Exhibit 4.3
HOUSEHOLD FINANCE CORPORATION,
as the Master Servicer,
together with
HOUSEHOLD AUTOMOBILE REVOLVING TRUST I,
as Issuer,
HOUSEHOLD AUTO RECEIVABLES CORPORATION,
as Seller,
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee and Trust Collateral Agent
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
SERIES 1998-1 SUPPLEMENT
Dated as of October 1, 1998
to the
INDENTURE
Dated as of October 1, 1998
and to the
TRUST AGREEMENT
Dated as of March 1, 1998
TABLE OF CONTENTS
Page
ARTICLE I CREATION OF THE SERIES 1998-1 NOTES.....................................................................1
SECTION 1.01. DESIGNATION.....................................................................................1
SECTION 1.02. PLEDGE OF SERIES 1998-1 TRUST ESTATE............................................................1
SECTION 1.03. PAYMENTS AND COMPUTATIONS.......................................................................3
SECTION 1.04. DENOMINATIONS...................................................................................3
ARTICLE II DEFINITIONS............................................................................................3
SECTION 2.01. DEFINITIONS.....................................................................................3
ARTICLE III DISTRIBUTIONS AND STATEMENTS TO SERIES 1998-1 NOTEHOLDERS; SERIES SPECIFIC COVENANTS.................13
SECTION 3.01. SERIES 1998-1 TRUST ACCOUNTS...................................................................13
SECTION 3.02. RESERVE ACCOUNT................................................................................14
SECTION 3.03. DISTRIBUTIONS..................................................................................14
SECTION 3.04. STATEMENTS TO NOTEHOLDERS......................................................................16
SECTION 3.05. REPORTING REQUIREMENTS.........................................................................17
SECTION 3.06. COMPLIANCE WITH WITHHOLDING REQUIREMENTS.......................................................17
SECTION 3.07. SPECIAL COVENANTS AND ACKNOWLEDGEMENTS.........................................................17
SECTION 3.08. TAX CHARACTERIZATION...........................................................................18
ARTICLE IV EVENTS OF DEFAULT; REMEDIES...........................................................................18
SECTION 4.01. EVENTS OF DEFAULT..............................................................................18
SECTION 4.02. RIGHTS UPON EVENT OF DEFAULT...................................................................19
SECTION 4.03. REMEDIES.......................................................................................20
SECTION 4.04. PRIORITIES.....................................................................................21
ARTICLE V PREPAYMENT AND REDEMPTION..............................................................................22
SECTION 5.01. OPTIONAL "CLEAN-UP" REDEMPTION.................................................................22
ARTICLE VI MISCELLANEOUS.........................................................................................22
SECTION 6.01. RATIFICATION OF BASIC DOCUMENTS................................................................22
SECTION 6.02. COUNTERPARTS...................................................................................23
SECTION 6.03. GOVERNING LAW..................................................................................23
SECTION 6.04. AMENDMENTS WITHOUT CONSENT OF NOTEHOLDERS......................................................23
SECTION 6.05. AMENDMENTS WITH CONSENT OF THE SERIES 1998-1 NOTEHOLDERS.......................................24
SECTION 6.06. NON-PETITION CLAUSES...........................................................................26
Schedule I Schedule of Eligibility Criteria
Exhibit A-1 Form of Series 1998-1 Class A-1 Note
Exhibit A-2 Form of Series 1998-1 Class A-2 Note
Exhibit A-3 Form of Series 1998-1 Class A-3 Note
Exhibit A-4 Form of Series 1998-1 Class A-4 Note
Exhibit B-1 Form of Series 1998-1 Class B-1 Note
Exhibit B-2 Form of Series 1998-1 Class B-2 Note
Exhibit C Form of Series 1989-1 Class C Note
2
Exhibit D Form of Series 1998-1 Certificate
Exhibit E Form of Master Servicer's Certificate
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This Series 1998-1 Supplement, dated as of October 1, 1998, is by and
among Household Finance Corporation, a Delaware corporation, as master servicer
(the "Master Servicer"), Household Automobile Revolving Trust I, a Delaware
business trust, as Issuer (the "Issuer"), Household Auto Receivables
Corporation, a Nevada corporation, as Seller ("Seller"), The Chase Manhattan
Bank, a New York banking corporation ("Chase"), as trustee for the Noteholders
(the "Indenture Trustee") and as Trust Collateral Agent, and Wilmington Trust
Company, a Delaware banking corporation, as owner trustee (the "Owner Trustee")
for the Certificateholders.
RECITALS
This Series 1998-1 Supplement, is executed and delivered by the
parties hereto pursuant to Section 9.3 of the Indenture dated as of October 1,
1998 (the "Indenture") among the Issuer, the Master Servicer, the Indenture
Trustee and the Trust Collateral Agent and pursuant to Section 3.2 of the Trust
Agreement (the "Trust Agreement") dated as of March 1, 1998 between the Seller
and the Owner Trustee. In the event that any term or provision contained herein
shall conflict with or be inconsistent with any term or provision contained in
the Indenture or the Trust Agreement, the terms and provisions of this Series
1998-1 Supplement shall govern with respect to Series 1998-1.
Article I
CREATION OF THE SERIES 1998-1 NOTES
SECTION I.01. Designation.
(a) There is hereby created a Series of Notes to be issued pursuant to
the Indenture and this Series 1998-1 Supplement to be known as "Household
Automobile Revolving Trust I, Series 1998-1 Notes." The Series 1998-1 Notes
shall be issued in seven classes (each, a "Class"). The Class A-1 Notes in an
aggregate initial principal amount of $________ (the "Class A-1 Notes"), the
Class A-2 Notes in an aggregate initial principal amount of $________ (the
"Class A-2 Notes"), the Class A-3 Notes in an aggregate initial principal amount
of $________ (the "Class A-3 Notes"), the Class A-4 Notes in an aggregate
initial principal amount of $________ (the "Class A-4 Notes", and together with
Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the "Class A
Notes"), the Class B-1 Notes in an aggregate initial principal amount of
$________ (the "Class B-1 Notes"), the Class B-2 Notes in an aggregate initial
principal amount of $________ (the "Class B-2 Notes", and together with the
Class B-1 Notes, the "Class B Notes") and the Class C Notes in an aggregate
initial principal amount of $________ (the "Class C Notes").
(b) There is hereby created a Series of Series Trust Certificates to
be issued pursuant to the Trust Agreement and this Series 1998-1 Supplement to
be known as the "Household Automobile Revolving Trust I, Series 1998-1
Certificates."
SECTION I.02. Pledge of Series 1998-1 Trust Estate.
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The Issuer hereby Grants to the Indenture Trustee, for the benefit of
the Holders of the Notes all of the Issuer's right, title and interest (but none
of its obligations) in and to (a) each and every Receivable listed as a Series
1998-1 Receivable on the Schedule of Receivables attached hereto as Schedule I
and all monies paid or payable thereon or in respect thereof after the Cutoff
Date (including amounts due on or before the Cutoff Date but received by HAFC,
the Seller, the Master Servicer or the Issuer after the Cutoff Date); (b) an
assignment of the security interests in the related Financed Vehicles granted by
Obligors pursuant to such Series 1998-1 Receivables and any other interest of
the Issuer in the related Financed Vehicles; (c) all rights of HAFC against
Dealers pursuant to Dealer Agreements or Dealer Assignments related to such
Series 1998-1 Receivables; (d) any proceeds and the right to receive proceeds
with respect to such Series 1998-1 Receivables repurchased by a Dealer, pursuant
to a Dealer Agreement as a result of a breach of representation or warranty in
the related Dealer Agreement; [(e) all rights under any Service Contracts on the
related Financed Vehicles;] (f) any proceeds and the right to receive proceeds
with respect to such Series 1998-1 Receivables from claims on any physical
damage, credit life or disability insurance policies covering the related
Financed Vehicles or Obligors including rebates of insurance premiums relating
to such Series 1998-1 Receivables; (g) all funds on deposit from time to time in
the Series 1998-1 Trust Accounts (including all investments and proceeds thereof
from time to time allocable to the Series 1998-1 Reserve Account, but excluding
all investments and proceeds thereof allocable to the other Series 1998-1 Trust
Accounts or allocable to the Master Collection Account); (h) all rights of the
Seller in and to the Purchase Agreement and the Purchase Agreement Supplement or
Purchase Agreement Supplements related to Series 1998-1, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of HAFC under the Purchase Agreement and such Purchase Agreement
Supplement, or Purchase Agreement Supplements, (i) all property (including the
right to receive future Net Liquidation Proceeds) that secures such Series
1998-1 Receivables and that has been acquired by or on behalf of the Issuer
pursuant to liquidation of such Series 1998-1 Receivables; (j) all items
contained in the Receivable Files with respect such Series 1998-1 Receivables
and any and all other documents that the Master Servicer or HAFC keeps on file
in accordance with its customary procedures relating to such Series 1998-1
Receivables, or the related Financed Vehicles or Obligors, (k) the Master Sale
and Servicing Agreement and the Transfer Agreement or Transfer Agreements
related to Series 1998-1 (including all rights of the Seller under the Purchase
Agreement and the related Purchase Agreement Supplement or Purchase Agreement
Supplements, assigned to the Issuer pursuant to the Master Sale and Servicing
Agreement and the related Transfer Agreement or Transfer Agreements); (l) one
share of the Preferred Stock of the Seller and (m) all present and future
claims, demands, causes and chooses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, into cash or other liquid property,
all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of obligations
and receivables, instruments and other property which at any time constitute all
or part of or are included in the proceeds of any of the foregoing
(collectively, the "Series 1998-1 Trust Estate").
