EXHIBIT
4.4


 




 





SALE AND SERVICING
AGREEMENT



among



HSBC AUTOMOTIVE TRUST 200  -  ,

as Issuer,



HSBC AUTO RECEIVABLES CORPORATION,

as Seller,



HSBC FINANCE CORPORATION,

as Servicer



[INDENTURE TRUSTEE],

as Indenture Trustee



and



[ADMINISTRATOR],

as Administrator



Dated as of                 ,
200  




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
   

  	
   

  	
   

  
	
  Definitions

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
  Definitions

  	
  5

  
	
  SECTION 1.2.

  	
  Other
  Interpretive Provisions

  	
  21

  
	
  SECTION 1.3.

  	
  Usage of
  Terms

  	
  22

  
	
  SECTION 1.4.

  	
  Certain
  References

  	
  22

  
	
  SECTION 1.5.

  	
  No Recourse

  	
  22

  
	
  SECTION 1.6.

  	
  Action by or
  Consent of Noteholders

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  	
   

  	
   

  
	
  Conveyance of Receivables

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  Conveyance
  of Receivables

  	
  23

  
	
  SECTION 2.2.

  	
  Further
  Encumbrance of Owner Trust Estate

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  
	
  The Receivables

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  Representations
  and Warranties of Seller

  	
  28

  
	
  SECTION 3.2.

  	
  Repurchase
  upon Breach

  	
  28

  
	
  SECTION 3.3.

  	
  Custody of
  Receivables Files

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  	
   

  	
   

  
	
  Administration and Servicing of Receivables

  
	
   

  
	
  SECTION 4.1.

  	
  Duties of the
  Servicer

  	
  30

  
	
  SECTION 4.2.

  	
  Collection
  of Receivable Payments; Modifications of Receivables

  	
  31

  
	
  SECTION 4.3.

  	
  Realization
  Upon Receivables

  	
  34

  
	
  SECTION 4.4.

  	
  Insurance

  	
  35

  
	
  SECTION 4.5.

  	
  Maintenance
  of Security Interests in Vehicles

  	
  36

  
	
  SECTION 4.6.

  	
  Covenants, Representations,
  and Warranties of Servicer

  	
  36

  
	
  SECTION 4.7.

  	
  Repurchase
  of Receivables Upon Breach of Covenant

  	
  37

  
	
  SECTION 4.8.

  	
  Total
  Servicing Fee; Payment of Certain Expenses by Servicer

  	
  38

  
	
  SECTION 4.9.

  	
  Servicer’s
  Certificate

  	
  38

  
	
  SECTION
  4.10.

  	
  Annual Statement
  as to Compliance, Notice of Servicer Termination Event

  	
  39

  
	
  SECTION
  4.11.

  	
  Access to
  Certain Documentation and Information Regarding Receivables

  	
  40

  



 

















 


	
  SECTION
  4.12.

  	
  Fidelity
  Bond and Errors and Omissions Policy

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
   

  	
   

  	
   

  
	
  Trust Accounts; Distributions;

  
	
  Statements to Certificateholders and Noteholders

  
	
   

  
	
  SECTION 5.1.

  	
  Establishment
  of Trust Accounts

  	
  41

  
	
  SECTION 5.2.

  	
  Certain
  Reimbursements to the Servicer

  	
  43

  
	
  SECTION 5.3.

  	
  Application
  of Collections

  	
  43

  
	
  SECTION 5.4.

  	
  Additional
  Deposits

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  	
   

  	
   

  
	
  RESERVED

  
	
   

  
	
  ARTICLE VII

  
	
   

  	
   

  	
   

  
	
  RESERVED

  
	
   

  
	
  ARTICLE VIII

  
	
   

  	
   

  	
   

  
	
  The Seller

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  Representations
  of Seller

  	
  44

  
	
  SECTION 8.2.

  	
  Corporate
  Existence

  	
  46

  
	
  SECTION 8.3.

  	
  Liability of
  Seller; Indemnities

  	
  47

  
	
  SECTION 8.4.

  	
  Merger or
  Consolidation of, or Assumption of the Obligations of, Seller

  	
  48

  
	
  SECTION 8.5.

  	
  Limitation
  on Liability of Seller and Others

  	
  48

  
	
  SECTION 8.6.

  	
  Seller May
  Own Certificates or Notes

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
   

  	
   

  	
   

  
	
  The Servicer

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  Representations
  of Servicer

  	
  49

  
	
  SECTION 9.2.

  	
  Liability of
  Servicer; Indemnities

  	
  51

  
	
  SECTION 9.3.

  	
  Merger or
  Consolidation of, or Assumption of the Obligations of the Servicer

  	
  53

  
	
  SECTION 9.4.

  	
  Limitation
  on Liability of Servicer and Others

  	
  53

  
	
  SECTION 9.5.

  	
  Delegation
  of Duties

  	
  54

  
	
  SECTION 9.6.

  	
  Servicer Not
  to Resign

  	
  55

  
	
  SECTION 9.7.

  	
  Subservicing
  Agreements Between Servicer and Subservicers

  	
  55

  
	
  SECTION 9.8.

  	
  Successor
  Subservicers

  	
  55

  



 


ii

















 


	
  ARTICLE X

  
	
   

  	
   

  	
   

  
	
  Default

  
	
   

  	
   

  	
   

  
	
  SECTION
  10.1.

  	
  Servicer Termination
  Event

  	
  56

  
	
  SECTION
  10.2.

  	
  Consequences
  of a Servicer Termination Event

  	
  57

  
	
  SECTION
  10.3.

  	
  Appointment
  of Successor

  	
  59

  
	
  SECTION
  10.4.

  	
  Notification
  to Noteholders

  	
  60

  
	
  SECTION
  10.5.

  	
  Waiver of
  Past Defaults

  	
  60

  
	
  SECTION
  10.6.

  	
  Successor to
  Servicer

  	
  60

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  
	
   

  	
   

  	
   

  
	
  Termination

  
	
   

  	
   

  	
   

  
	
  SECTION
  11.1.

  	
  Optional
  Purchase of All Receivables

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  
	
   

  	
   

  	
   

  
	
  Administrative Duties of the Servicer

  
	
   

  	
   

  	
   

  
	
  SECTION
  12.1.

  	
  Administrative
  Duties

  	
  61

  
	
  SECTION
  12.2.

  	
  Records

  	
  64

  
	
  SECTION
  12.3.

  	
  Additional
  Information to be Furnished to the Issuer

  	
  64

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  
	
   

  	
   

  	
   

  
	
  Miscellaneous Provisions

  
	
   

  	
   

  	
   

  
	
  SECTION
  13.1.

  	
  Amendments

  	
  64

  
	
  SECTION
  13.2.

  	
  Protection
  of Title to Series Trust Estate

  	
  65

  
	
  SECTION
  13.3.

  	
  Notices

  	
  67

  
	
  SECTION
  13.4.

  	
  Assignment

  	
  68

  
	
  SECTION
  13.5.

  	
  Limitations
  on Rights of Others

  	
  68

  
	
  SECTION
  13.6.

  	
  Severability

  	
  68

  
	
  SECTION
  13.7.

  	
  Separate
  Counterparts

  	
  68

  
	
  SECTION
  13.8.

  	
  Headings

  	
  68

  
	
  SECTION
  13.9.

  	
  Governing
  Law

  	
  68

  
	
  SECTION
  13.10.

  	
  Assignment
  to Indenture Trustee

  	
  69

  
	
  SECTION
  13.11.

  	
  Nonpetition
  Covenants

  	
  69

  
	
  SECTION 13.12.

  	
  Limitation
  of Liability of the Owner Trustee, the Administrator and the Indenture
  Trustee

  	
  69

  
	
  SECTION
  13.13.

  	
  Limitation
  of Liability of Issuer

  	
  70

  
	
  SECTION
  13.14.

  	
  Independence
  of the Servicer

  	
  70

  
	
  SECTION
  13.15.

  	
  No Joint
  Venture

  	
  70

  
	
  SECTION
  13.16.

  	
  [Third Party
  Beneficiary

  	
  70

  
	
  SECTION
  13.17.

  	
  Regulation
  AB

  	
  70

  



 


iii

















 


	
  SECTION
  13.18.

  	
  Information
  to Be Provided by the Indenture Trustee and the Administrator

  	
  71

  



 


EXHIBITS


 


	
  EXHIBIT A

  	
   

  	
  Form of Transfer
  Agreement

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
   

  	
  Form of Performance Certifications

  
	
  EXHIBIT C

  	
   

  	
  Form of Report on Assessment of Compliance
  with Applicable Servicing Criteria

  
	
  EXHIBIT D

  	
   

  	
  Servicing Criteria to be Addressed in
  Report on Assessment of Compliance with Applicable Servicing Criteria

  



 


iv

















 


SALE AND SERVICING AGREEMENT dated as of                 ,
200  , among HSBC AUTOMOTIVE TRUST 200  -  , a
Delaware statutory trust (the “Issuer” or the “Trust”), HSBC AUTO RECEIVABLES
CORPORATION, a Nevada corporation (the “Seller”), HSBC FINANCE CORPORATION, a
Delaware corporation (the “Servicer”), [INDENTURE TRUSTEE], a               
banking               ,
in its capacity as Indenture Trustee, and [ADMINISTRATOR], a [                ]
banking [                ],
in its capacity as Administrator.


 


WHEREAS the Issuer desires to purchase from time to
time Receivables arising in connection with motor vehicle retail installment
sale contracts originated or acquired by HSBC Auto Finance Inc. (“HAFI”) or any
of its predecessors or Affiliates, including, but not limited to, HSBC Auto
Credit Inc. (“HACI”);


 


WHEREAS the Seller will purchase from time to time
Receivables from HAFI or one or more of its Affiliates, including, but not
limited to, HACI, and is willing to sell Receivables to the Issuer;


 


WHEREAS the Servicer is willing to service all such
Receivables;


 


NOW, THEREFORE, in consideration of the promises and
the mutual covenants herein contained, the parties hereto agree as follows:


 


ARTICLE I



Definitions


 


SECTION 1.1.        Definitions.   Whenever
used in this Agreement, the following words and phrases shall have the
following meanings:


 


“Accounting Date” means, with respect to a
Distribution Date, the last day of the Collection Period immediately preceding
such Distribution Date.


 


“Actuarial Method” means the method of allocating a
fixed level monthly payment on an obligation between principal and interest,
pursuant to which the portion of such payment that is allocated to interest is
equal to the product of (a) 1/12, (b) the fixed annual rate of interest on such
obligation and (c) the outstanding principal balance of such obligation.


 


“Actuarial Receivable” means a Receivable under which
the portion of the payment allocated to interest and the portion allocable to
principal is determined in accordance with the Actuarial Method.


 


“Addition Notice” means, with respect to any transfer
of Receivables to the Trust pursuant to Section 2.1 of this Agreement, notice
of the Seller’s election to transfer Receivables to the Trust, such notice to
designate the related Transfer Date, and the approximate principal amount of
Receivables to be transferred on such Transfer Date.


 

















 


“Additional Principal Amount” has the meaning, if any,
assigned to such term in the Series Supplement.


 


“Administrator” means [                                        ],
a [national/state] banking association, as Administrator under the Indenture
and the other Basic Documents to which it is a party, or any successor
administrator under the Indenture appointed in accordance with such agreement.


 


“Advanced Insurance Premiums” means any amounts due to
the Servicer for amounts advanced by the Servicer to acquire or maintain an LPI
Policy as to a Financed Vehicle.


 


“Affiliate” means, with respect to any specified
Person, any other Person controlling or controlled by or under common control
with such specified Person. For the purposes of this definition, “control” when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.


 


“Aggregate Principal Balance” means, with respect to any
date of determination, the sum of the Principal Balances for all Receivables
(other than (i) any Receivable that has become a Liquidated Receivable and (ii)
any Receivable that has become a Repurchased Receivable as of the date of
determination).


 


“Agreement” means this Sale and Servicing Agreement,
as the same may be amended and supplemented from time to time.


 


“Amount Financed” means, with respect to a Receivable,
the aggregate amount advanced under such Receivable toward the purchase price
of the Financed Vehicle and any related costs, including amounts advanced in
respect of accessories, insurance premiums (other than premiums with respect to
LPI Policies), service and warranty contracts, other items customarily financed
as part of retail motor vehicle installment sale contracts and related costs.


 


“Annual Percentage Rate” or “APR” of a Receivable
means the annual percentage rate of finance charges or service charges, as
stated in the related Contract.


 


“Basic Documents” has the meaning assigned to such
term in the Series Supplement.


 


“Business Day” has the meaning assigned to such term
in the Series Supplement.


 


“Certificates” has the meaning assigned to such term
in the Trust Agreement.


 


“Certificateholder” means the holders of the
Certificates.


 


6

















 


“Class” means a class of Notes or Certificates, as the
context requires.


 


“Closing Date” has the meaning assigned to such term
in the Series Supplement.


 


“Code”  has the
meaning assigned to such term in the Trust Agreement.


 


“Collections” means, with respect to any Collection
Period, all amounts paid on or with respect to the Receivables, including all
payments of principal and interest, cancellation fees, administrative fees,
expenses and charges, late fees, payment fees, liquidation fees, Net
Liquidation Proceeds, proceeds of Insurance Policies and any Substitution
Adjustment Amounts, and received by the Servicer on or with respect to the
Receivables during such Collection Period; provided, however,
Collections shall not include taxes, assessments, Advanced Insurance Premiums
repaid by an Obligor or similar items or Repurchase Amounts.


 


“Collection Account” means the collection account
designated in the Series Supplement.


 


“Collection Period” means, (i) with respect to the
first Distribution Date, the period beginning on the opening of business on the
day after the related Cut-off Date and ending on the close of business on the
last day of the calendar month preceding such Distribution Date and (ii) with
respect to each subsequent Distribution Date, the preceding calendar month. Any
amount stated “as of the close of business of the last day of a Collection
Period” shall give effect to all applications of Collections on such day.


 


“Collection Records” means all manually prepared or
computer generated records relating to collection efforts or payment histories
with respect to the Receivables.


 


“Commission” means the Securities and Exchange
Commission.


 


“Contract” means a motor vehicle retail installment
sales contract.


 


“Controlling Party” has the meaning assigned to such
term in the Series Supplement.


 


“Corporate Trust Office” has the meaning assigned to
such term in the Series Supplement.


 


“Cram Down Loss” means, with respect to a Receivable,
if a court of appropriate jurisdiction in an insolvency proceeding shall have
issued a final order reducing the amount owed on a Receivable or otherwise
modifying or restructuring the scheduled payments to be made on a Receivable,
an amount equal to the excess of the Principal Balance of such Receivable
immediately prior to such order over the Principal Balance of such Receivable
as so reduced. A “Cram Down Loss” shall be deemed to have occurred on the date
of issuance of such order.


 


7

















 


“Cut-off Date” means, except as otherwise provided in
the Series Supplement, with respect to a Receivable, the date designated in the
related Transfer Agreement as the Cut-off Date for such Receivable transferred
to the Trust on the related Transfer Date.


 


“Dealer” means a dealer who sold a Financed Vehicle
and who originated and assigned the respective Receivable, directly or
indirectly, to HAFI or one of its Affiliates under a Dealer Agreement or
pursuant to a Dealer Assignment.


 


“Dealer Agreement” means any agreement between HAFI or
one if its Affiliates and a Dealer relating to the acquisition of Receivables
from a Dealer by HAFI or one of its Affiliates.


 


“Dealer Assignment” means, with respect to a
Receivable, the assignment by a Dealer conveying such Receivable to HAFI or one
of its Affiliates.


 


“Delaware Trustee” has the meaning, if any, assigned
to such term in the Series Supplement.


 


“Delivery” means, with respect to Trust Account
Property:


 


(1)           (a)           with
respect to bankers’ acceptances, commercial paper, negotiable certificates of
deposit and other obligations that constitute “instruments” within the meaning
of Article 9 of the UCC, transfer thereof:


 


(i)            by
physical delivery to the Administrator, indorsed to, or registered in the name
of, the Administrator or its nominee or indorsed in blank;


 


(ii)           by the Administrator
continuously maintaining possession of such instrument; and


 


(iii)          by
the Administrator continuously indicating by book-entry that such instrument is
credited to the related Trust Account;


 


(b)           with
respect to a “certificated security” (as defined in Article 8 of the UCC),
transfer thereof:


 


(i)            by (x)
physical delivery of such certificated security to the Administrator, provided
that if the certificated security is in registered form, it shall be indorsed
to, or registered in the name of, the Administrator or indorsed in blank, and
(y) the Administrator continuously maintaining possession of such certificated
security; or


 


(ii)           by another
Person (not a securities intermediary) (1) acquiring possession of such
certificated security on behalf of the Administrator, provided that if the
certificated security is in registered form, it shall be indorsed to, or
registered in the name of, the 


 


8

















 


Administrator or indorsed in blank, or (2) having
acquired possession of such certificated security, acknowledging that it holds
such certificated security for the Administrator, and, in either such case,
continuously maintaining possession of such certificated security; and


 


by the Administrator continuously indicating by
book-entry that such certificated security is credited to the related Trust
Account;


 


(c)           with
respect to any security issued by the U.S. Treasury, the Federal Home Loan
Mortgage Corporation or the Federal National Mortgage Association that is a
book-entry security held through the Federal Reserve System pursuant to federal
book entry regulations, transfer thereof pursuant to the following procedures,
all in accordance with applicable law, including applicable federal regulations
and Articles 8 and 9 of the UCC:


 


(i)            by (x)
book-entry registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a securities intermediary that is
also a “depositary” pursuant to applicable federal regulations and issuance by
such securities intermediary of a deposit advice or other written confirmation
of such book-entry registration to the Administrator of the purchase by the
securities intermediary on behalf of the Administrator of such book-entry
security; the making by such securities intermediary of entries in its books
and records identifying such book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations as belonging to the Administrator
and continuously indicating that such securities intermediary holds such
book-entry security solely as agent for the Administrator or such additional or
alternative procedures as are appropriate under applicable law to effect a
complete transfer of ownership of such property to the Administrator or its
nominee or custodian; or (y) continuous book-entry registration of such
property to a book-entry account maintained by the Administrator with a Federal
Reserve Bank; and


 


(ii)           by the Administrator
continuously indicating by book-entry that such property is credited to the
related Trust Account;


 


(d)           with
respect to any asset in the Trust Accounts that is an “uncertificated security”
(as defined in Article 8 of the UCC) and that is not governed by clause (c)
above or clause (e) below:


 


(i)            transfer
thereof:


 


(A)          by
registration to the Administrator as the registered owner thereof, on the books
and records of the issuer thereof; or


 


(B)           by another
Person (not a securities intermediary) (1) becoming the registered owner of the
uncertificated security on behalf of 


 


9

















 


the Administrator, or (2) having become the registered
owner of the uncertificated security, acknowledging that it holds such
uncertificated security for the Administrator; or


 


(ii)           the issuer
of the uncertificated security has agreed that it will comply with instructions
originated by the Administrator with respect to such uncertificated security
without further consent of the registered owner thereof; and


 


the Administrator continuously indicating by
book-entry that such uncertificated security is credited to the related Trust
Account;


 


(e)           in the
case of a security in the custody of or maintained on the books of a clearing
corporation (as defined in Article 8 of the UCC) or its nominee, transfer
thereof by causing:


 


(i)            the
relevant clearing corporation to credit such security to a securities account
of the Administrator at such clearing corporation; and


 


(ii)           the Administrator
to continuously indicate by book-entry that such security is credited to the
related Trust Account; or


 


(f)            with
respect to a “security entitlement” (as defined in Article 8 of the UCC) to be
transferred to or for the benefit of the Administrator and not governed by
clauses (c) or (e) above, transfer thereof by:


 


(i)            a
securities intermediary’s (A) indicating by book entry that the underlying “financial
asset” (as defined in Article 8 of the UCC) has been credited to the Administrator’s
“securities account” (as defined in Article 8 of the UCC), (B) receiving a
financial asset from the Administrator or acquiring the underlying financial
asset for the Administrator, and in either case, accepting it for credit to the
Administrator’s securities account, or (C) becoming obligated under other law,
regulation or rule to credit the underlying financial asset to the Administrator’s
securities account,


 


(ii)           the
making by the securities intermediary of entries on its books and records
continuously identifying such security entitlement as belonging to the Administrator;
and continuously indicating by book-entry that such securities entitlement is
credited to the Administrator’s securities account; and


 


(iii)          the
Administrator’s continuously indicating by book-entry that such security
entitlement (or all rights and property of the Administrator representing such
securities entitlement) is credited to the related Trust Account; and/or


 


10

















 


(2)           In the
case of any such asset, (i) compliance with such additional or alternative
procedures as are now or may hereafter become appropriate to effect the
complete transfer of ownership of, or control over, any such Trust Account
Property to the Administrator free and clear of any adverse claims, consistent
with changes in applicable law or regulations or the interpretation thereof,
and (ii) the Administrator’s continuously indicating by book entry that such
asset is credited to the related Trust Account.


 


In each case of delivery contemplated herein, the Administrator
shall make appropriate notations on its records, and shall cause the same to be
made on the records of its nominees, indicating that securities are held in
trust pursuant to and as provided in this Agreement.


 


“Depositor” means the Seller in its capacity as
Depositor under the Trust Agreement.


 


“Determination Date” means, unless otherwise provided
in the Series Supplement, the second Business Day preceding each Distribution
Date.


 


“Distribution Date” has the meaning assigned to such
term in the Series Supplement.


 


“Eligibility Criteria” means the criteria set forth in
the Schedule of Eligibility Criteria.


 


“Eligible Account” means, except as otherwise provided
in the Series Supplement, either (a) a segregated account with an Eligible Bank
or (b) a segregated trust account with the corporate trust department of a
depository institution with corporate trust powers organized under the laws of
the United States of America or any state thereof or the District of Columbia
(or any United States branch or agency of a foreign bank), provided that such
institution also must have a rating of Baa3 or higher from Moody’s, a rating of
BBB- or higher from Standard & Poor’s and a rating of BBB- or higher from
Fitch, in each case only if such Person is a Rating Agency, with respect to
long-term deposit obligations, or such other lower ratings acceptable to the
Rating Agency [and the Insurer (for so long as it is the Controlling Party)].


