaulted
Receivables. (a) Removal of Accounts. On any day of any Due Period each
Transferor shall have the right to (x) designate (i) Zero Balance Accounts,
specific terminated merchant or co-branding participant accounts as requested by
the terminated merchant or co-branding participant and (ii) 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
26
Interchange and Recoveries related thereto, all monies due or to become due and
all amounts received or receivable with respect thereto after the Removal Date
and all proceeds thereof in or with respect to such Accounts and any Insurance
Proceeds relating thereto (the "Removed Accounts") (unless otherwise set forth
in the applicable Indenture Supplement) designated for removal by the
Transferor, upon satisfaction of the conditions in clauses (i) through (v)
below; provided, however, that the conditions listed in clauses (iv) and (v)
below need not be satisfied if the Removed Accounts are relate to a terminated
Affinity Agreement and the related merchant or co-branding participant or
designee has elected to purchase or direct the purchase of the Receivables in
such Removed Accounts; provided further, however, that the conditions listed in
clauses (i) through (v) below need not be satisfied if the Removed Accounts are
Zero Balance Accounts:
(i) 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 Series Enhancer (unless such notice requirement
is otherwise waived) of such removal and specifying the date for removal
of the Removed Accounts (the "Removal Date");
(ii) 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 date notice 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;
(iii) such Transferor shall have represented and
warranted, as of the Removal Date, that the list of Removed Accounts
delivered pursuant to paragraph (ii) above, as of the Removal Date, is
true and complete in all material respects;
(iv) the Rating Agency Condition shall have been
satisfied with respect to the removal of the Removed Accounts; and
(v) such Transferor shall have delivered to the
Owner Trustee 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 Removed
Accounts, all Interchange and 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.
(b) Treatment of Defaulted Receivables. 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
27
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 Interchange related
thereto, 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.
(c) Termination of Affinity Agreements. Anything to the
contrary herein notwithstanding, the Transferor shall be entitled to purchase
all Receivables in Accounts designated for purchase or re-purchase by a merchant
or co-branding participant pursuant to the termination of an Affinity Agreement
to which such merchant or co-branding participant is a party. Any repurchase of
Receivables pursuant to this subsection 2.10(c) shall be effected in the manner,
and at a price determined in accordance with subsection 2.05(b), as if the
Receivables being repurchased were Ineligible Receivables. Amounts deposited in
the Collection Account in connection therewith shall be deemed to be Collections
of Principal Receivables and shall be applied in accordance with Article VIII of
the Indenture and the terms of each Indenture Supplement.
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 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 amount of Receivables transferred to the Trust by such Transferor
in the Trust on such date), (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 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
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 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
28
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 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 Bank or other Account Owner. The Transferor shall provide
to the Servicer, the Owner Trustee, the Indenture Trustee and the Rating Agency
30 days' prior written notice of a Discount Option Date and such designation
shall become effective on a Discount Option Date only if, (i) the Transferor
delivers an Officer's Certificate 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.
[END OF ARTICLE II]
29
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 (including the
underlying receivables) and any Participation Interests, shall collect and
deposit into the Collection Account amounts received under the Receivables
(including the underlying receivables) and any Participation Interests and shall
charge-off as uncollectible Receivables, all in accordance with its customary
and usual servicing procedures for servicing revolving credit 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
and the Noteholders hereunder, Funding 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 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 revolving credit 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 and all
applicable rules and regulations of MasterCard and VISA, except insofar as
30
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. 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 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 Monthly Period prior to the termination of the Trust pursuant
to 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 (including
the underlying 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.
31
(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, 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 underlying
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 (or
the underlying 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 underlying 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.
32
(k) Receivables Not To Be Evidenced by Promissory
Notes. Except in connection with its enforcement or collection of an
Account, the Servicer will take no action to cause any Receivable to be
evidenced by any instrument (as defined in the UCC) and if any
Receivable is so evidenced it shall be reassigned or assigned to the
Servicer as provided in this Section.
(l) 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.
(m) 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 Rate 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 revolving credit accounts owned by the Bank (or other Account
Owner if the Bank 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 the Bank (or other
Account Owner if the Bank is not the Account Owner) and an unrelated
third party or by the terms of the Credit Agreements.