The foregoing Grant is made in trust to the Indenture Trustee for the
benefit of the
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Holders of the Notes. The Indenture Trustee hereby acknowledges such Grant,
accepts the trusts under the Indenture and this Series 1998-1 Supplement in
accordance with the provisions of the Indenture and this Series 1998-1
Supplement and agrees to perform its duties required in the Indenture and in
this Series 1998-1 Supplement in accordance with the provisions hereof and of
the Indenture to the best of its ability to the end that the interests of such
parties, recognizing the priorities of their respective interests may be
adequately and effectively protected.
SECTION I.03. Payments and Computations.
All amounts to be paid or deposited by any Person hereunder shall be
paid or deposited in accordance with the terms hereof no later than 12:00 noon
(New York City time) on the day when due in immediately available funds, or by
prior-day ACH debit.
SECTION I.04. Denominations.
The Notes of each Class will be issued in denominations of $100,000
and integral multiples of $1,000 in excess thereof, except for one Note of each
Class which may be issued in a denomination other than an integral multiple of
$1,000.
Article II
DEFINITIONS
SECTION II.01. Definitions.
(a) Whenever used in this Series 1998-1 Supplement and when used in
the Series 1998-1 Related Documents with respect to the Series 1998-1 Notes or
the Series 1998-1 Certificates, 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. Unless otherwise defined in
this Series 1998-1 Supplement, terms defined in the Basic Documents are used
herein as therein defined. A term used herein preceded by the designation
"Series 1998-1" but not defined herein, shall have the meaning specified for
such term in the Basic Documents as such term relates to Series 1998-1.
"Aggregate Note Principal Balance" means, as of any date, the
aggregate outstanding principal amount of all the Notes on such date.
"Aggregate Optimal Note Principal Balance" means, with respect to any
Distribution Date, the excess, if any, of (x) the Pool Balance as of the last
day of the prior Collection Period over (y) the Targeted Overcollateralization
Amount for such Distribution Date.
"Available Funds" means, with respect to any Collection Period, and
the related Distribution Date, the sum of (i) the Collected Funds for such
Collection Period, (ii) investment earnings realized during the related
Collection Period, (iii) all Repurchase Amounts deposited in the Collection
Account during such Collection Period, (iv) any Insolvency Proceeds or proceeds
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of any liquidation, in whole or in part, of the assets of the Trust and (v) the
lesser of (a) the excess, if any, of the aggregate amount distributable pursuant
to Section 3.03(a)(i) - (x) on such Distribution Date, over the aggregate of the
amounts specified in clauses (i), (ii) and (iii) with respect to such Collection
Period and (b) the Reserve Account Balance.
"Base Servicing Fee" means, with respect to any Collection Period, the
fee payable to the Master Servicer for services rendered during such Collection
Period, which shall be equal to one-twelfth of the Servicing Fee Rate multiplied
by the Aggregate Principal Balances of the Series 1998-1 Receivables, as of the
Accounting Date immediately preceding such Collection Period.
"Basic Documents" means the Master Sale and Servicing Agreement, the
Indenture, the Trust Agreement, the Purchase Agreement, and other documents and
certificates delivered therewith or pursuant thereto in connection with Series
1998-1.
"Book Entry Notes" means any beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 of the Indenture.
"Certificateholders" means the holders of Series 1998-1 Certificates.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the amount payable pursuant to Section 3.03 (a)(xiii) hereof.
"Class A Distributable Amount" means, with respect to any Distribution
Date and each class of Class A Notes, the sum of (i) the Class A Interest
Distributable Amount for such Distribution Date and (ii) the Class A Principal
Distributable Amount for such Distribution Date.
"Class A Interest Carryover Shortfall" means, with respect to any
Distribution Date and each Class of Class A Notes, the sum of: (i) excess of (a)
the related Class A Interest Distributable Amount for the preceding Distribution
Date, over (b) the amount actually paid as interest to the Class A Noteholders
on such preceding Distribution Date, plus (ii) interest on such excess, to the
extent permitted by law, at a rate per annum equal to the related Class A Note
Rate from such preceding Distribution Date to but excluding the current
Distribution Date.
"Class A Interest Distributable Amount" means, with respect to any
Distribution Date and each class of Class A Notes, an amount equal to the sum
of: (i) the aggregate amount of interest accrued on the Class A Notes at the
related Class A Note Rate from and including the preceding Distribution Date
(or, in the case of the initial Distribution Date, from and including the
Closing Date) to but excluding the current Distribution Date plus (ii) the
related Class A Interest Carryover Shortfall for the current Distribution Date.
"Class A Monthly Principal Distributable Amount" means (i) with
respect to any Distribution Date, prior to the Distribution Date on which the
principal balance of the Class A-1 Notes is reduced to zero, 100% of the
Principal Distributable Amount, (ii) with respect to the Distribution Date on
which the principal balance of the Class A-1 Notes is reduced to zero, 100%
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of the Principal Distributable Amount with respect to that portion of the
Principal Distributable Amount required to reduce the principal balance of the
Class A-1 Notes to zero, plus the excess of the amount described in clause (iii)
of this definition for such Distribution Date over the amount of the Principal
Distributable Amount applied on such Distribution Date to reduce the principal
balance of the Class A-1 Notes to zero, (iii) with respect to any Distribution
Date on and after the Distribution Date on which the Principal Balance of the
Class A-1 Notes is reduced to zero until the Distribution Date on which the
Principal Balance of the Class A Notes is reduced to zero, the excess of (x)
aggregate outstanding principal balance of the Class A Notes over (y) (A) the
product of 69.25% and the Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount for such Distribution
Date.
"Class A Noteholders" means the Holders of the Class A Notes.
"Class A Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class A Monthly Principal Distributable
Amount for the preceding Distribution Date over the amount that was actually
distributed in respect of principal of the Class A Notes on such preceding
Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class A Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class A Principal Carryover
Shortfall for such Distribution Date; provided, however, that (x) the sum of
clauses (i) and (ii) shall not exceed the outstanding principal amount of the
Class A Notes, and (y) on the Final Scheduled Distribution Date, the Class A
Principal Distributable Amount will include the amount, to the extent of the
remaining Available Funds, necessary (after giving effect to other amounts
having a higher payment priority on such Distribution Date) to reduce the
outstanding principal amount of the Class A Notes to zero.
"Class A-1 Noteholders" means the Holders of the Class A-1 Notes.
"Class A-1 Scheduled Maturity Date" means with respect to the Class
A-1 Notes, _______________.
"Class A-2 Noteholders" means the Holders of the Class A-2 Notes.
"Class A-3 Noteholders" means the Holders of the Class A-3 Notes.
"Class A-4 Noteholders" means the Holders of the Class A-4 Notes.
"Class B-1 Distributable Amount" means, with respect to any
Distribution Date, the sum of (i) the Class B-1 Interest Distributable Amount
for such Distribution Date and (ii) the Class B-1 Principal Distributable Amount
for such Distribution Date.
