EX-10.2



 





EXHIBIT
10.2




EXECUTION COPY




 





HSBC FUNDING (USA) INC. V,

TRANSFEROR,




HSBC FINANCE CORPORATION,

SERVICER,




and




WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE OF THE

HSBC PRIVATE LABEL CREDIT CARD MASTER NOTE TRUST (USA) I,

ISSUER




AMENDED AND RESTATED

TRANSFER AND SERVICING AGREEMENT




Dated as of August 11, 2006 amending and restating in full the

Transfer and Servicing Agreement dated as of June 12, 2001




 







 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	          Section 1.01
	 	Definitions	 	 	1	 
	          Section 1.02
	 	Other Definitional Provisions	 	 	15	 
	 
	 	 	 	 	 	 
	ARTICLE II CONVEYANCE OF RECEIVABLES	 	 	17	 
	 
	 	 	 	 	 	 
	          Section 2.01
	 	Conveyance of Receivables	 	 	17	 
	          Section 2.02
	 	Acceptance by Owner Trustee	 	 	18	 
	          Section 2.03
	 	Representations and Warranties of Each Transferor Relating to Such Transferor	 	 	19	 
	          Section 2.04
	 	Representations and Warranties of each Transferor Relating to the	 	 	 	 
	 
	 	Agreement and Any Participation Interest Supplement and the Receivables	 	 	20	 
	          Section 2.05
	 	Reassignment of Ineligible Receivables	 	 	22	 
	          Section 2.06
	 	Reassignment of Trust Portfolio	 	 	23	 
	          Section 2.07
	 	Covenants of each Transferor	 	 	24	 
	          Section 2.08
	 	Covenants of each Transferor with Respect to Receivables Purchase Agreement	 	 	27	 
	          Section 2.09
	 	Addition of Accounts	 	 	27	 
	          Section 2.10
	 	Removal of Accounts and Participation Interests	 	 	32	 
	          Section 2.11
	 	Account Allocations	 	 	33	 
	          Section 2.12
	 	Discount Option	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES	 	 	35	 
	 
	 	 	 	 	 	 
	          Section 3.01
	 	Acceptance of Appointment and Other Matters Relating to the Servicer 	 	 	35	 
	          Section 3.02
	 	Servicing Compensation	 	 	36	 
	          Section 3.03
	 	Representations, Warranties and Covenants of the Servicer	 	 	37	 
	          Section 3.04
	 	Reports and Records for the Owner Trustee and the Indenture Trustee	 	 	39	 
	          Section 3.05
	 	Annual Certificate of Servicer and Report of Assessment of Compliance with Servicing Criteria.	 	 	40	 
	          Section 3.06
	 	Annual Attestation Report of Registered Public Accountant Firms; Copies of Reports Available 	 	 	40	 
	          Section 3.07
	 	Tax Treatment	 	 	41	 
	          Section 3.08
	 	Notices to HSBC Finance Corporation	 	 	41	 
	          Section 3.09
	 	Adjustments	 	 	42	 
	          Section 3.10
	 	Reports to the Commission	 	 	42	 
	 
	 	 	 	 	 	 
	ARTICLE IV OTHER MATTERS RELATING TO EACH TRANSFEROR	 	 	43	 
	 
	 	 	 	 	 	 
	          Section 4.01
	 	Liability of each Transferor	 	 	43	 
	          Section 4.02
	 	Merger or Consolidation of, or Assumption of the Obligations of, a Transferor 	 	 	43	 
	          Section 4.03
	 	Limitations on Liability of Each Transferor	 	 	44	 






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	 	 	 	 	Page	 
	          Section 4.04
	 	Assumption of the Transferor Obligations	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE V OTHER MATTERS RELATING TO THE SERVICER	 	 	46	 
	 
	 	 	 	 	 	 
	          Section 5.01
	 	Liability of the Servicer	 	 	46	 
	          Section 5.02
	 	Merger or Consolidation of, or Assumption of the Obligations of, the Servicer 	 	 	46	 
	          Section 5.03
	 	Limitation on Liability of the Servicer and Others 	 	 	46	 
	          Section 5.04
	 	Servicer Indemnification of the Owner Trustee and the Indenture Trustee	 	 	47	 
	          Section 5.05
	 	Resignation of the Servicer	 	 	47	 
	          Section 5.06
	 	Access to Certain Documentation and Information Regarding the Receivables	 	 	48	 
	          Section 5.07
	 	Delegation of Duties	 	 	48	 
	          Section 5.08
	 	Examination of Records	 	 	48	 
	 
	 	 	 	 	 	 
	ARTICLE VI INSOLVENCY EVENTS	 	 	49	 
	 
	 	 	 	 	 	 
	          Section 6.01
	 	Rights upon the Occurrence of an Insolvency Event	 	 	49	 
	 
	 	 	 	 	 	 
	ARTICLE VII SERVICER DEFAULTS	 	 	50	 
	 
	 	 	 	 	 	 
	          Section 7.01
	 	Servicer Defaults	 	 	50	 
	          Section 7.02
	 	Indenture Trustee To Act; Appointment of Successor	 	 	52	 
	          Section 7.03
	 	Notification to Noteholders	 	 	53	 
	 
	 	 	 	 	 	 
	ARTICLE VIII TERMINATION	 	 	54	 
	 
	 	 	 	 	 	 
	          Section 8.01
	 	Termination of Agreement	 	 	54	 
	 
	 	 	 	 	 	 
	ARTICLE IX MISCELLANEOUS PROVISIONS	 	 	55	 
	 
	 	 	 	 	 	 
	          Section 9.01
	 	Amendment; Waiver of Past Defaults	 	 	55	 
	          Section 9.02
	 	Protection of Right, Title and Interest to Trust	 	 	57	 
	          Section 9.03
	 	Governing Law	 	 	58	 
	          Section 9.04
	 	Notices; Payments	 	 	58	 
	          Section 9.05
	 	Severability of Provisions	 	 	58	 
	          Section 9.06
	 	Additional Obligations of the Servicer	 	 	59	 
	          Section 9.07
	 	Further Assurances	 	 	59	 
	          Section 9.08
	 	No Waiver; Cumulative Remedies	 	 	59	 
	          Section 9.09
	 	Counterparts	 	 	59	 
	          Section 9.10
	 	Third-Party Beneficiaries	 	 	59	 
	          Section 9.11
	 	Actions by Noteholders	 	 	59	 
	          Section 9.12
	 	Rule 144A Information	 	 	59	 
	          Section 9.13
	 	Merger and Integration	 	 	60	 
	          Section 9.14
	 	Headings	 	 	60	 
	          Section 9.15
	 	Certain Commercial Law Representations and Warranties	 	 	60	 
	          Section 9.16
	 	Nonpetition Covenants	 	 	61	 
	          Section 9.17
	 	Regulation AB	 	 	61	 






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	 	 	 	 	Page	 
	ARTICLE X ADMINISTRATION PROVISIONS	 	 	62	 
	 
	 	 	 	 	 	 
	          Section 10.01
	 	Administrative Duties.	 	 	62	 
	          Section 10.02
	 	Records	 	 	63	 
	          Section 10.03
	 	Additional Information to be Furnished to the Trust	 	 	64	 






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	 	 	 	 	Page	 	 
	 

	 	EXHIBITS	 	 	 	 
	 
	 	 	 	 	 	 
	EXHIBIT A

	 	Form of Assignment of Receivables in Additional Accounts
	 	A-1	 	 
	 
	 	 	 	 	 	 
	EXHIBIT B

	 	Form of Reassignment of Receivables in Removed Accounts
	 	B-1	 	 
	 
	 	 	 	 	 	 
	EXHIBIT C-1

	 	Certification Pursuant to Item 1123 of Regulation AB
	 	C-1	 	 
	 
	 	 	 	 	 	 
	EXHIBIT C-2

	 	Form of Annual Servicer’s Certificate
	 	C-2	 	 
	 
	 	 	 	 	 	 
	EXHIBIT C-3

	 	Form of Report on Assessment of Compliance with Applicable
Servicing Criteria Pursuant to Item 1122 of Regulation AB
	 	C-3	 	 
	 
	EXHIBIT D-1

	 	Form of Opinion of Counsel with Respect to Accounts
	 	D-1-1	 	 
	 
	 	 	 	 	 	 
	EXHIBIT D-2

	 	Provisions to be Included in Annual Opinion of Counsel
	 	D-2-1	 	 
	 
	 	 	 	 	 	 
	 

	 	SCHEDULES	 	 	 	 
	 
	 	 	 	 	 	 
	SCHEDULE 1

	 	List of Accounts
	 	I-1	 	 






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          This AMENDED AND RESTATED TRANSFER AND SERVICING AGREEMENT, dated as of August 11, 2006, among
HSBC FUNDING (USA) INC. V, a Delaware corporation, as successor by assignment to HRSI Funding, Inc.
II (the “Transferor”), HSBC FINANCE CORPORATION, a Delaware corporation, as Servicer (successor by
merger to Household Finance Corporation, the “Servicer”), and WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee (the “Owner Trustee”) on behalf of the HSBC PRIVATE
LABEL CREDIT CARD MASTER NOTE TRUST (USA) I (formerly known as Household Credit Card Master Note
Trust I), (the “Trust”), a common law trust organized and existing under the laws of the State of
Delaware amends and restates in full the Transfer and Servicing Agreement, dated as of June 12,
2001, among the parties (or their predecessors in interest) listed above.




          In consideration of the mutual agreements herein contained, each party agrees as follows for
the benefit of the other parties, the Noteholders and any Series Enhancer (as defined below) to the
extent provided herein, in the Indenture and in any Indenture Supplement:




ARTICLE I




DEFINITIONS




          Section 1.01 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the following meanings, and the definitions of such terms are applicable to the
singular as well as the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such terms.




          “Account” shall mean (a) each Initial Account, (b) each Additional
Account (but only from and after the Addition Date with respect thereto), (c) each Related Account,
(d) any account originated as a replacement of an Account in connection with the upgrade of such
account to premium status (provided that such replacement account can be identified by reference to
its predecessor Account), (e) each Transferred Account, and (f) each surviving account resulting
from the combination, in accordance with the Credit Guidelines, of two or more of the Accounts, but
shall exclude (i) any Account that has been closed and terminated in accordance with the relevant
Credit Guidelines and (ii) any Account all the Receivables in which are (A) after the Removal Date,
removed by the Transferor pursuant to Section 2.10, (B) reassigned to the Transferor pursuant to
Section 2.05 or (C) assigned and transferred to the Servicer pursuant to Section 3.03.




          “Account Owner” shall mean the Bank or any other entity which is
the issuer of the revolving credit relating to an Account pursuant to a Credit Agreement and/or a
seller of Receivables to the Transferor.




          “Accountant’s Report” shall have the meaning assigned to such term in Section 3.06.




          “Addition Date” shall mean (a) with respect to Aggregate Addition
Accounts and Automatic Additional Accounts, the date from and after which such Aggregate Addition
Accounts and Automatic Additional Accounts are to be included as Accounts pursuant to




 









 







subsection 2.09(a), (b) or (d), and (b) with respect to Participation Interests, the date from
and after which such Participation Interests are to be included as assets of the Trust pursuant to
subsection 2.09(a) or (b).




          “Additional Account” shall mean each Automatic Additional Account
and each Aggregate Addition Account.




          “Additional Cut-Off Date” shall mean (a) with respect to Aggregate
Addition Accounts or Participation Interests, the date specified as such in the notice delivered
with respect thereto pursuant to subsection 2.09(c) and (b) with respect to Automatic Additional
Accounts, the later of the dates on which such Automatic Additional Accounts are originated or
designated pursuant to subsection 2.09(d).




          “Additional Transferor” shall have the meaning specified in
subsection 2.09(g).




          “Adverse Effect” shall mean, with respect to any action, that such
action will (a) result in the occurrence of an Amortization Event, a Reinvestment Event or an Event
of Default or (b) materially adversely affect the amount or timing of distributions to be made to
the Noteholders of any Series or Class pursuant to this Agreement, the Indenture or the related
Indenture Supplement.




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




          “Aggregate Addition” shall mean the designation of additional
Eligible Accounts, other than Automatic Additional Accounts, to be included as Accounts or of
Participation Interests to be included as Trust Assets pursuant to subsection 2.09(a) or (b).




          “Aggregate Addition Account” shall mean each Eligible Account
designated pursuant to subsection 2.09(a) or (b) to be included as an Account and identified in the
computer file or microfiche list delivered to the Owner Trustee by the Transferor pursuant to
Sections 2.01 and 2.09(h).




          “Agreement” shall mean this Amended and Restated Transfer and
Servicing Agreement, as the same may be further amended, supplemented or otherwise modified from
time to time.




          “Amortization Event” shall have the meaning specified in the
Indenture.




          “Appointment Date” shall have the meaning specified in Section
6.01.




          “Assignment” shall have the meaning specified in subsection
2.09(h).




          “Assumed Obligations” shall have the meaning specified in Section 4.04.




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          “Assuming Entity” shall have the meaning specified in Section 4.04.




          “Assumption Agreement” shall have the meaning specified in Section 4.04(a).




          “Authorized Newspaper” shall mean any newspaper or newspapers of
general circulation in the Borough of Manhattan, City of New York, printed in the English language
(and, with respect to any Series or Class, if and so long as the Notes of such Series are listed on
a stock exchange and such exchange shall so require, a newspaper satisfying the requirements of
such exchange) and customarily published on each business day at such place, whether or not
published on Saturdays, Sundays or holidays.




          “Automatic Additional Accounts” shall mean each revolving credit
account established pursuant to a Credit Agreement, which account is designated pursuant to
subsection 2.09(d) to be included as an Account and is identified in the computer file or
microfiche list delivered to the Owner Trustee by the Transferor pursuant to Section 2.01 and
subsection 2.09(h).




          “Bank” shall mean HSBC Bank Nevada, National Association (formerly
known as Household Bank (SB), N.A.), and its successors and permitted assigns.




          “Bank RPA” shall mean (a) the Amended and Restated Receivables Purchase Agreement,
dated as of June 12, 2002, between the Bank and HPLAC, as amended from time to time, and (b) any
other receivables purchase agreement, substantially in the form of either such agreement, entered
into between the Bank or another Account Owner and a Receivables Seller or another Affiliate in the
future.




          “Bankruptcy Code” shall have the meaning specified in subsection
4.02(a)(i)(x).




          “Bearer Notes” shall have the meaning specified in the Indenture.




          “Business Day” shall mean any day other than (a) a Saturday or
Sunday or (b) any other day on which national banking associations or state banking institutions in
New York City, New York, Delaware, Nevada or any other State in which the principal executive
offices of the Bank, the Servicer, the Owner Trustee, the Indenture Trustee or other Account Owner,
as the case may be, are located, are authorized or obligated by law, executive order or
governmental decree to be closed or (c) for purposes of any particular Series, any other day
specified in the related Indenture Supplement.




          “Class” shall have the meaning specified in the Indenture.




          “Closing Date” shall mean, with respect to any Series, the closing
date specified in the related Indenture Supplement.




          “Collections” shall mean all payments by or on behalf of Obligors
(including Insurance Proceeds) received in respect of the Receivables, in the form of cash, checks,
wire transfers, electronic transfers, ATM transfers or any other form of payment in accordance with
a Credit Agreement in effect from time to time and all other amounts specified by this Agreement,
the Indenture or any Indenture Supplement as constituting Collections. As specified in any




3









 







Participation Interest Supplement or Indenture Supplement, Collections shall include amounts
received with respect to Participation Interests. All Recoveries with respect to Receivables
previously charged-off as uncollectible will be treated as Collections of Finance Charge and
Administrative Receivables. Collections with respect to any Due Period shall include a portion,
calculated pursuant to subsection 2.07(h), of Interchange, if applicable, paid to the Trust with
respect to such Due Period, to be applied as if such amount were Collections of Finance Charge and
Administrative Receivables for all purposes.




          “Commission” shall mean the Securities and Exchange Commission and
its successors in interest.




          “Corporate Trust Office” shall have the meaning (a) when used in
respect of the Owner Trustee, specified in the Trust Agreement and (b) when used in respect of the
Indenture Trustee, specified in the Indenture.




          “Coupon” shall have the meaning specified in the Indenture.




          “Credit Agreement” shall mean, with respect to a revolving credit
account, the agreements between an Account Owner and the Obligor governing the terms and conditions
of such account, as such agreements may be amended, modified or otherwise changed from time to time
and as distributed (including any amendments and revisions thereto) to holders of such account.




          “Credit Guidelines” shall mean the respective policies and
procedures of the Bank, the Servicer, and/or any other Account Owner, as the case may be, as such
policies and procedures may be amended from time to time, (a) relating to the operation of its
credit business, which generally are applicable to its portfolio of revolving credit accounts or,
in the case of an Account Owner that has only a portion of its portfolio subject to a Receivables
Purchase Agreement, applicable to such portion of its portfolio, and in each case which are
consistent with prudent practice, including the policies and procedures for determining the
creditworthiness of Obligors and the extension of credit to Obligors, and (b) relating to the
maintenance of credit accounts and collection of receivables created thereunder.




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




          “Defaulted Amount” shall mean, with respect to any Due Period, an
amount (which shall not be less than zero) equal to (a) the amount of Principal Receivables which
became Defaulted Receivables in such Due Period, minus (b) the amount of any Defaulted Receivables
of which the Transferor or the Servicer became obligated to accept reassignment or assignment in
accordance with the terms of this Agreement during such Due Period; provided, however, that, if an
Insolvency Event occurs with respect to the Transferor, the amount of such Defaulted Receivables
which are subject to reassignment to the Transferor in accordance with the terms of this Agreement
shall not be added to the sum so subtracted and, if any of the events described in subsection
7.01(d) occur with respect to the Servicer, the amount of such Defaulted




4









 







Receivables which are subject to reassignment or assignment to the Servicer in accordance with
the terms of this Agreement shall not be added to the sum so subtracted.




          “Defaulted Receivables” shall mean, with respect to any Due Period
and any Pool and related Group, all Principal Receivables which are charged off as uncollectible in
such Due Period in accordance with the Credit Guidelines and the Servicer’s customary and
usual servicing procedures for servicing revolving credit accounts. A Principal Receivable shall
become a Defaulted Receivable on the day on which such Principal Receivable is recorded as
charged-off on the Servicer’s computer file of revolving credit accounts.




          “Discount Option Date” shall mean each date on which a Discount
Percentage designated by the Transferor pursuant to Section 2.12 takes effect.




          “Discount Option Receivable Collections” shall mean on any Date of
Processing occurring after a Discount Option Date occurs, the product of (a) a fraction the
numerator of which is the Discount Option Receivables and the denominator of which is the sum of
the Principal Receivables and the Discount Option Receivables in each case (for both the numerator
and the denominator) at the end of the preceding Due Period and (b) Collections of Principal
Receivables on such Date of Processing (without giving effect to the proviso in the definition of
Principal Receivables).




          “Discount Option Receivables” shall have the meaning specified in
Section 2.12. The aggregate amount of Discount Option Receivables outstanding on any Date of
Processing occurring on or after a Discount Option Date shall equal the sum of (a) the aggregate
Discount Option Receivables at the end of the prior Date of Processing (which amount, prior to the
Discount Option Date, shall be zero) plus (b) any new Discount Option Receivables created on such
Date of Processing minus (c) any Discount Option Receivables Collections received on such Date of
Processing minus (d) the product of (i) the Discount Percentage and (ii) the Defaulted Amount with
respect to the Principal Receivables in the Discount Reference Pool, minus (e) the product of (i)
the Discount Percentage and (ii) any reduction pursuant to Section 3.09 of Principal Receivables in
the Discount Reference Pool. Discount Option Receivables on any Date of Processing shall mean the
product of the amount of any Principal Receivables outstanding on such Date of Processing (without
giving effect to the proviso in the definition of Principal Receivables) and the Discount
Percentage.




          “Discount Percentage” shall mean the percentages, if any,
designated by the Transferor pursuant to Section 2.12 or in any Supplement.




          “Discount Reference Pool” shall have the meaning specified in Section 2.12.




          “Distribution Date” shall mean, with respect to any Series, the
date specified in the applicable Indenture Supplement.




          “Document Delivery Date” shall have the meaning specified in
subsection 2.09(h).




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




5









 








          “Due Period” shall have the meaning specified in the Indenture.




          “Eligible Account” shall mean a revolving credit account owned by
the Bank in the case of the Initial Accounts on the Initial Cut-Off Date, or the Bank or other
Account Owner, in the case of Additional Accounts which, as of the Initial Cut-Off Date with
respect to an Initial Account or as of the Additional Cut-Off Date with respect to an Additional
Account meets the following requirements:




          (a) is a
MasterCard®, VISA®, American Express,
Discover®
or other revolving credit account in existence and maintained by the Bank or other Account
Owner, as the case may be; 




          (b) is payable in Dollars;




          (c) has an Obligor who has provided, as his most recent billing address, an address located in
the United States or its territories, possessions or military bases provided, however, that as of
any date of determination, up to 1% of the Principal Receivables arising under the revolving credit
accounts, may have account obligors who have provided as their billing addresses, addresses outside
of the United States;




          (d) except as provided below, has an Obligor who has not been identified by the Servicer in
its computer files as being currently involved in a voluntary or involuntary bankruptcy proceeding;




          (e) has not been identified as an account with respect to which (i) the related card, if any,
has been lost or stolen or (ii) the related account number has been stolen;




          (f) has not been sold or pledged to any other party except for any sale to another Account
Owner that has either entered into a Receivables Purchase Agreement or is an Additional Transferor;




          (g) does not have receivables which have been sold or pledged by the Bank or any other Account
Owner, as the case may be, to any other party other than any Receivables Seller or any Transferor
pursuant to a Receivables Purchase Agreement;




          (h) with respect to the Initial Accounts, is an account in existence and maintained by the
Bank or other Account Owner as of the Initial Cut-Off Date, or as of the Additional Cut-Off Date
with respect to Additional Accounts;




          (i) except as provided below, does not have any Receivables that are Defaulted Receivables;
and




          (j) does not have any Receivables that have been identified by the Servicer or the relevant
Obligor as having been incurred as a result of fraudulent use of any related credit card, if any,
or related account number.




          Eligible Accounts may include Accounts, the Receivables of which have been charged off, or
with respect to which the Servicer believes the related Obligor is bankrupt, in




6









 







each case as of the Initial Cut-Off Date, with respect to the Initial Accounts, and as of the
related Additional Cut-Off Date, with respect to Additional Accounts; provided, that (a) the
balance of all Receivables included in such Accounts is reflected on the books and records of such
Transferor (and is treated for purposes of this Agreement) as “zero” and (b)
charging privileges with respect to all such Accounts have been canceled in accordance with the
relevant Credit Guidelines.




