Document:

Exhibit 4.2

 

EXECUTION COPY

 

 

AMENDED AND RESTATED

 

TRUST AGREEMENT

 

 

between

 

 

HSBC AUTO RECEIVABLES
CORPORATION

 

 

and

 

 

THE BANK OF NEW YORK

Owner Trustee

 

 

and

 

 

THE BANK OF NEW YORK
(DELAWARE)

Delaware Trustee

 

 

Dated as of July 27, 2005

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Capitalized Terms

  	
   

  
	
  Section 1.2.

  	
  Other Definitional Provisions

  	
   

  
	
  Section 1.3.

  	
  Action by or Consent of Noteholders and
  Certificateholders

  	
   

  
	
  Section 1.4.

  	
  Material Adverse Effect

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II Organization

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Name

  	
   

  
	
  Section 2.2.

  	
  Office

  	
   

  
	
  Section 2.3.

  	
  Purposes and Powers

  	
   

  
	
  Section 2.4.

  	
  Appointment of Owner Trustee and Delaware Trustee

  	
   

  
	
  Section 2.5.

  	
  Initial Capital Contribution of Owner Trust Estate

  	
   

  
	
  Section 2.6.

  	
  Declaration of Trust

  	
   

  
	
  Section 2.7.

  	
  Liability

  	
   

  
	
  Section 2.8.

  	
  Title to Owner Trust Estate

  	
   

  
	
  Section 2.9.

  	
  Situs of Owner Trust Estate

  	
   

  
	
  Section 2.10.

  	
  Representations and Warranties of the Depositor

  	
   

  
	
  Section 2.11.

  	
  Federal Income Tax Allocations

  	
   

  
	
  Section 2.12.

  	
  Covenants of the Depositor

  	
   

  
	
  Section 2.13.

  	
  Covenants of the Certificateholders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  Certificates and Transfer of Interests

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Initial Ownership

  	
   

  
	
  Section 3.2.

  	
  The Certificates

  	
   

  
	
  Section 3.3.

  	
  Authentication of Certificates

  	
   

  
	
  Section 3.4.

  	
  Registration of Transfer and Exchange of Certificates

  	
   

  
	
  Section 3.5.

  	
  Mutilated, Destroyed, Lost or Stolen Certificates

  	
   

  
	
  Section 3.6.

  	
  Persons Deemed Certificateholders

  	
   

  
	
  Section 3.7.

  	
  Access to List of Certificateholders’ Names and
  Addresses

  	
   

  
	
  Section 3.8.

  	
  Maintenance of Office or Agency

  	
   

  
	
  Section 3.9.

  	
  ERISA Restrictions

  	
   

  
	
  Section 3.10.

  	
  Securities Matters

  	
   

  
	
  Section 3.11.

  	
  Distributions

  	
   

  
	
  Section 3.12.

  	
  Certificate Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV Voting Rights
  and Other Actions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Prior Notice to Holders with Respect to Certain
  Matters

  	
   

  
	
  Section 4.2.

  	
  Action by Certificateholders with Respect to
  Certain Matters

  	
   

  
	
  Section 4.3.

  	
  Action by Certificateholders with Respect to
  Bankruptcy

  	
   

  
	
  Section 4.4.

  	
  Restrictions on Certificateholders’ Power

  	
   

  
	
  Section 4.5.

  	
  Majority Control

  	
   

  

 

 

	
  ARTICLE V Certain Duties

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Accounting and Records to the Noteholders,
  Certificateholders, the Internal Revenue Service and Others

  	
   

  
	
  Section 5.2.

  	
  Signature on Returns; Tax Matters Partner

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI Authority and Duties of Owner Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  General Authority

  	
   

  
	
  Section 6.2.

  	
  General Duties

  	
   

  
	
  Section 6.3.

  	
  Action upon Instruction

  	
   

  
	
  Section 6.4.

  	
  No Duties Except as Specified in
  this Agreement or in Instructions

  	
   

  
	
  Section 6.5.

  	
  No Action Except under Specified
  Documents or Instructions

  	
   

  
	
  Section 6.6.

  	
  Restrictions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII Concerning the Owner Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Acceptance of Trust and Duties

  	
   

  
	
  Section 7.2.

  	
  Furnishing of Documents

  	
   

  
	
  Section 7.3.

  	
  Representations and Warranties

  	
   

  
	
  Section 7.4.

  	
  Reliance; Advice of Counsel

  	
   

  
	
  Section 7.5.

  	
  Not Acting in Individual Capacity

  	
   

  
	
  Section 7.6.

  	
  Owner Trustee Not Liable for
  Certificates or Receivables

  	
   

  
	
  Section 7.7.

  	
  Owner Trustee May Own Certificates
  and Notes

  	
   

  
	
  Section 7.8.

  	
  Payments from Owner Trust Estate

  	
   

  
	
  Section 7.9.

  	
  Doing Business in Other
  Jurisdictions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII Compensation of Owner Trustee and Delaware Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Owner Trustee’s and Delaware
  Trustee’s Fees and Expenses

  	
   

  
	
  Section 8.2.

  	
  Indemnification

  	
   

  
	
  Section 8.3.

  	
  Payments to the Owner Trustee and
  Delaware Trustee

  	
   

  
	
  Section 8.4.