 


“Eligible Bank” means, except as otherwise provided in
the Series Supplement, any depository institution (which shall initially be the
Administrator), organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any United States
branch or agency of a foreign bank), which is subject to supervision and
examination by federal or state banking authorities and which at all times (a)
has a net worth in excess of $50,000,000 and (b) (i) has a rating of P-1 from
Moody’s, A-1 from Standard & Poor’s and F1 from Fitch, in each case only if
such Person is a Rating Agency, with respect to short-term deposit obligations,
or such other lower ratings acceptable to the Rating Agency [and the Insurer
(for so long as it is the Controlling Party)], or (ii) if such institution has
issued long-term unsecured debt 


 


11

















 


obligations, a rating acceptable to the Rating Agency with
respect to long-term unsecured debt obligations.


 


“Eligible Investments” shall mean, except as otherwise
provided in a Series Supplement, (i) negotiable instruments or securities
represented by instruments in bearer or registered form (or, in the case of
Eligible Investments described in clause (a) of this definition, book-entry
securities representing such obligations), or (ii) securities entitlements (as
defined in Article 8 of the UCC) arising from Delivery of any such negotiable
instruments or securities in accordance with the provisions of clause (1)(f) of
the definition of such term, or (iii) in the case of deposits described below,
deposit accounts held in the name of the Administrator in trust for the benefit
of the Holders of the Securities, subject to the exclusive custody and control
of the Administrator and for which the Administrator has sole signature
authority, which evidence or arise out of, as the case may be:


 


(a)           direct
obligations of, or obligations fully guaranteed as to timely payment by, the
United States of America;


 


(b)           demand
deposits, time deposits or certificates of deposit (having original maturities
of no more than 365 days) of depositary institutions or trust companies
incorporated under the laws of the United States of America or any state
thereof (or domestic branches of foreign banks) and subject to supervision and
examination by federal or state banking or depositary institution authorities; provided,
that at the time of the Trust’s investment or contractual commitment to invest
therein, the short-term debt rating of such depository institution or trust
company shall be satisfactory to the Rating Agency, and provided  further
that the “jurisdiction” of such depositary institution or trust company, for
purposes of Article 9 of the UCC, shall be a state in which Revised Article 9
of the UCC has become effective and in which security interests in deposit
accounts are subject to Article 9, as in effect therein;


 


(c)           commercial
paper (having original or remaining maturities of not more than 30 days)
having, at the time of the Trust’s investment or contractual commitment to
invest therein, a rating satisfactory to the Rating Agency;


 


(d)           investments
in money market funds having, at the time of the Trust’s investment therein, a
rating satisfactory to the Rating Agency;


 


(e)           demand
deposits, time deposits and certificates of deposit which are fully insured by
the FDIC having, at the time of the Trust’s investment therein, a rating
satisfactory to the Rating Agency;


 


(f)            bankers’
acceptances (having original maturities of no more than 365 days) issued by a
depository institution or trust company referred to in (b) above;


 


(g)           (x) time
deposits (having maturities not later than the succeeding Distribution Date)
other than as referred to in clause (e) above, with a Person the commercial
paper of which has a credit rating satisfactory to the Rating Agency or (y)
notes which are payable on demand issued by HSBC Finance Corporation; provided
such 


 


12

















 


notes will constitute Eligible Investments only if HSBC
Finance Corporation has, at the time of the Trust’s investment in such notes, a
commercial paper rating of not less than A-1 by Standard & Poor’s, P-1 by
Moody’s and F1 by Fitch (or such other rating as shall be satisfactory to such
Rating Agency [and the Insurer (for so long as it is the Controlling Party)]);
or


 


(h)           any other
investment of a type or rating that is acceptable to the Rating Agency [and the
Insurer (for so long as it is the Controlling Party)].


 


Any of the foregoing Eligible Investments may be
purchased by or through the Administrator, the Indenture Trustee or through any
of their respective Affiliates.


 


“Eligible Servicer” means HSBC Finance Corporation [or
any other Person reasonably acceptable to the Insurer (for so long as it is the
Controlling Party)], which at the time of its appointment as Servicer, (i) is
servicing a portfolio of motor vehicle retail installment sales contracts
and/or motor vehicle installment loans, (ii) is legally qualified and has the
capacity to service the Receivables, (iii) has demonstrated the ability
professionally and competently to service a portfolio of motor vehicle retail
installment sales contracts and/or motor vehicle installment loans similar to
the Receivables with reasonable skill and care, (iv) is qualified and entitled
to use, pursuant to a license or other written agreement, and agrees to
maintain the confidentiality of, the software which the Servicer uses in
connection with performing its duties and responsibilities under this Agreement
or otherwise has available software which is adequate to perform its duties and
responsibilities under this Agreement and (v) has a net worth of at least $                .


 


“Eligible Subservicer” means HSBC Auto Finance Inc. or
any wholly owned subsidiary of HSBC Finance Corporation [or any other Person reasonably
acceptable to the Insurer (for so long as it is the Controlling Party)] which
at the time of its appointment as Subservicer, (i) is servicing a portfolio of
motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service
the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables
with reasonable skill and care, and (iv) is qualified and entitled to use,
pursuant to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with performing
its duties and responsibilities under this Agreement or otherwise has available
software which is adequate to perform its duties and responsibilities under
this Agreement.


 


“Exchange Act” means The Securities Exchange Act of 1934, as amended.


 


“Financed Vehicle” means a new or used automobile,
light duty truck or van securing an Obligor’s indebtedness under the respective
Receivable.


 


“Fitch” means Fitch Inc., or its successor.


 


13

















 


“Grant” has the meaning assigned to such term in the
Indenture.


 


“HACI” means HSBC Auto Credit Inc., a Delaware corporation.
For the avoidance of doubt, HACI is an Affiliate of HAFI.


 


“HAFI” means HSBC Auto Finance Inc., a Delaware corporation.


 


“Indenture” has the meaning assigned to such term in
the Series Supplement.


 


“Indenture Trustee” means the Person acting as
Indenture Trustee under the Indenture, its successors in interest and any
successor Indenture Trustee under the Indenture.


 


“Indenture Trustee Fee” means the fees and reasonable
out-of-pocket expenses due to the Indenture Trustee as may be set forth in that
certain fee agreement dated as of the date hereof between the Servicer and the
Indenture Trustee.


 


“Insolvency Event” means, with respect to a specified
Person, (a) the filing of a petition against such Person or the entry of a
decree or order for relief by a court having jurisdiction in respect of such
Person or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person’s affairs, and such petition, decree or order shall remain unstayed
and in effect for a period of 60 consecutive days; or (b) the commencement by
such Person of a voluntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under
any such law, or the consent by such Person to the appointment of or taking
possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part
of its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.


 


“Insurance Policy” means, with respect to a
Receivable, any insurance policy (including the insurance policies described in
Section 4.4 hereof) benefiting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the Obligor.


 


[“Insurance Agreement” has the meaning assigned to
such term in the Series Supplement.]


 


[“Insurer” has the meaning assigned to such term in
the Series Supplement.]


 


14

















 


“Interest Period” has the meaning assigned to such
term in the Series Supplement.


 


“Issuer” means HSBC Automotive Trust 200  -  ,
a Delaware statutory trust formed under the laws of the State of Delaware.


 


“Lien” means a security interest, lien, charge,
pledge, equity, or encumbrance of any kind, other than tax liens, mechanics’
liens and any liens that attach to the respective Receivable by operation of
law as a result of any act or omission by the related Obligor, provided that
the lien created by this Agreement or the Indenture shall not be deemed to
constitute a Lien.


 


“Lien Certificate” means, with respect to a Financed
Vehicle, an original certificate of title, certificate of lien or other
notification issued by the Registrar of Titles of the applicable state to a
secured party which indicates that the lien of the secured party on the
Financed Vehicle is recorded on the original certificate of title. In any
jurisdiction in which the original certificate of title is required to be given
to the Obligor, the term “Lien Certificate” shall mean only a certificate or
notification issued to a secured party. For Financed Vehicles registered in
states which only issue confirmation of the lienholder’s interest
electronically, the “Lien Certificate” may consist of notification of an
electronic recordation, by either a third party service provider or the
relevant Registrar of Titles of the applicable state, which indicates that the
lien of the secured party on the Financed Vehicle is recorded on the original
certificate of title on the electronic lien and title system of the applicable
state.


 


“Liquidated Receivable” means, with respect to any
Collection Period, upon the earliest of any of the following to occur, a
Receivable as to which (i) such Receivable has been liquidated by the Servicer
through the sale of the Financed Vehicle, (ii) 90 days have elapsed since
the Servicer repossessed the Financed Vehicle, (iii) proceeds have been
received in respect of such Receivable which, in the Servicer’s reasonable
judgment, constitute the final amounts recoverable in respect of such
Receivable or (iv) 10% or more of a Scheduled Payment shall have become
150 or more days delinquent (or, in the case where the Obligor of such
Receivable is subject to an Insolvency Event, 10% or more of a Scheduled
Payment shall have become 210 or more days delinquent); provided, however,
that the number of days specified in either clause (ii) or (iv) may at the
election of the Servicer be such shorter number of days as may from time to
time be consistent with the Servicer’s then-current collection policy. Any
Receivable that becomes a Repurchased Receivable on or before the related
Accounting Date shall not be a Liquidated Receivable.


 


“LPI Policy” has the meaning assigned to such term in
Section 4.4(b).


 


“Master Receivables Purchase Agreements” has the meaning
assigned to such term in the Series Supplement.


 


“Monthly Records” means all records and data
maintained by the Servicer with respect to the Receivables, including the
following with respect to each Receivable: 


 


15

















 


the account number; the originating Dealer, if any;
Obligor name; Obligor address; Obligor home phone number; Obligor business
phone number; original Principal Balance; original term; Annual Percentage
Rate; current Principal Balance; current remaining term; origination date;
first payment date; final scheduled payment date; next payment due date; date
of most recent payment; new/used classification; collateral description; days
currently delinquent; number of contract extensions (months) to date; amount of
Scheduled Payment; current Insurance Policy expiration date; and past due late
charges.


 


“Moody’s” means Moody’s Investors Service, Inc., or
its successor.


 


“Net Liquidation Proceeds” means, with respect to a
Liquidated Receivable, all amounts realized with respect to such Receivable
(other than amounts withdrawn or received from any Series Support) net of (i)
reasonable expenses incurred by the Servicer in connection with the collection
of such Receivable and the repossession and disposition of the Financed Vehicle
and (ii) amounts that are required to be refunded to the Obligor on such
Receivable; provided, however, that the Net Liquidation Proceeds with respect to any
Receivable shall in no event be less than zero; provided, further,
that, so long as amounts are not traced to specific Receivables the
Servicer shall reasonably estimate, on or prior to each Accounting Date, the
amount of Net Liquidation Proceeds attributable to the Series Trust Estate.


 


“Noteholder” means the Person in whose name a Note is
registered on the Note Register.


 


“Notes” has the meaning assigned to such term in the
Indenture.


 


“Obligor” on a Receivable means the purchaser or
co-purchasers of the Financed Vehicle and any other Person who owes payments
under the Receivable.


 


“Officers’ Certificate” means a certificate signed by
the chairman of the board, the president, any executive vice president or any
vice president, any treasurer, assistant treasurer, secretary or assistant
secretary of the Seller or the Servicer, as appropriate.


 


“Opinion of Counsel” means an opinion of counsel who
may be counsel to the Servicer or the Seller, acceptable to the Indenture Trustee[,
the Insurer (for so long as it is the Controlling Party)] and/or the
Administrator, as the case may be.


 


“Other Conveyed Property” means all property conveyed
by the Seller to the Trust pursuant to Section 2.1(a)(ii) through (xii) of this
Agreement.


 


“Outstanding” has the meaning assigned to such term in
the Indenture.


 


“Outstanding Amount” has the meaning assigned to such
term in the Indenture.


 


16

















 


“Owner Trust Estate” has the meaning assigned to such
term in the Trust Agreement.


 


“Owner Trustee” means the Person acting as Owner
Trustee under the Trust Agreement, its successors-in-interest or any successor
Owner Trustee under the Trust Agreement.


 


“Payment Record” means the record maintained by the
Servicer for the Trust as provided in Section 4.2(e) hereof.


 


“Person” means any individual, corporation, limited
liability company, estate, partnership, joint venture, association, joint stock
company, trust (including any beneficiary thereof), unincorporated organization
or government or any agency or political subdivision thereof.


 


“Principal Balance” means, with respect to any
Receivable, as of any date, the Amount Financed minus (i) that portion of all
amounts received on or prior to such date and allocable to principal in
accordance with the Actuarial Method, or the Simple Interest Method, as
appropriate and (ii) any Cram Down Loss in respect of such Receivable. The “Principal
Balance” of a Repurchased Receivable or Liquidated Receivable shall be deemed
to be zero.


 


“Rating Agency” has the meaning assigned to such term
in the Series Supplement.


 


“Receivables” has the meaning assigned to such term in
the Series Supplement.


 


“Receivable Files” means the documents specified in
Section 3.3.


 


“Receivables Purchase Agreement Supplement” means any
Receivables Purchase Agreement Supplement to any Master Receivables Purchase
Agreement.


 


“Record Date” with respect to each Distribution Date
means the Business Day immediately preceding such Distribution Date, unless
otherwise specified in the Series Supplement.


 


“Registrar of Titles” means, with respect to any
state, the governmental agency or body responsible for the registration of, and
the issuance of certificates of title relating to, motor vehicles and liens
thereon.


 


“Regulation AB” 
means Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17
C.F.R. §§229.1100-229.1123, as such may be amended from time to time and
subject to such clarification and interpretation as have been provided by the
Commission in the adopting release (Asset-Backed Securities, Securities Act
Release No. 33-8518.70 Fed. Reg. 1, 506, 1,531 (January 7, 2005)) or by the
staff of the Commission, or as may be provided by the Commission or its staff
from time to time.


 


17

















 


“Related Documents” has the meaning assigned to such
term in the Series Supplement.


 


“Repurchase Amount” means, with respect to a
Receivable, the Principal Balance and all accrued and unpaid interest on the
Receivable, after giving effect to the receipt of any moneys collected (from
whatever source) on such Receivable, if any, as of the date of repurchase,
provided that, reductions in the Principal Balance resulting from such
Receivable becoming a Liquidated Receivable shall be disregarded.


 


“Repurchased Receivable” means a Receivable purchased
by the Servicer pursuant to Section 4.7 or repurchased by the Seller pursuant
to Section 3.2 or the Servicer pursuant to Section 11.1(a).


 


“Schedule of Eligibility Criteria” means the Schedule
of Eligibility Criteria attached as Schedule I to the Series Supplement.


 


“Schedule of Receivables” has the meaning assigned to
such term in the Series Supplement.


 


“Scheduled Payment” means, with respect to any
Collection Period for any Receivable, the sum of (i) the amount set forth in
such Receivable as required to be paid by the Obligor in such Collection Period
and (ii) any outstanding Advanced Insurance Premiums. If after the Closing
Date, the Obligor’s obligation under a Receivable with respect to a Collection
Period has been modified so as to differ from the amount specified in such
Receivable as a result of (i) the order of a court in an insolvency proceeding
involving the Obligor, (ii) pursuant to the Servicemembers Civil Relief Act, as
amended, or similar state legislation or regulation, or (iii) modifications or
extensions of the Receivable permitted by Sections 4.2(b) and (c), the
Scheduled Payment with respect to such Collection Period shall refer to the
Obligor’s payment obligation under the Receivable with respect to such
Collection Period as so modified.


 


“Secured Parties” has the meaning assigned to such
term in the Series Supplement.


 


“Securities” means the Notes and the Certificates.


 


“Securityholders” means the Noteholders and the
Certificateholders.


 


“Seller” means HSBC Auto Receivables Corporation, a
Nevada corporation, and its successors in interest to the extent permitted
hereunder.


 


“Series” means the Notes and Certificates issued
pursuant to the Series Supplement.


 


“Series 200  -   Notes” shall have
the meaning assigned to such term in the Series Supplement.


 


18

















 


“Series Supplement” means, the Series Supplement,
dated as of the Closing Date, to this Agreement, the Indenture and the Trust
Agreement, among the Servicer, the Issuer, the Seller, the Indenture Trustee,
the Owner Trustee, the Delaware Trustee (if any) and the Administrator, as such
agreement may be amended or supplemented from time to time.


 


“Series Support” means any such rights and benefits as
specified in the Series Supplement provided to the Indenture Trustee or the
Noteholders of any Class pursuant to any letter of credit, surety bond, cash
collateral account, spread account, reserve account, guaranteed rate agreement,
maturity liquidity facility, interest rate swap agreement, tax protection
agreement or other similar arrangement. The subordination of any Class to
another Class shall be deemed to be Series Support. Notwithstanding that such
Series Support may be held by or in favor of the Indenture Trustee for the
benefit of any Class, only those Class(es) to which such Series Support relates
shall have any rights with respect thereto and all payments thereunder received
by the Indenture Trustee (or the Administrator on its behalf) shall be
distributed exclusively as prescribed in the Series Supplement.


 


“Series Trust Estate” has the meaning assigned to such
term in the Series Supplement.


 


“Service Contract” means, with respect to a Financed
Vehicle, the agreement, if any, financed under the related Receivable that
provides for the repair of such Financed Vehicle.


 


“Servicer” means HSBC Finance Corporation, as the
servicer of the Receivables, and each Successor Servicer pursuant to Section
10.3.


 


“Servicer Credit Facility” means the credit facility
maintained by the Servicer with a Servicer Credit Facility Issuer pursuant to
Section 4.2(e).


 


“Servicer Credit Facility Issuer” means a depository
institution or insurance company that qualifies pursuant to Section 4.2(e).


 


“Servicer’s Certificate” has the meaning assigned to
such term in the Series Supplement.


 


“Servicer Termination Event” means an event specified
in Section 10.1.


 


“Servicing Criteria” means the “servicing criteria”
set forth in Item 1122(d) of Regulation AB.


 


“Servicing Fee” has the meaning assigned to such term
in the Series Supplement.


 


“Servicing Fee Rate” means the rate per annum
specified in the Series Supplement.


 


19

















 


“Simple Interest Method” means the method of
allocating a fixed level monthly payment on an obligation between principal and
interest, pursuant to which the portion of such payment that is allocated to
interest is equal to the product of (a) the fixed rate of interest on such
obligation, (b) the period of time (expressed as a fraction of a year, based on
the actual number of days in the calendar month and 365 or 360 days (as
applicable in the underlying document) in the calendar year) elapsed since the
preceding payment under the obligation was made and (c) the outstanding
principal balance of such obligation.


 


“Simple Interest Receivable” means a Receivable under
which the portion of the payment allocable to interest and the portion
allocable to principal is determined in accordance with the Simple Interest
Method.


 


“Standard & Poor’s” means Standard & Poor’s
Rating Services, a division of The McGraw-Hill Companies, Inc., or its
successor.


 


“Subservicer” means, initially, HSBC Auto Finance Inc.,
and any Eligible Subservicer with whom the Servicer has entered into an
agreement relating to subservicing the Receivables.


 


“Successor Servicer” has the meaning assigned to such
term in Section 10.3(a).


 


“Support Default” means a default relating to an
Insolvency Event with respect to, or the performance of, a Support Provider.


 


“Support Provider” means the Person, if any,
designated in the Series Supplement, as providing any Series Support, other
than HSBC Finance Corporation or any of its Affiliates or the Noteholders of
any Class which is subordinated to any other Class.


 


“Transfer Agreement” means the agreement among the
Issuer, the Seller, the Servicer, the Indenture Trustee and the Administrator,
substantially in the form of Exhibit A.


 


“Transfer Date” means, with respect to Receivables,
any date on which Receivables are to be transferred to the Trust pursuant to
this Agreement and a related Transfer Agreement.


 


“Treasury Regulations” 
has the meaning assigned to such term in the Trust Agreement.


 


“Trust” means the Issuer.


 


“Trust Account Property” means the Trust Accounts, all
amounts and investments held from time to time in any Trust Account (whether in
the form of deposit accounts, book-entry securities, uncertificated securities
or otherwise), and all proceeds of the foregoing.


 


20

















 


“Trust Accounts” has the meaning assigned to such term
in the Series Supplement.


 


“Trust Agreement” has the meaning assigned to such
term in the Series Supplement.


 


“Trust Officer” means, (i) in the case of the
Indenture Trustee, any officer within the Corporate Trust Office of the
Indenture Trustee, including any President, Vice President, Assistant Vice
President, Assistant Treasurer, Assistant Secretary, Financial Services Officer
or any other officer of the Indenture Trustee, customarily performing functions
similar to those performed by any of the above designated officers and in each
case having direct responsibility for the administration of the Indenture, (ii)
in the case of the Administrator, any officer within the Corporate Trust Office
of the Administrator, and (iii) in the case of the Owner Trustee, any officer
in the corporate trust office of the Owner Trustee or any agent of the Owner
Trustee under a power of attorney with direct responsibility for the
administration of this Agreement or any of the Basic Documents or Related
Documents on behalf of the Owner Trustee.


 


“UCC” means the Uniform Commercial Code as in effect
in the relevant jurisdiction on the date of this Agreement.


 


SECTION 1.2.        Other
Interpretive Provisions.   (a)   Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in the Indenture, the Series Supplement or the Trust Agreement.


 


(b)           All terms
defined in this Agreement shall have the defined meanings when used in any
instrument governed hereby and in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.


 


(c)           As used in
this Agreement, in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto or thereto, accounting terms
not defined in this Agreement or in any such instrument, certificate or other
document, and accounting terms partly defined in this Agreement or in any such
instrument, certificate or other document to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the
definitions of accounting terms in this Agreement or in any such instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such instrument, certificate or other document shall
control.


 


(d)           Any
agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein.


 


21

















 


(e)           Any term
defined herein, which is otherwise defined in the Series Supplement, shall have
the meaning specified therefor in the Series Supplement, whether or not the
definition in this Agreement includes a phrase to the effect that such term may
be otherwise defined in the Series Supplement.


 


(f)            In the
event that with respect to the Series there is no Support Provider, any
references herein or in any other of the Basic Documents to the consent of, or
acceptability to, the Support Provider shall be deemed to be deleted.


 


(g)           In the
event that with respect to the Series, the Indenture and Series Supplement do
not provide for the purchase by the Noteholders of Additional Principal
Amounts, any references herein or in any other Basic Document to Additional
Principal Amounts shall be deemed to be deleted.


 


SECTION 1.3.        Usage
of Terms. With respect to all terms used in this Agreement, the singular
includes the plural and the plural includes the singular; words importing any
gender include the other gender; references to “writing” include printing, typing,
lithography, and other means of reproducing words in a visible form; references
to agreements and other contractual instruments include all subsequent
amendments thereto or changes therein entered into in accordance with their
respective terms and not prohibited by this Agreement; references to Persons
include their permitted successors and assigns; the terms “include” or “including”
mean “include without limitation” or “including without limitation;” the words “herein”,
“hereof” and “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision, and Article, Section, Schedule and Exhibit references, unless
otherwise specified, refer to Articles and Sections of Schedules and Exhibits
to this Agreement.