"Class B-1 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the sum of: (i) the excess of (a) the Class B-1 Interest
Distributable Amount for the preceding Distribution Date, over (b) the amount
actually paid as interest to the Class B-1 Noteholders on such preceding
Distribution Date, plus (ii) interest on such excess, to the extent
8
permitted by law, at a rate per annum equal to the Class B-1 Note Rate from such
preceding Distribution Date to but excluding the current Distribution Date.
"Class B-1 Interest Distributable Amount" means, with respect to any
Distribution Date, an amount equal to the sum of: (i) the aggregate amount of
interest accrued on the Class B-1 Notes at the Class B-1 Note Rate from and
including the preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date) to but excluding the
current Distribution Date plus (ii) the Class B-1 Interest Carryover Shortfall
for the current Distribution Date.
"Class B-1 Monthly Principal Distributable Amount" means, with respect
to each Distribution Date on and after the Distribution Date on which the
principal balance of the Class A-1 Notes is reduced to zero, until the
Distribution Date on which the outstanding principal amount of the Class B-1
Notes has been reduced to zero, an amount equal to the excess of: (i) the sum of
(x) the outstanding principal balance of the Class A Notes on such Distribution
Date (after giving effect to distribution of the Class A Principal Distributable
Amount for such Distribution Date) plus (y) the outstanding principal balance of
the Class B-1 Notes prior to such Distribution Date over (ii) (A) the product of
81.25% and the outstanding Pool Balance as of the end of the related Collection
Period minus (B) the Targeted Overcollateralization Amount.
"Class B-1 Noteholders" means the Holders of the Class B-1 Notes."
"Class B-1 Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class B-1 Principal Distributable Amount
for the preceding Distribution Date over the amount that was actually
distributed in respect of principal of the Class B-1 Notes on such Preceding
Distribution Date.
"Class B-1 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class B-1 Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class B-1 Principal Carryover
Shortfall for such Distribution Date; provided, however, that the sum of clauses
(i) and (ii) shall not exceed the outstanding principal amount of the Class B-1
Notes, and on the Final Scheduled Distribution Date, the Class B-1 Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Distribution Date) to reduce the outstanding principal
amount of the Class B-1 Notes to zero.
"Class B-2 Distributable Amount" means, with respect to any
Distribution Date, the sum of (i) the Class B-2 Interest Distributable Amount
for such Distribution Date and (ii) the Class B-2 Principal Distributable Amount
for such Distribution Date.
"Class B-2 Interest Carryover Shortfall" means, with respect to any
Distribution Date, the sum of: (i) the excess of (a) the Class B-2 Interest
Distributable Amount for the preceding Distribution Date, over (b) the amount
actually paid as interest to the Class B-2 Noteholders on such preceding
Distribution Date, plus (ii) interest on such excess, to the extent permitted by
law, at a rate per annum equal to the Class B-2 Note Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
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"Class B-2 Interest Distributable Amount" means, with respect to any
Distribution Date, an amount equal to the sum of: (i) the aggregate amount of
interest accrued on the Class B-2 Notes at the Class B-2 Note Rate from and
including the preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date) to but excluding the
current Distribution Date plus (ii) the Class B-2 Interest Carryover Shortfall
for the current Distribution Date.
"Class B-2 Monthly Principal Distributable Amount" means, with respect
to each Distribution Date on and after the Distribution Date on which the
principal balance of the Class A-1 Notes is reduced to zero, until the
Distribution Date on which the outstanding principal amount of the Class B-2
Notes has been reduced to zero, an amount equal to the excess of: (i) the sum of
(x) the outstanding principal balance of the Class A Notes on such Distribution
Date (after giving effect to distribution of the Class A Principal Distributable
Amount for such Distribution Date) plus (y) the outstanding principal balance of
the Class B-1 Notes (after giving effect to distribution of the Class B-1
Principal Distributable Amount for such Distribution Date) and (z) the
outstanding principal balance of the Class B-2 Notes (after giving effect to
distribution of the Class B-2 Principal Distributable Amount for such
Distribution Date) over (ii) (A) the product of 92.65% and the outstanding Pool
Balance as of the end of the related Collection Period minus (B) the Targeted
Overcollateralization Amount.
"Class B-2 Noteholders" means the Holders of the Class B-2 Notes."
"Class B-2 Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class B-2 Principal Distributable Amount
for the preceding Distribution Date over the amount that was actually
distributed in respect of principal of the Class B-2 Notes on such Preceding
Distribution Date.
"Class B-2 Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class B-2 Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class B-2 Principal Carryover
Shortfall for such Distribution Date; provided, however, that the sum of clauses
(i) and (ii) shall not exceed the outstanding principal amount of the Class B-2
Notes, and on the Final Scheduled Distribution Date, the Class B-2 Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Distribution Date) to reduce the outstanding principal
amount of the Class B-2 Notes to zero.
"Class C Distributable Amount" means, with respect to any Distribution
Date, the sum of (i) the Class C Interest Distributable Amount and (ii) the
Class C Principal Distributable Amount.
"Class C Interest Carryover Shortfall" means, with respect to any
Distribution Date the sum of: (i) excess of (a) the Class C Interest
Distributable Amount for the preceding Distribution Date, over (b) the amount
actually paid as interest to the Class C Noteholders on such preceding
Distribution Date, plus (ii) interest on such excess, to the extent permitted by
law, at a rate per annum equal to the Class C Note Rate from such preceding
Distribution Date to but excluding the current Distribution Date.
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"Class C Interest Distributable Amount" means, with respect to any
Distribution Date an amount equal to the sum of: (i) the aggregate amount of
interest accrued on the Class C Notes at the related Class C Note Rate from and
including the preceding Distribution Date (or, in the case of the initial
Distribution Date, from and including the Closing Date) to but excluding the
current Distribution Date plus (ii) the Class C Interest Carryover Shortfall for
the current Distribution Date.
"Class C Monthly Principal Distributable Amount" means, with respect
to each Distribution Date on and after the Distribution Date on which the
outstanding principal amount of the Class A-1 Notes is reduced to zero, until
the Distribution Date on which the outstanding principal amount of the Class C
Notes has been reduced to zero, an amount equal to the excess, if any of: (i)
the sum of (x) the outstanding principal balance of the Class A Notes on such
Distribution Date (after giving effect to distribution of the Class A Principal
Distribution Amount for such Distribution Date), plus (y) the outstanding
principal balance of the Class B Notes on such Distribution Date (after giving
effect to distribution of the Class B-1 Principal Distributable Amount and the
Class B-2 Principal Distributable Amount for such Distribution Date), plus (z)
the outstanding principal balance of the Class C Notes immediately prior to such
Distribution Date and (ii) (A) the product of 100% and the outstanding Pool
Balance as of the end of the related Collection Period minus (B) the Targeted
Overcollateralization Amount for such Distribution Date.
"Class C Noteholders" means the Holders of the Class C Notes.
"Class C Principal Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Class C Principal Distributable Amount for
the preceding Distribution Date over the amount that was actually distributed in
respect of principal of the Class C Notes on such Preceding Distribution Date.
"Class C Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of: (i) the Class C Monthly Principal Distributable
Amount for such Distribution Date and (ii) the Class C Principal Carryover
Shortfall for such Distribution Date; provided, however, that the sum of clauses
(i) and (ii) shall not exceed the outstanding principal amount of the Class C
Notes, and on the Final Scheduled Distribution Date, the Class C Principal
Distributable Amount will include the amount, to the extent of the remaining
Available Funds, necessary (after giving effect to other amounts having a higher
payment priority on such Distribution Date) to reduce the outstanding principal
amount of the Class C Notes to zero.
"Cutoff Date" means ________________.
"Definitive Notes" means the Notes that have been certificated and
fully registered in accordance with Section 2.12 of the Indenture.
"Distribution Date" means, with respect to each Collection Period, the
seventeenth day of the following calendar month, or if such day is not a
Business Day, the immediately following Business Day, commencing on _____ __,
1998.
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"Eligibility Criteria" means the criteria for eligibility for Eligible
Receivables set forth on Schedule I hereto.