  	
  Non-recourse Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX Termination of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
  Termination of Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  X Successor Owner Trustees and Delaware Trustees and Additional Owner
  Trustees

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
  Eligibility Requirements for
  Owner Trustee and Delaware Trustee

  	
   

  
	
  Section 10.2.

  	
  Resignation or Removal of Owner
  Trustee or Delaware Trustee

  	
   

  
	
  Section 10.3.

  	
  Successor Owner Trustee or
  Delaware Trustee

  	
   

  
	
  Section 10.4.

  	
  Merger or Consolidation of Owner
  Trustee or Delaware Trustee

  	
   

  
	
  Section 10.5.

  	
  Appointment of Co-Trustee or
  Separate Trustee

  	
   

  

 

ii

 

	
  ARTICLE
  X-A Authority and Duties of Delaware Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10A.1.

  	
  Acceptance of Trust

  	
   

  
	
  Section 10A.2.

  	
  Duties of Delaware Trustee

  	
   

  
	
  Section 10A.3.

  	
  Representations and Warranties

  	
   

  
	
  Section 10A.4.

  	
  Not Acting in Individual
  Capacity

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI Miscellaneous

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
  Supplements and Amendments

  	
   

  
	
  Section 11.2.

  	
  No Legal Title to Owner Trust
  Estate in Certificateholders

  	
   

  
	
  Section 11.3.

  	
  Limitations on Rights of Others

  	
   

  
	
  Section 11.4.

  	
  Notices

  	
   

  
	
  Section 11.5.

  	
  Severability

  	
   

  
	
  Section 11.6.

  	
  Separate Counterparts

  	
   

  
	
  Section 11.7.

  	
  Assignments; Support Provider

  	
   

  
	
  Section 11.8.

  	
  Covenants of the Depositor

  	
   

  
	
  Section 11.9.

  	
  No Petition

  	
   

  
	
  Section 11.10.

  	
  No Recourse

  	
   

  
	
  Section 11.11.

  	
  Headings

  	
   

  
	
  Section 11.12.

  	
  GOVERNING LAW

  	
   

  
	
  Section 11.13.

  	
  Master Servicer

  	
   

  

 

EXHIBITS

 

	
  Exhibit
  A

  	
  Form of
  Certificate

  	
   

  
	
  Exhibit
  B

  	
  Form of
  Certificate of Trust

  	
   

  

 

iii

 

THIS AMENDED AND RESTATED TRUST AGREEMENT, dated as of
July 27, 2005, between HSBC AUTO RECEIVABLES CORPORATION, a Nevada corporation
(the “Depositor”), THE BANK OF NEW YORK, a New York banking corporation, as Owner
Trustee (the “Owner Trustee”) and THE BANK OF NEW YORK (DELAWARE), a Delaware
banking corporation, as Delaware Trustee (the “Delaware Trustee”), amends and
restates in its entirety that certain Trust Agreement, dated as of July 20,
2005, between the Depositor, the Owner Trustee and the Delaware Trustee.

 

ARTICLE I

 

Definitions

 

Section 1.1.            Capitalized
Terms.  For all purposes of this
Agreement, the following terms shall have the meanings set forth below:

 

“Administrator” shall mean HSBC Bank USA, National
Association, or its successors, not in its individual capacity but solely as
administrator under the Transaction Documents to which it is a party, and any
successor administrator thereunder.

 

“Agreement” shall mean this Amended and Restated Trust
Agreement, as the same may be amended and supplemented from time to time.

 

“Benefit Plan” shall have the meaning assigned to such
term in Section 3.9.

 

“Certificates” means, if the Depositor elects (i) to
evidence its interest in certificated form pursuant to Section 3.2, the
certificate substantially in the form of Exhibit A or (ii) to have its interest
be uncertificated pursuant to Section 3.2, such uncertificated interest.

 

“Certificate Majority” shall have the meaning assigned
to such term in Section 4.1.

 

“Certificate Paying Agent” means the Administrator.

 

“Certificate Register” and “Certificate Registrar”
shall mean the register mentioned and the registrar appointed pursuant to
Section 3.4.

 

“Certificate of Trust” shall mean the Certificate of
Trust in the form of Exhibit B which was filed on July 20, 2005 pursuant to
§ 3810(a) of the Statutory Trust Statute.

 

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

 

“Corporate Trust Office” shall mean, with respect to
the Owner Trustee, the office of the Owner Trustee located at 101 Barclay
Street, 8 West ABS, New York, New York 10286, and, with respect to the Delaware
Trustee, 502 White Clay Center, Route 273, P.O. Box 6973, Newark, Delaware
19711, or, in each case, at such other

 

 

address as the Owner Trustee or the Delaware Trustee,
as the case may be, may designate by notice to the Certificateholders and the
Depositor, or the principal corporate trust office of any successor Owner
Trustee or Delaware Trustee (the address of which the successor owner trustee or
Delaware trustee will notify the Certificateholders and the Depositor).

 

“Delaware Trustee” shall mean The Bank of New York
(Delaware), a Delaware banking corporation resident in Delaware, not in its
individual capacity but solely as Delaware Trustee under this Agreement, and
any successor Delaware Trustee hereunder.

 

“Depositor” shall mean HSBC Auto Receivables
Corporation in its capacity as Depositor hereunder.

 

“ERISA” shall have the meaning assigned to such term
in Section 3.9.

 

“Expenses” shall have the meaning assigned to such
term in Section 8.2.