 


SECTION 1.4.        Certain
References. All references to the Principal Balance of a Receivable as of
any date of determination shall refer to the close of business on such day, or
as of the first day of an Interest Period shall refer to the opening of
business on such day. All references to the last day of an Interest Period
shall refer to the close of business on such day.


 


SECTION 1.5.        No
Recourse. Without limiting the obligations of the Servicer or Seller
hereunder, no recourse may be taken, directly or indirectly, under this
Agreement or any certificate or other writing delivered in connection herewith
or therewith, against any stockholder, officer or director, as such, of the
Servicer or Seller, or of any of their respective Affiliates, predecessors or
successors.


 


SECTION 1.6.        Action
by or Consent of Noteholders. Whenever any provision of this Agreement
refers to action to be taken, or consented to, by Noteholders, such provision
shall be deemed to refer to the Noteholders of record as of the Record Date
immediately preceding the date on which such action is to be taken, or consent
given, by Noteholders. Solely for the purposes of any action to be taken, or
consented to, by Noteholders, any Note registered in the name of HAFI or any
Affiliate thereof shall be deemed not to be outstanding; provided, however, that, solely
for the purpose of 


 


22

















 


determining whether the Indenture Trustee is entitled to rely upon any
such action or consent, only Notes which a Trust Officer of the Indenture
Trustee actually knows to be so owned shall be so disregarded.


 


ARTICLE II



Conveyance of Receivables


 


SECTION 2.1.        Conveyance
of Receivables. (a)  Subject to the
conditions set forth in paragraph (b) below, in consideration of the Issuer’s
delivery to or upon the order of the Seller on a Transfer Date (which may
include the Closing Date) of the net proceeds of the issuance of Notes or from
any Additional Principal Amount thereunder and the other amounts to be
distributed from time to time to the Seller in accordance with the terms of
this Agreement and the Series Supplement, the Seller shall, from time to time,
sell, transfer, assign, set over and otherwise convey to the Issuer, without
recourse (subject to the obligations set forth herein), all right, title and
interest of the Seller in and to:


 


(i)            each and
every Receivable listed on the Schedule of Receivables and all monies paid or
payable thereon or in respect thereof after the related Cut-off Date (including
amounts due on or before such Cut-off Date but received by HSBC Finance, the
Servicer, HAFI or any Affiliate of HAFI that is a seller under a Master
Receivables Purchase Agreement or the Seller after such Cut-off Date);


 


(ii)           the
security interests in the related Financed Vehicles granted by Obligors
pursuant to the related Receivables and any other interest of the Seller in
such Financed Vehicles;


 


(iii)          all
rights of HAFI or any Affiliate of HAFI that is the seller under a Master
Receivables Purchase Agreement against the Dealers pursuant to Dealer
Agreements or Dealer Assignments related to such Receivables;


 


(iv)          any
proceeds and the right to receive proceeds with respect to such Receivables
repurchased by a Dealer pursuant to a Dealer Agreement;


 


(v)           all rights
under any Service Contracts on the related Financed Vehicles;


 


(vi)          any
proceeds and the right to receive proceeds with respect to such Receivables
from claims on any Insurance Policy covering the related Financed Vehicles or
Obligors[, including rebates of insurance premiums relating to the Receivables];


 


23





















 


(vii)         all
items contained in the related Receivables Files with respect to the
Receivables; and any and all other documents that HAFI or any Affiliate of HAFI
that is a seller under a Master Receivables Purchase Agreement, the Seller or
the Servicer, as applicable, keeps on file in accordance with its customary
procedures relating to the related Receivables, the Obligors or the Financed
Vehicles;


 


(viii)        all
funds on deposit from time to time in the Trust Accounts (including all
investments and proceeds thereof);


 


(ix)           all
property (including the right to receive future Net Liquidation Proceeds) that
secures a Receivable and that has been acquired by or on behalf of the Seller
pursuant to liquidation of such Receivable;


 


(x)            all of
the Seller’s right, title and interest in its rights and benefits, but none of
its obligations or burdens, under each of the Master Receivables Purchase Agreements
and the Receivables Purchase Agreement Supplements, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of HAFI or any Affiliate of HAFI that is a seller under a Master
Receivables Purchase Agreement or HSBC Finance Corporation, as applicable,
under each of the Master Receivables Purchase Agreements and the related
Receivables Purchase Agreement Supplements, after the related Cut-off Date;


 


(xi)           on the
Closing Date, one share of Class SV Preferred Stock of the Seller together with
the exclusive right to vote such share; and


 


(xii)          all
present and future claims, demands, causes and choses 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, investment property, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing.


 


(b)           The Seller
shall transfer to the Issuer the Receivables and the other property and rights
related thereto described in paragraph (a) above only upon 


 


24

















 


the satisfaction
of each of the following conditions on or prior to the related Transfer Date
(if the Transfer Date is not also the Closing Date):


 


(i)            the
Seller shall have provided the Indenture Trustee, the Administrator[, the
Insurer]  and the Owner Trustee with an
Addition Notice not later than five days prior to such Transfer Date and shall
have provided any information reasonably requested by any of the foregoing with
respect to the related Receivables;


 


(ii)           the Seller
shall have delivered to the Owner Trustee a duly executed Transfer Agreement [and
to the Insurer a copy of such Transfer Agreement] which shall include
supplements to Schedule A (which may be in electronic format), listing the
Receivables to be transferred to the Issuer;


 


(iii)          the
Servicer, on behalf of the Issuer, shall have delivered to the Indenture
Trustee and the Administrator a supplemental schedule to the Series Supplement
(which may be in electronic format), listing the Receivables to be pledged to
the Indenture Trustee under the Indenture;


 


(iv)          the Seller
shall, to the extent required by Section 4.2, have deposited in the Collection
Account all Collections received after the related Cut-off Date in respect of
the Receivables to be transferred;


 


(v)           as of each
Transfer Date, (A) the Seller shall not be insolvent and shall not become
insolvent as a result of the transfer of Receivables on such Transfer Date, (B)
the Seller shall not intend to incur or believe that it shall incur debts that
would be beyond its ability to pay as such debts mature, (C) such transfer
shall not have been made with actual intent to hinder, delay or defraud any
Person and (D) the assets of the Seller shall not constitute unreasonably small
capital to carry out its business as conducted;


 


(vi)          each of the
representations and warranties made by the Seller pursuant to Section 3.1 with
respect to the Receivables to be transferred on such Transfer Date shall be
true and correct as of the related Transfer Date, and the Seller shall have
performed all obligations to be performed by it hereunder on or prior to such
Transfer Date;


 


(vii)         the
Seller shall, at its own expense, on or prior to the Transfer Date indicate in
its computer files that the Receivables identified in the Transfer Agreement
have been sold to the Trust pursuant to this Agreement;


 


25





















 


(viii)        the
Seller shall have taken any action necessary or, if required by the Indenture
Trustee, advisable to obtain and maintain the first priority perfected
ownership interest of the Trust in the Owner Trust Estate;


 


(ix)           the Issuer
shall have taken any action necessary or, if required by the Indenture Trustee,
advisable to obtain and maintain the first priority perfected security interest
of the Indenture Trustee, for the benefit of the Noteholders, in the Series
Trust Estate;


 


(x)            no
selection procedures adverse to the interests of the Noteholders or any Support
Provider shall have been utilized in selecting the related Receivables;


 


(xi)           the
addition of any such Receivables shall not cause the Trust to be treated as an
association or publicly traded partnership taxable as a corporation for federal
income tax purposes, or cause the Notes to fail to qualify as debt for federal
income tax purposes;


 


(xii)          if
required by any of the Related Documents, the Issuer shall simultaneously
transfer to the Administrator any amounts required to be deposited in the
related Trust Accounts with respect to the Receivables transferred on such
Transfer Date; and


 


(xiii)         the
Seller shall have delivered to the Indenture Trustee and the Administrator an
Officers’ Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b).


 


The Seller covenants that in the event any of the
foregoing conditions precedent are not satisfied with respect to any Receivable
on the date required as specified above, the Seller will immediately repurchase
such Receivable from the Trust, at a price equal to the Repurchase Amount
thereof, in the manner specified in Section 5.4.


 


It is the intention of the Seller that the transfer
and assignment contemplated by this Agreement and each related Transfer
Agreement shall constitute a sale of the related Receivables, other than for
federal income tax purposes, and the related Other Conveyed Property from the
Seller to the Issuer and the beneficial interest in and title to such property
shall not be part of the Seller’s estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. In the
event that, notwithstanding the intent of the Seller, the transfer and
assignment contemplated hereby and thereby is held not to be a sale, this
Agreement and the related Transfer Agreement and financing statements described
in this Agreement, shall constitute a Grant by the Seller of a valid and
continuing first priority perfected security interest in the property 


 


26

















 


referred to in this Section 2.1 to the Issuer. The
Seller hereby authorizes the Issuer to file such financing statements as it
deems necessary in connection with the security interest granted pursuant to
the preceding sentence.


 


(c)           Notwithstanding
the provisions of this Section 2.1 and any other provisions of any Transaction
Document that purport to allow multiple conveyances of Receivables from the
Seller to the Issuer, the parties hereto agree that, other than the conveyance
of (i) the Receivables on the Closing Date and (ii) any Eligible Substitute
Receivables on any date hereafter, the Seller shall not convey any Receivables
to the Trust pursuant to this Agreement or any Transfer Agreement.


 


SECTION 2.2.        Further
Encumbrance of Owner Trust Estate. (a) 
Immediately upon the conveyance to the Trust by the Seller of
Receivables and the related Other Conveyed Property pursuant to Section 2.1,
all right, title and interest of the Seller in and to such Receivables and such
Other Conveyed Property shall terminate, and all such right, title and interest
shall vest in the Issuer, in accordance with the Trust Agreement and Sections
3802 and 3805 of the Statutory Trust Statute (as defined in the Trust
Agreement).


 


(b)           Immediately
upon the vesting of any Receivables and the related Other Conveyed Property,
the Trust shall have the sole right to pledge or otherwise encumber such
property subject to the terms of the Basic Documents. Pursuant to the Indenture
and the Series Supplement, the Trust will grant a security interest in the
Series Trust Estate to secure the repayment of the Notes [and amounts owing to
the Insurer under the Insurance Agreement and the Basic Documents]. The
Certificates shall represent the beneficial ownership interest in the
Receivables and the Other Conveyed Property, and the Certificateholders shall
be entitled to receive distributions with respect thereto as set forth in the
Series Supplement.


 


(c)           The
Indenture Trustee shall hold the Series Trust Estate for the benefit of the
Secured Parties. Following the payment in full of the Notes [and all amounts
owing to the Insurer under the Insurance Agreement and the Basic Documents] and
the release and discharge of the Indenture and the Series Supplement, all
covenants of the Issuer under Article III of the Indenture and the Series
Supplement shall, until payment in full of the Certificates, remain as
covenants of the Issuer for the benefit of the Certificateholders, enforceable
by the Certificateholders to the same extent as such covenants were enforceable
by the Secured Parties prior to the discharge of the Indenture. Any rights of the
Indenture Trustee under Article III of the Indenture and the Series Supplement,
following the discharge of the Indenture and the Series Supplement, shall vest
in the Certificateholders.


 


(d)           The
Indenture Trustee shall, at such time as there are no Securities outstanding and
all [amounts owing to the Insurer under the Insurance Agreement and the Basic
Documents and all] sums due to the Indenture Trustee or any agent or counsel
thereof pursuant to the Indenture as supplemented by the Series Supplement, have
been paid, pursuant to Section 4.1 of the Indenture, and subject to 


 


27

















 


satisfaction of
the conditions set forth therein, release the Lien of the Series Supplement and
the Indenture with respect to the Series Trust Estate.


 


ARTICLE III



The Receivables


 


SECTION 3.1.        Representations
and Warranties of Seller. The Seller represents and warrants as to the
related Receivables that the representations and warranties set forth on the
Schedule of Eligibility Criteria are, or will be, true and correct as of the
respective dates specified in such Schedule. The Issuer is deemed to have
relied on such representations and warranties in acquiring the related
Receivables[, the Insurer is deemed to have relied on such representations and
warranties in issuing the Notes Policy] and the related Securityholders shall
be deemed to rely on such representations and warranties in purchasing the
Notes and Certificates or any Additional Principal Amounts thereunder. Such
representations and warranties shall survive the sale, transfer and assignment
of the Owner Trust Estate to the Issuer and any pledge of the Series Trust
Estate to the Indenture Trustee pursuant to the Indenture and the Series
Supplement.


 


SECTION 3.2.        Repurchase
upon Breach. (a)  The Seller, the
Servicer, any Trust Officer of the Indenture Trustee, the Administrator or the
Owner Trustee, as the case may be, shall inform each of the other parties to
this Agreement promptly, in writing, upon the discovery of any breach of the
Seller’s representations and warranties made pursuant to Section 3.1; provided, however,
that the failure to give any such notice shall not derogate from any
obligations of the Seller under this Section 3.2. As of the last day of the
second (or, if the Seller so elects, the first, or with respect to any
exceptions appearing on any exception report delivered by the Indenture
Trustee, the first) month following the discovery by the Seller or receipt by
the Seller of notice of such breach (or such longer period not in excess of 120
days, as may be agreed upon by the Indenture Trustee[, the Insurer (for so long
as it is the Controlling Party)] and the Servicer), unless such breach is cured
by such date, the Seller shall have an obligation to repurchase or cause HAFI
or an Affiliate of HAFI that is the seller under a Master Receivables Purchase
Agreement or HSBC Finance Corporation, as applicable, to repurchase any
Receivable in which the interests of the Securityholders [and/or the Insurer] are
materially and adversely affected by any such breach. In consideration of and
simultaneously with the repurchase of the Receivables, the Seller shall remit,
or cause HAFI or an Affiliate of HAFI that is the seller under a Master
Receivables Purchase Agreement or HSBC Finance Corporation, as applicable, to
remit, to the Collection Account the Repurchase Amount in the manner specified
in Section 5.4 and the Issuer shall execute such assignments and other
documents reasonably requested by such person in order to effect such
repurchase. The sole remedy of the Issuer, the Owner Trustee, the Indenture
Trustee, the Administrator and the related holders with respect to a breach of
representations and warranties pursuant to Section 3.1 and the agreement
contained in this Section shall be the repurchase by the Seller of the
Receivables pursuant to this Section, subject to the conditions contained
herein or to enforce the obligation of HAFI or an Affiliate of HAFI that is the
seller under a Master Receivables Purchase Agreement or HSBC Finance
Corporation, as applicable, to the Seller to repurchase such Receivables 


 


28

















 


pursuant to the related Master Receivables Purchase Agreement. None of
the Owner Trustee, the Indenture Trustee or the Administrator shall have a duty
to conduct any affirmative investigation as to the occurrence of any conditions
requiring the repurchase of any Receivable pursuant to this Section.


 


(b)           Pursuant
to Section 2.1 of this Agreement and pursuant to the related Transfer
Agreement, the Seller conveyed to the Trust all of the Seller’s right, title
and interest in its rights and benefits, but none of its obligations or
burdens, under the Master Receivables Purchase Agreements and the related
Receivables Purchase Agreement Supplements, including the Seller’s rights under
the Master Receivables Purchase Agreements and the delivery requirements,
representations and warranties and the cure or repurchase obligations of HAFI
or an Affiliate of HAFI that is the seller under a Master Receivables Purchase
Agreement or HSBC Finance Corporation, as applicable, thereunder. The Seller
hereby represents and warrants to the Trust that such assignment is valid,
enforceable and effective to permit the Trust to enforce such obligations of HAFI
or an Affiliate of HAFI that is the seller under a Master Receivables Purchase
Agreement and HSBC Finance Corporation under the Master Receivables Purchase
Agreements.


 


SECTION 3.3.        Custody
of Receivables Files. In connection with the sale, transfer and assignment
of the Receivables to the Trust pursuant to this Agreement and pursuant to the
related Transfer Agreement, the Servicer shall act, until such time as the
Servicer resigns as Servicer or is replaced as Servicer pursuant to the terms
of this Agreement, as custodian for the benefit of the Indenture Trustee of the
following documents or instruments with respect to each Receivable:


 


(i)            The fully
executed original of the Contract (together with any agreements modifying the Contract,
including, without limitation, any extension agreements);


 


(ii)           The
original credit application, or a physical or electronic copy thereof, of each
Obligor, fully executed by each such Obligor on the customary form used by HAFI,
an Affiliate of HAFI, or the related Dealer, as applicable, or on a form
approved by HAFI or an Affiliate of HAFI, as applicable, for such application;
and


 


(iii)          The
Lien Certificate (when received) and otherwise such documents, if any, that HAFI
or any Affiliate of HAFI that is the seller under a Master Receivables Purchase
Agreement, as applicable, keeps on file in accordance with its customary
procedures indicating that the Financed Vehicle is owned by the Obligor and
subject to the interest of HAFI or any Affiliate of HAFI that is the seller
under a Master Receivables Purchase Agreement as first lienholder or secured
party (including any Lien Certificate received by HAFI or any Affiliate of HAFI
that is the seller under a Master Receivables Purchase Agreement, as
applicable), or, if such Lien Certificate has not yet been received, a 


 


29

















 


copy of the
application therefor, showing any of HAFI, any Affiliate of HAFI that is a
seller under a Master Receivables Purchase Agreement or a Dealer as secured
party (in the case of a Dealer, the application shall be to obtain title in the
name of HAFI or any Affiliate of HAFI that is a seller under a Master
Receivables Purchase Agreement); and


 


(iv)          Documents
evidencing or relating to any Insurance Policy, to the extent such documents
are maintained by or on behalf of the Seller, HAFI or any Affiliate of HAFI
that is a seller under a Master Receivables Purchase Agreement.


 


At such time as the
Servicer resigns as Servicer or is replaced as Servicer pursuant to the terms
of this Agreement, the Successor Servicer shall act as custodian of the
Receivables Files.


 


Notwithstanding the
foregoing, the Servicer may appoint a subcustodian, which subcustodian may hold
physical possession of some or all of the Receivable Files. The Indenture
Trustee shall have no liability for the acts or omissions of any custodian or
subcustodian.


 


ARTICLE IV



Administration and Servicing of Receivables


 


SECTION 4.1.        Duties
of the Servicer. The Servicer is hereby authorized to act as agent for the
Trust (and also on behalf of the Indenture Trustee and the Noteholders [and the
Insurer]) and in such capacity shall manage, service, administer and make
collections on the Receivables, and perform the other actions required by the
Servicer under this Agreement, the Indenture and the Series Supplement. The
Servicer agrees that its servicing of the Receivables shall be carried out in
accordance with customary and usual procedures of institutions which service
motor vehicle retail installment sales contracts and, to the extent more
exacting, the degree of skill and attention that the Servicer exercises with
respect to all comparable motor vehicle receivables that it services for itself
or others. In performing such duties, so long as HSBC Finance Corporation is
the Servicer, it shall comply with the standard and customary procedures for
servicing all of its comparable motor vehicle receivables. The Servicer’s
duties shall include, without limitation, collection and posting of all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending monthly billing statements to Obligors, reporting any
required tax information to Obligors, monitoring the collateral, accounting for
collections and furnishing monthly and annual statements to the Indenture
Trustee, the Administrator and the Noteholders with respect to distributions,
monitoring the status of Insurance Policies with respect to the Financed
Vehicles and performing the other duties specified herein. The Servicer shall
also administer and enforce all rights and responsibilities of the holder of
the Receivables provided for in the Dealer Agreements (and HSBC Finance
Corporation shall make commercially reasonable efforts to obtain possession of
the Dealer 


 


30

















 


Agreements, to the extent it is necessary to do so), the Dealer
Assignments, the Master Receivables Purchase Agreements, and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments, the
Master Receivables Purchase Agreements, and Insurance Policies relate to the
Receivables, the Financed Vehicles or the Obligors. To the extent consistent
with the standards, policies and procedures otherwise required hereby, the
Servicer shall follow its customary standards, policies, and procedures and
shall have full power and authority, acting alone, to do any and all things in
connection with such managing, servicing, administration and collection that it
may deem necessary or desirable. In performing such duties, the Servicer or any
Subservicer may delegate their duties in accordance with Section 9.5 hereof. Without
limiting the generality of the foregoing, the Servicer is hereby authorized and
empowered by the Trust to execute and deliver, on behalf of the Trust, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all other comparable instruments, with respect to the
Receivables and with respect to the Financed Vehicles. The Servicer is hereby
authorized to commence, in its own name or in the name of the Trust, a legal
proceeding to enforce a Receivable pursuant to Section 4.3 or to commence or
participate in any other legal proceeding (including, without limitation, a
bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a
Financed Vehicle. If the Servicer commences or participates in such a legal
proceeding in its own name, the Trust shall thereupon be deemed to have
automatically assigned such Receivable to the Servicer solely for purposes of
commencing or participating in any such proceeding as a party or claimant, and
the Servicer is authorized and empowered by the Trust to execute and deliver in
the Servicer’s name any notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceeding. The Indenture Trustee and the Owner Trustee shall furnish the
Servicer with any powers of attorney and other documents which the Servicer may
reasonably request and which the Servicer deems necessary or appropriate and
take any other steps which the Servicer may deem reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.


 


SECTION 4.2.        Collection
of Receivable Payments; Modifications of Receivables. (a)  Consistent with the standards, policies and
procedures required by this Agreement, the Servicer shall make reasonable
efforts to collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable motor
vehicle receivables that it services for itself or others and otherwise act
with respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
the Master Receivables Purchase Agreements, the Insurance Policies and the
Other Conveyed Property in such manner as will, in the reasonable judgment of
the Servicer, maximize the amount to be received by the Trust with respect
thereto. Consistent with the foregoing, the Servicer may, if it determines in
its reasonable judgment that such action would maximize the amount to be
received by the Trust, arrange for the sale by the Trust of Liquidated
Receivables with respect to which the related Financed Vehicle has been sold,
and the net proceeds of such sale shall be included in Net Liquidation Proceeds.
The Servicer is authorized in its discretion to waive any prepayment charge,
late payment charge or any other similar fees that may be collected in the
ordinary course of servicing any Receivable.