In the event (x) 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, or (y) as provided in subsection
3.03(k) with respect to any Receivable, 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 Interchange and 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 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
33
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 reports
necessary to make such identification. 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 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 and each Rating Agency
on or before March 31 of each calendar year, beginning with March 31, 2004, 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, 2004, 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 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, 2004, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also
34
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 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 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 as indebtedness under
applicable tax law, as described in this Section 3.07. The parties hereto agree
that they will not cause or permit the making, as applicable, of any election
under Treasury Regulation Section 301.7701-3 whereby the Trust or any portion
thereof would be treated as an association taxable as a corporation for federal
income tax purposes 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 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 because of a rebate, refund, unauthorized charge or billing error to
an Obligor, because such Receivable was created in respect of merchandise which
was refused or returned by an Obligor, or if the Servicer otherwise 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
35
reduced by the amount of the adjustment. Similarly, the amount of Principal
Receivables used to calculate the Transferor Amount and (unless otherwise
specified) any other amount required herein or in any Indenture Supplement to be
calculated by reference to the amount of Principal Receivables will be reduced
by the principal amount of any Receivable which was discovered as having been
created through a fraudulent or counterfeit charge or with respect to which the
covenant contained in subsection 2.07(b) was breached. Any adjustment required
pursuant to either of the two preceding sentences 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
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.
[END OF ARTICLE III]
36
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 Title 11 of
the United States Code (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 Funding
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 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 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(c), 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
37
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 revolving credit accounts and the receivables arising
thereunder and interests in the Transferor Amount, which may include all, but
not less than all, of the Accounts and such Transferor's interest in the
Transaction Documents and its remaining interest in the Accounts and Receivables
arising thereunder (collectively, the "Assigned Assets"), together with all
servicing functions and other obligations under this Agreement or relating to
the 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 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 the Rating Agency (with a copy to the
38
Servicer and the Indenture Trustee) notice of such transfer and
assumption, and that each Rating Agency that has rated an Outstanding
Series of Notes shall confirm 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 Servicer, the Owner Trustee 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 Servicer, the Owner Trustee and the Indenture
Trustee;
(d) the Owner Trustee 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 the Trust, (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 Transferors
shall surrender the 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.
[END OF ARTICLE IV]
39
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 and the Indenture Trustee, in form satisfactory to the Owner
Trustee and the Indenture Trustee, the performance of every covenant and
obligation of the Servicer hereunder;
(ii) the Servicer has delivered to the Owner Trustee
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.
40
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 the
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 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 and the
Indenture Trustee, in form satisfactory to the Owner Trustee 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 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.
41
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.
[END OF ARTICLE V]
42
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 Noteholders in accordance with
the terms of the Indenture and each Indenture Supplement.
[END OF ARTICLE VI]
43
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 10% or more of the
aggregate unpaid principal amount of all Notes (or, with respect to any
such failure that does not relate to all Series, 10% or more 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 10% or more 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% or more 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 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;
44
Then, in the event of any Servicer Default, so long as the
Servicer Default shall not have been remedied, either the Indenture Trustee or
the Holders of Notes evidencing more than 50% of the aggregate unpaid principal
amount of all 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 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,
45
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 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. 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 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.
(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 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
46
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
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.
[END OF ARTICLE VII]
47
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.
[END OF ARTICLE VIII]
48
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 one or more amendments, without the consent of the Indenture Trustee 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 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 the appropriate 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 and the Owner
Trustee an Officer's Certificate to the effect that the proposed amendments meet
the requirements set forth in this subsection, (ii) the Rating Agency Condition
is satisfied with respect to such amendment 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 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
49
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 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).