          “Eligible Receivable” shall mean each Receivable, including, where
applicable, the underlying receivable:




          (a) which has arisen in an Eligible Account;




          (b) which was created in compliance in all material respects with all Requirements of Law
applicable to the institution which owned such Receivable at the time of its creation and pursuant
to a Credit Agreement which complies in all material respects with all Requirements of Law
applicable to the Bank or other Account Owner, as the case may be;




          (c) with respect to which all material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority required to be obtained, effected or
given in connection with the creation of such Receivable or the execution, delivery and performance
by the Bank or other Account Owner, as the case may be, of the Credit Agreement pursuant to which
such Receivable was created, have been duly obtained, effected or given and are in full force and
effect;




          (d) as to which at the time of the transfer of such Receivable to the Trust, the Transferor or
the Trust will have good and marketable title thereto and which itself is, and the underlying
receivables are, free and clear of all Liens (other than any Lien for municipal or other local
taxes if such taxes are not then due and payable or if the Transferor is then contesting the
validity thereof in good faith by appropriate proceedings and has set aside on its books adequate
reserves with respect thereto);




          (e) which has been the subject of either a valid transfer and assignment from the Transferor
to the Trust of all the Transferor’s right, title and interest therein (including any
proceeds thereof), or the grant of a first priority perfected security interest therein (and in the
proceeds thereof), effective until the termination of the Trust;




          (f) which at all times will be the legal, valid and binding payment obligation of the Obligor
thereon enforceable against such Obligor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting the enforcement of creditors’
rights in general and except as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity);




          (g) which, at the time of transfer to the Trust, has not been waived or modified except as
permitted in accordance with the Credit Guidelines and which waiver or modification is reflected in
the Servicer’s computer file of revolving credit accounts;




7









 








          (h) which, at the time of transfer to the Trust, is not subject to any right of rescission,
setoff, counterclaim or any other defense (including defenses arising out of violations of usury
laws) of the Obligor, other than defenses arising out of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of creditors’
rights in general;




          (i) as to which, at the time of transfer to the Trust, the Bank or other Account Owner, as the
case may be, has satisfied all of its obligations required to be satisfied by such time;




          (j) as to which, at the time of transfer to the Trust, none of the Transferor, the Bank or any
other Account Owner or Receivables Seller, as the case may be, has taken any action which would
impair, or omitted to take any action the omission of which would impair, the rights of the Trust
or the Noteholders therein; and




          (k) which constitutes either an “account” or a “general intangible” under
and as defined in Article 9 of the UCC as then in effect in the State of Delaware and any other
state where the filing of a financing statement is required to perfect the Trust’s
interest in the Receivables and the proceeds thereof.




          “Eligible Servicer” shall mean the Indenture Trustee or, if the
Indenture Trustee is not acting as Servicer, an entity which, at the time of its appointment as
Servicer, (a) is servicing a portfolio of revolving credit accounts, (b) is legally qualified and
has the capacity to service the Accounts, (c) in the sole determination of the Indenture Trustee,
which determination shall be conclusive and binding, has demonstrated the ability to service
professionally and competently a portfolio of similar accounts in accordance with high standards of
skill and care, (d) is qualified to use the software that is then being used to service the
Accounts or obtains the right to use or has its own software which is adequate to perform its
duties under this Agreement and (e) has a net worth of at least $50,000,000 as of the end of its
most recent fiscal quarter.




          “Event of Default” shall have the meaning specified in the
Indenture.




          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.




          “FDIA” shall mean the Federal Deposit Insurance Act, as amended by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and as further amended from
time to time.




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




          “Finance Charge and Administrative Receivables” shall mean with
respect to any Pool, all amounts billed to the Obligors on any Account in respect of (a) all
Periodic Rate Finance Charges, (b) cash advance fees, if any, (c) annual membership fees and annual
service charges, if any, (d) late fees, (e) overlimit fees, if any, (f) Discount Option Receivables
and (g) any other fees with respect to the Accounts designated by the Transferor at any time and
from time to time to be included as Finance Charge and Administrative Receivables. Finance Charge
and Administrative Receivables shall also include the interest portion of Participation Interests
as




8









 







shall be determined pursuant to, and only if so provided in, the applicable Participation
Interest Supplement or Indenture Supplement for any Series.




          “Fitch” shall mean Fitch, Inc. or its successors.




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




          “Group” shall have the meaning set forth in the Indenture.




          “HPLAC” shall mean HSBC Private Label Acquisition Corporation (USA), a Delaware
corporation, and its successors and permitted assigns.




          “HSBC Finance Corporation” shall mean HSBC Finance Corporation
(successor by merger to Household Finance Corporation), a Delaware corporation, and its successors
and permitted assigns.




          “HSBC Funding” shall mean HSBC Funding (USA) Inc. V, a Delaware corporation, and its
successors and permitted assigns.




          “Indenture” shall mean the Amended and Restated Master Indenture,
dated as of August 11, 2006, between the Issuer and the Indenture Trustee, as the same may be
amended, supplemented or otherwise modified from time to time.




          “Indenture Supplement” shall have the meaning specified in the
Indenture.




          “Indenture Trustee” shall mean U.S. Bank National Association, in
its capacity as trustee under the Indenture, its successors in interest and any successor indenture
trustee under the Indenture.




          “Ineligible Receivables” shall have the meaning specified in
subsection 2.05(a).




          “Initial Account” shall mean each revolving credit account
established pursuant to a Credit Agreement between the Bank and any Obligor, which account is
identified in the computer file or microfiche list delivered to the Owner Trustee by the Transferor
pursuant to Section 2.01 on the Initial Issuance Date.




          “Initial Cut-Off Date” shall mean June 12, 2001.




          “Initial Issuance Date” shall mean June 12, 2001, the date the
Transferor’s Certificate is issued by the Trust to the Transferor pursuant to the Trust
Agreement.




          “Insolvency Event” shall have the meaning specified in Section
6.01.




          “Insurance Proceeds” shall mean any amounts received pursuant to
the payment of benefits under any credit life insurance policies, credit disability or unemployment
insurance policies covering any Obligor with respect to Receivables under such Obligor’s
Account.




9









 








          “Interchange” shall mean any interchange fees (net of expenses)
payable to the Bank or any other Account Owner, in its capacity as credit issuer, through
MasterCard, or VISA, or any similar entity or organization with respect to any type of revolving
credit accounts included as Accounts, in connection with Obligor charges for goods or services with
respect to the Accounts, as calculated pursuant to the related Indenture Supplement. Any reference
in this Agreement, the Indenture or any Indenture Supplement to Interchange shall refer to only the
fractional undivided interest in the interchange fees, if any, that are transferred by the Bank or
an Account Owner or other seller of Receivables to a Transferor pursuant to a Receivables Purchase
Agreement, which fractional undivided interest may be less than a 100% interest therein.




          “Invested Amount” shall mean, with respect to any Series and for
any date, an amount equal to the invested amount or adjusted invested amount, as applicable,
specified in the related Indenture Supplement.




          “Issuer” shall mean the Trust.




          “Lien” shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, equity interest, encumbrance, lien (statutory or
other), preference, participation interest, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever, including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the UCC or comparable law of any
jurisdiction to evidence any of the foregoing; provided, however, that any assignment permitted by
subsection 3.06(b) of the Trust Agreement or Section 4.02 of, and the lien created by, this
Agreement shall not be deemed to constitute a Lien.




          “Merchant Agreement” shall mean (a) a written agreement between the Bank or other
Account Owner, or an Affiliate of the Bank, as the case may be, and any merchant pursuant to which
such merchant sells, assigns or otherwise transfers to the Bank or other Account Owner, as the case
may be, certain Credit Agreements between such Merchant and Obligors, including all such merchant’s
rights and interests in the Accounts and Receivables arising under such Credit Agreements, or (b) a
written agreement between HSBC Finance Corporation, the Bank or other Account Owner, as the case
may be, and any merchant or co-branding participant establishing private label or co-branded credit
programs pursuant to which the Bank or other Account Owner will enter into Credit Agreements with
Obligors.




          “MasterCard” shall mean MasterCard International Incorporated, and
its successors in interest.




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




          “Note Owner” shall have the meaning specified in the Indenture.




          “Note Register” shall have the meaning specified in the Indenture.




          “Noteholder” or “Holder” shall have
the meaning specified in the Indenture.




          “Notices” shall have the meaning specified in subsection 9.04(a).




10









 









          “Obligor” shall mean, with respect to any Account, the Person or
Persons obligated to make payments with respect to such Account, including any guarantor thereof,
but excluding any merchant.




          “Officer’s Certificate” shall have the meaning specified
in the Indenture.




          “Opinion of Counsel” shall have the meaning specified in the
Indenture.




          “Owner Trustee” shall mean Wilmington Trust Company in its
capacity as owner trustee under the Trust Agreement, its successors in interest and any successor
owner trustee under the Trust Agreement.




          “Participation Interest Supplement” shall mean a supplement to
this Agreement entered into pursuant to subsection 2.09(a)(ii) or (b) in connection with the
conveyance of Participation Interests to the Trust.




          “Participation Interests” shall have the meaning specified in
subsection 2.09(a)(ii).




          “Paying Agent” shall have the meaning specified in the Indenture.




          “Periodic Rate Finance Charges” shall have the meaning specified
in the Credit Agreement applicable to each Account for finance charges (due to periodic rate) or
any similar term.




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




          “Pool” shall have the meaning specified in the Indenture.




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




          “Principal Receivables” shall mean with respect to any Pool all
Receivables other than Finance Charge and Administrative Receivables or Defaulted Receivables;
provided, however, that after a Discount Option Date, (except for purposes of determining the
amount of Principal Receivables in the Discount Reference Pool) Principal Receivables on any Date
of Processing thereafter shall mean Principal Receivables as otherwise determined pursuant to this
definition minus the amount of any Discount Option Receivables. Principal Receivables shall also
include the principal portion of Participation Interests as shall be determined pursuant to, and
only if so provided in, the applicable Participation Interest Supplement or Indenture Supplement
for any Series. In calculating the aggregate amount of Principal Receivables on any day, the
amount of Principal Receivables shall be reduced by the aggregate amount of credit balances in the
Accounts on such day; and, for the avoidance of doubt, there shall be no duplication of any amounts
in (c), (d) (ii) and (e) (ii) in the second sentence of the definition of Discount Option
Receivables in determining the aggregate amount of Principal Receivables for the purpose of
calculating the Transferor Amount and (unless otherwise specified) any other amount required herein
or in the Indenture or any Indenture Supplement to be calculated by




11









 







reference to the amount of Principal Receivables. Any Principal Receivables which the
Transferor is unable to transfer as provided in Section 2.11 shall not be included in calculating
the amount of Principal Receivables.




          “Quarter” shall mean the three consecutive Due Periods commencing in January, April,
July and October of each calendar year.




          “Rating Agency” shall have the meaning specified in the Indenture.




          “Rating Agency Condition” shall have the meaning specified in the
Indenture.




          “Reassignment” shall have the meaning specified in Section 2.10.




          “Receivables” shall mean all amounts shown on the
Servicer’s records as amounts payable by Obligors on any Account from time to time,
including amounts payable for Principal Receivables and Finance Charge and Administrative
Receivables. Receivables which become Defaulted Receivables will cease to be included as
Receivables as of the day on which they become Defaulted Receivables. Receivables, where
applicable, shall include also the interest and principal portion of Participation Interests.
Unless the context otherwise requires (whether or not there is a specific reference to the
underlying receivable), any reference in this Agreement, the Indenture or any Indenture Supplement
to a Receivable (including any Principal Receivable, Finance Charge and Administrative Receivable
or Defaulted Receivable) and any Collections thereon or other amounts recoverable with respect
thereto (including any Insurance Proceeds or Recoveries with respect thereto) shall refer to only
the fractional undivided interest in the amounts paid or payable by Obligors on the Accounts that
are transferred to a Transferor pursuant to a Receivables Purchase Agreement, which undivided
interest may be less than a 100% undivided interest therein. Any reference in this Agreement, the
Indenture or any Indenture Supplement to the “underlying receivable” with
respect to a Receivable shall refer to the receivable in which such Receivable represents an
undivided interest.




          “Receivables Purchase Agreement” shall mean the Bank RPA or the
Transferor RPA, as applicable; and “Receivables Purchase Agreements” shall mean such agreements,
collectively.




          “Receivables Seller” shall mean HPLAC or any other seller of Receivables under an
agreement substantially similar to the Transferor RPA.




          “Recoveries” shall mean all amounts received (net of expenses)
including Insurance Proceeds, which is reasonably estimated by the Servicer to be attributable to
Defaulted Receivables, including the net proceeds of any sale of such Defaulted Receivables.




          “Registered Notes” shall have the meaning specified in the
Indenture.




          “Regulation AB” shall mean Subpart 229.1100 – Asset Backed Securities (Regulation AB),
17 C.F.R. §§229.1100-229.1123 under the Exchange Act, as such may be amended from time to time.




          “Reinvestment Event” shall have the meaning specified in the
Indenture.




12









 








          “Related Account” shall mean an Account with respect to which a
new account number has been issued by the applicable Account Owner or Servicer or the applicable
Transferor under circumstances resulting from a lost or stolen credit card or account number, and
not requiring standard application and credit evaluation procedures under the Credit Guidelines.




          “Removal Date” shall have the meaning specified in Section 2.10.




          “Removed Accounts” shall have the meaning specified in Section
2.10.




          “Removed Participation Interests” shall have the meaning specified
in Section 2.10.




          “Required Delivery Date” shall have the meaning specified in
subsection 2.01(c).




          “Required Designation Date” shall have the meaning specified in
subsection 2.09(a).




          “Required Minimum Principal Balance” shall mean, unless otherwise
provided in an Indenture Supplement relating to a Series having a Paired Series, with respect to
any date and any Pool (a) the sum of the Series Adjusted Invested Amounts for each Series
outstanding on such date in such Pool plus the Required Transferor Amount on such date, minus (b)
the Special Funding Amount.




          “Required Transferor Amount” shall have the meaning specified in
the Indenture.




          “Requirements of Law” shall mean any law, treaty, rule or
regulation, or determination of an arbitrator or Governmental Authority, whether Federal, state or
local (including usury laws, the Federal Truth in Lending Act and Regulation B and Regulation Z of
the Board of Governors of the Federal Reserve System), and, when used with respect to any Person,
the certificate of incorporation and by-laws or other organizational or governing documents of such
Person.




          “Revolving Credit Agreement” shall mean the revolving credit
agreement by and between the Transferor and HSBC Finance Corporation, dated as of June 12, 2001, as
such agreement may be amended from time to time in accordance therewith, and any substantially
similar agreement entered into between any lender and the Transferor or any Additional Transferor
in the future in accordance with the provisions hereof.




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




          “Series” shall have the meaning specified in the Indenture.




          “Series Account” shall have the meaning specified in the
Indenture.




          “Series Adjusted Invested Amount” shall have the meaning specified
in the related Indenture Supplement.




          “Series Enhancement” shall have the meaning specified in the
Indenture.




13









 








          “Series Enhancer” shall have the meaning specified in the
Indenture.




          “Series Portfolio Yield” shall have the meaning specified in the
related Indenture Supplement.




          “Service Transfer” shall have the meaning specified in Section
7.01.




          “Servicer” shall mean HSBC Finance Corporation, in its capacity as
Servicer pursuant to this Agreement, and, after any Service Transfer, the Successor Servicer or any
Eligible Servicer.




          “Servicer Default” shall have the meaning specified in Section
7.01.




          “Servicing Fee” shall have the meaning specified in Section 3.02.




          “Servicing Fee Rate” shall have the meaning specified in the related Indenture
Supplement.




          “Special Funding Account” shall have the meaning specified in the
Indenture.




          “Special Funding Amount” shall have the meaning specified in the
Indenture.




          “Standard & Poor’s” shall mean Standard &
Poor’s Ratings Group, or its successor.




          “Subservicer” shall mean HSBC Private Label Corporation, a Delaware corporation, or
any of its successors or assigns and each additional person to whom the Servicer delegates duties
hereunder pursuant to Section 5.07.




          “Successor Servicer” shall have the meaning specified in
subsection 7.02(a).




          “Supplemental Certificate” shall have the meaning specified in the
Trust Agreement.




          “Tax Opinion” shall have the meaning specified in the Indenture.




          “Termination Notice” shall have the meaning specified in
subsection 7.01(d).




          “Transaction Documents” shall have the meaning specified in the Indenture.




          “Transfer Agent and Registrar” shall have the meaning specified in
the Indenture.




          “Transfer Restriction Event” shall have the meaning specified in
Section 2.11.




          “Transferor” shall mean (a) HSBC Funding, a Delaware corporation,
or its successor under this Agreement and (b) any Additional Transferor or Transferors. References
to “each Transferor” shall refer to each entity mentioned in the
preceding sentence and references to “the Transferor” shall refer to
all of such entities.




14









 








          “Transferor Amount” shall have the meaning specified in the
Indenture.




          “Transferor Certificate” shall have the meaning specified in the
Trust Agreement.




          “Transferor Certificates” shall mean, collectively, the Transferor
Certificate and any outstanding Supplemental Certificates.




          “Transferor RPA” shall mean (a) the Amended and Restated Receivables Purchase
Agreement, dated as of August 11, 2006, between HPLAC and the Transferor, as amended, supplemented
or otherwise modified from time to time, and (b) any other receivables purchase agreement,
substantially in the form of such agreement, entered into between Transferor and an Account Owner
or other Receivables Seller.




          “Transferred Account” shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in accordance with the Credit
Guidelines and (ii) such account can be traced or identified as an account into which an Account
has been transferred.




          “Trust” shall mean the HSBC Private Label Credit Card Master Note
Trust (USA) I (formerly known as Household Private Label Credit Card Master Note Trust I), acting
by and through Wilmington Trust Company, not in its individual capacity but solely as Owner
Trustee.




          “Trust Agreement” shall mean the Amended and Restated Trust
Agreement relating to the Trust, dated as of August 11, 2006, between HSBC Funding and the Owner
Trustee, as the same may be amended, supplemented or otherwise modified from time to time.




          “Trust Assets” shall have the meaning specified in Section 2.01.




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




          “VISA” shall mean VISA USA, Inc., and its successors in interest.




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




          Section 1.02 Other Definitional Provisions.




          (a) With respect to any Series, all terms used herein and not otherwise defined herein shall
have meanings ascribed to them in the Trust Agreement, the Indenture or the related Indenture
Supplement, as applicable.




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




15









 








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




          (d) The agreements, representations and warranties of HSBC Funding and HSBC Finance
Corporation in this Agreement in each of their respective capacities as Transferor and Servicer
shall be deemed to be the agreements, representations and warranties of HSBC Funding and HSBC
Finance Corporation solely in each such capacity for so long as HSBC Funding and HSBC Finance
Corporation act in each such capacity under this Agreement.




          (e) Any reference to each Rating Agency shall only apply to any specific rating agency if such
rating agency is then rating any outstanding Series.




          (f) Unless otherwise specified, references to any amount as on deposit or outstanding on any
particular date shall mean such amount at the close of business on such day.




          (g) The words “hereof, ” “herein” and
“hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement;
references to any subsection, Section, Schedule or Exhibit are references to subsections, Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term
“including” means “including without
limitation.”




[END OF ARTICLE I]





16









 








ARTICLE II




CONVEYANCE OF RECEIVABLES




          Section 2.01 Conveyance of Receivables. (a) By execution of this Agreement, each of
HSBC Funding and, in the case of Additional Accounts, any Additional Transferor does hereby
transfer, assign, set over and otherwise convey to the Owner Trustee on behalf of the Trust,
without recourse except as provided herein, all its right, title and interest in, to and under the
Receivables existing at the close of business on the Initial Cut-Off Date, in the case of
Receivables arising in the Initial Accounts, and on each Additional Cut-Off Date, in the case of
Receivables arising in the Additional Accounts, and in each case thereafter created from time to
time until the termination of the Trust, all Interchange and Recoveries allocable to the Trust as
provided herein, all monies due or to become due and all amounts received or receivable with
respect thereto and all proceeds (including “proceeds” as defined in the UCC)
thereof. Such property, together with all monies and other property credited to the Collection
Account, the Series Accounts and the Special Funding Account (including any subaccounts of such
account), the Preferred Stock of the Transferor, the property conveyed to the Owner Trustee on
behalf of the Trust under any Participation Interest Supplement and the right to receive Recoveries
attributed to Obligor charges for merchandise and services in the Accounts shall constitute the
assets of the Trust (the “Trust Assets” ). The foregoing does not
constitute and is not intended to result in the creation or assumption by the Trust, the Owner
Trustee, the Indenture Trustee or any Noteholder of any obligation of a Receivables Seller, the
Bank or other Account Owner or the Transferor, any Additional Transferor, the Servicer or any other
Person in connection with the Accounts or the Receivables or under any agreement or instrument
relating thereto, including any obligation to Obligors, merchants, co-branding participants,
merchant banks, merchants clearance systems, VISA, MasterCard, other credit card associations or
insurers. The Obligors shall not be notified in connection with the creation of the Trust of the
transfer, assignment, set-over and conveyance of the Receivables to the Owner Trustee on behalf of
the Trust.




          (b) Each Transferor agrees to record and file, at its own expense, financing statements (and
continuation statements when applicable) with respect to the Receivables conveyed by such
Transferor existing on the Initial Cut-Off Date and thereafter created meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary to perfect, and
maintain the perfection of, the transfer and assignment of its interest in such Receivables to the
Owner Trustee on behalf of the Trust, and to deliver a file stamped copy of each such financing
statement or other evidence of such filing to the Owner Trustee as soon as practicable after the
first Closing Date, in the case of Receivables arising in the Initial Accounts, and (if any
additional filing is so necessary) as soon as practicable after the applicable Addition Date, in
the case of Receivables arising in Additional Accounts. The Owner Trustee shall be under no
obligation whatsoever to file such financing or continuation statements or to make any other filing
under the UCC in connection with such transfer and assignment.




          (c) Each Transferor further agrees, at its own expense, on or prior to (A) the first Closing
Date, in the case of the Initial Accounts, (B) the applicable Addition Date, in the case of
Additional Accounts specified in the Receivables Purchase Agreement with such Transferor, and (C)
the applicable Removal Date, in the case of Removed Accounts specified in the Receivables Purchase
Agreement with such Transferor, (i) to indicate in the appropriate




17









 







computer files that Receivables created (or reassigned, in the case of Removed Accounts) in
connection with the Accounts have been conveyed to the Owner Trustee on behalf of the Trust
pursuant to this Agreement (or conveyed to each such Transferor or its designee in accordance with
Section 2.10, in the case of Removed Accounts) and (ii) on or prior to (A) the Closing Date, in the
case of the Initial Accounts, (B) the date that is five Business Days after the applicable Addition
Date, in the case of designation of Aggregate Addition Accounts, (C) the Distribution Date on which
the Opinion of Counsel is required to be delivered with respect to the Due Period which includes
the applicable Additional Date, in the case of Automatic Additional Accounts, and (D) except for
Zero Balance Accounts, the date that is five Business Days after the applicable Removal Date, in
the case of Removed Accounts (the “Required Delivery Date”), to deliver to the Owner Trustee a
computer file or microfiche list containing a true and complete list of all such Accounts
specifying for each such Account, as of the Initial Cut-Off Date, in the case of the Initial
Accounts, the applicable Additional Cut-Off Date in the case of Additional Accounts, and the
applicable Removal Date in the case of Removed Accounts, (1) its account number, (2) the aggregate
amount outstanding in such Account, and (3) the aggregate amount of Principal Receivables
outstanding in such Account. Each such file or list, as supplemented, from time to time, to
reflect Additional Accounts and Removed Accounts, shall be marked as Schedule 1 to this
Agreement and is hereby incorporated into and made a part of this Agreement.