"Eligible Receivable" or "Series 1998-1 Eligible Receivable" means a
Series 1998-1 Receivable that satisfies the Eligibility Criteria set forth in
Schedule I hereto.
"Event of Default" shall have the meaning assigned to such term in
Section 4.01.
"Final Scheduled Distribution Date" means ____________.
"HAFC " means Household Automotive Finance Corporation.
"HFC " means Household Finance Corporation.
"Indenture" means the indenture dated as of October 1, 1998 among the
Issuer, the Master Servicer and The Chase Manhattan Bank, as indenture trustee,
as supplemented by the Series 1998-1 Supplement.
"Initial Reserve Account Deposit" means 1% of the Pool Balance as of
the Cutoff Date.
"Interest Period" means, with respect to any Distribution Date, the
period from and including the prior Distribution Date (or, in the case of the
first Distribution Date, from and including the Series 1998-1 Closing Date)
through (and including) the day preceding such Distribution Date.
"Master Servicer's Certificate" means, with respect to Series 1998-1,
a report in substantially the form of Exhibit E hereto (appropriately
completed), furnished by the Master Servicer to the Indenture Trustee and the
Owner Trustee pursuant to the Master Sale and Servicing Agreement.
"Maximum Reserve Account Deposit Amount" for any Distribution Date is
equal to that portion of Collected Funds representing interest collections on
the Receivables (including amounts representing Net Liquidation Proceeds for
such Collection Period) for the related Collection Period less the sum of: the
Base Servicing Fee paid to any third party Master Servicer, the fees due to the
Indenture Trustee, Trust Collateral Agent and Owner Trustee, to the extent not
paid by the Servicer, plus, the aggregate Noteholders' Interest Distributable
Amount for such Distribution Date, plus the aggregate Principal Balances of all
Receivables which became Liquidated Receivables during the related Collection
Period, plus the aggregate amount of Cram Down Losses during such Collection
Period.
"Note Account" means the Note Account.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class A Distributable Amount, the Class B-1
Distributable Amount, the Class B-2 Distributable Amount and the Class C
Distributable Amount.
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"Noteholders' Interest Distributable Amount" means with respect to any
Distribution Date, the sum of the Class A Interest Distributable Amount, the
Class B-1 Interest Distributable Amount, the Class B-2 Interest Distributable
Amount, and the Class C Interest Distributable Amount.
"Note Rate" means the per annum rate of interest due with respect to
each Class of Notes as set forth below for the respective Class of Note:
Class A-1 Notes: ___%
Class A-2 Notes: ___%
Class A-3 Notes: ___%
Class A-4 Notes: ___%
Class B-1 Notes: ___%
Class B-2 Notes: ___%
Class C Notes: ___%
Interest (including interest calculated with respect to Interest
Carryover Shortfalls) on the Class A-1 and Class A-2 Notes will be calculated on
the basis of a 360-day year and the actual number of days elapsed in an
applicable Interest Period. Interest (including interest calculated with respect
to Interest Carryover Shortfalls) on the Class A-3, Class A-4, Class B-1, Class
B-2 and Class C Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
"Notes" means the Class A Notes, the Class B-1 Notes, the Class B-2
and the Class C Notes, collectively.
"Original Pool Balance" means the aggregate of the Principal Balance
of the Receivables as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the
Trust Agreement.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity.
"Pledge" means the Grant by the Issuer hereunder to the Indenture
Trustee for the benefit of the Holders of Notes in accordance with Section 1.02
hereof in and to specified Pledged Property related thereto.
"Pledged Property" means, with respect to the Series 1998-1 Trust
Estate, each Series 1998-1 Receivable, together with all associated property and
rights with respect thereto described in the definition of Series 1998-1 Trust
Estate.
"Pool Balance" means, as of any date of determination, the aggregate
of the outstanding Principal Balances of the Receivables as of the close of
business on such Business Day.
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"Principal Amount Available" means, with respect to any Distribution
Date, the amount remaining in the Note Account on such Distribution Date after
the payment of the amounts required to be paid pursuant to clause (i) through
(vi) of Section 3.03(a) on such Distribution Date minus the Reserve Account
Deposit Amount for such Distribution Date.
"Principal Distributable Amount" means, with respect to any
Distribution Date, the lesser of (x) the Principal Amount Available for such
Distribution Date and (y) the excess, if any, of (i) the Aggregate Note
Principal Balance immediately prior to such Distribution Date over (ii) the
Aggregate Optimal Note Balance for such Distribution Date.
"Rating Agencies" means Standard & Poor's and Xxxxx'x. If such
organization or a successor does not maintain a rating on the Notes, "Rating
Agency" shall be a nationally recognized statistical rating organization or
other comparable Person designated by Seller, notice of which designation shall
be given to the Indenture Trustee, the Owner Trustee and the Master Servicer.
"Redemption Price" has the meaning specified in Section 5.01 hereof.
"Reserve Account" means the Series 1998-1 Reserve Account which shall
be an Eligible Deposit Account created pursuant to Section 3.01 hereof, which
initially shall be account no. ________, reference Household Automobile
Revolving Trust I, Series 1998-1, at the Indenture Trustee, ABA No. _________.
"Reserve Account Balance" means, with respect to a Distribution Date,
the amount on deposit in the Reserve Account as of the opening of business on
such Distribution Date.
"Reserve Account Deposit Amount" means, with respect to any
Distribution Date, the lesser of: (x) the Maximum Reserve Account Deposit Amount
for such Distribution Date and (y) the Reserve Account Shortfall Amount for such
Distribution Date.
"Reserve Account Shortfall Amount" means, with respect to any
Distribution Date, the excess of: (x) the Targeted Reserve Account Balance for
such Distribution Date over (y) the Reserve Account Balance for such
Distribution Date less amounts, if any, included in the definition of Available
Funds for such Distribution Date.
"Schedule of Receivables" means the schedule of all retail installment
sales contracts and promissory notes held as part of the Series 1998-1 Trust
Estate.
"Series 1998-1 Certificate" means the Series Trust Certificate (as
defined in the Trust Agreement) designated as the "Series 1998-1 Certificate".
"Series 1998-1 Closing Date" means _______________, 1998.
"Series 1998-1 Collected Funds" means, with respect to a date of
determination, the amount of Collected Funds with respect to the Collection
Period immediately preceding such
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date of determination, including all Net Liquidation Proceeds collected during
the related Collection Period (but excluding any Purchase Amounts).
"Series 1998-1 Collection Account" means the Eligible Deposit Account
created pursuant to Section 3.01 hereof which initially shall be account no.
__________, reference Household Automobile Revolving Trust I, Series 1998-1, at
the Indenture Trustee, ABA No. _______________.
"Series 1998-1 Eligible Investments" means, with respect to funds in
the Series 1998-1 Collection Account and Reserve Account, "Eligible Investments"
as defined in the Master Sale and Servicing Agreement, except that (i) all
references in such definition to "rating satisfactory to the Rating Agency" or
words of similar import shall mean ratings of not less than "A-1" by Standard &
Poor's and "P-1" by Xxxxx'x (whichever is applicable), and (ii) all such
investments shall have maturities at the time of the acquisition thereof
occurring no later than the Business Day immediately preceding the Distribution
Date following such date of acquisition.
"Series 1998-1 Note Account" means the Eligible Deposit Account
created pursuant to Section 3.01 hereof, which initially shall be account no.
___, reference Household Automobile Revolving Trust I, Series 1998-1 at the
Indenture Trustee, ATSA No. ______________.
"Series 1998-1 Receivables" means each Receivable listed on the
Schedule of Receivables, which (a) has not been released from the Series 1998-1
Trust Estate as provided herein or in the Indenture and (b) is not a Liquidated
Receivable.
"Series 1998-1 Related Documents" means the Basic Documents, this
Series 1998-1 Supplement, each Purchase Agreement Supplement related to the
Series 1998-1 Trust Estate, each Transfer Agreement related to the Series 1998-1
Trust Estate, the Series 1998-1 Notes, the Series 1998-1 Certificates and other
documents and certificates delivered in connection therewith.
"Series 1998-1 Reserve Account" means the Reserve Account.
