exv4w2



 






Exhibit 4.2



 




METRIS RECEIVABLES, INC.,




Transferor




HSBC FINANCE CORPORATION,




Servicer




and




U.S. BANK NATIONAL ASSOCIATION,




Trustee




on behalf of Securityholders




of the Metris Master Trust



 




FOURTH AMENDED AND RESTATED

POOLING AND SERVICING AGREEMENT




Dated as of December 1, 2005



 




 









 








TABLE OF CONTENTS




	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS
	 	2
	 
	 	 
	Section 1.1 Definitions
	 	2
	Section 1.2 Other Definitional Provisions
	 	21
	 
	 	 
	ARTICLE II CONVEYANCE OF RECEIVABLES; ISSUANCE OF SECURITIES
	 	22
	 
	 	 
	Section 2.1 Conveyance of Receivables
	 	22
	Section 2.2 Acceptance by Trustee
	 	23
	Section 2.3 Representations and Warranties of the Transferor
	 	24
	Section 2.4 Representations and Warranties of the Transferor Relating to the
Agreement and the Receivables
	 	26
	Section 2.5 Covenants of the Transferor
	 	30
	Section 2.6 Addition of Accounts
	 	33
	Section 2.7 Removal of Accounts
	 	37
	Section 2.8 Discount Option
	 	39
	Section 2.9 Covenants of the Transferor with Respect to the Purchase Agreement
	 	39
	Section 2.10 Receivables in Defaulted Accounts
	 	40
	 
	 	 
	ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES
	 	41
	 
	 	 
	Section 3.1 Acceptance of Appointment and Other Matters Relating to the Servicer
	 	41
	Section 3.2 Servicing Compensation
	 	42
	Section 3.3 Representations and Warranties of the Servicer
	 	43
	Section 3.4 Reports and Records for the Trustee
	 	45
	Section 3.5 Annual Servicer’s Certificate
	 	46
	Section 3.6 Annual Independent Accountants’ Servicing Report
	 	46
	Section 3.7 Tax Treatment
	 	47
	Section 3.8 Adjustments
	 	47
	Section 3.9 Notices to HSBC Finance
	 	48
	 
	 	 
	ARTICLE IV RIGHTS OF SECURITYHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS
	 	49
	 
	 	 
	Section 4.1 Rights of Securityholders
	 	49
	Section 4.2 Establishment of Accounts
	 	49
	Section 4.3 Collections and Allocations
	 	52
	 
	 	 
	ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
	 	55
	 
	 	 
	ARTICLE VI THE SECURITIES
	 	56
	 
	 	 
	Section 6.1 The Securities
	 	56






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	 	 	Page
	Section 6.2 Authentication of Securities
	 	56
	Section 6.3 Registration of Transfer and Exchange of Securities
	 	57
	Section 6.4 Mutilated, Destroyed, Lost or Stolen Securities
	 	60
	Section 6.5 Persons Deemed Owners
	 	60
	Section 6.6 Appointment of Paying Agent
	 	61
	Section 6.7 Access to List of Securityholders’ Names and Addresses
	 	61
	Section 6.8 Authenticating Agent
	 	62
	Section 6.9 New Issuances
	 	63
	Section 6.10 Book-Entry Securities
	 	65
	Section 6.11 Notices to Clearing Agency
	 	66
	Section 6.12 Definitive Securities
	 	66
	Section 6.13 Global Security; Euro-Security Exchange Date
	 	67
	Section 6.14 Meetings of Securityholders
	 	67
	 
	 	 
	ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR
	 	68
	 
	 	 
	Section 7.1 Liability of the Transferor
	 	68
	Section 7.2 Merger or Consolidation of, or Assumption of the Obligations of, the
Transferor
	 	68
	Section 7.3 Limitation on Liability
	 	69
	Section 7.4 Liabilities
	 	69
	 
	 	 
	ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER
	 	71
	 
	 	 
	Section 8.1 Liability of the Servicer
	 	71
	Section 8.2 Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer
	 	71
	Section 8.3 Limitation on Liability of the Servicer and Others
	 	71
	Section 8.4 Servicer Indemnification of the Transferor, the Trust and the Trustee
	 	72
	Section 8.5 The Servicer Not to Resign
	 	73
	Section 8.6 Access to Certain Documentation and Information Regarding the
Receivables
	 	73
	Section 8.7 Delegation of Duties
	 	73
	 
	 	 
	ARTICLE IX PAY OUT EVENTS
	 	75
	 
	 	 
	Section 9.1 Pay Out Events
	 	75
	Section 9.2 Additional Rights Upon the Occurrence of Certain Events
	 	75
	 
	 	 
	ARTICLE X SERVICER DEFAULTS
	 	78
	 
	 	 
	Section 10.1 Servicer Defaults
	 	78
	Section 10.2 Trustee to Act; Appointment of Successor
	 	80
	Section 10.3 Notification to Securityholders
	 	81
	Section 10.4 Waiver of Past Defaults
	 	82
	 
	 	 
	ARTICLE XI THE TRUSTEE
	 	83
	 
	 	 
	Section 11.1 Duties of Trustee
	 	83






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	 	 	Page
	Section 11.2 Certain Matters Affecting the Trustee
	 	84
	Section 11.3 Trustee Not Liable for Recitals in Securities
	 	86
	Section 11.4 [Reserved]
	 	86
	Section 11.5 The Servicer to Pay Trustee’s Fees and Expenses
	 	86
	Section 11.6 Eligibility Requirements for Trustee
	 	87
	Section 11.7 Resignation or Removal of Trustee
	 	87
	Section 11.8 Successor Trustee
	 	88
	Section 11.9 Merger or Consolidation of Trustee
	 	88
	Section 11.10 Appointment of Co-Trustee or Separate Trustee
	 	88
	Section 11.11 Tax Returns
	 	89
	Section 11.12 Trustee May Enforce Claims Without Possession of Securities
	 	90
	Section 11.13 Suits for Enforcement
	 	90
	Section 11.14 Rights of Securityholders to Direct Trustee
	 	90
	Section 11.15 Representations and Warranties of Trustee
	 	91
	Section 11.16 Maintenance of Office or Agency
	 	91
	 
	 	 
	ARTICLE XII TERMINATION
	 	92
	 
	 	 
	Section 12.1 Section 13.1 Termination of Trust
	 	92
	Section 12.2 Optional Termination
	 	93
	Section 12.3 Final Payment with Respect to any Series
	 	94
	Section 12.4 Termination Rights of Holder of the Exchangeable
Transferor Security
	 	95
	 
	 	 
	ARTICLE XIII MISCELLANEOUS PROVISIONS
	 	96
	 
	 	 
	Section 13.1 Amendment
	 	96
	Section 13.2 Protection of Right, Title and Interest to Trust
	 	98
	Section 13.3 Limitation on Rights of Securityholders
	 	98
	Section 13.4 Governing Law
	 	99
	Section 13.5 Notices
	 	99
	Section 13.6 Severability of Provisions
	 	100
	Section 13.7 Assignment
	 	100
	Section 13.8 Securities Non-Assessable and Fully Paid
	 	100
	Section 13.9 Further Assurances
	 	100
	Section 13.10 No Waiver; Cumulative Remedies
	 	100
	Section 13.11 Counterparts
	 	100
	Section 13.12 Third-Party Beneficiaries
	 	101
	Section 13.13 Actions by Securityholders
	 	101
	Section 13.14 Rule 144A Information
	 	101
	Section 13.15 Merger and Integration
	 	101
	Section 13.16 Headings
	 	102
	Section 13.17 Limitation on Voting Preferred Stock
	 	102
	Section 13.18 Nonpetition Covenant
	 	102






iii 









 






SCHEDULES AND EXHIBITS




	 	 	 
	Schedule 1

	 	Account Schedule
	 
	 	 
	Exhibit A

	 	Form of Exchangeable Transferor Security
	 
	 	 
	Exhibit B

	 	[Reserved]
	 
	 	 
	Exhibit C

	 	Form of Settlement Statement
	 
	 	 
	Exhibit D

	 	Form of Annual Servicer’s Certificate
	 
	 	 
	Exhibit E

	 	Form of Annual Opinion of Counsel
	 
	 	 
	Exhibit F

	 	Form of Reconveyance
	 
	 	 
	Exhibit G

	 	[Reserved]
	 
	 	 
	Exhibit H

	 	Form of Assignment of Receivables in Supplemental Accounts
	 
	 	 
	Exhibit I

	 	Form of Opinion of Counsel Regarding Supplemental Accounts
	 
	 	 
	Exhibit J

	 	Form of Reassignment of Receivables in Removed Accounts






iv 









 






          FOURTH AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of December 1, 2005 (the
“Pooling and Servicing Agreement”) by and among METRIS RECEIVABLES, INC., a corporation organized
and existing under the laws of the State of Delaware, as Transferor (the “Transferor”), HSBC
FINANCE CORPORATION, a corporation organized and existing under the laws of the State of Delaware,
as Servicer (the “Servicer”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association,
as Trustee (the “Trustee”).




          WHEREAS, the Transferor, Direct Merchants Credit Card Bank, National Association (the
“Original Servicer”), and The Bank of New York (Delaware), as trustee (the “Prior Trustee”),
entered into an Amended and Restated Pooling and Servicing Agreement, dated as of July 30, 1998 (as
amended and supplemented to the date hereof, the “Previous Pooling and Servicing Agreement”);




          WHEREAS the Transferor, the Original Servicer, the Prior Trustee and the Trustee have entered
into that certain Agreement of Resignation, Appointment and Acceptance, dated as of December 11,
2000, pursuant to which the Trustee assumed all of the rights and obligations of the Prior Trustee
under the terms of the Previous Pooling and Servicing Agreement;




          WHEREAS, the Transferor, the Original Servicer, as servicer thereunder, and the Trustee,
entered into the Second Amended and Restated Pooling and Servicing Agreement, as amended by
Amendment No. 1, dated as of January 22, 2002 (the “Second Amended and Restated Pooling and
Servicing Agreement”), pursuant to the which the parties thereto amended and restated the Previous
Pooling and Servicing Agreement in its entirety;




          WHEREAS, the Transferor, HSBC Bank Nevada, National Association (as successor by merger with
the Original Servicer, the “Prior Servicer”) as servicer thereunder, and the Trustee, entered into
the Third Amended and Restated Pooling and Servicing Agreement, dated as of December 1, 2005 (the
“Third Amended and Restated Pooling and Servicing Agreement”), pursuant to which the parties
thereto amended and restated the Second Amended and Restated Pooling and Servicing Agreement in its
entirety; and




          WHEREAS, the Transferor, the Servicer and the Trustee desire to amend and restate the Third
Amended and Restated Pooling and Servicing Agreement in accordance with the provisions of
subsection 13.1(a) of the Third Amended and Restated Pooling and Servicing Agreement to read in its
entirety as set forth below.




          NOW, THEREFORE, pursuant to subsection 13.1(a) of the Third Amended and Restated Pooling and
Servicing Agreement, the parties hereto hereby agree that effective on and as of the date hereof,
the Pooling and Servicing Agreement is hereby amended to read in its entirety as follows:




          In consideration of the mutual agreements herein contained, each party agrees as follows for
the benefit of the other parties and the Securityholders:




 









 








ARTICLE I




DEFINITIONS




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




          “Account” shall mean each revolving credit consumer credit card account established
pursuant to a Contract between a Credit Card Originator and any Person, which is identified on an
Account Schedule delivered by the Transferor to the Trustee on or after the Amendment Cut-Off Date
and which on the Initial Closing Date was an Eligible Account or, with respect to accounts
designated for the Trust after the Initial Closing Date, is an Additional Account or Supplemental
Account. The definition of “Account” shall include each Transferred Account but shall not include
any Accounts containing only Ineligible Receivables that are reassigned to the Transferor pursuant
to Section 2.4. The term “Account” shall refer to an Additional Account or Supplemental Account
only from and after the Addition Date with respect thereto, and the term “Account” shall refer to
any Removed Account only prior to the Removal Date with respect thereto.




          “Account Schedule” shall mean a computer file or microfiche list containing a true and
complete list of Accounts, identified by account number and setting forth, with respect to each
Account, the aggregate amount of Principal Receivables outstanding in such Account and, except in
the case of clause (a), the aggregate amount outstanding in such Account (a) on the Amendment
Cut-Off Date (for the Account Schedule delivered on or prior to the Amendment Closing Date), (b) on
or prior to the Determination Date immediately succeeding the related Monthly Period (for any
Account Schedule relating to Additional Accounts designated after the Amendment Closing Date) and
(c) on the Addition Cut-Off Date (for any Account Schedule relating to Supplemental Accounts
designated after the Amendment Closing Date).




          “Addition Cut-Off Date” shall mean (a) for Supplemental Accounts, the date specified
in the related Assignment, and (b) for Additional Accounts, the later of the dates on which such
Additional Accounts are originated or designated pursuant to subsection 2.6(a).




          “Addition Date” shall mean (a) for Supplemental Accounts, the date from and after
which such Supplemental Accounts are to be included as Accounts pursuant to subsections 2.6(c) or
(d), and (b) for Additional Accounts, the later of the dates on which such Additional Accounts are
originated or designated pursuant to subsection 2.6(a).




          “Additional Account” shall mean, each revolving credit consumer credit card account
established pursuant to a Contract between a Credit Card Originator and any Person, which account
comes into existence after the Initial Closing Date, is an Approved Account, is designated pursuant
to subsection 2.6(a) to be included as an Additional Account, and is identified on or after the
Amendment Cut-Off Date on the Account Schedule delivered to the Trustee by the Transferor.




          “Adjustment Payment” shall have the meaning specified in subsection 3.8(a).




2









 








          “Affiliate” shall mean, with respect to a particular Person, any Person that, directly
or indirectly, is in control of, is controlled by, or is under common control with, such Person.




          “Aggregate Invested Amount” shall mean, as of any date of determination, the sum of
the Invested Amounts of all Series of Securities issued and outstanding on such date of
determination.




          “Aggregate Investor Percentage” with respect to each of Principal Collections, Finance
Charge Collections and Defaulted Receivables, as the case may be, shall mean, as of any date of
determination, the sum of such Investor Percentages of all Series of Securities issued and
outstanding on such date of determination; provided, however, that the Aggregate
Investor Percentage shall not exceed 100%.




          “Aggregate Principal Receivables” shall mean, for any day, the aggregate amount of
Principal Receivables at the end of such day.




          “Agreement” shall mean this Pooling and Servicing Agreement and all amendments hereof
and supplements hereto, including any Supplement.




          “Amendment Closing Date” shall mean January 22, 2002.




          “Amendment Cut-Off Date” shall mean October 18, 2001, but in the case of Accounts
designated in Assignment No. 40 supplementing this Agreement, November 1, 2001.




          “Amortization Period” shall mean, with respect to any Series, the period following the
Revolving Period for such Series, which shall be the Amortization Period, the Early Amortization
Period, or other amortization or accumulation period, in each case as defined with respect to such
Series in the related Supplement.




          “Amortization Period Commencement Date” shall mean with respect to any Series, the
date on which the Amortization Period commences with respect thereto as set forth in the related
Supplement.




          “Applicants” shall have the meaning specified in Section 6.7.




          “Appointment Day” shall have the meaning specified in subsection 9.2(a).




          “Approved Account” shall mean (i) each Eligible Account that is a MasterCard, VISA, or
Discover account or (ii) any other revolving credit consumer credit card account the inclusion in
the Trust of which would not cause a Ratings Event.




          “Assignment” shall have the meaning specified in subsection 2.6(e).




          “Authentication Agent” shall have the meaning specified in Section 6.8.




3









 








          “Authorized Newspaper” shall mean a newspaper of general circulation in the Borough of
Manhattan, The City of New York printed in the English language and customarily published on each
Business Day, whether or not published on Saturdays, Sundays and holidays.




          “Automatic Addition Suspension Date” shall mean the Business Day specified as such
pursuant to subsection 2.6(b).




          “Automatic Addition Termination Date” shall mean the Business Day specified as such
pursuant to subsection 2.6(b).




          “Bank Receivables Purchase Agreement” shall mean (a) with respect to Receivables
created before December 1, 2005, the Second Amended and Restated Bank Receivables Purchase
Agreement dated as of January 22, 2002 by and between Metris, as purchaser, and DMCCB, as seller,
as amended from time to time, or (b) with respect to Receivables created on or after December 1,
2005, the Second Amended and Restated Receivables Purchase Agreement, dated as of July 1,
2002, by and between, HRAC II, as purchaser, and HSBC Nevada, as seller, as amended from time to
time.




          “Base Rate” shall mean, with respect to any outstanding Series, the amount which the
related Supplement specifies as the “Base Rate”.




          “Bearer Rules” shall mean the provisions of the Internal Revenue Code, in effect from
time to time, governing the treatment of bearer obligations, including sections 163(f), 871, 881,
1441, 1442 and 4701, and any regulations thereunder including, to the extent applicable to any
Series, proposed or temporary regulations of the Internal Revenue Service.




          “Bearer Securities” shall have the meaning specified in Section 6.1.




          “Benefit Plan” shall mean (i) an employee benefit plan (as defined in Section 3(3) of
ERISA that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of
a plan’s investment in the entity (each, a “Benefit Plan”).




          “Book-Entry Securities” shall mean Investor Securities that are registered in the name
of the Clearing Agency or a Foreign Clearing Agency, ownership and transfers of which shall be made
through book entries by such Clearing Agency or Foreign Clearing Agency, as described in Section
6.10; provided, that after the occurrence of a condition whereupon book entry registration
and transfer are no longer authorized and Definitive Securities are to be issued to the Security
Owners, such securities shall no longer be “Book-Entry Securities.”




          “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which
banking institutions in New York, Minnesota, Nevada, Arizona, Oklahoma, Illinois, or Delaware (or,
with respect to any Series, any additional city or state specified in the related Supplement) are
authorized or obligated by law or executive order to be closed; provided that, (i)
specifically with respect to any delivery of a Daily Report or a Daily Payment Certificate,
“Business Day” shall mean the Determination Date, and (ii) specifically with respect to any
determination, categorization or allocation of Collections or other funds on a daily basis with
respect to a Series and the related applications, transfers or withdrawals of such funds on such




4









 







basis, “Business Day” shall mean the Transfer Date and any period of such determination shall
be the period since the prior date of determination.




          “Cash Equivalents” shall mean, unless otherwise provided in the Supplement with
respect to any Series, (a) (i) obligations of or fully guaranteed by the United States of America;
(ii) time deposits, promissory notes, or certificates of deposit of any depositary institution or
trust company; provided, however, that at the time of the Trust’s investment or
contractual commitment to invest therein, the certificates of deposit or short-term deposits of
such depositary institution or trust company shall have a credit rating from Standard & Poor’s of
A-1+ and from Moody’s of P-1; (iii) commercial paper having, at the time of the Trust’s investment
or contractual commitment to invest therein, a rating from Standard & Poor’s of A-1+ and from
Moody’s of P-1; (iv) bankers acceptances issued by any depositary institution or trust company
described in clause (a)(ii) above; and (v) investments in money market funds rated AAA-m or AAA-mg
by Standard & Poor’s and Aaa by Moody’s or otherwise approved in writing by Moody’s and Standard &
Poor’s; (b) time deposits and demand deposits in the name of the Trust or the Trustee in any
depositary institution or trust company referred to in clause (a)(ii) above; (c) (x) shares of an
open end diversified investment company which is registered under the Investment Company Act which
(i) invests its assets exclusively in obligations of or guaranteed by the United States of America
or any instrumentality or agency thereof having in each instance a final maturity date of less than
one year from their date of purchase or other Cash Equivalents, (ii) seeks to maintain a constant
net asset value per share, (iii) has aggregate net assets of not less than $100,000,000 on the date
of purchase of such shares and (iv) which the Rating Agency designates in writing will not result
in a withdrawal or downgrading of its then current rating of any Series rated by it or (y)
Eurodollar time deposits of a depository institution or trust company that are rated A-1+ by
Standard & Poor’s and P-1 by Moody’s; provided, however, that at the time of the
Trust’s investment or contractual commitment to invest therein, the Eurodollar deposits of such
depositary institution or trust company shall have a credit rating from Standard & Poor’s of A-1+
and P-1 by Moody’s; (d) a guaranteed investment contract (guaranteed as to timely payment) which
each Rating Agency designates in writing will not result in a withdrawal or downgrading of its then
current rating of any Series rated by it; (e) repurchase agreements transacted with either (i) an
entity subject to the United States Bankruptcy Code, provided, however, that (A)
the term of the repurchase agreement is consistent with the requirements with regard to the
maturity of Cash Equivalents specified herein or in the applicable Supplement for the applicable
account or is due on demand, (B) the Trustee or a third party acting solely as agent for the
Trustee has possession of the collateral, (C) the Trustee on behalf of the Trust has a perfected
first priority security interest in the collateral, (D) the market value of the collateral is
maintained at the requisite collateral percentage of the obligation in accordance with standards of
the Rating Agencies, (E) the failure to maintain the requisite collateral level will obligate the
Trustee to liquidate the collateral as promptly as practicable upon instructions from the Servicer,
(F) the securities subject to the repurchase agreement are either obligations of, or fully
guaranteed as to principal and interest by, the United States of America or any agency or any
instrumentality or agency thereof, certificates of deposit or bankers acceptances and (G) the
securities subject to the repurchase agreement are free and clear of any third party lien or claim,
or (ii) a financial institution insured by the FDIC, or any broker-dealer with “retail-customers”
that is under the jurisdiction of the Securities Investors Protection Corp. (“SIPC”),
provided, however, that (A) the market value of the collateral is maintained at the
requisite collateral percentage of the obligation in accordance with the standards of the Rating
Agencies, (B) the




5









 







Trustee or a third party (with a rating from Moody’s and Standard & Poor’s of P-1 and A-1+,
respectively) acting solely as agent for the Trustee has possession of the collateral, (C) the
collateral is free and clear of third party liens and, in the case of an SIPC broker, was not
acquired pursuant to a repurchase or reverse repurchase agreement and (D) the failure to maintain
the requisite collateral percentage will obligate the Trustee to liquidate the collateral upon
instructions from the Servicer; provided, however, that at the time of the Trust’s
investment or contractual commitment to invest in any repurchase agreement the short-term deposits
or commercial paper rating of such entity or institution in subsections (i) and (ii) above shall
have a credit rating of P-1 or A-1+ or their equivalent from each Rating Agency; and (f) any other
investment if each Rating Agency confirms in writing that such investment will not adversely affect
its then current rating of the Investor Securities.




          “Class” shall mean, with respect to any Series, any one of the classes of Securities
of that Series as specified in the related Supplement.




          “Clearing Agency” shall mean an organization registered as a “clearing agency”
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.




          “Clearing Agency Participant” shall mean a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency or Foreign Clearing Agency
effects book-entry transfers and pledges of securities deposited with the Clearing Agency or
Foreign Clearing Agency.




          “Clearstream” shall mean Clearstream Banking, société anonyme.




          “Closing Date” shall mean, with respect to any Series, the date of issuance of such
Series of Securities, as specified in the related Supplement.




          “Collateral” shall have the meaning specified in subsection 2.4(f).




          “Collection Account” shall have the meaning specified in subsection 4.2(a).




          “Collections” shall mean all payments received by the Servicer in respect of the
Receivables in the form of cash, checks or any other form of payment in accordance with the
Contract in effect from time to time on any Receivables, including insurance proceeds allocable to
the Receivables.




          “Contract” shall mean an agreement between a Credit Card Originator and another Person
for the extension of revolving credit, including pursuant to a credit card, in the form of a
written contract, invoice, or revolving credit agreement (but shall not include any agreement or
plan relating to the extension of credit on a closed-end basis).




          “Corporate Trust Office” shall mean the principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which office at the date of
the execution of this Agreement is located at 60 Livingston Avenue, St. Paul, Minnesota 55107.




          “Coupon” shall have the meaning specified in Section 6.1.




6









 








          “Credit and Collection Policy” shall mean the written policies and procedures of the
applicable Credit Card Originator or the Servicer, as the case may be, (i) relating to the
operation of its credit card business, which generally are applicable to its portfolio of revolving
credit accounts or a portion of a portfolio of receivables in a similar nature to the Accounts, and
are consistent with prudent practice, including, without limitation, the written policies and
procedures for determining the creditworthiness of credit card customers and the extension of
credit to credit card customers, and (ii) relating to the maintenance of credit card accounts and
collection of receivables with respect thereto, as such policies and procedures may be amended,
modified, or otherwise changed from time to time.




          “Credit Card Originator” shall mean (i) DMCCB and its successors or assigns under the
Bank Receivables Purchase Agreement, as applicable, and/or any transferee of the Accounts from
DMCCB, (ii) HSBC Nevada and its successors or assigns under the Bank Receivables Purchase
Agreement, as applicable, or any transferee of the Accounts from HSBC Nevada, or (iii) any other
originator of revolving credit consumer credit card accounts which transfers Receivables directly
or indirectly to the Transferor and which has been identified in a prior written notice to each
Rating Agency.




          “Daily Payment Certificate” shall have the meaning set forth in any transfer and
administration agreement entered into in connection with the issuance of a Series.




          “Daily Report” shall mean the Settlement Statement.




          “Date of Processing” shall mean, with respect to any transaction, the date on which
such transaction is first recorded according to the Servicer’s computer master file of revolving
credit accounts (without regard to the effective date of such recordation).




          “Debtor Relief Laws” shall mean (a) the United States Bankruptcy Code and (b) all
other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, readjustment of debt, marshalling of assets,
assignment for the benefit of creditors or similar debtor relief laws from time to time in effect
in any jurisdiction affecting the rights of creditors generally or the rights of creditors of
national banks.




          “Default Amount” shall mean, (i) on any Business Day other than the Default
Recognition Date, the aggregate amount of Principal Receivables in Accounts which became Defaulted
Accounts on such Business Day and (ii) on any Default Recognition Date the aggregate amount of
Principal Receivables in Accounts which became Defaulted Accounts during the then current Monthly
Period (other than such Accounts which were included in clause (i)).




          “Default Recognition Date” shall mean the last day of each calendar month;
provided, however that with respect to any Monthly Period the “related Default Recognition
Date” shall mean the Default Recognition Date occurring closest to the last day of such Monthly
Period and any amounts allocated or applied on such Default Recognition Date shall be deemed to
apply to the related Monthly Period.




7









 








          “Defaulted Account” shall mean each Account with respect to which, in accordance with
the Credit and Collection Policy or the Servicer’s customary and usual servicing procedures, the
Servicer has charged off the Receivables in such Account as uncollectible; an Account shall become
a Defaulted Account on the day on which such Receivables are recorded as charged off as
uncollectible on the Servicer’s computer master file of revolving credit accounts. Notwithstanding
any other provision hereof, any Receivables in a Defaulted Account that are Ineligible Receivables
shall be treated as Ineligible Receivables rather than Receivables in Defaulted Accounts.




          “Defeasance Account” shall have the meaning specified in the applicable Supplement.




          “Definitive Security” shall have the meaning specified in Section 6.10.




          “Depositary” shall have the meaning specified in Section 6.10.




          “Depositary Agreement” shall mean, with respect to each Series, the agreement among
the Transferor, the Trustee and the applicable Clearing Agency, or as otherwise provided in the
related Supplement.




          “Determination Date” shall mean the second Business Day prior to each Distribution
Date.




          “Discount Option Receivables” shall mean, on and after the date on which the
Transferor’s exercise of its discount option pursuant to Section 2.8 takes effect, the sum of (a)
the aggregate Discount Option Receivables at the end of the prior Date of Processing (which amount,
prior to the date on which the Transferor’s exercise of its discount option takes effect and with
respect to Receivables generated prior to such date, shall be zero) plus (b) any New
Discount Option Receivables created on such Date of Processing minus (c) any Discount
Option Receivables Collections received on such Date of Processing.




          “Discount Option Receivable Collections” shall mean on any Date of Processing, on and
after the date on which the Transferor’s exercise of its discount option pursuant to Section 2.8
takes effect, the product of (a) a fraction the numerator of which is the amount of Discount Option
Receivables and the denominator of which is the sum of the Principal Receivables and the Discount
Option Receivables in each case (for both numerator and denominator) at the end of the prior Date
of Processing, (b) Collections of Principal Receivables and Discount Option Receivables received
on such Date of Processing and (c) a fraction the numerator of which is the aggregate amount of
Principal Receivables arising on each Date of Processing falling on or after the date on which the
Transferor exercises its discount option and the denominator of which is the Aggregate Principal
Receivables on such Date of Processing.




          “Discount Percentage” shall mean the fixed percentage, if any, designated by the
Transferor pursuant to Section 2.8.




          “Disposition” shall have the meaning specified in Section 9.2(a).




          “Distribution Account” shall have the meaning specified in subsection 4.2(c).




8









 








          “Distribution Date” shall mean, unless otherwise specified in any Supplement for the
related Series, the twentieth day of each month or, if such twentieth day is not a Business Day,
the next succeeding Business Day.




          “DMCCB” shall mean Direct Merchants Credit Card Bank, National Association, a national
banking organization organized and existing under the laws of the United States of America (as
predecessor in interest to HSBC Nevada).




          “Dollars”, “$” or “U.S. $” shall mean United States dollars.




          “Effective Date” shall mean December 1, 2005.




          “Eligible Account” shall mean, on the Initial Closing Date (or, with respect to
Additional Accounts and Supplemental Accounts, on the related Addition Cut-Off Date), a revolving
credit consumer credit card account owned by a Credit Card Originator:





     (a) which is payable in Dollars;




     (b) the Obligor on which has provided, as its initial billing address, an
address located in the United States or its territories or possessions or a United States
military address;




     (c) which has not been identified by the applicable Credit Card Originator or the
Servicer in its computer master file as stolen or lost;




     (d) which is not sold or pledged to any other party and which does not have Receivables
which are sold or pledged to any other party; and




     (e) the Receivables in which the applicable Credit Card Originator or the Servicer has
not charged off (or required to be charged off) in its customary and usual manner for
charging off Receivables in such Accounts.



          “Eligible Receivable” shall mean a Receivable that satisfies each of the following
criteria: (a) it arises under an Eligible Account, (b) it is not sold or pledged to any other
party, (c) it constitutes an “account” or a “payment intangible” as defined in Article 9 of the UCC
as then in effect in the Relevant UCC State, (d) it is the legal, valid, and binding obligation of,
or is guaranteed by, a Person who is competent to enter into a Contract and incur debt and is
enforceable against such Person in accordance with its terms, (e) it was created or acquired by the
Credit Card Originator in compliance, in all material respects, with all Requirements of Law
applicable to the Credit Card Originator and pursuant to a Contract that complies, in all material
respects, with all Requirements of Law applicable to the Credit Card Originator (including without
limitation, laws, rules and regulations relating to truth in lending, usury, fair credit billing,
fair credit reporting, equal credit opportunity and fair debt collection practices), (f) all
material consents, licenses, or authorizations of, or registrations with, any Governmental
Authority required to be obtained or given by the Credit Card Originator in connection with the
creation of such Receivable or the execution, delivery, creation, and performance of the related
Contract by the Credit Card Originator have been duly obtained or given and are in full force and
effect and (g) immediately prior to giving effect to the sale hereunder, the Transferor has good




9









 







and marketable title free and clear of all Liens and security interests arising under or
through the Transferor (other than Permitted Liens).




          “Enhancement” shall mean, with respect to any Series, any cash collateral account,
cash collateral guaranty, guaranty, collateral invested amount, letter of credit, guaranteed rate
agreement, maturity guaranty facility, tax protection agreement, interest rate cap, interest rate
swap, currency swap, subordination of the rights of one Class or one Series to another, or any
other contract, agreement or arrangement for the benefit of the Securityholders of such Series (or
Securityholders of any Class within such Series) as designated in the applicable Supplement.




          “Enhancement Provider” shall mean, with respect to any Series, the Person, if any,
designated as such in the related Supplement.




          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time.




          “Euroclear Operator” shall mean Euroclear Bank S.A./N.V., as operator of the Euroclear
System.




          “Excess Funding Account” shall have the meaning specified in subsection 4.2(d).




          “Exchangeable Transferor Security” shall mean, if the Transferor elects to evidence
its interest in the Transferor Interest in certificated form pursuant to Section 6.1, a certificate
executed and delivered by the Transferor and authenticated by the Trustee substantially in the form
of Exhibit A; provided, that at any time there shall be only one Transferor Certificate;
provided, further, that in any Supplement, “Exchangeable Transferor Certificate”
shall mean either a certificate executed and delivered by the Transferor and authenticated by the
Trustee substantially in the form of Exhibit A or the uncertificated interest in the Transferor
Interest.




          “Extended Trust Termination Date” shall have the meaning specified in subsection
12.1(a).




          “FDIC” shall mean the Federal Deposit Insurance Corporation, or any successor thereto.




          “Finance Charge Collections” shall mean, (i) with respect to any Business Day, the sum
of (x) Collections received by the Servicer with respect to Finance Charge Receivables on such
Business Day, plus (y) Recoveries, plus (z) investment earnings on amounts credited to the Excess
Funding Account and (ii) with respect to any Monthly Period, Interchange received with respect to
such Monthly Period.




          “Finance Charge Receivables” shall mean the sum of (y) all Receivables evidencing
amounts billed from time to time to the Obligors on any Account in respect of (i) Periodic Finance
Charges, (ii) overlimit fees, (iii) late charges, (iv) returned check fees, (v) annual membership
fees and annual service charges, if any, (vi) transaction charges, (vii) cash advance fees, (viii)
fees and charges relating to debt waiver programs administered by




10









 







a Credit Card Originator or an affiliate of such Credit Card Originator, and (ix) other
similar fees and charges that are designated as Finance Charge Receivables, plus (z) Discount
Option Receivables, if any.




          “Foreign Clearing Agency” shall mean Clearstream and the Euroclear Operator.




          “Global Security” shall have the meaning specified in Section 6.13.




          “Governmental Authority” shall mean the United States of America, any state or other
political subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.




          “Holder” or “Securityholder” shall mean the Person in whose name a Security is
registered in the Security Register, and if applicable, the holder of any Bearer Security or
Coupon, as the case may be.




          “Holder of the Exchangeable Transferor Security” shall mean the Holder of the
Exchangeable Transferor Security or the Holder of any uncertificated interest in the Transferor
Interest.




          “HRAC II” shall mean Household Receivables Acquisition Company II, a Delaware
corporation, and its successors and permitted assigns.




          “HSBC Finance” shall mean HSBC Finance Corporation, a Delaware corporation, and its
successors and permitted assigns.




          “HSBC Nevada” shall mean HSBC Bank Nevada, National Association, and its successors
and permitted assigns.




          “Ineligible Receivable” shall have the meaning specified in subsection 2.4(d).




          “Initial Closing Date” shall mean May 30, 1995.




          “Initial Invested Amount” shall mean, with respect to any Series of Securities, the
amount stated in the related Supplement or, if not stated therein, the initial Invested Amount.




          “Insolvency Event” shall have the meaning specified in subsection 9.2(a).




          “Interchange” shall mean all interchange fees payable to the Transferor pursuant to
the Purchase Agreement.




          “Interest Funding Account” shall have the meaning specified in subsection 4.2(b).




          “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.




          “Invested Amount” shall have, with respect to any Series of Securities, the meaning
stated in the related Supplement.