 


31

















 


(b)           The
Servicer may at any time agree to a modification or amendment of a Receivable
in order to (i) change the Obligor’s
regular due date to a date within 30 days of when such due date occurs or (ii)
re-amortize the Obligor’s obligation under the Receivable following a partial
prepayment of principal; provided, however, that no
re-amortization permitted by this clause (ii) shall extend the maturity date of
any Receivable. The Servicer may elect, at any time and from time to
time in accordance with its customary procedures, to defer a Scheduled Payment for
one month; provided, however, that (i) the Obligor has paid all
amounts due on the Receivable as of the date such deferral is granted, (ii) the
Servicer believes in good faith that such deferral will maximize the amount to
be received with respect to such Receivable and is otherwise in the best
interests of the Trust and (iii) a deferral
permitted by this sentence shall not extend the maturity date of such
Receivable.


 


(c)           The Servicer
may grant payment extensions on, or other modifications or amendments to, a
Receivable in accordance with its customary procedures if the Servicer believes
in good faith that such extension, modification or amendment is necessary to
avoid a default on such Receivable, will maximize the amount to be received
with respect to such Receivable, and is otherwise in the best interests of the
Trust; provided, however, that if the Servicer extends the date for final payment by the Obligor of any
Receivable beyond the last day of the Collection Period immediately preceding
the Final Scheduled Distribution Date of the Notes, the Servicer will (or will cause HAFI as subservicer to) promptly
purchase such Receivable by depositing the related Repurchase Amount
into the Collection Account.


 


(d)           Except as
otherwise provided below in Section 4.2(e) hereof, the Servicer shall deposit Collections
in immediately available funds on or with respect to Receivables into the
Collection Account as promptly as possible after the date of processing of such
Collections, but in no event later than the second Business Day following the
date of processing.


 


(e)           Subject to
the express terms of the Series Supplement, but notwithstanding anything else
in this Agreement to the contrary, for so long as (i) HSBC Finance Corporation
remains the Servicer and maintains a commercial paper rating of not less than
A-1 by Standard & Poor’s, P-1 by Moody’s and F1 by Fitch (or such other
rating as shall be satisfactory to such Rating Agency) [and the Insurer (for so
long as it is the Controlling Party)], in each case only if such Person is a
Rating Agency, and for five Business Days following any reduction of any such
rating or (ii) a Servicer Credit Facility is maintained in effect by the Servicer
in form and substance acceptable to the Rating Agency (such acceptability to be
evidenced in writing by the Rating Agency to the effect that failure to make
the aforementioned deposit on the basis of the maintenance of the Servicer
Credit Facility will not adversely affect the then current rating of the Notes)
[and the Insurer (for so long as it is the Controlling Party) issued by a
depository institution or insurance company] issued by a Servicer Credit
Facility Issuer having a rating on its (A) short-term obligations of at least
P-1 by Moody’s, A-1 by Standard & Poor’s and F1 by Fitch (or such other
rating as shall be satisfactory to such Rating Agency), in each case only if
such Person is a Rating Agency, and (B) long term obligations of at least A2 by
Moody’s, A by Standard & Poor’s, and A by Fitch, in each 


 


32

















 


case only if such
Person is a Rating Agency, the Servicer shall not be required to make deposits
of Collections on or with respect to Receivables as provided in Section 4.2(d),
but may make one or more deposits of Collections (excluding any portion of such
funds which the Servicer may retain in accordance with Section 4.8 or pay
directly to the Seller in its capacity as Certificateholder in accordance with
Section 5.1(f)) with respect to the Series Trust Estate with respect to a
Collection Period into the Collection Account in immediately available funds
not later than 1:00 P.M., Central time, on the Business Day immediately
preceding the related Distribution Date. The Servicer shall give written notice
to the Indenture Trustee[, the Insurer] and the Administrator if it is required
to deposit funds in accordance with Section 4.2(d). If, during any Collection
Period that the Servicer is required to deposit funds in accordance with
Section 4.2(d), the Servicer satisfies either condition of the first sentence
of this Section 4.2(e) such that the Servicer is no longer required to deposit
funds in accordance with Section 4.2(d), the Servicer may, as of the date of
such satisfaction but subject to the provisions of this Section 4.2(e),
withdraw from the Collection Account all of the Collections which it has
deposited thereto in accordance with Section 4.2(d) during such Collection
Period, and retain such funds in the manner provided in the first sentence of
this Section 4.2(e).


 


(f)            Notwithstanding
anything else in the Basic Documents to the contrary, with respect to any
Collection Period and whether the Servicer is required to make deposits of Collections
pursuant to Section 4.2(d) or Section 4.2(e), (i) the Servicer shall only be
required to deposit Collections into the Collection Account up to an aggregate
amount of Available Funds required to be distributed on or prior to the related
Distribution Date pursuant to the terms of the Basic Documents and (ii) if at
any time prior to such Distribution Date the amount of Collections deposited
into the Collection Account exceeds the amount required to be deposited
pursuant to clause (i) above, the Servicer shall be permitted to direct the
Administrator to withdraw the excess from the Collection Account and pay such
amount pursuant to the Basic Documents. Subject to the immediately preceding
sentence, the Servicer may retain its Servicing Fee pursuant to Section 4.8 and
shall not be required to deposit it in the Collection Account.


 


(g)           In the
event that a Servicer Credit Facility is maintained, the Servicer shall within
two Business Days of the date of processing of Collections on or with respect
to Receivables notify the Indenture Trustee, the Administrator and the Servicer
Credit Facility Issuer in writing of the amount of Collections that would
otherwise be deposited in the Collection Account and the Servicer shall
establish and maintain for the Trust a Payment Record in which the payments on
or with respect to the Receivables shall be credited and the Servicer shall
notify the Indenture Trustee, the Administrator and the Servicer Credit
Facility Issuer in writing as promptly as practicable (but in any event prior
to the Determination Date for the following Distribution Date) of the amounts
so credited on or with respect to the Receivables that are to be included in
Collections (as determined for this purpose after giving effect to the
exclusions described above) for the related Distribution Date and of the
amounts so credited which will constitute a part of Collections (as determined
for this purpose after giving effect to the exclusions described above) for the
second following Distribution Date. The Payment Record shall be made available
for inspection during normal business hours of the 


 


33

















 


Servicer upon request
of the Indenture Trustee, [the Insurer (for so long as it is the Controlling
Party),] the Administrator or any Servicer Credit Facility Issuer.


 


SECTION 4.3.        Realization
Upon Receivables. (a)  Consistent
with the standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, as soon as is practicable after default on such
Receivable but in no event later than the date on which 10% or more of a
Scheduled Payment has become 150 days delinquent (other than in the case of
Financed Vehicles where neither the Financed Vehicle nor the Obligor can be
physically located by the Servicer (using procedures consistent with the
standards, policies and procedures of the Servicer required by this Agreement)
and other than in the case of an Obligor who is subject to a bankruptcy
proceeding); provided, however, that the Servicer may elect not to repossess a Financed
Vehicle within such time period if in its good faith judgment it determines
that the proceeds ultimately recoverable with respect to such Receivable would
be increased by forbearance. The Servicer is authorized to follow such
customary practices and procedures as it shall deem necessary or advisable,
consistent with the standard of care required by Section 4.1, which practices
and procedures may include reasonable efforts to realize upon any recourse to
Dealers, the sale of the related Financed Vehicle at public or private sale,
the submission of claims under an Insurance Policy and other actions,
including, without limitation, entering into settlements with Obligors, by the Servicer
in order to realize upon such a Receivable. The foregoing is subject to the
provision that, in any case in which the Financed Vehicle shall have suffered
damage, the Servicer shall not expend funds in connection with any repair or
towards the repossession of such Financed Vehicle unless it shall determine in
its discretion that such repair and/or repossession shall increase the proceeds
of liquidation of the related Receivable by an amount greater than the amount
of such expenses. The Servicer shall be entitled to recover all reasonable
expenses incurred by it in the course of repossessing and liquidating a
Financed Vehicle but only from the liquidation proceeds of the vehicle or under
the related Dealer Agreement. The Servicer shall pay on behalf of the Trust any
personal property taxes assessed on repossessed Financed Vehicles. The Servicer
shall be entitled to reimbursement of any such tax from Net Liquidation
Proceeds with respect to such Receivable.


 


(b)           If the Servicer
elects to commence a legal proceeding to enforce a Dealer Agreement or Dealer
Assignment, the act of commencement shall be deemed to be an automatic
assignment from the Trust to the Servicer of the rights under such Dealer
Agreement and Dealer Assignment for purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Dealer Agreement or
Dealer Assignment on the grounds that it is not a real party in interest or a
Person entitled to enforce the Dealer Agreement or Dealer Assignment, the
Indenture Trustee, at the Servicer’s written direction and expense, or the
Seller, at the Seller’s expense, shall take such steps as the Servicer deems
reasonably necessary to enforce the Dealer Agreement or Dealer Assignment,
including bringing suit in its name or the name of the Seller, the Trust or the
Owner Trustee. All amounts 


 


34

















 


recovered shall be
remitted directly by the Servicer as provided in Section 4.2(d) or 4.2(e), as
applicable.


 


SECTION 4.4.        Insurance.
(a)  The Servicer shall require, in
accordance with its customary servicing policies and procedures, that each
Financed Vehicle be insured by the related Obligor under an insurance policy
covering physical loss and damage to the related Financed Vehicle and shall
monitor the status of such physical loss and damage insurance coverage
thereafter, in accordance with its customary servicing procedures. Each
Receivable requires the Obligor to obtain such physical loss and damage
insurance, naming HAFI or any Affiliate of HAFI that is the seller under a
Master Receivables Purchase Agreement, as applicable, and its successors and
assigns as loss payee, and with respect to liability coverage, additional insureds,
and permits the holder of such Receivable to obtain physical loss and damage
insurance at the expense of the Obligor if the Obligor fails to maintain such
insurance. If the Servicer shall determine that an Obligor has failed to obtain
or maintain a physical loss and damage Insurance Policy covering the related
Financed Vehicle which satisfies the conditions set forth in the related
Eligibility Criteria (including, without limitation, during the repossession of
such Financed Vehicle) the Servicer shall, in accordance with its customary
servicing procedures, enforce the rights of the holder of the Receivable under
the Receivable to require the Obligor to obtain such physical loss and damage
insurance in accordance with its customary servicing policies and procedures.


 


(b)           The Servicer
may, if an Obligor fails to obtain or maintain a physical loss and damage
Insurance Policy, obtain insurance with respect to the related Financed Vehicle
and advance on behalf of such Obligor, as required under the terms of the
Insurance Policy, the premiums for such insurance (such insurance policy being
referred to herein as an “LPI Policy”). All LPI Policies shall be endorsed with
clauses providing for loss payable to the Servicer or a Seller. Any cost
incurred by the Servicer in maintaining such LPI Policy shall be recoverable
only out of premiums paid by the Obligors or Net Liquidation Proceeds with
respect to the Receivable, as provided in Section 4.4(c).


 


(c)           In
connection with any LPI Policy obtained hereunder, the Servicer may, in the
manner and to the extent permitted by applicable law, require the Obligors to
repay any Advanced Insurance Premiums to the Servicer. In no event shall the Servicer
include the amount of the premium in the Amount Financed under the Receivable. The
Servicer will not add any Advanced Insurance Premium to the Principal Balance
of the related Receivable, and amounts allocable thereto will not be available
for distribution on the Notes. The Servicer shall retain and separately
administer the right to receive payments from or pay rebates to Obligors with
respect to LPI Policies. If an Obligor makes a payment with respect to a
Receivable having an LPI Policy in place that is less than the Scheduled
Payment, then, unless otherwise required by applicable law or the terms of the
related Receivable, the Servicer shall apply the payment first to any accrued
and unpaid interest on the Receivable, then to any outstanding Advanced
Insurance Premium, and then to principal and other amounts due on the Receivable
in accordance with the Servicer’s standard and customary servicing procedures. Unless
otherwise required by applicable law or the terms of the related Receivable,
Net 


 


35

















 


Liquidation
Proceeds on any Receivable will be applied first to the Principal Balance until
paid in full, then to other amounts due from the Obligor, including any
outstanding Advanced Insurance Premiums, in accordance with the terms of the
related Receivable and the Servicer’s standard and customary servicing
procedures.


 


(d)           The Servicer
may sue to enforce or collect upon the Insurance Policies, in its own name, if
possible, or as agent of the Trust. If the Servicer elects to commence a legal
proceeding to enforce an Insurance Policy, the act of commencement shall be
deemed to be an automatic assignment of the rights of the Trust under such
Insurance Policy to the Servicer for purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce an Insurance Policy on
the grounds that it is not a real party in interest or a holder entitled to
enforce the Insurance Policy, the Indenture Trustee, at the Servicer’s written
direction and expense, or the Seller, at the Seller’s expense, shall take such
steps as the Servicer deems reasonably necessary to enforce such Insurance
Policy, including bringing suit in its name or the name of the Trust or the
Owner Trustee.


 


SECTION 4.5.        Maintenance
of Security Interests in Vehicles . Consistent with the policies and
procedures required by this Agreement, the Servicer shall take such steps on
behalf of the Trust as are necessary to maintain perfection of the security
interest created by each Receivable in the related Financed Vehicle on behalf
of the Trust or as the Indenture Trustee shall reasonably request, including,
but not limited to, obtaining the execution by the Obligors and the recording,
registering, filing, re-recording, re-filing, and re-registering of all
security agreements, financing statements and continuation statements as are
necessary to maintain the security interest granted by the Obligors under the
respective Receivables. The Owner Trustee, on behalf of the Trust, hereby
authorizes the Servicer, and the Servicer agrees, to take any and all steps
necessary to re-perfect such security interest on behalf of the Trust as
necessary because of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Trust is
insufficient, without a notation on the related Financed Vehicle’s certificate
of title, or without fulfilling any additional administrative requirements
under the laws of the state in which the Financed Vehicle is located, to
perfect a security interest in the related Financed Vehicle in favor of the
Trust, the Seller hereby agrees to cause HAFI or any Affiliate of HAFI that is
the seller under a Master Receivables Purchase Agreement, as applicable, to
treat the designation of HAFI or any Affiliate of HAFI that is the seller under
a Master Receivables Purchase Agreement, as applicable, as the secured party on
the certificate of title as a designation in its capacity as agent of the Trust
for such limited purpose.


 


SECTION 4.6.        Covenants,
Representations, and Warranties of Servicer. By its execution and delivery
of this Agreement, the Servicer makes the following representations, warranties
and covenants on which the Issuer relies in accepting the Receivables, on which
the Administrator relies in authenticating the Notes, on which the Noteholders
rely in purchasing the Notes and any Additional Principal Amount thereunder, on
which the Owner Trustee relies in executing the Certificates [and on which the
Insurer relies in issuing the Note Policy].


 


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The Servicer covenants as follows:


 


(i)            Liens
in Force. The Financed Vehicle securing each Receivable shall not be
released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;


 


(ii)           No
Impairment. The Servicer shall do nothing to impair the rights of the Trust[,
the Insurer] or the Noteholders in the Receivables, the Dealer Agreements, the
Dealer Assignments, the Master Receivables Purchase Agreements, the Insurance
Policies or the Other Conveyed Property;


 


(iii)          No
Amendments. The Servicer shall not extend or otherwise amend the terms of
any Receivable, except in accordance with Section 4.2;


 


(iv)          Restrictions
on Liens. The Servicer shall not (i) create, incur or suffer to exist, or
agree to create, incur or suffer to exist, or consent to cause or permit in the
future (upon the happening of a contingency or otherwise) the creation,
incurrence or existence of any Lien or restriction on transferability of the
Receivables except for the Lien in favor of the Indenture Trustee for the
benefit of the Secured Parties, and the restrictions on transferability imposed
by this Agreement or (ii) sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement which names HAFI, the Servicer or any
Affiliate thereof as a debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, with respect to the
Receivables, except in each case any such instrument solely securing the rights
and preserving the Lien in favor of the Indenture Trustee for the benefit of
the Secured Parties;


 


(v)           Servicing
of Receivables. The Servicer shall service the Receivables as required by
the terms of this Agreement and in material compliance with its standard and
customary procedures for servicing all its other comparable motor vehicle
receivables and in compliance with applicable law; and


 


(vi)          Relocations
of Principal Office. The Servicer shall notify in writing the Indenture
Trustee and the Administrator of any relocation of the Servicer’s principal
office set forth in Section 13.3 hereof and all Receivables Files shall be
maintained by the Servicer in the United States.


 


SECTION 4.7.        Repurchase
of Receivables Upon Breach of Covenant. Upon discovery by any of the Servicer,
the Seller, [the Insurer,] or a Trust Officer of any 


 


37

















 


of the Owner Trustee, the Indenture Trustee or the Administrator of a
breach of any of the covenants set forth in Sections 4.5 or 4.6, the party
discovering such breach shall give prompt written notice to the others; provided, however,
that the failure to give any such notice shall not affect any obligation of the
Servicer under this Section 4.7. As of the second Accounting Date following its
discovery or receipt of notice of any breach of any covenant set forth in
Sections 4.5 or 4.6 which materially and adversely affects the interests of the
Securityholders in any Receivable (including any Liquidated Receivable) or the
related Financed Vehicle (or, if such second Accounting Date is more than 45
days after discovery or receipt by the Servicer of notice of such breach, then
the first Accounting Date so following), the Servicer shall, unless such breach
shall have been cured in all material respects, repurchase from the Trust the
Receivable affected by such breach and, on the date specified in Section 5.4,
the Servicer shall pay the related Repurchase Amount and deposit such
Repurchase Amounts into the Collection Account. It is understood and agreed
that the obligation of the Servicer to repurchase any Receivable (including any
Liquidated Receivable) with respect to which such a breach has occurred and is
continuing shall, if such obligation is fulfilled, constitute the sole remedy
against the Servicer for such breach.


 


SECTION 4.8.        Total
Servicing Fee; Payment of Certain Expenses by Servicer. So as long as:  (i) HSBC Finance Corporation is the Servicer,
(ii) the Servicer is permitted to make deposits of Collections in accordance
with Section 4.2(e) hereof and (iii) the Servicer’s Certificate delivered with
respect to such Distribution Date indicates that Available Funds with respect
to such Distribution Date are sufficient to make the distributions required to
be made on such Distribution Date in respect of the Servicing Fee payable to HSBC
Finance Corporation as Servicer (and all other distributions required to be
made on such Distribution Date having a higher priority than the distribution
of the Servicing Fee payable to HSBC Finance Corporation as Servicer), the Servicer
shall be entitled to retain out of amounts otherwise to be deposited in the
Collection Account with respect to a Collection Period, the Servicing Fee payable
to HSBC Finance Corporation as Servicer for such Collection Period. The Servicer
shall be required to pay all expenses incurred by it in connection with its
activities under this Agreement (including taxes imposed on the Servicer,
expenses incurred in connection with distributions and reports made by the Servicer
to Securityholders, all fees and expenses of the Owner Trustee, the Indenture
Trustee and the Administrator), except taxes levied or assessed against the
Trust, and claims against the Trust in respect of indemnification, which taxes
and claims in respect of indemnification against the Trust are expressly stated
to be for the account of HSBC Finance Corporation. The Servicer shall not be
entitled to reimbursement of Advanced Insurance Premiums except as set forth in
Section 4.4(c). The Servicer shall be liable for the fees, charges and expenses
of the Owner Trustee, the Indenture Trustee, the Administrator, any Subservicer
and their respective agents.


 


SECTION 4.9.        Servicer’s
Certificate. No later than 10:00 a.m. Central time on each Determination
Date, the Servicer shall deliver, and cause to be delivered via access to its
or its Affiliate’s web-site address, to the Rating Agencies, the Indenture
Trustee, the Administrator and the Owner Trustee, a Servicer’s Certificate
executed by a responsible officer or agent of the Servicer containing among
other things, all 


 


38

















 


information necessary to enable the Administrator to make the
distributions with respect to the related Distribution Date pursuant to the
Series Supplement. In addition to the information set forth in the preceding
sentence, the Servicer’s Certificate shall also contain the information
required by the Series Supplement.


 


SECTION 4.10.      Annual
Statement as to Compliance, Notice of Servicer Termination Event. (a)  The Servicer shall deliver, and, to the
extent required by Section 1123 of Regulation AB, shall cause each Subservicer
to deliver, to the Seller, [the Insurer,] the Indenture Trustee, the
Administrator and the Owner Trustee, an Officer’s Certificate satisfying the
requirments of Section 1123 of Regulation AB signed by a responsible officer of
the Servicer or such Subservicer, as applicable, dated as of December 31 (or
other applicable date) of the immediately preceding year, and stating that (i)
a review of the activities of the Servicer or such Subservicer, as applicable, during
the preceding 12-month period (or such shorter or longer, as applicable, period
since the Closing Date) and of its performance under this Agreement has been
made under such officer’s supervision, and (ii) to such officer’s knowledge,
based on such review, the Servicer or such Subservicer, as applicable, has
fulfilled in all material respects all of its obligations under this Agreement
throughout such period, or, if there has been a failure to fulfill any such
obligation in any material respect, specifying each such failure known to such
officer and the nature and status thereof.


 


The Officer’s
Certificates referred to in this Section 4.10(a) will be delivered on or before
March 1 of each calendar year, beginning March 1, 200[  ], unless the
Issuer is not required to file periodic reports under the Exchange Act, in
which case the reports may be delivered within 90 days after the end of each
calendar year.


 


(b)           The Seller
or the Servicer shall deliver to [the Insurer,] the Indenture Trustee, the
Administrator, the Owner Trustee, the Servicer or the Seller (as applicable)
promptly after having obtained knowledge thereof, but in no event later than five
(5) Business Days thereafter, written notice in an Officer’s Certificate of any
event that with the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under Section 10.1.


 


(c)           The Servicer
shall, and, to the extent required by Section 1122 of Regulation AB, shall cause
each Subservicer to:


 


(i)            deliver to [the Insurer,] the
Indenture Trustee, the Administrator and the Owner Trustee, a report, dated as of December 31 of the
preceding calendar year, on its assessment of compliance during the preceding
calendar year with the Servicing
Criteria applicable to it,
including disclosure of any material instance of non-compliance identified by
the Servicer or such Subservicer, as applicable, that satisfies the
requirements of Rule 13a-18 and 15d-18 under the Exchange Act and Item 1122 of
Regulation AB under the Securities Act; and


 


(ii)           cause an independent registered public
accounting firm that is qualified and independent within the meaning of Rule
2-01 of 


 


39

















 


Regulation
S-X under the Securities Act to deliver to [the Insurer,] the Indenture
Trustee, the Administrator and the Owner Trustee an attestation report that satisfies the requirements of Rule 13a-18 or
Rule 15d-18 under the Exchange Act and Item 1122 of Regulation AB, with respect
to each assessment of compliance with Servicing Criteria delivered pursuant to
clause (i) above. Such attestation report will be addressed to the board of
directors of the Servicer or such Subservicer, as applicable, and to [the
Insurer,] the Indenture Trustee, the Administrator and the Owner Trustee and will be in accordance with Rules
1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act. The firm may
render other services to the Servicer, such Subservicer or the Seller, but the firm must indicate in each
attestation report that it is qualified and independent within the meaning of
Rule 2-01 of Regulation S-X under the Securities Act.