"Series 1998-1 Secured Obligations" means all amounts and obligations
which the Issuer may at any time owe to the Agent and the Purchasers (including
the principal of, and interest on, the Series 1998-1 Notes) and all other
amounts owing at any time to the Agent and each Purchaser under this Series
1998-1 Supplement or any other Series 1998-1 Related Documents.
"Series 1998-1 Securities" means the Series 1998-1 Notes and the
Series 1998-1 Certificates.
"Series 1998-1 Supplement" means this Series 1998-1 Supplement to the
Indenture and the Trust Agreement.
"Series 1998-1 Support" means, with respect to the Series 1998-1
Notes, the
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Series 1998-1 Certificates.
"Series 1998-1 Support Provider" means none.
"Series 1998-1 Trust Accounts" means the Series 1998-1 Collection
Account, the Series 1998-1 Reserve Account, and the Series 1998-1 Note Account.
"Series 1998-1 Trust Estate" shall have the meaning set forth in
Section 1.02 hereof.
"Servicing Fee Rate" means 3% per annum.
"Supplemental Servicing Fee" means, with respect to any Collection
Period, (i) all administrative fees, expenses and charges actually paid by or on
behalf of Obligors, including late fees, prepayment fees and liquidation fees
collected on the Series 1998-1 Receivables during such Collection Period, and
(ii) the net realized investment earnings of funds on deposit in the Series
1998-1 Collection Account or on deposit in the Master Collection Account and
allocable to the investment of Available Funds with respect to Series 1998-1.
"Targeted Credit Enhancement Amount" means, with respect to any
Distribution Date, 13.75% of the Pool Balance as of the of last day of the
related Collection Period.
"Targeted Overcollateralization Amount" means, with respect to any
Distribution Date, the excess (but not less than zero), if any, of: (i) the
Targeted Credit Enhancement Amount over (ii) the Targeted Reserve Account
Balance.
"Targeted Reserve Account Balance" means, with respect to any
Distribution Date, the lesser of: (i) the greater of (a) 3.0% of the outstanding
Pool Balance as of the end of the related Collection Period, and (b) 2.0% of the
Original Pool Balance, and (ii) the Aggregate Note Principal Balance.
"Trust" means the Issuer.
"Trust Agreement" means the Trust Agreement dated as of March 1, 1998
between the Seller and the Owner Trustee, as supplemented by the Series 1998-1
Supplement.
Article III
DISTRIBUTIONS AND STATEMENTS TO
SERIES 1998-1 NOTEHOLDERS; SERIES SPECIFIC COVENANTS
SECTION III.01. Series 1998-1 Trust Accounts.
(a) The Trust Collateral Agent, for the benefit of the Holders of the
Series 1998-1 Securities, shall establish and maintain an account (the "Series
1998-1 Collection Account") as a segregated trust account in the Trust
Collateral Agent's corporate trust department, identified as the "Collection
Account for Household Automobile Revolving Trust I, in trust for the registered
Holders of the
16
Series 1998-1 Securities." The Trust Collateral Agent shall make or
permit withdrawals from the Series 1998-1 Collection Account only as provided in
this Series 1998-1 Supplement.
(b) On each Distribution Date, the Indenture Trustee pursuant to
Section 5.5(a) of the Master Sale and Servicing Agreement shall transfer amounts
with respect to Series 1998-1 and such Distribution Date from the Master
Collection Account to the Series 1998-1 Collection Account.
(c) The Indenture Trustee for the benefit of the Holders of the Series
1998-1 Notes shall establish and maintain an account (the "Series 1998-1 Reserve
Account") as a segregated trust account in the Indenture Trustee's corporate
trust department, identified as the "Series 1998-1 Reserve Account for Household
Automobile Revolving Trust I, in trust for the registered Holders of the Series
1998-1 Notes." The Indenture Trustee shall make or permit withdrawals from the
Reserve Account only as provided in this Series 1998-1 Supplement. On the Series
1998-1 Closing Date, the Series 1998-1 Reserve Account will be funded with the
Initial Reserve Account Deposit.
(d) The Indenture Trustee, for the benefit of the Holders of Series
1998-1 Notes, shall establish and maintain an account (the "Series 1998-1 Note
Account") as a segregated trust account in the Indenture Trustee's corporate
trust department, identified as the "Note Account for Household Automobile
Revolving Trust I, in trust for the registered Holders of the Series 1998-1
Notes." The Indenture Trustee shall make or permit withdrawals from the Series
1998-1 Note Account only as provided in this Series 1998-1 Supplement.
(e) On each Distribution Date, the Indenture Trustee shall transfer
Available Funds for such Distribution Date from the Series 1998-1 Collection
Account and from the Series 1998-1 Reserve Account, if applicable, to the Series
1998-1 Note Account.
(f) In the event that any Series 1998-1 Trust Account ceases to be an
Eligible Deposit Account, the Trust Collateral Agent or the Indenture Trustee,
as applicable, within five Business Days, shall establish a new Eligible Deposit
Account. No withdrawals may be made of funds in any Series 1998-1 Trust Account
except as provided in this Series 1998-1 Supplement. Except as specifically
provided in this Series 1998-1 Supplement, funds in the Series 1998-1 Trust
Accounts shall not be commingled with any other moneys. All moneys deposited
from time to time in each of the Series 1998-1 Trust Accounts shall be invested
and reinvested by the Owner Trustee or the Indenture Trustee, as applicable, in
Series 1998-1 Eligible Investments selected in writing by the Master Servicer
(pursuant to standing instructions or otherwise) which, absent any instruction
shall be the investments specified in clause (d) of the definition of Eligible
Investment. The provisions of Section 5.1 of the Master Sale and Servicing
Agreement shall apply to investment of funds in the Series 1998-1 Trust Accounts
to the same extent as they apply to the Master Collection Account.
SECTION III.02. Reserve Account.
On the earlier of (x) the maturity date of the Series 1998-1 Notes
(whether by acceleration or otherwise) or (y) the Final Scheduled Distribution
Date, the amount on deposit in the Reserve Account shall be withdrawn from the
Reserve Account and distributed in accordance with Section 4.04.
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SECTION III.03. Distributions.
(a) On each Distribution Date, the Indenture Trustee shall (based
solely on the information contained in the Master Servicer's Certificate
delivered with respect to such Distribution Date) distribute the following
amounts from Available Funds with respect to such Distribution Date, and in the
following order of priority:
(i) to the Master Servicer, any Supplemental Servicing Fees for
the related Collection Period and, if HFC is no longer acting as
Master Servicer, the Base Servicing Fee for the related Collection
Period;
(ii) to the Indenture Trustee and the Owner Trustee, any accrued
and unpaid trustees' fees and any accrued and unpaid fees of the Trust
Collateral Agent (in each case, to the extent such fees have not been
previously paid by the Master Servicer);
(iii) to the Class A Noteholders, the Class A Interest
Distributable Amount;
(iv) to the Class B-1 Noteholders, the Class B-1 Interest
Distributable Amount;
(v) to the Class B-2 Noteholders, the Class B-2 Interest
Distributable Amount;
(vi) to the Class C Noteholders, the Class C Interest
Distributable Amount;
(vii) (i) to the Class A Noteholders, the Class A Principal
Distributable Amount, for such Distribution Date, such amount to be
applied in reduction of the principal balance of the Class A-1 Notes
until such principal balance is reduced to zero, and thereafter such
amount to be applied in reduction of the principal balance of the
Class A-2 Notes until such principal balance is reduced to zero, and
thereafter such amount to be applied in reduction of the principal
balance of the Class A-3 Notes until such principal balance is reduced
to zero, and thereafter such amount to be applied in reduction of the
principal balance of the Class A-4 Notes until such principal balance
is reduced to zero.
(viii) to the Class B-1 Noteholders, the Class B-1 Principal
Distributable Amount;
(ix) to the Class B-2 Noteholders, the Class B-2 Principal
Distributable Amount;
(x) to the Class C Noteholders, the Class C Principal
Distributable Amount;
(xi) to the Reserve Account, the Reserve Account Deposit Amount,
if any, required to increase the amount therein to the Targeted
Reserve Account Balance;
(xii) if HFC is acting as the Master Servicer, the Base Servicing
Fee for the related Collection period; and
(xiii) to the holders of the Series 1998-1 Certificates, any
remaining Available Funds;
provided, however, that, in the event that the Series 1998-1 Notes are
accelerated following the occurrence of an Event of Default, distributions to
the Series 1998-1 Securityholders shall be made pursuant to Section 4.04 hereof.