 

“Holder” or “Certificateholder” shall mean a Person in
whose name a Certificate is registered on the Certificate Register.

 

“HSBC Finance” shall mean HSBC Finance Corporation.

 

“Indemnified Parties” shall have the meaning assigned
to such term in Section 8.2.

 

“Owner Trust Estate” shall mean all right, title and
interest of the Trust in and to the property and rights assigned to the Trust
pursuant to Article II of the Master Sale and Servicing Agreement, all funds on
deposit from time to time in the Trust Accounts and all other property of the
Trust from time to time, including any rights of the Owner Trustee and the
Trust pursuant to the Master Sale and Servicing Agreement and each Related
Document.

 

“Owner Trustee” shall mean The Bank of New York, a New
York banking corporation, not in its individual capacity but solely as Owner
Trustee under this Agreement, and any successor Owner Trustee hereunder.

 

“Percentage Interest” shall mean, with respect to a
Certificate, the portion of the interests in the Trust represented by a
Certificate, as reflected in the Certificate Register.

 

“Secretary of State” shall mean the Secretary of State
of the State of Delaware.

 

“Securities Act” shall have the meaning assigned to
such term in the Indenture.

 

2

 

“Series Trust Estate” shall mean the property granted
to the Indenture Trustee on behalf of the Trust pursuant to Section 1.02 of the
Series Supplement.

 

“Statutory Trust Statute” shall mean Chapter 38 of
Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq. as the
same may be amended from time to time.

 

“Treasury Regulations” shall mean regulations,
including proposed or temporary regulations, promulgated under the Code.  References herein to specific provisions of
proposed or temporary regulations shall include analogous provisions of final
Treasury Regulations or other successor Treasury Regulations.

 

“Trust” shall mean the trust established by this
Agreement.

 

Section 1.2.            Other
Definitional Provisions. 
(a)  Capitalized terms used herein and not otherwise defined
have the meanings assigned to them in the Master Sale and Servicing Agreement
or, if not defined therein, in the Indenture; provided  that, as
used herein, Series means only the Series of Notes and Series of Certificates
with respect to which the Trust is the Issuer and only such Series Trust
Estates included in the Owner Trust Estate.

 

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

 

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

 

(d)           The words “hereof,”
“herein,” “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; Section and Exhibit references contained in this Agreement
are references to Sections and Exhibits in or to this Agreement unless
otherwise specified; and the term “including” shall mean “including without
limitation.”

 

(e)           The
definitions contained in this Agreement 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.

 

Section 1.3.            Action
by or Consent of Noteholders and Certificateholders.  Whenever any provision of this Agreement
refers to action to be

 

3

 

taken, or consented to, by Noteholders or Certificateholders, such
provision shall be deemed to refer to the Certificateholder or Noteholder, as the
case may be, of record as of the Record Date immediately preceding the date on
which such action is to be taken, or consent given, by Noteholders or
Certificateholders.  Solely for the
purposes of any action to be taken, or consented to, by Noteholders, any Note
registered in the name of the Depositor or any Affiliate thereof shall be
deemed not to be outstanding; provided, however, that, solely for
the purpose of determining whether the Indenture Trustee is entitled to rely
upon any such action or consent, only Notes which the Owner Trustee or the
Indenture Trustee knows to be so owned shall be so disregarded.

 

Section 1.4.            Material
Adverse Effect.  Whenever a
determination is to be made under this Agreement as to whether a given event,
action, course of conduct or set of facts or circumstances could or would have
a material adverse effect on the Noteholders or Certificateholders (or any
similar or analogous determination), such determination shall be made without
taking into account the funds available from claims under any policy or other
Series Support.

 

ARTICLE II

 

Organization

 

Section 2.1.            Name.  There is hereby formed a trust to be known as
“HSBC Automotive Trust 2005-2”, in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.

 

Section 2.2.            Office.  The principal place of business of the Trust
for purposes of Delaware law shall be in care of the Delaware Trustee at the
Corporate Trust Office of the Delaware Trustee or at such other address as the Delaware
Trustee may designate by written notice to the Certificateholders and the
Depositor.  The Trust may establish
additional offices located at such place or places inside or outside the State
of Delaware as the Owner Trustee may designate from time to time by written
notice to the Certificateholders and the Depositor.  Initially, the Trust shall establish one such
additional office at the Corporate Trust Office of the Owner Trustee.

 

Section 2.3.            Purposes
and Powers.  (a)  The
purpose of the Trust is, and the Trust shall have the power and authority, to
engage in the following activities:

 

(i)            to issue the Notes
pursuant to the Indenture and the Series Supplement and the Certificates
pursuant to this Agreement and the Series Supplement, and to sell the Notes;

 

(ii)           with the proceeds of
the sale of the Notes, to fund the expense of obtaining any Series Support and
to pay the organizational, start-up and transactional expenses of the Trust and
to pay the balance to the Depositor pursuant to the Master Sale and Servicing
Agreement;

 

4

 

(iii)          with respect to the
Series Trust Estate, to assign, grant, transfer, pledge, mortgage and convey
the Series Trust Estate to the Indenture Trustee pursuant to the Indenture and
the Series Supplement for the benefit of the Secured Parties;

 

(iv)          to enter into and
perform its obligations under the Basic Documents and the Related Documents, in
each case, to which it is a party;

 

(v)           to acquire, hold and
manage the Owner Trust Estate;

 

(vi)          to make distributions on
the Certificates in accordance with their respective terms;

 

(vii)         to own Class SV
Preferred Stock of the Depositor;

 

(viii)        to engage in those
activities, including entering into agreements, that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith; and

 

(ix)           subject to compliance
with the Basic Documents and the Related Documents, to engage in such other
activities as may be required in connection with conservation of the Owner
Trust Estate and the making of distributions to the Certificateholders and the
Noteholders.