          (d) If the arrangements with respect to the Receivables hereunder shall constitute a loan and
not a purchase and sale of such Receivables, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law, and that each Transferor
shall be deemed to have granted and does hereby grant to the Owner Trustee on behalf of the Trust a
first priority perfected security interest in all of such Transferor’s right, title and
interest, whether now owned or hereafter acquired, in, to and under the Receivables and the other
Trust Assets conveyed by such Transferor to secure its obligations hereunder.




          Section 2.02 Acceptance by Owner Trustee.




          (a) The Owner Trustee hereby acknowledges its acceptance on behalf of the Trust of all right,
title and interest to the property, now existing and hereafter created, conveyed pursuant to
Section 2.01. The Owner Trustee further acknowledges, that in accordance with this Agreement, the
Transferor has delivered to the Owner Trustee the computer file or microfiche list relating to the
Initial Accounts described in subsection 2.01(c). The Owner Trustee shall maintain a copy of
Schedule 1, as delivered from time to time, at the Corporate Trust Office.




          (b) The Owner Trustee hereby agrees not to disclose to any Person any of the account numbers
or other information contained in the computer files or microfiche lists marked as Schedule
1 and delivered to the Owner Trustee, from time to time, except (i) to a Successor Servicer or
as required by a Requirement of Law applicable to the Owner Trustee, (ii) in connection with the
performance of the Owner Trustee’s duties hereunder, (iii) to the Indenture Trustee in
connection with its duties in enforcing the rights of Noteholders or (iv) to bona fide creditors or
potential creditors of any Account Owner, the Bank, any Receivables Seller or any Transferor for
the limited purpose of enabling any such creditor to identify Receivables or Accounts subject to
this Agreement or the Receivables Purchase Agreements. The Owner Trustee agrees to take such
measures as shall be reasonably requested by any Transferor to




18









 







protect and maintain the security and confidentiality of such information and, in connection
therewith, shall allow each Transferor or its duly authorized representatives to inspect the Owner
Trustee’s security and confidentiality arrangements as they specifically relate to the
administration of the Trust from time to time during normal business hours upon prior written
notice. The Owner Trustee shall provide the applicable Transferor with notice five Business Days
prior to disclosure of any information of the type described in this subsection 2.02(b).




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




          Section 2.03 Representations and Warranties of Each Transferor Relating to Such
Transferor. Each Transferor hereby severally represents and warrants to the Owner Trustee and
the Trust (and agrees that the Indenture Trustee may conclusively rely on each such representation
and warranty in authenticating the Notes) as of each Closing Date (but only if it was a Transferor
on such date) that:




          (a) Organization and Good Standing. Such Transferor is a corporation validly existing
under the laws of the jurisdiction of its organization or incorporation and has, in all material
respects, full power and authority to own its properties and conduct its business as presently
owned or conducted, and to execute, deliver and perform its obligations under this Agreement, any
Receivables Purchase Agreement to which it is a party and each applicable Participation Interest
Supplement.




          (b) Due Qualification. Such Transferor is duly qualified to do business and is in
good standing as a foreign corporation and has obtained all necessary licenses and approvals, in
each jurisdiction in which failure to so qualify or to obtain such licenses and approvals would (i)
render any Credit Agreement relating to an Account specified in the applicable Receivables Purchase
Agreement with such Transferor or any Receivable conveyed to the Trust by such Transferor
unenforceable by such Transferor or the Trust or (ii) have a material adverse effect on the
Noteholders.




          (c) Due Authorization. The execution and delivery of this Agreement, the applicable
Receivables Purchase Agreement and each applicable Participation Interest Supplement by such
Transferor and the order to the Owner Trustee to have the Notes authenticated and delivered and the
consummation by such Transferor of the transactions provided for in this Agreement, the applicable
Receivables Purchase Agreement and each applicable Participation Interest Supplement have been duly
authorized by such Transferor by all necessary corporate action on the part of such Transferor.




          (d) No Conflict. The execution and delivery by such Transferor of this Agreement, the
applicable Receivables Purchase Agreement and each applicable Participation Interest Supplement,
and the performance of the transactions contemplated by this Agreement, the applicable Receivables
Purchase Agreement and each applicable Participation Interest Supplement and the fulfillment of the
terms hereof and thereof applicable to such Transferor, will not conflict with or violate any
Requirements of Law applicable to such Transferor or conflict with, result in any breach of any of
the material terms and provisions of, or constitute




19









 







(with or without notice or lapse of time or both) a material default under, any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which such Transferor is a
party or by which it or its properties are bound.




          (e) No Proceedings. There are no proceedings or investigations, pending or, to the
best knowledge of such Transferor, threatened against such Transferor before any Governmental
Authority (i) asserting the invalidity of this Agreement, the applicable Receivables Purchase
Agreement or any applicable Participation Interest Supplement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, the applicable Receivables
Purchase Agreement or any applicable Participation Interest Supplement, (iii) seeking any
determination or ruling that, in the reasonable judgment of such Transferor, would materially and
adversely affect the performance by such Transferor of its obligations under this Agreement, the
applicable Receivables Purchase Agreement or any applicable Participation Interest Supplement, (iv)
seeking any determination or ruling that would materially and adversely affect the validity or
enforceability of this Agreement, the applicable Receivables Purchase Agreement or any applicable
Participation Interest Supplement or (v) seeking to affect adversely the income or franchise tax
attributes of the Trust under the United States Federal or any State income or franchise tax
systems.




          (f) All Consents. All authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required to be obtained, effected or
given by such Transferor in connection with the execution and delivery by such Transferor of this
Agreement, the applicable Receivables Purchase Agreement and each applicable Participation Interest
Supplement and the performance of the transactions contemplated by this Agreement, the applicable
Receivables Purchase Agreement and each applicable Participation Interest Supplement by such
Transferor have been duly obtained, effected or given and are in full force and effect.




          Section 2.04 Representations and Warranties of each Transferor Relating to the Agreement
and Any Participation Interest Supplement and the Receivables.




          (a) Representations and Warranties. Each Transferor hereby severally represents and
warrants to the Owner Trustee and the Trust as of the Initial Issuance Date, each Closing Date and,
with respect to Additional Accounts, as of the related Addition Date (but only if, in either case,
it was a Transferor on such date and only with respect to Accounts it has designated on such date
and Receivables arising therein) that:





          (i) this Agreement, the applicable Receivables Purchase Agreement, each applicable
Participation Interest Supplement and, in the case of Additional Accounts, the related
Assignment, each constitutes a legal, valid and binding obligation of such Transferor
enforceable against such Transferor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally from time
to time in effect or general principles of equity;




          (ii) as of the Initial Cut-Off Date with respect to the Initial Accounts and as of the
related Additional Cut-Off Date with respect to Additional Accounts, the



20









 







portion of Schedule 1 to this Agreement under such Transferor’s name,
as supplemented to such date, is, or will be on the Required Delivery Date in the case of
Additional Accounts, an accurate and complete listing in all material respects of all the
Accounts the Receivables in which were transferred by such Transferor on the first Closing
Date or the Addition Date, as the case may be, and the information contained therein with
respect to the identity of such Accounts and the Receivables existing thereunder is, or will
be on the Required Delivery Date in the case of Additional Accounts, true and correct in all
material respects as of the Initial Cut-Off Date or such Additional Cut-Off Date, as the
case may be;




          (iii) on the date each Receivable is conveyed to the Trust by such Transferor, such
Receivable has been conveyed to the Trust free and clear of any Lien and, on such date, any
related underlying receivable is free and clear of all Liens;




          (iv) all authorizations, consents, orders or approvals of or registrations or
declarations with any Governmental Authority required to be obtained, effected or given by
such Transferor in connection with the conveyance by such Transferor of Receivables to the
Trust have been duly obtained, effected or given and are in full force and effect;




          (v) either this Agreement or, in the case of Additional Accounts, the related
Assignment constitutes a valid sale, transfer and assignment to the Trust of all right,
title and interest of such Transferor in the Receivables conveyed to the Trust by such
Transferor and the proceeds thereof and Recoveries and Interchange identified as relating to
the Receivables conveyed to the Trust by such Transferor which have become Defaulted
Receivables or, if this Agreement or, in the case of Additional Accounts, the related
Assignment does not constitute a sale of such property, it constitutes a grant of a first
priority perfected “security interest” (as defined in the UCC) in such
property to the Trust, which, in the case of existing Receivables and the proceeds thereof
and said Recoveries and Interchange, if any, is enforceable upon execution and delivery of
this Agreement, or, with respect to then existing Receivables in Additional Accounts, as of
the applicable Addition Date, and which will be enforceable with respect to such Receivables
hereafter and thereafter created and the proceeds thereof upon such creation. Upon the
filing of the financing statements and, in the case of Receivables hereafter created and the
proceeds thereof, upon the creation thereof, the Trust shall have a first priority perfected
security or ownership interest in such property and proceeds;




          (vi) on the Initial Cut-Off Date, each Initial Account specified in Schedule 1
with respect to such Transferor is an Eligible Account and, on the applicable Additional
Cut-Off Date, each related Additional Account specified in Schedule 1 with respect
to such Transferor is an Eligible Account;




          (vii) on the Initial Cut-Off Date, each Receivable then existing and conveyed to the
Trust by such Transferor is an Eligible Receivable and, on the applicable Additional Cut-Off
Date, each Receivable contained in the related Additional Accounts and conveyed to the Trust
by such Transferor is an Eligible Receivable;



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          (viii) as of the date of the creation of any new Receivable in an Account specified in
the applicable Receivables Purchase Agreement, such Receivable is an Eligible Receivable;




          (ix) no selection procedures believed by such Transferor to be materially adverse to
the interests of the Trust have been used in selecting such Accounts; and




          (x) each of the Initial Accounts is a consumer revolving credit account.



          (b) Notice of Breach. The representations and warranties set forth in Section 2.03,
this Section 2.04 and subsection 2.09(f) shall survive the transfers and assignments of the
Receivables to the Trust, the pledge of the Receivables to the Indenture Trustee pursuant to the
Indenture, and the issuance of the Notes. Upon discovery by any Transferor, the Servicer or the
Owner Trustee of a breach of any of the representations and warranties set forth in Section 2.03,
this Section 2.04 or subsection 2.09(f), the party discovering such breach shall give notice to the
other parties and to the Indenture Trustee within three Business Days following such discovery,
provided that the failure to give notice within three Business Days does not preclude subsequent
notice.




          Section 2.05 Reassignment of Ineligible Receivables.




          (a) Reassignment of Receivables. In the event (i) any representation or warranty
contained in subsection 2.04(a)(ii), (iii), (iv), (vi), (vii), (viii) or (ix) or in Section 9.15 is
not true and correct in any material respect as of the date specified therein with respect to any
Receivable or the related Account and such breach has a material adverse effect on any Receivable
(which determination shall be made without regard to whether funds are then available pursuant to
any Series Enhancement) unless cured within 60 days (or such longer period, not in excess of 120
days, as may be agreed to by the Indenture Trustee and the Servicer) after the earlier to occur of
the discovery thereof by the Transferor which conveyed such Receivables to the Trust or receipt by
the Transferor of written notice thereof given by the Owner Trustee, the Indenture Trustee or the
Servicer, or (ii) it is so provided in subsection 2.07(a) with respect to any Receivables conveyed
to the Trust by such Transferor, then such Transferor shall accept reassignment of all Receivables
in the related Account ( “Ineligible Receivables” ) on the terms and
conditions set forth in paragraph (b) below.




          (b) Price of Reassignment. The Servicer shall deduct the portion of such Ineligible
Receivables reassigned to each Transferor which are Principal Receivables from the aggregate amount
of the Principal Receivables used to calculate the Transferor Amount. In the event that, following
the exclusion of such Principal Receivables from the calculation of the Transferor Amount, the
Transferor Amount would be less than the Required Transferor Amount, not later than 1:00 P.M., New
York City time, on the first Distribution Date following the Due Period in which such reassignment
obligation arises, the applicable Transferor shall make a deposit into the Special Funding Account
in immediately available funds in an amount equal to the amount by which the Transferor Amount
would be below the Required Transferor Amount (up to the amount of such Principal Receivables).




22









 








          Upon reassignment of any Ineligible Receivable, the Trust shall automatically and without
further action be deemed to transfer, assign, set over and otherwise convey to the applicable
Transferor or its designee, without recourse, representation or warranty, all the right, title and
interest of the Owner Trustee and the Trust in and to such Ineligible Receivable, all Interchange
and Recoveries related thereto, all monies and amounts due or to become due and all proceeds
thereof and such reassigned Ineligible Receivable shall be treated by the Owner Trustee and the
Trust as collected in full as of the date on which it was transferred. The obligation of each
Transferor to accept reassignment of any Ineligible Receivables conveyed to the Trust by such
Transferor, and to make the deposits, if any, required to be made to the Special Funding Account as
provided in this Section, shall constitute the sole remedy respecting the event giving rise to such
obligation available to Noteholders (or the Indenture Trustee on behalf of the Noteholders) or any
Series Enhancer. Notwithstanding any other provision of this subsection 2.05(b), a reassignment of
an Ineligible Receivable in excess of the amount that would cause the Transferor Amount to be less
than the Required Transferor Amount shall not occur if the applicable Transferor fails to make any
deposit required by this subsection 2.05(b) with respect to such Ineligible Receivable. The Owner
Trustee shall execute such documents and instruments of transfer or assignment and take such other
actions as shall reasonably be requested and provided by the applicable Transferor to effect the
conveyance of such Ineligible Receivables pursuant to this subsection 2.05(b), but only upon
receipt of an Officer’s Certificate from such Transferor that states that all conditions
set forth in this Section 2.05 have been satisfied.




          Section 2.06 Reassignment of Trust Portfolio. In the event any representation or
warranty of a Transferor set forth in subsection 2.03(a) or (c) or subsection 2.04(a)(i) or (v) is
not true and correct in any material respect and such breach has a material adverse effect on the
Receivables or Participation Interests conveyed to the Trust by such Transferor or the availability
of the proceeds thereof to the Trust (which determination shall be made without regard to whether
funds are then available pursuant to any Series Enhancement), then either the Owner Trustee, the
Indenture Trustee or the Holders of Notes evidencing not less than 50% of the aggregate unpaid
principal amount of all outstanding Notes, by notice then given to such Transferor and the Servicer
(and to the Owner Trustee and Indenture Trustee if given by the Noteholders), may direct such
Transferor to accept a reassignment of the Receivables and any Participation Interests conveyed to
the Trust by such Transferor if such breach and any material adverse effect caused by such breach
is not cured within 60 days of such notice (or within such longer period, not in excess of 120
days, as may be specified in such notice), and upon those conditions such Transferor shall be
obligated to accept such reassignment on the terms set forth below; provided, however, that such
Receivables and Participation Interests will not be reassigned to such Transferor if, on any day
prior to the end of such 60-day or longer period (i) the relevant representation and warranty shall
be true and correct in all material respects as if made on such day and (ii) such Transferor shall
have delivered to the Owner Trustee a certificate of an authorized officer describing the nature of
such breach and the manner in which the relevant representation and warranty has become true and
correct.




          The applicable Transferor shall deposit in the Collection Account in immediately available
funds not later than 1:00 P.M., New York City time, on the first Distribution Date following the
Due Period in which such reassignment obligation arises, in payment for such reassignment, an
amount equal to the sum of the amounts specified therefor with respect to each outstanding Series
in the related Indenture Supplement. Notwithstanding anything to the




23









 







contrary in this Agreement, such amounts shall be distributed to the Noteholders on such
Distribution Date in accordance with the terms of each Indenture Supplement. If the Owner Trustee,
the Indenture Trustee or the Noteholders give notice directing the applicable Transferor to accept
a reassignment of the Receivables and Participation Interests as provided above, the obligation of
such Transferor to accept such reassignment pursuant to this Section 2.06 and to make the deposit
required to be made to the Collection Account as provided in this paragraph shall constitute the
sole remedy respecting an event of the type specified in the first sentence of this Section 2.06
available to the Noteholders (or the Indenture Trustee on behalf of the Noteholders) or any Series
Enhancer. Upon reassignment of the Receivables and Participation Interests on such Distribution
Date, the Trust shall automatically and without further action be deemed to transfer, assign, set
over and otherwise convey to the applicable Transferor, without recourse, representation or
warranty, all of the right, title and interest of the Owner Trustee and the Trust in and to the
Receivables and Participation Interests, all Interchange and Recoveries allocable to the Trust, all
monies and amounts due or to become due with respect thereto and all proceeds thereof. The Owner
Trustee shall execute such documents and instruments of transfer or assignment and take such other
actions as shall reasonably be requested by the applicable Transferor to effect the conveyance of
such property pursuant to this subsection.




          Section 2.07 Covenants of each Transferor. Each Transferor hereby severally covenants
that:




          (a) Receivables Not To Be Evidenced by Promissory Notes. Except in connection with
its enforcement or collection of an Account, such Transferor will take no action to cause any
Receivable conveyed by it to the Trust to be evidenced by any instrument (as defined in the UCC)
and if any such Receivable (or any underlying receivable) is so evidenced it shall be deemed to be
an Ineligible Receivable in accordance with Section 2.05(a) and shall be reassigned to such
Transferor in accordance with Section 2.05(b).




          (b) Security Interests. Except for the conveyances hereunder, such Transferor will
not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer
to exist any Lien on, any Receivable (or any underlying receivable) or Participation Interest
conveyed by it to the Trust, whether now existing or hereafter created, or any interest therein,
and such Transferor shall defend the right, title and interest of the Trust and the Indenture
Trustee in, to and under the Receivables and any Participation Interest, whether now existing or
hereafter created, against all claims of third parties claiming through or under such Transferor.




          (c) Transferor Amount. Except for (i) the conveyances hereunder, in connection with
any transaction permitted by subsection 4.02 or Section 4.04 or as provided in subsection 2.09(g)
of this Agreement or Section 2.12 of the Indenture or (ii) conveyances with respect to which the
Rating Agency Condition shall have been satisfied and a Tax Opinion shall have been delivered, any
Transferor agrees not to transfer, sell, assign, exchange or otherwise convey or pledge,
hypothecate or otherwise grant a security interest in the Transferor Amount, the Transferor
Certificate or any Supplemental Certificate or the Transferor’s interest in the Trust and
any such attempted transfer, assignment, exchange, conveyance, pledge, hypothecation, grant or sale
shall be void; provided, however, that nothing in this subsection 2.07(c) shall prevent the owner
of an interest in the Transferor Amount from granting to an Affiliate a




24









 







participation interest or other beneficial interest in the rights to receive cash flows
related to the Transferor Amount, if (i) such interest does not grant such Affiliate any rights
hereunder or delegate to such Affiliate any obligations or duties hereunder, (ii) such transferor
of such interest obtains the prior written consent of the Transferor and (iii) after giving effect
to such transfer, the interest in the Transferor Amount owned directly by such Transferor
represents an undivided ownership interest in two percent (2.0%) or more of the Trust Assets.




          (d) Delivery of Collections or Recoveries. In the event that such Transferor receives
Collections or Recoveries, such Transferor agrees to pay the Servicer all such Collections and
Recoveries as soon as practicable after receipt thereof.




          (e) Notice of Liens. Such Transferor shall notify the Owner Trustee, the Indenture
Trustee and each Series Enhancer promptly after becoming aware of any Lien on any Receivable (or on
the underlying receivable) or Participation Interest conveyed by it to the Trust other than the
conveyances hereunder and under the applicable Receivables Purchase Agreement and the Indenture.




          (f) Amendment of the Certificate of Incorporation. Such Transferor will not amend in
any material respect its certificate of incorporation without providing the Rating Agency with
notice no later than the fifth Business Day prior to such amendment (unless the right to such
notice is waived by the Rating Agency) and satisfying the Rating Agency Condition.




          (g) Other Indebtedness. Such Transferor shall not incur any additional debt, unless
(i) such debt is incurred pursuant to the Revolving Credit Agreement or (ii) the Rating Agency is
provided with notice no later than the fifth Business Day prior to the incurrence of such
additional debt (unless the right to such notice is waived by the Rating Agency) and the Rating
Agency Condition is satisfied with respect to the incurrence of such debt.




          (h) Interchange. Subject to Section 8.04 of the Indenture, with respect to any
Distribution Date, on or prior to the immediately preceding Transfer Date, the Servicer shall
notify the Transferor of the amount of Interchange, if any, required to be included as Collections
of Finance Charge and Administrative Receivables with respect to such Due Period, which amount for
any Series shall be specified in the related Indenture Supplement. Not later than 1:00 p.m., New
York City time, on the related Distribution Date, the Transferor shall cause to be deposited into
the Collection Account, in immediately available funds, the amount of Interchange to be so included
as Collections of Finance Charge and Administrative Receivables with respect to such Due Period.




          (i) Compliance and Separateness.





          (i) During the term of this Agreement, such 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



25









 






Agreement and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated thereby.




          (ii) During the term of this Agreement, such Transferor will observe the applicable
legal requirements for the recognition of such Transferor as a legal entity separate and
apart from its Affiliates, including as follows:



                  (1) such Transferor shall not engage in any other business other than as provided in Article
THIRD of its certificate of incorporation;



                  (2) such Transferor will maintain corporate records and books, of account separate from those
of its Affiliates;



                  (3) except as otherwise provided in the Transaction Documents, such Transferor will not
commingle its assets and funds with those of any other Person;



                  (4) such 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);



                  (5) such Transferor will at all times hold itself out to the public under its own name as a
legal entity separate and distinct from its Affiliates;



                  (6) such Transferor will not become involved in the day-to-day management of any other Person;



                  (7) such Transferor will not guarantee any other Person’s obligations or advance funds to any
other Person for the payment of expenses or otherwise;



                  (8) such Transferor will not act as an agent of any other Person in any capacity;



                  (9) such Transferor will not dissolve or liquidate, in whole or in part, except as may be
permitted by this Agreement; and



                  (10) all transactions and dealings between such Transferor and its Affiliates will be
conducted on an arm’s length basis.




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



26









 






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




          (v) During the term of this Agreement, such Transferor will maintain adequate capital
in light of its contemplated business obligations.




          (vi) Except as otherwise permitted under any Transaction Document entered into in
connection with this Agreement, such Transferor will pay its own liabilities out of its own
funds.



          Section 2.08 Covenants of each Transferor with Respect to Receivables Purchase
Agreement. Each Transferor, in its capacity as purchaser of Receivables pursuant to a
Receivables Purchase Agreement, hereby covenants that such Transferor will at all times enforce the
covenants and agreements of each Receivables Seller to enforce, or will enforce, the covenants of
the Bank or such other Account Owner in such Receivables Purchase Agreement, including covenants
substantially to the effect set forth below:




          (a) Periodic Rate Finance Charges. (i) Except (A) as otherwise required by any
Requirements of Law or (B) as is deemed by the Bank or any other Account Owner, as the case may be,
to be necessary in order for it to maintain its credit business or a program operated by such
credit business on a competitive basis based on a good faith assessment by it of the nature of the
competition with respect to the credit business or such program, it shall not at any time take any
action which would have the effect of reducing the Series Portfolio Yield to a level that could be
reasonably expected to result in an Adverse Effect with respect to any Series based on the
insufficiency of the Series Portfolio Yield or any similar test.