11









 








          “Investment Company Act” shall mean the Investment Company Act of 1940, as amended
from time to time.




          “Investor Account” shall mean each of any Interest Funding Account, any Principal
Account, the Excess Funding Account, any Distribution Account and any Series Account.




          “Investor Percentage” shall mean, with respect to Principal Collections, Finance
Charge Collections and Receivables in Defaulted Accounts, and with respect to any Series of
Securities, the percentage specified in the related Supplement.




          “Investor Security” shall mean any one of the securities (including, without
limitation, the Bearer Securities or the Registered Securities) executed by the Transferor and
authenticated by the Trustee substantially in the form (or forms in the case of a Series with
multiple classes) of the investor security or variable funding security attached to the related
Supplement.




          “Investor Securityholder” shall mean the Holder of an Investor Security.




          “Lien” shall mean any lien, security interest or other encumbrance; provided,
however, that any assignment pursuant to Section 7.2 shall not be deemed to constitute a
Lien.




          “Metris” shall mean Metris Companies Inc., a corporation organized and existing under
the laws of the State of Delaware.




          “Minimum Aggregate Principal Receivables” shall mean, as of any date of determination,
the sum of the numerators used in the calculation of the Investor Percentages for Principal
Collections for all outstanding Series on such date of determination.




          “Minimum Retained Interest” shall mean the product of the weighted average Minimum
Retained Percentages for all Series and the sum of the outstanding principal amounts of all Classes
of all Series.




          “Minimum Retained Percentage” shall mean, for any Series, the Minimum Retained
Percentage specified in the Supplement for that Series.




          “Minimum Transferor Interest” shall mean, as of any date of determination, the product
of (i) the sum of (a) the aggregate Principal Receivables and (b) the amounts on deposit in the
Excess Funding Account and (ii) the Minimum Transferor Percentage.




          “Minimum Transferor Percentage” shall mean the highest Minimum Transferor Percentage
specified in any Supplement.




          “Monthly Period” shall mean, unless otherwise defined with respect to a Series in the
related Supplement, the period from and including the first day of each calendar month of the
Transferor to and including the last day of such calendar month.




12









 








          “Monthly Servicing Fee” shall mean the Servicing Fee payable to the Servicer with
respect to a Monthly Period.




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




          “MRI” shall mean Metris Receivables, Inc., a Delaware corporation.




          “New Discount Option Receivables” shall mean, on any Date of Processing on and after
the date on which the Transferor’s exercise of its discount option pursuant to Section 2.8 takes
effect, the product of the amount of any Principal Receivables created on such Date of Processing
(without reducing the amount of Principal Receivables by the amount of Financial Charge Receivables
which are Discount Option Receivables) and the Discount Percentage.




          “New Issuance” shall mean either of the procedures described in subsection 6.9(b).




          “New Issuance Date” shall have the meaning, with respect to any Series issued pursuant
to a New Issuance, specified in subsection 6.9(b).




          “New Issuance Notice” shall have the meaning, with respect to any Series issued
pursuant to a New Issuance, specified in subsection 6.9(b).




          “Obligor” shall mean a Person obligated to make payments with respect to a Receivable
arising under an Account pursuant to a Contract.




          “Officer’s Certificate” shall mean a certificate signed by any Vice President,
Treasurer, Assistant Treasurer or more senior officer of the Transferor or Servicer, as applicable,
and delivered to the Trustee.




          “Opinion of Counsel” shall mean a written opinion of counsel, who may be counsel for
or an employee of the Person providing the opinion, and who shall be reasonably acceptable to the
Trustee.




          “Original Servicer” shall have the meaning specified in the recitals hereto.




          “Pay Out Commencement Date” shall mean, with respect to each Series, the date on which
(a) a Trust Pay Out Event is deemed to occur pursuant to Section 9.1 or (b) a Series Pay Out Event
is deemed to occur pursuant to the Supplement for such Series.




          “Pay Out Event” shall mean, with respect to each Series, a Trust Pay Out Event or a
Series Pay Out Event.




          “Paying Agent” shall mean any paying agent appointed pursuant to Section 6.6 and shall
initially be the Trustee.




          “Periodic Finance Charges” shall have, with respect to any Account, the meaning
specified in the Contract applicable to such Account for finance charges (due to periodic rate) or
any similar term.




13









 








          “Permitted Activities” shall mean the primary activities of the Trust, which are:





     (a) holding Receivables transferred from the Transferor and the other assets of the
Trust, including passive derivative financial instruments that pertain to beneficial
interests issued or sold to parties other than the Transferor, its Affiliates or its agents;




     (b) issuing Securities and other interests in the Trust Property;




     (c) receiving Collections and making payments on such Securities and interests in
accordance with the terms of the Pooling and Servicing Agreement and any Supplement; and




     (d) engaging in other activities that are necessary or incidental to accomplish these
limited purposes, which activities can not be contrary to the status of the Trust as a
qualified special purpose entity under existing accounting literature.



          “Permitted Lien” shall mean with respect to the Receivables: (i) Liens in favor of
the Transferor created pursuant to the Purchase Agreement assigned to the Trustee pursuant to this
Agreement; (ii) Liens in favor of the Trustee pursuant to this Agreement; and (iii) Liens that
secure the payment of taxes, assessments and governmental charges or levies, if such taxes are
either (a) not delinquent or (b) being contested in good faith by appropriate legal or
administrative proceedings and as to which adequate reserves in accordance with generally accepted
accounting principles shall have been established.




          “Person” shall mean any person or entity, including any individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental entity or other entity of similar nature.




          “Pool Factor” shall mean, as of any Record Date, a number carried out to seven
decimals representing the ratio of the applicable Invested Amount as of such Record Date
(determined after taking into account any reduction in the Invested Amount which will occur on the
following Distribution Date) to the applicable Initial Invested Amount unless otherwise specified
with respect to a Series in the related Supplement.




          “Pooling and Servicing Agreement” shall have the meaning assigned in the preamble
hereto.




          “Portfolio Yield” shall mean, with respect to any Monthly Period and any outstanding
Series, the amount which the related Supplement specifies as the “Portfolio Yield” for such Monthly
Period.




          “Preferred Stock” shall mean one share of the authorized preferred shares of the
Transferor designated as such, with a par value of $1.00 per share and a liquidation value of $1.00
per share.




          “Principal Account” shall have the meaning specified in subsection 4.2(b).




14









 








          “Principal Collections” shall mean, with respect to any Business Day, the Collections
received with respect to each Principal Receivable on such Business Day.




          “Principal Receivables” shall mean all Receivables other than Finance Charge
Receivables (including Discount Option Receivables) or Receivables in Defaulted Accounts. In
calculating the aggregate amount of Principal Receivables on any day, the amount of Principal
Receivables shall be reduced by the aggregate amount of credit balances in the Accounts on such
day.




          “Principal Shortfalls” shall mean, with respect to any Business Day and any
outstanding Series, the amount which the related Supplement specifies as the “Principal Shortfall”
for such Business Day.




          “Principal Terms” shall have the meaning, with respect to any Series issued pursuant
to a New Issuance, specified in subsection 6.9(c).




          “Prior Servicer” shall have the meaning specified in the recitals hereto.




          “Prospective Pay Out Event” shall have the meaning specified in subsection 2.3(m).




          “Publication Date” shall have the meaning specified in subsection 9.2(a).




          “Purchase Agreement” shall mean (a) with respect to Receivables originated prior to
December 1, 2005 the Second Amended and Restated Purchase Agreement dated as of January 22, 2002,
between the Transferor, as buyer of receivables, and Metris, as seller of receivables, as amended
from time to time, or (b) with respect to Receivables originated on or after December 1, 2005, the
Receivables Purchase Agreement, dated as of December 1, 2005, between the Transferor, as buyer of
receivables, and HRAC II, as seller of receivables, as amended from time to time.




          “Qualified Institution” shall have the meaning specified in subsection 4.2(a).




          “Rating Agency” shall mean, with respect to each Series, the rating agency or
agencies, if any, specified in the related Supplement.




          “Ratings Event” shall mean, with respect to any Class of any outstanding Series rated
by a Rating Agency, a reduction or withdrawal of the rating of any such Class by a Rating Agency.




          “Reassignment Date” shall have the meaning specified in subsection 2.4(e).




          “Receivable” shall mean all of the indebtedness of any Obligor under an Account,
including the right to receive payment of any interest or finance charges and other obligations of
such Obligor with respect thereto, but only to the extent that such amounts payable have been
conveyed to the Transferor pursuant to the Purchase Agreement. Each Receivable includes, without
limitation, all rights of the Transferor under the applicable Contract. A Receivable shall




15









 







be deemed to have been created at the end of the day on the Date of Processing of such
Receivable.




          “Record Date” shall mean, with respect to any Distribution Date, unless otherwise
specified in the applicable Supplement, the Business Day preceding such Distribution Date, except
that, with respect to any Definitive Securities, Record Date shall mean the fifth day of the then
current Monthly Period.




          “Recoveries” shall mean all Recoveries as defined in the Purchase Agreement that are
paid to the Transferor as provided in the Purchase Agreement.




          “Registered Securities” shall have the meaning specified in Section 6.1.




          “Related Person” shall mean a Person that is an Affiliate of Metris, any Investor
Securityholder, any Enhancement Provider, or any Person whose status would violate the conditions
for a trustee contained in Section (4)(i) of Rule 3a-7 under the Investment Company Act of 1940, as
amended.




          “Relevant UCC State” shall mean the State of Delaware and each jurisdiction in which
the filing of a UCC financing statement is necessary to perfect the ownership interest and security
interest of the Transferor pursuant to the Purchase Agreement or the ownership or security interest
of the Trustee established under this Agreement.




          “Removal Date” shall have the meaning specified in subsection 2.7(b).




          “Removal Notice Date” shall mean the day, no later than the fifth Business Day prior
to a Removal Date, on which the Transferor gives notice to the Trustee pursuant to Section 2.7(a)
of its intention to remove Accounts from the Trust.




          “Removed Accounts” shall have the meaning specified in subsection 2.7(a).




          “Required Delivery Date” shall mean, as applicable, the date that is five Business
days after (a) the applicable Removal Date, (b) the applicable Addition Date, or (c) the Initial
Closing Date.




          “Requirements of Law” for any Person shall mean the certificate of incorporation or
articles of association and by-laws or other organizational or governing documents of such Person,
and any material law, treaty, rule or regulation, or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which such Person is
subject.




          “Responsible Officer” shall mean any officer within the Corporate Trust Office (or any
successor group of the Trustee), including the President, any Vice President or any other officer
of the Trustee customarily performing functions similar to those performed by any person who at the
time shall be an above-designated officer and who shall have direct responsibility for the
administration of this Agreement.




16









 








          “Restart Date” shall mean the date specified in the notice delivered by the Transferor
to the Trustee pursuant to subsection 2.6(b).




          “Retained Interest” shall mean, on any date of determination, the sum of the
Transferor Interest and the Invested Amount represented by any Transferor Retained Security.




          “Retained Percentage” shall mean, on any date of determination, the percentage
equivalent of a fraction the numerator of which is the Retained Interest and the denominator of
which is the aggregate amount of Principal Receivables at the end of the day immediately prior to
such date of determination plus all amounts on deposit in the Excess Funding Account (but not
including investment earnings on such amounts).




          “Revolving Period” shall have, with respect to each Series, the meaning specified in
the related Supplement.




          “Second Amended and Restated Pooling and Servicing Agreement” shall have the meaning
specified in the recitals hereto.




          “Securities Act” shall mean the Securities Act of 1933, as amended from time to time.




          “Security” shall mean any one of the Investor Securities of any Series or the
Exchangeable Transferor Security, if applicable.




          “Security Interest” shall mean interest payable in respect of the Investor Securities
of any Series pursuant to Article IV of the Agreement as supplemented by the Supplement for such
Series.




          “Security Owner” shall mean, with respect to a Book-Entry Security, the Person who is
the owner of an interest in such Book-Entry Security, as may be reflected on the books of the
Clearing Agency or Foreign Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such
Clearing Agency).




          “Security Principal” shall mean principal payable in respect of the Investor
Securities of any Series pursuant to Article IV of this Agreement.




          “Security Rate” shall mean, with respect to any Series of Securities (or, for any
Series with more than one Class, for each Class of such Series), the percentage (or formula on the
basis of which such rate shall be determined) stated in the related Supplement.




          “Security Register” shall mean the register maintained pursuant to Section 6.3,
providing for the registration of the Securities and transfers and exchanges thereof.




          “Securityholder” or “Holder” shall mean the Person in whose name a Security is
registered in the Security Register and, if applicable, the holder of any Bearer Security or
Coupon, as the case may be and, if used with respect to the Transferor Interest, a Person in whose
name the Exchangeable Transferor Security is registered in the Security Register or a




17









 







Person in whose name ownership of the uncertificated interest in the Transferor Interest is
recorded in the books and records of the Trustee.




          “Series” shall mean any series of Investor Securities issued by the Trust pursuant to
a Supplement, which may include within any such Series a Class or Classes of Investor Securities
subordinate to another such Class or Classes of Investor Securities.




          “Series Account” shall mean any account or accounts established pursuant to a
Supplement for the benefit of the related Series.




          “Series Charge Off” shall have, with respect to each Series, the meaning specified in
the applicable Supplement.




          “Series Default Amount” shall have, with respect to any Series of Securities, the
meaning stated in the related Supplement.




          “Series Pay Out Event” shall have, with respect to any Series, the meaning specified
in the related Supplement.




          “Series Percentage” shall mean with respect to any Series, on any date of
determination, the percentage equivalent of a fraction the numerator of which is the Invested
Amount of such Series and the denominator of which is the sum of the Invested Amounts of all Series
then outstanding.




          “Series Servicing Fee Percentage” shall mean, with respect to any Series, the amount
specified as such in the related Supplement.




          “Series Termination Date” shall mean, with respect to any Series of Securities, the
date stated as such in the related Supplement.




          “Servicer” shall mean HSBC Finance, in its capacity as Servicer of the Receivables or
any Person appointed as Successor Servicer as herein provided to service the Receivables.




          “Servicer Default” shall have the meaning specified in Section 10.1.




          “Servicing Fee” shall have the meaning specified in Section 3.2.




          “Settlement Statement” shall mean a report in the form specified in subsection 1.2(d)
as may be supplemented pursuant to any Supplement.




          “Shared Principal Collections” shall mean, with respect to any Business Day, the
aggregate amount of Principal Collections for all outstanding Series that the related Supplements
specify are to be treated as “Shared Principal Collections” available to be allocated to other
Series for such Business Day.




          “Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a Division of The
McGraw-Hill Companies, or its successor.




18









 








          “Successor Servicer” shall have the meaning specified in subsection 10.2(a).




          “Supplement” shall mean, with respect to any outstanding Series, a supplement to this
Agreement complying with the terms of Section 6.9 of this Agreement, executed in conjunction with
any issuance of Securities of such Series.




          “Supplemental Accounts” shall mean each revolving credit consumer credit card account
established pursuant to a Contract between a Credit Card Originator and any Person, which account
is designated pursuant to subsection 2.6(c) or (d) to be included as a Supplemental Account and is
identified on or after the Amendment Cut-Off Date on the Account Schedule delivered to the Trustee
by the Transferor.




          “Supplemental Security” shall have the meaning specified in subsection 6.9(d).




          “Termination Notice” shall have, with respect to any Series, the meaning specified in
Section 10.1.




          “Third Amended and Restated Pooling and Servicing Agreement” shall have the meaning
specified in the recitals hereto.




          “Transfer” shall mean transfer, sell, exchange, pledge, hypothecate, participate,
assign or otherwise dispose, in whole or in part.




          “Transfer Agent and Registrar” shall have the meaning specified in Section 6.3(a) and
shall initially be U.S. Bank National Association.




          “Transfer Date” shall mean, with respect to any Series, the Business Day immediately
prior to each Distribution Date.




          “Transferor” shall mean Metris Receivables, Inc., a corporation organized and existing
under the laws of the State of Delaware, and any successor thereto.




          “Transferor Interest” shall mean, on any date of determination, the aggregate amount
of Principal Receivables at the end of the day immediately prior to such date of determination plus
all amounts on deposit in the Excess Funding Account (but not including investment earnings on such
amounts) at the end of such immediately preceding day, minus the Aggregate Invested Amount at the
end of such immediately preceding day.




          “Transferor Percentage” shall mean, on any date of determination, when used with
respect to Principal Collections, Finance Charge Collections and Receivables in Defaulted Accounts,
a percentage equal to 100% minus the Aggregate Investor Percentage with respect to such categories
of Collections and Receivables, as applicable.




          “Transferor Retained Class” shall mean any Class of Investor Securities of any Series
which the Transferor retained pursuant to the terms of any Supplement.




          “Transferor Retained Securities” shall mean Investor Securities of any Series which
the Transferor is required to retain pursuant to the terms of any Supplement.




19









 








          “Transferred Account” shall mean a revolving credit consumer credit card account into
which an Account shall be transferred pursuant to the Credit and Collection Policies; provided,
however , that such Transferred Account can be traced or identified as an account into which an
Account has been transferred.




          “Trigger Event” shall have the meaning specified in subsection 9.2(a).




          “Trust” shall mean the trust created by this Agreement, the corpus of which shall
consist of the Trust Property.




          “Trust Extension” shall have the meaning specified in subsection 12.1(a).




          “Trust Pay Out Event” shall have, with respect to each Series, the meaning specified
in Section 9.1.




          “Trust Property” shall have the meaning specified in Section 2.1.




          “Trust Termination Date” shall mean the earliest to occur of (i) unless a Trust
Extension shall have occurred, the day after the Distribution Date with respect to any Series
following the date on which funds shall have been deposited in the Distribution Account or the
applicable Series Account for the payment of Investor Securityholders of each Series then issued
and outstanding sufficient to pay in full the Aggregate Invested Amount plus interest accrued at
the applicable Security Rate through the end of the day prior to the Distribution Date with respect
to each such Series and certain other amounts as may be specified in any Series Supplement, (ii) if
a Trust Extension shall have occurred, the Extended Trust Termination Date, and (iii) the date
specified in subsection 12.1(a).




          “Trustee” shall mean U.S. Bank National Association, a national banking association,
and its successors and any Person resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee appointed as herein provided.




          “UCC” shall mean the Uniform Commercial Code, as amended from time to time, as in
effect in the applicable jurisdiction.




          “Undivided Interest” shall mean the undivided interest in the Trust evidenced by an
Investor Security.




          “Variable Funding Securities” shall mean a Series of Investor Securities, issued
pursuant to Section 6.9 and a Variable Funding Supplement, in one or more Classes.




          “Variable Funding Supplement” shall mean a Supplement executed in connection with the
issuance of Variable Funding Securities.




          “Zero Balance Account” shall mean an account which, according to the Servicer’s
records, has had a balance of zero for 180 days or for such other period of time specified in the
Credit and Collection Policy.




20









 








          Section 1.2 Other Definitional Provisions.




          (a) All terms defined in any Supplement or this Agreement shall have the meanings ascribed to
them herein when used in any security, certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.




          (b) As used herein and in any security, certificate or other document made or delivered
pursuant hereto or thereto, accounting terms not defined in Section 1.1, and accounting terms
partially defined in Section 1.1 to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that the definitions
of accounting terms herein are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained herein shall control.




          (c) The agreements, representations and warranties of HSBC Finance in this Agreement and in
any Supplement in its capacity as Servicer and of MRI in its capacity as Transferor shall be deemed
to be the agreements, representations and warranties of HSBC Finance and MRI solely in each such
capacity for so long as either of them acts in each such capacity under this Agreement.




          (d) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to any Supplement or this Agreement as a whole and not to any particular
provision of this Agreement or any Supplement; and Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are references to Sections, subsections,
Schedules and Exhibits in or to this Agreement or any Supplement unless otherwise specified.




          The Settlement Statement shall be in substantially the form of Exhibit C, with such changes as
the Servicer may determine to be necessary or desirable; provided, however, that no
such change shall serve to exclude information required by this Agreement or any Supplement and
each such change shall be reasonably acceptable to the Transferor and the Trustee. The Servicer
shall, upon making such determination and receiving the consent of the Transferor and the Trustee
to such change, deliver to the Trustee, the Transferor and each Rating Agency an Officer’s
Certificate of the Servicer to which shall be annexed the form of the related Exhibit, as so
changed. Upon the delivery of such Officer’s Certificate to the Trustee, the related Exhibit, as
so changed, shall for all purposes of this Agreement constitute such Exhibit. The Trustee may
conclusively rely upon such Officer’s Certificate in determining whether the related Exhibit, as
changed, conforms to the requirements of this Agreement.




[End of Article I]




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ARTICLE II




CONVEYANCE OF RECEIVABLES;

ISSUANCE OF SECURITIES




          Section 2.1 Conveyance of Receivables. The Transferor does hereby transfer, assign,
set-over, and otherwise convey to the Trustee, without recourse, all of its right, title and
interest in, to and under (i) in the case of Receivables arising in the Accounts designated on the
Initial Closing Date (including Transferred Accounts related to such Accounts), the Receivables
existing at the close of business on the Initial Closing Date and thereafter created from time to
time in such Accounts until the termination of the Trust, (ii) in the case of Receivables arising
in the Additional Accounts and the Supplemental Accounts (including Transferred Accounts related to
such Additional Accounts and Supplemental Accounts), the Receivables existing at the close of
business on the applicable Addition Cut-Off Date and thereafter created from time to time in such
Accounts until the termination of the Trust, (iii) all Interchange allocable to the Trust as
provided herein, (iv) all monies and investments due or to become due with respect to all of the
foregoing (including, without limitation, the right to any Finance Charge Receivables, any
Collections, and any Recoveries), (v) all proceeds of all of the foregoing, (vi) the Purchase
Agreement, (vii) the Bank Receivables Purchase Agreement to the extent that it relates to all of
the foregoing, and (viii) computer equipment as may be elected to be transferred by the Transferor
from time to time. Such property, together with all monies and investments on deposit, from time
to time, in the Collection Account, the Excess Funding Account, the Series Accounts maintained for
the benefit of the Securityholders of any Series of Securities, any Enhancement and all monies
available under any Enhancement, to be provided for any Series for payment to the Securityholders
of such Series, shall constitute the assets of the Trust (collectively, the “Trust Property”). The
foregoing transfer, assignment, set-over and conveyance does not constitute and is not intended to
result in a creation or an assumption by the Trust, the Trustee or any Investor Securityholder of
any obligation of the Transferor, the Servicer, the applicable Credit Card Originator or any other
Person in connection with the Accounts or any agreement or instrument relating thereto, including,
without limitation, any obligation to any Obligors, merchant banks, merchant clearance systems,
VISA®, MasterCard®, and Discover®1 or insurers, or in connection with the Purchase
Agreement or the Bank Receivables Purchase Agreement. The Transferor has issued and delivered the
Preferred Stock in the name of the Trustee to the Trustee and the Trustee hereby acknowledges
receipt of the Preferred Stock.




          In connection with such transfer, assignment, set-over and conveyance, the Transferor agrees
to record and file, at its own expense, one or more financing statements (including any
continuation statements and other amendments with respect to such financing statements when
applicable) with respect to the Receivables meeting the requirements of applicable state law in
such manner and in such jurisdictions as are necessary to perfect the assignment of the Receivables
to the Trust, and to deliver file-stamped copies of such financing statements and continuation
statements (and other amendments) or other evidence of such filing






 




			
	1	 	VISA, MasterCard, and Discover are
registered trademarks of VISA USA, Inc., MasterCard International
Incorporated., and Discover Financial Services LLC, respectively.




22









 









(which may, for purposes of this Section 2.1, consist of telephone or facsimile confirmation
of such filing) to the Trustee on or prior to the date of issuance of the Securities, and in the
case of any continuation statements and other amendments filed pursuant to this Section 2.1, as
soon as practicable after receipt thereof by the Transferor. The foregoing transfer, assignment,
set-over and conveyance to the Trust shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, set-over and conveyance shall be
construed accordingly.




          The Transferor further agrees, at its own expense, (i) on or prior to (A) the Initial Closing
Date, in the case of the Accounts designated on the Initial Closing Date, and (B) the applicable
Addition Date, in the case of Additional Accounts and Supplemental Accounts, to indicate in its
books and records (including the appropriate computer files) that Receivables created in connection
with the Accounts (other than Removed Accounts) and the related Trust Property have been conveyed
to the Trustee pursuant to this Agreement, including by identifying such Accounts in its master
file maintained in its computer files with the designation portfolio ID 0001 and (ii) on or prior
to (A) the Amendment Closing Date, in the case of the Accounts existing on the Amendment Closing
Date, and (B) the applicable Addition Date, in the case of Additional Accounts and Supplemental
Accounts, to deliver to the Trustee an Account Schedule (provided that such Account Schedule shall
be provided in respect of Additional Accounts on or prior to the Determination Date immediately
succeeding the related Monthly Period during which their respective Addition Dates occur). Each
Account Schedule, as supplemented from time to time, shall be marked as Schedule 1 to this
Agreement and is hereby incorporated into and made a part of this Agreement. Once the books and
records (including the appropriate computer files) referenced in clause (i) of this paragraph have
been indicated with respect to any Account, the Transferor further agrees not to alter such
indication during the remaining term of this Agreement, other than pursuant to Section 2.7 with
respect to Removed Accounts, unless and until the Transferor shall have delivered to the Trustee at
least twenty (20) days’ prior written notice of its intention to do so and has taken such action as
is necessary or advisable to cause the interest of the Trustee in the Trust Property to continue to
be perfected with the priority required by this Agreement.




          The parties hereto intend that each transfer of Receivables and other property pursuant to
this Agreement or any Assignment constitute a sale, and not a secured borrowing, for accounting
purposes. If and to the extent that the transfer pursuant to this Section 2.1 is not deemed to be
a sale, the Transferor shall be deemed hereunder to have granted and does hereby grant to the
Trustee a first priority perfected security interest in all of the Transferor’s right, title and
interest in, to and under the Trust Property, and this Agreement shall constitute a security
agreement under applicable law.




          Section 2.2 Acceptance by Trustee.




          (a) The Trustee hereby acknowledges its acceptance, on behalf of the Trust, of all right,
title and interest previously held by the Transferor in, to and under the Trust Property and
declares that it shall maintain such right, title and interest, upon the Trust herein set forth,
for the benefit of all Securityholders. The Trustee acknowledges that, on or before the Amendment
Closing Date, the Transferor delivered to the Trustee the Account Schedule relating to the Accounts
existing on such date.




23









 








          (b) The Trustee shall have no power to create, assume or incur indebtedness or other
liabilities in the name of the Trust other than as contemplated in this Agreement.




          Section 2.3 Representations and Warranties of the Transferor. The Transferor hereby
represents and warrants to the Trustee, on behalf of the Trust, on the Initial Closing Date, on the
Amendment Closing Date and, with respect to any Series of Securities, on the date of the related
Supplement and the related Closing Date for such Series:




          (a) Organization and Good Standing. The Transferor is a corporation duly organized
and validly existing and in good standing under the laws of the State of Delaware and has the
corporate power and authority and legal right to own its properties and conduct its business as
such properties are presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and the Purchase Agreement and to execute
and deliver to the Trustee the Securities pursuant hereto.




          (b) Due Qualification. The Transferor is duly qualified to do business and is in good
standing (or is exempt from such requirements) as a foreign corporation in any state required in
order to conduct its business, and has obtained all necessary licenses and approvals with respect
to the Transferor required under federal and Delaware law; provided, however, that
no representation or warranty is made with respect to any qualifications, licenses or approvals
which the Trustee would have to obtain to do business in any state in which the Trustee seeks to
enforce any Receivable.




          (c) Due Authorization. The execution and delivery by the Transferor of this Agreement
and the Purchase Agreement and the consummation by the Transferor of the transactions provided for
herein and therein, have been duly authorized by the Transferor by all necessary corporate action
on its part.




          (d) Binding Obligation. Each of this Agreement and the Purchase Agreement, and the
consummation of the transactions provided for herein and therein, constitutes a legal, valid, and
binding obligation of the Transferor, enforceable against the Transferor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect, affecting the
enforcement of creditors’ rights in general and as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at law or in equity).




          (e) No Conflicts. The execution and delivery by the Transferor of this Agreement and
the Purchase Agreement and the performance by the Transferor of the transactions contemplated
hereby and thereby, do not (i) contravene the Transferor’s charter or bylaws, (ii) violate any
material provision of law applicable to it or require any filing (except for the filings under the
UCC), registration, consent or approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having applicability to the
Transferor, except for such filings, registrations, consents or approvals as have already been
obtained and are in full force and effect.




          (f) Taxes. The Transferor has filed all material tax returns required to be filed by
the Transferor and has paid or made adequate provision for the payment of all material taxes,




24









 







assessments and other governmental charges due from the Transferor or is contesting any such
tax, assessment or other governmental charge in good faith through appropriate proceedings.




          (g) No Violation. The execution and delivery by the Transferor of this Agreement and
the Purchase Agreement and the execution and delivery by the Transferor to the Trustee of the
Securities, the performance by the Transferor of the transactions contemplated by this Agreement
and the Purchase Agreement and the fulfillment by the Transferor of the terms hereof and thereof
will not violate any Requirements of Law applicable to the Transferor, will not violate, result in
any breach of any of the material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under any Requirement of Law applicable to the Transferor or any
material indenture, contract, agreement, mortgage, deed of trust or other material instrument to
which the Transferor is a party or by which it or its properties are bound.




          (h) No Proceedings. There are no proceedings or investigations pending or, to the
best knowledge of the Transferor, threatened against the Transferor, before any Governmental
Authority (i) asserting the invalidity of this Agreement and the Purchase Agreement, (ii) seeking
to prevent the consummation of any of the transactions contemplated hereby or thereby, (iii)
seeking any determination or ruling that would materially and adversely affect the performance by
the Transferor of its obligations thereunder, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability thereof or (v) seeking to affect
adversely the tax attributes of the Trust.




          (i) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Governmental Authority required in connection with the execution and delivery by the
Transferor of this Agreement, the Purchase Agreement and the Securities, the performance by the
Transferor of the transactions contemplated by this Agreement and the Purchase Agreement and the
fulfillment by the Transferor of the terms hereof and thereof, have been obtained.




          (j) Bona Fide Receivables. Each Receivable is an account receivable arising out of
the performance by the applicable Credit Card Originator in accordance with the terms of the
Contract giving rise to such Receivable. The Transferor has no knowledge of any fact which should
have led it to expect at the time of the classification of any Receivable as an Eligible Receivable
that such Receivable would not be paid in full when due, and each Receivable classified as an
Eligible Receivable by the Transferor in any document or report delivered under this Agreement
satisfies the requirements of eligibility contained in the definition of Eligible Receivable set
forth in this Agreement.




          (k) Place of Business. The chief executive office of the Transferor is in Las Vegas,
Nevada.




          (l) Use of Proceeds. No proceeds of the issuance of any Security will be used by the
Transferor to purchase or carry any margin security.




          (m) Pay Out Event. No Pay Out Event and no condition that with the giving of notice
and/or the passage of time constitutes a Pay Out Event (a “Prospective Pay Out Event”) has occurred
and is continuing.




25









 








          (n) Not an Investment Company. The Transferor is not an “investment company” within
the meaning of the Investment Company Act, or is exempt from all provisions of such Act.




          (o) Solvency. The Transferor is not insolvent and will not be rendered insolvent upon
the transfer of the Receivables to the Trust.




          The representations and warranties set forth in this Section 2.3 shall survive the transfer
and assignment of the respective Receivables to the Trust, and termination of the rights and
obligations of the Servicer pursuant to Section 10.1. The Transferor hereby represents and
warrants to the Trust, with respect to any Series of Securities, on its Closing Date, unless
otherwise stated in the related Supplement, that the representations and warranties of the
Transferor set forth in Section 2.3, are true and correct on such date (and for the purposes of
such representations and warranties, “Securities” shall mean the Securities issued on the related
Closing Date) and that each representation and warranty set forth in this Section 2.3 and in
Section 2.4(a)(i) with respect to the Agreement shall be made at such time with respect to the
applicable Supplement. Upon discovery by the Transferor, the Servicer or a Responsible Officer of
the Trustee of a breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the others.




          Section 2.4 Representations and Warranties of the Transferor Relating to the Agreement and
the Receivables.




          (a) Binding Obligation; Valid Transfer and Assignment. The Transferor hereby
represents and warrants to the Trustee, on behalf of the Trust, that, on the Initial Closing Date,
on the Amendment Closing Date and, with respect to any Series of Securities, on the date of its
related Supplement and Closing Date, and, with respect to any matters involving Additional Accounts
or Supplemental Accounts, on the applicable Addition Date:





          (i) The Purchase Agreement and this Agreement each constitutes the legal, valid and
binding obligation of the Transferor, enforceable against the Transferor in accordance with
its terms, except (A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in effect,
affecting the enforcement of creditors’ rights in general, and (B) as such enforceability
may be limited by general principles of equity (whether considered in a suit at law or in
equity).




          (ii) The transfer of Receivables by the Transferor to the Trustee under this Agreement
constitutes either (A) a valid transfer, assignment, set-over and conveyance to the Trustee
of all right, title and interest of the Transferor in and to such Receivables, and such
Receivables will be held by the Trustee free and clear of any Lien of any Person claiming
through or under the Transferor, except for (x) Permitted Liens, (y) the interest of the
Transferor as Holder of the Exchangeable Transferor Security and any other Class of
Securities held by the Transferor from time to time and (z) the Transferor’s right, if any,
to interest accruing on, and investment earnings, if any, in respect of any Interest Funding
Account, any Principal Account, the Excess Funding Account, or any Series Account, as
provided in this Agreement or the related



26









 






Supplement, or (B) a grant of a first priority perfected security interest (as defined
in the UCC as in effect in the Relevant UCC State) in, to and under such Receivables, which
grant is enforceable with respect to the existing Receivables and the proceeds thereof upon
execution and delivery of this Agreement, and which will be enforceable with respect to such
Receivables hereafter created and the proceeds thereof, upon such creation. If this
Agreement constitutes the grant of a security interest to the Trustee in such property, upon
the filing of the financing statement described in Section 2.1, and in the case of the
Receivables hereafter created and proceeds thereof, upon such creation, the Trustee shall
have a first priority perfected security interest in such property, except for Permitted
Liens. Except as contemplated in this Agreement or any Supplement, neither the Transferor
nor any Person claiming through or under the Transferor shall have any claim to or interest
in the Collection Account, any Principal Account, any Interest Funding Account, the
Distribution Account, the Excess Funding Account, any principal funding account for any
Series or any other Series Account, except for the Transferor’s rights to receive interest
accruing on, and investment earnings in respect of, any such account as provided in this
Agreement (or, if applicable, any Series Account as provided in any Supplement) and, if this
Agreement constitutes the grant of a security interest in such property, except for the
interest of the Transferor in such property as a debtor for purposes of the UCC as in effect
in the Relevant UCC State.




          (iii) The Transferor is (or, with respect to Receivables arising after the date hereof,
will be upon their creation) the legal and beneficial owner of all right, title and interest
in and to each Receivable and each Receivable has been or will be transferred to the Trustee
free and clear of any Lien other than Permitted Liens.




          (iv) All consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required of the Transferor in connection with
the transfer of Trust Property to the Trust have been obtained.