 

(b)           The Trust
is hereby authorized to engage in the foregoing activities.  The Trust shall not engage in any activity
other than in connection with the foregoing or other than as required or
authorized by the terms of this Agreement, the Basic Documents or any Related
Documents.

 

Section 2.4.            Appointment
of Owner Trustee and Delaware Trustee. 
The Depositor hereby appoints the Owner Trustee and the Delaware Trustee
as trustees of the Trust effective as of the date hereof, to have all the
respective rights, powers and duties set forth herein.  Notwithstanding
any provision of this Agreement to the contrary, the Delaware Trustee shall not
be entitled to exercise any powers, nor shall the Delaware Trustee have any of
the duties and responsibilities of the Owner Trustee or the Depositor described
in this Agreement.  The Delaware Trustee
shall be a trustee of the Issuer for the sole and limited purpose of fulfilling
the requirements of Section 3807 of the Statutory Trust Statute and shall have
no duties or responsibilities except for those expressly undertaken by it
herein.  In no event shall the Delaware
Trustee be liable for any act or failure to act or omission of the Owner
Trustee or the Depositor hereunder.

 

Section 2.5.            Initial
Capital Contribution of Owner Trust Estate. 
The Depositor hereby sells, assigns, transfers, conveys and sets over to
the Owner Trustee, on behalf of the Trust, as of the date hereof, the sum of
$1,000 and one share of Class SV Preferred Stock of the Depositor.  The Owner Trustee hereby acknowledges receipt
in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate.  The Depositor shall pay organizational
expenses of the Trust as they may arise.

 

5

 

Section 2.6.            Declaration
of Trust.  The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject to
the conditions set forth herein, on behalf of the Trust, for the use and
benefit of the Certificateholders, subject to the obligations of the Trust
under the Basic Documents.  It is the
intention of the parties hereto that the Trust constitute a statutory trust
under the Statutory Trust Statute and that this Agreement constitute the
governing instrument of such statutory trust. 
It is the intention of the parties hereto that, solely for federal income
tax purposes, the Trust shall be disregarded as an entity separate from the
Certificateholder; provided, however, that in the event
Certificates are owned by more than one Certificateholder, it is the intention
of the parties hereto that, solely for federal income tax purposes, the Trust
shall then be treated as a partnership and that, unless otherwise required by
appropriate tax authorities, only after such time the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Trust as a partnership for such tax
purposes.  Effective as of the date
hereof, the Owner Trustee shall have all rights, powers and duties set forth
herein and to the extent not inconsistent herewith, in the Statutory Trust
Statute with respect to accomplishing the purposes of the Trust.

 

Section 2.7.            Liability.  (a)  The Depositor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee or the Delaware Trustee, promptly reimburse the
Owner Trustee and/or the Delaware Trustee for any such expenses paid by the
Owner Trustee and/or the Delaware Trustee, as applicable.

 

(b)           No Holder,
other than to the extent set forth in clause (a), shall have any personal
liability for any liability or obligation of the Trust.

 

Section 2.8.            Title
to Owner Trust Estate. 
(a)  Legal title to all of the Owner Trust Estate shall be
vested at all times in the Trust as a separate legal entity except where
applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which case title shall
be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate
trustee, as the case may be.

 

(b)           The
holders of the Certificates shall not have legal title to any part of the
Series Trust Estate.  The Holders of the
Certificates shall be entitled to receive distributions with respect to their
undivided ownership interest therein in accordance with the terms hereof and
the Series Supplement.  No transfer, by
operation of law or otherwise, of any right, title or interest by any
Certificateholder of its ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Series Trust Estate.

 

Section 2.9.            Situs
of Owner Trust Estate.  The Trust
will be located in the State of Delaware and administered in the State of Delaware
and the State of New York.  All bank
accounts maintained by the Owner Trustee on behalf of the Trust shall be
located with the Certificate Paying Agent in the State of New York.  Payments will be received by the Certificate
Paying Agent on behalf of the Trust in New York and

 

6

 

payments will be made by the Trust from New York.  The Trust shall not have any employees in any
state other than Delaware; provided, however, that nothing herein
shall restrict or prohibit the Owner Trustee, the Master Servicer or any agent
of the Trust from having employees within or without the State of
Delaware.  The principal office of the
Trust will be at the Corporate Trust Office of the Owner Trustee.

 

Section 2.10.          Representations
and Warranties of the Depositor.  The
Depositor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and executing the
Certificates and Notes and upon which any Support Provider relies in providing
any Series Support.  Each of the
following representations and warranties shall be deemed to be made on each
date on which a Series Trust Estate is pledged under the Indenture.

 

(a)           Organization
and Good Standing.  The Depositor is
duly organized and validly existing as a Nevada corporation with power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted and is proposed to
be conducted pursuant to this Agreement and the Basic Documents.