          (b) Credit Agreements and Guidelines. Subject to compliance with all Requirements of
Law and paragraph (a) above, the Servicer or the Bank (or other Account Owner if the Bank is not
the Account Owner) may change the terms and provisions of the applicable Credit Agreements or the
applicable Credit Guidelines of the Servicer or the Bank (or other Account Owner if the Bank is not
the Account Owner) in any respect (including the calculation of the amount or the timing of
charge-offs and the Periodic Rate Finance Charges to be assessed thereon). Notwithstanding the
above, unless required by Requirements of Law or as permitted by paragraph (a) above, the Servicer
or the Bank (or other Account Owner if the Bank is not the Account Owner) will not take any action
unless (i) at the time of such action, the Servicer or the Bank (or other Account Owner if the Bank
is not the Account Owner) reasonably believes that such action will not cause an Adverse Effect,
and (ii) such change is made applicable to the comparable segment of the revolving credit accounts
owned by the Bank (or other Account Owner if the Bank is not the Account Owner) or serviced by the
Servicer which have characteristics the same as, or substantially similar to, the Accounts that are
the subject of such change, except as otherwise restricted by an endorsement, sponsorship, or other
agreement between the Bank or an Affiliate of the Bank (or other Account Owner if the Bank is not
the Account Owner) and an unrelated third party or by the terms of the Credit Agreements.




          Section 2.09 Addition of Accounts.




27









 








          (a) Required Aggregate Additions.





          (i) Required Additional Accounts. If, as of the close of business on the last
day of any calendar month, the aggregate amount of Principal Receivables is less than the
Required Minimum Principal Balance (as adjusted for any Series having a Paired Series as
described in the Indenture Supplement for such Series) on such date, the Transferor shall on
or prior to the close of business on the last day of the next succeeding Due Period (the
“Required Designation Date” ), unless the aggregate amount of
Principal Receivables exceeds and continues to exceed the Required Minimum Principal Balance
as of the close of business on any day after the last day of such calendar month and prior
to the Required Designation Date, effect the addition of Eligible Accounts to be included as
Accounts as of the Required Designation Date or any earlier date in a sufficient amount (or
such lesser amount as shall represent all Eligible Accounts constituting revolving credit
accounts then available to the Transferor under the Receivables Purchase Agreement) such
that, after giving effect to such addition and the addition by each other Transferor, the
aggregate amount of the Principal Receivables is at least equal to the Required Minimum
Principal Balance on such date.




          (ii) Optional Participation Interests. In lieu of, or in addition to, causing
the designation of Additional Accounts pursuant to clause (i) above, the Transferor may (but
shall not be required), subject to the conditions specified in paragraph (c) below, convey
to the Trust participations (including 100% participations) representing undivided interests
in a pool of assets primarily consisting of revolving credit receivables and any interests
in any of the foregoing, including securities representing or backed by such receivables and
collections, together with all earnings, revenue, dividends, distributions, income, issues
and profits thereon ( “Participation Interests” ). The addition
of Participation Interests in the Trust pursuant to this paragraph (a) or paragraph (b)
below shall be effected by a Participation Interest Supplement, dated the applicable
Addition Date and entered into pursuant to subsection 9.01(a).




          (iii) Any Additional Accounts or Participation Interests designated to be included as
Trust Assets pursuant to clauses (i) or (ii) above may only be so included if the applicable
conditions specified in paragraph (c) below have been satisfied.



          (b) Permitted Aggregate Additions. Each Transferor may from time to time, in its sole
discretion, subject to the conditions specified in paragraph (c) below, voluntarily cause the
designation of additional Eligible Accounts to be included as Accounts or Participation Interests
to be included as Trust Assets, in either case as of the applicable Addition Date.




          (c) Conditions to Aggregate Additions. On the Addition Date with respect to any
Aggregate Additions, the Trust shall acquire the Receivables in such Aggregate Addition Accounts
(and such Aggregate Addition Accounts shall be deemed to be Accounts for purposes of this
Agreement) or shall acquire such Participation Interests existing as of the close of business on
the applicable Additional Cut-Off Date, subject to the satisfaction of the following conditions:




28









 









          (i) on or before the fifth Business Day immediately preceding the Addition Date, the
applicable Transferor shall have given the Owner Trustee, the Indenture Trustee, the
Servicer and each Rating Agency notice (unless such notice requirement is otherwise waived
by the Rating Agency) that the Aggregate Addition Accounts or Participation Interests will
be included and specifying the applicable Addition Date, the Additional Cut-Off Date and the
Pool or Pools to which such addition will be made;




          (ii) as of the applicable Additional Cut-Off Date, such Aggregate Addition Accounts
shall be Eligible Accounts;




          (iii) on or before the Required Delivery Date, the applicable Transferor shall have
delivered to the Owner Trustee and the Indenture Trustee copies of UCC-1 financing
statements covering such Aggregate Addition Accounts or Participation Interests, if
necessary to perfect the Owner Trustee’s and the Trust’s interest in the
Receivables arising therein and a schedule of such Aggregate Addition Accounts;




          (iv) to the extent required by Section 8.04 of the Indenture, such Transferor shall
have deposited in the Collection Account all Collections with respect to such Aggregate
Addition Accounts or Participation Interests since the Additional Cut-Off Date;




          (v) as of each of the Additional Cut-Off Date and the Addition Date, no Insolvency
Event with respect to any Receivables Seller, the Bank or any other Account Owner, as
applicable, or such Transferor shall have occurred nor shall the transfer to the Trust of
the Receivables arising in the Aggregate Addition Accounts or of the Participation Interests
have been made in contemplation of the occurrence thereof;




          (vi) solely with respect to Aggregate Additions designated pursuant to subsection
2.09(b), the Rating Agency Condition shall have been satisfied;




          (vii) such Transferor shall have delivered to the Owner Trustee and the Indenture
Trustee an Officer’s Certificate, dated the Addition Date, confirming, to the
extent applicable, the items set forth in clauses (ii) through (vi) above;




          (viii) the addition to the Trust of the Receivables arising in the Aggregate Addition
Accounts or of the Participation Interests will not result in an Adverse Effect and, in the
case of Aggregate Additions, such Transferor shall have delivered to the Owner Trustee and
the Indenture Trustee an Officer’s Certificate, dated the Addition Date, stating
that such Transferor reasonably believes that the addition to the Trust of the Receivables
arising in the Aggregate Addition Accounts or of the Participation Interests will not have
an Adverse Effect; and




          (ix) such Transferor shall have delivered to the Owner Trustee, the Indenture Trustee
and each Rating Agency an Opinion of Counsel, dated the Addition Date, in accordance with
subsection 9.02(d)(ii) or (iv), as applicable.



29









 





     (d) Automatic Additional Accounts. (i) Each Transferor may from time to time, at its
sole discretion, subject to the conditions specified in paragraph (e) below, voluntarily designate
Eligible Accounts to be included as Automatic Additional Accounts. For purposes of this paragraph,
Eligible Accounts shall be deemed to include only revolving credit accounts (a) originated or
underwritten by the Bank or any other Affiliate of the Bank and (b) which are of the same nature as
those included as Initial Accounts or which have previously been included in any Aggregate Addition
if the Assignment related to such Aggregate Addition expressly provides that such type of revolving
credit account is permitted to be designated as an Automatic Additional Account.




          (ii) The number of Automatic Additional Accounts designated with respect to any of the
three consecutive Due Periods commencing in January, April, July and October of each
calendar year shall not exceed (x) 15% of (A) the number of Accounts or (B) the total amount
of Principal Receivables, each as of the first day of the calendar year during which such
Due Periods commence, and the number of Automatic Additional Accounts designated during any
such calendar year shall not exceed (y) 20% of (A) the number of Accounts or (B) the total
amount of Principal Receivables, each as of the first day of such calendar year; provided,
however, Automatic Additional Accounts may be designated in excess of such 15% and 20%
limitations if the Rating Agency Condition is satisfied with respect to such designation.



     (e) Conditions to Addition of Automatic Additional Accounts. On the Addition Date
with respect to any Automatic Additional Accounts, the Trust shall acquire the Receivables in such
Automatic Additional Accounts (and such Automatic Additional Accounts shall be deemed to be
Accounts for purposes of this Agreement) as of the close of business on the applicable Addition
Date, subject to the satisfaction of the following conditions:





          (i) as of the applicable Additional Cut-Off Date, the Automatic Additional Accounts
shall all be Eligible Accounts;




          (ii) on or before the Required Delivery Date, the applicable Transferor shall have
delivered to the Owner Trustee and Indenture Trustee copies of UCC-1 financing statements
covering such Automatic Additional Accounts, if necessary to perfect the Owner
Trustee’s and the Trust’s interest and the Indenture Trustee’s
interest in the Receivables arising therein and a schedule of such Automatic Additional
Accounts;




          (iii) to the extent required by Section 8.04 of the Indenture, the applicable
Transferor shall have deposited in the Collection Account all Collections with respect to
such Automatic Additional Accounts since the Additional Cut-Off Date;




          (iv) as of each of the Additional Cut-Off Date and the Addition Date, no Insolvency
Event with respect to the Bank or any other Account Owner, as applicable, or such Transferor
shall have occurred nor shall the transfer to the Trust of the Receivables arising in the
Automatic Additional Accounts have been made in contemplation of the occurrence thereof;



30









 






          (v) such Transferor shall have delivered to the Owner Trustee and the Indenture Trustee
an Officer’s Certificate, dated the Addition Date, confirming, to the extent
applicable, the items set forth in clauses (i) through (iv) above;




          (vi) the addition of the Receivables arising in the Automatic Additional Accounts to
the Trust will not result in an Adverse Effect and such Transferor shall have delivered to
the Owner Trustee and the Indenture Trustee an Officer’s Certificate, dated the
Addition Date, stating that such Transferor reasonably believes that the addition to the
Trust of the Receivables arising in the Automatic Additional Accounts will not have an
Adverse Effect;




          (vii) on or before the first Distribution Date following the end of a Quarter in which
Automatic Additional Accounts are designated to the Trust, such Transferor shall deliver to
the Owner Trustee, the Indenture Trustee and each Rating Agency, an Opinion of Counsel
substantially in the form of Exhibit D-1 with respect to the Receivables in such
Automatic Additional Accounts. The opinion delivery requirement set forth in the
immediately preceding sentence may be modified provided that the Rating Agency Condition is
satisfied; and




          (viii) on or before the fifth Business Day preceding the Addition Date the applicable
Transferor shall have given each Rating Agency notice specifying the Pool or Pools to which
such Automatic Additional Accounts will be added.



          (f) Representations and Warranties. Each Transferor conveying Additional Accounts or
Participation Interests hereby represents and warrants to the Owner Trustee and the Trust as of the
related Addition Date as to the matters set forth in clauses (v) and (viii) of subsection 2.09(c)
above and that, in the case of Additional Accounts, the list delivered pursuant to subsection
2.09(h) is, as of the applicable Additional Cut-Off Date, true and complete in all material
respects.




          (g) Additional Transferors. The Transferor may designate Affiliates of the Transferor
to be included as Transferors ( “Additional Transferors” ) under this
Agreement in an amendment hereto pursuant to subsection 9.01(a) and, in connection with such
designation, the Transferor shall (i) surrender the Transferor Certificate to the Owner Trustee in
exchange for a newly issued Transferor Certificate modified to reflect such Additional
Transferor’s interest in the Transferor Certificate or (ii) if the Transferor Certificate
is uncertificated, direct the Indenture Trustee to make the appropriate entries in its books and
records to reflect such Additional Transferor’s interest in the Transferor Certificate;
provided, however, that prior to any such designation and exchange the conditions set forth in
clauses (iii) and (v) of subsection 3.06 of the Trust Agreement shall have been satisfied with
respect thereto.




          (h) Delivery of Documents. In the case of the designation of Additional Accounts, the
Transferor designating such Accounts shall deliver to the Indenture Trustee and the Owner Trustee
(i) the computer file or microfiche list required to be delivered pursuant to Section 2.01 with
respect to such Additional Accounts on the date such file or list is required to be delivered
pursuant to Section 2.01 (the “Document Delivery Date” ) and (ii) a duly
executed,




31









 







written Assignment (including an acceptance by the Trust), substantially in the form of
Exhibit A (the “Assignment” ), on the Document Delivery Date.




          Section 2.10 Removal of Accounts and Participation Interests. (a) On any day of any
Due Period each Transferor shall have the right to designate Accounts and require the reassignment
to it or its designee of all the Owner Trustee’s, if any, and the Trust’s right, title and interest
in, to and under the Receivables then existing and thereafter created, all Interchange, if any, and
Recoveries related thereto, all monies due or to become due and all amounts received or receivable
with respect thereto after the Removal Date and all proceeds thereof in or with respect to such
Accounts and any Insurance Proceeds relating thereto (the “Removed
Accounts” ) or Participation Interests conveyed to the Trust by such Transferor (the
“Removed Participation Interests” ) (unless otherwise set forth in the
applicable Participation Interest Supplement or Indenture Supplement) designated for removal by the
Transferor, upon satisfaction of the conditions in clauses (i) through (v) below; provided,
however, (x) that the conditions listed in clauses (iv) and (v) below need not be satisfied if the
Removed Accounts are related to a terminated Merchant Agreement, and (y) that the conditions listed
in clauses (i) through (v) below need not be satisfied if the Removed Accounts are Zero Balance
Accounts:





          (i) on or before the fifth Business Day immediately preceding the Removal Date, such
Transferor shall have given written notice to the Owner Trustee, the Indenture Trustee, the
Servicer, the Rating Agency and each Series Enhancer (unless such notice requirement is
otherwise waived) of such removal and specifying the date for removal of the Removed
Accounts and removed Participation Interests (the “Removal
Date” );




          (ii) on or prior to the date that is five Business Days after the Removal Date, such
Transferor shall amend Schedule 1 by delivering to the Owner Trustee a computer file
or microfiche list containing a true and complete list of the Removed Accounts specifying
for each such Account, as of the date notice of the Removal Date is given, its account
number, the aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account;




          (iii) such Transferor shall have represented and warranted as of the Removal Date that
the list of Removed Accounts delivered pursuant to paragraph (ii) above, as of the Removal
Date, is true and complete in all material respects;




          (iv) the Rating Agency Condition shall have been satisfied with respect to the removal
of the Removed Accounts and removed Participation Interests; and




          (v) such Transferor shall have delivered to the Owner Trustee and the Indenture Trustee
an Officer’s Certificate, dated the Removal Date, to the effect that such
Transferor reasonably believes that (A) such removal will not have an Adverse Effect and (B)
no selection procedures believed by such Transferor to be materially adverse to the
interests of the Noteholders have been used in selecting the Removed Accounts.



          Upon satisfaction of the above conditions, the Owner Trustee shall execute and deliver to such
Transferor a written reassignment in substantially the form of Exhibit B (the




32









 







“Reassignment” ) and shall, without further action, be deemed to
transfer, assign, set over and otherwise convey to such Transferor or its designee, effective as of
the Removal Date, without recourse, representation or warranty, all the right, title and interest
of the Owner Trustee and the Trust in and to the Receivables arising in the Removed Accounts and
Removed Participation Interests, all Interchange and Recoveries related thereto, all monies due and
to become due and all amounts received or receivable with respect thereto after the Removal Date
and all proceeds thereof and any Insurance Proceeds relating thereto. The Owner Trustee may
conclusively rely on the Officer’s Certificate delivered pursuant to this Section 2.10
and shall have no duty to make inquiries with regard to the matters set forth therein and shall
incur no liability in so relying.




          (b) Treatment of Defaulted Receivables. In addition to the foregoing, on the date
when any Receivable in an Account becomes a Defaulted Receivable, the Trust shall automatically and
without further action or consideration be deemed to transfer, set over and otherwise convey to the
Transferor with respect to such Account, without recourse, representation or warranty, all right,
title and interest of the Owner Trustee and the Trust in and to the Defaulted Receivables in such
Account, all Interchange related thereto, all monies and amounts due or to become due with respect
thereto, all proceeds thereof and any Insurance Proceeds relating thereto; provided, that
Recoveries of such Account shall be applied as provided herein.




          (c) Termination of Merchant Agreements. Anything to the contrary herein
notwithstanding, the Transferor shall be entitled to purchase all Receivables in Accounts
designated for purchase or re-purchase by a merchant or co-branding participant pursuant to the
termination of a Merchant Agreement to which such merchant or co-branding participant is a party.
Any repurchase of Receivables pursuant to this subsection 2.10(c) shall be effected in the manner,
and at a price determined in accordance with subsection 2.05(b), as if the Receivables being
repurchased were Ineligible Receivables. Amounts deposited in the Collection Account in connection
therewith shall be deemed to be Collections of Principal Receivables and shall be applied in
accordance with Article VIII of the Indenture and the terms of each Indenture Supplement.




          Section 2.11 Account Allocations. In the event that any Transferor is unable for any
reason to transfer Receivables to the Trust in accordance with the provisions of this Agreement,
including by reason of the application of the provisions of Section 6.01 or any order of any
Governmental Authority (a “Transfer Restriction Event” ), then, (a) such
Transferor and the Servicer agree (except as prohibited by any such order) to allocate and pay to
the Trust, after the date of such inability, all Collections, including Collections of Receivables
transferred to the Trust prior to the occurrence of such event, and all amounts which would have
constituted Collections but for such Transferor’s inability to transfer Receivables (up
to an aggregate amount equal to the amount of Receivables transferred to the Trust by such
Transferor in the Trust on such date), (b) such Transferor and the Servicer agree that such amounts
will be applied as Collections in accordance with Article VIII of the Indenture and the terms of
each Indenture Supplement and (c) for so long as the allocation and application of all Collections
and all amounts that would have constituted Collections are made in accordance with clauses (a) and
(b) above, Principal Receivables and all amounts which would have constituted Principal Receivables
but for such Transferor’s inability to transfer Receivables to the Trust which are




33









 







charged off as uncollectible in accordance with this Agreement shall continue to be allocated
in accordance with Article VIII of the Indenture and the terms of each Indenture Supplement. For
the purpose of the immediately preceding sentence, such Transferor and the Servicer shall treat the
first received Collections with respect to the Accounts as allocable to the Trust until the Trust
shall have been allocated and paid Collections in an amount equal to the aggregate amount of
Principal Receivables in the Trust as of the date of the occurrence of such event. If such
Transferor and the Servicer are unable pursuant to any Requirements of Law to allocate Collections
as described above, such Transferor and the Servicer agree that, after the occurrence of such
event, payments on each Account with respect to the principal balance of such Account shall be
allocated first to the oldest principal balance of such Account and shall have such payments
applied as Collections in accordance with Article VIII of the Indenture and the terms of each
Indenture Supplement. The parties hereto agree that Finance Charge and Administrative Receivables,
whenever created, accrued in respect of Principal Receivables which have been conveyed to the Trust
shall continue to be a part of the Trust notwithstanding any cessation of the transfer of
additional Principal Receivables to the Trust and Collections with respect thereto shall continue
to be allocated and paid in accordance with Article VIII of the Indenture and the terms of each
Indenture Supplement.




          Section 2.12 Discount Option.




          (a) The Transferor shall have the option to designate at any time and from time to time a
percentage or percentages, which may be a fixed percentage or a variable percentage based on a
formula (the “Discount Percentage”), of all or any specified portion of Principal
Receivables (the “Discount Reference Pool”) existing on and after a Discount Option Date to
be treated as Finance Charge and Administrative Receivables (“Discount Option
Receivables”). The Transferor shall also have the option of increasing, reducing or
withdrawing the Discount Percentage, at any time and from time to time; provided that the Discount
Percentage shall be reduced or withdrawn on the date which the Transferor shall deliver to the
Indenture Trustee and the Owner Trustee an Officer’s Certificate to the effect that, in
the reasonable belief of the Transferor, the continued discounting of Principal Receivables would
have an adverse regulatory implication with respect to the Transferor, the Bank or other Account
Owner. The Transferor shall provide to the Servicer, the Owner Trustee, the Indenture Trustee and
the Rating Agency 30 days’ prior written notice of a Discount Option Date and such
designation shall become effective on a Discount Option Date only if, (i) the Transferor delivers
an Officer’s Certificate to the effect that such designation in the reasonable belief of
the Transferor, would not cause an Adverse Effect and (ii) the Rating Agency Condition shall have
been satisfied with respect to such designation.




          (b) Discount Option Receivable Collections shall be treated as Collections of Finance Charge
and Administrative Receivables.




[END OF ARTICLE II]





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ARTICLE III




ADMINISTRATION AND SERVICING

OF RECEIVABLES




          Section 3.01 Acceptance of Appointment and Other Matters Relating to the Servicer.




          (a) HSBC Finance Corporation agrees to act as the Servicer under this Agreement and the
Noteholders by their acceptance of Notes consent to HSBC Finance Corporation acting as Servicer.




          (b) The Servicer shall service and administer the Receivables (including the underlying
receivables) and any Participation Interests, shall collect and deposit into the Collection Account
amounts received under the Receivables (including the underlying receivables) and any Participation
Interests and shall charge-off as uncollectible Receivables, all in accordance with its customary
and usual servicing procedures for servicing revolving credit receivables comparable to the
Receivables and in accordance with the Credit Guidelines. The Servicer shall have full power and
authority, acting alone or through any party properly designated by it hereunder, to do any and all
things in connection with such servicing and administration which it may deem necessary or
desirable; provided, however, that subject to the rights of the Owner Trustee, the Indenture
Trustee and the Noteholders hereunder, the Transferor shall have the absolute right to direct the
Servicer with respect to any power conferred on the Servicer hereunder in accordance with any such
direction. Without limiting the generality of the foregoing and subject to Section 7.01, the
Servicer or its designee is hereby authorized and empowered, unless such power is revoked by the
Indenture Trustee on account of the occurrence of a Servicer Default pursuant to Section 7.01, (i)
to instruct the Owner Trustee or the Indenture Trustee to make withdrawals and payments from the
Collection Account, the Special Funding Account and any Series Account, as set forth in this
Agreement, the Indenture or any Indenture Supplement, (ii) to take any action required or permitted
under any Series Enhancement, as set forth in this Agreement, the Indenture or any Indenture
Supplement, (iii) to execute and deliver, on behalf of the Trust, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and all other comparable
instruments, with respect to the Receivables and, after the delinquency of any Receivable and to
the extent permitted under and in compliance with applicable Requirements of Law, to commence
collection proceedings with respect to such Receivables and (iv) to make any filings, reports,
notices, applications and registrations with, and to seek any consents or authorizations from, the
Commission and any state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any Federal or state securities or reporting requirements or other laws or
regulations. Each of the Owner Trustee and the Indenture Trustee shall furnish the Servicer with
any documents in such Person’s possession reasonably necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties hereunder.