          (v) On the applicable Addition Cut-Off Date, each related Additional Account or
Supplemental Account is an Eligible Account. On the applicable Addition Cut-Off Date, with
respect to the related Additional Accounts or Supplemental Accounts, each Receivable
contained in such Accounts on such applicable date and conveyed to the Trustee by the
Transferor is an Eligible Receivable.




          (vi) Each Receivable then existing has been conveyed to the Trustee free and clear of
any Lien (other than Permitted Liens) and in compliance, in all material respects, with all
Requirements of Law applicable to the Transferor.



          (b) Daily Representations and Warranties. On each day on which any new Receivable is
transferred by the Transferor to the Trustee, the Transferor represents and warrants to the Trustee
that (A) each such Receivable has been conveyed to the Trustee in compliance, in all material
respects, with all Requirements of Law applicable to the Transferor and free and clear of any Lien
(other than Permitted Liens), (B) with respect to each such Receivable, all consents, licenses,
approvals or authorizations of or registrations or declarations with, any Governmental Authority
required to be obtained, effected or given by the Transferor in connection with the conveyance of
such Receivable to the Trustee have been duly obtained,




27









 







effected or given and are in full force and effect and (C) such Receivable is an Eligible
Receivable on such date.




          (c) Notice of Breach. The representations and warranties set forth in this Section
2.4 shall survive the transfer and assignment of the respective Receivables to the Trust. Upon
discovery by the Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of
any of the representations and warranties set forth in this Section 2.4, the party discovering such
breach shall give prompt written notice to the other parties mentioned above. The Transferor
agrees to cooperate with the Servicer and the Trustee in attempting to cure any such breach.




          (d) Designation of Ineligible Receivables. In the event of a breach with respect to a
Receivable of any representations and warranties set forth in subsection 2.3(j) or subsections
2.4(a)(iii) through (vi) or subsection 2.4(b), such Receivable shall be designated an “Ineligible
Receivable” and shall be assigned a principal balance of zero for the purpose of determining the
aggregate amount of Principal Receivables on any day; provided, however, that if
such representations and warranties with respect to such Receivable shall subsequently be true and
correct in all material respects as if such Receivable had been created on such day or such
Receivable shall subsequently satisfy the conditions set forth in the definition of Eligible
Receivable, such Receivable shall be designated an Eligible Receivable, and such Principal
Receivables shall be included in determining the Aggregate Principal Receivables on such day. On
and after the date of its designation as an Ineligible Receivable, each Ineligible Receivable shall
not be given credit in determining the aggregate amount of Principal Receivables used in the
calculation of any Investor Percentage, the Transferor Percentage or the Transferor Interest. In
the event that on any Business Day the exclusion of an Ineligible Receivable from the calculation
of the Transferor Interest would cause the Transferor Interest to be reduced below the Minimum
Transferor Interest, the Transferor shall immediately make a deposit in the Excess Funding Account
(for allocation as a Principal Receivable) in immediately available funds prior to the next
succeeding Business Day in an amount equal to the amount by which the Transferor Interest would be
reduced below the Minimum Transferor Interest as a result of the exclusion of such Ineligible
Receivable. The portion of such deposit allocated to the Investor Securities of each Series shall
be distributed to the Investor Securityholders of each Series in the manner specified in Article
IV.




          (e) Reassignment of Trust Portfolio. In the event of a breach of any of the
representations and warranties set forth in subsections 2.3(a), (b) and (c) and 2.4(a)(i) and (ii)
with respect to any Series, either the Trustee or the Holders of Investor Securities evidencing
Undivided Interests aggregating more than 50% of the aggregate Invested Amount of such Series, by
notice then given in writing to the Transferor (and to the Trustee and the Servicer, if given by
the Investor Securityholders of such Series), may direct the Transferor to accept reassignment of
an amount of Principal Receivables equal to the face amount of the Invested Amount to be
repurchased (as specified below) within 60 days of such notice (or within such longer period as may
be specified in such notice), and the Transferor shall be obligated to accept reassignment of such
Receivables on a Distribution Date specified by the Transferor (such Distribution Date, the
“Reassignment Date”) occurring within such applicable period on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be made,
and no notice of such reassignment may be given, if, at any time during




28









 







such applicable period, the representations and warranties contained in subsections 2.3(a),
(b) and (c) and subsections 2.4(a)(i) and (ii) shall then be true and correct in all material
respects. The Transferor shall, on the Transfer Date (in next day funds) preceding the
Reassignment Date, deposit an amount equal to the reassignment deposit amount for such Series in
the related Distribution Account or Series Account, as provided in the related Supplement, for
distribution to the Investor Securityholders pursuant to Article XII. The reassignment deposit
amount with respect to any Series, unless otherwise stated in the related Supplement, shall be
equal to (i) the Invested Amount of such Series at the end of the day on the Business Day preceding
the Reassignment Date (provided, however, that with respect to any Series issued
pursuant to a Variable Funding Supplement such amount shall be the Invested Amount of such Series
as of the Reassignment Date, less the amount, if any, previously allocated for payment of principal
to such Securityholders on the related Reassignment Date, in the Monthly Period in which the
Reassignment Date occurs), plus (ii) an amount equal to all interest accrued but unpaid on the
Investor Securities of such Series at the applicable Security Rate through such last day, less the
amount, if any, previously allocated for payment of interest to the Securityholders of such Series
on the related Distribution Date in the Monthly Period in which the Reassignment Date occurs plus
any other amounts accrued and owing as specified in the applicable Supplement. Payment of the
reassignment deposit amount with respect to any Series, and all other amounts in the Distribution
Account or the applicable Series Account in respect of the preceding Monthly Period, shall be
considered a prepayment in full of the Receivables represented by the Investor Securities of such
Series. On the Distribution Date following the Transfer Date on which such amount has been
deposited in full into the Distribution Account or the applicable Series Account, the Receivables
represented by such Investor Securities and all monies due or to become due with respect thereto
and all proceeds of the Receivables shall be released to the Transferor after payment of all
amounts otherwise due hereunder on or prior to such dates and the Trustee shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, representation or
warranty, as shall be prepared by and as are reasonably requested by the Transferor to vest in the
Transferor, or its designee or assignee, all right, title and interest of the Trust in and to such
Receivables, all monies due or to become due with respect thereto and all proceeds of such
Receivables. If the Trustee or the Investor Securityholders of any Series give notice directing
the Transferor to accept reassignment as provided above, the obligation of the Transferor to accept
reassignment of the applicable Receivables and pay the reassignment deposit amount pursuant to this
subsection 2.4(e) shall constitute the sole remedy respecting a breach of the representations and
warranties contained in subsections 2.3(a), (b) and (c) and 2.4(a)(i) and (ii) available to the
Investor Securityholders of such Series or the Trustee on behalf of the Investor Securityholders of
such Series. The Trustee shall have no duty to conduct any affirmative investigation as to the
occurrence of any condition requiring the repurchase of any Receivable by the Transferor pursuant
to this Agreement or any Supplement or the eligibility of any Receivable for purposes of this
Agreement or any Supplement.




          (f) Additional Representations and Warranties of the Transferor. The Transferor
hereby makes the following representations and warranties. Such representations and warranties
shall survive until the termination of this Agreement. Such representations and warranties speak
as of the date that the Collateral (as defined below) is transferred to the Trustee but shall not
be waived by any of the parties to this Agreement unless each Rating Agency shall have notified the
Transferor, the Servicer and the Trustee in writing that such waiver will not




29









 







result in a reduction or withdrawal of the rating of any outstanding Series or Class to which
it is a Rating Agency.





          (i) This Agreement creates a valid and continuing security interest (as defined in the
Delaware UCC) in favor of the Trustee in the Receivables described in Section 2.1 of this
Agreement (the “Collateral”), which security interest is prior to all other Liens, except
for Permitted Liens, and is enforceable as such as against creditors of and purchasers from
the Transferor.




          (ii) The Collateral constitutes “accounts” or “payment intangibles” within the meaning
of the applicable UCC.




          (iii) At the time of each transfer and assignment of Collateral to the Trustee pursuant
to this Agreement, the Transferor owned and had good and marketable title to such Collateral
free and clear of any Lien, claim or encumbrance of any Person, except for Permitted Liens.




          (iv) The Transferor caused or will cause, within ten days of the initial execution of
this Agreement, the filing of all appropriate financing statements in the proper filing
office in the appropriate jurisdictions under applicable law in order to perfect the
security interest in the Collateral granted to the Trustee pursuant to this Agreement.




          (v) Other than the transfer and the security interest granted to the Trustee pursuant
to this Agreement, the Transferor has not pledged, assigned, sold, granted a security
interest in, or otherwise conveyed the Collateral. The Transferor has not authorized the
filing of and is not aware of any financing statements against the Transferor that include a
description of the Collateral other than any financing statement relating to the security
interest granted to the Trustee pursuant to this Agreement or that has been terminated. The
Transferor is not aware of any judgment or tax lien filings against the Transferor.




     Section 2.5 Covenants of the Transferor. The Transferor hereby covenants that:




     (a) Receivables to be Accounts or Payment Intangibles. The Transferor will
take no action to cause any Receivable to be evidenced by any instrument or chattel paper
(as defined in the UCC as in effect in the Relevant UCC State), except in connection with
the enforcement or collection of a Receivable. Except in such circumstances, the Transferor
will take no action to cause any Receivable to be anything other than an “account” or a
“payment intangible” (as defined in the UCC as in effect in the Relevant UCC State).




     (b) Security Interests. Except for the conveyances hereunder, the Transferor
will not sell, pledge, assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any Lien (arising through or under the Transferor) on, any
Receivable, whether now existing or hereafter created, or any interest therein; the
Transferor will immediately notify the Trustee of the existence of any Lien of which it has
knowledge on



30









 






any Receivable; and the Transferor shall defend the right, title and interest of the
Trust in, to and under the Receivables, whether now existing or hereafter created, against
all claims of third parties claiming through or under the Transferor; provided,
however, that nothing in this subsection 2.5(b) shall prevent or be deemed to
prohibit the Transferor from suffering to exist upon any of the Receivables any Permitted
Lien.




     (c) Delivery of Collections. In the event that the Transferor receives
Collections, the Transferor agrees to deposit such Collections into the Collection Account
as soon as practicable after the receipt thereof, but in no event later than two Business
Days after receipt thereof.




     (d) Notice of Liens. The Transferor shall notify the Trustee promptly after
becoming aware of any Lien on any Receivable other than Permitted Liens.




     (e) Enforcement of Purchase Agreements. The Transferor agrees to take all
action necessary and appropriate to enforce its rights and claims under the Purchase
Agreement.




     (f) Compliance and Separate Business.




          (i) During the term of this Agreement, the Transferor will, subject to the terms of
this Agreement, 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 and
each other instrument or agreement necessary or appropriate to the proper administration of
this Agreement.




          (ii) The Transferor will hold such appropriate meetings of its board of directors as
are necessary to authorize all of its corporate actions required by law to be authorized by
the board of directors, will 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 to such Transferor that is not a corporation shall observe similar procedures in
accordance with its governing documents and applicable law).




          (iii) The Transferor shall not engage in any other business other than as provided in
its certificate of incorporation. During the term of this Agreement, the Transferor will
comply with the limitations on its business activities, as set forth in its certificate of
incorporation, and will not incur indebtedness other than pursuant to or as expressly
permitted by this Agreement, the Purchase Agreement, or its certificate of incorporation.




          (iv) The Transferor will not permit its assets to be commingled with those of HSBC
Nevada, HRAC II, HSBC Finance, or any other Affiliate and the Transferor shall maintain
separate corporate records, books of account and bank accounts from those of HSBC Nevada,
HRAC II, HSBC Finance, or any other Affiliate.



31









 






          (v) The Transferor will not become involved in the day to day management of any other
Person.




          (vi) So as not to mislead others as to the identity of the entity with which those
others are concerned, the Transferor will (A) not conduct its business in the name of HSBC
Nevada, HRAC II, HSBC Finance, or any other Affiliate, (B) cause HSBC Nevada, HRAC II, HSBC
Finance, or any other Affiliate to conduct its business solely in its own name, and (C) at
all times hold itself out to the public under its own name as a separate legal entity from
HSBC Nevada, HRAC II, HSBC Finance, or any other Affiliate.




          (vii) The Transferor will provide for its own operating expenses and liabilities from
its own funds, except that the organizational expenses of the Transferor may be paid by
either HSBC Nevada or HSBC Finance.




          (viii) The Transferor will not hold itself out, or permit itself to be held out, as
having agreed to pay, or as generally being liable for, the debts of HSBC Nevada, HRAC II,
HSBC Finance, or any other Affiliate.




          (ix) The Transferor shall cause HSBC Nevada, HRAC II, HSBC Finance, and any other
Affiliate not to hold itself out, or permit itself to be held out, as having agreed to pay,
or as generally being liable for, the debts of the Transferor except that the organizational
expenses of the Transferor may be paid by an Affiliate.




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




          (xi) The Transferor will not guarantee any other Person’s obligations or advance funds
to any other Person for the payment of expenses or otherwise.




          (xii) The Transferor will not act as an agent of any other Person in any capacity.




          (xiii) During the term of this Agreement, the Transferor will ensure that its corporate
records indicate that the Preferred Stock has been issued to the Trustee.




     (g) Notices under the Purchase Agreement. The Transferor (i) shall promptly
give the Trustee copies of any notices, reports or certificates given or delivered to the
Transferor under the Purchase Agreement, (ii) shall not, without the consents, approvals and
opinions, if any, required by Section 13.1, as if Section 13.1 related to such Purchase
Agreement rather than this Agreement, enter into any amendment, supplement or other
modification to, or waiver of any provision of, the Purchase Agreement and (iii) shall not
authorize the addition or removal of an Account or a Receivable to or from the operation of
the Purchase Agreement unless there is a corresponding right or obligation of the Transferor
to add or remove such Account or Receivable to or from the Trust.




     (h) Interchange. On or before each Determination Date, the Transferor shall
notify the Servicer of the amount of Interchange to be included as Finance Charge



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Collections with respect to the preceding Monthly Period, which shall be equal to the
amount of Interchange paid to the Transferor or its designee pursuant to the Purchase
Agreement with respect to such Monthly Period. On or before each Transfer Date, the
Transferor or its designee shall pay the Servicer the amount of Interchange to be included
as Finance Charge Collections allocable to the Investor Securities with respect to the
preceding Monthly Period.



          Section 2.6 Addition of Accounts.




          (a) By a written assignment supplementing this Agreement (except in the case of Additional
Accounts listed on the Account Schedule delivered on or prior to the Amendment Closing Date), the
Transferor in its sole discretion may designate Additional Accounts for automatic inclusion in the
Trust, and all Receivables in such Additional Accounts, whether such Receivables are then existing
or thereafter created, shall be transferred automatically to the Trustee pursuant to Section 2.1
and such assignment.




          (b) Notwithstanding the foregoing, the Transferor may elect at any time, or may be required
pursuant to subsection 2.6(g), to suspend the automatic inclusion of Additional Accounts on any
Business Day (the “Automatic Addition Suspension Date”), or terminate any such inclusion on any
Business Day (an “Automatic Addition Termination Date”) until a date (the “Restart Date”) to be
identified in writing by the Transferor to the Trustee, the Servicer and each Rating Agency at
least 10 days prior to such Restart Date. Promptly after an Automatic Addition Suspension Date or
any Automatic Addition Termination Date, or a Restart Date, the Transferor and the Trustee agree to
authorize and the Transferor agrees to record and file at its own expense an amendment to the
financing statements referred to in Section 2.1 hereof (if necessary) to specify the accounts then
subject to this Agreement (which specification may incorporate a list of accounts by reference) and
may, except in connection with any such filing made after a Restart Date, release any security
interest in any accounts created after the Automatic Addition Suspension Date or any Automatic
Addition Termination Date.




          (c) If the Transferor has elected to terminate or suspend the inclusion of Additional Accounts
and (i) on the tenth Business Day prior to any Determination Date, the Transferor Interest for the
related Monthly Period is less than the Minimum Transferor Interest, the Transferor shall designate
Supplemental Accounts to be included as Accounts in a sufficient amount such that the Transferor
Interest as a percentage of the Aggregate Principal Receivables for such Monthly Period after
giving effect to such addition is at least equal to the Minimum Transferor Interest, or on any
Record Date, the Aggregate Principal Receivables is less than the Minimum Aggregate Principal
Receivables, the Transferor shall designate Supplemental Accounts to be included as Accounts in a
sufficient amount such that the Aggregate Principal Receivables will be equal to or greater than
the Minimum Aggregate Principal Receivables. Receivables from such Supplemental Accounts shall be
transferred to the Trust on or before the tenth Business Day following such Record Date.




          (d) In addition to its obligation under subsection 2.6(c), the Transferor may, but shall not
be obligated to, subject to the conditions specified under subsection 2.6(e), designate from time
to time Supplemental Accounts to be included as Accounts.




33









 








          (e) Unless otherwise specified in a Series Supplement, the Transferor agrees that any such
transfer of Receivables in Supplemental Accounts, under subsection 2.6(c) or (d), shall satisfy the
following conditions (to the extent provided below):





          (i) on or before the fifth Business Day prior to the Addition Date with respect to
additions pursuant to subsection 2.6(c) and on or before the tenth Business Day prior to the
Addition Date with respect to additions pursuant to subsection 2.6(d) (as applicable, the
“Notice Date”), the Transferor shall give the Trustee, each Rating Agency and the Servicer
written notice that such Supplemental Accounts will be included, which notice shall specify
the approximate aggregate amount of the Receivables to be transferred;




          (ii) on or before the applicable Addition Date, the Transferor and the Trustee shall
have executed a written assignment in substantially the form of Exhibit H (the “Assignment”)
and the Transferor shall have indicated in its computer files that the Receivables created
in connection with the Supplemental Accounts have been transferred to the Trustee by
identifying such Supplemental Accounts in its master file maintained in its computer files
with the designation portfolio ID 0001 and the Transferor shall have delivered to the
Trustee an Account Schedule pursuant to Section 2.1;




          (iii) the Transferor shall represent and warrant that (x) no selection procedure that
is materially adverse to the interests of the Investor Securityholders was utilized in
selecting the Supplemental Accounts and (y) on the applicable Addition Date, the Transferor
is not insolvent and will not be rendered insolvent upon the transfer of Receivables to the
Trust;




          (iv) the Transferor shall represent and warrant that, on the Addition Date, the
Assignment constitutes either (x) a valid transfer and assignment to the Trustee of all
right, title and interest of the Transferor in and to the Receivables then existing and
thereafter created and arising in connection with the Supplemental Accounts and the proceeds
thereof, and such Receivables and all proceeds thereof will be held by the Trustee free and
clear of any Lien of any Person claiming through or under the Transferor, except for (i)
Permitted Liens, (ii) the interest of the Transferor as Holder of the Exchangeable
Transferor Security and any other Class or Series of Securities and (iii) the Transferor’s
right, if any, to receive interest accruing on, and investment earnings, if any, in respect
of, any Interest Funding Account and any Principal Account, the Excess Funding Account or
any Series Account as provided in this Agreement and any related Supplement or (y) a grant
of a security interest (as defined in the UCC as in effect in the Relevant UCC State) in
such property to the Trustee, which is enforceable with respect to then existing Receivables
of the Supplemental Accounts and the proceeds (as defined in the UCC as in effect in the
Relevant UCC State) thereof upon the conveyance of such Receivables to the Trustee, and
which will be enforceable with respect to the Receivables thereafter created in respect of
Supplemental Accounts designated on such Addition Date and the proceeds (as defined in the
UCC as in effect in the Relevant UCC State) thereof upon such creation; and (z) if the
Assignment constitutes the grant of a security interest to the Trustee in such property,
upon the filing of a financing statement as described in Section 2.1 with respect to such
Supplemental Accounts and in the case of the



34









 






Receivables thereafter created in such Supplemental Accounts and the proceeds (as
defined in the UCC as in effect in the Relevant UCC State) thereof, upon such creation, the
Trustee shall have a first priority perfected security interest in such property, except for
Permitted Liens;




          (v) the Transferor shall deliver to the Trustee an Officer’s Certificate of the
Transferor substantially in the form of Schedule 2 to Exhibit H confirming the items set
forth in paragraph (ii) above;




          (vi) the Transferor shall deliver to the Trustee an Opinion of Counsel with respect to
the Receivables in the Supplemental Accounts (with a copy to the Rating Agencies)
substantially in the form of Exhibit I; and




          (vii) unless the Transferor shall have received written notice from each Rating Agency
that the inclusion of such accounts as Supplemental Accounts pursuant to subsection 2.6(c)
or (d), as the case may be, will not result in the reduction or withdrawal of its then
existing rating of any Class of any Series of Investor Securities then issued and
outstanding and shall have delivered such notice to the Trustee, the number of Supplemental
Accounts the Receivables of which are designated to be included in the Trust pursuant to
subsection 2.6(c) or (d) since (A) the first day of the eleventh preceding Monthly Period
minus the number of Accounts of the type described in clause (ii) of the definition
of “Approved Account” which have been added to the Trust since the first day of such
eleventh preceding Monthly Period, shall not exceed 20% of the number of Accounts on the
first day of such eleventh preceding Monthly Period, and (B) the first day of the second
preceding Monthly Period minus the number of Accounts of the type described in
clause (ii) of the definition of “Approved Account” which have been added to the Trust since
the first day of such second preceding Monthly Period, shall not exceed 15% of the number of
Accounts on the first day of such second preceding Monthly Period; provided,
however, that the aggregate principal balance in the Supplemental Accounts specified
(y) in clause (A) above shall not exceed the product of (i) 20% and (ii) the Aggregate
Principal Receivables determined as of the first day of the eleventh preceding Monthly
Period and (z) in clause (B) above shall not exceed the product of (i) 15% and (ii) the
Aggregate Principal Receivables determined as of the first day of the second preceding
Monthly Period; provided further, however, that the Supplemental
Accounts specified in clauses (A) and (B) above shall not include Accounts not initially
originated by DMCCB, HSBC Nevada, the respective successors or assigns of either of them, or
any Affiliate thereof; provided further, however, that the first and
second provisos to this subsection 2.6(e)(vii) may be changed or eliminated at any time if
the Transferor shall have received written notice from each Rating Agency that such action
will not result in the reduction or withdrawal of its then existing rating of any Class of
any Series of Investor Securities then issued and outstanding and shall have delivered such
notice to the Trustee.



          (f) The Transferor shall be permitted to designate Additional Accounts with respect to any
Monthly Period (the “Current Monthly Period”) prior to the last day of the May 1996 Monthly Period
pursuant to subsection 2.6(a) of the Agreement, without limitation,




35









 







provided, however, that with respect to each Monthly Period beginning with the
September 1995 Monthly Period:





          (i) the arithmetic average for the three Monthly Periods preceding the Current Monthly
Period, of the annualized percentage equivalent of a fraction for each respective Monthly
Period, the numerator of which is equal to the Default Amount for the respective Monthly
Period (provided, however, that the Default Amount with respect to each
Default Recognition Date shall be deemed to apply to the Monthly Period ending closest to
such Default Recognition Date) and the denominator of which is equal to the average amount
of Aggregate Principal Receivables outstanding on each day during such Monthly Period, is
less than 6%;




          (ii) the arithmetic average for the three Monthly Periods preceding the Current Monthly
Period, of the percentage (the “Payment Rate Percentage”) equivalent of a fraction for each
respective Monthly Period, the numerator of which is equal to the amount of Collections
received during the respective Monthly Period and the denominator of which is equal to the
Aggregate Principal Receivables as of the first day of the respective Monthly Period, is
greater than or equal to 6%;




          (iii) the weighted average of the Portfolio Yields for each Series then outstanding for
the three Monthly Periods preceding the Current Monthly Period minus the weighted average of
the Base Rates for each Series then outstanding for such three Monthly Periods (the “Excess
Spread Percentage”) is greater than or equal to 4%; or




          (iv) Standard & Poor’s shall not have notified the Transferor that the continued
addition of Additional Accounts pursuant to this subsection 2.6(f) will result in a
reduction or withdrawal of the then current rating of any Class by Standard & Poor’s.



          In the event that as of any date of determination prior to last day of the May 1996 Monthly
Period any of the conditions in clauses (i) through (iii) listed above is not met, and with respect
to each Monthly Period after the May 1996 Monthly Period, this subsection 2.6(f) shall no longer
apply and the conditions of subsection 2.6(g) shall apply. On or before the later of (x) the last
day of the September 1995 Monthly Period, the December 1995 Monthly Period and the March 1996
Monthly Period or (y) in each case the tenth day following receipt of the settlement statement for
the prior Monthly Period, Standard & Poor’s shall determine whether a Ratings Event shall have
occurred in connection with the addition of Additional Accounts during the three consecutive
Monthly Periods ending in August, November and February preceding such date. Upon the occurrence
of a Ratings Event in connection with the addition of Additional Accounts this subsection 2.6(f)
shall no longer apply and the conditions of subsection 2.6(g) shall apply.




          (g) Unless each Rating Agency otherwise consents to the continued automatic addition of
accounts, on and after the beginning of the June 1996 Monthly Period, the Transferor shall be
required to cease the automatic addition of accounts and notify the Trustee, the Servicer and each
Rating Agency of the Automatic Addition Suspension Date in the following circumstances: the number
of Accounts the Receivables of which are designated to be included in the Trust pursuant to
subsection 2.6(a) since (i) the first day of the eleventh preceding




36









 







Monthly Period (or, in the case of any date on which Additional Accounts are to be added to
the Trust which occurs on or before the last day of the May 1997 Monthly Period, June 1, 1996)
minus the number of Accounts of the type described in clause (ii) of the definition of “Approved
Account” which have been added on the initial day of the addition of such type of Account pursuant
to such clause (ii) since the first day of such eleventh preceding Monthly Period (or June 1, 1996,
as the case may be) shall not exceed 20% of number of Accounts on the first day of such eleventh
preceding Monthly Period (or June 1, 1996, as the case may be), and (ii) the first day of the
second preceding Monthly Period (or, in the case of any date on which Additional Accounts are to be
added to the Trust which occurs on or before the last day of the August 1996 Monthly Period, June
1, 1996) minus the number of Accounts of the type described in clause (ii) of the definition of
“Approved Accounts” have been added on the initial day of the addition of such type of Account
pursuant to such clause (ii) since the first day of such second preceding Monthly Period (or June
1, 1996, as the case may be) shall not exceed 15% of the number of Accounts on the first day of
such second preceding Monthly Period (or June 1, 1996, as the case may be) ; provided,
however, that the Additional Accounts specified in clauses (i) and (ii) above shall not
include Accounts not initially originated by DMCCB, HSBC Nevada, the respective successors or
assigns of either of them, or any Affiliate thereof; provided, however, that no
Accounts related to Discover Cards may be automatically included under this Section 2.6(g) unless
the Transferor shall have received the consent of each Rating Agency; provided,
further, however, that the immediately preceding proviso to this subsection 2.6(g)
may be changed or eliminated at any time if the Transferor shall have received written notice from
each Rating Agency that such action will not result in the reduction or withdrawal of its then
existing rating of any Class of any Series of Investor Securities then issued and outstanding and
shall have delivered such notice to the Trustee.




          Section 2.7 Removal of Accounts.




          (a) On each Determination Date that the Transferor Interest for the related Monthly Period
exceeds the Minimum Transferor Interest with respect to such Determination Date, the Trustee shall
be deemed to have offered to the Transferor automatically and without any notice to or action by or
on behalf of the Trustee, as of such Determination Date, the right to remove from the Trust all of
the Trust’s right, title and interest in, to and under the Receivables then existing and thereafter
created, all monies then due or to become due and all amounts thereafter received with respect
thereto and all proceeds thereof in or with respect to those Accounts designated by the Transferor
(the “Removed Accounts”) in an aggregate amount not greater than the lesser of (i) the excess of
the Transferor Interest over the Minimum Transferor Interest and (ii) the excess of Aggregate
Principal Receivables over the Minimum Aggregate Principal Receivables. To accept such offer, the
Transferor is required to furnish to the Trustee and each Rating Agency written notice by the fifth
Business Day after the Determination Date specifying the approximate aggregate amount of Principal
Receivables covered by the offer that the Transferor intends to accept. There shall be no more
than one such removal with respect to any Monthly Period.




          (b) In addition to the satisfaction of the conditions set forth in subsection 2.7(a), the
Transferor shall be permitted to accept reassignment to it of the Receivables from Removed Accounts
only upon satisfaction of the following conditions:




37









 









          (i) On each date specified by the Transferor for removal of the Removed Accounts (a
“Removal Date”), the Transferor and the Trustee shall execute a written reassignment in
substantially the form of Exhibit J (the “Reassignment”) and the Transferor shall deliver to
the Trustee a true and complete Account Schedule reflecting the removal of the Removed
Accounts.




          (ii) The Transferor shall have delivered to the Trustee an Officer’s Certificate, dated
the Removal Date, to the effect that the Transferor reasonably believes that (A) such
removal will not have a material and adverse effect on the interests of the Trust or the
Investor Securityholders, and (B) no selection procedures believed by the Transferor to be
materially adverse to the interests of the Securityholders have been used in selecting the
Removed Accounts..




          (iii) The Transferor shall represent and warrant that the removal of any Receivables in
any Removed Accounts on any Removal Date shall not, in the reasonable belief of the
Transferor, cause, immediately or with the passage of time, a Pay Out Event to occur.




          (iv) The Transferor shall have delivered at least 20 days’ (or such lesser number as
any Rating Agency may agree) prior written notice (which may be given prior to the Removal
Date in expectation that the Trustee will make the offer described in subsection 2.7(a)) of
such removal to each Rating Agency that has rated any outstanding Class of any Series and
the Trustee shall have received written confirmation from each such Rating Agency that such
Rating Agency will not reduce or withdraw its rating on any outstanding Class of any Series
as a result of such removal.




          (v) The Transferor shall have delivered to the Trustee an Officer’s Certificate of the
Transferor confirming the Transferor’s compliance with the items set forth in paragraphs (i)
through (iv) above. The Trustee may conclusively rely on such certificate, shall have no
duty to make inquiries with regard to the matters set forth therein and shall incur no
liability in so relying.


provided that, the conditions listed in clauses (i) through (v) above need not be satisfied if the
Removed Accounts are Zero Balance Accounts.




          (c) In addition to the satisfaction of the conditions set forth in subsections 2.7(a) and (b),
the Transferor’s right to require the reassignment to it of the Receivables in Removed Accounts,
shall be subject to the following restrictions:





          (i) Except for Removed Accounts described in subsection 2.7(c)(ii), the Accounts to be
designated as Removed Accounts shall be selected by the Transferor in a manner which will
not materially and adversely affect the interests of the Trust or the Investor
Securityholders.




          (ii) The Transferor may designate Removed Accounts as provided in and subject to the
terms and conditions contained in this Section 2.7 without being subject to the restrictions
set forth in subsection 2.7(c)(i) if the Removed Accounts are



38









 






designated in response to a third-party action or decision not to act and not the
unilateral action of the Transferor.



          (d) Upon satisfaction of the conditions set forth in subsections 2.7(a), (b), and (c), the
Receivables from the Removed Accounts shall no longer constitute part of the Trust.




          Section 2.8 Discount Option.




          (a) The Transferor shall have the option to designate a percentage, which may be a fixed
percentage or a variable percentage based on a formula (the “Discount Percentage”), of Principal
Receivables, without giving effect to any discounting pursuant to this Section 2.8, arising on or
after the date of such designation, to be treated as Finance Charge Receivables. The Transferor
shall provide to the Servicer, the Trustee, any Enhancement Provider and the Rating Agency 15 days’
prior written notice of such designation, and such designation shall become effective on the date
designated therein (i) unless such designation in the reasonable belief of the Transferor would
cause a Pay Out Event to occur, or an event which, with notice or the lapse of time or both, would
constitute a Pay Out Event and (ii) only if the Rating Agency shall have delivered a letter to the
Transferor and the Trustee confirming that its then current rating of the Investor Securities of
any Series then outstanding will not be reduced or withdrawn as a result of such designation.




          (b) After the date on which the Transferor’s exercise of its discount option takes effect, and
with respect to Receivables generated on and after such date, the Transferor, in accordance with
Section 4.3, shall deposit into the Collection Account in immediately available funds an amount
equal to the amount of the Discount Option Receivable Collections processed on such day. The
deposit made by the Transferor into the Collection Account under the preceding sentence shall be
considered a payment of such Discount Option Receivables and shall be applied as Finance Charge
Receivables in accordance with Article IV.




          Section 2.9 Covenants of the Transferor with Respect to the Purchase Agreement. The
Transferor, in its capacity as purchaser of Receivables from Metris or from HRAC II pursuant to a
Purchase Agreement, as applicable, or a Credit Card Originator, hereby covenants that the
Transferor will at all times enforce the covenants and agreements of Metris, HRAC II, and each
Credit Card Originator in the applicable Purchase Agreement, the applicable Bank Receivables
Purchase Agreement or any other agreement, including, without limitation, any covenants to the
effect set forth below.




          (a) Periodic Finance Charges and Other Fees. Except as otherwise required by any
Requirement of Law, or as is deemed by the applicable Credit Card Originator in its sole discretion
to be necessary in order to maintain its credit card business or a program operated by such Credit
Card Originator to administer such credit card business on a competitive basis, it shall not at any
time reduce the annual percentage rates of the Periodic Finance Charges assessed on the Receivables
or other fees charged on any of the Accounts if, as a result of any such reduction, either (i) such
Credit Card Originator’s reasonable expectation is that such reduction will cause a Pay Out Event
to occur so long as there are Investor Securities outstanding or (ii) such reduction is not also
applied to any comparable segment of consumer revolving credit




39









 







card accounts owned by such Credit Card Originator that have characteristics the same as, or
substantially similar to, such Accounts.




          (b) Credit and Collection Policy and Contracts. Subject to compliance with all
Requirements of Law, the applicable Credit Card Originator and the Servicer shall comply with and
perform its obligations under the Contracts relating to the Accounts and the Credit and Collection
Policy except insofar as any failure so to comply or perform would not materially and adversely
affect the rights of the Trust and the beneficiaries thereof. Subject to compliance with all
Requirements of Law, the Servicer or such Credit Card Originator may change the terms and
provisions of the Contracts or the Credit and Collection Policy with respect to any of the Accounts
in any respect (including the calculation of the amount, or the timing, of charge-offs and the
Periodic Finance Charges and other fees to be assessed thereon) only if in the reasonable judgment
of the Servicer or such Credit Card Originator, as applicable, (i) at the time of such action, the
Servicer or Credit Card Originator reasonably believes that such action will not materially and
adversely affect the rights of the Trust or the beneficiaries thereof, and (ii) such change is made
applicable to the comparable segment of the revolving credit accounts owned by the Credit Card
Originator or serviced by the Servicer which have characteristics the same as, or substantially
similar to, the Accounts that are the subject of such change, except as otherwise restricted by an
endorsement, sponsorship, or other agreement between HSBC Nevada or an Affiliate of HSBC Nevada (or
Credit Card Originator if HSBC Nevada is not the Credit Card Originator) and an unrelated third
party or by the terms of the Contracts.




          The Transferor further covenants that the Transferor will not enter into any amendments to the
Purchase Agreement that would cause a Ratings Event to occur so long as there are Investor
Securities outstanding.