 

(b)           Due
Qualification.  It is duly qualified
to do business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership
or lease of its property, the conduct of its business and the performance of
its obligations under this Agreement and the Basic Documents requires such
qualification and in which the failure to so qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
otherwise) of the Depositor.

 

(c)           Power
and Authority.  The Depositor has the
corporate power and authority to execute and deliver this Agreement and to
carry out its terms; the Depositor has full power and authority to sell and
assign the property to be sold and assigned to and deposited with the Trust;
the Depositor has duly authorized such sale, assignment and deposit to the
Trust by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the Depositor by all
necessary corporate action.

 

(d)           Binding
Obligations.  This Agreement, when
duly executed and delivered, shall constitute legal, valid and binding
obligations of the Depositor enforceable against the Depositor in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.

 

(e)           No
Consent Required.  To the best
knowledge of the Depositor, no consent, license, approval or authorization or
registration or declaration with, any Person or with any governmental
authority, bureau or agency is required in connection with the execution,
delivery or performance of this Agreement and the Related Documents, except

 

7

 

for such as have been obtained, effected or made or as to which a
failure to obtain, effect or make would not have a material adverse effect on
the business, properties, assets or condition (financial or other) of the
Depositor.

 

(f)            No Violation.  The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Depositor, or any material
indenture, agreement or other instrument to which the Depositor is a party or
by which it is bound; nor result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents or any applicable
Related Documents); nor violate any law or, to the best of the Depositor’s
knowledge, any order, rule or regulation applicable to the Depositor of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Depositor or
its properties, provided, however, that the Receivables will not
satisfy the Eligibility Criteria set forth in Schedule I to the Series
Supplement until the date on which such Receivables are transferred to the
Issuer.

 

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

 

Section 2.11.          Federal
Income Tax Allocations. 
(a)  For so long as the Trust has a single owner for federal
income tax purposes, it will, pursuant to Treasury Regulations promulgated
under section 7701 of the Code, be disregarded as an entity separate from the
Certificateholder for all federal income tax purposes.  Accordingly, for federal income tax purposes,
the Certificateholder will be treated as (i) owning all assets owned by the
Trust, (ii) having incurred all liabilities incurred by the Trust, and (iii)
all transactions between the Trust and the Certificateholder will be
disregarded.

 

(b)           Neither
the Owner Trustee nor any Certificateholder will, under any circumstances, and
at any time, make an election on IRS Form 8832 or otherwise, to classify the
Trust as an association taxable as a corporation for federal, state or any
other applicable tax purpose.

 

(c)           In the
event that the Trust has two or more equity owners for federal income tax
purposes, the Trust will be treated as a partnership.  At any such time that the Trust has two or
more equity owners, this Agreement will be amended, in

 

8

 

accordance with Section 11.1 herein, and appropriate provisions will be
added so as to provide for treatment of the Trust as a partnership.

 

Section 2.12.          Covenants
of the Depositor.  The Depositor
agrees and covenants for the benefit of the Owner Trustee and the Indenture
Trustee for the benefit of the Secured Parties, during the term of this
Agreement, and to the fullest extent permitted by applicable law, that:

 

(a)           (i) it
shall not create, incur or suffer to exist any indebtedness or (ii) engage in
any business, except (x) as permitted by its articles of incorporation and the
Related Documents and (y) in connection with a securitization transaction
(including warehousing transactions) and the related documents in which the
related indebtedness is issued pursuant to an indenture having a provision
substantially similar to Section 11.18 of the Indenture; provided, however,
that no other Series shall be issued under the Basic Documents so long as the
Notes are outstanding;

 

(b)           it shall
not, for any reason, institute proceedings for the Trust to be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against the Trust, or file a petition seeking or
consenting to reorganization or relief under any applicable federal or state
law relating to the bankruptcy of the Trust, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trust or a substantial part of the property of the Trust or
cause or permit the Trust to make any assignment for the benefit of creditors,
or admit in writing the inability of the Trust to pay its debts generally as
they become due, or declare or effect a moratorium on the debt of the Trust or
take any action in furtherance of any such action;

 

(c)           it shall
obtain from each counterparty to each Basic Document to which it or the Trust
is a party and each other agreement entered into on or after the date hereof to
which it or the Trust is a party, an agreement by each such counterparty that
prior to the occurrence of the event specified in Section 9.1(e) such
counterparty shall not institute against, or join any other Person in
instituting against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and

 

(d)           it shall
not, for any reason, withdraw or attempt to withdraw from this Agreement,
dissolve, institute proceedings for it to be adjudicated a bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of it or a substantial part
of its property, or make any assignment for the benefit of creditors, or admit
in writing its inability to pay its debts generally as they become due, or
declare or effect a moratorium on its debt or take any action in furtherance of
any such action.