          (c) The Servicer shall not, and no Successor Servicer shall, be obligated to use separate
servicing procedures, offices, employees or accounts for servicing the Receivables from the
procedures, offices, employees and accounts used by the Servicer or such Successor Servicer, as the
case may be, in connection with servicing other revolving credit receivables.




35









 








          (d) The Servicer shall comply with and perform its servicing obligations with respect to the
Accounts and Receivables in accordance with the Credit Agreements relating to the Accounts and the
Credit Guidelines and all applicable rules and regulations of MasterCard, VISA, and other credit
card associations, except insofar as any failure to so comply or perform would not materially and
adversely affect the Trust or the Noteholders.




          (e) The Servicer shall pay from the Servicing Fee, all expenses incurred in connection with
the Trust and the servicing activities hereunder including expenses related to enforcement of the
Receivables, fees and disbursements of the Owner Trustee (as such) and the Indenture Trustee
(including the reasonable fees and expenses of its outside counsel) and independent accountants and
all other fees and expenses, including the costs of filing UCC continuation statements, and the
costs and expenses relating to obtaining and maintaining the listing of any Notes on any stock
exchange. The Transferor shall pay out of its own funds, without reimbursement, the costs and
expenses relating to any stamp, documentary, excise, property (whether on real, personal or
intangible property) or any similar tax levied on the Trust or the Trust’s assets that
are not expressly stated in this Agreement to be payable by the Trust or the Transferor (other than
federal, state, local and foreign income and franchise taxes, if any, or any interest or penalties
with respect thereto, assessed on the Trust).




          Section 3.02 Servicing Compensation. As full compensation for its servicing
activities hereunder and as reimbursement for any expense incurred by it in connection therewith,
the Servicer shall be entitled to receive a servicing fee (the “Servicing Fee”) with
respect to each Due Period, payable monthly on the related Distribution Date, in an amount equal to
one-twelfth of the product of (a) the weighted average of the Servicing Fee Rates with respect to
each outstanding Series (based upon the Servicing Fee Rate for each Series, and weighted based on
the Invested Amount or such other amount as specified in the related Indenture Supplement) and (b)
the total amount of Principal Receivables (without reduction for Discount Option Receivables) as of
the close of business on the last day of the immediately preceding Due Period, excluding the
principal portion of Participation Interests; provided, however, that with respect to any Due
Period in which an Addition Date for an Aggregate Addition or a Removal Date occurs, such amount
shall be the sum of the following amounts for each day in that Due Period divided by the number of
days in such Due Period: (a) the aggregate amount of Principal Receivables in the designated pool,
excluding the principal portion of participation interests, as of the close of business on the last
day of the prior Due Period, for each day in the period from and including the first day of such
Due Period to and including the last day of such Due Period and (b) the aggregate amount of
Principal Receivables, excluding the principal portion of Participation Interests, added to or
removed on the related Additional Cut-Off Date or Removal Date, as the case may be, for each day in
the period from and including the related Additional Cut-Off Date or Removal Date to and including
the last day of such Due Period. The share of the Servicing Fee allocable to a particular Series
with respect to any Due Period will each be determined in accordance with the relevant Indenture
Supplement. The portion of the Servicing Fee with respect to any Due Period not so allocated to
any particular Series or, if specified in the related Indenture Supplement, payable from
Interchange, shall be paid by the Holders of the Transferor Certificates on the related
Distribution Date and in no event shall the Trust, the Owner Trustee, the Indenture Trustee, the
Noteholders of any Series or any Series Enhancer be liable for the share of the Servicing Fee with
respect to any Due Period to be paid by the Holders of the Transferor Certificates.




36









 








          Section 3.03 Representations, Warranties and Covenants of the Servicer. HSBC Finance
Corporation, as initial Servicer, hereby makes, and any Successor Servicer by its appointment
hereunder shall make, with respect to itself, on each Closing Date (and on the date of any such
appointment), the following representations, warranties and covenants on which the Owner Trustee
and the Indenture Trustee shall be deemed to have relied in accepting the Receivables in trust and
in entering into the Indenture:




          (a) Organization and Good Standing. The Servicer is a corporation validly existing
under the laws of the jurisdiction of its organization or incorporation and has, in all material
respects, full power and authority to own its properties and conduct its credit servicing business
as presently owned or conducted, and to execute, deliver and perform its obligations under this
Agreement.




          (b) Due Qualification. The Servicer is duly qualified to do business and is in good
standing as a foreign corporation or other foreign entity (or is exempt from such requirements) and
has obtained all necessary licenses and approvals in each jurisdiction in which the servicing of
the Receivables (including the underlying receivables) and any Participation Interests as required
by this Agreement requires such qualification except where the failure to so qualify or obtain
licenses or approvals would not have a material adverse effect on its ability to perform its
obligations as Servicer under this Agreement.




          (c) Due Authorization. The execution, delivery, and performance of this Agreement and
the other agreements and instruments executed or to be executed by the Servicer as contemplated
hereby, have been duly authorized by the Servicer by all necessary action on the part of the
Servicer.




          (d) Binding Obligation. This Agreement constitutes a legal, valid and binding
obligation of the Servicer, enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors’ rights generally from time to time in effect or by general
principles of equity.




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




          (f) No Violation. The execution and delivery of this Agreement by the Servicer, the
performance of the transactions contemplated by this Agreement and the fulfillment of the terms
hereof and thereof applicable to the Servicer will not conflict with or violate any Requirements of
Law applicable to the Servicer.




          (g) No Proceedings. There are no proceedings or investigations pending or, to the
best knowledge of the Servicer, threatened against the Servicer before any Governmental




37









 







Authority seeking to prevent the consummation of any of the transactions contemplated by this
Agreement or seeking any determination or ruling that, in the reasonable judgment of the Servicer,
would materially and adversely affect the performance by the Servicer of its obligations under this
Agreement.




          (h) Compliance with Requirements of Law. The Servicer shall duly satisfy all
obligations on its part to be fulfilled under or in connection with each Receivable (and the
underlying receivable) and the related Account, if any, will maintain in effect all qualifications
required under Requirements of Law in order to service properly each Receivable and the related
Account, if any, and will comply in all material respects with all other Requirements of Law in
connection with servicing each Receivable and the related Account the failure to comply with which
would have an Adverse Effect.




          (i) No Rescission or Cancellation. The Servicer shall not permit any rescission or
cancellation of any Receivable (or the underlying receivable) except in accordance with the Credit
Guidelines or as ordered by a court of competent jurisdiction or other Governmental Authority.




          (j) Protection of Rights. The Servicer shall take no action which, nor omit to take
any action the omission of which, would impair the rights of the Trust, the Owner Trustee, the
Indenture Trustee or the Noteholders in any Receivable (or the underlying receivable) or the
related Account or any Participation Interest, if any, nor shall it reschedule, revise or defer
payments due on any Receivable except in accordance with the Credit Guidelines.




          (k) Receivables Not To Be Evidenced by Promissory Notes. Except in connection with
its enforcement or collection of an Account, the Servicer will take no action to cause any
Receivable to be evidenced by any instrument (as defined in the UCC) and if any Receivable is so
evidenced it shall be reassigned or assigned to the Servicer as provided in this Section.




          (l) All Consents. All authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required to be obtained, effected or
given by the Servicer in connection with the execution and delivery of this Agreement by the
Servicer and the performance of the transactions contemplated by this Agreement by the Servicer,
have been duly obtained, effected or given and are in full force and effect.




          (m) Changes to Credit Guidelines. Subject to compliance with all Requirements of Law,
the Servicer may change the terms and provisions of the applicable Credit Guidelines of the
Servicer in any respect (including the calculation of the amount or the timing of charge-offs and
the Periodic Rate Finance Charges to be assessed thereon). Notwithstanding the above, unless
required by Requirements of Law, the Servicer will not take any action unless (i) at the time of
such action, the Servicer reasonably believes that such action will not cause an Amortization
Event, Reinvestment Event or Event of Default to occur, and (ii) such change is made applicable to
the comparable segment of the revolving credit accounts owned by the Bank (or other Account Owner
if the Bank is not the Account Owner) which have characteristics the same as, or substantially
similar to, the Accounts that are the subject of such change, except as otherwise restricted by an
endorsement, sponsorship, or other agreement between the Bank (or




38









 







other Account Owner, or an Affiliate of the Bank and an unrelated third party or by the terms
of the Credit Agreements.




          In the event (x) any of the representations, warranties or covenants of the Servicer contained
in subsection 3.03(h), (i) or (j) with respect to any Receivable or the related Account is
breached, and such breach has a material adverse effect on such Receivable (which determination
shall be made without regard to whether funds are then available to any Noteholders pursuant to any
Series Enhancement) and is not cured within 60 days (or such longer period, not in excess of 120
days, as may be agreed to by the Indenture Trustee and the Transferor) of the earlier to occur of
the discovery of such event by the Servicer, or receipt by the Servicer of notice of such event
given by the Indenture Trustee or the Transferor, or (y) as provided in subsection 3.03(k) with
respect to any Receivable, all Receivables in the Account or Accounts to which such event relates
shall be assigned and transferred to the Servicer on the terms and conditions set forth below.




          The Servicer shall effect such assignment by making a deposit into the Collection Account in
immediately available funds on the Distribution Date following the Due Period in which such
assignment obligation arises in an amount equal to the amount of such Receivables.




          Upon each such reassignment or assignment to the Servicer, the Trust shall automatically and
without further action be deemed to sell, transfer, assign, set over and otherwise convey to the
Servicer, without recourse, representation or warranty, all right, title and interest of the Owner
Trustee and the Trust in and to such Receivables, all Interchange, if any, and Recoveries related
thereto, all monies due or to become due and all amounts received or receivable with respect
thereto and all proceeds thereof. The Owner Trustee shall execute such documents and instruments
of transfer or assignment and take such other actions as shall be reasonably requested by the
Servicer to effect the conveyance of any such Receivables pursuant to this Section but only upon
receipt of an Officer’s Certificate of the Servicer that states that all conditions set
forth in this section have been satisfied. The obligation of the Servicer to accept reassignment
or assignment of such Receivables, and to make the deposits, if any, required to be made to the
Collection Account as provided in the preceding paragraph, shall constitute the sole remedy
respecting the event giving rise to such obligation available to Noteholders (or the Indenture
Trustee on behalf of Noteholders) or any Series Enhancer, except as provided in Section 5.04.




          Section 3.04 Reports and Records for the Owner Trustee and the Indenture Trustee.




          (a) Daily Records. On each Business Day, the Servicer shall make or cause to be made
available at the office of the Servicer for inspection by the Owner Trustee and the Indenture
Trustee upon request a record setting forth (i) the Collections in respect of Principal Receivables
and in respect of Finance Charge and Administrative Receivables processed by the Servicer on the
second preceding Business Day in respect of each Account and (ii) the amount of Receivables as of
the close of business on the second preceding Business Day in each Account. The Servicer shall, at
all times, maintain its computer files with respect to the Accounts in such a manner so that the
Accounts may be specifically identified and shall make available to the Owner Trustee and the
Indenture Trustee at the office of the Servicer on any Business Day any




39









 







report necessary to make such identification. The Owner Trustee and the Indenture Trustee
shall enter into such reasonable confidentiality agreements as the Servicer shall deem necessary to
protect its interests and as are reasonably acceptable in form and substance to the Owner Trustee
and the Indenture Trustee.




          (b) Monthly Servicer’s Certificate. Not later than the second Business Day
preceding each Distribution Date, the Servicer shall, with respect to each outstanding Series,
deliver to the Owner Trustee, the Indenture Trustee and each Rating Agency a certificate of an
Authorized Officer in substantially the form set forth in the related Indenture Supplement.




          Section 3.05 Annual Certificate of Servicer and Report of Assessment of Compliance with
Servicing Criteria.




          (a) To the extent required by Regulation AB, the Servicer shall deliver to the Owner Trustee,
the Indenture Trustee and each Rating Agency on or before March 31 of each calendar year, beginning
with March 31, 2007, an Officer’s Certificate substantially in the form of Exhibit
C-1, and such other certifications required by Regulation AB, including certifications required
under Item 1123 of Regulation AB; provided that, no report is required to be filed hereby with
respect to any series of Notes paid in full prior to such date.




          (b) To the extent the Servicer is not obligated to deliver a report of compliance pursuant to
Section 3.05(a), the Servicer shall deliver to the Owner Trustee, the Indenture Trustee and each
Rating Agency on or before March 31 of each calendar year, beginning with March 31, 2007, an
Officer’s Certificate substantially in the form of Exhibit C-2; provided that, no
report is required to be filed hereby with respect to any series of Notes paid in full prior to
such date.




          (c) To the extent required by Regulation AB, on or before March 31 of each calendar year,
beginning with March 31, 2007, the Servicer will deliver to the Owner Trustee, the Indenture
Trustee, the Servicer and each Rating Agency, a report of compliance with servicing criteria during
the preceding calendar year, as required under Item 1122 of Regulation AB; provided that, no report
is required to be filed hereby with respect to any series of Notes paid in full prior to such date.
A form of such report is attached as Exhibit C-3 hereto.




          Section 3.06 Annual Attestation Report of Registered Public Accountant Firms; Copies of
Reports Available.




          (a) On or before March 31 of each calendar year, beginning with March 31, 2007, to the extent
required by Regulation AB, the Servicer shall cause an independent registered public accounting
firm (who may also render other services to the Servicer or the Transferor) to furnish an
attestation report (the “Accountant’s Report”) (addressed to the Owner Trustee) to the
Owner Trustee, the Indenture Trustee, the Servicer and each Rating Agency to the effect that they
have applied certain procedures agreed upon with the Servicer and examined certain documents and
records relating to the servicing of Accounts under this Agreement, the Indenture and each
Indenture Supplement and that, on the basis of such agreed-upon procedures, nothing has come to the
attention of such accountants that caused them to believe that the servicing (including the
allocation of Collections) has not been conducted in compliance with the terms




40









 







and conditions as set forth in Article III and Section 5.08 of this Agreement and the
applicable provisions of the Indenture and each Indenture Supplement, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set forth in such statement;
provided that, no report is required to be filed hereby with respect to any series of Notes paid in
full prior to such date. Such attestation report shall set forth the agreed-upon procedures
performed. In the event such firm requires the Indenture Trustee to agree to the procedures
performed by such firm, the Servicer shall direct the Indenture Trustee in writing to so agree; it
being understood and agreed that the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Indenture Trustee shall not make
any independent inquiry or investigation as to, and shall have no obligation or liability in
respect of, the sufficiency, validity or correctness of such procedures. To the extent required by
Regulation AB, such attestation report on assessments of compliance with the servicing criteria
with respect to the Servicer or any affiliate during the related calendar year delivered by such
accountants shall satisfy the requirements of Rule 13(a)-18 or Rule 15(d)-18 of the Exchange Act
and Item 1122 of Regulation AB.




          (b) A copy of each certificate and report provided pursuant to subsection 3.04(b), or Section
3.05 or 3.06 may be obtained by any Noteholder or Note Owner by a request in writing to the Owner
Trustee addressed to the Corporate Trust Office.




          Section 3.07 Tax Treatment. Unless otherwise specified in the Indenture or an
Indenture Supplement with respect to a particular Series, the Transferor has entered into this
Agreement, and the Notes will be issued, with the intention that, for federal, state and local
income and franchise tax purposes, (i) the Notes of each Series which are characterized as
indebtedness at the time of their issuance will qualify as indebtedness secured by the Receivables
and (ii) the Trust shall not be treated as an association (or publicly traded partnership) taxable
as a corporation. The Transferor, by entering into this Agreement, and each Noteholder, by the
acceptance of any such Note (and each Note Owner, by its acceptance of an interest in the
applicable Note), agree to treat such Notes for federal, state and local income and franchise tax
purposes as indebtedness of the Transferor. Each Holder of such Note agrees that it will cause any
Note Owner acquiring an interest in a Note through it to comply with this Agreement, as described
in this Section 3.07. The parties hereto agree that they will, for federal income tax purposes,
treat the Trust as a disregarded entity and that they will not cause or permit the making, as
applicable, of any election whereby the Trust or any portion thereof would be treated as an
association (or publicly traded partnership) taxable as a corporation for federal income tax
purposes and, except as required by Section 6.13 of the Indenture, shall not file tax returns or
obtain any federal employer identification number for the Trust but shall treat the Trust as a
security device for such purposes. The provisions of this Agreement shall be construed in
furtherance of the foregoing intended tax treatment.




          Section 3.08 Notices to HSBC Finance Corporation. In the event that HSBC Finance
Corporation is no longer acting as Servicer, any Successor Servicer shall deliver or make available
to HSBC Finance Corporation each certificate and report required to be provided thereafter pursuant
to subsection 3.04(b) and Sections 3.05 and 3.06.




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          Section 3.09 Adjustments.




          (a) If the Servicer adjusts downward the amount of any Receivable because of a rebate, refund,
unauthorized charge or posting error to an Obligor, because such Receivable was created in respect
of merchandise which was refused or returned by an Obligor, or if the Servicer otherwise adjusts
downward the amount of any Receivable without receiving Collections therefor or charging off such
amount as uncollectible, then, in any such case, the amount of Principal Receivables used to
calculate the Transferor Amount, and (unless otherwise specified) any other amount required herein
or in the Indenture or any Indenture Supplement to be calculated by reference to the amount of
Principal Receivables, will be reduced by the amount of the adjustment. Similarly, the amount of
Principal Receivables used to calculate the Transferor Amount and (unless otherwise specified) any
other amount required herein or in any Indenture Supplement to be calculated by reference to the
amount of Principal Receivables will be reduced by the principal amount of any Receivable which was
discovered as having been created through a fraudulent or counterfeit charge or with respect to
which the covenant contained in subsection 2.07(b) was breached. Any adjustment required pursuant
to either of the two preceding sentences shall be made on or prior to the end of the Due Period in
which such adjustment obligation arises. In the event that, following the exclusion of such
Principal Receivables from the calculation of the Transferor Amount, the Transferor Amount would be
less than the Required Transferor Amount, not later than 1:00 p.m., New York City time, on the
Distribution Date following the Due Period in which such adjustment obligation arises, the
Transferor shall make a deposit into the Special Funding Account in immediately available funds in
an amount equal to the amount by which the Transferor Amount would be less than the Required
Transferor Amount, due to adjustments with respect to Receivables conveyed by such Transferor (up
to the amount of such Principal Receivables).




          (b) If (i) the Servicer makes a deposit into the Collection Account in respect of a Collection
of a Receivable and such Collection was received by the Servicer in the form of a check which is
not honored for any reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the
Collection Account to reflect such dishonored check or mistake. Any Receivable in respect of which
a dishonored check is received shall be deemed not to have been paid. Notwithstanding the first
two sentences of this paragraph, adjustments made pursuant to this Section shall not require any
change in any report previously delivered pursuant to subsection 3.04(a).




          Section 3.10 Reports to the Commission. For so long as the Trust is required to file
reports under the Exchange Act, the Servicer shall, on behalf of the Trust, cause to be filed with
the Commission any periodic reports and certifications required to be filed under the provisions of
the Exchange Act, and the rules and regulations of the Commission thereunder. The Trust and the
Transferor shall, at its own expense, cooperate in any reasonable request of the Servicer in
connection with such filings.




[END OF ARTICLE III]





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ARTICLE IV




OTHER MATTERS RELATING TO EACH TRANSFEROR




          Section 4.01 Liability of each Transferor. Each Transferor shall be severally, and
not jointly, liable for all obligations, covenants, representations and warranties of such
Transferor arising under or related to this Agreement. Except as provided in the preceding
sentence, each Transferor shall be liable only to the extent of the obligations specifically
undertaken by it in its capacity as a Transferor.




          Section 4.02 Merger or Consolidation of, or Assumption of the Obligations of, a
Transferor.




          (a) No Transferor shall dissolve, liquidate, consolidate with or merge into any other
corporation or convey, transfer or sell its properties and assets substantially as an entirety to
any Person unless:





          (i) (x) the Person formed by such consolidation or into which such Transferor is merged
or the Person which acquires by conveyance, transfer or sale the properties and assets of
the Transferor substantially as an entirety shall be, if such Transferor is not the
surviving entity, organized and existing under the laws of the United States of America or
any State or the District of Columbia, and shall be a savings association, a national
banking association, a bank or other entity which is not eligible to be a debtor in a case
under Title 11 of the United States Code (the “Bankruptcy Code” ) or is a
special purpose corporation whose powers and activities are limited to substantially the
same degree as provided in the certificate of incorporation of HSBC Funding and, if such
Transferor is not the surviving entity, shall expressly assume, by an agreement supplemental
hereto, executed and delivered to the Owner Trustee and the Indenture Trustee, in form
reasonably satisfactory to the Owner Trustee and the Indenture Trustee, the performance of
every covenant and obligation of such Transferor hereunder; and (y) such Transferor or the
surviving entity, as the case may be, has delivered to the Owner Trustee and the Indenture
Trustee (with a copy to each Rating Agency) an Officer’s Certificate and an
Opinion of Counsel each stating that such consolidation, merger, conveyance, transfer or
sale and such supplemental agreement comply with this Section, that such supplemental
agreement is a valid and binding obligation of such surviving entity enforceable against
such surviving entity in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors’ rights generally from time to time in effect or general
principles of equity, and that all conditions precedent herein provided for relating to such
transaction have been complied with; and




          (ii) the Rating Agency Condition shall have been satisfied with respect to such
consolidation, merger, conveyance or transfer.



          (b) Except as permitted by subsection 2.07(c), the obligations, rights or any part thereof of
each Transferor hereunder shall not be assignable nor shall any Person succeed to such obligations
or rights of any Transferor hereunder except (i) for conveyances, mergers,




43









 







consolidations, assumptions, sales or transfers in accordance with the provisions of the
foregoing paragraph and (ii) for conveyances, mergers, consolidations, assumptions, sales or
transfers to other entities (1) which such Transferor and the Servicer determine will not result in
an Adverse Effect, (2) which meet the requirements of clause (ii) of the preceding paragraph and
(3) for which such purchaser, transferee, pledgee or entity shall expressly assume, in an
Assumption Agreement, executed and delivered to the Owner Trustee and the Indenture Trustee in
writing in form satisfactory to the Owner Trustee and the Indenture Trustee, the performance of
every covenant and obligation of such Transferor thereby conveyed.




          Section 4.03 Limitations on Liability of Each Transferor. Subject to Section 4.01, no
Transferor nor any of the directors, officers, employees, incorporators or agents of any Transferor
acting in such capacities shall be under any liability to the Trust, the Owner Trustee, the
Indenture Trustee, the Noteholders, any Series Enhancer, any other Transferor or any other Person
for any action taken or for refraining from the taking of any action in good faith in such
capacities pursuant to this Agreement, it being expressly understood that such liability is
expressly waived and released as a condition of, and consideration for, the execution of this
Agreement, the Indenture and any Indenture Supplement and the issuance of the Notes; provided,
however, that this provision shall not protect any Transferor or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of obligations and
duties hereunder. Each Transferor and any director, officer, employee or agent of such Transferor
may rely in good faith on any document of any kind prima facie properly executed and submitted by
any Person (other than such Transferor) respecting any matters arising hereunder.