          Section 2.10 Receivables in Defaulted Accounts. On the date on which an Account
becomes a Defaulted Account, the Trust shall automatically and without further action or
consideration be deemed to transfer, set over, and otherwise convey to the Transferor, without
recourse, representation or warranty, all the right, title and interest of the Trust in and to the
Receivables in such Defaulted Account, all monies due or to become due with respect thereto, all
proceeds of such Receivables allocable to the Trust with respect to such Receivable, excluding
Recoveries relating thereto, which shall remain a part of the Trust Property. On each
Determination Date, the Servicer shall calculate the aggregate Series Default Amount for the
preceding Monthly Period with respect to each Series.




[End of Article II]




40









 








ARTICLE III




ADMINISTRATION AND SERVICING

OF RECEIVABLES




          Section 3.1 Acceptance of Appointment and Other Matters Relating to the Servicer.




          (a) HSBC Finance agrees, as of the Effective Date, to act as the Servicer under this
Agreement. The Investor Securityholders of each Series by their acceptance of the related
Securities consent to HSBC Finance acting as Servicer. Notwithstanding the foregoing or any other
provisions of this Agreement or any Supplement, the Investor Securityholders consent to an
Affiliate of HSBC Finance acting as Servicer hereunder, in full substitution thereof; provided that
such Affiliate shall expressly assume in writing (unless such assumption occurs by operation of
law), by an agreement supplemental hereto, executed by and delivered to the Transferor and the
Trustee, the performance of every covenant and obligation of the Servicer, as applicable hereunder,
and shall in all respects be designated the Servicer under this Agreement;




          (b) The Servicer shall service and administer the Receivables and shall collect payments due
under the Receivables in accordance with its customary and usual servicing procedures and the
Credit and Collection Policies and shall have full power and authority, acting alone or through any
party properly designated by it hereunder, to do any and all things in connection with such
servicing and administration that it may deem necessary or desirable. Without limiting the
generality of the foregoing and subject to Section 10.1, the Servicer is hereby authorized and
empowered (i) to make withdrawals from the Collection Account as set forth in this Agreement, (ii)
unless such power and authority is revoked by the Trustee on account of the occurrence of a
Servicer Default pursuant to Section 10.1, to instruct the Trustee in writing to make withdrawals
and payments, from any Interest Funding Account, the Excess Funding Account, any Principal Account
and any Series Account, in accordance with such instructions as set forth in this Agreement, (iii)
unless such power and authority is revoked by the Trustee on account of the occurrence of a
Servicer Default pursuant to Section 10.1, to instruct the Trustee in writing to take any action
permitted or required under any Enhancement at such time as set forth in this Agreement and any
Supplement, (iv) to execute and deliver, on behalf of the Trust for the benefit of the
Securityholders, any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, and all other comparable instruments, with respect to the Receivables and,
after the delinquency of any Receivable and to the extent permitted under and in compliance with
applicable law and regulations, to commence enforcement proceedings with respect to such
Receivables, (v) at the expense of the Transferor, to make any filings, reports, notices,
applications, registrations with, and to seek any consents or authorizations from, the Securities
and Exchange Commission and any state securities authority on behalf of the Trust as may be
necessary or advisable to comply with any federal or state securities or reporting requirements (it
being understood that any amounts to be paid by the Transferor pursuant to this clause (v) shall
not be payable from the Trust Property conveyed by the Transferor hereunder) and (vi) to delegate
certain of its service, collection, enforcement and administrative duties hereunder with respect to
the Accounts and the Receivables to any Person who agrees to conduct such duties in accordance with
the Credit and Collection Policies; provided, however, that the Servicer shall
notify the Transferor and the Trustee in writing of any




41









 







such delegation; and provided further that the Servicer shall remain jointly and severally
liable with such Person. The Trustee agrees that it shall promptly follow the instructions of the
Servicer or its delegate to withdraw funds from the Collection Account, any Principal Account, any
Interest Funding Account, the Excess Funding Account, or any Series Account and to take any action
required under any Enhancement at such time as required under this Agreement. The Trustee shall
execute at the Servicer’s written request such documents prepared by the Transferor and acceptable
to the Trustee as the Servicer certifies are necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.




          (c) The Servicer shall not be obligated to use separate servicing procedures, offices or
employees for servicing the Receivables from the procedures, offices and employees used by the
Servicer in connection with servicing other credit card receivables.




          Section 3.2 Servicing Compensation. As compensation for its servicing activities
hereunder and reimbursement for its expenses as set forth in the immediately following paragraph,
the Servicer shall be entitled to receive a servicing fee in respect of each Business Day prior to
the termination of the Trust pursuant to Section 12.1 (the “Servicing Fee”), payable in arrears on
each date and in the manner specified in the applicable Supplement, equal to the product of (i) a
fraction, the numerator of which is the actual number of days from but excluding the next preceding
Business Day to and including such Business Day and the denominator of which is the actual number
of days in the year, (ii) the weighted average Series Servicing Fee Percentage for all outstanding
Series (based upon the Series Servicing Fee Percentage for each Series and the Invested Amount of
such Series) and (iii) the daily average aggregate balance of all Principal Receivables over the
term of such measuring period. The share of the Servicing Fee allocable to each Series with
respect to any date of payment shall be equal to the product of (i) a fraction, the numerator of
which is the actual number of days in the measuring period specified in the applicable Supplement
and the denominator of which is the actual number of days in the year, (ii) the applicable Series
Servicing Fee Percentage for such Series and (iii) the Invested Amount of such Series, as
appropriate, as of the date of determination for such payment as specified in the applicable
Supplement. The remainder of the Servicing Fee (and any Servicing Fee allocable to the Investor
Securities but not paid) shall be paid by the Transferor, or retained by the Servicer as provided
in Article IV, and in no event shall the Trust, the Trustee, any Enhancement Provider, or the
Investor Securityholders be liable for the share of the Servicing Fee allocable to the Transferor,
nor shall any amounts to be paid by the Transferor pursuant to this Section 3.2 be payable from the
Trust Property conveyed by the Transferor hereunder.




          The Servicer shall be responsible for its own expenses, which shall include the amounts due to
the Trustee pursuant to Section 11.5 and the reasonable fees and disbursements of independent
public accountants and all other expenses incurred by the Servicer in connection with its
activities hereunder; provided, that the Servicer shall not be liable for any liabilities,
costs or expenses of the Trust, the Investor Securityholders or the Security Owners arising under
any tax law, including without limitation any federal, state or local income or franchise taxes or
any other tax imposed on or measured by income (or any interest, penalties or additions with
respect thereto or arising from a failure to comply therewith). In the event that the Servicer
fails to pay any amounts due to the Trustee pursuant to Section 11.5, the Trustee shall be entitled
to deduct and receive such amounts from the Servicing Fee prior to the payment thereof to the
Servicer and the obligations of the Trust to pay any such amounts shall thereby be fully satisfied.




42









 







The Servicer shall be required to pay such expenses for its own account and shall not be
entitled to any payment therefor other than the Servicing Fee.




          Section 3.3 Representations, Warranties and Covenants of the Servicer. HSBC Finance,
as Servicer, hereby makes, and any Successor Servicer by its appointment hereunder shall make, the
following representations and warranties on which the Trustee has relied in accepting the
Receivables in trust and in authenticating the Securities issued on the Initial Closing Date:




          (a) Organization and Good Standing. The Servicer is either (i) a national banking
association duly organized, validly existing and in good standing under the laws of the United
States or (ii) a corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has the corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its obligations under this Agreement.




          (b) Due Qualification. The Servicer is duly qualified to do business and is in good
standing (or is exempt from such requirements) as a foreign corporation in any state where such
qualification is necessary in order to service the Receivables as required by this Agreement and
has obtained all necessary licenses and approvals as required under Federal and state law in order
to service the Receivables as required by this Agreement, and if the Servicer shall be required by
any Requirement of Law to so qualify or register or obtain such license or approval, then it shall
do so except where the failure to obtain such license or approval does not materially affect the
Servicer’s ability to perform its obligations hereunder or the enforceability of the Receivables.




          (c) Due Authorization. The execution and delivery by the Servicer of this Agreement
and the consummation by the Servicer of the transactions provided for herein, have been duly
authorized by the Servicer by all necessary corporate action on the part of the Servicer.




          (d) Binding Obligation. This Agreement and the consummation of the transactions
provided for herein, constitutes a legal, valid and binding obligation of the Servicer, enforceable
against the Servicer in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors’ rights in general and as such
enforceability may be limited by general principles of equity (whether considered in a proceeding
at law or in equity).




          (e) No Violation. The execution and delivery of this Agreement by the Servicer, and
the performance by the Servicer of the transactions contemplated by this Agreement and the
fulfillment by the Servicer of the terms hereof applicable to the Servicer, will not violate,
result in any breach of any of the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any Requirement of Law applicable to the Servicer
or any material indenture, contract, agreement, mortgage, deed of trust or other material
instrument to which the Servicer is a party or by which it is bound.




43









 








          (f) No Proceedings. There are no proceedings or investigations pending or, to the
best knowledge of the Servicer, threatened against the Servicer before any Governmental Authority
(i) asserting the invalidity of this Agreement, (ii) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by this Agreement, (iii)
seeking any determination or ruling that would materially and adversely affect the performance by
the Servicer of its obligations under this Agreement, (iv) seeking any determination or ruling that
would materially and adversely affect the validity or enforceability of this Agreement or (v)
seeking to affect adversely the tax attributes of the Trust.




          (g) Compliance with Requirements of Law. The Servicer shall duly satisfy all
obligations on its part to be fulfilled under or in connection with each Receivable and the related
Contract, will maintain in effect all qualifications required under Requirements of Law in order to
service properly each Receivable and the related Contract and will comply in all material respects
with all other Requirements of Law in connection with servicing each Receivable and the related
Contract the failure to comply with which would have a material adverse effect on the
Securityholders or any Enhancement Provider.




          (h) Protection of Securityholders’ Rights. The Servicer shall take no action which,
nor omit to take any action the omission of which, would impair the rights of the Trustee in any
Receivable or the rights or obligations of any Enhancement Provider, nor shall it reschedule,
revise or defer payments due on any Receivable except in accordance with the Credit and Collection
Policies.




          (i) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Governmental Authority required in connection with the execution and delivery by the
Servicer of this Agreement and the performance by the Servicer of the transactions contemplated by
this Agreement and the fulfillment by the Servicer of the terms hereof, have been obtained;
provided, however, that the Servicer makes no representation or warranty regarding
State securities or “Blue Sky” laws in connection with the distribution of the Securities.




          (j) Rescission or Cancellation. The Servicer shall not cause any rescission or
cancellation of any Receivable except as ordered by a court of competent jurisdiction or other
Governmental Authority or in accordance with the Credit and Collection Policy or the normal
operating procedures of the Servicer.




          (k) Receivables Not To Be Evidenced by Instruments or Chattel Paper. Except in
connection with its enforcement or collection of an Account (in which case any such instrument or
chattel paper would be made in the name of the Trustee), the Servicer will take no action to cause
any Receivable to be evidenced by an instrument or chattel paper (as defined in the UCC as in
effect in the Relevant UCC State); provided, however, that Receivables evidenced by
instruments or chattel paper taken from Obligors in the ordinary course of the Servicer’s
collection efforts and maintained in the possession of the Servicer shall not result in a breach of
this subsection.




          (l) Principal Place of Business. The Servicer shall at all times maintain its
principal executive offices within the United States.




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          (m) Credit and Collection Policy and Contracts. Subject to compliance with all
Requirements of Law, the applicable Credit Card Originator and the Servicer shall comply with and
perform its obligations under the Contracts relating to the Accounts and the Credit and Collection
Policy except insofar as any failure so to comply or perform would not materially and adversely
affect the rights of the Trust and the beneficiaries thereof. Subject to compliance with all
Requirements of Law, the Servicer or such Credit Card Originator may change the terms and
provisions of the Contracts or the Credit and Collection Policy with respect to any of the Accounts
in any respect (including the calculation of the amount, or the timing, of charge-offs and the
Periodic Finance Charges and other fees to be assessed thereon) only if in the reasonable judgment
of the Servicer or such Credit Card Originator, as applicable, (i) at the time of such action, the
Servicer or Credit Card Originator reasonably believes that such action will not materially and
adversely affect the rights of the Trust or the beneficiaries thereof, and (ii) such change is made
applicable to the comparable segment of the revolving credit accounts owned by the Credit Card
Originator or serviced by the Servicer which have characteristics the same as, or substantially
similar to, the Accounts that are the subject of such change, except as otherwise restricted by an
endorsement, sponsorship, or other agreement between HSBC Nevada or an Affiliate of HSBC Nevada (or
Credit Card Originator if HSBC Nevada is not the Credit Card Originator) and an unrelated third
party or by the terms of the Contracts.



In the event any of the representations, warranties or covenants of the Servicer set forth in this
Section 3.3 are breached, the Transferor, the Trustee and the Trust shall have the remedies set
forth in Section 8.4.




          Section 3.4 Settlement Statement. On the second Business Day prior to each
Distribution Date, the Servicer shall, prior to 3:00 p.m. (New York City time) on such day,
deliver to the Transferor, the Trustee and the Paying Agent the Settlement Statement for the
related Monthly Period substantially in the form of Exhibit C hereto, including the following
information (which, in the case of clauses (iii), (iv) and (v) below, will be stated on the basis
of an original principal amount of $1,000 per Security): (i) the aggregate amount of Collections
received in the Collection Account for the Monthly Period preceding such Determination Date and the
aggregate amount of Finance Charge Collections and the aggregate amount of Principal Collections
processed during such Monthly Period; (ii) the aggregate amount of the applicable Investor
Percentage of Principal Collections during the preceding Monthly Period for each Series of
Securities and the aggregate amount of the applicable Investor Percentage of Finance Charge
Collections during the preceding Monthly Period for each Series of Securities; (iii) for each
Series and for each Class within any such Series, the total amount to be distributed to Investor
Securityholders on the next succeeding Distribution Date; (iv) for each Series and for each Class
within any such Series, the amount of such distribution allocable to principal; (v) for each Series
and for each Class within any such Series, the amount of such distribution allocable to interest;
(vi) for each Series and each Class within a Series, the Series Default Amount for the immediately
preceding Monthly Period; (vii) for each Series and each Class within a Series, the amount of the
Series Charge-Offs and the amount of the reimbursements of Series Charge-Offs for such Distribution
Date; (viii) for each Series, the Servicing Fee allocated to and paid by such Series for such
Distribution Date; (ix) for each Series, the existing deficit controlled amortization amount, if
applicable; (x) the Aggregate Principal Receivables in the Trust at the close of business on the
last day of the Monthly Period preceding such Distribution Date; (xi) for each Series, the Invested
Amount at the close of business on the last day of the Monthly Period




45









 







immediately preceding such Distribution Date; (xii) the available amount of any Enhancement
for each Class of each Series, if any; (xiii) for each Series and each Class within a Series, the
Pool Factor as of the end of the related Monthly Period; (xiv) whether a Pay Out Event or a
Prospective Pay Out Event with respect to any Series shall have occurred during or with respect to
the related Monthly Period; (xv) the aggregate amount of Discount Option Receivables in the Trust
at the close of business on the last day of the Monthly Period preceding such Distribution Date;
(xvi) the aggregate amount of Discount Option Receivables Collections processed during such Monthly
Period; and (xvii) such other calculations as may be required by any Supplement. The Trustee shall
be under no duty to recalculate, verify or recompute the information supplied to it under this
Section 3.4 or such other matters as are set forth in any Settlement Statement. The Servicer shall
also provide a copy of the Settlement Statement in a prompt manner to each Rating Agency.




          Section 3.5 Annual Servicer’s Certificate. The Servicer will deliver, in accordance
with Section 13.5, to the Transferor, the Trustee, any Enhancement Provider and the Rating
Agencies, within 100 days of the end of each fiscal year, beginning in 1995, an Officer’s
Certificate of the Servicer substantially in the form of Exhibit D stating that (a) a review of the
activities of the Servicer during the preceding fiscal year and of its performance under this
Agreement was made under the supervision of the officer signing such certificate and (b) to such
officer’s knowledge, based on such review, the Servicer has fully performed all its obligations
under this Agreement throughout such period, or, if there has been a default in the performance of
any such obligation, specifying each such default known to such officer and the nature and status
thereof. A copy of such certificate may be obtained by any Investor Securityholder by a request in
writing to the Trustee addressed to the Corporate Trust Office.




          Section 3.6 Annual Independent Accountants’ Servicing Report.




          (a) Within 100 days of the end of each fiscal year, the Servicer shall cause a firm of
nationally recognized independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish an attestation report (addressed to the Servicer) with
respect to the prior fiscal year (or, in the case of the first such period, the period beginning on
the Initial Closing Date and ending on the last day of the related fiscal year) to the Transferor,
the Trustee, any Enhancement Provider and each Rating Agency, to the effect that such firm has
applied certain procedures relating to the servicing of the receivables and based on the results of
such procedures performed, management’s assertion that the servicing of receivables has been
conducted in compliance with the terms and conditions set forth in this Article III and that such
assertion is fairly presented, except for such exceptions as they believe to be immaterial and such
other exceptions as shall be set forth in such statement.




          (b) Within 100 days of the end of each fiscal year, the Servicer shall cause a firm of
nationally recognized independent certified public accountants (who may also render other services
to the Servicer or the Transferor) to furnish a report (addressed to the Servicer) to the
Transferor, the Trustee, any Enhancement Provider and the Rating Agency to the effect that they
have compared the amounts and percentages set forth in four of the monthly certificates forwarded
by the Servicer pursuant to subsection 3.4(c) during the period covered by such report with the
computer reports (which may include personal computer generated reports that summarize data from
the computer reports generated by either the Transferor or Servicer) which




46









 







were the source of such amounts and percentages and that on the basis of such comparison, such
amounts and percentages are in agreement except as shall be set forth in such report. A copy of
such report will be sent by the Trustee to each Investor Securityholder. In the event such firm
requires the Trustee to agree to the procedures performed by such firm, the Servicer shall direct
the Trustee in writing to so agree.




          Section 3.7 Tax Treatment. The Transferor has structured this Agreement and the
Investor Securities with the intention that the Investor Securities will qualify under applicable
federal, state, local and foreign tax law as indebtedness of the Transferor. Except to the extent
expressly specified to the contrary in any Supplement, the Transferor, the Servicer, the Holder of
the Exchangeable Transferor Security, each Investor Securityholder, Holder of a Variable Funding
Security, and each Security Owner agree to treat and to take no action inconsistent with the
treatment of the Investor Securities (or beneficial interest therein) as indebtedness for purposes
of federal, state, local and foreign income or franchise taxes and any other tax imposed on or
measured by income. Each Investor Securityholder and Holder of a Variable Funding Security, by
acceptance of its Security; each Holder of the Exchangeable Transferor Security, by acquisition of
its interest in the Transferor Interest; and each Security Owner, by acquisition of a beneficial
interest in a Security, agrees to be bound by the provisions of this Section 3.7. Each
Securityholder agrees that it will cause any Security Owner acquiring an interest in a Security
through it to comply with this Agreement as to treatment as indebtedness under applicable tax law,
as described in this Section 3.7. Furthermore, subject to Section 11.11, the Trustee shall treat
the Trust as a security device only, and shall not file tax returns or obtain an employer
identification number on behalf of the Trust.




          Section 3.8 Adjustments.




          (a) If the Servicer adjusts downward the amount of any Receivable because of a rebate, refund,
unauthorized charge or billing error to an Obligor, because such Receivable was created in respect
of merchandise which was refused or returned by an Obligor, or if the Servicer otherwise adjusts
downward the amount of any Receivable without receiving Collections therefor or without charging
off such amount as uncollectible, then, in any such case (other than cases resulting from Servicer
error, a remedy for which is provided for in Section 3.3 or subsection 3.8(b)), the aggregate
amount of the Principal Receivables used to calculate the Investor Percentages applicable to any
Series and the Transferor Interest will be reduced by the principal amount of any such adjustment.
Similarly, the aggregate amount of the Principal Receivables used to calculate the Investor
Percentages applicable to any Series will be reduced by the amount of any Principal Receivable
which was discovered as having been created through a fraudulent or counterfeit charge or with
respect to which the covenant contained in subsection 2.5(b) was breached. Any adjustment required
pursuant to either of the two preceding sentences shall be made on or prior to the end of the
Monthly Period in which such adjustment obligation arises. In the event that, following any such
adjustment, the Transferor Interest would be less than the Minimum Transferor Interest, within two
Business Days of the date on which such adjustment obligation arises, the Transferor shall pay to
the Servicer, for deposit into the Excess Funding Account, in immediately available funds an amount
equal to the amount by which the Transferor Interest would be reduced below the Minimum Transferor
Interest as a result of such adjustment or exclusion. Any amount deposited into the Excess Funding
Account in connection




47









 







with the adjustment of a Receivable (an “Adjustment Payment”) shall be applied in accordance
with Article IV and the terms of each Supplement.




          (b) If (i) the Servicer makes a deposit into the Collection Account in respect of a Collection
of a Receivable and such deposit was in the form of a check which is not honored for any reason or
(ii) the Servicer makes a mistake with respect to the amount of any Collection and deposits an
amount that is less than or more than the actual amount of such Collection, the Servicer shall
appropriately adjust the amount subsequently deposited into the Collection Account (or shall be
entitled to receive a refund from the Collection Account in the case of an excess deposit) to
reflect such dishonored check or mistake. Any Receivable in respect of which a dishonored check is
received shall be deemed not to have been paid. Notwithstanding the first two sentences of this
paragraph, any adjustments made pursuant to this paragraph will be reflected in a current report
but will not change any amount of Collections previously reported pursuant to subsection 3.4(b).




          Section 3.9 Notices to HSBC Finance. In the event that HSBC Finance or any Affiliate
thereof is no longer acting as Servicer, any Successor Servicer appointed pursuant to Section 10.2
shall deliver or make available to HSBC Finance each certificate and report required to be
prepared, forwarded or delivered thereafter pursuant to Sections 3.4, 3.5 and 3.6.




[End of Article III]




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ARTICLE IV




RIGHTS OF SECURITYHOLDERS AND ALLOCATION

AND APPLICATION OF COLLECTIONS




          Section 4.1 Rights of Securityholders. Each Series of Investor Securities shall
represent Undivided Interests in the Trust, including the benefits of any Enhancement issued with
respect to such Series and the right to receive the Collections and other amounts at the times and
in the amounts specified in this Article IV and the related Supplement to be deposited in the
Investor Accounts or to be paid to the Investor Securityholders of such Series; provided,
however, that the aggregate interest represented by such Securities at any time in the
Principal Receivables shall not exceed an amount equal to the Invested Amount of such Securities.
The Exchangeable Transferor Security or, as the case may be, the uncertificated interest in the
Transferor Interest, shall represent the remaining undivided interest in the Trust, including the
right to receive the Collections and other amounts with respect to each Series at the times and in
the amounts specified in this Article IV and the related Supplement to be paid to the Holder of the
Exchangeable Transferor Security; provided, however, that if the Transferor elects
to have its interest in the Transferor Interest be uncertificated as provided in Section 6.1
hereof, then such uncertificated interest shall represent the Transferor Interest;
provided, further, that the aggregate interest represented by such Exchangeable
Transferor Security at any time in the Principal Receivables or, as the case may be, the aggregate
uncertificated interest of the Transferor in the Principal Receivables, shall not exceed the
Transferor Interest at any time and such Exchangeable Transferor Security or, as the case may be,
such uncertificated interest shall not represent any interest in the Investor Accounts, except as
provided in this Agreement and the Supplements, or the benefits of any Enhancement issued with
respect to any Series




          Section 4.2 Establishment of Accounts.




          (a) The Collection Account. The Servicer, for the benefit of the Securityholders,
shall establish in the name of the Trustee, on behalf of the Trust, a non-interest bearing
segregated account (the “Collection Account”) bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of the Securityholders, and shall cause
such Collection Account to be established and maintained, (i) in a segregated trust account with
the corporate trust department of a depositary institution or trust company (which may include the
Trustee but not the Servicer or any Affiliate thereof) organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia which has a
long-term unsecured debt rating of at least Baa3 by Moody’s and whose deposits are insured to the
limits provided by law by the FDIC having corporate trust powers and acting as trustee for funds
deposited therein (provided, however, that such account need not be maintained as a
segregated trust account with the corporate trust department of such institution if at all times
the certificates of deposit, short-term deposits or commercial paper or the long term unsecured
debt obligations (other than such obligation whose rating is based on collateral or on the credit
of a Person other than such institution or trust company) of such depositary institution or trust
company shall have a credit rating from Standard & Poor’s of at least A-1+ and P-1 from Moody’s in
the case of the certificates of deposit, short-term deposits or commercial paper, or a rating from
Standard & Poor’s of AAA and from Moody’s of Aaa in the case of the long-term unsecured debt
obligations) or (ii) with a depositary institution, which may include the Trustee




49









 







but not the Servicer or any Affiliate thereof, which is acceptable to the Rating Agency (in
the case of (i) and (ii), a “Qualified Institution”). If, at any time, the institution holding the
Collection Account ceases to be a Qualified Institution, the Transferor shall direct the Servicer
to establish within 10 Business Days a new Collection Account with a Qualified Institution,
transfer any cash and/or any investments to such new Collection Account and from the date such new
Collection Account is established, it shall be the “Collection Account.” The Servicer shall give
written notice to the Transferor and the Trustee of the location and account number of the
Collection Account and shall notify the Transferor and the Trustee in writing prior to any
subsequent change thereof. Pursuant to authority granted to it pursuant to subsection 3.1(b), the
Servicer shall have the power revocable by the Trustee to withdraw funds from the Collection
Account for the purposes of carrying out its duties hereunder.




          The Collection Account shall be under the sole dominion and control of the Trustee and the
Trustee shall possess all right, title and interest in all funds from time to time on deposit in
such account.




          (b) The Interest Funding and Principal Accounts. The Trustee, for the benefit of the
Investor Securityholders, shall establish and maintain with a Qualified Institution in the name of
the Trustee two segregated trust accounts for each Series (an “Interest Funding Account” and a
“Principal Account,” respectively), each bearing a designation clearly indicating that the funds
therein are held for the benefit of the Investor Securityholders of such Series. Except as
provided in subsection 4.2(e), each Interest Funding Account and each Principal Account shall be
under the sole dominion and control of the Trustee for the benefit of the Investor Securityholders.
Pursuant to authority granted to it hereunder, the Servicer shall have the revocable power to
instruct the Trustee to withdraw funds from the Interest Funding Account and any Principal Account
for any purpose of carrying out the Servicer’s or the Trustee’s duties hereunder. The Trustee at
all times shall maintain accurate records reflecting each transaction in each Principal Account and
each Interest Funding Account and that funds held therein shall at all times be held in trust for
the benefit of the Investor Securityholders of such Series. If, at any time, the institution
holding the Interest Funding Account ceases to be a Qualified Institution, the Servicer shall
direct the Trustee to establish within 10 Business Days a new Interest Funding Account meeting the
conditions specified above with a Qualified Institution, transfer any cash and/or any investments
to such new Interest Funding Account and from the date such new Interest Funding Account is
established, it shall be the “Interest Funding Account.” Similarly, if, at any time, the
institution holding any Principal Account ceases to be a Qualified Institution, the Servicer shall
direct the Trustee to establish within 10 Business Days a new Principal Account meeting the
conditions specified above with a Qualified Institution, transfer any cash and/or any investments
to such new Principal Account and from the date such new Principal Account is established, it shall
be a “Principal Account.”




          (c) Distribution Accounts. The Trustee, for the benefit of the Investor
Securityholders of each Series, shall cause to be established and maintained in the name of the
Trustee, with an office or branch of a Qualified Institution a non-interest-bearing segregated
demand deposit account for each Series (a “Distribution Account”) bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of the Investor
Securityholders of such Series. Each Distribution Account shall be under the sole dominion and
control of the Trustee for the benefit of the Investor Securityholders of the related Series.




50









 







Pursuant to the authority granted to the Paying Agent herein, the Paying Agent shall have the
power, revocable by the Trustee, to make withdrawals and payments from the Distribution Account for
the purpose of carrying out the Paying Agent’s duties hereunder. If, at any time, the institution
holding a Distribution Account ceases to be a Qualified Institution, the Servicer shall direct the
Trustee to establish within 10 Business Days a new Distribution Account meeting the conditions
specified above with a Qualified Institution, transfer any cash and/or any investments to such new
Distribution Account and from the date such new Distribution Account is established, it shall be a
“Distribution Account.”




          (d) The Excess Funding Account. The Trustee, for the benefit of the Securityholders,
shall cause to be established in the name of the Trustee, on behalf of the Securityholders, with a
Qualified Institution, a segregated trust account (the “Excess Funding Account”) bearing a
designation clearly indicating that the funds deposited therein are held for the benefit of the
Securityholders. Except as provided in subsection 4.3(e), the Excess Funding Account shall, except
as otherwise provided herein, be under the sole dominion and control of the Trustee for the benefit
of the Securityholders. Pursuant to the authority granted to the Servicer herein, the Servicer
shall have the power, revocable by the Trustee, to make withdrawals and payments from the Excess
Funding Account for the purpose of carrying out the Servicer’s or Trustee’s duties hereunder. If,
at any time, the institution holding the Excess Funding Account ceases to be a Qualified
Institution, the Servicer shall direct the Trustee to establish within 10 Business Days a new
Excess Funding Account meeting the conditions specified above with a Qualified Institution,
transfer any cash and/or any investments to such new Excess Funding Account and from the date such
new Excess Funding Account is established, it shall be the “Excess Funding Account.”




          (e) Administration of the Principal Accounts and the Interest Funding Accounts. Funds
on deposit in each Principal Account and each Interest Funding Account shall at all times be
invested by the Servicer (or, at the written direction of the Transferor, by the Trustee) pursuant
to this subsection 4.2(e). Any such investment shall mature and such funds shall be available for
withdrawal on the Transfer Date following the Monthly Period in which such funds were processed for
collection. No such investments shall be liquidated prior to maturity. At the end of each month,
all interest and earnings (net of losses and investment expenses) on funds on deposit in each
Principal Account and each Interest Funding Account (unless otherwise specified in the applicable
Supplement) shall be deposited by the Trustee in a separate deposit account with a Qualified
Institution in the name of the Transferor, which shall not constitute a part of the Trust, or shall
otherwise be turned over by the Trustee to the Transferor in accordance with instructions from the
Transferor to the Trustee not less frequently than monthly. Subject to the restrictions set forth
above, the Servicer, or a Person designated in writing by the Transferor, of which the Trustee
shall have received written notification, shall have the authority to instruct the Trustee with
respect to the investment of funds on deposit in any Principal Account and any Interest Funding
Account. Any investment instructions to the Trustee shall be in writing, shall be given no later
than 10:00 a.m. New York City time on a Business Day that such investment is proposed to be made
and shall include a certification that the proposed investment is a Cash Equivalent that matures at
or prior to the time required by this Agreement. For purposes of determining the availability of
funds or the balances in any Interest Funding Account and any Principal Account for any reason
under this Agreement, all investment earnings on such funds shall be deemed not to be available or
on deposit.




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          Each Cash Equivalent (other than investment earnings distributed to the Transferor pursuant to
this subsection 4.2(e)) that constitutes investment property shall be held by the Trustee through a
securities intermediary, which securities intermediary shall agree with the Trustee that (i) such
investment property at all times shall be credited to a securities account of the Trustee, (ii) all
property credited to such securities account shall be treated as a financial asset, (iii) such
securities intermediary shall treat the Trustee as entitled to exercise the rights that comprise
each financial asset credited to such securities account, (iv) such securities intermediary shall
comply with entitlement orders originated by the Trustee without the further consent of any other
person or entity, (v) such securities intermediary shall not agree with any person or entity other
than the Trustee to comply with entitlement orders originated by any person or entity other than
the Trustee, (vi) such securities account and all property credited thereto shall not be subject to
any lien, security interest, right of set-off, or encumbrance in favor of such securities
intermediary or anyone claiming through such securities intermediary (other than the Trustee),
(vii) such agreement between such securities intermediary and the Trustee shall be governed by the
laws of the State of New York, and (viii) the State of New York shall be the securities
intermediary’s jurisdiction for purposes of the UCC. The Trustee shall maintain possession of each
other Cash Equivalent (other than investment earnings distributed to the Transferor pursuant to
this subsection 4.2(e)) in the State of Minnesota, separate and apart from all other property held
by the Trustee. Notwithstanding any other provision of this Agreement, the Trustee shall not hold
any Cash Equivalent through an agent except as expressly permitted by this subsection 4.2(e). Each
term used in this subsection 4.2(e) and defined in the New York UCC shall have the meaning set
forth in the New York UCC.




          Section 4.3 Collections and Allocations.




          (a) Collections. Obligors shall make payments on the Receivables to the Servicer who
shall deposit all such payments in the Collection Account no later than the second Business Day
following the Date of Processing thereof. On or before each Transfer Date, the Servicer shall
deposit Finance Charge Collections consisting of Interchange with respect to the preceding Monthly
Period in the Collection Account, in immediately available funds, to be treated as Finance Charge
Collections available to be applied in accordance with this Article IV and the related Supplement
on the last Business Day of such preceding Monthly Period.




          The Servicer shall allocate such amounts to each Series of Investor Securities and to the
Holder of the Exchangeable Transferor Security and shall cause the Trustee to withdraw the required
amounts from the Collection Account or pay such amounts to the Holder of the Exchangeable
Transferor Security in accordance with this Article IV and the related Supplement. The Servicer
shall make such deposits or payments on the date indicated herein by wire transfer or as otherwise
provided in the Supplement for any Series of Securities with respect to such Series.




          Notwithstanding anything in this Agreement to the contrary, but subject to the terms of any
Supplement, for so long as, and only so long as, HSBC Finance (or any successors to HSBC Finance
pursuant to Section 8.2) or an Affiliate of HSBC Finance shall remain the Servicer hereunder, and
(a)(i) HSBC Finance (or any successors to HSBC Finance pursuant to Section 8.2) or an Affiliate of
HSBC Finance, as applicable, provides to the Transferor and the Trustee a letter of credit or other
form of Enhancement rated at least A-1 by Standard & Poor’s




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and P-1 by Moody’s (as certified to the Transferor and the Trustee by such entity), and (ii)
after notifying each Rating Agency of the proposed use of such letter of credit or other form of
Enhancement the Transferor shall have received a notice from each Rating Agency that the Servicer
making payments monthly rather than daily would not result in a downgrading or withdrawal of any of
such Rating Agency’s then-existing ratings of the Investor Securities, or (b) HSBC Finance (or any
successors to HSBC Finance pursuant to Section 8.2) shall have and maintain a short-term credit
rating of at least A-1 by Standard & Poor’s and P-1 by Moody’s (as certified to the Transferor and
the Trustee by the Servicer), the Servicer need not deposit Collections from the Collection Account
into the Principal Account or the Interest Funding Account or any Series Account or make payments
to the Holder of the Exchangeable Transferor Security, prior to the close of business on the day
any Collections are deposited in the Collection Account as otherwise provided in this Article IV
and the related Supplement, but may instead make such deposits, payments and withdrawals on each
Transfer Date in an amount equal to the net amount of such deposits, payments and withdrawals which
would have been made but for the provisions of this paragraph; provided that (i) the
Servicer will only be required to deposit Collections into the Collection Account up to the
aggregate amount of Collections required to be deposited into any Series Account or, without
duplication, distributed on or prior to the related Distribution Date and (ii) if at any time prior
to such Distribution Date the amount of Collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer will be permitted to
withdraw the excess from the Collection Account and pay such amount pursuant to the terms hereof.
Subject to the immediately preceding sentence, the Servicer may retain its Servicing Fee with
respect to a Series and shall not be required to deposit it in the Collection Account.