 

9

 

Section 2.13.          Covenants
of the Certificateholders.  Each
Certificateholder agrees:

 

(a)           to be
bound by the terms and conditions of the related Certificates, of this
Agreement and, with respect to the holders of Certificates, of the Series
Supplement, including any supplements or amendments hereto and to perform the
obligations of a Certificateholder as set forth therein or herein, in all
respects as if it were a signatory hereto. 
This undertaking is made for the benefit of the Trust, the Owner Trustee
and the Secured Parties;

 

(b)           to hereby
appoint the Depositor as such Certificateholder’s agent and attorney-in-fact to
sign any federal income tax information return filed on behalf of the Trust, if
any, and agree that, if requested by the Trust, it will sign such federal
income tax information return in its capacity as holder of an interest in the
Trust.  Each Certificateholder also hereby
agrees that in its tax returns it will not take any position inconsistent with
those taken in any tax returns that may be filed by the Trust;

 

(c)           if such
Certificateholder is other than an individual or other entity holding its
Certificate through a broker who reports securities sales on Form 1099-B, to
notify the Owner Trustee of any transfer by it of a Certificate in a taxable
sale or exchange, within 30 days of the date of the transfer;

 

(d)           until the
completion of the events specified in Section 9.1(e), not to, for any
reason, institute proceedings for the Trust or the Depositor to be adjudicated
a bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against the Trust, or file a petition seeking or consenting
to reorganization or relief under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Trust or a
substantial part of its property, or cause or permit the Trust to make any
assignment for the benefit of its creditors, or admit in writing its inability
to pay its debts generally as they become due, or declare or effect a
moratorium on its debt or take any action in furtherance of any such action;
and

 

(e)           that there
shall not be more than 98 other holders of Certificates.

 

ARTICLE III

 

Certificates and Transfer
of Interests

 

Section 3.1.            Initial
Ownership.  Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.5, the
Trust shall issue an uncertificated ownership interest in the Trust (the “Uncertificated
Certificate”) to the Depositor.  Unless
and until the Depositor transfers all or a portion of the Percentage Interest
represented by such Uncertificated Certificate, such Uncertificated Certificate
shall represent one hundred percent (100%) of the Percentage Interest.  Upon issuance, the Certificates shall be
fully paid and nonassessable.

 

10

 

Section 3.2.            The
Certificates.  (a)   The
Certificates shall be in uncertificated form with records of interest ownership
maintained by the Certificate Registrar in the Certificate Register.  If, on or after the Closing Date, the holder
of any Uncertificated Certificate delivers to the Owner Trustee a written
request that the Uncertificated Certificate specified in such request be issued
in certificated form (a related “Certification Request”), the Owner Trustee
shall promptly issue such Certificate to the holder thereof in certificated
form.  If a Certification Request has
been delivered, the Certificate will be issued in registered form,
substantially in the form of Exhibit A, and shall upon issue, be executed and
delivered by the Depositor to the Owner Trustee for authentication and
redelivery as provided in Section 3.3.

 

(b)           If the
Certificates are in certificated form, they shall be executed on behalf of the
Trust by manual or facsimile signature of an authorized officer of the Owner
Trustee.  Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of authentication and delivery of such
Certificates.

 

(c)             A transferee of a Certificate (whether in
certificated or uncertificated form) shall become a Certificateholder, and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder, upon due registration of such Certificate in such
transferee’s name pursuant to Section 3.4. 
Any transfer of a Certificate (whether in certificated or uncertificated
form) shall satisfy each of the transfer restrictions set forth herein and
other requirements set forth in the form of Certificate attached hereto as
Exhibit A.

 

(d)           No
Certificates shall be issued under this Agreement unless such Certificates have
been authorized pursuant to the Series Supplement and all conditions precedent
to the issuance thereof, as specified in the Series Supplement shall have been
satisfied.  All Certificates issued under
this Agreement shall be in all respects entitled to the benefits hereof and of
the Owner Trust Estate.

 

Section 3.3.            Authentication
of Certificates.  If the Certificates
are in certificated form, the Owner Trustee shall cause the related
Certificates to be executed on behalf of the Trust, authenticated and delivered
to or upon the written order of the Depositor, signed by its chairman of the
board, its president or any vice president, its treasurer or any assistant
treasurer without further corporate action by the Depositor, in authorized
denominations.  No Certificate shall
entitle its holder to any benefit under this Agreement or, with respect to a
Series, the Series Supplement, or shall be valid for any purpose, unless there
shall appear on such Certificate a certificate of authentication substantially
in the form set forth in Exhibit A, executed by the Owner Trustee or its
authenticating agent, by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated
and delivered hereunder.  All
Certificates shall be dated the date of their authentication.

 

11

 

Section 3.4.            Registration
of Transfer and Exchange of Certificates. 
(a)  The Certificate Registrar shall keep or cause to be kept,
at the office or agency maintained pursuant to Section 3.8, a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Owner Trustee shall provide for the registration of Certificates (whether
in certificated or uncertificated form) and of transfers and exchanges of
Certificates (whether in certificated or uncertificated form) as herein
provided.  The Owner Trustee shall be the
initial Certificate Registrar.

 

(b)           The
Certificate Registrar shall provide the Indenture Trustee and the Administrator
with a list of the names and addresses of the Certificateholders on the Closing
Date in the form which such information is provided to the Certificate
Registrar by the Depositor.  Upon any
transfers of Certificates, the Certificate Registrar shall notify the Indenture
Trustee and the Administrator of the name and address of the transferee in
writing, by facsimile, on the day of such transfer.