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
50
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, corporate structure or jurisdiction of organization which
would make any financing statement or amendment to any financing statement filed
in accordance with paragraph (a) seriously misleading within the meaning of
Section 9-402(7) (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, within 90 days of such change or such earlier time as prescribed by law,
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 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 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 Automatic Additional 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 before April 30 of each year, beginning with April 30, 2004, 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 Affinity Funding
Corporation III, 0000 Xxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000, Attention: [*]
(facsimile no. (702) [*]), (ii) in the case of the Bank, to
51
Household Bank (SB), N.A. at 0000 Xxxx Xxxxxx, Xxx Xxxxx, Xxxxxx 00000,
Attention: General Counsel (facsimile no. (702) [*]), (iii) in the case of the
Servicer, to Household Finance Corporation, at 0000 Xxxxxxx Xxxx, Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000, Attention: X.X. Xxxxx, Assistant 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, Xxxxxx Square North, 0000 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate Trust
Administration, (v) in the case of Fitch, to Fitch, Inc., Xxx Xxxxx Xxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 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, Xxx Xxxx 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, Xxx Xxxx 00000,
Attention: Credit Card ABS (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 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 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 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.
52
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.
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 9.14. 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 in 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.
Section 9.15. Certain Commercial Law Representations and
Warranties. The Transferor hereby makes the following representations and
warranties. Such representations and warranties shall survive until the
termination of this Agreement. Such representations and warranties speak of the
date that the Receivables are transferred to the Trust, but shall not be waived
by any of the parties to this Agreement unless each Rating Agency shall have
notified the Transferor, the Servicer and
53
the Owner Trustee in writing that such waiver will not result in a reduction or
withdrawal of the rating of any outstanding Series or Class to which it is a
Rating Agency.
(a) This Agreement creates a valid and continuing security
interest (as defined in the applicable UCC) in favor of the Trust in the
Receivables described in Section 2.01 of this Agreement or in Section 3(a) of
any Assignment, which security interest is prior to all other liens, and is
enforceable as such against creditors of and purchasers from the Issuer.
(b) The Receivables constitute "accounts" within the meaning
of the applicable UCC.
(c) At the time of its grant of any security interest in the
Receivables pursuant to this Agreement or an Assignment, the Transferor owned
and had good and marketable title to the Receivables free and clear of any lien,
claim or encumbrance of any Person.
(d) The Transferor has caused or will have caused, within
ten (10) days of the initial execution of this Agreement and each Assignment,
the filing of all appropriate financing statements in the proper filing office
in the appropriate jurisdictions under applicable law in order to perfect the
security interest in the Receivables granted to the Trust pursuant to this
Agreement or such Assignment.
(e) Other than the security interest granted to the Trust
pursuant to this Agreement or an Assignment, the Transferor has not pledged,
assigned, sold, granted a security interest in, or otherwise conveyed the
Receivables. The Transferor has not authorized the filing of and is not aware of
any financing statements against the Issuer that include a description of the
Receivables other than any financing statement relating to the security interest
granted to the Trust and the Indenture Trustee pursuant to this Agreement, an
Assignment or the Indenture, as applicable, or that has been terminated. The
Transferor is not aware of any judgment or tax lien filings against the Issuer.
[END OF ARTICLE IX]
54
ARTICLE X
ADMINISTRATION PROVISIONS
Section 10.01. Administrative Duties.
(a) Duties With Respect to the Indenture. The Servicer shall
perform all its duties and the duties of the Issuer under the Indenture. In
addition, the Servicer shall consult with the Owner Trustee as the Servicer
deems appropriate regarding the duties of the Issuer under the Indenture. The
Servicer shall monitor the performance of the Issuer and shall advise the Owner
Trustee when action is necessary to comply with the Issuer's duties under the
Indenture. The Servicer shall prepare for execution by the Issuer or shall cause
the preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.03, 2.05, 2.06, 2.09(a), 2.11, 2.12(d), 2.15, 2.16, 3.03,
3.04, 3.05, 3.06, 3.07(b), 3.07(d), 3.09, 3.10, 3.19, 4.01, 5.05, 6.08, 6.10,
7.01, 8.09, 10.01, 10.02, 10.03, 10.06, 12.01(a), 12.01(b), 12.05 and 12.06.