 


The reports referred to
in this Section 4.10(c) shall be delivered on or prior to March 1 of each
calendar year, beginning March 1, 200[  ], unless the Issuer is not
required to file periodic reports under the Exchange Act, in which case the
reports may be delivered within 90 days of the end of each calendar year.


 


(d)           If
directed by the Seller, the Servicer will prepare, execute, file and deliver
all reports, statements, information, certificates or other documentation
required to be delivered by the Issuer pursuant to the Exchange Act and the
Sarbanes-Oxley Act of 2002 and the rules thereunder.


 


SECTION 4.11.      Access
to Certain Documentation and Information Regarding Receivables. The Servicer
shall provide to representatives of [the Insurer (for so long as it is the
Controlling Party),] the Indenture Trustee and the Owner Trustee reasonable
access to the documentation regarding the Receivables. In each case, such
access shall be afforded without charge but only upon reasonable request and
during normal business hours. Nothing in this Section shall derogate from the
obligation of the 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.


 


SECTION 4.12.      Fidelity
Bond and Errors and Omissions Policy. The Servicer or such Eligible
Subservicer that is performing the servicing duties of the Servicer, has
obtained, and shall continue to maintain in full force and effect, a Fidelity
Bond and Errors and Omissions Policy of a type and in such amount as is
customary for servicers engaged in the business of servicing motor vehicle
receivables.


 


40

















 


ARTICLE V



Trust Accounts; Distributions;

Statements to Certificateholders and Noteholders


 


SECTION 5.1.        Establishment
of Trust Accounts. (a)  (i)  The Administrator shall establish and
maintain the Trust Accounts required to be established and maintained pursuant
to the Series Supplement, and such Trust Accounts shall be subject to the sole
dominion and control of the Administrator on behalf of the Indenture Trustee
for the benefit of the Noteholders [and the Insurer].


 


(ii)           No
Trust Account shall be maintained with an institution other than the Administrator
unless such institution agrees in writing to the provisions of this Section 5.1
as if such institution were the Administrator, except that the Administrator shall
continue to be the “entitlement holder” of the related Trust Account.


 


(iii)          With
respect to any Trust Account Property held from time to time in any Trust
Account, the Administrator agrees that (A) such Trust Account Property shall at
all times be credited in the Administrator’s books and records to the relevant
Trust Account, (B) any Eligible Investment constituting a deposit account shall
be, except as otherwise provided herein, subject to the exclusive custody and
control of the Administrator, and, if the Administrator is not the depositary
bank with which such deposit account is maintained, the Administrator shall be
the depositary bank’s customer with respect thereto, and (C) any Eligible
Investment other than a deposit account shall be held, pending maturity or
disposition by the Administrator, in accordance with the relevant terms of the
definition of “Delivery.”  The Administrator
acknowledges and agrees that (i) each item of property (whether investment
property, financial asset, security, instrument, cash or any other type of property)
credited to a Trust Account that is a “securities account,” (as defined in
Article 8 of the UCC) shall be treated as a “financial asset” within the
meaning of Article 8 of the UCC, (ii) it shall act as a “securities
intermediary” (as defined in Article 8 of the UCC) with respect to each Trust
Account which is a “securities account” and a “bank” (as defined in Article 9
of the UCC) with respect to each Trust Account that is a “deposit account” (as
defined in Article 9 of the UCC), and (iii) each Trust Account is either a “securities
account” or a “deposit account.”


 


(b)           Except as
otherwise provided in the Series Supplement, funds on deposit in the Trust
Accounts shall be invested by the Administrator (or any custodian with respect
to funds on deposit in any such account) in Eligible Investments selected in
writing by the Servicer (pursuant to standing instructions or otherwise) which
absent any instruction shall be the investments specified in clause (d) of the
definition of Eligible Investments set forth herein. Unless otherwise agreed in
writing by the Rating Agencies, funds on deposit in any Trust Account shall be
invested in Eligible Investments that will mature so that such funds will be
available at the close of business on the Business Day immediately preceding
the following Distribution Date. Funds deposited in a Trust Account on the day
immediately preceding a Distribution Date and representing the proceeds of
Eligible Investments are required to be held overnight in an 


 


41

















 


Eligible Account
and shall be included in Available Funds (as defined in the Series Supplement)
for the succeeding Distribution Date.


 


(c)           All
investment earnings of monies deposited in the Trust Accounts shall be
deposited (or caused to be deposited) by the Administrator in the Collection
Account no later than the close of business on the Business Day immediately
preceding the related Distribution Date, and any loss resulting from such
investments shall be charged to the Collection Account. The Servicer will not
direct the Administrator to make any investment of any funds held in any of the
Trust Accounts unless the security interest granted and perfected in such
account will continue to be perfected in such investment, in either case
without any further action by any Person, and, in connection with any direction
to the Administrator, to make any such investment, if necessary, the Servicer
shall deliver to the Administrator and the Indenture Trustee an Opinion of
Counsel to such effect.


 


(d)           The Administrator
shall not in any way be held liable by reason of any insufficiency in any of
the Trust Accounts resulting from any loss on any Eligible Investment included
therein except for losses attributable to the Administrator’s negligence or bad
faith.


 


(e)           If (i) the
Servicer shall have failed to give investment directions for any funds on
deposit in the Trust Accounts to the Administrator by 2:00 p.m. Eastern Time
(or such other time as may be agreed by the Issuer and the Administrator) on
any Business Day; or (ii) an Event of Default shall have occurred and be
continuing, the Administrator shall, to the fullest extent practicable, invest
and reinvest funds in the Trust Accounts in one or more Eligible Investments in
accordance with paragraph (b) above; provided that, if following an
Event of Default amounts are to be distributed to Securityholders other than on
a Distribution Date, investments shall mature on the Business Day preceding any
such proposed date of distribution.


 


(f)            The Administrator
shall possess all right, title and interest in all funds on deposit from time
to time in the Trust Accounts and in all proceeds thereof and all such funds,
investments, proceeds and income shall be part of the Series Trust Estate. Except
as otherwise provided herein, the Trust Accounts shall be under the sole
dominion and control of the Administrator for the benefit of the Secured
Parties. If, at any time, any Trust Account ceases to be an Eligible Account,
the Administrator (or the Servicer on its behalf) shall within five Business
Days (or such longer period as to which each Rating Agency [and the Insurer
(for so long as it is the Controlling Party)] may consent) establish a new
Trust Account as an Eligible Account and shall transfer any cash and/or any
investments to such new Trust Account. In connection with the foregoing, the Servicer
agrees that, in the event that any of the Trust Accounts are not accounts with
the Administrator, the Servicer shall notify the Administrator in writing
promptly upon any of such Trust Accounts ceasing to be an Eligible Account. The
Servicer may net against any deposits required to be made to the Collection
Account on the Business Day before any Determination Date amounts that the
Seller, as Certificateholder or otherwise, is entitled to receive as
distributions from the Collection Account on the related Distribution Date.


 


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SECTION 5.2.        Certain
Reimbursements to the Servicer. The Servicer shall be entitled to withhold
from amounts otherwise required to be remitted to the Collection Account with
respect to a Collection Period an amount in respect of funds deposited with
respect to prior Collection Periods in the Collection Account but later
determined by the Servicer to have resulted from mistaken deposits or postings
or checks returned for insufficient funds; provided, that, such
withholding may be made only following certification by the Servicer of such
amounts and the provision of such information to the Indenture Trustee and the
Administrator as may be necessary in the opinion of the Indenture Trustee and
the Administrator to verify the accuracy of such certification.


 


SECTION 5.3.        Application
of Collections. All Collections for the Collection Period shall be applied
by the Servicer as follows:  with respect
to each Simple Interest Receivable (other than a Repurchased Receivable),
payments by or on behalf of the Obligor, (other than amounts, if any, collected
with respect to administrative fees, including late fees, prepayment fees and
liquidation fees collected on the Receivable) shall be applied to interest and
principal in accordance with the Simple Interest Method. With respect to each
Actuarial Receivable, (other than a Repurchased Receivable), payments by or on
behalf of the Obligor, (other than amounts, if any, collected with respect to
administrative fees, including late fees, prepayment fees and liquidation fees
collected on the Receivable) shall be applied to interest and principal in
accordance with the Actuarial Method.


 


SECTION 5.4.        Additional
Deposits.


 


(a)           HAFI, any
Affiliate of HAFI that is the seller under a Master Receivables Purchase
Agreement, HSBC Finance Corporation and the Seller, as applicable, shall
deposit or cause to be deposited in the Collection Account on the Business Day
preceding the Distribution Date following the date on which such obligations
are due the aggregate Repurchase Amount with respect to Repurchased
Receivables.


 


(b)           The Servicer
agrees for the benefit of the Indenture Trustee that any amounts payable by the
Servicer to the Seller under the Master Receivables Purchase Agreement to which
the Servicer is a party which are to be paid by the Seller to the Indenture
Trustee for the benefit of the Secured Parties shall be paid by the Servicer,
on behalf of the Seller, directly to the Administrator (on behalf of the Indenture
Trustee).


 


ARTICLE VI



RESERVED


 


ARTICLE VII



RESERVED


 


43

















 


ARTICLE VIII



The Seller


 


SECTION 8.1.        Representations
of Seller. The Seller makes the following representations on which the
Issuer is deemed to have relied in acquiring the Receivables and on which the
Noteholders are deemed to have relied on in the purchasing of Notes and any
Additional Principal Amount and on which each Support Provider shall be deemed
to have relied on providing the Series Support. Except as otherwise
specifically provided, the representations speak as of the Closing Date and as
of each Transfer Date and shall survive each sale of the Receivables to the
Issuer and each pledge thereof to the Indenture Trustee pursuant to the
Indenture and the Series Supplement.


 


(a)           Representations
in Transfer Agreement. The representations and warranties set forth on the
Schedule of Eligibility Criteria attached as Schedule I to the Series
Supplement are true and correct with respect to the Receivables included in the
Series Trust Estate.


 


(b)           Organization
and Good Standing. The Seller has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Nevada, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own and sell the Owner Trust Estate transferred to the
Trust.


 


(c)           Due
Qualification. The Seller is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions where the failure to do so would materially and
adversely affect the Seller’s ability to transfer the Receivables and the Other
Conveyed Property to the Trust pursuant to this Agreement, or the validity or
enforceability of the Receivables and the Other Conveyed Property or to perform
the Seller’s obligations hereunder and under the Related Documents to which the
Seller is a party.


 


(d)           Power
and Authority. The Seller has the power and authority to execute and
deliver this Agreement and the Related Documents to which it is a party and to
carry out its terms and their terms, respectively; the Seller has full power
and authority to sell and assign the Owner Trust Estate to be sold and assigned
to and deposited with the Trust by it and has duly authorized such sale and
assignment to the Trust by all necessary corporate action; and the execution,
delivery and performance of this Agreement and the Related Documents to which
the Seller is a party have been duly authorized by the Seller by all necessary
corporate action.


 


(e)           Valid
Sale, Binding Obligations. This Agreement and each related Transfer
Agreement effects a valid sale, transfer and assignment of the Owner Trust
Estate, enforceable against the Seller and creditors of and purchasers from the
Seller; and this Agreement and the Related Documents to which the Seller is a
party, when duly executed and delivered, shall constitute legal, valid and
binding obligations of 


 


44

















 


the Seller
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law.


 


(f)            No
Violation. The consummation of the transactions contemplated by this
Agreement and the Related Documents and the fulfillment of the terms of this
Agreement and the Related Documents shall not (A) conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice, lapse of time or both) a default under, the articles of incorporation
or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Seller is a party or by which it is bound, (B)
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or (C) violate any law, order,
rule or regulation applicable to the Seller of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its properties,
except in the case of (A), (B) or (C) where any such default, Lien or violation
shall not materially and adversely affect the interest of the Noteholders[, the
Insurer] or the Trust in the Series Trust Estate.


 


(g)           No
Proceedings. There are no proceedings or investigations pending or, to the
Seller’s knowledge, threatened against the Seller, before any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Seller or its properties (A) asserting the
invalidity of this Agreement or any of the Related Documents, (B) seeking to
prevent the issuance of any Securities or the consummation of any of the
transactions contemplated by this Agreement or any of the Related Documents,
(C) seeking any determination or ruling that might materially and adversely
affect the performance by the Seller of its obligations under, or the validity
or enforceability of, this Agreement or any of the Related Documents, or (D)
seeking to adversely affect the federal income tax or other federal, state or
local tax attributes of the Securities.


 


(h)           Approvals.
All approvals, authorizations, consents, orders or other actions of any person,
corporation or other organization, or of any court, governmental agency or body
or official, required in connection with the execution and delivery by the
Seller of this Agreement and the other Related Documents to which it is a
party, and the consummation of the transactions contemplated hereby and thereby
have been or will be taken or obtained on or prior to the Closing Date and each
Transfer Date.


 


(i)            No
Consents. The Seller is not required to obtain the consent of any other
party or any consent, license, approval or authorization, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement which has not already been obtained.


 


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(j)            No
Lien Filings. The Seller is not aware of any judgment lien filings or tax
lien filings against itself.


 


(k)           Chief
Executive Office. The chief executive office of the Seller is at 1111 Town
Center Drive, Las Vegas, Nevada 89144.


 


SECTION 8.2.        Corporate
Existence. (a)  During the term of
this Agreement, the Seller will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of
its incorporation and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Related
Documents and each other instrument or agreement necessary or appropriate to
the proper administration of this Agreement and the transactions contemplated
hereby.


 


(b)           During the
term of this Agreement, the Seller shall observe the applicable legal
requirements for the recognition of the Seller as a legal entity separate and
apart from its Affiliates, including as follows:


 


(i)            the
Seller shall not engage in any other business other than as provided in Article
THIRD of Seller’s Articles of Incorporation [and shall not amend such Article
THIRD without the prior written consent of the Insurer (for so long as it is
the Controlling Party) which consent shall not be unreasonably withheld];


 


(ii)           the Seller
shall maintain corporate records and books of account separate from those of
its Affiliates;


 


(iii)          except
as otherwise provided in this Agreement, the Seller shall not commingle its
assets and funds with those of its Affiliates;


 


(iv)          the Seller
shall hold such appropriate meetings of its Board of Directors as are necessary
to authorize all the Seller’s corporate actions required by law to be
authorized by the Board of Directors, shall keep minutes of such meetings and
of meetings of its stockholder(s) and observe all other customary corporate
formalities or shall obtain written consents in lieu of formal meetings of its
Board of Directors or stockholder(s) (and any successor Seller that is not a
corporation shall observe similar procedures in accordance with its governing
documents and applicable law);


 


(v)           the Seller
shall at all times hold itself out to the public under the Seller’s own name as
a legal entity separate and distinct from its Affiliates;


 


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(vi)          the Seller
shall not become involved in the day-to-day management of any other Person;


 


(vii)         the
Seller shall not guarantee any other Person’s obligations or advance funds to
any other Person for the payment of expenses or otherwise;


 


(viii)        the
Seller shall not act as an agent of any other Person in any capacity;


 


(ix)           the Seller
shall not dissolve or liquidate, in whole or in part; and


 


(x)            all
transactions and dealings between the Seller and its Affiliates will be
conducted on an arm’s-length basis.


 


(c)           During the
term of this Agreement, the Seller will comply with the limitations on its
business and activities, as set forth in its Articles of Incorporation, and
will not incur indebtedness other than pursuant to or as expressly permitted by
the Related Documents.


 


(d)           During the
term of this Agreement, the Seller will ensure that its corporate records
indicate that the Indenture Trustee has the exclusive right to vote the Class
SV Preferred Stock.


 


SECTION 8.3.        Liability
of Seller; Indemnities. The Seller shall be liable in accordance herewith
only to the extent of the obligations specifically undertaken under this
Agreement by the Seller and the representations made by the Seller under this
Agreement.


 


(a)           The Seller
shall indemnify, defend and hold harmless the Issuer, [the Insurer,] the Owner
Trustee, the Delaware Trustee, the Indenture Trustee and the Administrator from
and against any taxes that may at any time be asserted against any such Person
with respect to the transactions contemplated in this Agreement and any of the
Basic Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Delaware Trustee, the Indenture Trustee or the Administrator, and
except any taxes to which the Owner Trustee, the Delaware Trustee, the
Indenture Trustee or the Administrator may otherwise be subject to), including
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Issuer, not including any
taxes asserted with respect to federal or other income taxes arising out of
distributions on the Certificates and the Notes) and costs and expenses in
defending against the same.


 


(b)           The Seller
shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the
Delaware Trustee, the Indenture Trustee and the Administrator against any loss,
liability or expense incurred by reason of (i) the Seller’s willful
misfeasance, bad faith or negligence in the performance of its duties under
this Agreement, or by reason of reckless disregard of its obligations and
duties under this 


 


47

















 


Agreement and (ii)
the Seller’s or the Issuer’s violation of federal or state securities laws in
connection with the offering and sale of the Notes.


 


(c)           The Seller
shall indemnify, defend and hold harmless the Owner Trustee, the Delaware
Trustee, the Indenture Trustee and the Administrator and their respective
officers, directors, employees and agents from and against any and all costs,
expenses, losses, claims, damages and liabilities arising out of, or incurred
in connection with, the acceptance or performance of the trusts and duties set
forth herein and in the Basic Documents, except to the extent that such cost,
expense, loss, claim, damage or liability shall be due to the willful
misfeasance, bad faith or negligence (except for errors in judgment) of the
Person seeking indemnification.


 


Indemnification under this Section shall survive the
resignation or removal of the Owner Trustee, the Delaware Trustee, the
Indenture Trustee or the Administrator and the termination of this Agreement or
the Indenture or the Trust Agreement, as applicable, and shall include
reasonable fees and expenses of counsel and other expenses of litigation. If
the Seller shall have made any indemnity payments pursuant to this Section and
the Person to or on behalf of whom such payments are made thereafter shall
collect any of such amounts from others, such Person shall promptly repay such
amounts to the Seller, without interest.


 


SECTION 8.4.        Merger
or Consolidation of, or Assumption of the Obligations of, Seller. Any
Person (a) into which the Seller may be merged or consolidated, (b) which may
result from any merger or consolidation to which the Seller shall be a party or
(c) which may succeed to the properties and assets of the Seller substantially
as a whole, which Person in any of the foregoing cases (x) has articles of
incorporation containing provisions relating to limitations on business and
other matters substantially identical to those contained in the Seller’s
articles of incorporation and (y) executes an agreement of assumption to
perform every obligation of the Seller under this Agreement and the other
Related Documents shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement[, provided, however, that the Insurer (for so long
as it is the Controlling Party) shall have consented to such action and written
confirmation shall be received by the Indenture Trustee, and the Insurer from
each Rating Agency rating the Notes that the then current rating of the Notes
will not be withdrawn, downgraded or suspended as a result of any action
described in this Section 8.4].


 


SECTION 8.5.        Limitation
on Liability of Seller and Others. (a) 
The Seller and any director or officer or employee or agent of the
Seller may rely in good faith on the written advice of counsel or on any
document of any kind, prima facie properly executed and submitted by any Person
respecting any matters arising under any Basic Document. The Seller shall not
be under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its obligations under this Agreement, and that in
its opinion may involve it in any expense or liability. Except as provided in
Section 8.3 hereof, neither the Seller nor any of the directors, officers,
employees or agents of the Seller acting in such capacities shall be under any
liability to the Trust, the Securityholders, any Support Provider or any other
Person for any action 


 


48

















 


taken or for refraining from the taking of any action in good faith in
such capacities pursuant to this Agreement; provided, however,
that this provision shall not protect the Seller or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.


 


(b)           All
obligations of the Seller under this Agreement (including, but not limited to,
repurchase and indemnification obligations) and under any of the Related
Documents shall be limited in recourse to property, if any, which the Seller
may hold from time to time, not subject to any Lien.


 


SECTION 8.6.        Seller
May Own Certificates or Notes. The Seller and any Affiliate thereof may in
its individual or any other capacity become the owner or pledgee of
Certificates or Notes with the same rights as it would have if it were not the
Seller or an Affiliate thereof, except as expressly provided herein or in any
Basic Document. Notes or Certificates so owned by the Seller or such Affiliate
shall have an equal and proportionate benefit under the provisions of the Basic
Documents, without preference, priority, or distinction as among all of the
Notes or Certificates; provided, however, [(i)] except in the event that
all outstanding Notes and Certificates are owned by the Seller and/or any
Affiliates thereof, that any Notes or Certificates owned by the Seller or any
Affiliate thereof, during the time such Notes or Certificates are owned by
them, shall be without voting rights for any purpose set forth in the Basic
Documents [and (ii) any Notes or Certificates owned by the Seller or any
Affiliate thereof, during the time such Notes or Certificates are owned by
them, will not be entitled to the benefits of the Note Policy]. The Seller shall
notify the Owner Trustee, the Indenture Trustee and the Administrator promptly
after it or any of its Affiliates become the owner or pledgee of a Certificate
or a Note.


 


ARTICLE IX



The Servicer


 


SECTION 9.1.        Representations
of Servicer. The Servicer makes the following representations on which the
Issuer is deemed to have relied in acquiring the Owner Trust Estate, on which
the Noteholders are deemed to have relied in the purchasing of Notes and any
Additional Principal Amount, and on which Support Provider shall be deemed to
have relied in providing the Series Support. The representations speak as of
the execution and delivery of this Agreement, the Closing Date and as of each
Transfer Date and shall survive the sale of the Owner Trust Estate to the
Issuer and the pledge of the Series Trust Estate to the Indenture Trustee
pursuant to the Indenture.


 


(i)            Organization
and Good Standing. The Servicer has been duly organized and is validly
existing and in good standing under the laws of its jurisdiction of
organization, with power, authority and legal right to own its properties and
to conduct its business as such properties are currently owned and such
business


 


49

















 


is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to enter into and perform its obligations under this Agreement and
the other Related Documents to which it is a party.