          (b) Allocations for the Holder of the Exchangeable Transferor Security. The Servicer
shall allocate to the Holder of the Exchangeable Transferor Security an amount equal to the product
of (A) the Transferor Percentage as of the end of the preceding Business Day, and (B) the aggregate
amount of Principal Collections and Finance Charge Collections available in the Collection Account.
The Servicer shall pay such amount to the Holder of the Exchangeable Transferor Security on each
Business Day, or as otherwise agreed with the Holder of the Exchangeable Transferor Security, or in
the case of any Finance Charge Collections consisting of Interchange, on or before each Transfer
Date ; provided, however, that amounts payable to the Holder of the Exchangeable
Transferor Security pursuant to this clause (b) shall instead be deposited in the Excess Funding
Account to the extent necessary to prevent the Transferor Interest from being less than the Minimum
Transferor Interest.




          (c) Allocation for Series. (i) The amount of Finance Charge Collections available in
the Collection Account allocable to each Series, (ii) the amount of Principal Collections available
in the Collection Account allocable to each Series and (iii) the Receivables in Defaulted Accounts
allocable to each Series shall be determined in accordance with the provisions of the related
Supplement. The Servicer shall, prior to the close of business on the day any Collections are
deposited in the Collection Account, cause the Trustee to withdraw the required amounts from the
Collection Account and cause the Trustee to deposit such amounts into the applicable Principal
Account, the applicable Interest Funding Account, the Excess Funding Account, or any Series Account
or pay such amounts to the Holder of the Exchangeable Transferor Security in accordance with the
provisions of this Article IV and the Supplements.




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          (d) Unallocated Principal Collections; Excess Funding Account. Shared Principal
Collections shall be allocated to each outstanding Series pro rata based on the
Principal Shortfall, if any, for each such Series, and then, at the option of the Transferor, any
remainder may be applied as principal with respect to the Variable Funding Securities. The
Servicer shall pay any remaining Shared Principal Collections to the Transferor; provided,
that if the Transferor Interest does not exceed the Minimum Transferor Interest, then such
remaining Shared Principal Collections shall be deposited in the Excess Funding Account to the
extent necessary to increase the Transferor Interest above the Minimum Transferor Interest;
provided, further, that if an Amortization Period has commenced and is continuing
with respect to more than one outstanding Series, such remaining Shared Principal Collections shall
be allocated to such Series pro rata based on the Investor Percentage for Principal Receivables
applicable for such Series.




          (e) Amounts in Excess Funding Account. Amounts on deposit in the Excess Funding
Account on any Business Day will be invested by the Servicer (or, at the direction of the
Transferor, by the Trustee) pursuant to the second paragraph of subsection 4.2(e) in Cash
Equivalents which shall mature and be available on or before the next Business Day on which amounts
may be released from the Excess Funding Account. Earnings from such investments received shall be
deposited in the Collection Account and treated as Finance Charge Collections. Any investment
instructions to the Trustee shall be in writing and shall include a certification that the proposed
investment is a Cash Equivalent that matures at or prior to the date required by this Agreement.
If on any Business Day other than a Business Day on which a Pay Out Event or a Prospective Pay Out
Event has occurred and is continuing, the Transferor Interest is greater than the Minimum
Transferor Interest, amounts on deposit in the Excess Funding Account may, at the option of the
Transferor, be released to the Holder of the Exchangeable Transferor Security. On the first
Business Day of the Amortization Period for any Series, funds on deposit in the Excess Funding
Account will be deposited in the Principal Account for such Series to the extent of the lesser of
(x) the Invested Amount of such Series and (y) the amount then on deposit in the Excess Funding
Account.




[THE REMAINDER OF ARTICLE IV IS RESERVED AND SHALL

BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]




[End of Article IV]





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ARTICLE V




[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY

SUPPLEMENT WITH RESPECT TO ANY SERIES]




[End of Article V]





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ARTICLE VI




THE SECURITIES




          Section 6.1 The Securities. Subject to Sections 6.10 and 6.13, the Investor
Securities of each Series and any Class thereof may be issued in bearer form (the “Bearer
Securities”) with attached interest coupons and, if applicable, a special coupon (collectively, the
“Coupons”) or in fully registered form (the “Registered Securities”), and shall be substantially in
the form of the exhibits with respect thereto attached to the related Supplement. The Transferor
may elect at any time, by written notice to the Trustee, to have its interest in the Transferor
Interest be (i) an uncertificated interest or (ii) evidenced by an Exchangeable Transferor
Security. If the Transferor elects to have its interest in the Transferor Interest be
uncertificated, it shall deliver to the Trustee for cancellation any Exchangeable Transferor
Security previously issued. If the Transferor elects to have its interest in the Transferor
Interest be evidenced by an Exchangeable Transferor Security, the Exchangeable Transferor Security
shall be issued pursuant hereto or to Section 6.9 or Section 6.10, substantially in the form of
Exhibit A and shall upon issuance be executed and delivered by the Transferor to the Trustee for
authentication and redelivery as provided in Sections 2.1 and 6.2. The Investor Securities shall,
upon issue pursuant hereto or to Section 6.9 or Section 6.10, be executed and delivered by the
Transferor to the Trustee for authentication and redelivery as provided in Sections 2.1 and 6.2.
Unless otherwise specified in any Supplement, any Investor Security shall be issuable in a minimum
denomination of $1,000 Undivided Interest and integral multiples thereof, and shall be issued upon
original issuance in an original aggregate principal amount equal to the Initial Invested Amount.
The Exchangeable Transferor Security shall be issued as a single security. Each Security shall be
executed by manual or facsimile signature on behalf of the Transferor by its President or any Vice
President. Securities bearing the manual or facsimile signature of the individual who was, at the
time when such signature was affixed, authorized to sign on behalf of the Transferor or the Trustee
shall not be rendered invalid, notwithstanding that such individual has ceased to be so authorized
prior to the authentication and delivery of such Securities or does not hold such office at the
date of such Securities. No Security shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless there appears on such Security a certificate of authentication
substantially in the form provided for herein, executed by or on behalf of the Trustee by the
manual signature of a duly authorized signatory, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been validly issued and duly
authenticated and delivered hereunder. All Securities shall be dated the date of their
authentication except Bearer Securities which shall be dated the applicable Issuance Date as
provided in the related Supplement. If an Affiliate of the Servicer holds a certificate, a
residual interest, or any other interest in the Trust then such Affiliate may elect at any time, by
written notice to the Trustee, to have its interest in the Trust be an uncertificated interest;
provided that, if the Affiliate elects to have its interest in the Trust be uncertificated,
it shall deliver to the Trustee for cancellation any certificated Securities previously issued.




          Section 6.2 Authentication of Securities. Contemporaneously with the initial
assignment and transfer of the Receivables, whether now existing or hereafter created (other than
Receivables in Supplemental Accounts) and the other components to the Trust, the Trustee shall
authenticate and deliver the initial Series of Investor Securities (or applicable Classes thereof),
upon the written order of the Transferor. Upon the issuance of such Investor Securities, such




56









 







Investor Securities shall be validly issued, fully paid and non-assessable. The Trustee shall
authenticate and deliver the Exchangeable Transferor Security, if applicable, to the Transferor
simultaneously with its delivery of the initial Series of Investor Securities. Upon a New Issuance
as provided in Section 6.9 and the satisfaction of certain other conditions specified therein, the
Trustee shall authenticate and deliver the Investor Securities of additional Series (with the
designation provided in the related Supplement), upon the written order of the Transferor. Upon
the written order of the Transferor, the Securities of any Series shall be duly authenticated by or
on behalf of the Trustee, in authorized denominations equal to (in the aggregate) the Initial
Invested Amount of such Series of Investor Securities. If specified in the related Supplement for
any Series, the Trustee shall authenticate and deliver outside the United States the Global
Security that is issued upon original issuance thereof, upon the written order of the Transferor,
to the Depositary. If specified in the related Supplement for any Series, the Trustee shall
authenticate Book-Entry Securities that are issued upon original issuance thereof, upon the written
order of the Transferor, to a Clearing Agency or its nominee as provided in Section 6.10.




          Section 6.3 Registration of Transfer and Exchange of Securities.




          (a) The Trustee shall cause to be kept at the office or agency to be maintained by a transfer
agent and registrar (the “Transfer Agent and Registrar”) in accordance with the provisions of
Section 11.16, a register (the “Security Register”) in which, subject to such reasonable
regulations as it may prescribe, the Transfer Agent and Registrar shall provide for the
registration of the Investor Securities of each Series (unless otherwise provided in the related
Supplement) and of transfers and exchanges of the Investor Securities as herein provided. Whenever
reference is made in this Agreement to the transfer or exchange of the Securities by the Trustee,
such reference shall be deemed to include the transfer or exchange on behalf of the Trustee by a
Transfer Agent and Registrar. The Trustee is hereby initially appointed Transfer Agent and
Registrar for the purposes of registering the Investor Securities and transfers and exchanges of
the Investor Securities as herein provided. If any form of Investor Security is issued as a Global
Security, the Trustee may, or if and so long as any Series of Investor Securities are listed on a
stock exchange and such exchange shall so require, the Trustee shall appoint a co-transfer agent
and co-registrar, which will also be a co-paying agent, in such city as the Transferor may specify.
Any reference in this Agreement to the Transfer Agent and Registrar shall include any co-transfer
agent and co-registrar unless the context otherwise requires. The Trustee shall be permitted to
resign as Transfer Agent and Registrar upon 30 days’ written notice to the Servicer and the
Transferor. In the event that the Trustee shall no longer be the Transfer Agent and Registrar, the
Transferor shall appoint a successor Transfer Agent and Registrar. If any Series with respect to
which Book Entry Securities were originally issued is no longer issued as Book-Entry Securities,
then the Transferor may appoint a successor Transfer Agent and Registrar.




          Unless otherwise provided in the related Supplement, in the case of any Investor Security with
respect to which no Opinion of Counsel to the effect that such Investor Security (or Class or
Series to which such Investor Security pertains) will be characterized as indebtedness for federal
income tax purposes was delivered, no sale, assignment, participation, pledge, hypothecation,
transfer or other disposition of such Investor Security (or any interest therein) shall be made
unless the Transferor shall have granted prior consent thereto, which consent may not be
unreasonably withheld and, provided further, that for purposes of this




57









 







sentence, it shall in all cases be reasonable for the Transferor to withhold consent to such
proposed sale, assignment, participation, pledge, hypothecation, transfer or other disposition of
all or any part of a Security (or any interest therein) if the transaction would, if effected, give
rise to any adverse tax consequence, as determined in the sole and absolute discretion of the
Transferor.




          Upon surrender for registration of transfer of any Security at any office or agency of the
Transfer Agent and Registrar maintained for such purpose, the Transferor shall execute, subject to
the provisions of subsection 6.3(c), and the Trustee shall (unless the Transfer Agent and Registrar
is different than the Trustee, in which case the Transfer Agent and Registrar shall) authenticate
and deliver, in the name of the designated transferee or transferees, one or more new Securities in
authorized denominations of like aggregate Undivided Interests; provided, that the
provisions of this paragraph shall not apply to Bearer Securities.




          At the option of any Holder of Registered Securities, Registered Securities may be exchanged
for other Registered Securities of the same Series in authorized denominations of like aggregate
Undivided Interests in the Trust, upon surrender of the Registered Securities to be exchanged at
any office or agency of the Transfer Agent and Registrar maintained for such purpose. At the
option of a Bearer Securityholder, subject to applicable laws and regulations (including without
limitation, the Bearer Rules), Bearer Securities may be exchanged for other Bearer Securities or
Registered Securities of the same Series in authorized denominations of like aggregate Undivided
Interests in the Trust, in the manner specified in the Supplement for such Series, upon surrender
of the Bearer Securities to be exchanged at an office or agency of the Transfer Agent and
Registrar located outside the United States. Each Bearer Security surrendered pursuant to this
Section 6.3 shall have attached thereto (or be accompanied by) all unmatured Coupons, provided that
any Bearer Security so surrendered after the close of business on the Record Date preceding the
relevant Distribution Date after the related Series Termination Date need not have attached the
Coupons relating to such Distribution Date.




          Whenever any Investor Securities of any Series are so surrendered for exchange, the Transferor
shall execute, and the Trustee shall (unless the Transfer Agent and Registrar is different than the
Trustee, in which case the Transfer Agent and Registrar shall) authenticate and deliver, the
Investor Securities of such Series which the Securityholder making the exchange is entitled to
receive. Every Investor Security presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a form satisfactory to the Trustee and
the Transfer Agent and Registrar duly executed by the Securityholder thereof or his
attorney-in-fact duly authorized in writing.




          The preceding provisions of this Section 6.3 notwithstanding, the Trustee or the Transfer
Agent and Registrar, as the case may be, shall not be required to register the transfer of or
exchange any Investor Security of any Series for the period from the Record Date preceding the due
date for any payment to the Distribution Date with respect to the Investor Securities of such
Series.




          Unless otherwise provided in the related Supplement, no service charge shall be made for any
registration of transfer or exchange of Securities, but the Transfer Agent and




58









 







Registrar may require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Securities.




          All Investor Securities (together with any Coupons attached to Bearer Securities) surrendered
for registration of transfer or exchange shall be canceled by the Transfer Agent and Registrar and
disposed of in a manner satisfactory to the Trustee. The Trustee shall cancel and dispose of any
Global Security upon its exchange in full for Definitive Securities, but shall not be required to
destroy such Global Securities. Such security shall also state that a security or securities of
each Foreign Clearing Agency to the effect referred to in Section 6.13 was received with respect to
each portion of the Global Security exchanged for Definitive Securities.




          The Transferor shall execute and deliver to the Trustee or the Transfer Agent and Registrar,
as applicable, Bearer Securities and Registered Securities in such amounts and at such times as are
necessary to enable the Trustee to fulfill its responsibilities under this Agreement and the
Securities.




          (b) Except as provided in Section 6.9 or 7.2 or in any Supplement, in no event shall the
Exchangeable Transferor Security or any interest therein, or , as the case may be, the
uncertificated interest in the Transferor Interest or any interest therein, be transferred, sold,
exchanged, pledged, participated or otherwise assigned hereunder, in whole or in part, unless the
Transferor shall have consented in writing to such transfer and unless the Trustee shall have
received (1) confirmation in writing from each Rating Agency that such transfer will not result in
a lowering or withdrawal of its then-existing rating of any Series of Investor Securities and (2)
an Opinion of Counsel that such transfer does not (i) adversely affect the conclusions reached in
any of the federal income tax opinions issued in connection with the original issuance of any
Series of Investor Securities or (ii) result in a taxable event to the holders of any such Series.




          (c) Unless otherwise provided in the related Supplement, registration of transfer of
Registered Securities containing a legend relating to the restrictions on transfer of such
Registered Securities (which legend shall be set forth in the Supplement relating to such Investor
Securities) shall be effected only if the conditions set forth in such related Supplement are
satisfied.




          Whenever a Registered Security containing the legend set forth in the related Supplement is
presented to the Transfer Agent and Registrar for registration of transfer, the Transfer Agent and
Registrar shall promptly seek instructions from the Servicer regarding such transfer. The Transfer
Agent and Registrar and the Trustee shall be entitled to receive written instructions signed by an
officer of the Servicer prior to registering any such transfer or authenticating new Registered
Securities, as the case may be. The Servicer hereby agrees to indemnify the Transfer Agent and
Registrar and the Trustee and to hold each of them harmless against any loss, liability or expense
incurred without negligence or bad faith on their part arising out of or in connection with actions
taken or omitted by them in reliance on any such written instructions furnished pursuant to this
subsection 6.3(c).




          (d) The Transfer Agent and Registrar will maintain at its expense in the Borough of Manhattan,
The City of New York, an office or offices or an agency or agencies




59









 







where Investor Securities of such Series may be surrendered for registration of transfer or
exchange.




          (e) Prior to the Transfer of any portion of a Transferor Retained Class, the Trustee shall
have received an Opinion of Counsel to the effect that such proposed Transfer will not adversely
affect the Federal income tax characterization of any outstanding Series of Investor Securities or
the taxability (or tax characterization) of the Trust under Federal income tax laws. The
Transferor shall provide to Moody’s notice of any such Transfer and a copy of the Opinion of
Counsel described above.




          Section 6.4 Mutilated, Destroyed, Lost or Stolen Securities. If (a) any mutilated
Security (together, in the case of Bearer Securities, with all unmatured Coupons, if any,
appertaining thereto) is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and
Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Security
and (b) in the case of destruction, loss or theft, there is delivered to the Transfer Agent and
Registrar and the Trustee such security or indemnity as may be required by them to hold each of
them and the Trust harmless, then, in the absence of notice to the Trustee that such Security has
been acquired by a protected purchaser, the Trustee shall (unless the Transfer Agent and Registrar
is different from the Trustee, in which case the Transfer Agent and Registrar shall) authenticate
and deliver (in compliance with applicable law), in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Security, a new Security of like tenor and aggregate Undivided Interest.
In connection with the issuance of any new Security under this Section 6.4, the Trustee or the
Transfer Agent and Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee and the Transfer Agent and Registrar) connected therewith. Any
duplicate Security issued pursuant to this Section 6.4 shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Security shall be found at any time.




          Section 6.5 Persons Deemed Owners. Prior to due presentation of a Security for
registration of transfer, the Trustee, the Paying Agent, the Transfer Agent and Registrar and any
agent of any of them may treat the Person in whose name any Security is registered as the owner of
such Security for the purpose of receiving distributions pursuant to Articles IV and V (as
described in any Supplement) and Article XII and for all other purposes whatsoever, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them shall be
affected by any notice to the contrary; provided, however, that in determining
whether the holders of Investor Securities evidencing the requisite Undivided Interests have given
any request, demand, authorization, direction, notice, consent or waiver hereunder, Investor
Securities owned by the Transferor, the Servicer or any Affiliate thereof shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent or waiver, only
Investor Securities which a Responsible Officer in the Corporate Trust Office of the Trustee knows
to be so owned shall be so disregarded. Investor Securities so owned that have been pledged in
good faith shall not be disregarded as outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee’s right so to act with respect to such Investor Securities and that the
pledgee is not the Transferor, the Servicer or an Affiliate thereof.




60









 








          In the case of a Bearer Security, the Trustee, the Paying Agent, the Transfer Agent and
Registrar and any agent of any of them may treat the holder of a Bearer Security or Coupon as the
owner of such Bearer Security or Coupon for the purpose of receiving distributions pursuant to
Article V (as described in any Supplement) and Article XII and for all other purposes whatsoever,
and neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of
them shall be affected by any notice to the contrary. Securities so owned that have been pledged
in good faith shall not be disregarded and may be regarded as outstanding, if the pledgee
establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such
Investor Securities and that the pledgee is not the Transferor, the Servicer or an Affiliate
thereof.




          Section 6.6 Appointment of Paying Agent.




          (a) The Paying Agent shall make distributions to Investor Securityholders from the appropriate
account or accounts maintained for the benefit of Securityholders as specified in this Agreement or
the related Supplement for any Series pursuant to Articles IV and V hereof. Any Paying Agent shall
have the revocable power to withdraw funds from such appropriate account or accounts for the
purpose of making distributions referred to above. The Trustee (or the Transferor if the Trustee
is the Paying Agent) may revoke such power and remove the Paying Agent, if the Trustee (or the
Transferor if the Trustee is the Paying Agent) determines in its sole discretion that the Paying
Agent shall have failed to perform its obligations under this Agreement in any material respect or
for other good cause. The Paying Agent, unless the Supplement with respect to any Series states
otherwise, shall initially be the Trustee. The Trustee shall be permitted to resign as Paying
Agent upon 30 days’ written notice to the Transferor and the Servicer. Upon the resignation of the
Paying Agent, if the Paying Agent was not the Trustee, the Trustee shall be the successor Paying
Agent unless and until another successor has been appointed as Paying Agent. In the event that the
Trustee, shall no longer be the Paying Agent, the Transferor shall appoint a successor to act as
Paying Agent (which shall be a bank or trust company). Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires otherwise.




          If specified in the related Supplement for any Series, so long as the Investor Securities of
such Series are outstanding and the Paying Agent is not located in New York City, the Transferor
shall maintain a co-paying agent in New York City (for Registered Securities only) or any other
city designated in such Supplement.




          (b) The Trustee shall cause each Paying Agent (other than itself) to execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the Trustee that such Paying
Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the
benefit of the Securityholders entitled thereto and waive all rights of set off the Paying Agent
may have against any sums held by it until such sums shall be paid to such Securityholders and
shall agree, and if the Trustee is the Paying Agent it hereby agrees, that it shall comply with all
requirements of the Internal Revenue Code regarding the withholding by the Trustee of payments in
respect of federal income taxes due from Security Owners.




          Section 6.7 Access to List of Securityholders’ Names and Addresses. The Trustee will
furnish or cause to be furnished by the Transfer Agent and Registrar to the




61









 







Transferor, the Servicer or the Paying Agent, within five Business Days after receipt by the
Trustee of a request therefor from the Transferor, the Servicer or the Paying Agent, respectively,
in writing, a list in such form as the Transferor, the Servicer or the Paying Agent may reasonably
require, of the names and addresses of the Investor Securityholders as of the most recent Record
Date for payment of distributions to Investor Securityholders. Unless otherwise provided in the
related Supplement, holders of Investor Securities evidencing Undivided Interests aggregating not
less than 25% of the Invested Amount of the Investor Securities of any Series (the “Applicants”)
may apply in writing to the Trustee, and if such application states that the Applicants desire to
communicate with other Investor Securityholders of any Series with respect to their rights under
this Agreement or under the Investor Securities and is accompanied by a copy of the communication
which such Applicants propose to transmit, then the Trustee, after having been adequately
indemnified by such Applicants for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford such Applicants access during normal business hours to the most
recent list of Securityholders held by the Trustee and shall give the Servicer and the Transferor
notice that such request has been made, within five Business Days after the receipt of such
application. Such list shall be as of a date no more than 45 days prior to the date of receipt of
such Applicants’ request. Every Securityholder, by receiving and holding a Security, agrees with
the Trustee that neither the Trustee, the Transfer Agent and Registrar, the Transferor, the
Servicer, nor any of their respective agents shall be held accountable by reason of the disclosure
of any such information as to the names and addresses of the Securityholders hereunder, regardless
of the source from which such information was obtained.




          Section 6.8 Authenticating Agent.




          (a) The Trustee may appoint one or more authenticating agents (each, an “Authenticating
Agent”) with respect to the Securities which shall be authorized to act on behalf of the Trustee in
authenticating the Securities in connection with the issuance, delivery, registration of transfer,
exchange or repayment of the Securities. The Trustee will appoint any Transfer Agent and Registrar
to be an Authentication Agent. Whenever reference is made in this Agreement to the authentication
of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall
be deemed to include authentication on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent must be acceptable to the Transferor. The Trustee hereby initially appoints
U.S. Bank National Association as its Authenticating Agent.




          (b) Any institution succeeding to the corporate agency business of an Authenticating Agent
shall continue to be an Authenticating Agent without the execution or filing of any paper or any
further act on the part of the Trustee or such Authenticating Agent.




          (c) An Authenticating Agent may at any time resign by giving written notice of resignation to
the Trustee and to the Transferor. The Trustee may at any time terminate the agency of an
Authenticating Agent by giving notice of termination to such Authenticating Agent and to the
Transferor. Upon receiving such a notice of resignation or upon such a termination, or in case at
any time an Authenticating Agent shall cease to be acceptable to the Trustee or the Transferor, the
Trustee promptly may appoint a successor Authenticating Agent. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested with all




62









 







the rights, powers and duties of its predecessor hereunder, with like effect as if originally
named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless
acceptable to the Trustee and the Transferor.




          (d) The Servicer agrees to pay each Authenticating Agent from time to time reasonable
compensation for its services under this Section 6.8.




          (e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable to any Authenticating
Agent.




          (f) Pursuant to an appointment made under this Section 6.8, the Securities may have endorsed
thereon, in lieu of the Trustee’s certificate of authentication, an alternate certificate of
authentication in substantially the following form:




          Trustee’s Certificate of Authentication




          This is one of the securities described in the Pooling and Servicing Agreement.




	 	 	 	 	 
	 	 	 
	,
	 	 	as Authenticating Agent for the Trustee
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Authorized Signatory






	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 

	 	 






          Section 6.9  New Issuances.




          (a) Upon the issuance of Investor Securities of a new Series, the Transferor shall deliver to
the Trustee for authentication under Section 6.2, one or more new Series of Investor Securities.
Any such Series of Investor Securities shall be substantially in the form specified in the related
Supplement and shall bear, upon its face, the designation for such Series to which it belongs, as
selected by the Transferor. Except as specified in any Supplement for a related Series, all
Investor Securities of any Series shall rank pari passu and be equally and ratably entitled as
provided herein to the benefits hereof (except that the Enhancement provided for any Series shall
not be available for any other Series) without preference, priority or distinction on account of
the actual time or times of authentication and delivery, all in accordance with the terms and
provisions of this Agreement and the related Supplement.




          (b) The Holder of the Exchangeable Transferor Security may permit Investor Securities of one
or more new Series to be issued (each, a “New Issuance”) by notifying the Trustee in writing at
least five Business Days in advance (a “New Issuance Notice”) of the date upon which the New
Issuance is to occur (a “New Issuance Date”). Any New Issuance Notice shall state the designation
of any Series to be issued on the New Issuance Date and, with respect to each such Class or Series:
(i) its Initial Invested Amount (or the method for calculating such Initial Invested Amount), (ii)
its Security Rate (or the method for allocating interest payments or other cash flows to such
Series), if any, and (iii) the Enhancement Provider, if any, with respect




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to such Series. On the New Issuance Date, the Trustee shall authenticate and deliver any such
Class or Classes of such Series of Investor Securities only upon delivery to it of the following:
(i) a Supplement satisfying the criteria set forth in subsection 6.9(c) and in form reasonably
satisfactory to the Trustee executed by the Transferor and the Servicer and specifying the
Principal Terms of such Series, (ii) the applicable Enhancement, if any, (iii) the agreement, if
any, pursuant to which the Enhancement Provider agrees to provide the Enhancement, if any, (iv) an
Opinion of Counsel to the effect that (A) any Class of the newly issued Series of Investor
Securities sold to third parties will be characterized as either indebtedness or partnership
interests for Federal and applicable state income tax purposes and (B) that the issuance of the
newly issued Series of Investor Securities will not adversely affect the Federal income tax
characterization of any outstanding Series of Investor Securities or the taxability of the Trust
under Federal income tax laws, (v) written confirmation from each Rating Agency that the New
Issuance will not result in such Rating Agency’s reducing or withdrawing its rating on any then
outstanding Class of any Series as to which it is a Rating Agency, (vi) an Officer’s Certificate of
the Transferor, that on the New Issuance Date after giving effect to such New Issuance (A) the
Transferor Interest would be at least equal to the Minimum Transferor Interest and (B) the
Retained Interest would be at least equal to the Minimum Retained Interest, (vii) the existing
Exchangeable Transferor Security, if any, and (viii) such other documents, certificates and
Opinions of Counsel as may be required by the applicable Supplement. Upon satisfaction of such
conditions, the Trustee shall cancel the existing Exchangeable Transferor Security, if any, and
issue such Series of Investor Securities and a new Exchangeable Transferor Security, if applicable,
each dated the New Issuance Date, as provided above. There is no limit to the number of New
Issuances that may be performed under this Agreement.




          (c) In conjunction with a New Issuance, the parties hereto shall execute a Supplement, which
shall specify the relevant terms with respect to any newly issued Series of Investor Securities,
which may include without limitation: (i) its name or designation, (ii) the Initial Invested
Amount or the method of calculating the Initial Invested Amount, (iii) the Security Rate (or
formula for the determination thereof), (iv) the Closing Date, (v) the rating agency or agencies
rating such Series, (vi) the name of the Clearing Agency, if any, (vii) the rights of the Holder of
the Exchangeable Transferor Security that have been transferred to the Holders of such Series
pursuant to such New Issuance (including any rights to allocations of Finance Charge Collections
and Principal Collections), (viii) the interest payment date or dates and the date or dates from
which interest shall accrue, (ix) the method of allocating Principal Collections for such Series
and the method by which the principal amount of Investor Securities of such Series shall amortize
or accrete and the method for allocating Finance Charge Collections, (x) the names of any accounts
to be used by such Series and the terms governing the operation of any such account, (xi) the
Series Servicing Fee Percentage, (xii) the Minimum Transferor Interest, (xiii) the Series
Termination Date, (xiv) the terms of any Enhancement with respect to such Series, (xv) the
Enhancement Provider, if applicable, (xvi) the base rate applicable to such Series, (xvii) the
terms on which the Securities of such Series may be repurchased or remarketed to other investors,
(xviii) any deposit into any account provided for such Series, (xix) the number of Classes of such
Series and, if more than one Class, the rights and priorities of each such Class, (xx) whether any
fees will be included in the funds available to be paid for such Series, (xxi) the subordination of
such Series to any other Series, (xxii) the Pool Factor, (xxiii) the Minimum Aggregate Principal
Receivables, (xxiv) whether such Series will be a part of a group or subject to being paired with
any other Series, (xxv) whether such Series will




64









 







be pre-funded, and (xxvi) any other relevant terms of such Series (including whether or not
such Series will be pledged as collateral for an issuance of any other securities, including
commercial paper) (all such terms, the “Principal Terms” of such Series). The terms of such
Supplement may modify or amend the terms of this Agreement solely as applied to such new Series.
If on the date of the issuance of such Series there is issued and outstanding one or more Series of
Investor Securities and no Series of Investor Securities is currently rated by a Rating Agency,
then as a condition to such New Issuance a nationally recognized investment banking firm or
commercial bank shall also deliver to the Trustee an officer’s certificate stating, in substance,
that the New Issuance will not have an adverse effect on the timing or distribution of payments to
such other Series of Investor Securities then issued and outstanding.




          (d) If applicable, the Transferor may surrender the Exchangeable Transferor Security to the
Trustee in exchange for a newly issued Exchangeable Transferor Security and a second security (a
“Supplemental Security”), the terms of which shall be defined in a supplement to this Agreement
(which supplement shall be subject to Section 13.1 hereof to the extent that it amends any of the
terms of this Agreement), to be delivered to or upon the order of the Transferor (or a Person
designated by the Transferor, in the case of the transfer or exchange thereof, as provided below),
upon satisfaction of the following conditions: (i) following such exchange, the Transferor
Interest (less any interest therein represented by any Supplemental Securities) would be at least
equal to the Minimum Transferor Interest, (ii) following such exchange the Retained Interest (less
any interest therein represented by any Supplemental Securities) equals or exceeds the Minimum
Retained Interest, and (iii) the Trustee received prior to such exchange (A) a letter from the
Rating Agency stating that the then current ratings on the Investor Securities of each rated class
of each Series then outstanding will not be reduced or withdrawn because of the issuance of such
Supplemental Security and (B) an Opinion of Counsel to the effect that (i) such Supplemental
Security will be characterized as either indebtedness or a partnership interest for Federal income
tax purposes and (ii) such Supplemental Security will not adversely affect the Federal income tax
characterization of any outstanding Series of Investor Securities or the taxability of the Trust
under Federal income tax laws. A Supplemental Security may be transferred or exchanged only upon
satisfaction of the conditions set forth in clause (iii) above.




          Section 6.10 Book-Entry Securities. Unless otherwise provided in any related
Supplement, the Investor Securities, upon original issuance, shall be issued in the form of
typewritten Securities representing the Book-Entry Securities, to be delivered to the depositary
specified in such Supplement (the “Depositary”) which shall be the Clearing Agency or Foreign
Clearing Agency, by or on behalf of such Series. The Investor Securities of each Series shall,
unless otherwise provided in the related Supplement, initially be registered on the Security
Register in the name of the nominee of the Clearing Agency or Foreign Clearing Agency. No Security
Owner will receive a definitive security representing such Security Owner’s interest in the related
Series of Investor Securities, except as provided in Section 6.12. Unless and until definitive,
fully registered Investor Securities of any Series (“Definitive Securities”) have been issued to
Security Owners pursuant to Section 6.12:





          (i) the provisions of this Section 6.10 shall be in full force and effect with respect
to each such Series;



65









 






          (ii) the Transferor, the Servicer, the Paying Agent, the Transfer Agent and Registrar
and the Trustee may deal with the Clearing Agency and the Clearing Agency Participants for
all purposes (including the making of distributions on the Investor Securities of each such
Series) as the authorized representatives of the Security Owners;




          (iii) to the extent that the provisions of this Section 6.10 conflict with any other
provisions of this Agreement, the provisions of this Section 6.10 shall control with respect
to each such Series; and




          (iv) the rights of Security Owners of Investor Securities of each such Series shall be
exercised only through the Clearing Agency or Foreign Clearing Agency and the applicable
Clearing Agency Participants and shall be limited to those established by law and agreements
between such Security Owners and the Clearing Agency or Foreign Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Depositary Agreement applicable to a Series,
unless and until Definitive Securities of such Series are issued pursuant to Section 6.12,
the initial Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and interest on the
Investor Securities to such Clearing Agency Participants.



          Section 6.11 Notices to Clearing Agency. Whenever notice or other communication to
the Securityholders is required under this Agreement, unless and until Definitive Securities shall
have been issued to Security Owners pursuant to Section 6.12, the Trustee shall give all such
notices and communications specified herein to be given to Holders of the Investor Securities to
the Clearing Agency or Foreign Clearing Agency.




          Section 6.12 Definitive Securities. If (i) (A) the Transferor advises the Trustee in
writing that the Clearing Agency or Foreign Clearing Agency is no longer willing or able to
discharge properly its responsibilities under the applicable Depositary Agreement, and (B) the
Transferor is unable to locate a qualified successor, (ii) the Transferor, at its option, advises
the Trustee in writing that it elects to terminate the book-entry system through the Clearing
Agency or Foreign Clearing Agency with respect to any Series of Securities or (iii) after the
occurrence of a Servicer Default, Security Owners of a Series representing beneficial interests
aggregating not less than 50% of the Invested Amount of such Series advise the Trustee and the
applicable Clearing Agency or Foreign Clearing Agency through the applicable Clearing Agency
Participants in writing that the continuation of a book-entry system through the applicable
Clearing Agency or Foreign Clearing Agency is no longer in the best interests of the Security
Owners, the Trustee shall notify all Security Owners of such Series, through the applicable
Clearing Agency Participants, of the occurrence of any such event and of the availability of
Definitive Securities to Security Owners of such Series requesting the same. Upon surrender to the
Trustee of the Investor Securities of such Series by the applicable Clearing Agency or Foreign
Clearing Agency for registration, accompanied by registration instructions from the applicable
Clearing Agency or Foreign Clearing Agency, the Trustee shall issue the Definitive Securities of
such Series. Neither the Transferor nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Securities of such Series, all references herein




66









 







to obligations imposed upon or to be performed by the applicable Clearing Agency or Foreign
Clearing Agency shall be deemed to be imposed upon and performed by the Trustee, to the extent
applicable with respect to such Definitive Securities, and the Trustee shall recognize the Holders
of the Definitive Securities of such Series as Securityholders of such Series hereunder.