 

(c)           If a
Certificate is in certificated form, upon surrender for registration of
transfer of any Certificate to the Certificate Registrar at the office or
agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of the same Series in the aggregate
Percentage Interest to be transferred, dated the date of authentication by the
Owner Trustee or any authenticating agent. 
If a Certificate is in uncertificated form, upon representation of such
Certificate in accordance with Section 3.2, the Certificate Registrar shall
reflect in the Certificate Register the transfer of the relevant Percentage
Interest.  If a Certificate is in certificated
form, at the option of the Holder thereof, such Certificate may be exchanged
for one or more other Certificates of the same Series in authorized
denominations of a like Percentage Interest upon surrender of the Certificates
of the same Series, to be exchanged at the office or agency maintained pursuant
to Section 3.8.  Certificates may be
issued in any Percentage Interest not to exceed 100%.

 

(d)           Every
Certificate presented or, in the case of certificated Certificates, surrendered
for registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Certificateholder or his attorney
duly authorized in writing, with such signature guaranteed by an “eligible
guarantor institution” meeting the requirements of the Certificate Registrar,
which requirements include membership or participation in the Securities
Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee
program” as may be determined by the Certificate Registrar in addition to, or
in substitution for, STAMP, all in accordance with the Exchange Act.  Each certificated Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently
disposed of by the Owner Trustee in accordance with its customary practice.

 

(e)           No service
charge shall be made for any registration of transfer or exchange of
Certificates, but the Owner Trustee or the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.

 

12

 

Section 3.5.            Mutilated,
Destroyed, Lost or Stolen Certificates. 
If (a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall be delivered to the Certificate Registrar and the Owner Trustee, such
security or indemnity as may be required by them to hold each of them harmless,
then in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute
and the Owner Trustee or its authenticating agent shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like Series principal balance.  In connection with the issuance of any new
Certificate under this Section, the Owner Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.  Any duplicate Certificate issued pursuant to
this section shall constitute conclusive evidence of an ownership interest in
the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.

 

Section 3.6.            Persons
Deemed Certificateholders.  Every
Person by virtue of becoming a Certificateholder in accordance with this
Agreement and the rules and regulations of the Certificate Registrar shall be
deemed to be bound by the terms of this Agreement.  Prior to due presentation of a Certificate
for registration of transfer, the Owner Trustee and the Certificate Registrar
and any agent of the Owner Trustee and the Certificate Registrar may treat the
Person in whose name any Certificate shall be registered in the Certificate
Register as the owner of such Certificate for the purpose of receiving
distributions pursuant hereto, the Indenture or the Series Supplement (in the
case of a Certificate) and for all other purposes whatsoever, and none of the
Owner Trustee, the Certificate Registrar nor any agent of the Owner Trustee or
the Certificate Registrar shall be bound by any notice to the contrary.

 

Section 3.7.            Access
to List of Certificateholders’ Names and Addresses.  The Owner Trustee or the Certificate
Registrar shall furnish or cause to be furnished to the Master Servicer, the
Depositor, the Indenture Trustee or the Administrator within 15 days after
receipt by the Owner Trustee or the Certificate Registrar of a request therefor
from such Person in writing, a list, of the names and addresses of the
Certificateholders as of the most recent Record Date.  If three or more Holders of Certificates or
one or more Holders of Certificates evidencing not less than 25% of the
Percentage Interest apply in writing to the Owner Trustee or the Certificate
Registrar, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement, under the Certificates of such Series or under the Series
Supplement and such application is accompanied by a copy of the communication
that such applicants propose to transmit, then the Owner Trustee or the
Certificate Registrar shall, within five Business Days after the receipt of
such application, afford such applicants access during normal business hours to
the current list of Certificateholders of such Series.  Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Depositor, the
Master Servicer, the Owner Trustee or any agent thereof accountable by reason
of the disclosure of its name and address, regardless of the source from which
such information was derived.

 

13

 

Section 3.8.            Maintenance
of Office or Agency.  The Owner
Trustee or the Certificate Registrar shall maintain in New York, New York, an
office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Owner Trustee in respect of the Certificates and the Basic Documents
may be served.  The Owner Trustee
initially designates its Corporate Trust Office for such purposes.  The Owner Trustee shall give prompt written
notice to the Depositor, the Certificateholders and any Support Provider of any
change in the location of the Certificate Register or any such office or
agency.

 

Section 3.9.            ERISA
Restrictions.  The Certificates may
not be acquired by or for the account of (i) an employee benefit plan (as
defined in § 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”)) that is subject to the provisions of Title I of ERISA,
(ii) a plan (as defined in § 4975(e)(1) of the Code) that is subject to
Section 4975 of the Code or (iii) any entity whose underlying assets include
assets of a plan described in (i) or (ii) by reason of such plan’s investment
in the entity (each, a “Benefit Plan”). 
The Certificate Registrar shall not register the transfer of a
Certificate unless the transferee has delivered to the Owner Trustee a
representation letter in form and substance satisfactory to the Owner Trustee
to the effect that the transferee is not, and is not acquiring the Certificate
for the account of, a Benefit Plan.

 

Section 3.10.          Securities
Matters.  Notwithstanding anything
contained herein to the contrary, the Owner Trustee shall not be responsible
for ascertaining whether any transfer complies with the registration provisions
or exemptions from the Securities Act, the Exchange Act, applicable state securities
law or the Investment Company Act; provided, however, that if a
certificate is specifically required to be delivered to the Owner Trustee by a
purchaser or transferee of a Certificate, the Owner Trustee shall be under a
duty to examine the same to determine whether it conforms to the requirements
of this Agreement and shall promptly notify the party delivering the same if
such certificate does not so conform.