 


(ii)           Due
Qualification. The Servicer is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and approvals,
in all jurisdictions in which the ownership or lease of property or the conduct
of its business (including the servicing of the Receivables as required by this
Agreement) requires or shall require such qualification; except where the
failure to qualify or obtain licenses or approvals would not have a material
adverse effect on its ability to perform its obligations as Servicer under this
Agreement and the other Related Documents to which it is a party.


 


(iii)          Power
and Authority. The Servicer has the power and authority to execute and
deliver this Agreement and the Related Documents to which it is a party and to
carry out its terms and their terms, respectively, and the execution, delivery
and performance of this Agreement and the Related Documents to which the Servicer
is a party have been duly authorized by the Servicer by all necessary corporate
action.


 


(iv)          Binding
Obligation. This Agreement and the Related Documents to which the Servicer
is a party shall constitute legal, valid and binding obligations of the Servicer
enforceable in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors’ rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.


 


(v)           No
Violation. The consummation of the transactions contemplated by this
Agreement and the Related Documents to which the Servicer is a party, and the
fulfillment of the terms of this Agreement and the Related Documents to which
the Servicer is a party, shall not (A) conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or bylaws of the Servicer,
or any indenture, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound, or (B) result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, mortgage, deed of trust or other
instrument, or (C) violate any law, order, rule 


 


50

















 


or regulation
applicable to the Servicer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or any of its properties, except in the case of
(A), (B) or (C) where any such default, Lien or violation shall not materially
and adversely affect the interest of the Noteholders[, the Insurer] or the
Trust in the Series Trust Estate or affect the Servicer’s ability to perform
its obligations under this Agreement.


 


(vi)          No
Proceedings. There are no proceedings or investigations pending or, to the Servicer’s
knowledge, threatened against the Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over the Servicer or its properties (A) asserting the invalidity
of this Agreement or any of the Related Documents, (B) seeking to prevent the
issuance of the Securities or the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents, or (C) seeking
any determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents or (D)
seeking to adversely affect the federal income tax or other federal, state or
local tax attributes of the Securities.


 


(vii)         Approvals.
All approvals, authorizations, consents, orders or other actions of any person,
corporation or other organization, or of any court, governmental agency or body
or official, required in connection with the execution and delivery by the Servicer
of this Agreement and the consummation of the transactions contemplated hereby
have been or will be taken or obtained on or prior to the Closing Date.


 


(viii)        No
Consents. The Servicer is not required to obtain the consent of any other
party or any consent, license, approval or authorization, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement which has not already been obtained.


 


(ix)           Chief
Executive Office. The chief executive office of the Servicer is located at
2700 Sanders Road, Prospect Heights, Illinois 60070.


 


SECTION 9.2.        Liability
of Servicer; Indemnities. (a)  The Servicer
(in its capacity as such) shall be liable hereunder only to the extent of the
obligations in this 


 


51

















 


Agreement specifically undertaken by the Servicer and the
representations made by the Servicer.


 


(b)           The Servicer
shall defend, indemnify and hold harmless the Trust, the Administrator, the
Indenture Trustee, the Owner Trustee, the Delaware Trustee, each Support
Provider and their respective officers, directors, agents and employees, from
and against any and all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel and expenses of
litigation arising out of or resulting from the use, ownership or operation of,
or lien on, any Financed Vehicle.


 


(c)           The Servicer
(when the Servicer is HSBC Finance Corporation or an Affiliate of HSBC Finance
Corporation) shall indemnify, defend and hold harmless the Trust, the Administrator,
the Indenture Trustee, the Owner Trustee, the Delaware Trustee, each Support
Provider and their respective officers, directors, agents and employees and
from and against any taxes that may at any time be asserted against any of such
parties with respect to the transactions contemplated in this Agreement,
including, without limitation, any sales, gross receipts, tangible or
intangible personal property, privilege or license taxes (but not including any
federal or other income taxes) and costs and expenses in defending against the
same, except to the extent that such costs, expenses, losses, damages, claims
and liabilities arise out of the negligence or willful misconduct of such
parties. The Servicer hereby agrees to indemnify the Indenture Trustee as set
forth in Section 6.7(a) of the Indenture and the Administrator as set forth in
Section 6.17(b) of the Indenture.


 


(d)           The Servicer
(when the Servicer is not HSBC Finance Corporation) shall indemnify, defend and
hold harmless the Trust, the Administrator, the Indenture Trustee, the Owner
Trustee, the Delaware Trustee, each Support Provider and their respective
officers, directors, agents and employees from and against any taxes with
respect to the sale of Receivables in connection with servicing hereunder that
may at any time be asserted against any of such parties with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, tangible or intangible personal property, privilege or
license taxes (but not including any federal or other income taxes) and costs
and expenses in defending against the same, except to the extent that such
costs, expenses, losses, damages, claims and liabilities arise out of the
negligence or willful misconduct of such parties.


 


(e)           The Servicer
shall indemnify, defend and hold harmless the Trust, the Administrator, the
Indenture Trustee, the Owner Trustee, the Delaware Trustee, each Support
Provider and their respective officers, directors, agents and employees from and
against any and all costs, expenses, losses, claims, damages, and liabilities
to the extent that such cost, expense, loss, claim, damage, or liability arose
out of, or was imposed upon the Trust, the Administrator, the Indenture Trustee[,
the Insurer (to the extent provided in the Insurance Agreement)] or the Owner
Trustee, by reason of the breach of this Agreement by the Servicer, the
negligence, misfeasance, or bad faith of the Servicer in the performance of its
duties under this Agreement or the Series Supplement or by reason of reckless
disregard of its obligations and duties under this Agreement or the Series
Supplement, except to the extent that such costs, expenses, losses, damages, 


 


52

















 


claims, and liabilities
arise out of the negligence or willful misconduct of the Person seeking
indemnification.


 


(f)            The Servicer
(when the Servicer is HSBC Finance Corporation or an Affiliate of HSBC Finance
Corporation) shall indemnify, defend and hold harmless the Trust, the
Administrator, the Indenture Trustee, the Owner Trustee the Delaware Trustee[, the
Insurer (to the extent provided in the Insurance Agreement)] and their
respective officers, directors, agents and employees from and against any loss,
liability or expense incurred by reason of the violation by Servicer of federal
or state securities laws in connection with the registration or the sale of the
Securities, except to the extent that such costs, expenses, losses, damages,
claims, and liabilities arise out of the negligence or willful misconduct of
such parties.


 


(g)           Indemnification
under this Article shall survive the termination of this Agreement and will
survive the early resignation or removal of any of the parties hereto and shall
include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer has made any indemnity payments
pursuant to this Article and the recipient thereafter collects any of such
amounts from others, the recipient shall promptly repay such amounts collected
to the Servicer, without interest. Notwithstanding any other provision of this
Agreement, the obligations of the Servicer shall not terminate or be deemed
released upon the resignation or termination of HSBC Finance Corporation as the
Servicer and shall survive any termination of this Agreement.


 


SECTION 9.3.        Merger
or Consolidation of, or Assumption of the Obligations of the Servicer. Any
Person (i) into which the Servicer may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) which acquires by conveyance, transfer, or lease substantially all
of the assets of the Servicer, or (iv) succeeding to the business of the Servicer,
in any of the foregoing cases shall execute an agreement of assumption to
perform every obligation of the Servicer under this Agreement and each Related
Document and, whether or not such assumption agreement is executed, shall be
the successor to the Servicer under this Agreement and each Related Document
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement or the Series Supplement, anything in this
Agreement or the Series Supplement to the contrary notwithstanding. Notwithstanding
the foregoing, the Servicer shall not merge or consolidate with any other
Person or permit any other Person to become a successor to the Servicer’s
business, unless the Servicer shall have delivered to the Owner Trustee[, the
Insurer] and the Indenture Trustee an Officer’s Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 9.3 and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with.


 


SECTION 9.4.        Limitation
on Liability of Servicer and Others. (a) 
None of the Servicer, the Administrator, the Indenture Trustee, or any
of the directors or officers or employees or agents of any such Persons shall
be under any liability to the Trust, except as provided in this Agreement and
each Related Document, for any action 


 


53

















 


taken or for refraining from the taking of any action pursuant to this
Agreement or a Related Document; provided, however, that this provision shall not protect
the Servicer, the Administrator, the Indenture Trustee or any such Persons
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence (excluding errors in judgment) in the
performance of duties (including negligence with respect to the Servicer’s
indemnification obligations hereunder), by reason of reckless disregard of
obligations and duties under this Agreement and each Related Document or any
violation of law by the Servicer, the Administrator, the Indenture Trustee or
such person, as the case may be; provided, further, that this
provision shall not affect any liability to indemnify the Indenture Trustee,
the Administrator, the Delaware Trustee or the Owner Trustee for costs, taxes,
expenses, claims, liabilities, losses or damages paid by the Indenture Trustee,
the Administrator, the Delaware Trustee or the Owner Trustee, in their
individual capacities. The Servicer, the Administrator, the Indenture Trustee
and any director, officer, employee or agent of such Persons may rely in good
faith on the written advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person pertaining to any matters
arising under this Agreement. The Indenture Trustee shall not be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if the repayment of such funds or adequate written indemnity
against such risk or liability is not reasonably assured to it in writing prior
to the expenditure of risk of such funds or incurrence of financial liability.


 


(b)           Unless
serving as Successor Servicer pursuant to Sections 10.2 and 10.3 hereof, and
notwithstanding any other provision to the contrary herein, the Indenture
Trustee and the Administrator shall not be liable for any obligation of the Servicer
contained in this Agreement or any Related Document, and the Owner Trustee, ,
the Delaware Trustee, the Seller and the Noteholders shall look only to the Servicer
to perform such obligations.


 


(c)           The
parties expressly acknowledge and consent to the initial Indenture Trustee
acting in the potential dual capacity of Successor Servicer and in the capacity
as Indenture Trustee. Such Indenture Trustee may, in such dual or other
capacity, discharge its separate functions fully, without hindrance or regard
to conflict of interest principles, duty of loyalty principles or other breach
of fiduciary duties to the extent that any such conflict or breach arises from
the performance by such Indenture Trustee of express duties set forth in this
Agreement in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto and the
Noteholders except in the case of negligence or willful misconduct by such
Indenture Trustee.


 


SECTION 9.5.        Delegation
of Duties. Subject to Section 9.7, in the ordinary course of business, the Servicer
and the Subservicer, provided it is HAFI, at any time may delegate any of their
duties hereunder to any Person, including any of their Affiliates, who agrees
to conduct such duties in accordance with standards employed by the Servicer or
such Subservicer in compliance with Section 4.1. Such delegation shall not
relieve the Servicer of its liabilities and responsibilities with respect to
such duties and shall not constitute a resignation within the meaning of
Section 9.6.


 


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SECTION 9.6.        Servicer
Not to Resign. Subject to the provisions of Section 9.3, the Servicer shall
not resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are
no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it or its
subsidiaries or Affiliates, or (ii) upon satisfaction of the following
conditions:  (a) the Servicer has
proposed a successor servicer to the Indenture Trustee [and the Insurer (for so
long as it is the Controlling Party)] in writing and such proposed successor
servicer is reasonably acceptable to the Indenture Trustee[, the Insurer (for
so long as it is the Controlling Party)]; (b) such proposed successor servicer
has agreed in writing to assume the obligations of Servicer hereunder and under
each Basic Document to which it is a party and (c) the Servicer has delivered to
the Indenture Trustee an Opinion of Counsel to the effect that all conditions
precedent to the resignation of the Servicer and the appointment of and
acceptance by the proposed successor servicer have been satisfied; provided, however, that, in the
case of clause (i) above, no such resignation by the Servicer shall become
effective until the Indenture Trustee shall have assumed the Servicer’s
responsibilities and obligations hereunder or the Indenture Trustee shall have designated
a successor servicer [reasonably acceptable to the Insurer (for so long as it
is the Controlling Party)] in accordance with Section 10.3 which shall have
assumed such responsibilities and obligations. Any such resignation shall not
relieve the Servicer of responsibility for any of its obligations hereunder
arising prior to the effective date of such resignation. Any such determination
permitting the resignation of the Servicer pursuant to clause (i) above shall
be evidenced by an Opinion of Counsel to such effect delivered to the Indenture
Trustee.


 


SECTION 9.7.        Subservicing
Agreements Between Servicer and Subservicers. The Servicer initially
appoints HAFI to subservice the Receivables. From time to time after the
Closing Date, the Servicer may enter into a subservicing agreement with any
Person other than HAFI which is an Eligible Subservicer and is in compliance
with the laws of each state necessary to enable it to perform the obligations
of the Servicer pursuant to this Agreement. Any such subservicing agreement
shall be consistent with and not violate the provisions of this Agreement. The Servicer
shall not be relieved of its obligations under this Agreement and each Basic
Document to which it is a party notwithstanding any agreement relating to
subservicing and the Servicer shall be obligated to the same extent and under
the same terms and conditions as if it alone were servicing and administering
the Receivables. For purposes of this Agreement and each Related Document, the Servicer
shall be deemed to have received payments on Receivables when any Subservicer
has received such payments. The parties hereto acknowledge that with respect to
statements or certificates required to be delivered by the Servicer in
accordance with this Agreement and the Series Supplement, including, but not
limited to, Sections 4.9, 4.10 and 14.7 hereof, unless otherwise required
pursuant to this Agreement or pursuant to applicable law, that a statement or
certificate delivered by a subservicer shall be sufficient to discharge the Servicer’s
obligation to deliver such certificate or statement.


 


SECTION 9.8.        Successor
Subservicers. The Servicer may terminate any Subservicer and either
directly service the related Receivables itself or enter into an 


 


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agreement with a successor Subservicer that is an Eligible Subservicer.
None of the Owner Trustee, the Administrator or the Indenture Trustee shall
have a duty or obligation to monitor or supervise the performance of any
Subservicer.


 


ARTICLE X



Default


 


SECTION 10.1.      Servicer
Termination Event. For purposes of this Agreement, each of the following
shall constitute a “Servicer Termination Event”:


 


(a)           Any
failure by the Servicer to deliver, or cause to be delivered, to the Administrator
for distribution pursuant to the terms of this Agreement or any Basic Document,
any proceeds or payment required to be so delivered by the Servicer under the
terms of this Agreement or any Basic Document (including deposits of the
Repurchase Amount pursuant to Section 4.7) that continues unremedied for a
period of three Business Days after written notice is received by the Servicer
from the Administrator[, the Insurer] or the Indenture Trustee or after
discovery of such failure by a responsible officer of the Servicer (but in no event
later than three Business Days after the Servicer is required to make such
delivery or deposit);


 


(b)           Failure on
the part of the Servicer duly to observe or perform any other covenants or
agreements of the Servicer set forth in this Agreement or the Basic Documents,
which failure (i) materially and adversely affects the rights of Noteholders
(determined without regard to the availability of funds under any Series
Support) [or the Insurer] and (ii) continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer by the Administrator[, the
Insurer] or the Indenture Trustee or after discovery thereof by the Servicer;


 


(c)           The entry
of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of the Servicer in an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or another present or
future, federal bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or of any substantial part of its property or
ordering the winding up or liquidation of the affairs of the Servicer or the
commencement of an involuntary case under the federal bankruptcy laws, as now
or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law and such case is not dismissed within 60
days;


 


(d)           The
commencement by the Servicer of a voluntary case under the federal bankruptcy
laws, as now or hereafter in effect, or any other present or future, federal or
state, bankruptcy, insolvency or similar law, or the consent by the Servicer to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer or
of any substantial part of its property or the making by the Servicer of an
assignment for the benefit of creditors or the failure by the Servicer
generally to pay its debts as such debts 


 


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become due or the
taking of corporate action by the Servicer in furtherance of any of the
foregoing; or


 


(e)           Any
representation, warranty or certification of the Servicer made in this
Agreement or any Basic Document or any certificate, report or other writing
delivered pursuant hereto or thereto shall prove to be incorrect in any
material respect as of the time when the same shall have been made, and the
incorrectness of such representation, warranty or statement has a material
adverse effect on the interests of the Indenture Trustee in the Series Trust
Estate and, within 60 days after written notice thereof shall have been given
to the Servicer by the Indenture Trustee or the Administrator after discovery
thereof by the Servicer, the circumstances or condition in respect of which
such representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.


 


(f)            [An Event
of Default (as defined in the Insurance Agreement) shall have occurred;] or


 


(g)           [A demand
for payment shall be made by the Indenture Trustee under the Note Policy.]


 


Notwithstanding the foregoing, a delay in or failure
of performance under Section 10.1(a) for a period of three Business Days or
under Section 10.1(b) for a period of 60 days, shall not constitute a Servicer
Termination Event 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, acts of declared or undeclared war, terrorism, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement, and the Servicer
shall provide the Administrator, the Indenture Trustee and the Seller with an
Officers’ Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts to so perform its obligations.


 


SECTION 10.2.      Consequences
of a Servicer Termination Event. If a Servicer Termination Event shall
occur and be continuing, the Indenture Trustee (to the extent a Trust Officer
of the Indenture Trustee has actual knowledge or has received written notice
thereof), by notice given in writing to the Rating Agencies and the Servicer
may[, with the consent of the Insurer (for so long as it is the Controlling
Party)] and shall, at the written direction of the Controlling Party, terminate
all of the rights and obligations of the Servicer, including in its capacity as
custodian, under this Agreement and the other Basic Documents to which it is a
party. On or after the receipt by the Servicer of such written notice, all
authority, power, obligations and responsibilities of the Servicer, including in
its capacity as custodian, under this Agreement, whether with respect to the
Notes, the Receivables or the Other Conveyed Property or otherwise,
automatically shall pass to, be vested in, and become obligations and
responsibilities, of the Indenture Trustee (or such other Successor Servicer
appointed by the Controlling Party pursuant to Section 10.3); provided, however,
that the Successor Servicer shall have (i) no liability 


 


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with respect to any obligation which was required to be performed by
the terminated Servicer prior to the date that the Successor Servicer becomes
the Servicer or any claim of a third party based on any alleged action or
inaction of the terminated Servicer, (ii) no obligation to perform any
repurchase or advancing obligations, if any, of the terminated Servicer, (iii)
no obligation to pay any of the fees and expenses of any other party involved
in this transaction not expressly assumed by the Servicer and (iv) no liability
or obligation with respect to any Servicer indemnification obligations of any
prior servicer including the original servicer.


 


Notwithstanding anything contained in this Agreement
to the contrary, the Indenture Trustee as Successor Servicer and any other Successor
Servicer, are authorized to accept and rely on all of the accounting, records
(including computer records) and work of the prior Servicer relating to the
Receivables (collectively, the “Predecessor Servicer Work Product”) without any
audit or other examination thereof, and the Indenture Trustee or other Successor
Servicer shall have no duty, responsibility, obligation or liability for the
acts and omissions of the prior Servicer. If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, “Errors”) exist
in any Predecessor Servicer Work Product and such Errors make it materially
more difficult to service or should cause or materially contribute to the
Indenture Trustee or other Successor Servicer making or continuing any Errors
(collectively, “Continued Errors”), the Indenture Trustee or other Successor Servicer,
as the case may be, shall have no duty, responsibility, obligation or liability
for such Continued Errors; provided, however, that
the Indenture Trustee or other Successor Servicer agrees to use its best
efforts to prevent further Continued Errors. In the event that the Indenture
Trustee or other Successor Servicer becomes aware of Errors or Continued
Errors, such Indenture Trustee or other Successor Servicer shall, with the
prior consent of [(i) for so long as it is the Controlling Party, the Insurer,
or (ii) for so long as the Insurer is not the Controlling Party,] Noteholders
representing 66-2/3% of the outstanding Notes, use its best efforts to
reconstruct and reconcile such data as is commercially reasonable to correct
such Errors and Continued Errors and to prevent future Continued Errors.


 


The Successor Servicer is authorized and empowered by
this Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer
and endorsement of the Owner Trust Estate and related documents to show the
Trust as lienholder or secured party on the related Lien Certificates, or
otherwise. The terminated Servicer agrees to cooperate with the Successor Servicer
in effecting the termination of the responsibilities and rights of the
terminated Servicer, including in its capacity as custodian, under this
Agreement, including, without limitation, the transfer to the Successor Servicer
for administration by it of all cash amounts that shall at the time be held by
the terminated Servicer for deposit, or have been deposited by the terminated Servicer,
in a Trust Account and the delivery to the Successor Servicer of all Receivable
Files being held by the terminated Servicer in its capacity as custodian,
Monthly Records and Collection Records and a computer tape in readable form as
of the most recent Business Day containing all information necessary to 


 


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enable the Successor Servicer to service the Owner
Trust Estate. If requested by the Controlling Party, the Successor Servicer
shall direct the Obligors to make all payments under the Receivables directly
to the Successor Servicer (in which event the Successor Servicer shall process
such payments in accordance with Section 4.2(d) or 4.2(e), as applicable). The
terminated Servicer shall grant the Indenture Trustee and the Successor Servicer
reasonable access to the terminated Servicer’s premises at the terminated Servicer’s
expense.


 


SECTION 10.3.      Appointment
of Successor. (a)  On and after the
time the Servicer receives a notice of termination pursuant to Section 10.2 or
upon the resignation of the Servicer pursuant to Section 9.6, the Servicer
shall continue to perform all servicing functions under this Agreement until
the date specified in such termination notice or until such resignation becomes
effective or until a date mutually agreed upon by the Servicer[, the Insurer
(for so long as it is the Controlling Party)] and the Indenture Trustee. The
Indenture Trustee shall as promptly as possible after such termination or
resignation appoint an Eligible Servicer as a successor servicer (the “Successor
Servicer”) [reasonable acceptable to the Insurer (for so long as it is the
Controlling Party)], and such Successor Servicer shall accept its appointment
by a written assumption in a form reasonably acceptable to the Indenture
Trustee [and the Insurer (for so long as it is the Controlling Party]. 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[, with the consent of the Insurer (for so long as it
is the Controlling Party),] delegate any of its servicing obligations to an
Affiliate or agent in accordance with Section 9.5. Notwithstanding the
foregoing, the Indenture Trustee shall, if it is legally unable so to act,
petition a court of competent jurisdiction to appoint any established
institution qualifying as an Eligible Servicer as the Successor Servicer
hereunder. The Indenture Trustee or the Successor Servicer, as the case may be,
shall be the successor in all respects to the Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for in
this Agreement, and shall be subject to all the rights, responsibilities,
restrictions, duties, liabilities and termination provisions relating thereto
placed on the Servicer by the terms and provisions of this Agreement, except as
otherwise stated herein. The Indenture Trustee or
the Successor Servicer, as the case may be, shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession. The
Successor Servicer shall be subject to termination under Section 10.2 upon the
occurrence of any Servicer Termination Event applicable to it as Servicer.