(b) Duties With Respect to the Issuer. (i) In addition to
the duties of the Servicer set forth in this Agreement or any of the Transaction
Documents, the Servicer shall perform such calculations and shall prepare for
execution by the Issuer or the Owner Trustee, or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer or the Owner
Trustee, to prepare, file or deliver pursuant to this Agreement or any of the
Transaction Documents or under state or federal tax and securities laws, and
shall take all appropriate action that it is the duty of the Issuer to take
pursuant to this Agreement or any of the Transaction Documents. In accordance
with the directions of the Issuer or the Owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other activities in
connection with the Trust Estate (including the Transaction Documents) as are
not covered by any of the foregoing provisions and as are expressly requested by
the Issuer or the Owner Trustee and are reasonably within the capability of the
Servicer.
(ii) Notwithstanding anything in this Agreement or
any of the Transaction Documents to the contrary, the Servicer shall be
responsible for promptly notifying the Owner Trustee and the Indenture
Trustee in the event that any withholding tax is imposed on the Issuer's
payments (or allocations of income) to a Transferor as contemplated by
this Agreement or any of the Transaction Documents. Any such notice
shall be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee or the Indenture Trustee
pursuant to such provision.
(iii) The Servicer shall perform the duties of the
Servicer specified in Section 9.02 of the Trust Agreement required to be
performed in connection with the resignation or removal of the Owner
Trustee, and any other duties expressly required to be performed by the
Servicer under this Agreement or any of the Transaction Documents.
(iv) In carrying out the foregoing duties or any of
its other obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
55
(c) Tax Matters. The Servicer shall prepare and file, or
cause to be prepared and filed, all required tax returns, tax elections,
financial statements and such annual or other reports of the Issuer as are
necessary for preparation of tax reports, including, without limitation, Form
1099. All tax returns will be signed by the Issuer.
(d) Non-Ministerial Matters. With respect to any matters
that in the reasonable judgment of the Servicer are non-ministerial, the
Servicer shall not take any action pursuant to this Article X unless within a
reasonable time before the taking of such action, the Servicer shall have
notified the Owner Trustee and the Indenture Trustee of the proposed action and
the Owner Trustee and the Indenture Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:
(i) the initiation of any claim or lawsuit by the
Issuer and the compromise of any action, claim or lawsuit brought by or against
the Issuer;
(ii) the appointment of successor Note Registrars,
successor Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the consent to the assignment by the Note Registrar, Paying Agent
or Indenture Trustee of its obligations under the Indenture; or
(iii) the removal of the Indenture Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the Transaction
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) making any payments to the Noteholders or the Transferor
under the Transaction Documents, (2) sell any of the assets of the Trust, (3)
take any other action that the Issuer directs the Servicer not to take on its
behalf or (4) in connection with its duties hereunder assume any indemnification
obligation of any other Person.
(f) Neither the Indenture Trustee nor any successor Servicer
shall be responsible for any obligations or duties of a predecessor Servicer
under this Section 10.01.
Section 10.02. Records. The Servicer shall maintain appropriate
books of account and records relating to services performed under this
Agreement, which books of account and records shall be accessible for inspection
by the Issuer and the Indenture Trustee at any time during normal business
hours.
Section 10.03. Additional Information to be Furnished to the
Trust. The Servicer shall furnish to the Issuer and the Indenture Trustee, from
time to time, such additional information regarding the Trust Estate as the
Issuer and the Indenture Trustee shall reasonably request.
[END OF ARTICLE X]
56
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 AFFINITY FUNDING
CORPORATION III,
Transferor
By:
----------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
Servicer
By:
----------------------------------
Name:
Title:
HOUSEHOLD AFFINITY CREDIT CARD MASTER
NOTE TRUST I
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee of the
Trust
By:
----------------------------------
Name:
Title:
Acknowledged and Accepted:
By: THE BANK OF NEW YORK,
not in its individual capacity but
solely as Indenture Trustee
By:
---------------------------------------
Name:
Title:
57
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 AFFINITY FUNDING CORPORATION
III, a Delaware corporation, as Transferor (the "Transferor"), HOUSEHOLD FINANCE
CORPORATION, a Delaware corporation, as Servicer (the "Servicer"), and HOUSEHOLD
AFFINITY CREDIT CARD MASTER NOTE TRUST I (the "Trust"), a Delaware statutory
trust, pursuant to the Transfer and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, the Transferor, the Servicer and the Trust are parties
to the Transfer and Servicing Agreement, dated as of February [*], 2003 (as
amended and supplemented, 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 Trust; and
WHEREAS, Wilmington Trust Company, as Owner Trustee (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, on behalf of the Trust, 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 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.