          Section 6.13 Global Security; Euro-Security Exchange Date. If specified in the
related Supplement for any Series, the Investor Securities may be initially issued in the form of a
single temporary Global Security (the “Global Security”) in bearer form, without interest coupons,
in the denomination of the Initial Invested Amount of such Series and substantially in the form
attached to the related Supplement. Unless otherwise specified in the related Supplement, the
provisions of this Section 6.13 shall apply to such Global Security. The Global Security will be
authenticated by the Trustee upon the same conditions, in substantially the same manner and with
the same effect as the Definitive Securities. The Global Security may be exchanged in the manner
described in the related Supplement for Registered Securities or Bearer Securities in definitive
form.




          Section 6.14 Meetings of Securityholders.




          To the extent provided by the Supplement for any Series issued in whole or in part in Bearer
Securities, the Transferor or the Trustee may at any time call a meeting of the Securityholders of
such Series, to be held at such time and at such place as the Transferor or the Trustee, as the
case may be, shall determine, for the purpose of approving a modification of or amendment to, or
obtaining a waiver of, any covenant or condition set forth in this Agreement with respect to such
Series or in the Securities of such Series, subject to Section 13.1 of this Agreement.




[End of Article VI]







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ARTICLE VII




OTHER MATTERS RELATING TO THE TRANSFEROR




          Section 7.1 Liability of the Transferor. The Transferor shall be liable in accordance
herewith solely to the extent of the obligations specifically undertaken by the Transferor.




          Section 7.2 Merger or Consolidation of, or Assumption of the Obligations of, the
Transferor.




          (a) The Transferor shall not consolidate with or merge into any other business entity or
convey or transfer its properties and assets substantially as an entirety to any Person, unless:





          (i) the business entity formed by such consolidation or into which the Transferor is
merged or the Person which acquires by conveyance or transfer the properties and assets of
the Transferor substantially as an entirety shall be, if the Transferor is not the surviving
entity, (x) a corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia or (y) a state or national banking
association that is not eligible to be a debtor under the United States Bankruptcy Code, as
amended from time to time, or to any successor statute, and shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the performance of every covenant and obligation of the Transferor, as
applicable hereunder and shall benefit from all the rights granted to the Transferor, as
applicable hereunder. To the extent that any right, covenant or obligation of the
Transferor, as applicable hereunder, is inapplicable to the successor entity, such successor
entity shall be subject to such covenant or obligation, or benefit from such right, as would
apply, to the extent practicable, to such successor entity. In furtherance hereof, in
applying this Section 7.2 to a successor entity, Section 9.2 hereof shall be applied by
reference to events of involuntary liquidation, bankruptcy, receivership or conservatorship
applicable to such successor entity as shall be set forth in the officer’s certificate
described in subsection 7.2(a)(ii);




          (ii) the Transferor shall have delivered to the Trustee an Officer’s Certificate of the
Transferor signed by a Vice President (or any more senior officer) of the Transferor stating
that such consolidation, merger, conveyance or transfer and such supplemental agreement
comply with this Section 7.2 and that all conditions precedent herein provided for relating
to such transaction have been complied with and an Opinion of Counsel that such supplemental
agreement is legal, valid and binding and that the entity surviving such consolidation,
conveyance or transfer is organized and existing under the laws of the United States of
America or any State or the District of Columbia and, in the case of subsection 7.2(a)(i)(x)
and subject to customary limitations and qualifications, such entity will not be
substantively consolidated with the seller under the Purchase Agreement;



68









 






          (iii) the Transferor shall have delivered notice to the Rating Agency of such
consolidation, merger, conveyance or transfer and the Rating Agency shall have provided
written confirmation that such consolidation, merger, conveyance or transfer will not result
in the Rating Agency reducing or withdrawing its rating on any then outstanding Series as to
which it is a Rating Agency;




          (iv) in the case of subsection 7.2(a)(i)(x), the successor entity shall be a special
purpose bankruptcy remote entity; and




          (v) if the Transferor is not the surviving entity, the surviving entity shall file new
UCC financing statements with respect to the interest of the Trustee in the Receivables.



          (b) The obligations of the Transferor hereunder shall not be assignable nor shall any Person
succeed to the obligations of the Transferor hereunder except for mergers, consolidations,
assumptions or transfers in accordance with the provisions of the foregoing paragraph.




          Section 7.3 Limitation on Liability. The directors, officers, employees or agents of
the Transferor shall not be under any liability to the Trust, the Trustee, the Securityholders, any
Enhancement Provider or any other Person hereunder or pursuant to any document delivered hereunder,
it being expressly understood that all such liability is expressly waived and released as a
condition of, and as consideration for, the execution of this Agreement and any Supplement and the
issuance of the Securities; provided, however, that this provision shall not
protect the officers, directors, employees, or agents of the Transferor against any liability which
would otherwise be imposed upon them by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Except as provided in Sections 7.1 and 7.4 with respect to the Trust and the
Trustee and its officers, directors, employees and agents, the Transferor shall not be under any
liability to the Trust, the Trustee, its officers, directors, employees and agents, the
Securityholders, any Enhancement Provider or any other Person for any action taken or for
refraining from the taking of any action in its capacity as Transferor pursuant to this Agreement
or any Supplement whether arising from express or implied duties under this Agreement or any
Supplement or otherwise; provided, however, that this provision shall not protect
the Transferor against any liability which would otherwise be imposed upon it by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Transferor and any of its directors, officers,
employees or agents may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.




          Section 7.4 Liabilities. With respect to any Series issued prior to the date hereof,
notwithstanding Section 7.3, by entering into this Agreement, the Transferor agrees to be liable,
directly to the injured party, for the entire amount of any losses, claims, damages, penalties or
liabilities (other than those incurred by a Securityholder in the capacity of an investor in the
Investor Securities as a result of the performance of the Receivables, market fluctuations, a
shortfall or failure by the Enhancement Provider to make payment under any Enhancement or other
similar market or investment risks associated with ownership of the




69









 







Investor Securities) arising out of or based on the arrangement created by this Agreement as
though this Agreement created a partnership under the Delaware Uniform Partnership Law, in which
the Transferor is a general partner; provided, however, that the Transferor shall
not be liable for a breach by the Servicer, DMCCB, HSBC Nevada, HRAC II, or Metris, as applicable,
of its representations, warranties, covenants, or obligations under this Agreement, the Bank
Receivables Purchase Agreement, the Purchase Agreement, or any related document. With respect to
any Series issued prior to the date hereof, the Transferor agrees to pay, indemnify and hold
harmless each Investor Securityholder against and from any and all such losses, claims, damages and
liabilities (other than those incurred by a Securityholder in the capacity of an investor in the
Investor Securities as a result of the performance of the Receivables, market fluctuations, a
shortfall or failure by an Enhancement Provider to make payment under an Enhancement or other
similar market or investment risks) except to the extent that they arise from any action by such
Investor Securityholder. Any amounts to be paid by the Transferor pursuant to this Section 7.4
shall not be payable from the Trust Property conveyed by the Transferor hereunder. Subject to
Sections 8.3 and 8.4, in the event of a Service Transfer, the Successor Servicer will indemnify and
hold harmless the Transferor for any losses, claims, damages and liabilities of the Transferor as
described in this Section 7.4 arising from the actions or omissions of such Successor Servicer.




[End of Article VII]





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ARTICLE VIII




OTHER MATTERS RELATING




TO THE SERVICER




          Section 8.1 Liability of the Servicer. The Servicer shall be liable in accordance
herewith only to the extent of the obligations specifically undertaken by the Servicer in such
capacity herein.




          Section 8.2 Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer. Subject to subsection 3.1(a), the Servicer shall not consolidate with or merge into
any other corporation or convey or transfer its properties and assets substantially as an entirety
to any Person, unless:





          (i) the corporation formed by such consolidation or into which the Servicer is merged
or the Person which acquires by conveyance or transfer the properties and assets of the
Servicer substantially as an entirety shall be (x) a corporation organized and existing
under the laws of the United States of America or any State or the District of Columbia or
(y) a state or national banking association that is not eligible to be a debtor under the
United States Bankruptcy Code, as amended from time to time, or to any successor statute,
and, if the Servicer is not the surviving entity, shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trustee and the Transferor in form
satisfactory to the Trustee and the Transferor, the performance of every covenant and
obligation of the Servicer hereunder (to the extent that any right, covenant or obligation
of the Servicer, as applicable hereunder, is inapplicable to the successor entity, such
successor entity shall be subject to such covenant or obligation, or benefit from such
right, as would apply, to the extent practicable, to such successor entity);




          (ii) the Servicer shall have delivered to the Trustee and the Transferor an Officer’s
Certificate of the Servicer that such consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 8.2 and that all conditions precedent herein
provided for relating to such transaction have been complied with and an Opinion of Counsel
that such supplemental agreement is legal, valid and binding with respect to the Servicer
and that the entity surviving such consolidation, conveyance or transfer is organized and
existing under the laws of the United States of America or any State or the District of
Columbia; and




          (iii) the Servicer shall have delivered notice to the Rating Agency of such
consolidation, merger, conveyance or transfer.



          Section 8.3 Limitation on Liability of the Servicer and Others. The directors,
officers, employees or agents of the Servicer shall not be under any liability to the Trust, the
Trustee, the Securityholders, any Enhancement Provider or any other Person hereunder or pursuant to
any document delivered hereunder, it being expressly understood that all such liability is
expressly waived and released as a condition of, and as consideration for, the execution of this
Agreement and any Supplement and the issuance of the Securities; provided,




71









 







however, that this provision shall not protect the directors, officers, employees and
agents of the Servicer against any liability which would otherwise be imposed upon them by reason
of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder. Except as provided in Sections 8.1 and 8.4
with respect to the Trustee, its officers, directors, employees and agents, the Servicer shall not
be under any liability to the Trust, the Trustee, its officers, directors, employees and agents,
the Securityholders, any Enhancement Provider or any other Person for any action taken or for
refraining from the taking of any action in its capacity as Servicer pursuant to this Agreement or
any Supplement; provided, however, that this provision shall not protect the
Servicer against any liability which would otherwise be imposed upon it by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by reason of its
reckless disregard of its obligations and duties hereunder or under any Supplement. The Servicer
may rely in good faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which is not incidental to
its duties to service the Receivables in accordance with this Agreement which in its reasonable
opinion may involve it in any expense or liability.




          Section 8.4 Servicer Indemnification of the Transferor, the Trust and the Trustee.
Subject to the limitations on liability set forth in Section 8.3, the Servicer shall indemnify and
hold harmless the Transferor, the Trustee and the Trust (each, an “Indemnified Party”) from and
against any loss, liability, reasonable expense, damage or injury, including, but not limited to,
any judgment, award, settlement, reasonable attorneys’ fees and other costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or claim, suffered or
sustained by reason of any acts or omissions or alleged acts or omissions of the Servicer, with
respect to activities of the Trust or the Trustee, in breach of the representations, warranties,
covenants, or obligations of the Servicer under this Agreement; provided, however,
that the Servicer shall not indemnify or hold harmless an Indemnified Party if such acts, omissions
or alleged acts or omissions constitute or are caused by fraud, gross negligence, or willful
misconduct by such Indemnified Party (or any of such Indemnified Party’s officers, directors,
employees or agents) or the Investor Securityholders; provided, further, that the
Servicer shall not indemnify or hold harmless the Transferor, the Trust, the Investor
Securityholders or the Security Owners for any losses, liabilities, expenses, damages or injuries
suffered or sustained by any of them with respect to any action taken by the Trustee at the request
of the Investor Securityholders; provided, further, that the Servicer shall not
indemnify or hold harmless the Transferor, the Trust, the Investor Securityholders or the Security
Owners as to any losses, liabilities, expenses, damages or injuries suffered or sustained by any of
them in their capacities as investors, including without limitation losses incurred as a result of
Receivables in Defaulted Accounts; provided, further, that the Servicer shall not
indemnify or hold harmless the Transferor, the Trust, the Investor Securityholders or the Security
Owners for any losses, liabilities, expenses, damages or injuries suffered or sustained by the
Transferor, the Trust, the Investor Securityholders or the Security Owners arising under any tax
law, including without limitation, any federal, state, local or foreign income or franchise taxes
or any other tax imposed on or measured by income (or any interest, penalties or additions with
respect thereto or arising from a failure to comply therewith) required to be paid by the
Transferor, the Trust, the Investor Securityholders or the Security Owners in connection herewith
to any taxing authority; and, provided, further, that in no event will the Servicer
be liable, directly or indirectly, for or in




72









 







respect of any indebtedness or obligation evidenced or created by any Security, recourse as to
which shall be limited solely to the assets of the Trust allocated for the payment thereof as
provided in this Agreement and any applicable Supplement. Any such indemnification shall not be
payable from the assets of the Trust, but the Servicer shall be subrogated to the rights of the
Trust with respect to the foregoing matters if and to the extent that the Servicer shall have
indemnified the Trust with respect thereto. The Servicer shall indemnify and hold harmless the
Trustee and its officers, directors, employees or agents from and against any loss, liability,
reasonable expense, damage or injury suffered or sustained by reason of the acceptance of this
Trust by the Trustee, the issuance by the Trust of the Securities or any of the other matters
contemplated herein or in any Supplement; provided, however, that the Servicer
shall not indemnify the Trustee or its officers, directors, employees or agents for any loss,
liability, expense, damage or injury caused by the fraud, negligence or willful misconduct of any
of them. The provisions of this indemnity shall run directly to and be enforceable by an injured
party subject to the limitations hereof and shall survive the resignation or removal of the
Servicer, the resignation or removal of the Trustee and/or the termination of the Trust and shall
survive the termination of the Agreement.




          Section 8.5 The Servicer Not to Resign. Subject to subsection 3.1(a), the Servicer
shall not resign from the obligations and duties hereby imposed on it except upon determination
that (i) the performance of its duties hereunder is no longer permissible under applicable law and
(ii) there is no reasonable action that the Servicer could take to make the performance of its
duties hereunder permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Trustee. No such resignation shall become effective until the Trustee
or a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.2 hereof. If the Trustee is unable within 120 days of the date of
delivery to it of such Opinion of Counsel to appoint a Successor Servicer, the Trustee shall serve
as Successor Servicer hereunder (but shall have continued authority to appoint another Person as
Successor Servicer).




          Section 8.6 Access to Certain Documentation and Information Regarding the Receivables.
The Servicer shall provide to the Transferor and the Trustee, and their agents (who shall be
reasonably acceptable to the Servicer), access to the documentation regarding the Accounts and the
Receivables in such cases where the Transferor or the Trustee is required in connection with the
enforcement of the rights of the Investor Securityholders, or by applicable statutes or
regulations, to review such documentation, such access being afforded without charge but only (i)
upon reasonable request, (ii) during normal business hours, (iii) subject to the Servicer’s normal
security and confidentiality procedures and (iv) at offices designated by the Servicer. Nothing in
this Section 8.6 shall derogate from the obligation of any Credit Card Originator, the Transferor,
the Trustee or 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 8.6 as a result of such obligations shall not constitute a breach of this Section 8.6.




          Section 8.7 Delegation of Duties. It is understood and agreed by the parties hereto
that the Servicer may delegate certain of its duties hereunder to First Data Resources, Inc., a
Delaware corporation. In the ordinary course of business, the Servicer may at any time




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delegate any duties hereunder to any Person who agrees to conduct such duties in accordance
with the Credit and Collection Policies. Any such delegations shall not relieve the Servicer of
its liability and responsibility with respect to such duties, and shall not constitute a
resignation within the meaning of Section 8.5 hereof and the Servicer will remain jointly and
severally liable with such Person for any amounts which would otherwise be payable pursuant to this
Article VIII as if the Servicer had performed such duty; provided, however, that in
the case of any significant delegation to a Person other than First Data Resources, Inc. or an
Affiliate of the Servicer (i) written notice shall be given to the Transferor, the Trustee and to
each Rating Agency of such delegation, (ii) Moody’s shall have notified the Transferor and the
Trustee in writing that such delegation will not result in the lowering or withdrawal of its then
existing rating of any Series or Class of Investor Securities and (iii) the Transferor shall not
have received written notice from Standard & Poor’s that such delegation would result in the
lowering or withdrawal of its then existing rating of any Series or Class of Investor Securities.




[End of Article VIII]






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ARTICLE IX




PAY OUT EVENTS




          Section 9.1 Pay Out Events. If any one of the following events (each, a “Trust Pay
Out Event”) shall occur:




          (a) the Transferor, HSBC Nevada, HRAC II or HSBC Finance shall consent to the appointment of a
bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating
to all or substantially all of its property; or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of a bankruptcy
trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the Transferor, HSBC
Nevada, HRAC II or HSBC Finance; or the Transferor, HSBC Nevada, HRAC II or HSBC Finance shall
admit in writing its inability to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization statute including the United States
Bankruptcy Code, make an assignment for the benefit of its creditors or voluntarily suspend payment
of its obligations; or the Transferor shall become unable for any reason , including the breach by
either DMCCB or HSBC Nevada of its obligation under the applicable Bank Receivables Purchase
Agreement to transfer to HRAC II, as applicable, such of those Receivables (as defined in the
applicable Bank Receivables Purchase Agreement) that are required to be conveyed to the Trustee
pursuant to this Agreement, the breach by HRAC II of its obligation under the applicable Purchase
Agreement, to transfer Receivables (as defined in such Purchase Agreement) to the Transferor, and
the breach by MRI of its obligation to transfer Receivables to the Trust in accordance with the
provisions of this Agreement; or




          (b) the Trust shall become subject to regulation by the Securities and Exchange Commission as
an “investment company” within the meaning of the Investment Company Act;




then a Pay Out Event with respect to all Series of Securities shall occur without any notice or
other action on the part of the Trustee or the Investor Securityholders immediately upon the
occurrence of such event. The Trustee shall provide notice of a Pay Out Event in a prompt manner
to each Rating Agency.




          Section 9.2 Additional Rights Upon the Occurrence of Certain Events.




          (a) If (x) the Transferor shall consent to the appointment of a bankruptcy trustee or receiver
or liquidator for the winding-up or liquidation of its affairs, or a decree or order of a court or
agency or supervisory authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator for the winding-up or liquidation of its affairs shall
have been entered against the Transferor, HRAC II, HSBC Finance or HSBC Nevada (an “Insolvency
Event”), on the day of such Insolvency Event (the “Appointment Day”) or (y) the Retained Percentage
shall at any time be equal to or less than 2% (a “Trigger Event”), the following actions shall be
taken and processes begun:




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          (i) If an Insolvency Event shall have occurred, the Transferor shall immediately cease
to transfer Principal Receivables to the Trust and shall promptly give written notice to the
Trustee of such Insolvency Event. Notwithstanding any cessation of the transfer to the
Trust of additional Principal Receivables, receivables accrued in respect of Finance Charge
Receivables (other than Discount Option Receivables), whenever created, accrued in respect
of Receivables that have been transferred to the Trust, shall continue to be a part of the
Trust, and Collections with respect thereto shall continue to be allocated and paid in
accordance with Article IV.




          (ii) If an Insolvency Event or a Trigger Event shall have occurred this Agreement and
the Trust shall be deemed to have terminated, subject to the liquidation, winding-up and
dissolution procedures described below; provided, however, that within 15
days of the date of written notice to the Trustee, the Trustee shall (i) publish a notice in
an Authorized Newspaper that an Insolvency Event or a Trigger Event has occurred, that the
Trust has terminated, and that the Trustee intends to sell, dispose of or otherwise
liquidate the Receivables pursuant to this Agreement (a “Disposition”), and (ii) send
written notice to the Investor Securityholders describing the provisions of this Section 9.2
and requesting each Investor Securityholder to advise the Trustee in writing that it elects
one of the following options: (A) the Investor Securityholder wishes the Trustee to instruct
the Servicer not to effectuate a Disposition, or (B) the Investor Securityholder refuses to
advise the Trustee as to the specific action the Trustee shall instruct the Servicer to
take, or (C) the Investor Securityholder wishes the Servicer to effect a Disposition. If
after 90 days from the day notice pursuant to clause (i) above is first published (the
“Publication Date”), the Trustee shall not have received the written instruction described
in clause (A) above from Holders of Investor Securities representing Undivided Interests
aggregating in excess of 50% of the related Invested Amount of each Series (or, in the case
of a Series having more than one Class, each Class of such Series) and the holders of any
Supplemental Securities or any other interest in the Transferor Interest other than the
Transferor as provided in Section 6.3(b) (for each Series, a “Holders’ Majority”), the
Trustee shall instruct the Servicer to effectuate a Disposition, and the Servicer shall
proceed to consummate a Disposition. If, however, with respect to the portion of
the Receivables allocable to any outstanding Series, a Holders’ Majority instruct the
Trustee not to effectuate a Disposition of the portion of the Receivables allocable to such
Series, the Trust shall be reconstituted and continue with respect to such Series pursuant
to the terms of this Agreement and the applicable Supplement (as amended in connection with
such reconstitution). The portion of the Receivables allocable to any Series shall be equal
to the sum of (1) the product of (A) the Transferor Percentage, (B) the aggregate
outstanding Principal Receivables and (C) a fraction the numerator of which is the related
Investor Percentage of Finance Charge Collections and the denominator of which is the sum of
all Investor Percentages with respect to Finance Charge Collections for all Series
outstanding and (2) the Invested Amount of such Series. The Transferor, but none of its
Affiliates, shall be permitted to bid for the Receivables. In addition, the Transferor, but
none of its Affiliates, shall have the right to match any bid by a third person and be
granted the right to purchase the Receivables at such matched bid price. The Trustee shall
use its best efforts to effectuate a Disposition by the use of competitive bids and on terms
equivalent to the best purchase offer as determined by the Trustee. The Trustee may obtain
a prior determination from



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any such bankruptcy trustee, receiver or liquidator that the terms and manner of any
proposed Disposition are commercially reasonable. The provisions of Sections 9.1 and 9.2
shall not be deemed to be mutually exclusive.



          (b) The proceeds from the Disposition pursuant to subsection (a) above shall be treated as
Collections on the Receivables and shall be allocated and deposited in accordance with the
provisions of Article IV; provided, however, that the proceeds from a Disposition
with respect to any Series shall be applied solely to make payments to such Series; provided,
further, that the Trustee shall determine conclusively in its sole discretion the amount of such
proceeds that are allocable to Finance Charge Collections and the amount of such proceeds that are
allocable to Collections of Principal Receivables. Unless the Trustee receives written
instructions from Investor Securityholders of one or more Series to continue the Trust with respect
to such Series as provided in subsection 9.2(a) above, on the day following the last Distribution
Date in the Monthly Period during which such proceeds are distributed to the Investor
Securityholders of each Series, the Trust shall terminate.




          (c) The Trustee may appoint an agent or agents to assist with its responsibilities pursuant to
this Article IX with respect to competitive bids.




[End of Article IX]






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ARTICLE X




SERVICER DEFAULTS




          Section 10.1 Servicer Defaults. If any one of the following events (a “Servicer
Default”) shall occur and be continuing:




          (a) any failure by the Servicer to make any payment, transfer or deposit or to give
instructions or notice to the Trustee pursuant to Article IV or to instruct the Trustee to make any
required drawing, withdrawal, or payment under any Enhancement on or before the date occurring five
Business Days after the date such payment, transfer, deposit, withdrawal or drawing or such
instruction or notice is required to be made or given, as the case may be, under the terms of this
Agreement; provided, however, that any such failure caused by a non- willful act of
the Servicer shall not constitute a Servicer Default if the Servicer promptly remedies such failure
within five Business Days after receiving notice of such failure or otherwise becoming aware of
such failure;




          (b) failure on the part of the Servicer duly to observe or perform in any respect any other
covenants or agreements of the Servicer set forth in this Agreement, which has a material adverse
effect on the Investor Securityholders of any Series and which 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 Trustee or the Transferor, or to the Servicer, the
Transferor and the Trustee by the Holders of Investor Securities evidencing Undivided Interests
aggregating not less than 50% of the Invested Amount of any Series materially adversely affected
thereby and continues to materially adversely affect such Investor Securityholders for such period;
or the Servicer shall delegate its duties under this Agreement, except as permitted by Section 8.7;




          (c) any representation, warranty or certification made by the Servicer in this Agreement or in
any certificate delivered pursuant to this Agreement shall prove to have been incorrect when made,
which has a material adverse effect on the Investor Securityholders of any Series and which
continues to be incorrect in any material respect 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 Trustee or the Transferor, or to the Servicer, the Transferor and the Trustee by
the Holders of Investor Securities evidencing Undivided Interests aggregating not less than 50% of
the Invested Amount of any Series materially adversely affected thereby and continues to materially
adversely affect such Investor Securityholders for such period; or




          (d) the Servicer shall consent to the appointment of a bankruptcy trustee or receiver or
liquidator in any bankruptcy proceeding or any other insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating
to all or substantially all of its property; or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of a bankruptcy
trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the Servicer, and such
decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or




78









 







the Servicer shall admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or reorganization statute, make
any assignment for the benefit of its creditors or voluntarily suspend payment of its obligations;



then, so long as such Servicer Default shall not have been remedied, any of the Transferor (with
the consent of the Holders of Investor Securities evidencing Undivided Interests aggregating more
than 50% of the Aggregate Invested Amount), the Trustee, or the Holders of Investor Securities
evidencing Undivided Interests aggregating more than 50% of the Aggregate Invested Amount, by
notice then given in writing to the Servicer (and to the Trustee and the Transferor if given by the
Investor Securityholders) (a “Termination Notice”), may terminate all of the rights and obligations
of the Servicer as Servicer under this Agreement. After receipt by the Servicer of such
Termination Notice, and on the date that a Successor Servicer shall have been appointed by the
Trustee pursuant to Section 10.2, all authority and power of the Servicer under this Agreement
shall pass to and be vested in a Successor Servicer; and, without limitation, the Trustee is hereby
authorized and empowered (upon the failure of the Servicer to cooperate) to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other instruments upon
the failure of the Servicer to execute or deliver such documents or instruments, and to do and
accomplish all other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights and obligations. The Servicer agrees to cooperate with the Trustee
and such Successor Servicer in effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing hereunder including, without limitation, the transfer to such
Successor Servicer of all authority of the Servicer to service the Receivables provided for under
this Agreement, including, without limitation, all authority over all Collections which shall on
the date of transfer be held by the Servicer for deposit, or which have been deposited by the
Servicer, in the Collection Account, the Excess Funding Account, the Interest Funding Account or
the Principal Account, and any Series Account, or which shall thereafter be received with respect
to the Receivables. The Servicer shall promptly transfer its electronic records or electronic
copies thereof relating to the Receivables to the Successor Servicer in such electronic form as the
Successor Servicer may reasonably request and shall promptly transfer to the Successor Servicer all
other records, correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Servicer shall reasonably request. To
the extent that compliance with this Section 10.1 shall require the Servicer to disclose to the
Successor Servicer information of any kind which the Servicer deems to be confidential, the
Successor Servicer shall be required to enter into such customary licensing and confidentiality
agreements as the Servicer shall deem necessary to protect its interests. The Servicer shall, on
the date of any servicing transfer, transfer all of its rights and obligations under the
Enhancement with respect to any Series to the Successor Servicer. In connection with any service
transfer, all reasonable costs and expenses (including attorneys’ fees) incurred in connection with
transferring the records, correspondence and other documents with respect to the Receivables and
the other Trust Property to the Successor Servicer and amending this Agreement to reflect such
succession as Successor Servicer pursuant to this Section 10.1 and Section 10.2 shall be paid by
the Servicer (unless the Trustee is acting as the Servicer on a temporary basis, in which case the
original Servicer shall be responsible therefor) upon presentation of reasonable documentation of
such costs and expenses.




          Notwithstanding the foregoing, a delay in or failure of performance referred to in subsection
10.1(a) for a period of five Business Days or under subsection 10.1(b) or (c) for a




79









 







period of 60 days, shall not constitute a Servicer Default if such delay or failure could not
be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or the public enemy, acts of declared or undeclared war or terrorism,
public disorder, rebellion, riot or sabotage, epidemics, landslides, lightning, fire, hurricanes,
tornadoes, earthquakes, nuclear disasters or meltdowns, floods, power outages, bank closings,
communications outages, computer failure 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 Trustee, any
Enhancement Provider, the Transferor and the Holders of Investor Securities with an Officer’s
Certificate giving prompt notice of such failure or delay by it, together with a description of the
cause of such failure or delay and its efforts so to perform its obligations.




          Section 10.2 Trustee to Act; Appointment of Successor.




          (a) On and after the receipt by the Servicer of a Termination Notice pursuant to Section 10.1,
the Servicer shall continue to perform all servicing functions under this Agreement until the date
specified in the Termination Notice or as otherwise specified by the Trustee in writing or, if no
such date is specified in such Termination Notice, or otherwise specified by the Trustee, until a
date mutually agreed upon by the Servicer and Trustee. The Trustee shall notify each Rating Agency
and the Transferor of such removal of the Servicer. The Trustee shall, as promptly as possible
after the giving of a Termination Notice, appoint a successor servicer (the “Successor Servicer”),
and such Successor Servicer shall accept its appointment by a written assumption in a form
acceptable to the Trustee. If such Successor Servicer is unable to accept such appointment, the
Trustee may obtain bids from any potential successor servicer. If the Trustee is unable to obtain
any bids from any potential successor servicer and the Servicer delivers an Officer’s Certificate
of the Servicer to the effect that it cannot in good faith cure the Servicer Default which gave
rise to a Termination Notice, and if the Trustee is legally unable to act as Successor Servicer,
then the Trustee, except in the case of a Servicer Default set forth in subsection 10.1(d), shall
offer the Transferor the right to accept reassignment of all of the Receivables for an amount equal
to the Aggregate Invested Amount on the date of such purchase plus all interest accrued but unpaid
on all of the outstanding Investor Securities at the applicable Security Rate through the date of
such purchase; provided, however, that no such purchase by the Transferor shall
occur unless the Transferor shall deliver an Opinion of Counsel reasonably acceptable to the
Trustee that such purchase would not constitute a fraudulent conveyance of the Transferor. The
proceeds of such sale shall be deposited in the Distribution Account or any Series Account, as
provided in the related Supplement, for distribution to the Investor Securityholders of each
outstanding Series pursuant to Section 12.3 of the Agreement. In the event that a Successor
Servicer has not been appointed and has not accepted its appointment at the time when the Servicer
ceases to act as Servicer, the Trustee without further action shall automatically be appointed the
Successor Servicer (but shall have continued authority to appoint another Person as Successor
Servicer). The Trustee may delegate any of its servicing obligations to an affiliate or agent of
the Trustee in accordance with Article III hereof. Any such delegations shall not relieve the
Trustee of its liability and responsibility with respect to such duties. Notwithstanding the
above, the Trustee shall, if it is legally unable to act, petition a court of competent
jurisdiction to appoint any established financial institution having, in the case of an entity that
is subject to risk-based capital adequacy requirements, risk based capital of at least $50,000,000
or, in the case of an entity that is not subject to risk based




80









 







capital requirements, having a net worth of not less than $50,000,000 and whose regular
business includes the servicing of credit card receivables similar to the Receivables as the
Successor Servicer hereunder.




          (b) Upon its appointment, the Successor Servicer shall be the successor in all respects to the
Servicer with respect to servicing functions under this Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to
the Successor Servicer. Any Successor Servicer, by its acceptance of its appointment, will
automatically agree to be bound by the terms and provisions of each Enhancement.




          (c) In connection with such appointment and assumption, the Trustee shall be entitled to such
compensation, or may make such arrangements for the compensation of the Successor Servicer out of
Collections, as it and such Successor Servicer shall agree; provided, however, that
no such compensation shall be in excess of the Servicing Fee permitted to the Servicer pursuant to
Section 3.2. The Transferor agrees that if the Servicer is terminated hereunder, it will agree to
deposit a portion of the Collections in respect of Finance Charge Receivables that it is entitled
to receive pursuant to Article IV to pay its ratable share of the compensation of the Successor
Servicer.




          (d) All authority and power granted to the Servicer under this Agreement shall automatically
cease and terminate upon termination of the Trust pursuant to Section 12.1 and shall pass to and be
vested in the Transferor and, without limitation, the Transferor is hereby authorized and empowered
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents
and other instruments, and to do and accomplish all other acts or things necessary or appropriate
to effect the purposes of such transfer of servicing rights. The Servicer agrees to cooperate with
the Transferor in effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing on the Receivables. The Servicer shall transfer its electronic records relating
to the Receivables to the Transferor in such electronic form as the Transferor may reasonably
request and shall transfer all other records, correspondence and documents to the Transferor in the
manner and at such times as the Transferor shall reasonably request. To the extent that compliance
with this Section 10.2 shall require the Servicer to disclose to the Transferor information of any
kind which the Servicer deems to be confidential, the Transferor shall be required to enter into
such customary licensing and confidentiality agreements as the Servicer shall deem necessary to
protect its interests.




          Section 10.3 Notification to Securityholders. Upon the Servicer becoming aware of any
Servicer Default, the Servicer shall give prompt written notice thereof to the Trustee, the
Transferor and any Enhancement Provider and, upon receipt of such written notice, the Trustee shall
give notice to the Investor Securityholders at their respective addresses appearing in the Security
Register. Upon any termination or appointment of a Successor Servicer pursuant to this Article X,
the Trustee shall give prompt written notice thereof to the Transferor and to the Investor
Securityholders at their respective addresses appearing in the Security Register.




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          Section 10.4 Waiver of Past Defaults. The Holders of Investor Securities evidencing
Undivided Interests aggregating not less than 66-2/3% of the Invested Amount of each Series
materially adversely affected by any default by the Servicer or Transferor may, on behalf of all
Securityholders of such Series, waive any default by the Servicer or Transferor in the performance
of their respective obligations hereunder and its consequences, except a default in the failure to
make any required deposits or payments of interest or principal relating to such Series pursuant to
Article IV, which default does not result from the failure of the Paying Agent to perform its
obligations to make any required deposits or payments of interest and principal in accordance with
Article IV. 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.




[End of Article X]






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ARTICLE XI




THE TRUSTEE




          Section 11.1 Duties of Trustee.




          (a) The Trustee, prior to the occurrence of any Servicer Default of which a Responsible
Officer of the Trustee has actual knowledge and after the curing of all Servicer Defaults which may
have occurred, undertakes to perform such duties and only such duties as are specifically set forth
in this Agreement, and no implied covenants or duties shall be read into this Agreement against the
Trustee. If a Responsible Officer has received written notice that a Servicer Default has occurred
(and such Servicer Default has not been cured or waived), the Trustee shall exercise such of the
rights and powers vested in it by this Agreement, and use the same degree of care and skill in its
exercise, as a prudent person would exercise or use under the circumstances in the conduct of such
person’s own affairs; provided, however, that if the Trustee shall assume the
duties of the Servicer pursuant to Section 8.5 or 10.2, the Trustee in performing such duties shall
use the degree of skill and attention customarily exercised by a servicer with respect to
comparable receivables that it services for itself or others.