Neither the Indenture Trustee nor the Trust Collateral
18
Agent shall have any duty to recalculate or verify the information set forth in
the Master Servicer's Certificate.
(b) If on a Distribution Date, the Master Servicer's Certificate
delivered with respect to such Distribution Date indicates that the amount
specified in clauses (i) through (iv) of the definition of Available Funds with
respect to such Distribution Date is less than the sum of the amounts required
to be distributed pursuant to clauses (i) through (x) of subsection (a) on such
Distribution Date, the Indenture Trustee shall withdraw from the Series 1998-1
Reserve Account an amount up to the amount of such deficiency and distribute
such amount as a component of Available Funds.
(c) Each Series 1998-1 Certificateholder by its acceptance of its
Certificate will be deemed to have consented to the provisions of paragraph (a)
above relating to the priority of distributions, and will be further deemed to
have acknowledged that no property rights in any amount of or the proceeds of
any such amount shall vest in such Certificateholder until such amounts have
been distributed to such Certificateholder pursuant to such provisions;
provided, that the foregoing shall not restrict the right of any
Certificateholder, upon compliance with the provisions hereof, from seeking to
compel the performance of the provisions hereof by the parties hereto. Each
Series 1998-1 Certificateholder, by acceptance of its Certificate, further
specifically acknowledges that it has no right to or interest in any monies at
any time held in the Series 1998-1 Reserve Account, such monies being held in
trust for the benefit of the Series 1998-1 Noteholders.
(d) In the event that the Series 1998-1 Collection Account is
maintained with an institution other than the Indenture Trustee, the Master
Servicer shall instruct and cause such institution to transfer the amounts to be
withdrawn therefrom in accordance with Section 3.03(a) or 3.03(b) to the
Indenture Trustee for distribution pursuant to Section 3.03(a) or Section
3.03(b), as the case may be, on the related Distribution Date.
(e) Unless Definitive Notes are issued pursuant to Section 2.12 of the
Indenture, with respect to Notes registered on the related Record Date in name
of a nominee of the Clearing Agency, payment will be made by wire transfer to an
account designated by such nominee, without presentation or surrender of the
Series 1998-1 Notes or the making of any notation thereon, except that the final
distribution with respect to the Series 1998-1 Notes shall be made against
tender thereof.
(f) If not theretofore paid in full, all amounts outstanding with
respect to the Class A-1 Notes shall be due and payable on the Class A-1
Scheduled Maturity Date, and if not theretofore paid in full, all amounts
outstanding with respect to the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class B-1 Notes, the Class B-2 Notes and the Class C Notes shall
be due and payable on the Final Scheduled Distribution Date.
SECTION III.04. Statements to Noteholders.
On or prior to each Determination Date, the Master Servicer shall
provide to the Trust Collateral Agent (with a copy to the Rating Agencies) for
the Trust Collateral Agent to forward to each Noteholder of record, and to each
Certificateholder of record, a statement setting forth at least the following
information as to the Notes to the extent applicable:
19
(i) the amount of such distribution allocable to principal of
each Class of Notes;
(ii) the amount of such distribution allocable to interest on or
with respect to each Class of Notes;
(iii) the aggregate outstanding principal amount of each Class of
the Notes after giving effect to payments allocated to principal
reported under (i) above;
(iv) the Class A Interest Carryover Shortfall, the Class B-1
Interest Carryover Shortfall, the Class B-2 Interest Carryover
Shortfall, the Class C Interest Carryover Shortfall, the Class A
Principal Carryover Shortfall, the Class B-1 Principal Carryover
Shortfall, the Class B-2 Principal Carryover Shortfall, the Class C
Principal Carryover Shortfall, if any, and the change in such amounts
from the preceding statement.
(v) the amount of the Base Servicing Fee paid to the Master
Servicer with respect to such Collection Period;
(vi) the Targeted Reserve Account Balance and the amount on
deposit in the Reserve Account at the end of such Distribution Date.
Each amount set forth pursuant to paragraph (i)through (v) above shall be
expressed as a dollar amount per $1,000 of the initial principal balance of the
applicable Class of Notes.
SECTION III.05. Reporting Requirements.
(a) The Master Servicer's Certificate shall be in the form attached
hereto as Exhibit E hereto.
(b) By January 31 of each calendar year, commencing January 31, 1999,
the Master Servicer on behalf of the Issuer shall prepare and distribute to the
Indenture Trustee a statement containing such information as is required to be
provided by an issuer of indebtedness under the Code and such other customary
information as is necessary to enable the Noteholders to prepare their tax
returns.
(c) If an Event of Default occurs and is continuing and if it is
either known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail to each Noteholder notice of the Default within [30] days after such
knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION III.06. Compliance With Withholding Requirements.
Notwithstanding any other provisions of this Series 1998-1 Supplement
or the Indenture to the contrary, the Indenture Trustee, shall comply with all
federal withholding requirements respecting payments (or advances thereof) to
the Noteholders as may be applicable to instruments constituting indebtedness
for federal income tax purposes. Any amounts so withheld shall be treated as
having been paid to the applicable Noteholders for all purposes of the
20
Indenture. In no event shall the consent of any Noteholder be required for
any such withholding.
SECTION III.07. Special Covenants and Acknowledgements.
With respect to the Series 1998-1 Notes, the Issuer hereby represents
and warrants, as of the Series 1998-1 Closing Date:
(i) Valid Pledge. It is the intention of the Issuer that each
pledge herein contemplated constitutes the Grant of a perfected, first
priority security interest in all Pledged Property to the Indenture
Trustee for the benefit of the Series 1998-1 Noteholders.
(ii) Governmental Authorization. Other than the filing of the
financing statements required hereunder, no authorization or approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by the Issuer of this Series 1998-1
Supplement, the Indenture, and each Series 1998-1 Related Document to
which it is a party.
SECTION III.08. Tax Characterization.
It is the intent of the parties hereto that, for all Federal, state,
local and foreign taxes, the Series 1998-1 Notes will be evidence of
indebtedness. To the extent permitted by law, the parties hereto, and each owner
of a beneficial interest in the Series 1998-1 Notes by acceptance of such
interest, agrees to treat the Series 1998-1 Notes for purposes of all Federal,
state, local and foreign taxes as indebtedness secured by the Series 1998-1
Trust Estate.
Article IV
EVENTS OF DEFAULT; REMEDIES
SECTION IV.01. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five calendar days; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable, and such default shall continue for a period of five calendar
days; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in the Series 1998-1 Related Documents
(other than a covenant or agreement, a default in the observance or
performance of which is elsewhere in this Section specifically dealt
with), or any representation or warranty of the Issuer made in the
Series 1998-1 Related Documents or in any certificate or other writing
delivered pursuant thereto or in connection therewith proving to have
21
been incorrect in any material respect as of the time when the
same shall have been made and has a material adverse effect on the
Noteholders, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation
or warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 60 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee
or to the Issuer and the Indenture Trustee by the Holders of at least
25% of the Outstanding Amount of the Notes, a written notice
specifying such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Assets in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Property, or ordering
the winding-up or liquidation of the Issuer's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such
law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Assets, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
SECTION IV.02. Rights Upon Event of Default.
(a) If an Event of Default shall have occurred and be continuing, the
Indenture Trustee in its discretion may, or if so requested in writing by
Holders holding Notes representing at least 66 2/3% of the Outstanding Amount of
the Notes, declare by written notice to the Issuer that the Notes have become
due and payable, whereupon they shall become, immediately due and payable at
100% of the outstanding principal balance of the Notes, and accrued interest
thereon (together with interest accrued at the relevant Note Rate on such
overdue interest).
(b) At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee, the Holders of Notes representing a majority
of the Outstanding Amount of the Notes, by written notice to the Issuer and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not
occurred; and
22
(B) all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.9 of
the Indenture.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION IV.03. Remedies.
If an Event of Default shall have occurred and be continuing, the
Indenture Trustee, subject to Section 11.17 of the Indenture, may exercise any
of the remedies specified in Article V of the Indenture and, in addition, may do
one or more of the following.