----------
/1/ To be dated as of the applicable Addition Date.
A-1
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 Interchange and 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, merchant
banks, merchants clearance systems, VISA, MasterCard 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 Interchange
and 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.
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
A-2
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 Interchange and 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 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
A-3
(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, on behalf of the Trust, have caused this Assignment to be duly executed
by their respective officers as of the day and year first above written.
HOUSEHOLD AFFINITY FUNDING
CORPORATION III,
Transferor
By:
----------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
Servicer
By:
----------------------------------
Name:
Title:
HOUSEHOLD AFFINITY CREDIT CARD MASTER
NOTE TRUST I,
Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity,
but solely as Owner Trustee on
behalf of the Trust
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 AFFINITY FUNDING CORPORATION III, a
Delaware corporation, as Transferor (the "Transferor"), HOUSEHOLD FINANCE
CORPORATION, a Delaware corporation, as Servicer, and HOUSEHOLD AFFINITY CREDIT
CARD MASTER NOTE TRUST I, (the "Trust"), a Delaware statutory trust, pursuant to
the Transfer and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, the Transferor, the Servicer and the Trust are parties
to the Transfer and Servicing Agreement, dated as of February [*], 2003 (as
amended and supplemented, the "Agreement");
WHEREAS, pursuant to the Agreement, the Transferor wishes to
remove from the Trust all Receivables owned by Wilmington Trust Company, as
Owner Trustee (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 Owner Trustee, on behalf
of 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, __________, ____.
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.
----------
/1/ To be dated as of the Removal Date.
B-1
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 Interchange and 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, on
behalf of the Trust, 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.
(c) List of Removed Accounts. The list of Removed
Accounts delivered pursuant to subsection 2.10(a)(ii) 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-2
IN WITNESS WHEREOF, the Transferor, the Servicer and the Owner
Trustee, on behalf of the Trust, have caused this Reassignment to be duly
executed by their respective officers as of the day and year first above
written.
HOUSEHOLD AFFINITY FUNDING
CORPORATION III,
Transferor
By:
----------------------------------
Name:
Title:
HOUSEHOLD FINANCE CORPORATION,
Servicer
By:
----------------------------------
Name:
Title:
HOUSEHOLD AFFINITY CREDIT CARD MASTER
NOTE TRUST I,
Issuer
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee of the
Trust
By:
----------------------------------
Name:
Title:
B-3
EXHIBIT C
FORM OF ANNUAL SERVICER'S CERTIFICATE
(To be delivered on or before March 31 of
each calendar year beginning with 2004,
pursuant to Section 3.05 of the Transfer and
Servicing Agreement referred to below)
HOUSEHOLD AFFINITY CREDIT CARD 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 February [*], 2003 (as amended
and supplemented, the "Agreement"), among Household Affinity Funding Corporation
III, as transferor, Household Finance Corporation, and Household Affinity Credit
Card 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."]
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.
(i) The amendment to the Transfer and Servicing
Agreement, attached hereto as Schedule 1 (the "Amendment" ), has been
duly authorized, executed and delivered by the Transferor and
constitutes the legal, valid and binding agreement of the Transferor,
enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws from time to time in effect affecting
creditors' rights generally. The enforceability of the Transferor's
obligations is also subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity
or at law).
(ii) 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. To the extent that Article 9 of the New York UCC applies
to the transfer of the Additional Receivables and the proceeds thereof by HRAC
II to the Transferor pursuant to the Supplemental Conveyance, the Supplemental
Conveyance creates in favor of the transferor a security interest in the rights
of HRAC II 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, on behalf of the Trust,
pursuant to the Assignment does not constitute an absolute assignment by the
Transferor to the Owner Trustee, on behalf of the Trust, of such Additional
Receivables or the proceeds thereof, the Assignment creates in favor of the
Owner Trustee, on behalf of the Trust, 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, on behalf of the Trust, 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