          (b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the Trustee that are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to determine whether
they substantially conform to the requirements of this Agreement. The Trustee shall retain all
such items for at least one year after receipt and shall make such items available for inspection
by any Investor Securityholder at the Corporate Trust Office, such inspection to be made during
regular business hours and upon reasonable prior notice to the Trustee.




          (c) Subject to subsection 11.1(a), no provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own negligent failure to act
or its own misconduct; provided, however, that:





          (i) the Trustee shall not be personally liable for an error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;




          (ii) the Trustee shall not be personally liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the direction of the
Holders of Investor Securities evidencing Undivided Interests aggregating more than 50% of
the Invested Amount of any Series relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee with respect to such Series, or
exercising any trust or power conferred upon the Trustee with respect to such Series, under
this Agreement; and




          (iii) the Trustee shall not be charged with knowledge of any failure by the Servicer
referred to in clauses (a) and (b) of Section 10.1 or of any breach by the Servicer
contemplated by clause (c) of Section 10.1 or any Pay Out Event unless a



83









 






Responsible Officer of the Trustee obtains actual knowledge of such failure, breach or
Pay Out Event or the Trustee receives written notice of such failure, breach or Pay Out
Event from the Servicer, the Transferor or any Holders of Investor Securities evidencing
Undivided Interests aggregating not less than 10% of the Invested Amount of any Series
adversely affected thereby.



          (d) The 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 there is reasonable ground for believing that the repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured to it, and none of
the provisions contained in this Agreement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of the Servicer under this
Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested
with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement.




          (e) Except for actions expressly authorized by this Agreement, the Trustee shall take no
action reasonably likely to impair the interests of the Trust in any Receivable now existing or
hereafter created or to impair the value of any Receivable now existing or hereafter created.




          (f) Except as provided in this Agreement, the Trustee shall have no power to vary the corpus
of the Trust.




          (g) If a Responsible Officer of the Trustee has received written notice that the Paying Agent
or the Transfer Agent and Registrar shall fail to perform any obligation, duty or agreement in the
manner or on the day required to be performed by the Paying Agent or the Transfer Agent and
Registrar, as the case may be, under this Agreement, the Trustee shall be obligated promptly upon
its obtaining knowledge thereof by a Responsible Officer of the Trustee to perform such obligation,
duty or agreement in the manner so required.




          (h) If the Transferor has agreed to transfer any of its open-end revolving credit card
receivables (other than the Receivables) to another Person, upon the written request of the
Transferor, the Trustee on behalf of the Trust will enter into such intercreditor agreements with
the transferee of such receivables as are customary and necessary to identify separately the
rights, if any, of the Trust and such other Person in the Transferor’s open-end revolving credit
card receivables; provided, however, that the Trust shall not be required to enter
into any intercreditor agreement that could adversely affect the interests of the Securityholders
or the Trustee and, upon the request of the Trustee, the Transferor will deliver an Opinion of
Counsel on any matters relating to such intercreditor agreement, reasonably requested by the
Trustee.




          Section 11.2 Certain Matters Affecting the Trustee. Except as otherwise provided in
Section 11.1:




          (a) the Trustee may rely on and shall be protected in acting on, or in refraining from acting
in accordance with, the initial report, the Settlement Statement, the annual Servicer’s
certificate, the monthly payment instructions and notification to the Trustee, the




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monthly Securityholder’s statement, any resolution, Officer’s Certificate, certificate of
auditors or any other certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have
been signed or presented to it pursuant to this Agreement by the proper party or parties;




          (b) the Trustee may consult with counsel, and the advice or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;




          (c) the Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Agreement or any Enhancement, or to institute, conduct or defend any litigation
hereunder or in relation hereto, at the request, order or direction of any of the Securityholders
or any Enhancement Provider, pursuant to the provisions of this Agreement, unless such
Securityholders or Enhancement Provider shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
nothing contained herein shall, however, relieve the Trustee of the obligations, upon the
occurrence of any Servicer Default (which has not been cured or waived) of which a Responsible
Officer of the Trustee has knowledge, to exercise such of the rights and powers vested in it by
this Agreement and any Enhancement, and to use the same degree of care and skill in its exercise as
a prudent person would exercise or use under the circumstances in the conduct of his own affairs;




          (d) the Trustee shall not be personally liable for any action taken, suffered or omitted by it
in good faith and believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;




          (e) the Trustee shall not be bound to make any investigation into the facts of matters stated
in the initial report, the Settlement Statement, the annual Servicer’s certificate, the monthly
payment instructions and notification to the Trustee, the monthly Securityholders statement, any
resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing so to do by Holders of
Investor Securities evidencing Undivided Interests aggregating more than 50% of the Invested Amount
of any Series which could be adversely affected if the Trustee does not perform such acts;




          (f) subject to subsection 4.2(e), the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a
custodian, and the Trustee shall not be responsible for any misconduct or negligence on the part of
any such agent, attorney or custodian appointed with due care by it hereunder;




          (g) except as may be required by subsection 11.1(a), the Trustee shall not be required to make
any initial or periodic examination of any documents or records related to the Accounts or the
Receivables for the purpose of establishing the presence or absence of defects, the compliance by
the Transferor with its representations and warranties or for any other purpose;




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          (h) whenever in the administration of this Agreement the Trustee shall deem it desirable that
a matter be proved or established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officer’s Certificate; and




          (i) the right of the Trustee to perform any discretionary act enumerated in this Agreement or
any Supplement or Enhancement shall not be construed as a duty, and the Trustee shall not be
answerable for performance of any such act.




          Section 11.3 Trustee Not Liable for Recitals in Securities. The Trustee assumes no
responsibility for the correctness of the recitals contained herein and in the Securities (other
than the certificate of authentication on the Securities). Except as set forth in Section 11.15,
the Trustee makes no representations as to the validity or sufficiency of this Agreement or of the
Securities (other than the certificate of authentication on the Securities) or of any Receivable or
related document. The Trustee shall not be accountable for the use or application by the
Transferor of any of the Securities or of the proceeds of such Securities, or for the use or
application of any funds paid to the Transferor in respect of the Receivables or deposited in or
withdrawn from the Collection Account, the Excess Funding Account, the Principal Account or the
Interest Funding Account, or any Series Account or other accounts now or hereafter established to
effectuate the transactions contemplated herein and in accordance with the terms hereof. The
Trustee shall have no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of any security
interest or Lien granted to it hereunder (unless the Trustee shall have become the Successor
Servicer) or to prepare or file any Securities and Exchange Commission filing for the Trust or to
record this Agreement or any Supplement.




          Section 11.4 [Reserved].




          Section 11.5 The Servicer to Pay Trustee’s Fees and Expenses. The Servicer covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to receive,
reasonable compensation (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by the Trustee in the
execution of the trust hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and, subject to Section 8.4, the Servicer will pay or reimburse
the Trustee (without reimbursement from any Investor Account, any Series Account or otherwise
except from the Servicing Fee) upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement
(including the reasonable fees and expenses of its agents and counsel) except any such expense,
disbursement or advance as may arise from its own negligence or bad faith and except as provided in
the following sentence. If the Trustee is appointed Successor Servicer pursuant to Section 10.2,
the provisions of this Section 11.5 shall not apply to expenses, disbursements and advances made or
incurred by the Trustee in its capacity as Successor Servicer (which shall be covered out of the
Servicing Fee).




          The obligations of the Servicer under this Section 11.5 shall survive the termination of the
Trust and the resignation or removal of the Trustee.




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          Section 11.6 Eligibility Requirements for Trustee. The Trustee hereunder shall at all
times (a) be a corporation organized and doing business under the laws of the United States of
America or any state thereof authorized under such laws to exercise corporate trust powers, having
a long-term unsecured debt rating of at least Baa3 by Moody’s, having, in the case of an entity
that is subject to risk-based capital adequacy requirements, risk-based capital of at least
$50,000,000 or, in the case of an entity that is not subject to risk-based capital adequacy
requirements, having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authority and (b) not be a Related Person. If such
corporation publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the purpose of this
Section 11.6, the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the provisions of this
Section 11.6, the Trustee shall resign immediately in the manner and with the effect specified in
Section 11.7.




          Section 11.7 Resignation or Removal of Trustee.




          (a) The Trustee may at any time resign and be discharged from the Trust hereby created by
giving written notice thereof to the Servicer and the Transferor. Upon receiving such notice of
resignation, the Transferor shall promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and have accepted such
appointment within 30 days after the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a successor trustee.




          (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of
Section 11.6 hereof and shall fail to resign after written request therefor by the Transferor, or
if at any time the Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Transferor may, but shall not be required
to, remove the Trustee and promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy
to the successor trustee.




          (c) If (i) the Trustee shall fail to perform any of its obligations hereunder, (ii) a
Securityholder shall deliver written notice of such failure to the Trustee, and (iii) the Trustee
shall not have corrected such failure for 60 days thereafter, then the Transferor or the Holders of
Investor Securities representing more than 50% of the Invested Amount (including related
commitments of holders of Variable Funding Securities) shall have the right to remove the Trustee
and (if by the Holders, with the consent of the Transferor, which shall not be unreasonably
withheld) promptly appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to the successor
trustee.




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          (d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant
to any of the provisions of this Section 11.7 shall not become effective until acceptance of
appointment by the successor trustee as provided in Section 11.8 hereof and any liability of the
Trustee arising hereunder shall survive such appointment of a successor trustee. Notice of any
resignation or removal of the Trustee and appointment of a successor trustee shall be provided to
Moody’s and Standard & Poor’s by the Transferor or the Servicer in a prompt manner.




          Section 11.8 Successor Trustee.




          (a) Any successor trustee appointed as provided in Section 11.7 hereof shall execute,
acknowledge and deliver to the Transferor, the Servicer and to its predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations
of its predecessor hereunder, with the like effect as if originally named as Trustee herein. The
predecessor Trustee shall deliver to the successor trustee all funds, property, documents and
statements held by it hereunder, and the Transferor, the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties
and obligations.




          (b) No successor trustee shall accept appointment as provided in this Section 11.8 unless at
the time of such acceptance such successor trustee shall be eligible under the provisions of
Section 11.6 hereof.




          (c) Upon acceptance of appointment by a successor trustee as provided in this Section 11.8,
such successor trustee shall mail notice of such succession hereunder to all Securityholders at
their addresses as shown in the Security Register.




          Section 11.9 Merger or Consolidation of Trustee. Any Person into which the Trustee
may be merged or converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such Person shall be eligible under the provisions of Section
11.6 hereof, without the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.




          Section 11.10 Appointment of Co-Trustee or Separate Trustee.




          (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time
be located, the Trustee shall have the power and may execute and deliver all instruments to appoint
one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Securityholders, such title to the trust, or any part thereof, and,
subject to the other provisions of this Section 11.10, such powers, duties,




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obligations, rights and trusts as the Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 11.6 and no notice to Securityholders of the appointment of any
co-trustee or separate trustee shall be required under Section 11.8. The Trustee shall provide
written notice to each Rating Agency of any co-trustee or separate trustee so appointed.




          (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed
and act subject to the following provisions and conditions:





          (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee
shall be conferred or imposed upon and exercised or performed by the Trustee and such
separate trustee or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee joining in such act),
except to the extent that under any laws of any jurisdiction in which any particular act or
acts are to be performed (whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding of title to
the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of the Trustee;




          (ii) no trustee hereunder shall be personally liable by reason of any act or omission
of any other trustee hereunder; and




          (iii) the Trustee may at any time accept the resignation of or remove any separate
trustee or co-trustee.



          (c) Any notice, request or other writing given to the Trustee shall be deemed to have been
given to each of the then separate trustees and co-trustees, as effectively as if given to each of
them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article XI. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified in its instrument
of appointment, either jointly with the Trustee or separately, as may be provided therein, subject
to all the provisions of this Agreement, specifically including every provision of this Agreement
or Enhancement relating to the conduct of, affecting the liability of, or affording protection to,
the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer and the Transferor.




          (d) Any separate trustee or co-trustee may at any time constitute the Trustee as its agent or
attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect to this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to
the extent permitted by law, without the appointment of a new or successor trustee.




          Section 11.11 Tax Returns. Consistent with Section 3.7, the Trustee shall not, except
as required by law, file any United States federal income tax returns on behalf of the




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Trust; provided, however, that if a class of Securities is issued that will be
characterized (in the sole and absolute discretion of the Transferor) as equity interests in a
partnership for federal income tax purposes, partnership information returns for the Trust shall be
prepared and signed by the Transferor, as general partner, and the Transferor shall act as the “Tax
Matters Partner” (as defined in Section 6231(a)(7) of the Internal Revenue Code). In the event the
Trust shall be required to file tax returns, the Servicer shall at the expense of the Transferor
prepare or cause to be prepared any tax returns required to be filed by the Trust and, to the
extent possible, shall remit such returns to the Trustee for signature at least five days before
such returns are due to be filed. The Trustee is hereby authorized to sign any such return on
behalf of the Trust. The Servicer shall prepare or shall cause to be prepared all tax information
required by law to be distributed to Securityholders and shall deliver such information to the
Trustee at least five days prior to the date it is required by law to be distributed to
Securityholders. The Trustee, upon request, will furnish the Servicer and the Transferor with all
such information known to the Trustee as may be reasonably required in connection with the
preparation of all tax returns of the Trust and shall, upon request, execute such return. In no
event shall the Trustee, the Transferor, or the Servicer be liable for any liabilities, costs or
expenses of the Trust, the Investor Securityholders or the Security Owners arising under any tax
law, including without limitation federal, state, local or foreign income or excise taxes or any
other tax imposed on or measured by income (or any interest or penalty or addition with respect
thereto or arising from a failure to comply therewith).




          Section 11.12 Trustee May Enforce Claims Without Possession of Securities. All rights
of action and claims under this Agreement or any Series of Securities may be prosecuted and
enforced by the Trustee without the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee. Any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of any Series of Securityholders in respect of which
such judgment has been obtained.




          Section 11.13 Suits for Enforcement. If a Servicer Default of which a Responsible
Officer of the Trustee has knowledge shall occur and be continuing, the Trustee, in its discretion
may, subject to the provisions of Section 10.1, proceed to protect and enforce its rights and the
rights of any Series of Securityholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any covenant or agreement
contained in this Agreement or in aid of the execution of any power granted in this Agreement or
for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or any
Series of Securityholders.




          Section 11.14 Rights of Securityholders to Direct Trustee. Holders of Investor
Securities representing more than 50% of the Aggregate Invested Amount (or, with respect to any
remedy, trust or power that does not relate to all Series, 50% of the aggregate Invested Amount of
the Investor Securities of all Series to which such remedy, trust or power relates) shall have the
right to direct the time, method, and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that Holders of Investor Securities representing more than 50% of the




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aggregate Invested Amount of any Class may direct the Trustee to exercise its rights under
Section 8.6; provided, further, that, subject to Section 11.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the Trustee in good faith
shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the
proceedings so directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Securityholders not parties to such direction; and provided,
further that nothing in this Agreement shall impair the right of the Trustee to take any action
deemed proper by the Trustee and which is not inconsistent with such direction of such Holders of
Investor Securities.




          Section 11.15 Representations and Warranties of Trustee. The Trustee represents and
warrants that:





          (i) the Trustee is a national banking association, duly organized, validly existing and
in good standing under the laws of the United States of America;




          (ii) the Trustee is an entity that satisfies the eligibility requirements of Section
11.6;




          (iii) the Trustee has full power, authority and right to execute, deliver and perform
this Agreement, and has taken all necessary action to authorize the execution, delivery and
performance by it of this Agreement; and




          (iv) this Agreement has been duly executed and delivered by the Trustee.



          Section 11.16 Maintenance of Office or Agency. The Trustee will maintain at its
expense an office or offices, or agency or agencies, where notices and demands to or upon the
Trustee in respect of the Securities and this Agreement may be served. The Trustee initially
appoints its Corporate Trust Office as its office for such purposes. The Trustee will give prompt
written notice to the Servicer, the Register or any such office or agency.




[End of Article XI]





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ARTICLE XII




TERMINATION




          Section 12.1 Termination of Trust.




          (a) The respective obligations and responsibilities of the Transferor, the Servicer and the
Trustee created hereby (other than Transferor and to Securityholders (or in the case of Holders of
Bearer Securities, in the manner provided for in the related Supplement) of any change in the
location of the Security the obligation of the Trustee to make payments to Securityholders as
hereafter set forth) shall terminate, except with respect to the duties described in Sections 7.4,
8.4 and 11.5 and subsection 12.3(b), on the Trust Termination Date; provided,
however, that the Trust shall not terminate on the date specified in clause (i) of the
definition of “Trust Termination Date” if each of the Transferor and the Holder of the Exchangeable
Transferor Security notify the Trustee and the Servicer in writing, not later than five Business
Days preceding such date, that they desire that the Trust not terminate on such date, which notice
(such notice, a “Trust Extension”) shall specify the date on which the Trust shall terminate (such
date, the “Extended Trust Termination Date”); provided, however, that the Extended
Trust Termination Date shall be not later than May 26, 2095. The Transferor and the Holder of the
Exchangeable Transferor Security may, on any date following the Trust Extension, so long as no
Series of Securities is outstanding, deliver a notice in writing to the Trustee and the Servicer
changing the Extended Trust Termination Date.




          (b) In the event that (i) the Trust has not terminated by the Distribution Date occurring in
the second month preceding the Trust Termination Date, and (ii) the Invested Amount of any Series,
exclusive of any Transferor Retained Class (after giving effect to all transfers, withdrawals,
deposits and drawings to occur on such date and the payment of principal on any Series of
Securities to be made on the related Distribution Date during such month pursuant to Article IV),
would be greater than zero, the Servicer shall sell within 30 days after such Transfer Date an
amount of Receivables up to the remaining Invested Amount if it can do so in a commercially
reasonable manner. The Servicer shall notify the Transferor and each Enhancement Provider of the
proposed sale of the Receivables and shall provide each Enhancement Provider an opportunity to bid
on the Receivables. The Transferor shall have the right of first refusal to purchase the
Receivables on terms equivalent to the best purchase offer as determined by the Trustee in its sole
discretion. The proceeds of any such sale shall be treated as Collections on the Receivables and
shall be allocated and deposited in accordance with Article IV; provided, however,
that the Trustee shall determine conclusively in its sole discretion the amount of such proceeds
which are allocable to Finance Charge Collections and the amount of such proceeds which are
allocable to Principal Collections. During such thirty-day period, the Servicer shall continue to
collect payments on the Receivables and allocate and deposit such payments in accordance with the
provisions of Article IV.




          (c) All principal or interest with respect to any Series of Investor Securities shall be due
and payable no later than the Series Termination Date with respect to such Series. Unless
otherwise provided in a Supplement, in the event that the Invested Amount of any Series of
Securities is greater than zero, exclusive of any Class held by the Transferor, on its Series
Termination Date (the “Affected Series”), after giving effect to all transfers, withdrawals,

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deposits and drawings to occur on such date and the payment of principal to be made on such
Series on such date, the Trustee will sell or cause to be sold, and the Trustee will pay the
proceeds to all Securityholders of such Series pro rata in final payment of all principal of and
accrued interest on such Series of Securities or, if any Class of such Series is subordinated, in
order of their respective seniorities, an amount of Principal Receivables and the related Finance
Charge Receivables (or interests therein) up to 110% of the Invested Amount of such Series at the
close of business on such date (but the amount of such Principal Receivables not to be more than an
amount of Receivables equal to the sum of (1) the product of (A) the Transferor Percentage, (B) the
aggregate outstanding Principal Receivables and (C) a fraction the numerator of which is the
Invested Amount of such Series on such date and the denominator of which is the sum of the Invested
Amounts of all Series on such Date and (2) the Invested Amount of such Series). Receivables on
which the Obligor has not made the full monthly payment for the prior months shall be deemed to be
in default for purposes of this Section 12.1(c) to the extent that the cash allocated to any Class
of Transferor Retained Securities of such Series pursuant to a sale under Section 12.1(c) is less
than the amount that would have been allocated to the Holder of the Exchangeable Transferor
Security and the Transferor Retained Securities had the proceeds from such sale been allocated
pursuant to Section 4.3. The Servicer shall notify the Transferor and each Enhancement Provider of
the proposed sale of such Receivables and shall provide each Enhancement Provider an opportunity to
bid on such Receivables. Any proceeds of such sale in excess of such principal and interest paid
shall be paid to the Holder of the Exchangeable Transferor Security. Upon such Series Termination
Date with respect to the applicable Series of Securities, final payment of all amounts allocable to
any Investor Securities of such Series shall be made in the manner provided in Section 12.3.




          Section 12.2 Optional Termination.




          (a) If so provided in any Supplement, the Transferor (so long as the Transferor is the
Servicer or an Affiliate of the Servicer) may, but shall not be obligated to, cause a final
distribution to be made in respect of the related Series of Securities on a Distribution Date
specified in such Supplement by depositing into the Distribution Account or the applicable Series
Account, not later than the Transfer Date preceding such Distribution Date, for application in
accordance with Section 12.3, the amount specified in such Supplement; provided, however
that if the short-term deposits or long-term unsecured debt obligations of the Transferor are not
rated at the time of such purchase of Receivables at least P 3 or Baa3, respectively, by Moody’s,
no such event shall occur unless the Transferor shall deliver to the Trustee, with a copy to
Moody’s, an Officer’s Certificate of the Transferor which shall have attached to it the relevant
fraudulent conveyance statue, if any, and set forth the factual basis for a conclusion that such
deposit into the Distribution Account or any Series Account as provided in the related Supplement
would not constitute a fraudulent conveyance of the Transferor.




          (b) The amount deposited pursuant to subsection 12.2(a) shall be paid to the Investor
Securityholders of the related Series pursuant to Section 12.3 on the related Distribution Date
following the date of such deposit. All Securities of a Series with respect to which a final
distribution has been made pursuant to subsection 12.2(a) shall be delivered by the Holder to, and
be canceled by, the Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferor. The Invested Amount of each Series with respect to which a final
distribution has been made pursuant to subsection 12.2(a) shall, for the purposes of the

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definition of “Transferor Interest,” be deemed to be equal to zero on the Distribution Date
following the making of the deposit, and the Transferor Interest shall thereupon be deemed to have
been increased by the Invested Amount of such Series.




          Section 12.3 Final Payment with Respect to any Series.




          (a) Written notice of any termination, specifying the Distribution Date upon which the
Investor Securityholders of any Series may surrender their Securities for payment of the final
distribution with respect to such Series and cancellation, shall be given (subject to at least four
Business Days’ prior notice from the Servicer to the Trustee) by the Trustee to the Transferor and
the Investor Securityholders of such Series mailed not later than the fifth day of the month of
such final distribution (or in the manner provided by the Supplement relating to such Series)
specifying (i) the Distribution Date (which shall be the Distribution Date in the month (x) in
which the deposit is made pursuant to subsection 2.4(e), 9.2(a), 10.2(a), or 12.2(a) of the
Agreement or such other section as may be specified in the related Supplement, or (y) in which the
related Series Termination Date occurs) upon which final payment of such Investor Securities will
be made upon presentation and surrender of such Investor Securities at the office or offices
therein designated (which, in the case of Bearer Securities, shall be outside the United States),
(ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon presentation and surrender
of the Investor Securities at the office or offices therein specified. The Servicer’s notice to
the Trustee in accordance with the preceding sentence shall be accompanied by an Officer’s
Certificate setting forth the information specified in Article V of this Agreement covering the
period during the then current calendar year through the date of such notice and setting forth the
date of such final distribution. The Trustee shall give such notice to the Transfer Agent and
Registrar and the Paying Agent at the time such notice is given to the Transferor and the Investor
Securityholders.




          (b) Notwithstanding the termination of the Trust pursuant to subsection 12.1(a) or the
occurrence of the Series Termination Date with respect to any Series, all funds then on deposit in
the Excess Funding Account, the Interest Funding Account, the Principal Account, the Distribution
Account or any Series Account applicable to the related Series shall continue to be held in trust
for the benefit of the Securityholders of the related Series and the Paying Agent or the Trustee
shall pay such funds to the Securityholders of the related Series upon surrender of their
Securities (which surrenders and payments, in the case of Bearer Securities, shall be made only
outside the United States). In the event that all of the Investor Securityholders of any Series
shall not surrender their Securities for cancellation within six months after the date specified in
the above-mentioned written notice, the Trustee shall give a second written notice (or, in the case
of Bearer Securities, publication notice) to the remaining Investor Securityholders of such Series
upon receipt of the appropriate records from the Transfer Agent and Registrar to surrender their
Securities for cancellation and receive the final distribution with respect thereto. If within one
and one half years after the second notice with respect to a Series, all the Investor Securities of
such Series shall not have been surrendered for cancellation, the Trustee may take appropriate
steps or may appoint an agent to take appropriate steps, to contact the remaining Investor
Securityholders of such Series concerning surrender of their Securities, and the cost thereof shall
be paid out of the funds in the Distribution Account or any Series Account held for the benefit of
such Investor Securityholders. The Trustee and the





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Paying Agent shall pay to the Transferor upon request any monies held by them for the payment
of principal or interest which remains unclaimed for two years. After payment to the Transferor,
Investor Securityholders entitled to the money must look to the Transferor for payment as general
creditors unless an applicable abandoned property law designates otherwise.




          (c) All Securities surrendered for payment of the final distribution with respect to such
Securities and cancellation shall be canceled by the Transfer Agent and Registrar and be disposed
of in a manner satisfactory to the Trustee and the Transferor.




          Section 12.4 Termination Rights of Holder of the Exchangeable Transferor Security.
Upon the termination of the Trust pursuant to Section 12.1, and after payment of all amounts due
hereunder on or prior to such termination and the surrender of the Exchangeable Transferor
Security, if applicable, the Trustee shall execute a written reconveyance substantially in the form
of Exhibit F pursuant to which it shall reconvey to the Holder of the Exchangeable Transferor
Security (without recourse, representation or warranty) all right, title and interest of the Trust
in the Receivables, whether then existing or thereafter created, all moneys due or to become due
with respect thereto (including all accrued interest theretofore posted as Finance Charge
Receivables) allocable to the Trust pursuant to any Supplement, except for amounts held by the
Trustee pursuant to subsection 12.3(b). The Trustee shall execute and deliver such instruments of
transfer and assignment, in each case prepared by the Transferor and without recourse,
representation or warranty (other than a warranty that such property is conveyed free and clear of
any Lien of any Person claiming by or through the Trustee) as shall be reasonably requested by the
Holder of the Exchangeable Transferor Security to vest in such Holder all right, title and interest
which the Trust had in the Receivables and other Trust Property.



[End of Article XII]





95









 








ARTICLE XIII




MISCELLANEOUS PROVISIONS




          Section 13.1 Amendment.




          (a) This Agreement (including any Supplement) may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the Securityholders, (i) to
cure any ambiguity, to revise any exhibits or Schedules, to correct or supplement any provisions
herein or thereon which may be inconsistent with any other provisions herein or thereon or (ii) to
add any other provisions with respect to matters or questions raised under this Agreement which
shall not be inconsistent with the provisions of this Agreement; provided, however,
that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any of the Investor Securityholders; provided further, that such action
shall not effect a significant change in the Permitted Activities of the Trust. Additionally, this
Agreement may be amended from time to time by the Servicer, the Transferor and the Trustee, without
the consent of any of the Securityholders, to add to or change any of the provisions of this
Agreement to provide that Bearer Securities may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal of (or premium, if any) or any interest on
Bearer Securities to comply with the Bearer Rules, to permit Bearer Securities to be issued in
exchange for Registered Securities (if then permitted by the Bearer Rules), to permit Bearer
Securities to be issued in exchange for Bearer Securities of other authorized denominations or to
permit the issuance of Securities in uncertificated form.




          This Agreement (including any Supplement), and any schedule or exhibit thereto may also be
amended from time to time by the Servicer, the Transferor and the Trustee, without the consent of
any of the Securityholders, 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 Holders of Securities; provided, however, that (i) the Transferor shall have
provided an Officer’s Certificate of the Transferor to the Trustee to the effect that such
amendment will not materially and adversely affect the interests of the Securityholders, (ii) such
amendment shall not, as evidenced by an Opinion of Counsel, cause the Trust to be characterized for
Federal income tax purposes as an association taxable as a corporation or otherwise have any
material adverse impact on the Federal income taxation of any outstanding Series of Investor
Securities or any Security Owner and (iii) the Transferor shall have provided at least ten Business
Days prior written notice to each Rating Agency of such amendment and shall have received written
confirmation from each Rating Agency to the effect that the rating of any Series or any class of
any Series will not be reduced or withdrawn as a result of such amendment; provided further, that
such action shall not effect a significant change in the Permitted Activities of the Trust;
provided, further, that such amendment shall not reduce in any manner the amount of, or
delay the timing of, distributions which are required to be made on any Investor Security of such
Series without the consent of the related Investor Securityholder, change the definition of or the
manner of calculating the interest of any Investor Securityholder of such Series without the
consent of the related Investor Securityholder or reduce the percentage pursuant to Subsection
13.1(b) required to consent to any such amendment, in each case without the consent of all such
Investor Securityholders.




96









 








          (b) This Agreement and any Supplement may also be amended from time to time by the Servicer,
the Transferor and the Trustee (A) in the case of a significant change in the Permitted Activities
of the Trust which is not materially adverse to Holders of Investor Securities, with the consent of
Holders of Investor Securities evidencing Undivided Interests aggregating not less than 50% of the
Investor Interest of each outstanding Series affected by such change, and (B) in all other cases
with the consent of the Holders of Investor Securities evidencing Undivided Interests aggregating
not less than 66-2/3% of the Invested Amount of each and every Series adversely affected, 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 Investor Securityholders of any
Series then issued and outstanding; provided, however, that no such amendment under
this subsection shall (i) reduce in any manner the amount of, or delay the timing of, distributions
which are required to be made on any Investor Security of such Series without the consent of all of
the related Investor Securityholders; (ii) change the definition of or the manner of calculating
the interest of any Investor Securityholder of such Series without the consent of the related
Investor Securityholder or (iii) reduce the aforesaid percentage required to consent to any such
amendment, in each case without the consent of all such Investor Securityholders.




          (c) Notwithstanding anything in this Section 13.1 to the contrary, the Supplement with respect
to any Series may be amended on the terms and in accordance with the procedures provided in such
Supplement.




          (d) Promptly after the execution of any such amendment (other than an amendment pursuant to
paragraph (a)), the Trustee shall furnish notification of the substance of such amendment to each
Investor Securityholder of each Series adversely affected and ten Business Days prior to the
proposed effective date for such amendment the Servicer shall furnish notification of the substance
of such amendment to each Rating Agency providing a rating for such Series.




          (e) It shall not be necessary to obtain the consent of Investor Securityholders under this
Section 13.1 to approve the particular form of any proposed amendment, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Investor Securityholders shall be subject
to such reasonable requirements as the Trustee may prescribe.




          (f) Any Supplement executed and delivered pursuant to Section 6.9 and any amendments regarding
the addition or removal of Receivables from the Trust as provided in Sections 2.6 or 2.7, executed
in accordance with the provisions hereof, shall not be considered amendments to this Agreement for
the purpose of subsections 13.1(a) and (b).




          (g) In connection with any amendment, the Trustee may request an Opinion of Counsel from the
Transferor to the effect that the amendment complies with all requirements of this Agreement. The
Trustee may, but shall not be obligated to, enter into any amendment which affects the Trustee’s
rights, duties or immunities under this Agreement or otherwise.




97









 








          Section 13.2 Protection of Right, Title and Interest to Trust.




          (a) The Transferor shall cause this Agreement, all amendments hereto and/or all financing
statements, and continuation statements and other amendments thereto, and any other necessary
documents covering the Securityholders and the Trustee’s right, title and interest to the Trust to
be promptly recorded, registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law fully to preserve and
protect the right, title and interest of the Securityholders or the Trustee, as the case may be,
hereunder to all property comprising the Trust. The Transferor shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration or filing. The
Transferor shall cooperate fully with the Servicer in connection with the obligations set forth
above and will execute any and all documents reasonably required to fulfill the intent of this
subsection 13.2(a).




          (b) The Transferor shall not change its name or its type or jurisdiction of organization
without previously having delivered to the Trustee an Opinion of Counsel to the effect that all
actions have been taken, and all filings have been made, as are necessary to continue and maintain
the first priority perfected security interest of the Trustee in the Receivables.




          (c) The Transferor and the Servicer each shall give the other and the Trustee prompt notice of
any relocation of its chief executive office or any change in the jurisdiction under whose laws it
is organized. The Transferor and the Servicer each shall at all times maintain its chief executive
office within the United States and shall at all times be organized under the laws of the United
States or a jurisdiction located within the United States.




          (d) The Transferor will deliver to the Trustee on or before March 31 of each year, beginning
with March 31, 2006, an Opinion of Counsel, substantially in the form of Exhibit E and upon each
date that any Supplemental Accounts are to be included in the Accounts pursuant to subsection
2.6(c) an Opinion of Counsel, substantially in the form of Exhibit I.




          Section 13.3 Limitation on Rights of Securityholders.




          (a) The death or incapacity of any Investor Securityholder shall not operate to terminate this
Agreement or the Trust, nor shall such death or incapacity entitle such Securityholder’s legal
representatives or heirs to claim an accounting or to take any action or commence any proceeding in
any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.




          (b) No Investor Securityholder shall have any right to vote (except with respect to the
Investor Securityholders as provided in Section 13.1 hereof) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Securities, be construed so as to constitute the
Securityholders from time to time as members of an association; nor shall any Investor
Securityholder be under any liability to any third person by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.




98









 








          (c) No Securityholder shall have any right by virtue of any provisions of this Agreement to
institute any suit, action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Securityholder previously shall have given written notice to the Trustee,
and unless the Holders of Securities evidencing Undivided Interests aggregating more than 50% of
the Invested Amount of any Series which may be adversely affected but for the institution of such
suit, action or proceeding, shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to
be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any such action, suit
or proceeding; it being understood and intended, and being expressly covenanted by each
Securityholder with every other Securityholder and the Trustee, that no one or more Securityholders
shall have the right in any manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb or prejudice the rights of the Securityholders of
any other of the Securities, or to obtain or seek to obtain priority over or preference to any
other such Securityholder, or to enforce any right under this Agreement, except in the manner
herein provided and for the equal, ratable and common benefit of all Securityholders. For the
protection and enforcement of the provisions of this Section 13.3, each and every Securityholder
and the Trustee shall be entitled to such relief as can be given either at law or in equity.




          Section 13.4 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. The undersigned hereby declare that it is their intention that this Agreement shall be
regarded as made under the laws of the State of New York and that the laws of said State shall be
applied in interpreting its provisions in all cases where legal interpretation shall be required.
Each of the parties hereto hereby irrevocably and unconditionally agrees to be subject to the
jurisdiction of the courts of the State of New York and of the federal courts sitting in the State
of New York.