 


(b)           Subject to
Section 9.6, no provision of this Agreement shall be construed as relieving the
Indenture Trustee of its obligation to succeed as Successor
Servicer upon the termination of the Servicer pursuant to Section 10.2 or the
resignation of the Servicer pursuant to Section 9.6.


 


(c)           Any
Successor Servicer shall be entitled to such compensation (whether payable out
of the Collection Account or otherwise) equal to the compensation the Servicer
would have been entitled to under this Agreement if the Servicer had not
resigned or been terminated hereunder or such other amount as may be 


 


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agreed to by the
Successor Servicer[, the Insurer (for so long as it is the Controlling Party)]
and the Indenture Trustee and consented to by the Holders of a majority of the
Outstanding Amount of Notes. In addition, any Successor Servicer shall be
entitled to reasonable transition expenses incurred in acting as Successor Servicer
payable by the outgoing Servicer, and to the extent such transition expenses
have not been paid by the outgoing Servicer, such Successor Servicer shall be
entitled to reimbursement for such reasonable expenses pursuant to the Series
Supplement.


 


SECTION 10.4.      Notification
to Noteholders. Upon any termination of, or appointment of a successor to,
the Servicer the Indenture Trustee shall give prompt written notice thereof to
each Noteholder.


 


SECTION 10.5.      Waiver
of Past Defaults. The Controlling Party or, with the consent of the
Controlling Party, a majority of the Noteholders may, on behalf of all
Securityholders, waive any default by the Seller 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.


 


SECTION 10.6.      Successor
to Servicer. (a)  The Indenture
Trustee, in its capacity as successor to the Servicer, shall perform such
duties and only such duties as are specifically set forth in this Agreement and
each Related Document with respect to the assumption of any servicing duties
and no implied covenants or obligations shall be read into this Agreement
against the Indenture Trustee.


 


(b)           In the
absence of bad faith or negligence on its part, each of the Indenture Trustee and the Administrator may conclusively rely as to the truth
of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to them and conforming to the requirements
of this Agreement and the Series Supplement; but in the case of any such
certificates or opinions, which by any provision hereof are specifically
required to be furnished to the Indenture Trustee and/or the Administrator, the
Indenture Trustee and/or the Administrator, as the
case may be, shall be under a duty to examine the same and to determine whether
or not they conform to the requirements of this Agreement and the Series
Supplement.


 


(c)           The
Indenture Trustee shall have no liability for any
actions taken or omitted by the terminated Servicer.


 


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ARTICLE XI



Termination


 


SECTION 11.1.      Optional
Purchase of All Receivables. (a)  To
the extent and under the circumstances provided in the Series Supplement, the Servicer
and HAFI each shall have the option to effect a “clean-up” redemption or
purchase of the Series Trust Estate.


 


(b)           Upon any
sale of the assets included in the Series Trust Estate permitted by the Series
Supplement, the Servicer shall instruct the Indenture Trustee (or the
Administrator on behalf of the Indenture Trustee) to deposit the proceeds from
such sale, after all payments and reserves therefrom (including the expenses of
such sale) have been made, in the Collection Account.


 


(c)           The
Servicer shall notify the Owner Trustee, the Indenture Trustee[, the Insurer]
and the Administrator of any termination of the Trust as soon as practicable
after the Servicer has received notice thereof.


 


(d)           Following
the satisfaction and discharge of the Indenture, the payment in full of the
principal of and interest on the Notes, the satisfaction of all payment
obligations under the Basic Documents and [the Insurance Agreement and] termination
of any Series Support (as provided therein), the Certificateholders will
succeed to the rights of the Noteholders hereunder and the Owner Trustee will
succeed to the rights of, and assume the obligations of, the Indenture Trustee and
the Administrator pursuant to this Agreement.


 


ARTICLE XII



Administrative Duties of the Servicer


 


SECTION 12.1.      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 2.7, 3.3, 3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 7.3, 8.3,
9.2, 9.3, 11.1 and 11.15 of the Indenture.


 


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(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 Related 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 Related Documents or under state and federal tax and
securities laws, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer to take pursuant to this
Agreement or any of the Basic Documents, including, without limitation,
pursuant to Sections 2.6 and 2.11 of the Trust Agreement. In accordance with
the directions of the Issuer or the Owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other activities in
connection with the Owner Trust Estate (including the Related Documents) as are
not covered by any of the foregoing provisions and as are expressly requested
by the Issuer or the Owner Trustee and are reasonably within the capability of
the Servicer.


 


(ii)           Notwithstanding
anything in this Agreement or any of the Basic Documents to the contrary, the Servicer
shall be responsible for promptly notifying the Owner Trustee, the Indenture
Trustee and the Administrator in the event that any withholding tax is imposed
on the Issuer’s payments (or allocations of income) to a Certificateholder as
contemplated by this Agreement. Any such notice shall be in writing and specify
the amount of any withholding tax required to be withheld by the Owner Trustee,
the Indenture Trustee or the Administrator pursuant to such provision.


 


(iii)          Notwithstanding
anything in this Agreement or the Basic Documents to the contrary, the Servicer
shall be responsible for performance of the duties of the Issuer and the Seller
set forth in Section 5.1(a), (b), (c) and (d) of the Trust Agreement with
respect to, among other things, accounting and reports to Owners (as defined in
the Trust Agreement); provided, however, that once prepared by the Servicer,
the Depositor shall retain responsibility for the distribution of such
information as may be required under the Code and applicable Treasury
Regulations (including Schedule K-1, if applicable) under Section 5.1(b) of the
Trust Agreement to enable each Certificateholder to prepare its federal and
state income tax returns.


 


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(iv)          The Servicer
shall perform the duties of the Depositor specified in Section 10.2 of the
Trust Agreement required to be performed in connection with the resignation or
removal of the Owner Trustee, and any other duties expressly required to be
performed by the Servicer under this Agreement or any of the Related Documents.


 


(v)           The Servicer,
on behalf of the Seller, shall direct the Issuer to request the tender of all
or a portion of the Notes in accordance with the Indenture or the Series
Supplement.


 


(vi)          In carrying
out the foregoing duties or any of its other obligations under this Agreement,
the 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.


 


(c)           Tax
Matters. The Servicer shall prepare and file, or cause to be prepared and
filed, on behalf of the Seller, all tax returns, tax elections, financial
statements and such annual or other reports of the Issuer as are necessary for
preparation of tax reports as provided in Article V of the Trust Agreement,
including Form 1099. All tax returns of the Issuer shall will be signed in
accordance with Article V of the Trust Agreement.


 


(d)           Non-Ministerial
Matters. With respect to matters that in the reasonable judgment of the Servicer
are non-ministerial, the Servicer shall not take any action pursuant to this
Article XII unless within a reasonable time before the taking of such action,
the Servicer shall have notified the Owner Trustee, [the Insurer,] the
Indenture Trustee and the Administrator of the proposed action and the Owner
Trustee, [the Insurer (for so long as it is the Controlling Party),] the
Indenture Trustee or the Administrator shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence, “non-ministerial
matters” shall include:


 


(A)          the
initiation of any claim or lawsuit by the Issuer and the compromise of any
action, claim or lawsuit brought by or against the Issuer (other than in
connection with the collection of the Receivables);


 


(B)           the
appointment of successor Note Registrars, successor Note Paying Agents,
successor Indenture Trustees or successor Administrators pursuant to the
Indenture or the consent to the assignment by the Note Registrar, Note Paying
Agent, the Administrator or Indenture Trustee of its obligations under the
Indenture; and


 


(C)           the
removal of the Indenture Trustee or the Administrator.


 


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(e)           Exceptions.
Notwithstanding anything to the contrary in this Agreement, except as expressly
provided herein or in the other Basic Documents, the Servicer, in its capacity
hereunder, shall not be obligated to, and shall not, (1) make any payments to
the Noteholders or Certificateholders under the Basic Documents, (2) sell any
portion of the Series Trust Estate pursuant to the Basic Documents, (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 Section 12.1.


 


SECTION 12.2.      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 12.3.      Additional
Information to be Furnished to the Issuer. The Servicer shall furnish to
the Issuer[, the Insurer (for so long as it is the Controlling Party)] and the
Indenture Trustee, from time to time such additional information regarding the
Owner Trust Estate as the Issuer[, the Insurer (for so long as it is the
Controlling Party)] and the Indenture Trustee shall reasonably request.


 


ARTICLE XIII



Miscellaneous Provisions


 


SECTION 13.1.      Amendments.
(a)  This Agreement may be amended by the
parties hereto at any time when no Securities are outstanding [and all amounts
payable to the Insurer pursuant to the Insurance Agreement have been paid in
full] without the requirement of any consents or the satisfaction of any
conditions set forth below.


 


(b)           Except as
otherwise provided in the Series Supplement, this Agreement may be amended from
time to time by the parties hereto, by a written instrument signed by each of
the parties hereto without the consent of any of the Securityholders, provided
that (i) an Opinion of Counsel for the Seller (which Opinion of Counsel may, as
to factual matters, rely upon Officers’ Certificates of the Seller or the Servicer)
is addressed and delivered to the Indenture Trustee and the Administrator,
dated the date of any such amendment, to the effect that the conditions
precedent to any such amendment, including those of Section 13.2(h)
hereof, have been satisfied and (ii) the Seller shall have delivered to the
Indenture Trustee and the Administrator, an Officer’s Certificate dated the
date of any such amendment, stating that the Seller reasonably believes that
such amendment will not have a material adverse effect on the rights of the
Noteholders.


 


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(c)           Except as
otherwise provided in the Series Supplement, subject to Section 13.2(h)
hereof, this Agreement may also be amended from time to time by the Servicer,
the Seller, the Indenture Trustee and the Administrator, with the prior written
consent of [the Insurer (so long as the Insurer is the Controlling Party) or
else the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of Notes and the Certificate Majority, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Securityholders; provided, however, that no such amendment shall
(i) reduce in any manner the amount of or delay the timing of any distributions
to be made to Securityholders or deposits of amounts to be so distributed or
the amount available under any Series Support without the consent of each
affected Securityholder, (ii) change the definition of or the manner of
calculating the interest of any Securityholder without the consent of each
affected Securityholder, or (iii) reduce the aforesaid percentage of
Noteholders or Certificateholders required to consent to any such amendment.


 


Promptly after the execution of any such amendment or
supplement, the Indenture Trustee shall furnish
written notification of the substance of such amendment or supplement to each
Securityholder.


 


It shall not be necessary for the consent of
Certificateholders or Noteholders pursuant to this Section to approve the
particular form of any amendment, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents (and
any other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by Noteholders or
Certificateholders shall be subject to such reasonable requirements as the Indenture
Trustee or the Owner Trustee, as the case may be, may prescribe, including the
establishment of record dates.


 


The Owner Trustee, the Indenture Trustee and the
Administrator may, but shall not be obligated to, enter into any amendment
which affects the Issuer’s, the Owner Trustee’s, the Indenture Trustee’s or the
Administrator’s, as the case may be, own rights, duties or immunities under
this Agreement or otherwise.


 


Prior to the execution of any amendment to this
Agreement, the Indenture Trustee and the Administrator shall be entitled to
receive and rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized and permitted by this Agreement and that all conditions
precedent to the execution and delivery of such amendment have been satisfied.


 


SECTION 13.2.      Protection
of Title to Series Trust Estate. (a) 
The Seller shall execute and file such financing statements and cause to
be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer in the Owner Trust Estate and the Indenture Trustee
in the Series Trust Estate.


 


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(b)           Neither
the Seller nor the Servicer shall change its name, identity or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Sections 9-503(a), 9-506 and 9-507
of the UCC, unless it shall have given the Owner Trustee and the Indenture
Trustee at least thirty days’ prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.


 


(c)           Each of
the Seller and the Servicer shall have an obligation to give [the Insurer,] the
Owner Trustee and the Indenture Trustee prompt notice of any change in its
state of incorporation if, as a result of such change, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment. The Servicer shall at all
times maintain each office from which it shall service Receivables within the
United States of America.


 


(d)           The Servicer
shall maintain accounts and records as to each Receivable accurately and in
sufficient detail to permit (i) the reader thereof to know at any time the
status of such Receivable, including payments and recoveries made and payments
owing (and the nature of each) and (ii) reconciliation between payments or
recoveries on (or with respect to) each Receivable and the amounts from time to
time deposited in the Collection Account in respect of such Receivable.


 


(e)           The Servicer
shall maintain or cause to be maintained, a computer system so that, from and
after the time of sale under this Agreement and each Transfer Agreement of the
Receivables to the Issuer, such master computer records (including any backup
archives) that refer to a Receivable shall indicate clearly the interest of the
Trust in such Receivable and that such Receivable is owned by the Trust and
such Receivable has been pledged pursuant to the Indenture. Indication of the
Trust’s and the Indenture Trustee’s interest in a Receivable shall be deleted
from or modified on such computer systems when, and only when, the related
Receivable shall have been paid in full, repurchased by HAFI, any Affiliate of HAFI
that is the seller under a Master Receivables Purchase Agreement, HSBC Finance
Corporation or the Seller or otherwise disposed of by the Issuer in accordance
with the terms of this Agreement.


 


(f)            If at any
time the Seller, HAFI or any Affiliate of HAFI that is the seller under a
Master Receivables Purchase Agreement shall propose to sell, grant a security
interest in or otherwise transfer any interest in motor vehicle receivables to
any prospective purchaser, lender or other transferee, the Servicer shall give
to such prospective purchaser, lender or other transferee computer tapes,
records or printouts (including any restored from backup archives) that, if
they shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Trust unless
such Receivable has been paid in full, been repurchased by HAFI, any Affiliate
of HAFI that is the seller under a Master Receivables Purchase Agreement, HSBC
Finance Corporation or the Seller or has otherwise been disposed of by the
Issuer in accordance with the terms of this Agreement.


 


66





















 


(g)           Upon
request, the Servicer shall furnish or cause to be furnished to [the Insurer,] the
Owner Trustee or the Indenture Trustee, within five Business Days, a list of
all Receivables (by contract number) then held as part of the Series Trust
Estate, together with a reconciliation of such list to the related Schedule of
Receivables and to any Servicer’s Certificates furnished before such request
indicating removal of Receivables from the Series Trust Estate. The Indenture
Trustee shall hold any such list and Schedule of Receivables for examination by
interested parties during normal business hours at the Corporate Trust Office
upon reasonable notice by such Persons of their desire to conduct an
examination.


 


(h)           The Servicer
shall deliver to [the Insurer,] the Owner Trustee, the Indenture Trustee and
the Administrator:


 


(1)           simultaneously
with the execution and delivery of the Agreement and, if required pursuant to
Section 13.1, of each amendment, an Opinion of Counsel stating that, in the
opinion of such Counsel, in form and substance reasonably satisfactory to the
addressees of such Opinion, either (A) all financing statements and
continuation statements have been executed and filed that are necessary fully
to preserve and protect the interest of the Trust and the Indenture Trustee in
the Receivables then held as part of the Series Trust Estate, or (B) no such
action shall be necessary to preserve and protect such interest or (C) any
action which is necessary to preserve and protect such interest during the
following 12-month period; and


 


(2)           on or
before March 31 of each year beginning with March 31, 200[  ], dated
as of a date during such period, stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Trust and the Indenture Trustee in the Series Trust Estate or
(B) no such action shall be necessary to preserve and protect such interest.


 


Each Opinion of Counsel referred to in clause (1) or
(2) above shall specify any action necessary (as of the date of such opinion)
to be taken in the following year to preserve and protect such interest.


 


SECTION 13.3.      Notices.
All demands, notices and communications upon or to the Seller, [the Insurer,] Servicer,
the Owner Trustee, the Administrator, the Indenture Trustee or any other Person
entitled to receive a notice, shall be in writing, personally delivered, or
mailed by certified mail, sent by confirmed telecopier transmission, or at the
consent of the receiving party by electronic mail, and shall be deemed to have
been duly given upon receipt at the address specified in the Series Supplement.
Any notice required or permitted to be mailed to a Noteholder or Certificateholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register or Note Register, as applicable. Any
notice so mailed within the time prescribed in the Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder or Noteholder shall receive such notice.


 


67

















 


SECTION 13.4.      Assignment.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto[, the Insurer] and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided in Sections 8.4 and 9.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Seller or the Servicer [without the prior written consent of
the Insurer], the Owner Trustee, the Administrator and the Indenture Trustee. In
the event that a successor Issuer is formed as permitted by the Series
Supplement, such Issuer shall succeed to all of the rights and obligations of
the predecessor Issuer hereunder; and all references to the Issuer hereunder
shall thereafter be deemed to be references to such successor Issuer.


 


SECTION 13.5.      Limitations
on Rights of Others. The provisions of this Agreement are solely for the
benefit of the parties hereto and for the benefit of the Certificateholders
(including the Seller), the Indenture Trustee, the Administrator, the Owner
Trustee, the Delaware Trustee, any Support Provider and the Secured Parties, as
third-party beneficiaries. Each Support Provider shall be entitled to rely upon
and directly enforce such provisions of this Agreement, the Series Supplement
and the Indenture so long as no default with respect to such Support Provider
shall have occurred and be continuing; provided that nothing herein shall
affect or limit the Support Provider’s rights as subrogee to the Noteholders. Nothing
in this Agreement or in the Series Supplement, whether express or implied,
shall be construed to give to any other Person any legal or equitable right,
remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.


 


SECTION 13.6.      Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.


 


SECTION 13.7.      Separate
Counterparts. This Agreement and each Transfer Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.


 


SECTION 13.8.      Headings.
The headings of the various Articles and Sections herein are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.


 


SECTION 13.9.      Governing
Law. THIS AGREEMENT AND EACH TRANSFER AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAWS PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.


 


68

















 


SECTION 13.10.    Assignment
to Indenture Trustee. The Seller hereby acknowledges and consents to any
mortgage, pledge, assignment and grant of a security interest by the Issuer to
the Indenture Trustee pursuant to the Indenture, as supplemented by the Series
Supplement for the benefit of the Secured Parties of all right, title and
interest of the Issuer in, to and under the Series Trust Estate.


 


SECTION 13.11.    Nonpetition
Covenants. (a)  Notwithstanding any
prior termination of this Agreement or the Series Supplement, none of the Servicer,
the Seller or any Secured Party shall, prior to the date which is one year and
one day after the termination of this Agreement and the payment in full of all
obligations of the Issuer under the Basic Documents, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Issuer under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Issuer or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Issuer.


 


(b)           Notwithstanding
any prior termination of this Agreement or the Series Supplement, neither the Servicer
nor any Secured Party shall, prior to the date that is one year and one day
after the termination of this Agreement, acquiesce to, petition or otherwise
invoke or cause the Seller to invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Seller
under any federal or state bankruptcy, insolvency or similar law, appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator, or other
similar official of the Seller or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Seller.


 


SECTION 13.12.    Limitation
of Liability of the Owner Trustee, the Administrator and the Indenture Trustee.
(a)  Notwithstanding anything contained
herein to the contrary, this Agreement and the Series Supplement have been
countersigned by the Owner Trustee not in its individual capacity but solely in
its capacity as Owner Trustee of the Issuer and in no event shall the Owner
Trustee in its individual capacity or, except as expressly provided in the
Trust Agreement, as Owner Trustee have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement and the Series Supplement, in the performance of
its duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.


 


(b)           Notwithstanding
anything contained herein to the contrary, this Agreement has been executed and
delivered by the Persons acting as the Indenture Trustee and the Administrator not
in their individual capacity but solely as Indenture Trustee or Administrator,
as applicable, and in no event shall such Persons have any liability for the
representations, warranties, covenants, agreements or other obligations of 


 


69

















 


the Issuer
hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.


 


SECTION 13.13.    Limitation
of Liability of Issuer. The Issuer shall have no liability to the Servicer
except for payment of the Servicing Fee and reimbursement of repossession and
liquidation expenses. The Issuer shall have no obligation to indemnify the Servicer
for costs or expenses, except with respect to the preceding sentence.


 


SECTION 13.14.    Independence
of the Servicer.For all purposes of this Agreement, the Servicer shall be
an independent contractor and shall not be subject to the supervision of the
Issuer, the Indenture Trustee, the Administrator or the Owner Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by this Agreement or the
Series Supplement, the Servicer shall have no authority to act for or represent
the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.


 


SECTION 13.15.    No
Joint Venture. Nothing contained in this Agreement or the Series Supplement
(i) shall constitute the Servicer and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.


 


SECTION 13.16.    [Third
Party Beneficiary. The parties hereto agree that the Insurer is a third
party beneficiary hereof.]


 


SECTION 13.17.    Regulation
AB. The Seller, the Servicer, the
Indenture Trustee and the Administrator acknowledge and agree that the purpose
of this Section 13.17 is to facilitate compliance by the Seller with the
provisions of Regulation AB and related rules and regulations of the
Commission. The Seller shall not exercise its right to request delivery of
information or other performance under these provisions other than in good
faith, or for purposes other than compliance with the Securities Act, the
Exchange Act and the rules and regulations of the Commission under the
Securities Act and the Exchange Act. The Servicer, the Indenture Trustee and
the Administrator acknowledge that interpretations of the requirements of
Regulation AB may change over time, whether due to interpretive guidance
provided by the Commission or its staff, consensus among participants in the
asset-backed securities markets, advice of counsel, or otherwise, and agrees to
comply with requests made by the Seller or the Servicer in good faith for
delivery of information under these provisions on the basis of evolving
interpretations of Regulation AB. The Servicer, the Indenture Trustee and the
Administrator shall cooperate fully with the Seller and the Issuer to deliver
to the Seller and the Issuer (including the Servicer and any other assignees or
designees) any and all statements, reports, certifications, records and any
other information necessary in the good faith determination of the Seller or
the Servicer to permit the Seller to comply with the provisions of Regulation
AB, together with such disclosures relating to the Servicer, the Subservicer, the
Indenture Trustee, the Administrator and the Receivables, or the 


 


70

















 


servicing of the Receivables, reasonably believed by the Seller or the Servicer
to be necessary in order to effect such compliance.