          Section 4.04 Assumption of the Transferor Obligations. Notwithstanding the provisions
of Section 4.02, each Transferor may assign, convey and transfer its interests in the Transferor
Amount, which may include all, but not less than all, such Transferor’s interest in the Trust
Assets and rights under the Transaction Documents (collectively, the “Assigned Assets”),
together with all obligations under this Agreement or the other Transaction Documents or otherwise
relating to the transactions contemplated hereby (collectively, the “Assumed Obligations”),
to other entities (such entity or entities, the “Assuming Entity”), which may be entities
that are not affiliated with such Transferor, and such Transferor may assign, convey and transfer
the Assigned Assets and the Assumed Obligations to such Assuming Entity, without the consent or
approval of the Holders of the Notes, upon satisfaction of the following conditions:




          (a) such Assuming Entity, such Transferor and the Trust shall have entered into an assumption
agreement (the “Assumption Agreement” ) providing for the Assuming
Entity to assume the Assumed Obligations, including the obligation under this Agreement to transfer
the Receivables arising under the Accounts to the Trust, and such Transferor shall have delivered
to the Owner Trustee and the Indenture Trustee an Officer’s Certificate and an Opinion of
Counsel each stating that such transfer and assumption comply with this Section, that such
Assumption Agreement is a valid and binding obligation of such Assuming Entity enforceable against
such Assuming Entity in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship or
other similar laws affecting creditors’ rights generally or creditors of national banking
associations, from time to time, in effect and except as such enforceability may be




44









 







limited by general principles of equity (whether considered in a suit at law or in equity),
and that all conditions precedent herein provided for relating to such transaction have been
complied with;




          (b) such Transferor or such Assuming Entity shall have delivered to the Owner Trustee and the
Indenture Trustee copies of UCC-1 financing statements covering such Accounts to perfect the Owner
Trustee’s and the Trust’s interest and the Indenture Trustee’s
interest in the Receivables arising herein;




          (c) such Transferor shall have delivered to the Rating Agency (with a copy to the Servicer and
the Indenture Trustee) notice of such transfer and assumption, and that the Rating Agency Condition
shall have been satisfied;




          (d) the Owner Trustee and the Indenture Trustee shall have received an Opinion of Counsel to
the effect that (i) the transfer of such Receivables by such Assuming Entity shall constitute
either a sale of, or the granting of a security interest in, such Receivables by such Assuming
Entity to the Trust, (ii) the condition specified in clause (b) shall have been satisfied, and
(iii) if such Assuming Entity shall be subject to the FDIA, the interest of the Trust in such
Receivables should not be subject to reclamation or recovery by the FDIC if the FDIC were to become
the receiver or conservator of such Assuming Entity; and




          (e) the Indenture Trustee shall have received a Tax Opinion.



Upon any such transfer to and assumption by an Assuming Entity, the Transferors shall surrender
Transferor Certificate to the Transfer Agent and Registrar for registration of transfer and the
Owner Trustee shall issue a new Transferor Certificate in the name of such Assuming Entity and any
non-assigning Transferor. Notwithstanding such assumption, such assigning Transferor shall
continue to be liable for all representations and warranties and covenants made by it and all
obligations performed or to be performed by it in its capacity as Transferor prior to such
transfer.




          Notwithstanding the provisions of this Section 4.04 to the contrary, any Transferor may
transfer, from time to time, Assigned Assets to any other Transferor upon the satisfaction of
subsections (a) and (b), above. Such Transferor shall promptly provide notice to the Rating Agency
indicating the occurrence of any such transfer.




[END OF ARTICLE IV]





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ARTICLE V




OTHER MATTERS RELATING TO THE SERVICER




          Section 5.01 Liability of the Servicer. The Servicer shall be liable under this
Article only to the extent of the obligations specifically undertaken by the Servicer in its
capacity as Servicer.




          Section 5.02 Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer. The Servicer shall not consolidate with or merge into any other corporation or
convey, transfer or sell its properties and assets substantially as an entirety to any Person,
unless:




          (a) (i) the Person formed by such consolidation or into which the Servicer is merged or the
Person which acquires by conveyance, transfer or sale the properties and assets of the Servicer
substantially as an entirety shall be, if the Servicer is not the surviving entity, a corporation
or a national banking association organized and existing under the laws of the United States of
America or any State or the District of Columbia, and, if the Servicer is not the surviving entity,
such corporation shall expressly assume, by an agreement supplemental hereto, executed and
delivered to the Owner Trustee and the Indenture Trustee, in form satisfactory to the Owner Trustee
and the Indenture Trustee, the performance of every covenant and obligation of the Servicer
hereunder;





          (ii) the Servicer has delivered to the Owner Trustee and the Indenture Trustee an
Officer’s Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale comply with this Section and that all
conditions precedent herein provided for relating to such transaction have been complied
with;




          (iii) the Servicer shall have given the Rating Agencies notice of such consolidation,
merger or transfer or assets; and



          (b) the corporation formed by such consolidation or into which the Servicer is merged or the
Person which acquires by conveyance or transfer the properties and assets of the Servicer
substantially as an entirety shall be an Eligible Servicer.




          Section 5.03 Limitation on Liability of the Servicer and Others. Except as provided
in Section 5.04, neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer in its capacity as Servicer shall be under any liability to the Trust, the Owner
Trustee, the Indenture Trustee, the Noteholders, any Series Enhancer or any other Person for any
action taken or for refraining from the taking of any action in good faith in its capacity as
Servicer pursuant to this Agreement; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person (other than the Servicer) respecting any matters
arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute




46









 







or defend any legal action which is not incidental to its duties as Servicer in accordance
with this Agreement and which in its reasonable judgment may involve it in any expense or
liability. The Servicer may, in its sole discretion, undertake any such legal action which it may
deem necessary or desirable for the benefit of the Noteholders with respect to this Agreement and
the rights and duties of the parties hereto and the interests of the Noteholders hereunder.




     Section 5.04 Servicer Indemnification of the Owner Trustee and the Indenture Trustee.
The Servicer shall indemnify and hold harmless the Owner Trustee and the Indenture Trustee and any
trustees predecessor thereto (including the Indenture Trustee in its capacity as Transfer Agent and
Registrar or as Paying Agent) and their respective directors, officers, employees and agents from
and against any and all loss, liability, claim, action, suit, cost, expense, damage or injury of
any kind or nature whatsoever suffered or sustained by reason of (a) any acts or omissions of the
Servicer with respect to the Trust pursuant to this Agreement or (b) the administration by the
Owner Trustee of the Trust and the administration by the Indenture Trustee of the Indenture and
Indenture Supplement (in the case of clause (a) or (b), other than such as may arise from the
negligence or willful misconduct (including fraud) of the Owner Trustee or the Indenture Trustee,
as applicable), including any judgment, award, settlement, reasonable attorneys’ fees and
other costs or expenses incurred in connection with the defense of any action, proceeding or claim.
Indemnification pursuant to this Section shall not be payable from the Trust Assets. The
Servicer’s obligations under this Section 5.04 shall survive the termination of this
Agreement or the Trust or the earlier removal or resignation of the Owner Trustee or the Indenture
Trustee, as applicable.



     Section 5.05 Resignation of the Servicer. The Servicer shall not resign from the
obligations and duties hereby imposed on it except (a) upon determination that (i) the performance
of its duties hereunder is no longer permissible under applicable law and (ii) there is no
reasonable action which the Servicer could take to make the performance of its duties hereunder
permissible under applicable law or (b) upon the assumption, by an agreement supplemental hereto,
executed and delivered to the Owner Trustee and the Indenture Trustee, in form satisfactory to the
Owner Trustee and the Indenture Trustee, of the obligations and duties of the Servicer hereunder by
any of its Affiliates or by any other entity the appointment of which shall have satisfied the
Rating Agency Condition and, in either case, qualifies as an Eligible Servicer. Any determination
permitting the resignation of the Servicer shall be evidenced as to clause (a) above by an Opinion
of Counsel to such effect delivered to the Owner Trustee and the Indenture Trustee. No resignation
shall become effective until the Indenture Trustee or a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 7.02 hereof. If within
120 days of the date of the determination that the Servicer may no longer act as Servicer under
clause (a) above the Indenture Trustee is unable to appoint a Successor Servicer, the Indenture
Trustee shall serve as Successor Servicer. Notwithstanding the foregoing, the Indenture Trustee
shall, if it is legally unable so to act, petition a court of competent jurisdiction to appoint any
established institution qualifying as an Eligible Servicer as the Successor Servicer hereunder.
The Indenture Trustee shall give prompt notice to each Rating Agency and each Series Enhancer upon
the appointment of a Successor Servicer. Notwithstanding anything in this Agreement to the
contrary, HSBC Finance Corporation may assign part or all of its obligations and duties as Servicer
under this Agreement to an Affiliate of HSBC Finance Corporation so long as HSBC Finance
Corporation shall have fully guaranteed the performance of such obligations and duties under this
Agreement.



47









 





     Section 5.06 Access to Certain Documentation and Information Regarding the
Receivables. The Servicer shall provide to the Owner Trustee or the Indenture Trustee, as
applicable, access to the documentation regarding the Accounts and the Receivables in such cases
where the Owner Trustee or the Indenture Trustee, as applicable, is required in connection with the
enforcement of the rights of Noteholders or by applicable statutes or regulations to review such
documentation, such access being afforded without charge but only (a) upon reasonable request, (b)
during normal business hours, (c) subject to the Servicer’s normal security and
confidentiality procedures and (d) at reasonably accessible offices in the continental United
States designated by the Servicer. Nothing in this Section shall derogate from the obligation of
the Transferor, the Owner Trustee, the Indenture Trustee and the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation shall not constitute a
breach of this Section.



     Section 5.07 Delegation of Duties. In the ordinary course of business, the Servicer
may at any time delegate its duties hereunder with respect to the Accounts and the Receivables to
any Person that agrees to conduct such duties in accordance with the Credit Guidelines and this
Agreement. Such delegation shall not relieve the Servicer of its liability and responsibility with
respect to such duties, and shall not constitute a resignation within the meaning of Section 5.05.
The Servicer has delegated certain duties with respect to the Receivables to the Subservicer. In
addition to the Servicer’s reporting requirements pursuant to this Agreement, and the related
Indenture and Indenture Supplement, including, but not limited to, Sections 3.04, 3.05, 3.06 and
3.10 hereof, the Subservicer agrees and each other Person to whom the Servicer delegates its duties
hereunder will be deemed by such delegation to agree, to deliver or cause to be delivered any
certificates, statements or reports that may be requested to be delivered by the Servicer or
required by law.



     Section 5.08 Examination of Records. Each Transferor and the Servicer shall indicate
generally in their computer files or other records that the Receivables arising in the Accounts
have been conveyed to the Owner Trustee, on behalf of the Trust, pursuant to this Agreement. Each
Transferor and the Servicer shall, prior to the sale or transfer to a third party of any receivable
held in its custody, examine its computer records and other records to determine that such
receivable is not, and does not include, a Receivable.



[END OF ARTICLE V]





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ARTICLE VI




INSOLVENCY EVENTS




          Section 6.01 Rights upon the Occurrence of an Insolvency Event. If any Transferor
shall consent or fail to object to the appointment of a bankruptcy trustee or conservator,
receiver, liquidator or similar official in any bankruptcy proceeding or other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating
to any Transferor or of or relating to all or substantially all of such Transferor’s
property, or the commencement of an action seeking a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of a bankruptcy
trustee or conservator, receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up, insolvency, bankruptcy,
reorganization, conservatorship, receivership or liquidation of such entity’s affairs, or
notwithstanding an objection by such Transferor any such action shall have remained undischarged or
unstayed for a period of 60 days or upon entry of any order or decree providing for such relief; or
such Transferor shall admit in writing its inability to pay its debts generally as they become due,
file, or consent or fail to object (or object without dismissal of any such filing within 30 days
of such filing) to the filing of, a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization, receivership or conservatorship or similar statute, make an
assignment for the benefit of its creditors or voluntarily suspend payment of its obligations (any
such act or occurrence with respect to any Person being an “Insolvency
Event” ), such Transferor shall on the day any such Insolvency Event occurs (the
“Appointment Date” ), immediately cease to transfer Principal
Receivables to the Owner Trustee or the Trust and shall promptly give notice to the Indenture
Trustee and the Owner Trustee thereof. Notwithstanding any cessation of the transfer to the Owner
Trustee or the Trust of additional Principal Receivables, Principal Receivables transferred to the
Trust prior to the occurrence of such Insolvency Event, Collections in respect of such Principal
Receivables and Finance Charge and Administrative Receivables (whenever created) accrued in respect
of such Principal Receivables shall continue to be a part of the Trust Assets and shall be
allocated and distributed to Noteholders in accordance with the terms of the Indenture and each
Indenture Supplement.




[END OF ARTICLE VI]





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ARTICLE VII




SERVICER DEFAULTS




          Section 7.01 Servicer Defaults. If any one of the following events (a
“Servicer Default” ) shall occur and be continuing:




          (a) any failure by the Servicer to make any payment, transfer or deposit or to give
instructions or to give notice to the Indenture Trustee to make such payment, transfer or deposit
on or before the date occurring five Business Days after the date such payment, transfer or deposit
or such instruction or notice is required to be made or given, as the case may be, under the terms
of this Agreement the Indenture or any Indenture Supplement;




          (b) failure on the part of the Servicer duly to observe or perform in any material respect any
other covenants or agreements of the Servicer set forth in this Agreement which has an Adverse
Effect and which continues unremedied for a period of 60 days after the date on which notice of
such failure, requiring the same to be remedied, shall have been given to the Servicer by the Owner
Trustee or the Indenture Trustee, or to the Servicer, the Owner Trustee and the Indenture Trustee
by Holders of Notes evidencing 10% or more of the aggregate unpaid principal amount of all Notes
(or, with respect to any such failure that does not relate to all Series, 10% or more of the
aggregate unpaid principal amount of all Series to which such failure relates); or the Servicer
shall assign or delegate its duties under this Agreement, except as permitted by Sections 5.02 and
5.07;




          (c) any representation, warranty or certification made by the Servicer in this Agreement or in
any certificate delivered pursuant to this Agreement shall prove to have been incorrect when made,
which has an Adverse Effect on the rights of the Noteholders of any Series (which determination
shall be made without regard to whether funds are then available pursuant to any Series
Enhancement) and which Adverse Effect continues for a period of 60 days after the date on which
notice thereof, requiring the same to be remedied, shall have been given to the Servicer by the
Owner Trustee or the Indenture Trustee, or to the Servicer, the Owner Trustee and the Indenture
Trustee by the Holders of Notes evidencing 10% or more of the aggregate unpaid principal amount of
all Notes (or, with respect to any such representation, warranty or certification that does not
relate to all Series, 10% or more of the aggregate unpaid principal amount of all Series to which
such representation, warranty or certification relates); or




          (d) the Servicer shall consent to the appointment of a bankruptcy trustee, conservator,
receiver, liquidator or similar official in any bankruptcy proceeding or other insolvency,
readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating
to the Servicer or of or relating to all or substantially all its property, or a decree or order of
a court or agency or supervisory authority having jurisdiction in the premises for the appointment
of a bankruptcy trustee, conservator, receiver, liquidator or similar official in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or
the winding-up or liquidation of its affairs, shall have been entered against the Servicer; or the
Servicer shall admit in writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable bankruptcy, insolvency or




50









 







reorganization statute, make any assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;




          then, in the event of any Servicer Default, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing more than 50% of the
aggregate unpaid principal amount of all Notes, by notice then given to the Servicer and the Owner
Trustee (and to the Indenture Trustee if given by the Noteholders) (a “Termination
Notice” ), may terminate all but not less than all the rights and obligations of the
Servicer as Servicer under this Agreement; provided, however, if within 60 days of receipt of a
Termination Notice the Indenture Trustee does not receive any bids from Eligible Servicers in
accordance with subsection 7.02(c) to act as a Successor Servicer and receives an
Officer’s Certificate of the Servicer to the effect that the Servicer cannot in good
faith cure the Servicer Default which gave rise to the Termination Notice, the Indenture Trustee
shall grant a right of first refusal to the Transferor which would permit the Transferor at its
option to acquire the Notes on the Distribution Date in the next calendar month.




          The price for the Notes shall be equal to the sum of the amounts specified therefor with
respect to each outstanding Series in the related Indenture Supplement. The Transferor shall
notify the Indenture Trustee prior to the Record Date for the Distribution Date of the acquisition
if it is exercising such right of first refusal. If the Transferor exercises such right of first
refusal, the Transferor shall deposit the price into the Collection Account not later than 1:00
p.m., New York City time, on such Distribution Date in immediately available funds. The price
shall be allocated and distributed to Noteholders in accordance with the terms of the Indenture and
each Indenture Supplement.




          After receipt by the Servicer of a Termination Notice, and on the date that a Successor
Servicer is appointed by the Indenture Trustee pursuant to Section 7.02, all authority and power of
the Servicer under this Agreement shall pass to and be vested in the Successor Servicer (a
“Service Transfer” ); and, without limitation, the Indenture Trustee is
hereby authorized and empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments upon the failure of the Servicer to execute or deliver such documents or instruments,
and to do and accomplish all other acts or things necessary or appropriate to effect the purposes
of such Service Transfer. The Servicer agrees to cooperate with the Indenture Trustee and such
Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer
to conduct servicing hereunder, including the transfer to such Successor Servicer of all authority
of the Servicer to service the Receivables provided for under this Agreement, including all
authority over all Collections which shall on the date of transfer be held by the Servicer for
deposit, or which have been deposited by the Servicer, in the Collection Account, or which shall
thereafter be received with respect to the Receivables, and in assisting the Successor Servicer.
The Servicer shall within 20 Business Days transfer its electronic records relating to the
Receivables to the Successor Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the Receivables in the manner
and at such times as the Successor Servicer shall reasonably request. To the extent that
compliance with this Section shall require the Servicer to disclose to the Successor Servicer
information of any kind which the Servicer deems to be confidential, the Successor Servicer shall
be required to enter




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into such customary licensing and confidentiality agreements as the Servicer shall deem
reasonably necessary to protect its interests. The Servicer shall pay to the Indenture Trustee and
any Successor Servicer the reasonable transition expenses incurred by such person and the agents in
connection with any transition of Servicing.




          Notwithstanding the foregoing, a delay in or failure of performance referred to in paragraph
(a) above for a period of 10 Business Days after the applicable grace period or under paragraph (b)
or (c) above for a period of 60 Business Days after the applicable grace period, shall not
constitute a Servicer Default if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the
public enemy, acts of declared or undeclared war, acts of terrorism, public disorder, rebellion or
sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or similar
causes. The preceding sentence shall not relieve the Servicer from using all commercially
reasonable efforts to perform its obligations in a timely manner in accordance with the terms of
this Agreement and the Servicer shall provide the Indenture Trustee, Owner Trustee, each Transferor
and any Series Enhancer with an Officer’s Certificate giving prompt notice of such
failure or delay by it, together with a description of its efforts so to perform its obligations.




          Section 7.02 Indenture Trustee To Act; Appointment of Successor.




          (a) On and after the receipt by the Servicer of a Termination Notice pursuant to Section 7.01,
the Servicer shall continue to perform all servicing functions under this Agreement until the date
specified in the Termination Notice or otherwise specified by the Indenture Trustee or until a date
mutually agreed upon by the Servicer and the Indenture Trustee. The Indenture Trustee shall as
promptly as possible after the giving of a Termination Notice appoint an Eligible Servicer as a
successor servicer (the “Successor Servicer” ), and such Successor
Servicer shall accept its appointment by a written assumption in a form acceptable to the Indenture
Trustee. In the event that a Successor Servicer has not been appointed or has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Indenture Trustee without
further action shall automatically be appointed the Successor Servicer. The Indenture Trustee may
delegate any of its servicing obligations to an Affiliate or agent in accordance with subsection
3.01(b) and Section 5.07. Notwithstanding the foregoing, the Indenture Trustee shall, if it is
legally unable so to act, petition at the expense of the Servicer a court of competent jurisdiction
to appoint any established institution qualifying as an Eligible Servicer as the Successor Servicer
hereunder. The Indenture Trustee shall give prompt notice to each Rating Agency and each Series
Enhancer upon the appointment of a Successor Servicer.




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




          (c) In connection with any Termination Notice, the Indenture Trustee will review any bids
which it obtains from Eligible Servicers and shall be permitted to appoint any Eligible Servicer
submitting such a bid as a Successor Servicer for servicing compensation not in excess of the
aggregate Servicing Fees for all Series plus the sum of the amounts with respect to




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each Series and with respect to each Distribution Date equal to any Collections of Finance
Charge and Administrative Receivables allocable to Noteholders of such Series which are payable to
the holders of the Transferor Certificates after payment of all amounts owing to the Noteholders of
such Series with respect to such Distribution Date or required to be deposited in the applicable
Series Accounts with respect to such Distribution Date and any amounts required to be paid to any
Series Enhancer for such Series with respect to such Distribution Date pursuant to the terms of any
Enhancement Agreement; provided, however, that the Holders of the Transferor Certificates shall be
responsible for payment of the Transferor’s portion of such aggregate Servicing Fees and
all other such amounts, including any amount of reasonable transition expenses not paid by the
Servicer pursuant to subsection 7.01, in excess of such aggregate Servicing Fees. Each Holder of
the Transferor’s Certificates agrees that, if HSBC Finance Corporation (or any Successor
Servicer) is terminated as Servicer hereunder, the portion of the Collections in respect of Finance
Charge and Administrative Receivables that the Transferor is entitled to receive pursuant to this
Agreement, the Indenture or any Indenture Supplement shall be reduced by an amount sufficient to
pay the Transferor’s share of the compensation of the Successor Servicer.




          (d) All authority and power granted to the Servicer under this Agreement shall automatically
cease and terminate upon termination of the Trust pursuant to Section 8.01 of the Trust Agreement,
and shall pass to and be vested in the Transferor and, without limitation, the Transferor is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purposes of such transfer of servicing rights. The Servicer
agrees to cooperate with the Transferor in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing of the Receivables. The Servicer shall transfer its
electronic records relating to the Receivables to the Transferor or its designee in such electronic
form as it may reasonably request and shall transfer all other records, correspondence and
documents to it in the manner and at such times as it shall reasonably request. To the extent that
compliance with this Section shall require the Servicer to disclose to the Transferor information
of any kind which the Servicer deems to be confidential, the Transferor shall be required to enter
into such customary licensing and confidentiality agreements as the Servicer shall deem necessary
to protect its interests.




          Section 7.03 Notification to Noteholders. Within five Business Days after the
Servicer becomes aware of any Servicer Default, the Servicer shall give notice thereof to the Owner
Trustee, the Indenture Trustee, each Rating Agency and each Series Enhancer and the Indenture
Trustee shall give notice to the Noteholders. Upon any termination or appointment of a Successor
Servicer pursuant to this Article, the Indenture Trustee shall give prompt notice thereof to the
Noteholders.