          Section 13.5 Notices. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at, sent by facsimile
to, sent by courier at or mailed by certified mail, return receipt requested, to (a) in the case of
the Transferor, 1111 Town Center Drive, Las Vegas, Nevada 89144, Attention: Manager-Compliance (facsimile
no. (702) 222-4096)), (b) in the case of the Servicer, 2700 Sanders Road, Prospect Heights,
Illinois 60070, Attention: Assistant Treasurer (facsimile no. (847) 205-7538), (c) in the case of
the Trustee, the Corporate Trust Office, (d) in the case of the Enhancement Provider for a
particular Series, the address, if any, specified in the Supplement relating to such Series and (e)
in the case of the Rating Agency for a particular Series, the address, if any, specified in the
Supplement relating to such Series; or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party. Unless otherwise provided with
respect to any Series in the related Supplement any notice required or permitted to be mailed to a
Securityholder shall be given by first class mail, postage prepaid, at the address of such
Securityholder as shown in the Security Register, or with respect to any notice required or
permitted to be made to the Holders of Bearer Securities, by publication in the manner provided




99









 







in the related Supplement. If and so long as any Series or Class is listed on the Luxembourg
Stock Exchange and such exchange shall so require, any Notice to Investor Securityholders shall be
published in an authorized newspaper of general circulation in Luxembourg within the time period
prescribed in this Agreement. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the Securityholder receives
such notice.




          Section 13.6 Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or of the Securities or rights
of the Securityholders thereof.




          Section 13.7 Assignment. Upon any assignment of this Agreement by the Servicer, or
the obligations of the Servicer hereunder, the Trustee shall provide notice to Moody’s in a prompt
manner.




          Section 13.8 Securities Non-Assessable and Fully Paid. Except to the extent otherwise
expressly provided in Section 7.4 with respect to the Transferor, it is the intention of the
parties to this Agreement that the Investor Securityholders shall not be personally liable for
obligations of the Trust, that the Undivided Interests represented by the Securities shall be non
assessable for any losses or expenses of the Trust or for any reason whatsoever, and that
Securities upon authentication thereof by the Trustee pursuant to Sections 2.1 and 6.2 are and
shall be deemed fully paid.




          Section 13.9 Further Assurances. The Transferor and the Servicer agree to do and
perform, from time to time, any and all acts and to execute any and all further instruments
required or reasonably requested by the Trustee more fully to effect the purposes of this
Agreement, including, without limitation, the authorization of any financing statements, or
continuation statements and other amendments thereto, relating to the Receivables and the other
Trust Property for filing under the provisions of the UCC of any applicable jurisdiction.




          Section 13.10 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Transferor, the Servicer, the Trustee, any Enhancement Provider or
the Investor Securityholders, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.




          Section 13.11 Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which shall be an
original, but all of which together shall constitute one and the same instrument.




100









 








          Section 13.12 Third-Party Beneficiaries. This Agreement will inure to the benefit of
and be binding upon the parties hereto, the Securityholders and, to the extent provided in the
related Supplement, to the Enhancement Provider named therein, and their respective successors and
permitted assigns. Except as otherwise provided in this Article XIII, no other Person will have
any right or obligation hereunder.




          Section 13.13 Actions by Securityholders.




          (a) Wherever in this Agreement a provision is made that an action may be taken or a notice,
demand or instruction given by Investor Securityholders, such action, notice or instruction may be
taken or given by any Investor Securityholder, unless such provision requires a specific percentage
of Investor Securityholders.




          (b) Any request, demand, authorization, direction, notice, consent, waiver or other act by a
Securityholder shall bind such Securityholder and every subsequent holder of such Security issued
upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee, the Transferor or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Security.




          (c) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement or any Supplement to be given or taken by Securityholders may be
embodied in and evidenced by one or more instruments of substantially similar tenor signed by such
Securityholders in person or by agent duly appointed in writing; and except as herein otherwise
expressly provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, when required, to the Transferor or the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Agreement or any Supplement and conclusive in favor of the Trustee, the
Transferor and the Servicer, if made in the manner provided in this Section.




          (d) The fact and date of the execution by any Securityholder of any such instrument or writing
may be proved in any reasonable manner which the Trustee deems sufficient.




          Section 13.14 Rule 144A Information. For so long as any of the Investor Securities of
any Series or any Class are “restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, each of the Transferor, the Servicer, the Trustee and the Enhancement Provider for
such Series agree to cooperate with each other to provide to any Investor Securityholders of such
Series or Class and to any prospective purchaser of Securities designated by such an Investor
Securityholder upon the request of such Investor Securityholder or prospective purchaser, any
information required to be provided to such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securities Act.




          Section 13.15 Merger and Integration. Except as specifically stated otherwise herein,
this Agreement sets forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this Agreement.




101









 







This Agreement may not be modified, amended, waived or supplemented except as provided herein.




          Section 13.16 Headings. The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision hereof.




          Section 13.17 Limitation on Voting Preferred Stock. The Trustee shall hold the
Preferred Stock of the Transferor in trust, for the benefit of the Securityholders and shall vote
such stock only pursuant to the written instructions of Securityholders holding 100% of the
Aggregate Invested Amount of Securities of all Series. The Preferred Stock shall be
non-transferable, provided, however that the Preferred Stock can be transferred if:
(a) the Trustee and the Transferor shall receive written instructions of Securityholders holding
100% of the Aggregate Invested Amount of all Series of Securities instructing the Trustee and the
Transferor of the transfer; and (b) if such transfer shall not cause a Ratings Event to occur. In
the event of the appointment of a successor trustee, the Trustee shall transfer the Preferred Stock
to the successor trustee.




          Section 13.18 Nonpetition Covenant. To the fullest extent permitted by applicable
law, notwithstanding any prior termination of this Agreement, neither the Servicer, the Trustee,
the Securityholders nor the Transferor shall, prior to the date which is one year and one day after
the termination of this Agreement, acquiesce, petition or otherwise invoke or cause the Trust to
invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case
against the Trust under any Debtor Relief Law or appointing a receiver, conservator, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the Trust or any
substantial part of its property or ordering the winding-up or liquidation of the affairs of the
Trust.




          To the fullest extent permitted by applicable law, notwithstanding any prior termination of
this Agreement, neither the Servicer, the Trustee nor the Securityholders shall institute, or join
in instituting a proceeding against the Transferor under any Debtor Relief Law or other proceedings
under any United States federal or state bankruptcy or similar law.



[End of Article XIII]




102









 








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




	 	 	 	 	 
	 	METRIS RECEIVABLES, INC.,
Transferor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	HSBC FINANCE CORPORATION, Servicer

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 


[Signature Page to Fourth Amended and Restated Pooling and Servicing Agreement]




 









 








SCHEDULE 1




Account Schedule




On file with U.S. Bank National Association, as Trustee


S-1-1









 








EXHIBIT A




[FORM OF EXCHANGEABLE TRANSFEROR SECURITY




			
	No. 1
	 	One Unit






METRIS MASTER TRUST

ASSET BACKED SECURITY




          THIS SECURITY WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), AND MAY BE SOLD ONLY PURSUANT TO A REGISTRATION STATEMENT
EFFECTIVE UNDER THE ACT OR AN EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION,
THE TRANSFER OF THIS SECURITY IS SUBJECT TO RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING AGREEMENT WILL BE FURNISHED TO
THE HOLDER OF THIS SECURITY BY THE TRUSTEE UPON WRITTEN REQUEST.




This Security represents an Undivided Interest

in the Metris Master Trust




          Evidencing an undivided interest in a trust, the corpus of which consists of open-end or
revolving credit receivables generated from time to time in the ordinary course of business by HSBC
Bank Nevada, National Association (“HSBC Nevada”) and other assets and interests constituting the
Trust under the Pooling and Servicing Agreement described below.




(Not an interest in or a recourse obligation of

Metris Receivables, Inc.,

HSBC Bank Nevada, National Association

or any Affiliate of either of them.)




          This certifies that METRIS RECEIVABLES, INC. (“MRI,” the “Holder” or the “Transferor,” as the
context requires) is the registered owner of a fractional undivided interest in the Metris Master
Trust (the “Trust”) issued pursuant to the Fourth Amended and Restated Pooling and Servicing
Agreement, dated as of December 1, 2005 (the “Pooling and Servicing Agreement”; such term to
include any amendment or Supplement thereto) by and among MRI, as Transferor, HSBC Finance
Corporation, as the Servicer (“HSBC Finance” or the “Servicer”), and U.S. Bank National
Association, as Trustee (the “Trustee”), as supplemented by each supplement thereto existing from
time to time. The corpus of the Trust will consist of the Trust Property (as defined in the
Pooling and Servicing Agreement).




          To the extent not defined herein, the capitalized terms used herein have the meanings assigned
in the Pooling and Servicing Agreement. This Security is issued under and is subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement, to which Pooling and Servicing
Agreement, as amended from time to time, the Holder by virtue of the acceptance hereof assents and
by which the Holder is bound.




A-1









 








          This Security has not been registered or qualified under the Securities Act of 1933, as
amended, or any state securities law. No sale, transfer or other disposition of this Security
shall be permitted other than in accordance with the provisions of Section 6.1, 6.3, 6.9 or 7.2 of
the Pooling and Servicing Agreement.




          The Receivables arise generally from revolving credit consumer credit card accounts.




          This Security is the Exchangeable Transferor Security (the “Security”), which represents an
undivided interest in the Trust, including the right to receive the Collections and other amounts
at the times and in the amounts specified in the Pooling and Servicing Agreement to be paid to the
Holder of the Exchangeable Transferor Security. The aggregate interest represented by this
Security at any time in the Principal Receivables in the Trust shall not exceed the Transferor
Interest at such time. In addition to this Security, Series of Investor Securities will be issued
to investors pursuant to the Pooling and Servicing Agreement, each of which will represent an
Undivided Interest in the Trust. This Security shall not represent any interest in any
Enhancement, except to the extent provided in the Pooling and Servicing Agreement. The Transferor
Interest on any date of determination will be an amount equal to the aggregate amount of Principal
Receivables at the end of the day immediately prior to such date of determination plus amounts on
deposit in the Excess Funding Account and Pre-Funding Account (but not including any investment
earnings thereon) minus the Aggregate Invested Amount at the end of such day.




          The Servicer shall deposit all Collections in the Collection Account as promptly as possible
after the Date of Processing of such Collections. Unless otherwise stated in any Supplement,
throughout the existence of the Trust, the Servicer shall allocate to the Holder of the
Exchangeable Transferor Security an amount equal to the product of (A) the Transferor Percentage
and (B) the aggregate amount of such Principal Collections and Finance Charge Collections,
respectively, in respect of each Monthly Period. Notwithstanding the first sentence of this
paragraph, the Servicer need not deposit this amount or any other amounts so allocated to the
Security pursuant to the Pooling and Servicing Agreement into the Collection Account and shall pay
such amounts as collected to the Holder of the Exchangeable Transferor Security.




          HBSC Finance or any permitted successor or assignee, as Servicer, is entitled to receive as
servicing compensation a monthly servicing fee. The portion of the servicing fee which will be
allocable to the Holder of the Exchangeable Transferor Security pursuant to the Pooling and
Servicing Agreement will be payable by the Holder of the Exchangeable Transferor Security and none
of the Trust, the Trustee or the Investor Securityholders will have any obligation to pay such
portion of the servicing fee.




          This Security does not represent a recourse obligation of, or any interest in, the Transferor
or the Servicer. This Security is limited in right of payment to certain Collections respecting
the Receivables, all as more specifically set forth hereinabove and in the Pooling and Servicing
Agreement.




          Upon the termination of the Trust pursuant to Section 12.1 of the Pooling and Servicing
Agreement, the Trustee shall assign and convey to the Holder of the Exchangeable




A-2









 







Transferor Security (without recourse, representation or warranty) all right, title and
interest of the Trustee in the Receivables, whether then existing or thereafter created, and all
proceeds relating to the foregoing, and all moneys due or to become due with respect to all of the
foregoing (including all accrued interest theretofore posted as Finance Charge Receivables)
allocable to the Trust pursuant to any Supplement, except for amounts held by the Trustee pursuant
to subsection 12.3(b) of the Pooling and Servicing Agreement. The Trustee shall execute and
deliver such instruments of transfer and assignment, in each case without recourse, as shall be
reasonably requested by the Holder of the Exchangeable Transferor Security to vest in such Holder
all right, title and interest which the Trustee had in the Receivables and other Trust Property.




          Unless the certificate of authentication hereon has been executed by or on behalf of the
Trustee, by manual signature, this Security shall not be entitled to any benefit under the Pooling
and Servicing Agreement, or be valid for any purpose.




          IN WITNESS WHEREOF, the Transferor has caused this Security to be duly executed.




	 	 	 	 	 
	 	METRIS RECEIVABLES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Date:                                        




A-3









 








CERTIFICATE OF AUTHENTICATION



This is the Exchangeable Transferor Security referred to in the within-mentioned Pooling and
Servicing Agreement.



 




	 	 	 	 	 
	 	 

Authenticating Agent

 	 
	 	By:  	
 	] 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



A-4









 






	 	 	 	 	 



Exhibit C




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Metris Receivables, Inc.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Monthly Report	 
	Securityholder’s Statement	 	 	Metris Master Trust	 	 	Series [___-__]	 	 	Month-Year	 
	Section 5.2	 	 	Class A*	 	 	Class B	 	 	Excess Collateral	 	 	Total	 
	 
	(i)	 	Security Amount
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	* Based on month-end level. Security
amount varied during the month.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(ii)	 	Security Principal Distributed
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(iii)	 	Security Interest Distributed
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(iv)	 	Principal Collections
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(v)	 	Finance Charge Collections
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Recoveries
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Interest Earned on Accounts
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total Finance Charge Collections
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total Collections
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(vi)	 	Aggregate Amount of Principal Receivables
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Invested Amount (End of Mth)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Floating Allocation Percentage
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Invested Amount (Beg. of Mth)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Average Daily Invested Amount
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(vii)	 	Receivable Delinquencies
(As a % of Total Receivables)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	30 Days to 59 Days (1 to 29 Days
Contractually Delinquent)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	60 Days to 89 Days (30 to 59 Days
Contractually Delinquent)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	90 Days and Over (60+ Days
Contractually Delinquent)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total Receivables
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(viii)	 	Aggregate Investor Default Amount


	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	As a % of Average Daily Invested Amount
(Annualized based on 365 days/year)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(ix)	 	Charge-Offs
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(x)	 	Servicing Fee
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(xi)	 	Pool Factor
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(xii)	 	Unreimbursed Redirected Principal

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Collections
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(xiii)	 	Excess Funding Account Balance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Prefunding Account Balance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(xiv)	 	Aggregate Interest Rate Caps
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Notional Amount
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Deposit to Caps Proceeds Amount
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Average Net Portfolio Yield	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Minimum Base Rate	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 






C-1









 






EXHIBIT D




FORM OF ANNUAL SERVICER’S CERTIFICATE




METRIS RECEIVABLES, INC.





METRIS MASTER TRUST






          The undersigned, a duly authorized representative of HSBC Finance Corporation (“HSBC
Finance”), as Servicer, pursuant to the Fourth Amended and Restated Pooling and Servicing Agreement
dated as of December 1, 2005 (the “Pooling and Servicing Agreement”) by and among Metris
Receivables, Inc., as Transferor (the “Transferor”), HSBC Finance, as Servicer (the “Servicer”),
and U.S. Bank National Association, as trustee (the “Trustee”), does hereby certify that:





	 	1.	 	HSBC Finance is Servicer under the Pooling and Servicing
Agreement.
	 
	 	2.	 	The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreement to execute and deliver this Certificate to the Trustee.
	 
	 	3.	 	This Certificate is delivered pursuant to Section 3.5 of the
Pooling and Servicing Agreement.
	 
	 	4.	 	A review of the activities of the Servicer during (the period
from the Closing Date until) (the twelve fiscal month period ended)                     ,
20___was conducted under our supervision.
	 
	 	5.	 	Based on such review, the Servicer has, to the best of our
knowledge, fully performed all its obligations under the Pooling and Servicing
Agreement throughout such period and no default in the performance of such
obligations has occurred or is continuing except as set forth in paragraph 6
below.
	 
	 	6.	 	The following is a description of each default in the
performance of the Servicer’s obligations under the provisions of the Pooling
and Servicing Agreement, including any Supplement, known to us to have been
made during such period which sets forth in detail (i) the nature of each such
default, (ii) the action taken by the Servicer, if any, to remedy each such
default and (iii) the current status of each such default:




[If applicable, insert “None.”]




D-1









 








          IN WITNESS WHEREOF, the undersigned has duly executed this certificate this ___day of
                                        ,                     .




	 	 	 	 	 
	 	HSBC FINANCE CORPORATION, as Servicer

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



D-2









 






	 	 	 	 	 



EXHIBIT E




FORM OF ANNUAL OPINION OF COUNSEL




          The opinion set forth below, which is to be delivered pursuant to subsection 13.2(d)(ii) of
the Fourth Amended and Restated Pooling and Servicing Agreement, may be subject to certain
qualifications, assumptions, limitations and exceptions taken or made in the opinion of counsel
delivered on the Initial Closing Date with respect to similar matters.




          No filing or other action, other than such filing or action described in such opinion, is
necessary from the date of such opinion through                      of the following year to continue the
perfected status of the interest of the Trustee in the collateral described in the financing
statements referred to in such opinion.




E-1









 








EXHIBIT F




FORM OF RECONVEYANCE




          RECONVEYANCE, dated as of                     , by and between METRIS RECEIVABLES, INC. (the
“Transferor”) and U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE (the “Trustee”), pursuant to the
Pooling and Servicing Agreement referred to below.




WITNESSETH:




          WHEREAS, the Transferor, the Trustee and HSBC Finance Corporation, as Servicer (the
“Servicer”), are parties to the Fourth Amended and Restated Pooling and Servicing Agreement, dated
as of December 1, 2005 (hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the “Pooling and Servicing Agreement”);




          WHEREAS, the Trust has terminated pursuant to the Pooling and Servicing Agreement, and all
amounts due under the Pooling and Servicing Agreement have been paid;




          WHEREAS, the Transferor wishes to cause the Trustee to reconvey certain Trust Property to the
Transferor, and the Trustee is willing to make such reconveyance subject to the terms and
conditions hereof.




          NOW, THEREFORE, the Transferor and the Trustee hereby agree as follows:




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




          2. Reconveyance of Trust Property.




          (a) The Trustee does hereby reconvey to the Transferor, without recourse, all of the Trustee’s
right, title and interest in, to and under, and the Trustee does hereby release its lien on and
security interest in, all Receivables now existing and hereafter arising in the Accounts, all other
Trust Property, and all proceeds of the foregoing, except in each case amounts held by the Trustee
pursuant to subsection 12.3(b) of the Pooling and Servicing Agreement.




          (b) In connection with the foregoing reconveyance, the Trustee agrees to record and file one
or more termination statements (and financing statements or amendments) as may be reasonably
requested by the Transferor.




          3. Counterparts. This Reconveyance may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument.




          4. GOVERNING LAW. THIS RECONVEYANCE 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




F-1









 







DETERMINED IN ACCORDANCE WITH SUCH LAWS. The undersigned hereby declare that it is their
intention that this Reconveyance shall be regarded as made under the laws of the State of New York
and that the laws of said State shall be applied in interpreting its provisions in all cases where
legal interpretation shall be required. Each of the parties hereto hereby irrevocably and
unconditionally agrees to be subject to the jurisdiction of the courts of the State of New York and
of the federal courts sitting in the State of New York.



[The remainder of this page is left blank intentionally.]




F-2









 








          IN WITNESS WHEREOF, the Trustee and the Transferor each has caused this Reconveyance to be
duly executed by their respective officers as of the day and year first written above.




	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION,
           as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	METRIS RECEIVABLES, INC.,
           as Transferor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Agreed and acknowledged:




HSBC FINANCE CORPORATION,
          as Servicer




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






F-3









 






EXHIBIT G




[Reserved].




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EXHIBIT H




FORM OF ASSIGNMENT OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS




          ASSIGNMENT NO. ___OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS, dated as of                     , by and
between METRIS RECEIVABLES, INC. (the “Transferor”) and U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE
(the “Trustee”), pursuant to the Pooling and Servicing Agreement referred to below.




WITNESSETH:




          WHEREAS, the Transferor, the Trustee and HSBC Finance Corporation, as Servicer (the
“Servicer”), are parties to the Fourth Amended and Restated Pooling and Servicing Agreement, dated
as of December 1, 2005 (hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the “Pooling and Servicing Agreement”);




          WHEREAS, pursuant to the Pooling and Servicing Agreement, the Transferor wishes to designate
Supplemental Accounts to be included as Accounts, and the Transferor wishes to convey its right,
title and interest in and to the Receivables of such Supplemental Accounts, whether existing on the
Addition Cut-Off Date or thereafter created, to the Trustee pursuant to this Assignment and the
Pooling and Servicing Agreement; and




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




          NOW, THEREFORE, the Transferor and the Trustee hereby agree as follows:




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




          “Addition Cut-Off Date” shall mean, with respect to the Supplemental Accounts,
                    .




          “Addition Date” shall mean, with respect to the Supplemental Accounts,                     .




          “Supplemental Accounts” shall mean the Supplemental Accounts, as defined in the
Pooling and Servicing Agreement, that are designated hereby and listed on Schedule 1
hereto.




          “Additional Transferred Assets” shall have the meaning set forth in subsection
3(a).




          2. Designation of Supplemental Accounts. The Transferor delivers herewith an Account
Schedule containing a true and complete list of the Supplemental Accounts. Such Account Schedule
is incorporated into and made part of this Assignment, shall be Schedule 1 to this Assignment and
shall supplement Schedule 1 to the Pooling and Servicing Agreement.





H-1









 








          3. Conveyance of Receivables.




          (a) The Transferor does hereby transfer, assign, set over and otherwise convey to the Trustee,
without recourse except as provided in the Pooling and Servicing Agreement, all of the Transferor’s
right, title and interest in, to and under (i) the Receivables existing in the Supplemental
Accounts at the close of business on the Addition Cut-Off Date and thereafter created from time to
time in the Supplemental Accounts until the termination of the Trust, (ii) all Interchange
allocable to such Receivables, (iii) all monies and investments due or to become due with respect
to all of the foregoing (including, without limitation, the right to any Finance Charge
Receivables, any Collections and any Recoveries), and (iv) all proceeds of all of the foregoing
(collectively, the “Additional Transferred Assets”).




          (b) In connection with the foregoing transfer and if necessary, the Transferor agrees to
record and file one or more financing statements (and continuation statements or other amendments
with respect to such financing statements when applicable) with respect to the Additional
Transferred Assets meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the transfer of the Additional Transferred Assets to the
Trustee, and to deliver a file-stamped copy of such financing statements and continuation
statements (or other amendments) or other evidence of such filing to the Trustee.




          (c) In connection with the foregoing transfer, the Transferor further agrees, on or prior to
the date of this Assignment, to indicate in its accounting, computer and other records that the
Additional Transferred Assets have been transferred to the Trustee pursuant to this Assignment,
including by identifying the Supplemental Accounts in its master file maintained in its computer
files with the designation portfolio ID 0001.




          (d) The parties hereto intend that the conveyance of the Transferor’s right, title and
interest in and to the Additional Transferred Assets shall constitute a sale, and not a secured
borrowing, for accounting purposes. Nevertheless, if and to the extent that this Assignment is not
deemed to be a sale, the Transferor shall be deemed to have granted, and the Transferor does hereby
grant, to the Trustee a first priority perfected security interest in all of the Transferor’s
right, title and interest, whether now owned or hereafter acquired, in, to and under the Additional
Transferred Assets to secure the obligations of the Transferor hereunder and under the Pooling and
Servicing Agreement and agrees that this Assignment shall constitute a security agreement under
applicable law.




          4. Acceptance by the Trustee. The Trustee hereby acknowledges that, prior to or
simultaneously with the execution and delivery of this Assignment, the Transferor delivered to the
Trustee the Account Schedule described in Section 2 of this Assignment with respect to all
Supplemental Accounts.




          5. Representations and Warranties of the Transferor. The Transferor hereby represents
and warrants to the Trustee on the Addition Date that:




          (a) This Assignment constitutes the legal, valid and binding obligation of the Transferor,
enforceable against the Transferor in accordance with its terms, except (i) as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium




H-2









 







or other similar laws now or hereafter in effect, affecting the enforcement of creditors’
rights in general, and (ii) as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).




          (b) All consents, licenses, approvals or authorizations of or registrations or declarations
with any Governmental Authority required of the Transferor in connection with the transfer of the
Additional Transferred Assets to the Trustee have been obtained.




          (c) On the Addition Cut-Off Date, each Supplemental Account is an Eligible Account. On the
Addition Cut-Off Date, each Receivable contained in the Supplemental Accounts and conveyed to the
Trustee by the Transferor is an Eligible Receivable.




          (d) This Assignment creates a valid and continuing security interest (as defined in the
Delaware UCC) in favor of the Trustee in the Receivables described in subsection 3(a) of this
Assignment (the “Collateral”), which security interest is prior to all other Liens, except for
Permitted Liens, and is enforceable as such as against creditors of and purchasers from the
Transferor.




          (e) The Collateral constitutes “accounts” or “payment intangibles” within the meaning of the
applicable UCC.




          (f) At the time of each transfer and assignment of Collateral to the Trustee pursuant to this
Assignment, the Transferor owned and had good and marketable title to such Collateral free and
clear of any Lien, claim or encumbrance of any Person, except for Permitted Liens.




          (g) The Transferor caused or will cause, within ten days of the initial execution of this
Assignment, the filing of all appropriate financing statements in the proper filing office in the
appropriate jurisdictions under applicable law in order to perfect the security interest in the
Collateral granted to the Trustee pursuant to this Assignment.




          (h) Other than the transfer and the security interest granted to the Trustee pursuant to this
Assignment and the Pooling and Servicing Agreement, the Transferor has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed the Collateral. The Transferor has not
authorized the filing of and is not aware of any financing statements against the Transferor that
include a description of the Collateral other than any financing statement relating to the security
interest granted to the Trustee pursuant to this Assignment and the Pooling and Servicing Agreement
or that has been terminated. The Transferor is not aware of any judgment or tax lien filings
against the Transferor.




          6. Ratification of the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement is hereby ratified, and all references to the “Pooling and Servicing Agreement,” to “this
Agreement” and “herein” shall be deemed from and after the Addition Date to be a reference to the
Pooling and Servicing Agreement as supplemented and amended by this Assignment. Except as
expressly amended hereby, all the representations, warranties, terms, covenants and conditions of
the Pooling and Servicing Agreement shall remain unamended and shall continue to be, and shall
remain, in full force and effect in accordance with its terms and except as expressly provided
herein shall not constitute or be deemed to constitute a waiver of




H-3









 







compliance with or consent to non-compliance with any term or provision of the Pooling and
Servicing Agreement.




          7. Counterparts. This Assignment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument.




          8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. The
undersigned hereby declare that it is their intention that this Assignment shall be regarded as
made under the laws of the State of New York and that the laws of said State shall be applied in
interpreting its provisions in all cases where legal interpretation shall be required. Each of the
parties hereto hereby irrevocably and unconditionally agrees to be subject to the jurisdiction of
the courts of the State of New York and of the federal courts sitting in the State of New York.



[The remainder of this page is left blank intentionally.]




H-4









 








          IN WITNESS WHEREOF, the Trustee and the Transferor each has caused this Assignment to be duly
executed by their respective officers as of the day and year first written above.




	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION,
          as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	METRIS RECEIVABLES, INC.,
          as Transferor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Agreed and acknowledged:




HSBC FINANCE CORPORATION,
          as Servicer




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






H-5









 






Schedule 1




SCHEDULE OF SUPPLEMENTAL ACCOUNTS




H-6









 








Schedule 2




Metris Receivables, Inc.

Metris Master Trust

Officer’s Certificate




          The undersigned, a duly authorized officer of Metris Receivables, Inc., a Delaware corporation
(the “Transferor”), hereby certifies and acknowledges on behalf of the Transferor that to the best
of his knowledge the following statements are true on                     ,                     , (the “Addition Date”), and
acknowledges on behalf of the Transferor that this Officer’s Certificate will be relied upon by
U.S. Bank National Association, as Trustee (the “Trustee”) of the Metris Master Trust, in
connection with the Trustee entering into Assignment No. ___of Receivables in Supplemental
Accounts, dated as of the Addition Date (the “Assignment”), by and between the Transferor and the
Trustee, in connection with the Fourth Amended and Restated Pooling and Servicing Agreement, dated
as of December 1, 2005, as heretofore supplemented and amended (the “Pooling and Servicing
Agreement”). The undersigned hereby certifies and acknowledges on behalf of the Transferor that:




          On or prior to the Addition Date, the Transferor has delivered to the Trustee the Assignment,
the Transferor has indicated in its computer files that the Receivables created in connection with
the Supplemental Accounts have been transferred to the Trustee by identifying such Supplemental
Accounts in its master file maintained in its computer files with the designation portfolio ID
0001, and the Transferor has delivered to the Trustee an Account Schedule (as defined in the
Pooling and Servicing Agreement). Such Account Schedule is hereby incorporated into and made a
part of the Assignment and the Pooling and Servicing Agreement.




          Each of the representations and warranties made by the Transferor in Paragraph 5 of the
Assignment is true and correct in all material respect on the Addition Date.




          Initially capitalized terms used herein and not otherwise defined are used as defined in the
Pooling and Servicing Agreement.




H-7









 








          IN WITNESS WHEREOF, I have hereunto set my hand this                     day of                                         , ___.




	 	 	 	 	 
	 	METRIS RECEIVABLES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



H-8









 






	 	 	 	 	 



EXHIBIT I




FORM OF OPINION OF COUNSEL REGARDING SUPPLEMENTAL ACCOUNTS




Provisions to be included in

Opinion of Counsel to be

delivered pursuant to

subsection 2.6(e)(vi) of the

Fourth Amended and Restated Pooling and Servicing Agreement




          The opinions set forth below may be subject to all the qualifications, assumptions,
limitations and exceptions taken or made in the Opinions of Counsel delivered on any applicable
Addition Date.




          1. The Supplemental Conveyance creates in favor of the Trustee a security interest in the
rights of the Transferor in the Receivables in such Supplemental Accounts and the proceeds thereof.




          2. To the extent that the transfer of the Receivables in such Supplemental Accounts by the
Transferor to the Trustee, pursuant to the Supplemental Conveyance does not constitute an absolute
assignment by the Transferor to the Trustee of such Additional Receivables or the proceeds thereof,
the Supplemental Conveyance creates in favor of the Trustee a security interest in the rights of
the Transferor in such Additional Receivables and the proceeds thereof.




          3. The security interests described in paragraphs 1 and 2 above are perfected and of first
priority.




I-1









 








EXHIBIT J




FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED ACCOUNTS




          REASSIGNMENT NO. ___OF RECEIVABLES IN REMOVED ACCOUNTS, dated as of                     , by and
between METRIS RECEIVABLES, INC. (the “Transferor”) and U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE
(the “Trustee”), pursuant to the Pooling and Servicing Agreement referred to below.




WITNESSETH:




          WHEREAS, the Transferor, the Trustee and HSBC Finance Corporation, as Servicer (the
“Servicer”), are parties to the Fourth Amended and Restated Pooling and Servicing Agreement, dated
as of December 1, 2005 (hereinafter as such agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the “Pooling and Servicing Agreement”);




          WHEREAS, pursuant to the Pooling and Servicing Agreement, the Transferor wishes to designate
Removed Accounts, and the Transferor wishes to cause the Trustee to reconvey its right, title and
interest in and to the Receivables of such Removed Accounts, whether existing on the Removal
Cut-Off Date or thereafter created, to the Transferor pursuant to this Reassignment and the Pooling
and Servicing Agreement; and




          WHEREAS, the Trustee is willing to make such reconveyance subject to the terms and conditions
hereof.




          NOW, THEREFORE, the Transferor and the Trustee hereby agree as follows:




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




          “Removal Cut-Off Date” shall mean, with respect to the Removed Accounts,                     .




          “Removal Date” shall mean, with respect to the Removed Accounts,                     .




          “Removed Accounts” shall mean the Removed Accounts, as defined in the Pooling and
Servicing Agreement, that are designated hereby and listed on Schedule 1 hereto.




          2. Designation of Removed Accounts. The Transferor delivers herewith an Account
Schedule containing a true and complete list of the Removed Accounts. Such Account Schedule is
incorporated into and made part of this Reassignment, shall be Schedule 1 to this
Reassignment and shall supplement Schedule 1 to the Pooling and Servicing Agreement.




          3. Reconveyance of Receivables.




          (a) The Trustee does hereby reconvey to the Transferor, without recourse, all of the Trustee’s
right, title and interest in, to and under, and the Trustee does hereby release its




J-1









 







lien on and security interest in, (i) the Receivables existing in the Removed Accounts at the
close of business on the Removal Cut-Off Date and thereafter created from time to time in the
Removed Accounts, (ii) all Interchange allocable to such Receivables, (iii) all monies and
investments due or to become due with respect to all of the foregoing (including, without
limitation, the right to any Finance Charge Receivables, any Collections and any Recoveries), and
(iv) all proceeds of all of the foregoing.




          (b) In connection with the foregoing reconveyance, the Trustee agrees to record and file one
or more termination statements (and financing statements or amendments) as may be reasonably
requested by the Transferor.




          4. Representations and Warranties of the Transferor. The Transferor hereby represents
and warrants to the Trustee on the Removal Date that:




          (a) No selection procedure was used by the Transferor that is materially adverse to the
interests of the Investor Securityholders in selecting the Removed Accounts.




          (b) The removal of the Receivables in the Removed Accounts on the Removal Date will not, in
the reasonable belief of the Transferor, cause, immediately or with the passage of time, a Pay Out
Event to occur.




          5. Ratification of the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement is hereby ratified, and all references to the “Pooling and Servicing Agreement,” to “this
Agreement” and “herein” shall be deemed from and after the Removal Date to be a reference to the
Pooling and Servicing Agreement as supplemented and amended by this Reassignment. Except as
expressly amended hereby, all the representations, warranties, terms, covenants and conditions of
the Pooling and Servicing Agreement shall remain unamended and shall continue to be, and shall
remain, in full force and effect in accordance with its terms and except as expressly provided
herein shall not constitute or be deemed to constitute a waiver of compliance with or consent to
non-compliance with any term or provision of the Pooling and Servicing Agreement.




          6. Counterparts. This Reassignment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument.




          7. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. The
undersigned hereby declare that it is their intention that this Reassignment shall be regarded as
made under the laws of the State of New York and that the laws of said State shall be applied in
interpreting its provisions in all cases where legal interpretation shall be required. Each of the
parties hereto hereby irrevocably and unconditionally agrees to be subject to the jurisdiction of
the courts of the State of New York and of the federal courts sitting in the State of New York.



[The remainder of this page is left blank intentionally.]




J-2









 








          IN WITNESS WHEREOF, the Trustee and the Transferor each has caused this Reassignment to be
duly executed by their respective officers as of the day and year first written above.




	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION,
          as Trustee

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	 	METRIS RECEIVABLES, INC.,
          as Transferor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



Agreed and acknowledged:




HSBC FINANCE CORPORATION,
          as Servicer




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 






J-3









 






Schedule 1




SCHEDULE OF REMOVED ACCOUNTS





J-4