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under the Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of the Indenture with respect to the Trust Assets;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee and the Holders of the Notes;
and
(iv) direct the Trust Collateral Agent to sell the Trust Assets
or any portion thereof or rights or interest therein, at one or more
public or private sales called and conducted in any manner permitted
by law; provided, however, that the Indenture Trustee may not sell or
otherwise liquidate the Trust Assets following an Event of Default
unless
(x) the Holders of 100% of the Outstanding Amount of the
Notes consent thereto,
(y) the proceeds of such sale or liquidation distributable
to the Noteholders are sufficient to discharge in full all
amounts then due and unpaid upon such Notes for principal and
interest, or
(z) the Indenture Trustee determines that the Trust Assets
will not continue to provide sufficient funds for the payment
of principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and payable,
and the Indenture Trustee obtains the consent of Holders of
66-2/3% of the Outstanding Amount of the Notes.
In determining such sufficiency or insufficiency with respect to
clause (y) and (z), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent
23
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Assets for such purpose.
SECTION IV.04. Priorities.
(a) On and after the maturity date of the Series 1998-1 Notes (by
acceleration or otherwise) all Available Funds, all amounts on deposit in the
Reserve Account withdrawn in accordance with Section 3.02 and any proceeds of
the liquidation of all or any portion of the Series 1998-1 Trust Estate pursuant
to Section 4.03(iv), shall be applied by the Indenture Trustee on the related
Distribution Date in the following order of priority:
First: amounts due and owing and required to be distributed to
the Master Servicer, the Owner Trustee and the Indenture Trustee,
respectively, pursuant to priorities (i) and (ii) of Section 3.03
hereof and not previously distributed, in the order of such priorities
and without preference or priority of any kind within such priorities;
Second: to Class A Noteholders for amounts due and unpaid on the
Class A Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A
Notes for interest;
Third: to the Class A Noteholders for amounts due and unpaid on
the Class A Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class A Notes for principal.
Fourth: to the Class B-1 Noteholders for amounts due and unpaid
on the Class B-1 Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-1 Notes for interest.
Fifth: to the Class B-1 Noteholders for amounts due and unpaid on
the Class B-1 Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-1 Notes for principal.
Sixth: to the Class B-2 Noteholders for amounts due and unpaid on
the Class B-2 Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-2 Notes for interest.
Seventh: to the Class B-2 Noteholders for amounts due and unpaid
on the Class B-2 Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B-2 Notes for principal.
Eighth: to the Class C Noteholders for amounts due and unpaid on
the Class C Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class C Notes for interest.
Ninth: to the Class C Noteholders for amounts due and unpaid on
the Class C Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on
24
the Class C Notes for principal.
Tenth: to the Series 1998-1 Certificateholders, any remaining
Available Funds.
(b) The Indenture Trustee may fix a record date and Distribution Date
for any payment to Series 1998-1 Noteholders pursuant to this Section 4.04. At
least 15 days before such record date, the Indenture Trustee shall mail to the
Noteholders a notice that states the record date, the Distribution Date and the
amount to be paid.
Article V
PREPAYMENT AND REDEMPTION
SECTION V.01. Optional "Clean-Up" Redemption.
On any Distribution Date occurring on or after the date upon which the
Series 0000-0 Xxxxxxxxx Note Principal Balance shall have been reduced to an
amount which is less than or equal to 10% of the Aggregate Note Principal
Balance of the Series 1998-1 Notes as of the Series 1998-1 Closing Date, the
Master Servicer and the Seller on behalf of the Issuer, shall each have the
option to redeem the outstanding Series 1998-1 Notes at a redemption price (the
"Redemption Price") which is not less than the then Aggregate Note Principal
Balance, plus all accrued and unpaid interest thereon and all fees and other
amounts owing to the Indenture Trustee, the Owner Trustee, the Trust Collateral
Agent and the Master Servicer (if other than HFC) under the Series 1998-1
Related Documents. The Master Servicer and the Seller, on behalf of the Issuer,
shall give the Master Servicer (if other than HFC), the Indenture Trustee, and
the Owner Trustee at least 10 days' irrevocable prior written notice of the date
on which the Master Servicer or the Seller, as applicable intends to exercise
such option to purchase. Not later than 12:00 P.M., New York City time, on such
Distribution Date, the Master Servicer or the Seller, as applicable, shall
deposit such amount in the Collection Account in immediately available funds for
distribution pursuant to Section 3.03 against the presentment of the Notes for
cancellation. Such purchase option is subject to payment in full of the
Redemption Price.
Article VI
MISCELLANEOUS
SECTION VI.01. Ratification of Basic Documents.
Each of the Basic Documents, and to the extent appropriate, as
supplemented by this Series 1998-1 Supplement, is in all respects ratified and
confirmed and each of the Basic Documents, as so supplemented by this Series
1998-1 Supplement shall be read, taken and construed as one and the same
instrument.
SECTION VI.02. Counterparts.
This Series 1998-1 Supplement may be executed in one or more
counterparts, each of which so executed shall be deemed to be an original, but
all of which shall together
25
constitute but one and the same instrument.
SECTION VI.03. GOVERNING LAW.
THIS SERIES 1998-1 SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION VI.04. Amendments Without Consent of Noteholders.
(a) Without the consent of the Noteholders but with prior written
notice to the Rating Agencies, as evidenced to the Indenture Trustee and the
Issuer, when authorized by an Issuer Order, at any time and from time to time,
the parties hereto may enter into one or more amendments hereto, in form
satisfactory to the Indenture Trustee and the Owner Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of the Indenture as supplemented by this
Series 1998-1 Supplement, or better to assure, convey and confirm unto
the Indenture Trustee, if any, any property subject or required to be
subjected to the lien of the Indenture as supplemented by this Series
1998-1 Supplement, or to subject to the lien of the Indenture as
supplemented by this Series 1998-1 Supplement additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Noteholders, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee, if any;
(v) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or to
make any other provisions with respect to matters or questions arising
under the Indenture, the Trust Agreement or in this Series
1998-1Supplement; provided that such action shall not adversely affect
the interests of the Series 1998-1 Noteholders;
(vi) to evidence and provide for the acceptance of the
appointment hereunder and under the Indenture by a successor indenture
trustee with respect to the Notes and to add to or change any of the
provisions of the Indenture or of this Series 1998-1 Supplement as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one indenture trustee, pursuant to the
requirements of Article VI of the Indenture; or
(vii) to modify, eliminate or add to the provisions of the
Indenture or of this Series 1998-1 Supplement to such extent as shall
be necessary to effect the qualification of the Indenture under the
TIA or under any similar federal statute hereafter enacted and to add
to the Indenture such other provisions as may
26
be expressly required by the TIA.
Each of the Indenture Trustee and the Owner Trustee is hereby
authorized to join in the execution of any amendment and to make any further
appropriate agreements and stipulations that may be therein contained.
(b) Except as otherwise provided herein, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order, may, also without the consent of
any of the Series 1998-1 Noteholders but with prior notice to the Rating
Agencies by the Issuer, as evidenced to the Indenture Trustee, enter into an
amendment hereto for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, the Indenture or of this Series
1998-1 Supplement of modifying in any manner the rights of the Series 1998-1
Noteholders under the Indenture or under this Series 1998-1 Supplement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any Series
1998-1 Noteholder.
SECTION VI.05. Amendments With Consent of the Series 1998-1
Noteholders.