[END OF ARTICLE VII]





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ARTICLE VIII




TERMINATION




          Section 8.01 Termination of Agreement. This Agreement and the respective obligations
and responsibilities of the Trust, the Owner Trustee, the Transferor and the Servicer under this
Agreement shall terminate, except with respect to the duties described in Section 5.04, on the
Trust Termination Date.




[END OF ARTICLE VIII]





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ARTICLE IX




MISCELLANEOUS PROVISIONS




          Section 9.01 Amendment; Waiver of Past Defaults.




          (a) This Agreement may be amended from time to time by the Servicer, the Transferor and the
Owner Trustee, by a written instrument signed by each of them, without the consent of the Indenture
Trustee or any of the Noteholders, provided that (i) the Transferor shall have delivered to the
Indenture Trustee and the Owner Trustee an Officer’s Certificate, dated the date of any
such Amendment, stating that the Transferor reasonably believes that such amendment will not have
an Adverse Effect and (ii) the Rating Agency Condition shall have been satisfied with respect to
any such amendment; provided, however, the Servicer, the Transferor and the Owner Trustee, may
enter into one or more amendments, without the consent of the Indenture Trustee or the Holders of
any Notes or prior notice to the Rating Agencies (provided that a final amendment to this Agreement
signed by the parties hereto shall be delivered to each Rating Agency within 10 days of its
execution) in order to (A) cure any ambiguity, to correct or supplement any provision herein or in
any amendment hereto that may be inconsistent with any other provision herein or in any amendment
hereto, (B) to make any other provisions with respect to matters or questions arising under this
Agreement or in any amendment hereto or (C) qualify for particular accounting treatment under the
appropriate generally accepted accounting principles; provided, that such amendment shall not have
an Adverse Effect and, in the case of clause (C), the Transferor shall have delivered a Tax Opinion
to the Indenture Trustee with respect to such amendment. Additionally, notwithstanding the
preceding sentence, this Agreement will be amended by the Servicer and the Owner Trustee at the
direction of the Transferor without the consent of the Indenture Trustee or any of the Noteholders
or Series Enhancers to add, modify or eliminate such provisions as may be necessary or advisable in
order to enable all or a portion of the Trust to avoid the imposition of state or local income or
franchise taxes imposed on the Trust’s property or its income; provided, however, that
(i) the Transferor delivers to the Indenture Trustee and the Owner Trustee an Officer’s
Certificate to the effect that the proposed amendments meet the requirements set forth in this
subsection, (ii) the Rating Agency Condition is satisfied with respect to such amendment and (iii)
such amendment does not affect the rights, duties or obligations of the Indenture Trustee or the
Owner Trustee hereunder. The amendments which the Transferor may make without the consent of
Noteholders or Series Enhancers pursuant to the preceding sentence may include, without limitation,
the addition of Receivables.




          (b) This Agreement may also be amended from time to time by the Servicer, the Transferor and
the Owner Trustee, with the consent of the Holders of Outstanding Notes evidencing not less than
66-2/3% of the aggregate unpaid principal amount of the Outstanding Notes of all affected Series
for which the Transferor has not delivered an Officer’s Certificate stating that there is
no Adverse Effect, for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the
Noteholders; provided, however, that no such amendment shall (i) reduce in any manner the amount of
or delay the timing of any distributions (changes in Amortization Events or Reinvestment Events
that decrease the likelihood of the occurrence thereof shall not be considered delays in the timing
of distributions for purposes of this clause) to





55









 






be made to Noteholders or deposits of amounts to be so distributed or the amount available
under any Series Enhancement without the consent of each affected Holder of Outstanding Notes, (ii)
change the definition of or the manner of calculating the interest of any Noteholder without the
consent of each affected Holder of Outstanding Notes, (iii) reduce the aforesaid percentage
required to consent to any such amendment without the consent of each Holder of Outstanding Notes
or (iv) adversely affect the rating of any Series or Class by each Rating Agency without the
consent of the Holders of Outstanding Notes of such Series or Class evidencing not less than
66-2/3% of the aggregate unpaid principal amount of the Outstanding Notes of such Series or Class.




     (c) Promptly after the execution of any such amendment or consent (other than an amendment
pursuant to paragraph (a)), the Servicer shall furnish notification of the substance of such
amendment to the Indenture Trustee, each Noteholder, each Rating Agency and each Series Enhancer.



     (d) It shall not be necessary for the consent of Noteholders under this Section 9.01 to
approve the particular form of any proposed amendment, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.



     (e) Notwithstanding anything in this Section 9.01 to the contrary, no amendment may be made to
this Agreement or any Participation Interest Supplement which would adversely affect in any
material respect the interests of any Series Enhancer without the consent of such Series Enhancer.



     (f) Any Indenture Supplement executed in accordance with the provisions of Article X of the
Indenture shall not be considered an amendment of this Agreement for the purposes of this Section
9.01.



     (g) The Holders of Outstanding Notes evidencing more than 66-2/3% of the aggregate unpaid
principal amount of the Outstanding Notes of each Series or, with respect to any Series with two or
more Classes, of each Class (or, with respect to any default that does not relate to all Series,
66-2/3% of the aggregate unpaid principal amount of the Outstanding Notes of each Series to which
such default relates or, with respect to any such Series with two or more Classes, of each Class)
may, on behalf of all Noteholders, waive any default by the Transferor or the Servicer in the
performance of their obligations hereunder and its consequences, except the failure to make any
distributions required to be made to Noteholders or to make any required deposits of any amounts to
be so distributed. Upon any such waiver of a past default, such default shall cease to exist, and
any default arising therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.



     (h) The Owner Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee’s rights, duties or immunities under this Agreement or
otherwise.



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     Section 9.02 Protection of Right, Title and Interest to Trust.



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



     (b) Within 30 days after any Transferor makes any change in its name, identity, corporate
structure or jurisdiction of organization which would make any financing statement or any amendment
or continuation to any financing statement filed in accordance with paragraph (a) seriously
misleading within the meaning of Section 9-506 (or any comparable provision) of the UCC, such
Transferor shall give the Owner Trustee and the Indenture Trustee notice of any such change and
shall, within 90 days of such change or such earlier time as prescribed by law, file such financing
statements or amendments as may be necessary to continue the perfection of the Owner Trustee’s and
the Trust’s security interest or ownership interest in the Receivables and the proceeds thereof.



     (c) Each Transferor shall give the Owner Trustee and the Indenture Trustee prompt notice of
any relocation of its chief executive office or any change in the jurisdiction of its organization
and whether, as a result of such relocation or change, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall file such financing statements or amendments as may be
necessary to perfect or to continue the perfection of the Owner Trustee’s and the
Trust’s security interest in the Receivables and the proceeds thereof. Each Transferor
shall at all times maintain its chief executive offices within the United States and shall at all
times be organized under the laws of a jurisdiction located within the United States.



     (d) The Transferor shall deliver to the Owner Trustee and the Indenture Trustee (i) on each
date specified in subsection 2.09(c)(ix) with respect to Aggregate Additions to be designated as
Accounts, an Opinion of Counsel substantially in the form of Exhibit D-1; (ii) on each date
specified in subsection 2.09(e)(vii), with respect to any Automatic Additional Accounts included as
Accounts, an Opinion of Counsel substantially in the form of Exhibit D-1; (iii) on each
Addition Date on which any Participation Interests are to be included in the Trust pursuant to
subsection 2.09(a) or (b), an Opinion of Counsel covering the same substantive legal issues
addressed by Exhibits D-1 but conformed to the extent appropriate to relate to
Participation Interests; and (iv) on or before April 30 of each year, an Opinion of Counsel
substantially in the form of Exhibit D-2.



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     Section 9.03 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.



     Section 9.04 Notices; Payments.



     (a) All demands, notices, instructions, directions and communications (collectively,
“Notices”) under this Agreement shall be in writing and shall be deemed to have been duly
given if personally delivered at, mailed by registered mail, return receipt requested, or sent by
facsimile transmission (i) in the case of the Transferor, to HSBC Funding (USA) Inc. V, 2700
Sanders Road, Prospect Heights, Illinois 60070, (ii) in the case of the Bank, to HSBC Bank Nevada,
National Association at 1111 Town Center, Las Vegas, Nevada 89144, Attention: General Counsel
(facsimile no. (702) 222-4096), (iii) in the case of the Servicer, to HSBC Finance Corporation, at
2700 Sanders Road, Prospect Heights, Illinois 60070, Attention: Assistant Treasurer (facsimile no.
(847) 205-7538), (iv) in the case of the Owner Trustee, to Wilmington Trust Company, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate U.S. Bank Administration
(facsimile no. (302) 636-4140), (v) in the case of the Indenture Trustee, to U.S. Bank National
Association, 209 South LaSalle Street, Suite 300, Chicago, Illinois 60604, (vi) in the case of
Fitch, to Fitch, Inc., One State Street Plaza, New York, New York 10004, Attention: ABS
Surveillance (facsimile no. (212) 480-4438), (vii) in the case of Moody’s, to Moody’s Investors
Service Inc., 99 Church Street, New York, New York 10007, Attention: ABS Monitoring Group
(facsimile no. (212) 553-7820), (viii) in the case of Standard & Poor’s, to Standard & Poor’s
Ratings Group, 55 Water Street, New York, New York 10041, Attention: Credit Card ABS (facsimile
no. (212) 438-2648) and (ix) to any other Person as specified in the Indenture or any Indenture
Supplement; or, as to each party, at such other address or facsimile number as shall be designated
by such party in a written notice to each other party.



     (b) Any Notice required or permitted to be given to a Holder of Registered Notes shall be
given by first-class mail, postage prepaid, at the address of such Holder as shown in the Note
Register. No Notice shall be required to be mailed to a Holder of Bearer Notes or Coupons but
shall be given as provided below. Any Notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not the Noteholder
receives such Notice. In addition, (a) if and so long as any Series or Class is listed on a stock
exchange and such exchange shall so require, any Notice to Noteholders shall be published in an
Authorized Newspaper within the time period prescribed in this Agreement and (b) in the case of any
Series or Class with respect to which any Bearer Notes are outstanding, any Notice required or
permitted to be given to Noteholders of such Series or Class shall be published in an Authorized
Newspaper within the time period prescribed in this Agreement.



     Section 9.05 Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid,
then such provisions shall be deemed severable from the remaining provisions of this Agreement and
shall in no way affect the validity or enforceability of the remaining provisions or of the Notes
or the rights of the Noteholders.



58









 





     Section 9.06 Additional Obligations of the Servicer. The Servicer further agrees to
perform all duties of the Servicer as described in the Indenture and any Indenture Supplement.



     Section 9.07 Further Assurances. The Transferor and the Servicer agree to do and
perform, from time to time, any and all acts and to execute any and all further instruments
required or reasonably requested by the Owner Trustee and the Indenture Trustee more fully to
effect the purposes of this Agreement, including the execution of any financing statements or
continuation statements relating to the Receivables for filing under the provisions of the UCC of
any applicable jurisdiction.



     Section 9.08 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Owner Trustee, the Indenture Trustee or the Noteholders, any right,
remedy, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided under this Agreement are
cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law.



     Section 9.09 Counterparts. This Agreement may be executed in two or more counterparts
(and by different parties on separate counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.



     Section 9.10 Third-Party Beneficiaries. This Agreement will inure to the benefit of
and be binding upon the parties hereto, the Indenture Trustee, the Owner Trustee, the Noteholders,
any Series Enhancer and their respective successors and permitted assigns. Except as otherwise
expressly provided in this Agreement, no other Person will have any right or obligation hereunder.



     Section 9.11 Actions by Noteholders.



     (a) Wherever in this Agreement a provision is made that an action may be taken or a Notice
given by Noteholders, such action or Notice may be taken or given by any Noteholder, unless such
provision requires a specific percentage of Noteholders.



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



     Section 9.12 Rule 144A Information. For so long as any of the Notes of any Series or
Class are “restricted securities” within the meaning of Rule 144(a)(3) under
the Securities Act, each of the Transferor, the Owner Trustee, the Indenture Trustee, the Servicer
and any Series Enhancer agree to cooperate with each other to provide to any Noteholders of such
Series or Class and to any prospective purchaser of Notes designated by such Noteholder, upon the
request of such Noteholder or prospective purchaser, any information required to be provided



59









 







to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4)
under the Securities Act.



     Section 9.13 Merger and Integration. Except as specifically stated otherwise herein,
this Agreement sets forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or supplemented except as provided herein.



     Section 9.14 Headings. The headings herein are for purposes of reference only and
shall not otherwise affect the meaning or interpretation of any provision hereof.



     Section 9.15 Certain Commercial Law Representations and Warranties. The Transferor
hereby makes the following representations and warranties. Such representations and warranties
shall survive until the termination of this Agreement. Such representations and warranties shall
be deemed made as of the date that the Receivables are transferred to the Trust, but shall not be
waived by any of the parties to this Agreement unless the Rating Agency Condition is satisfied.



     (a) This Agreement creates a valid and continuing security interest (as defined in the
applicable UCC) in favor of the Trust in the Receivables described in Section 2.01 of this
Agreement or in Section 3(a) of any Assignment, which security interest is prior to all other
liens, and is enforceable as such against creditors of and purchasers from the Transferor.



     (b) The Receivables constitute “accounts” or “general intangibles” within the meaning of the
applicable UCC.



     (c) At the time of its grant of any security interest in the Receivables pursuant to this
Agreement or an Assignment, the Transferor owned and had good and marketable title to the
Receivables free and clear of any lien, claim or encumbrance of any Person.



     (d) The Transferor has caused or will have caused, within ten (10) days of the initial
execution of this Agreement and each Assignment, the filing of all appropriate financing statements
in the proper filing office in the appropriate jurisdictions under applicable law in order to
perfect the security interest in the Receivables granted to the Trust pursuant to this Agreement or
such Assignment.



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



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     Section 9.16 Nonpetition Covenants.



     (a) Notwithstanding any prior termination of this Agreement, none of the Transferor, the
Servicer, the Owner Trustee, or the Indenture Trustee shall, prior to the date which is one year
and one day after the termination of this Agreement, with respect to the Issuer acquiesce, petition
or otherwise invoke or cause the Issuer to invoke the process of any court or governmental
authority for the purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect or appointing a
receiver, conservator, liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer; provided, however, that this subsection 9.16(a) shall not
operate to preclude any remedy described in Article V of the Indenture.



     (b) Notwithstanding any prior termination of this Agreement, none of the Trust, the Servicer,
the Owner Trustee, or the Indenture Trustee shall, prior to the date which is one year and one day
after the termination of this Agreement, with respect to the Issuer acquiesce, petition or
otherwise invoke or cause the Transferor to invoke the process of any court or governmental
authority for the purpose of commencing or sustaining a case against the Transferor under any
federal or state bankruptcy, insolvency or other similar law now or hereafter in effect or
appointing a receiver, conservator, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Transferor or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Transferor; provided, however, that this subsection 9.16(b)
shall not operate to preclude any remedy described in Article V of the Indenture.



     Section 9.17 Regulation AB. Each of the Transferor, the Servicer, Subservicer and the
Owner Trustee acknowledges and agrees that the purpose of this Section 9.17 is to facilitate
compliance by the Transferor with the provisions of Regulation AB and related rules and regulations
of the Commission. Each of the Servicer, Subservicer and the Owner Trustee acknowledges that
interpretations of the requirements of Regulation AB may change over time, whether due to
interpretive guidance provided by the Commission or its staff, consensus among participants in the
asset-backed securities markets, advice of counsel, or otherwise, and agrees hereby to comply with
reasonable requests made by the Transferor or the Servicer in good faith for delivery of
information under these provisions on the basis of evolving interpretations of Regulation AB. The
Servicer, Subservicer and the Owner Trustee shall cooperate in good faith with the Transferor and
the Issuer to deliver to the Transferor and the Issuer (including the Servicer and any other
assignees or designees) any and all statements, reports, certifications, records and any other
reasonable information necessary in the good faith determination of the Transferor to permit the
Transferor to comply with the provisions of Regulation AB, together with such disclosures relating
to the Servicer, Subservicer, the Owner Trustee and the Receivables, or the servicing of the
Receivables, reasonably believed by the Transferor or the Servicer to be necessary in order to
effect such compliance.



[END OF ARTICLE IX]




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ARTICLE X




ADMINISTRATION PROVISIONS




          Section 10.01 Administrative Duties.




          (a) Duties With Respect to the Transaction Documents. The Servicer shall perform all
its duties and the duties of the Issuer under the Transaction Documents. In addition, the Servicer
shall consult with the Owner Trustee as the Servicer deems appropriate regarding the duties of the
Issuer and the Owner Trustee under the Transaction Documents. The Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply
with the Issuer’s or the Owner Trustee’s duties under the Transaction Documents. The Servicer
shall prepare for execution by the Issuer or shall cause the preparation by other appropriate
Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to the Transaction Documents. In
furtherance of the foregoing, the Servicer shall take all necessary action that is the duty of the
Issuer to take pursuant to the Indenture, including, without limitation, pursuant to Sections 2.03,
2.04, 2.05, 2.06, 2.07, 2.08, 2.09(a), 2.10, 2.11, 2.12(e), 2.15, 2.16, 3.03, 3.04, 3.05, 3.06,
3.07(b), 3.07(d), 3.09, 3.10, 3.19, 4.01, 5.05, 6.08, 6.10, 7.01, 7.03, 8.08, 10.01, 10.02, 10.03,
10.06, 12.01(a), 12.01(b), 12.05 and 12.06.




          (b) Duties With Respect to the Issuer. (i) In addition to the duties of the Servicer
set forth in this Agreement or any of the Transaction Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee, or shall cause the
preparation by other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer or the Owner Trustee, to prepare,
file or deliver pursuant to this Agreement or any of the Transaction Documents or under state or
federal tax and securities laws (including, without limitation, any certification required by
13a-14(d) or 15d-14(d) of the Rules and Regulations promulgated under the Exchange Act), and shall
take all appropriate action that it is the duty of the Issuer to take pursuant to this Agreement or
any of the Transaction Documents. In accordance with the directions of the Issuer or the Owner
Trustee, the Servicer shall administer, perform or supervise the performance of such other
activities in connection with the Trust Estate (including the Transaction Documents) as are not
covered by any of the foregoing provisions and as are expressly requested by the Issuer or the
Owner Trustee and are reasonably within the capability of the Servicer.





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




          (iii) The Servicer shall perform the duties of the Servicer specified in Section 9.02 of
the Trust Agreement required to be performed in connection with the



62









 







resignation or removal of the Owner Trustee, and any other duties expressly required to
be performed by the Servicer under this Agreement or any of the Transaction Documents.




          (iv) In carrying out the foregoing duties or any of its other obligations under this
Agreement, the Servicer may enter into transactions with or otherwise deal with any of its
Affiliates; provided, however, that the terms of any such transactions or dealings shall be
in accordance with any directions received from the Issuer and shall be, in the Servicer’s
opinion, no less favorable to the Issuer in any material respect.



          (c) Tax Matters. The Servicer shall prepare and file, or cause to be prepared and
filed, all required tax returns, tax elections, financial statements and such annual or other
reports of the Issuer as are necessary for preparation of tax reports, including, without
limitation, Form 1099. All tax returns will be signed by the Issuer.




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





               (i) the initiation of any claim or lawsuit by the Issuer and the compromise of any
action, claim or lawsuit brought by or against the Issuer;




               (ii) the appointment of successor Note Registrars, successor Paying Agents and
successor Indenture Trustees pursuant to the Indenture or the consent to the assignment by
the Note Registrar, Paying Agent or Indenture Trustee, as the case may be, of its
obligations under the Indenture; or




               (iii) the removal of the Indenture Trustee.



          (e) Exceptions. Notwithstanding anything to the contrary in this Agreement, except as
expressly provided herein or in the Transaction Documents, the Servicer, in its capacity hereunder,
shall not be obligated to (1) make any payments to the Noteholders or the Transferor under the
Transaction Documents, (2) sell any of the assets of the Trust, (3) take any other action that the
Issuer directs the Servicer not to take on its behalf or (4) assume any indemnification obligation
of any other Person in connection with its duties hereunder.




          (f) Neither the Indenture Trustee nor any successor Servicer shall be responsible for the
performance of any obligations or duties of the predecessor Servicer under this Section 10.01, but
such duties shall remain the responsibility of, and continue to be performed by, HSBC Finance
Corporation.




          Section 10.02 Records. The Servicer shall maintain appropriate books of account and
records relating to services performed under this Agreement, which books of account and records
shall be accessible for inspection by the Issuer and the Indenture Trustee at any time during
normal business hours.




63









 








     Section 10.03 Additional Information to be Furnished to the Trust. The Servicer shall
furnish to the Owner Trustee and the Indenture Trustee, from time to time, such additional
information regarding the Trust Estate as such Person shall reasonably request.



[END OF ARTICLE X]




64









 








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



	 	 	 	 	 	 	 
	 	 	HSBC FUNDING (USA) INC. V, Transferor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven H. Smith
 

Name: Steven H. Smith
	 	 
	 

	 	 	 	Title: Vice President and Assistant Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC FINANCE CORPORATION,	 	 
	 	 	Servicer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William H. Kesler
 

Name: William H. Kesler
	 	 
	 

	 	 	 	Title: Senior Vice President – Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee on behalf of
the HSBC PRIVATE LABEL CREDIT CARD
MASTER NOTE TRUST (USA) I	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Rachel L. Simpson
 

Name: Rachel L. Simpson
	 	 
	 

	 	 	 	Title: Sr. Financial Services Officer	 	 






	 	 	 	 	 
	ACKNOWLEDGED AND ACCEPTED WITH	 	 
	RESPECT TO SECTIONS 5.07 AND 9.17 ONLY:	 	 
	 
	 	 	 	 
	HSBC PRIVATE LABEL CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ James Connaughton
 

Name: James Connaughton
	 	 
	 

	 	Title: Executive Vice President	 	 






65









 






EXHIBIT A




FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS




(As required by Section 2.09 of

the Amended and Restated Transfer and Servicing Agreement)




     ASSIGNMENT No.                      OF RECEIVABLES IN
ADDITIONAL ACCOUNTS, dated as of
                                        
,1 by and among HSBC FUNDING (USA) INC. V, a Delaware corporation, as
Transferor (the “Transferor” ), HSBC FINANCE CORPORATION, a Delaware
corporation, as Servicer (the “Servicer” ), and WILMINGTON TRUST
COMPANY, not in its individual capacity but solely as owner trustee (the “Owner
Trustee” ) of the HSBC PRIVATE LABEL CREDIT CARD MASTER NOTE TRUST (USA) I (the
“Trust” ), a Delaware common law trust, pursuant to the Amended and
Restated Transfer and Servicing Agreement referred to below.



WITNESSETH:




     WHEREAS, the Transferor, the Servicer and the Owner Trustee are parties to the Amended and
Restated Transfer and Servicing Agreement dated as of August 11, 2006 (as amended and supplemented,
the “Agreement” );



     WHEREAS, pursuant to the Agreement, the Transferor wishes to designate Additional Accounts to
be included as Accounts and to convey the Receivables of such Additional Accounts, whether now
existing or hereafter created, to the Owner Trustee on behalf of the Trust; and



     WHEREAS, the Owner Trustee on behalf of the Trust is willing to accept such designation and
conveyance subject to the terms and conditions hereof;



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



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



     “Addition Date” shall mean, with respect to the Additional
Accounts designated hereby,                     , ___.