 


SECTION 13.18.    Information
to Be Provided by the Indenture Trustee and the Administrator. (a) For so
long as the Issuer is required to report under the Exchange Act, each of the
Indenture Trustee and the Administrator shall (i) on or before the fifth
Business Day of each month, provide to the Servicer, in writing, such
information regarding the Indenture Trustee or the Administrator, as
applicable, as is requested by the Servicer for the purpose of compliance with
Items 1117 and 1119 of Regulation AB; provided,
however, that neither the
Indenture Trustee nor the Administrator shall be required to provide such
information in the event that there has been no change to the information
previously provided by the Indenture Trustee or the Administrator, as
applicable, to the Servicer, and (ii) as promptly as practicable following
notice to or discovery by a Responsible Officer of the Indenture Trustee or the
Administrator, as applicable, of any changes to such information, provide to
the Servicer, in writing, such updated information.


 


(b)           As soon as
available, but no later than March 1 of each calendar year, beginning
March 1, 200[  ] and continuing for so long as the Issuer is required
to report under the Exchange Act, each of the Indenture Trustee and the
Administrator shall:


 


(i)            if
requested by the Servicer, deliver to the Servicer a report, dated as of
December 31, of the preceding calendar year, on the Indenture Trustee’s or the
Administrator’s, as applicable, assessment of compliance during the preceding
calendar year with the Servicing Criteria applicable to it, including
disclosure of any material instance of non-compliance identified by the
Indenture Trustee of the Administrator, as applicable, that satisifies the
requirements of Rule 13a-18 and Rule 15d-18 under the Exchange Act and
Item 1122 of Regulation AB, substantially in the form attached hereto as Exhibit
C, or such other form as mutually agreed upon by the Servicer and the
Indenture Trustee or the Administrator, as applicable. Such report shall be
signed by an authorized officer of the Indenture Trustee or the Administrator,
as applicable, and shall address each of the Servicing Criteria specified in Exhibit
D, or such other Servicing Criteria as is mutually agreed upon by the
Seller and the Indenture Trustee or the Administrator, as applicable;


 


(ii)           if
requested by the Servicer, deliver to the Servicer an attestation report of an
independent registered public accounting firm that satisfies the requirements
of Rule 13a-18 or Rule 15d-18 under the Exchange Act and Item 1122 of
Regulation AB with respect to the assessment of compliance made by the
Indenture Trustee and the Administrator, as applicable, and delivered pursuant
to the preceding paragraph. Such attestation shall be in 


 


71

















 


accordance with
Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act; and


 


(iii)          if
requested by the Servicer, deliver to the Servicer and any other Person that
will be responsible for signing the certification required by Rules 13a-14(d)
and 15d-14(d) under the Exchange Act (pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002) on behalf of the Issuer or the Seller a
certification substantially in the form attached hereto as Exhibit B, or
such other form as mutually agreed upon by the Servicer and the Indenture
Trustee or the Administrator, as applicable.


 


The Indenture Trustee and the Administrator acknowledge
that each Person identified in clause (iii) above may rely on the
certification provided by the Indenture Trustee and the Administrator, as
applicable, pursuant to such clause in signing the certification referred to
therein and filing the certification with the Commission.


 


72

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Sale and Servicing Agreement to be duly executed and delivered by their
respective duly authorized officers as of the day and the year first above
written.


 


	
   

  	
  HSBC AUTOMOTIVE TRUST 200  -

  
	
   

  	
   

  
	
   

  	
  By:

  	
  [Owner Trustee],

  
	
   

  	
   

  	
  not in its individual capacity but solely as

  Owner Trustee on behalf of the Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC AUTO RECEIVABLES CORPORATION,

  
	
   

  	
        as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC FINANCE CORPORATION,

  
	
   

  	
       as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [INDENTURE TRUSTEE], not in its individual

  capacity but solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [ADMINISTRATOR],

  
	
   

  	
        as Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				



 

















 


EXHIBIT A


 


FORM OF TRANSFER
AGREEMENT


 


TRANSFER No.                           
of Receivables dated as of                           
pursuant to the Sale and Servicing Agreement dated as of               ,
200   (the “Sale and Servicing Agreement”), among HSBC AUTOMOTIVE
TRUST 200  -  , a Delaware statutory trust (the “Issuer” or
the “Trust”), HSBC AUTO RECEIVABLES CORPORATION, a Nevada corporation (the “Seller”),
HSBC FINANCE CORPORATION, a Delaware corporation (the “Servicer”), [INDENTURE
TRUSTEE], a             
banking              ,
in its capacity as Indenture Trustee (the “Indenture Trustee”) and [ADMINISTRATOR],
a [                ]
banking [                ],
in its capacity as Administrator (the “Administrator”).


 


W I T N E S S E T H:


 


WHEREAS pursuant to the Sale and Servicing Agreement,
the Seller wishes to convey the Receivable to the Issuer; and


 


WHEREAS, the Issuer is willing to accept such
conveyance subject to the terms and conditions hereof.


 


NOW, THEREFORE, the Issuer, the Seller, the Servicer,
the Indenture Trustee and the Administrator hereby agree as follows:


 


1.             Defined
Terms. Capitalized terms used herein shall have the meanings ascribed to
them in the Sale and Servicing Agreement unless otherwise defined herein.


 


“Cut-off Date” shall mean, with respect to the
Receivables conveyed hereby, the close of business on                    ,
20    .


 


“Transfer Date” shall mean, with respect to the
Receivables conveyed hereby,                     ,
        .


 


2.             List
of Receivables. Annexed hereto is Schedule A listing the Receivables that
constitute the Receivables to be conveyed pursuant to the Sale and Servicing
Agreement and this Agreement on the Transfer Date.


 


3.             Conveyance
of Receivables. The Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (except as expressly provided in the Sale and Servicing Agreement),
all right, title and interest of the Seller in and to:


 


(a)           each
and every Receivable listed on Schedule A and all monies paid or payable
thereon or in respect thereof after the related Cut-off Date (including amounts
due on or before the related Cut-off Date but received by 


 

















 


HAFI (or any
predecessor or Affiliate of HAFI, as applicable) or Seller on or after such
date);


 


(b)           the
security interests in the related Financed Vehicles granted by Obligors
pursuant to such Receivables and any other interest of the Seller in such
Financed Vehicles;


 


(c)           all
rights of the Seller against Dealers pursuant to Dealer Agreements or Dealer
Assignments related to such Receivables;


 


(d)           any
proceeds and the right to receive proceeds with respect to such Receivables
repurchased by a Dealer pursuant to a Dealer Agreement;


 


(e)           all
rights of the Seller under any Service Contracts on the related Financed
Vehicles;


 


(f)            any
proceeds and the right to receive proceeds with respect to such Receivables
from claims on any Insurance Policy covering the related Financed Vehicles or
Obligors;


 


(g)           all
items contained in the Receivables Files with respect to such Receivables and
any and all other documents that HAFI, any Affiliate of HAFI that is the seller
under a Master Receivables Purchase Agreement, the Seller or the Servicer, as
applicable, keeps on file in accordance with its customary procedures relating
to the related Receivables, the related Financed Vehicles or Obligors;


 


(h)           all
funds on deposit from time to time in the Trust Accounts (including all
investments and proceeds thereof);


 


(i)            all
property (including the right to receive future Net Liquidation Proceeds) that
secures each related Receivable and that has been acquired by or on behalf of
the Seller or the Trust pursuant to liquidation of such Receivable;


 


(j)            all
of Seller’s right, title and interest in its rights and benefits, but none of
its obligations or burdens, under each of the Master Receivables Purchase
Agreements and the Receivables Purchase Agreement Supplements, including the
delivery requirements, representations and warranties and the cure and
repurchase obligations of HAFI, any Affiliate of HAFI that is the seller under
a Master Receivables Purchase Agreement or HSBC Finance Corporation, as
applicable, under each of the Master Receivables Purchase Agreements and
related Receivables Purchase Agreement Supplements, on or after the related Cut-off
Date;


 


(k)           on
the initial Transfer Date only, one share of Class SV Preferred Stock of the
Seller together with the exclusive right to vote such share; and


 


A-2

















 


(l)            all
present and future claims, demands, causes and chooses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing.


 


4.             Representations
and Warranties of the Seller. The Seller hereby represents and warrants to
the Issuer as of the Transfer Date that:


 


(a)           Each
of its representations set forth in Sections 3.1 and 8.1 of the Sale and
Servicing Agreement are true and correct as if made on the Transfer Date,
except if specified to be true as of an earlier date, in which case, such
representations and warranties are true as of such earlier date.


 


(b)           The
aggregate of the Principal Balances of the Receivables listed on Schedule A
annexed hereto and conveyed to the Issuer pursuant to this Agreement as of the Cut-off
Date is $                      .


 


5.             Conditions
Precedent. The obligation of the Issuer to acquire the Receivables
hereunder is subject to the satisfaction, on or prior to the Transfer Date, of
the following conditions precedent:


 


Representations and
Warranties. Each of the representations and warranties made
by the Seller in Section 4 of this Agreement shall be true and correct as of
the Transfer Date.


 


Sale and Servicing
Agreement Conditions. Each of the conditions set forth in
Section 2.1(b) to the Sale and Servicing Agreement shall have been satisfied.


 


Additional Information.
The Seller shall have delivered to the Issuer such information as was reasonably
requested by the Issuer to satisfy itself as to the accuracy of the
representations and warranties set forth in Section 4 of this Agreement.


 


6.             Ratification
of Agreement. As supplemented by this Agreement, the Sale and Servicing
Agreement is in all respects ratified and confirmed and the Sale and Servicing
Agreement as so supplemented by this Agreement shall be read, taken and
construed as one and the same instrument.


 


7.             Counterparts.
This Agreement may be executed in two or more counterparts (and by different
parties in separate counterparts), each of which shall be an original but all
of which together shall constitute one and the same instrument.


 


A-3

















 


8.             GOVERNING
LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.


 


A-4

















 


IN WITNESS WHEREOF, the Issuer, the Seller and the Servicer
have caused this Agreement to be duly executed and delivered by their
respective duly authorized officers as of day and the year first above written.


 


	
   

  	
  HSBC AUTOMOTIVE TRUST 200  -

  
	
   

  	
   

  
	
   

  	
  By:

  	
  [Owner Trustee],

  
	
   

  	
   

  	
  not in its individual capacity but solely as

  Owner Trustee on behalf of the Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC AUTO RECEIVABLES CORPORATION,

  
	
   

  	
  as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC FINANCE CORPORATION,

  
	
   

  	
  as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					



 


A-5

















 


Acknowledged and Accepted:


 


[INDENTURE TRUSTEE],

not in its individual capacity but solely as

Indenture Trustee


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


[ADMINISTRATOR],

as Administrator


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


A-6

















 


EXHIBIT B


 


FORM OF PERFORMANCE CERTIFICATION


 


Re:          The
Sale and Servicing Agreement dated as of                ,
200   (the “Sale and Servicing Agreement”), among HSBC AUTOMOTIVE
TRUST 200  -  , a Delaware statutory trust (the “Issuer” or
the “Trust”), HSBC AUTO RECEIVABLES CORPORATION, a Nevada corporation (the “Seller”),
HSBC FINANCE CORPORATION, a Delaware corporation (the “Servicer”), [INDENTURE
TRUSTEE], a              
banking              ,
in its capacity as Indenture Trustee (the “Indenture Trustee”) and [ADMINISTRATOR],
a [                ]
banking [                ],
in its capacity as Administrator (the “Administrator”).


 


I,                                                                 ,
the                                              
of [NAME OF COMPANY] (the “Company”), certify to the Seller and the Servicer
and their officers, with the knowledge and intent that they will rely upon this
certification, that:


 


(1)           I
have reviewed the report on assessment of the Company’s compliance with the
servicing criteria set forth in Item 1122(d) of Regulation AB (the “Servicing
Criteria”), provided in accordance with Rules 13a-18 and 15d-18 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 1122
of Regulation AB (the “Servicing Assessment”), and the independent registered
public accounting firm’s attestation report provided in accordance with Rules
13a-18 and 15d-18 under the Exchange Act and Section 1122(b) of Regulation AB
(the “Attestation Report”), that were delivered by the Company to the Seller
and the Servicer pursuant to the Sale and Servicing Agreement (collectively,
the “Company Servicing Information”);


 


(2)           Based
on my knowledge, the Company Servicing Information, taken as a whole, does not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in the light of the circumstances
under which such statements were made, not misleading with respect to the
period of time covered by the Company Servicing Information;


 


(3)           Based
on my knowledge, all of the Company Servicing Information required to be
provided by the Company under the Sale and Servicing Agreement has been
provided to the Seller and the Servicer;


 


(4)           I
am responsible for reviewing the activities performed by the Company under the Sale
and Servicing Agreement, and based on my knowledge and the compliance review
and except as disclosed in the Servicing Assessment or the Attestation Report,
the Company has fulfilled its obligations under the Sale and Servicing Agreement;
and


 


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(5)           The
Servicing Assessment and Attestation Report required to be provided by the
Company pursuant to the Sale and Servicing Agreement have been provided to the
Servicer. Any material instances of noncompliance described in such reports
have been disclosed to the Servicer. Any material instance of noncompliance
with the Servicing Criteria has been disclosed in such reports.


 


 


	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
						



 


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EXHIBIT C


 


FORM OF REPORT ON ASSESSMENT OF COMPLIANCE
WITH APPLICABLE SERVICING CRITERIA PURSUANT TO ITEM 1122 OF REGULATION AB UNDER
THE

SECURITIES EXCHANGE ACT OF 1934


 


Date:


 


Re:          HSBC Auto Loan Trust 200    -    


 


[Servicer][Subservicer][Indenture
Trustee][Administrator](the “Company”) hereby certifies that it is responsible
for the assessment of its compliance with the servicing criteria set forth in
Item 1122 of Regulation AB applicable to it, as described on Schedule I
attached hereto (the “Applicable Servicing Criteria”), and further certifies as
follows:


 


1.             The
Company used the criteria set forth in paragraph (d) of Item 1122 of Regulation
AB to assess compliance with the Applicable Servicing Criteria; and


 


2.             The
Company is in compliance with the Applicable Servicing Criteria as of and for
the period ending December 31,         
[except as described below:].


 


[Accountant], an
independent registered public accounting firm has issued an attestation report
on our assessment of compliance with the Applicable Servicing Criteria as of
and for the period ending December 31,         ,
a copy of which is attached hereto.


 


	
   

  	
  [                                        ],

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


D-1

















 


SCHEDULE I


 


[ATTACH APPLICABLE
SERVICING CRITERIA]


 


D-2

















 


[ATTACH
ATTESTATION REPORT]


 


D-3

















 


EXHIBIT D


 


SERVICING CRITERIA
TO BE ADDRESSED IN REPORT

ON ASSESSMENT OF COMPLIANCE WITH APPLICABLE SERVICING CRITERIA


 


The assessment
of compliance to be delivered by the Indenture Trustee and the Administrator
shall address, at a minimum, the criteria identified for each party below under
the heading “Applicable Servicing Criteria”:


 


	
  Servicing Criteria

  	
   

  	
  Applicable

  
	
  Reference

  	
   

  	
  Criteria

  	
   

  	
  Servicing Criteria

  
	
   

  	
   

  	
  General
  Servicing Considerations

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(1)(i)

  	
   

  	
  Policies
  and procedures are instituted to monitor any performance or other triggers
  and events of default in accordance with the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(1)(ii)

  	
   

  	
  If
  any material servicing activities are outsourced to third parties, policies
  and procedures are instituted to monitor the third party’s performance and
  compliance with such servicing activities.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(1)(iii)

  	
   

  	
  Any
  requirements in the transaction agreements to maintain a back-up servicer for
  the auto loans are maintained.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(1)(iv)

  	
   

  	
  A
  fidelity bond and errors and omissions policy is in effect on the party
  participating in the servicing function throughout the reporting period in
  the amount of coverage required by and otherwise in accordance with the terms
  of the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cash Collection and Administration

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(2)(i)

  	
   

  	
  Payments
  on auto loans are deposited into the appropriate custodial bank accounts and
  related bank clearing accounts no more than two business days following
  receipt, or such other number of days specified in the transaction
  agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(2)(ii)

  	
   

  	
  Disbursements
  made via wire transfer on behalf of an obligor or to an investor are made
  only by authorized personnel.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(2)(iii)

  	
   

  	
  Advances
  of funds or guarantees regarding collections, cash flows or distributions,
  and any interest or other fees charged for such advances, are made, reviewed
  and approved as specified in the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(2)(iv)

  	
   

  	
  The
  related accounts for the transaction, such as cash reserve accounts or
  accounts established as a form of overcollateralization, are separately
  maintained (e.g., with respect to
  commingling of cash) as set forth in the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(2)(v)

  	
   

  	
  Each
  custodial account is maintained at a federally insured depository institution
  as set forth in the transaction agreements. For purposes of this criterion,
  “federally insured depository institution” with respect to a foreign
  financial institution means a foreign financial institution that meets the
  requirements of Rule 13k-1(b)(1) under the Securities Exchange Act of 1934,
  as amended.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(2)(vi)

  	
   

  	
  Unissued
  checks are safeguarded so as to prevent unauthorized access.

  	
   

  	
   

  



 

















 


	
  Servicing Criteria

  	
   

  	
  Applicable

  
	
  Reference

  	
   

  	
  Criteria

  	
   

  	
  Servicing Criteria

  
	
  1122(d)(2)(vii)

  	
   

  	
  Reconciliations
  are prepared on a monthly basis for all asset-backed securities related bank
  accounts, including custodial accounts and related bank clearing accounts.
  These reconciliations (A) are mathematically accurate; (B) are prepared
  within 30 calendar days after the bank statement cutoff date, or such other
  number of days specified in the transaction agreements; (C) are reviewed and approved
  by someone other than the person who prepared the reconciliation; and (D)
  contain explanations for reconciling items. These reconciling items are
  resolved within 90 calendar days of their original identification, or such
  other number of days specified in the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Investor Remittances and Reporting

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(3)(i)

  	
   

  	
  Reports
  to investors, including those to be filed with the SEC, are maintained in
  accordance with the transaction agreements and applicable SEC requirements.
  Specifically, such reports (A) are prepared in accordance with timeframes and
  other terms set forth in the transaction agreements; (B) provide information
  calculated in accordance with the terms specified in the transaction
  agreements; (C) are filed with the SEC as required by its rules and
  regulations; and (D) agree with investors’ or the trustee’s records as to the
  total unpaid principal balance and number of auto loans serviced by the
  servicer.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(3)(ii)

  	
   

  	
  Amounts
  due to investors are allocated and remitted in accordance with timeframes,
  distribution priority and other terms set forth in the transaction
  agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(3)(iii)

  	
   

  	
  Disbursements
  made to an investor are posted within two business days to the servicer’s
  investor records, or such other number of days specified in the transaction
  agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(3)(iv)

  	
   

  	
  Amounts
  remitted to investors per the investor reports agree with cancelled checks,
  or other form of payment, or custodial bank statements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pool Asset Administration

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(i)

  	
   

  	
  Collateral
  or security on auto loans is maintained as required by the transaction
  agreements or related auto loan documents.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(ii)

  	
   

  	
  Auto
  loans and related documents are safeguarded as required by the transaction
  agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(iii)

  	
   

  	
  Any
  additions, removals or substitutions to the auto loan pool are made, reviewed
  and approved in accordance with any conditions or requirements in the
  transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(iv)

  	
   

  	
  Payments
  on auto loans, including any payoffs, made in accordance with the related
  auto loan documents are posted to the servicer’s obligor records maintained
  no more than two business days after receipt, or such other number of days
  specified in the transaction agreements, and allocated to principal, interest
  or other items (e.g., escrow) in accordance
  with the related auto loan documents.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(v)

  	
   

  	
  The
  servicer’s records regarding the auto loans agree with the servicer’s records
  with respect to an obligor’s unpaid principal balance.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(vi)

  	
   

  	
  Changes
  with respect to the terms or status of an obligor’s auto loan (e.g., loan modifications or re-agings) are made, reviewed
  and approved by authorized personnel in accordance with the transaction
  agreements and related auto loan documents.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(vii)

  	
   

  	
  Loss
  mitigation or recovery actions (e.g.,
  forbearance plans, modifications and deeds in lieu of foreclosure,
  foreclosures and repossessions, as applicable) are initiated, conducted and
  concluded in accordance with the timeframes or other requirements established
  by the transaction agreements.

  	
   

  	
   

  



 


E-2

















 


	
  Servicing Criteria

  	
   

  	
  Applicable

  
	
  Reference

  	
   

  	
  Criteria

  	
   

  	
  Servicing Criteria

  
	
  1122(d)(4)(viii)

  	
   

  	
  Records
  documenting collection efforts are maintained during the period a auto loan
  is delinquent in accordance with the transaction agreements. Such records are
  maintained on at least a monthly basis, or such other period specified in the
  transaction agreements, and describe the entity’s activities in monitoring
  delinquent auto loans including, for example, phone calls, letters and
  payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(ix)

  	
   

  	
  Adjustments
  to interest rates or rates of return for auto loans with variable rates are
  computed based on the related auto loan documents.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(x)

  	
   

  	
  Regarding
  any funds held in trust for an obligor (such as escrow accounts): (A) such
  funds are analyzed, in accordance with the obligor’s auto loan documents, on
  at least an annual basis, or such other period specified in the transaction
  agreements; (B) interest on such funds is paid, or credited, to obligors in
  accordance with applicable auto loan documents and state laws; and (C) such
  funds are returned to the obligor within 30 calendar days of full repayment
  of the related auto loan, or such other number of days specified in the
  transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(xi)

  	
   

  	
  Payments
  made on behalf of an obligor (such as tax or insurance payments) are made on
  or before the related penalty or expiration dates, as indicated on the
  appropriate bills or notices for such payments, provided that such support
  has been received by the servicer at least 30 calendar days prior to these
  dates, or such other number of days specified in the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(xii)

  	
   

  	
  Any
  late payment penalties in connection with any payment to be made on behalf of
  an obligor are paid from the servicer’s funds and not charged to the obligor,
  unless the late payment was due to the obligor’s error or omission.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(xiii)

  	
   

  	
  Disbursements
  made on behalf of an obligor are posted within two business days to the obligor’s
  records maintained by the servicer, or such other number of days specified in
  the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(xiv)

  	
   

  	
  Delinquencies,
  charge-offs and uncollectible accounts are recognized and recorded in
  accordance with the transaction agreements.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1122(d)(4)(xv)

  	
   

  	
  Any
  external enhancement or other support, identified in Item 1114(a)(1) through
  (3) or Item 1115 of Regulation AB, is maintained as set forth in the
  transaction agreements.

  	
   

  	
   

  



 


E-3