Except as otherwise provided herein, the Issuer and the Indenture
Trustee, when authorized by an Issuer Order provided by the Master Servicer,
also may, upon satisfaction of the Rating Agency Condition and with the consent
of the Holders of not less than a majority of the Outstanding Amount of each
Class of affected Series 1998-1 Notes, by Act of such Holders delivered to the
Issuer and the Indenture Trustee, enter into an amendment hereto for the purpose
of adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Series 1998-1 Supplement or of modifying in any manner the
rights of the Series 1998-1 Noteholders under the Indenture or under this Series
1998-1 Supplement; provided, however, that no such amendment shall, without the
consent of the Holder of each Outstanding Series 1998-1 Note affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Series 1998-1 Note, or reduce the principal amount
thereof, the interest rate thereon, change the provision of the
Indenture relating to the application of collections on, or the
proceeds of the sale of, all or any portion of any Series 1998-1 Trust
Estate to payment of principal of or interest on the Series 1998-1
Notes, or change any place of payment where, or the coin or currency
in which, any Series 1998-1 Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of the Indenture requiring the application of funds
available therefor, as provided in Article V of the Indenture, to the
payment of any such amount due on the Series 1998-1 Notes on or after
the respective due dates thereof;
(iii) reduce the percentage of the Outstanding Amount of the
Series 1998-1 Notes, the consent of the Holders of which is required
for this Series 1998-1 Supplement, or the consent of the Holders of
which is required for any waiver of compliance with certain provisions
of the Indenture or certain defaults hereunder and their consequences
provided for in the Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
27
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Trustee to direct the Issuer to sell or
liquidate the Series 1998-1 Trust Estate pursuant to Section 5.4 of
the Indenture;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of the Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Series
1998-1 Note affected thereby;
(vii) modify any of the provisions of the Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Series 1998-1 Note on any
Distribution Date (including the calculation of any of the individual
components of such calculation) or to affect the rights of the Holders
of Series 1998-1 Notes to the benefit of any provisions for the
mandatory redemption of the Series 1998-1 Notes contained herein; or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any part of the
a Series 1998-1 Trust Estate or, except as otherwise permitted or
contemplated herein or the Series 1998-1 Related Documents, terminate
the lien of the Indenture on any property at any time subject hereto
or deprive the Holder of any Series 1998-1 Note of the security
provided by the lien of the Indenture.
Except as otherwise provided herein, the Indenture Trustee may
determine whether or not any Series 1998-1 Notes would be adversely affected by
any amendment upon receipt of an Opinion of Counsel to that effect and any such
determination shall be conclusive upon the Holders of all Series 1998-1 Notes,
whether theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of this Series 1998-1 Supplement, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee
of this Series 1998-1 Supplement, the Indenture Trustee shall mail to the Series
1998-1 Noteholders a notice setting forth in general terms the substance hereof.
Any failure of the Indenture Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of the Series
1998-1 Supplement.
SECTION VI.06. Non-petition Clauses.
By its acceptance of its interest in the Series 1998-1 Notes, each
owner of a beneficial interest in a Note shall be deemed to have agreed that
prior to the date which is one year and one day after the termination of the
Indenture, such Person shall not acquiesce, petition or otherwise invoke or
cause the Issuer or the Seller to invoke the process of any governmental
authority for the purpose of commencing or sustaining a case against the Seller
or Issuer under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of or for the Issuer or the Seller or any substantial
part of its property or ordering the winding-up or liquidation of the affairs of
28
the Issuer or the Seller.
29
IN WITNESS WHEREOF, the parties hereto have caused this Series 1998-1
Supplement to be fully executed by their respective officers as of the day and
year first above written.
HOUSEHOLD FINANCE CORPORATION,
as Master Servicer
By
--------------------------------
Name:
Title:
HOUSEHOLD AUTOMOBILE REVOLVING
TRUST I,
as Issuer
By WILMINGTON TRUST COMPANY
Not in its individual capacity but solely as
Owner Trustee
By
--------------------------------
Name:
Title:
HOUSEHOLD AUTO RECEIVABLES
CORPORATION,
By
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By
--------------------------------
Name:
30
Title:
WILMINGTON TRUST COMPANY,
as Owner Trustee
By
--------------------------------
Name:
Title:
31
INDEX OF TERMS
Page
Aggregate Note Principal Balance..................................................................................3
Aggregate Optimal Note Principal Balance..........................................................................3
Available Funds...................................................................................................3
Base Servicing Fee................................................................................................4
Book Entry Notes..................................................................................................4
Certificateholders................................................................................................4
Certificateholders' Distributable Amount..........................................................................4
Chase.............................................................................................................1
Class A Distributable Amount......................................................................................4
Class A Interest Carryover Shortfall..............................................................................4
Class A Interest Distributable Amount.............................................................................4
Class A Monthly Principal Distributable Amount....................................................................5
Class A Noteholders...............................................................................................5
Class A Principal Carryover Shortfall.............................................................................5
Class A Principal Distributable Amount............................................................................5
Class A-1 Noteholders.............................................................................................5
Class A-1 Scheduled Maturity Date.................................................................................5
Class A-2 Noteholders.............................................................................................5
Class A-3 Noteholders.............................................................................................5
Class A-4 Noteholders.............................................................................................6
Class B Distributable Amount......................................................................................6
Class B Interest Distributable Amount.............................................................................7
Class B-1 Interest Carryover Shortfall............................................................................6
Class B-1 Interest Distributable Amount...........................................................................6
Class B-1 Monthly Principal Distributable Amount..................................................................6
Class B-1 Noteholders.............................................................................................6
Class B-1 Principal Carryover Shortfall...........................................................................6
Class B-1 Principal Distributable Amount..........................................................................6
Class B-2 Distributable Amount....................................................................................7
Class B-2 Interest Carryover Shortfall............................................................................7
Class B-2 Monthly Principal Distributable Amount..................................................................7
Class B-2 Noteholders.............................................................................................7
Class B-2 Principal Carryover Shortfall...........................................................................7
Class B-2 Principal Distributable Amount..........................................................................8
Class C Distributable Amount......................................................................................8
Class C Interest Carryover Shortfall..............................................................................8
Class C Interest Distributable Amount.............................................................................8
Class C Monthly Principal Distributable Amount....................................................................8
Class C Noteholders...............................................................................................8
Class C Principal Carryover Shortfall.............................................................................8
Class C Principal Distributable Amount............................................................................9
Collected Funds..................................................................................................12
Cutoff Date.......................................................................................................9
Definitive Notes..................................................................................................9
Distribution Date.................................................................................................9
Eligibility Criteria..............................................................................................9
Eligible Receivable...............................................................................................9
Event of Default..................................................................................................9
Final Scheduled Distribution Date.................................................................................9
32
HAFC..............................................................................................................9
HFC...............................................................................................................9
Indenture.........................................................................................................1
Indenture Trustee.................................................................................................1
Initial Reserve Account Deposit...................................................................................9
Interest Period...................................................................................................9
Issuer............................................................................................................1
Master Servicer...................................................................................................1
Master Servicer's Certificate....................................................................................10
Maximum Reserve Account Deposit Amount...........................................................................10
Note Account.....................................................................................................10
Note Rate........................................................................................................10
Noteholders' Interest Distributable Amount.......................................................................10
Notes............................................................................................................11
Original Pool Balance............................................................................................11
Owner Trust Estate...............................................................................................11
Owner Trustee.....................................................................................................1
Pledge...........................................................................................................11
Pledged Property.................................................................................................11
Pool Balance.....................................................................................................11
Principal Amount Available.......................................................................................11
Principal Distributable Amount...................................................................................11
Rating Agencies..................................................................................................11
Redemption Price.................................................................................................11
Reserve Account..................................................................................................11
Reserve Account Balance..........................................................................................12
Reserve Account Deposit Amount...................................................................................12
Reserve Account Shortfall Amount.................................................................................12
Schedule of Receivables..........................................................................................12
Seller............................................................................................................1
Series 1998-1 Certificate........................................................................................12
Series 1998-1 Closing Date.......................................................................................12
Series 1998-1 Collection Account.................................................................................12
Series 1998-1 Eligible Investments...............................................................................12
Series 1998-1 Eligible Receivable.................................................................................9
Series 1998-1 Note Account.......................................................................................13
Series 1998-1 Receivables........................................................................................13
Series 1998-1 Related Documents..................................................................................13
Series 1998-1 Secured Obligations................................................................................13
Series 1998-1 Securities.........................................................................................13
Series 1998-1 Spread Account.....................................................................................13
Series 1998-1 Supplement.........................................................................................13
Series 1998-1 Support............................................................................................13
Series 1998-1 Support Provider...................................................................................13
Series 1998-1 Trust Accounts.....................................................................................13
Series 1998-1 Trust Estate.......................................................................................13
Servicing Fee Rate...............................................................................................13
Supplemental Servicing Fee.......................................................................................13
Targeted Credit Enhancement Amount...............................................................................14
Targeted Overcollateralization Amount............................................................................14
Targeted Reserve Account Balance.................................................................................14
Trust............................................................................................................14
Trust Agreement...................................................................................................1
33