     “Additional Cut-Off Date” shall mean, with respect to the
Additional Accounts designated hereby,                     , ___.



     2. Designation of Additional Accounts. On or before the Required Delivery Date, the
Transferor will deliver to the Owner Trustee on behalf of the Trust a computer file, microfiche
list or printed list containing a true and complete schedule identifying all additional





 




			
	1	 	To be dated as of the applicable Addition
Date.




A-1









 









accounts designated hereby (the “Additional Accounts”) specifying for each such Account, as of
the Additional Cut-Off Date, its account number, the aggregate amount outstanding in such Account
and the aggregate amount of Principal Receivables outstanding in such Account, which computer file,
microfiche list or printed list shall be marked as Schedule 1 to this Assignment, is hereby
incorporated into and made a part of this Assignment and shall supplement Schedule 1 to the
Agreement. The type of revolving credit accounts designated hereunder as Additional Accounts are
permitted to be designated as Automatic Additional Accounts.




     3. Conveyance of Receivables. (a) the Transferor does hereby sell, transfer, assign,
set over and otherwise convey, without recourse except as set forth in the Transfer and Servicing
Agreement, to the Owner Trustee on behalf of the Trust, all its right, title and interest in, to
and under the Receivables of such Additional Accounts existing on the Additional Cut-Off Date and
thereafter created from time to time until the termination of the Trust, all Interchange and
Recoveries related thereto, all monies due or to become due and all amounts received or receivable
with respect thereto and all proceeds (including “proceeds” as defined in the
UCC) thereof. The foregoing does not constitute and is not intended to result in the creation or
assumption by the Trust, the Owner Trustee, the Indenture Trustee, any Noteholders or any Series
Enhancer of any obligation of the Servicer, the Transferor or any other Person in connection with
the Accounts, the Receivables or under any agreement or instrument relating thereto, including any
obligation to Obligors, merchant banks, merchants clearance systems, VISA, MasterCard or insurers.



     (b) The Transferor agrees to record and file, at its own expense, financing statements (and
continuation statements when applicable) with respect to the Receivables existing on the Additional
Cut-Off Date and thereafter created in Additional Accounts, meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the sale and assignment of its interest in such Receivables to the Owner Trustee on
behalf of the Trust, and to deliver a file-stamped copy of each such financing statement or other
evidence of such filing to the Owner Trustee on or prior to the Addition Date. The Owner Trustee
shall be under no obligation whatsoever to file such financing or continuation statements or to
make any other filing under the UCC in connection with such sale and assignment.



     (c) In connection with such sale, the Transferor further agrees, at its own expense, on or
prior to the date of this Assignment, to indicate in the appropriate computer files that
Receivables created in connection with the Additional Accounts and designated hereby have been
conveyed to the Owner Trustee on behalf of the Trust pursuant to the Agreement and this Assignment.



     (d) The Transferor does hereby grant to the Owner Trustee on behalf of the Trust a security
interest in all of its right, title and interest, whether now owned or hereafter acquired, in and
to the Receivables of the Additional Accounts existing on the Additional Cut-Off Date and
thereafter created from time to time until the termination of the Trust, all Interchange, if any,
and Recoveries related thereto, all monies due or to become due and all amounts received or
receivable with respect thereto and all “proceeds” (including
“proceeds” as defined in the UCC) thereof. This Assignment constitutes a
security agreement under the UCC.



A-2









 





          4. Acceptance by Owner Trustee on Behalf of the Trust. The Owner Trustee on behalf of
the Trust hereby acknowledges its acceptance of all right, title and interest to the property, now
existing and hereafter created, conveyed to the Owner Trustee on behalf of the Trust pursuant to
Section 3 of this Assignment. The Trust further acknowledges that, prior to or simultaneously with
the execution and delivery of this Assignment, the Transferor delivered to the Owner Trustee the
computer file, microfiche list or printed list described in section 2 of this Assignment.




          5. Representations and Warranties of the Transferor. The Transferor hereby represents
and warrants to the Owner Trustee on behalf of the trust, as of the date of this Assignment and as
of the Addition Date that:





               (a) Legal Valid and Binding Obligation. This Assignment constitutes a legal,
valid and binding obligation of the Transferor enforceable against the Transferor in
accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors’ rights in general and except as
such enforceability may be limited by general principles of equity (whether considered in a
suit at law or in equity);




               (b) Eligibility of Accounts. As of the Additional Cut-Off Date, each
Additional Account designated hereby is an Eligible Account;




               (c) Insolvency. As of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the Transferor has occurred and the transfer by
the Transferor of Receivables arising in the Additional Accounts to the Trust has not been
made in contemplation of the occurrence thereof;




               (d) Amortization Event; Event of Default. The Transferor reasonably believes
that (A) the addition of the Receivables arising in the Additional Accounts will not, based
on the facts known to the Transferor, then or thereafter cause an Amortization Event or
Event of Default to occur with respect to any Series and (B) no selection procedure was
utilized by the Transferor which would result in the selection of Additional Accounts (from
among the available Eligible Accounts available to the Transferor) that would be materially
adverse to the interests of the Noteholders of any Series as of the Addition Date;




               (e) Security Interest. This Assignment constitutes a valid sale, transfer and
assignment to the Trust of all right, title and interest, whether now owned or hereafter
acquired, of the Transferor in the Receivables existing on the Additional Cut-Off Date and
thereafter created in the Additional Accounts, all Interchange, if any, and Recoveries
related thereto, all monies due or to become due and all amounts received or receivable with
respect thereto and the “proceeds” (including
“proceeds” as defined in the UCC) thereof, or, if this Assignment does
not constitute a sale of such property, it constitutes a grant of a “security
interest” (as defined in the UCC) in such property to the Owner Trustee on behalf
of the Trust, which, in the case of existing Receivables and the proceeds thereof, is
enforceable upon execution and delivery of this Assignment, and



A-3









 







which will be enforceable with respect to such Receivables hereafter created and the
proceeds thereof upon such creation. Upon the filing of the financing statements described
in Section 3 of this Assignment and, in the case of the Receivables hereafter created and
the proceeds thereof, upon the creation thereof, the Trust shall have a first priority
perfected security or ownership interest in such property;




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




               (g) No Proceedings. There are no proceedings or investigations, pending or, to
the best knowledge of the Transferor, threatened against the Transferor before any court,
regulatory body, administrative agency or other tribunal or governmental instrumentality (i)
asserting the invalidity of this Assignment, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Assignment, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Transferor, would materially and adversely
affect the performance by the Transferor of its obligations under this Assignment or (iv)
seeking any determination or ruling that would materially and adversely affect the validity
or enforceability of this Assignment; and




               (h) All Consents. All authorizations, consents, orders or approvals of any
court or other governmental authority required to be obtained by the Transferor in
connection with the execution and delivery of this Assignment by the Transferor and the
performance of the transactions contemplated by this Assignment by the Transferor, have been
obtained.



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




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




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




A-4









 








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



	 	 	 	 	 	 	 
	 	 	HSBC FUNDING (USA) INC. V, Transferor,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC FINANCE CORPORATION,	 	 
	 	 	Servicer,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee on behalf of
the HSBC PRIVATE LABEL CREDIT CARD
MASTER NOTE TRUST (USA) I, Issuer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






A-5









 






EXHIBIT B




FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED ACCOUNTS




(As required by Section 2.10 of

the Amended and Restated Transfer and Servicing Agreement)




     REASSIGNMENT No.
                                        
 OF RECEIVABLES dated as of
                                        
,1 by and among
HSBC FUNDING (USA) INC. V, a Delaware corporation, as Transferor (the
“Transferor” ), HSBC FINANCE CORPORATION, a Delaware corporation, as
Servicer and WILMINGTON TRUST COMPANY, not in its individual capacity but solely as owner trustee
(the “Owner Trustee” ) of the HSBC PRIVATE LABEL CREDIT CARD MASTER NOTE
TRUST (USA) I, (the “Trust” ), a Delaware common law trust, pursuant to
the Amended and Restated Transfer and Servicing Agreement referred to below.



WITNESSETH:




          WHEREAS, the Transferor, the Servicer and the Owner Trustee are parties to the Amended and
Restated Transfer and Servicing Agreement dated as of August 11, 2006 (as amended and supplemented,
the “Agreement” );




          WHEREAS, pursuant to the Agreement, the Transferor wishes to remove from the Trust all
Receivables owned by the Owner Trustee on behalf of the Trust in certain designated Accounts and to
cause the Owner Trustee on behalf of the Trust to reconvey the Receivables of such Removed
Accounts, whether now existing or hereafter created to the Transferor; and




          WHEREAS, the Owner Trustee on behalf of the Trust is willing to accept such designation and to
reconvey the Receivables in the Removed Accounts subject to the terms and conditions hereof;




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




          1. Defined Terms. All terms defined in the Agreement and used herein shall have such
defined meanings when used herein, unless otherwise defined herein.





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



          2. Designation of Removed Accounts. On or before the Required Delivery Date, the
Transferor will deliver to the Owner Trustee a computer file, microfiche list or printed list
containing a true and complete schedule identifying all Accounts (the “Removed Accounts”)
the Receivables of which are being removed from the Trust, specifying for each such Account, as of
the Removal Date, its account number, the aggregate amount outstanding in such Account and the
aggregate amount of Principal Receivables in such Account, which computer file,






 




			
	1	 	To be dated as of the Removal Date.




B-1









 









microfiche list or printed list shall be marked as Schedule 1 to this Reassignment, is hereby
incorporated into and made a part of this Reassignment and shall supplement Schedule 1 to the
Agreement.




          3. Conveyance of Receivables. (a) The Owner Trustee on behalf of the Trust does
hereby transfer, assign, set over and otherwise convey to the Transferor, without recourse, on and
after the Removal Date, all right, title and interest of the Owner Trustee and the Trust in, to and
under the Receivables existing at the close of business on the Removal Date and thereafter created
from time to time in the Removed Accounts designated hereby, all Interchange and Recoveries related
thereto, all monies due or to become due and all amounts received or receivable with respect
thereto and all proceeds thereof.




          (b) In connection with such transfer, the Owner Trustee agrees to execute and deliver to the
Transferor on or prior to the date this Reassignment is delivered, applicable termination
statements prepared by the Transferor with respect to the Receivables existing at the close of
business on the Removal Date and thereafter created from time to time in the Removed Accounts
reassigned hereby and the proceeds thereof evidencing the release by the Owner Trustee and the
Trust of its interest in the Receivables in the Removed Accounts, and meeting the requirements of
applicable state law, in such manner and such jurisdictions as are necessary to terminate such
interest.




          4. Representations and Warranties of the Transferor. The Transferor hereby represents
and warrants to the Owner Trustee and the Trust as of the Removal Date:





          (a) Legal, Valid and Binding Obligation. This Reassignment constitutes a
legal, valid and binding obligation of the Transferor enforceable against the Transferor, in
accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors’ rights in general and except as
such enforceability may be limited by general principles of equity (whether considered in a
suit at law or in equity).




          (b) List of Removed Accounts. The list of Removed Accounts delivered pursuant
to subsection 2.10(a)(ii) of the Agreement, as of the Removal Date, is true and complete in
all material respects.



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




          6. Counterparts. This Reassignment may be executed in two or more counterparts, and
by different parties on separate counterparts, each of which shall be an original, but all of which
shall constitute one and the same instrument.




          7. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE





B-2









 







OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.




B-3









 








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



	 	 	 	 	 	 	 
	 	 	HSBC FUNDING (USA) INC. V, Transferor,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC FINANCE CORPORATION,	 	 
	 	 	Servicer,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee on behalf of
the HSBC PRIVATE LABEL CREDIT CARD
MASTER NOTE TRUST (USA) I, Issuer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






B-4









 






EXHIBIT C-1




SERVICER COMPLIANCE CERTIFICATE

PURSUANT TO ITEM 1123 OF REGULATION AB UNDER THE

SECURITIES EXCHANGE ACT OF 1934




Date:                    




     Re: HSBC Private Label Credit Card Master Note Trust (USA) I



     I, [                    ],
[                                       
 ] of
[                                       
 ] (the “Company”), pursuant to Item
1123 of Regulation AB under the Securities Act of 1934, as amended, and Section 3.05(a) of the
Amended and Restated Transfer and Servicing Agreement, dated as of August 11, 2006 (as amended and
supplemented, the “Agreement” ), among HSBC Funding (USA) Inc. V, as
transferor, the Company, as servicer, and Wilmington Trust Company, as owner trustee of HSBC
Private Label Credit Card Master Note Trust (USA) I, hereby certify that:




	 	1.	 	A review of the activities of the Company from [___, 200_] through December
31, 200[_] and of its performance under the Agreement has been made under my
supervision; and
	 
	 	2.	 	To the best of my knowledge, based on my review, the Company has fulfilled all
of its obligations under the Agreement in all material respects throughout the
reporting period referred to above except as set forth below:





               [NONE]



C-1-1









 





               IN WITNESS WHEREOF, I have signed this certificate this [___] day of [___, 200___].



	 	 	 	 	 	 	 
	 	 	[                                                            ],	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






C-1-2









 






EXHIBIT C-2




FORM OF ANNUAL SERVICER’S CERTIFICATE




(To be delivered on or before March 31 of

each calendar year beginning with March 31, 2007,

pursuant to Section 3.05(b) of the Amended and Restated Transfer and

Servicing Agreement referred to below)




HSBC PRIVATE LABEL CREDIT CARD MASTER NOTE TRUST (USA) I




     The undersigned, a duly authorized representative of HSBC Finance Corporation, as Servicer
( “HSBC Finance Corporation” ), pursuant to Section 3.05(b) of the
Amended and Restated Transfer and Servicing Agreement, dated as of August 11, 2006 (as amended and
supplemented, the “Agreement” ), among HSBC Funding (USA) Inc. V, as
transferor, HSBC Finance Corporation, and Wilmington Trust Company, as Owner Trustee of HSBC
Private Label Credit Card Master Note Trust (USA) I, does hereby certify that:



     1. A review of the activities of the Servicer from
                    , 200___through December 31,
                     and
of the performance of the Servicer under the Agreement has been made under my supervision.



     2. To the best of my knowledge, based on such review, the Servicer has fulfilled its
obligations under the Agreement in all material respects throughout the reporting period referred
to above, except as set forth below:



     [NONE]



C-2-1









 





     IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this ___day of
                                        , 20___.



	 	 	 	 	 	 	 
	 	 	HSBC FINANCE CORPORATION,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 






C-2-2









 






EXHIBIT C-3




REPORT ON COMPLIANCE WITH APPLICABLE SERVICING CRITERIA

PURSUANT TO ITEM 1122 OF REGULATION AB UNDER THE

SECURITIES EXCHANGE ACT OF 1934




	 	 	 	 	 
	 

	 	Date:	 	 
	 
	 	 	 	 
	 

	 	Re:
	 	HSBC Private Label Credit Card Master Note Trust (USA) I






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



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



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



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



	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 






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Schedule I




	 	 	 	 	 
	Servicing Criteria
	 	 	 	 	Applicable
	Reference	 	Criteria	 	Servicing Criteria
	 

	 	General Servicing Considerations	 	 
	 
	 	 	 	 
	1122(d)(1)(i)

	 	Policies and procedures are instituted to monitor any performance or
other triggers and events of default in accordance with the transaction
agreements.	 	 
	 
	 	 	 	 
	1122(d)(1)(ii)

	 	If any material servicing activities are outsourced to third
parties, policies and procedures are instituted to monitor the third
party’s performance and compliance with such servicing activities.	 	 
	 
	 	 	 	 
	1122(d)(1)(iii)

	 	Any requirements in the transaction agreements to maintain a back-up
servicer for the credit card receivables are maintained.	 	 
	 
	 	 	 	 
	1122(d)(1)(iv)

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

	 	Cash Collection and Administration	 	 
	 
	 	 	 	 
	1122(d)(2)(i)

	 	Payments on credit card receivables are deposited into the
appropriate custodial bank accounts and related bank clearing accounts
no more than two business days following receipt, or such other number
of days specified in the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(2)(ii)

	 	Disbursements made via wire transfer on behalf of an obligor or to
an investor are made only by authorized personnel.	 	 
	 
	 	 	 	 
	1122(d)(2)(iii)

	 	Advances of funds or guarantees regarding collections, cash flows or
distributions, and any interest or other fees charged for such advances,
are made, reviewed and approved as specified in the transaction
agreements.	 	 
	 
	 	 	 	 
	1122(d)(2)(iv)

	 	The related accounts for the transaction, such as cash reserve
accounts or accounts established as a form of overcollateralization, are
separately maintained (e.g., with respect to commingling of cash) as set
forth in the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(2)(v)

	 	Each custodial account is maintained at a federally insured
depository institution as set forth in the transaction agreements. For
purposes of this criterion, “federally insured depository institution”
with respect to a foreign financial institution means a foreign
financial institution that meets the requirements of Rule 13k-1(b)(1)
under the Securities Exchange Act of 1934, as amended.	 	 
	 
	 	 	 	 
	1122(d)(2)(vi)

	 	Unissued checks are safeguarded so as to prevent unauthorized access.	 	 
	 
	 	 	 	 
	1122(d)(2)(vii)

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






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	Servicing Criteria
	 	 	 	 	Applicable
	Reference	 	Criteria	 	Servicing Criteria
	 

	 	Investor Remittances and Reporting	 	 
	 
	 	 	 	 
	1122(d)(3)(i)

	 	Reports to investors, including those to be filed with the SEC, are
maintained in accordance with the transaction agreements and applicable
SEC requirements. Specifically, such reports (A) are prepared in
accordance with timeframes and other terms set forth in the transaction
agreements; (B) provide information calculated in accordance with the
terms specified in the transaction agreements; (C) are filed with the
SEC as required by its rules and regulations; and (D) agree with
investors’ or the trustee’s records as to the total unpaid principal
balance and number of credit card accounts serviced by the servicer.	 	 
	 
	 	 	 	 
	1122(d)(3)(ii)

	 	Amounts due to investors are allocated and remitted in accordance
with timeframes, distribution priority and other terms set forth in the
transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(3)(iii)

	 	Disbursements made to an investor are posted within two business
days to the servicer’s investor records, or such other number of days
specified in the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(3)(iv)

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

	 	Pool Asset Administration	 	 
	 
	 	 	 	 
	1122(d)(4)(i)

	 	Collateral or security on credit card accounts is maintained as
required by the transaction agreements or related credit card documents.	 	 
	 
	 	 	 	 
	1122(d)(4)(ii)

	 	Credit card accounts and related documents are safeguarded as
required by the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(iii)

	 	Any additions, removals or substitutions to the pool are made,
reviewed and approved in accordance with any conditions or requirements
in the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(iv)

	 	Payments on credit card receivables, including any payoffs, made in
accordance with the related credit card documents are posted to the
servicer’s obligor records maintained no more than two business days
after receipt, or such other number of days specified in the transaction
agreements, and allocated to principal, interest or other items (e.g.,
escrow) in accordance with the related credit card documents.	 	 
	 
	 	 	 	 
	1122(d)(4)(v)

	 	The servicer’s records regarding the credit card accounts agree with
the servicer’s records with respect to an obligor’s unpaid principal
balance.	 	 
	 
	 	 	 	 
	1122(d)(4)(vi)

	 	Changes with respect to the terms or status of an obligor’s credit
card account (e.g restructurings) are made, reviewed and approved by
authorized personnel in accordance with the transaction agreements and
related credit card documents.	 	 
	 
	 	 	 	 
	1122(d)(4)(vii)

	 	Loss mitigation or recovery actions (e.g., forbearance plans,
modifications and deeds in lieu of foreclosure, foreclosures and
repossessions, as applicable) are initiated, conducted and concluded in
accordance with the timeframes or other requirements established by the
transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(viii)

	 	Records documenting collection efforts are maintained during the
period a credit card account is delinquent in accordance with the
transaction agreements. Such records are maintained on at least a
monthly basis, or such other period specified in the transaction
agreements, and describe the entity’s activities in monitoring
delinquent credit card accounts including, for example, phone calls,
letters and payment rescheduling plans in cases where delinquency is
deemed temporary (e.g., illness or unemployment).	 	 
	 
	 	 	 	 
	1122(d)(4)(ix)

	 	Adjustments to interest rates or rates of return for credit card
accounts with variable rates are computed based on the related credit
card documents.	 	 






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	Servicing Criteria
	 	 	 	 	Applicable
	Reference	 	Criteria	 	Servicing Criteria
	1122(d)(4)(x)

	 	Regarding any funds held in trust for an obligor (such as escrow
accounts): (A) such funds are analyzed, in accordance with the obligor’s
credit card documents, on at least an annual basis, or such other period
specified in the transaction agreements; (B) interest on such funds is
paid, or credited, to obligors in accordance with applicable credit card
documents and state laws; and (C) such funds are returned to the obligor
within 30 calendar days of full repayment of the related credit card
account, or such other number of days specified in the transaction
agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(xi)

	 	Payments made on behalf of an obligor (such as tax or insurance
payments) are made on or before the related penalty or expiration dates,
as indicated on the appropriate bills or notices for such payments,
provided that such support has been received by the servicer at least 30
calendar days prior to these dates, or such other number of days
specified in the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(xii)

	 	Any late payment penalties in connection with any payment to be made
on behalf of an obligor are paid from the servicer’s funds and not
charged to the obligor, unless the late payment was due to the obligor’s
error or omission.	 	 
	 
	 	 	 	 
	1122(d)(4)(xiii)

	 	Disbursements made on behalf of an obligor are posted within two
business days to the obligor’s records maintained by the servicer, or
such other number of days specified in the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(xiv)

	 	Delinquencies, charge-offs and uncollectible accounts are recognized
and recorded in accordance with the transaction agreements.	 	 
	 
	 	 	 	 
	1122(d)(4)(xv)

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






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EXHIBIT D-1




FORM OF OPINION OF COUNSEL

WITH RESPECT TO ACCOUNTS




Provisions to be included in

Opinion of Counsel to be

delivered pursuant to

subsection 9.02(d)(ii) or (iii) of the Amended and Restated

Transfer and Servicing Agreement




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



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



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



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



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EXHIBIT D-2




PROVISIONS TO BE INCLUDED IN

ANNUAL OPINION OF COUNSEL




     The opinions set forth below may be subject to all the qualifications, assumptions,
limitations and exceptions taken or made in the Opinions of Counsel delivered on any applicable
Closing Date. Unless otherwise indicated, all capitalized terms used herein shall have the
meanings ascribed to them in the Amended and Restated Transfer and Servicing Agreement and in the
Assignment.



     1. The Amended and Restated Transfer and Servicing Agreement, together with the Assignments,
creates in favor of the Owner Trustee a security interest in the relevant Transferor’s
rights in the Receivables identified in Schedule 1 to the Amended and Restated Transfer and
Servicing Agreement. Such security interest is perfected and of first priority.



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SCHEDULE 1




List of Accounts




[Original list delivered to Owner Trustee]





Sch-1-1