 

Section 3.11.          Distributions.  Distributions shall be made from time to time
by the Owner Trustee or the Certificate Paying Agent in accordance with the
Percentage Interests of the Certificateholders.

 

Section 3.12.          Certificate
Paying Agent.  Distributions to be
made in respect of the Certificates pursuant to this Agreement, or the Series
Supplement shall be made by the Certificate Paying Agent, by wire transfer or
check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of the Certificate or the making of any
notation thereon, except as provided in Section 9.1(c) with respect to the
final distribution on a Certificates.

 

14

 

ARTICLE IV

 

Voting Rights and Other
Actions

 

Section 4.1.            Prior
Notice to Holders with Respect to Certain Matters.  With respect to the following matters, the
Owner Trustee shall not take action unless at least 30 days before the taking
of such action, the Owner Trustee shall have notified the Certificateholders in
writing of the proposed action and Certificateholders holding, in the
aggregate, greater than 50% of the Percentage Interests (a “Certificate
Majority”) shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders have withheld
consent or provided alternative direction:

 

(a)           the
election by the Trust to file an amendment to the Certificate of Trust, which
amendment shall have satisfied the Rating Agency Condition (unless such
amendment is required to be filed under the Statutory Trust Statute or unless
such amendment would not materially and adversely affect the interests of the
Holders);

 

(b)           the
amendment of the Indenture by a supplemental indenture in circumstances where
the consent of any Noteholder is required;

 

(c)           the
amendment of the Indenture by a supplemental indenture in circumstances where
the consent of any Noteholder is not required and such amendment materially
adversely affects the interest of the Certificateholders;

 

(d)           except
pursuant to Section 13.1(b) of the Master Sale and Servicing Agreement,
the amendment, change or modification of the Master Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement any
provision in a manner that would not materially adversely affect the interests
of the Certificateholders; or

 

(e)           the
Depositor shall not, without the unanimous consent of the holders of the Class
SV Preferred Stock of the Depositor, institute proceedings to be adjudicated
insolvent, or consent to the institution of any bankruptcy or insolvency case
or proceedings against it, or file or consent to a petition under any
applicable federal or state law relating to bankruptcy, seeking the Depositor’s
liquidation or reorganization or any other relief for the Corporation as
debtor, or consent to the appointment of a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the
Corporation or a substantial part of its property, or make any assignment for
the benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due, or take any corporate action in furtherance of
such action.

 

The Owner Trustee shall notify the Certificateholders
in writing of any appointment of a successor Note Registrar or Certificate
Registrar within five Business Days thereof.

 

Section 4.2.            Action
by Certificateholders with Respect to Certain Matters.  The Owner Trustee shall not have the power
(a) to remove the Master Servicer

 

15

 

under the Master Sale and Servicing Agreement or (b) except as
expressly provided in the Indenture and the Series Supplement and at the
written direction of the Certificateholders, sell the Receivables after the
termination of the Indenture.  The Owner
Trustee shall take the actions referred to in the preceding sentence only upon
written instructions signed by the Certificateholders and the furnishing of
indemnification satisfactory to the Owner Trustee by the Certificateholders.

 

Section 4.3.            Action
by Certificateholders with Respect to Bankruptcy.  Until one year and one day following the date
of payment in full of the Notes, the Owner Trustee shall not have the power to,
and shall not, commence any proceeding or other actions contemplated by
Section 2.13(d) hereof relating to the Trust without the prior written
consent of all the Certificateholders and the delivery to the Owner Trustee by
each such Certificateholder of a certificate certifying that such
Certificateholder reasonably believes that the Trust is insolvent.

 

Section 4.4.            Restrictions
on Certificateholders’ Power. 
(a)  The Certificateholders shall not direct the Owner Trustee
to take or refrain from taking any action if such action or inaction would be
contrary to any obligation of the Trust or the Owner Trustee under this
Agreement or any of the Basic Documents or would be contrary to
Section 2.3 or otherwise contrary to law nor shall the Owner Trustee be
obligated to follow any such direction, if given.

 

(b)           No
Certificateholder shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement or any Basic
Document, unless there are no outstanding Notes and unless the Certificate Majority
previously shall have given to the Owner Trustee a written notice of default
and of the continuance thereof, as provided in this Agreement, and also unless
the Certificate Majority shall have made written request upon the Owner Trustee
to institute such action, suit or proceeding in its own name as Owner Trustee
under this Agreement and shall have offered to the Owner Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Owner Trustee, for 30
days after its receipt of such notice, request, and offer of indemnity, shall
have neglected or refused to institute any such action, suit, or proceeding,
and during such 30-day period no request or waiver inconsistent with such
written request has been given to the Owner Trustee pursuant to and in
compliance with this section or Section 6.3; it being understood and
intended, and being expressly covenanted by each Certificateholder with every
other Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common
benefit of all Certificateholders.  For
the protection and enforcement of the provisions of this Section 4.4, each
and every Certificateholder and the Owner Trustee shall be entitled to such
relief as can be given either at law or in equity.

 

16

 

Section 4.5.            Majority
Control.  No Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust except as expressly provided in this Agreement.  Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Certificate Majority. 
Except as expressly provided herein, any written notice of the
Certificateholders delivered pursuant to this Agreement shall be effective if
signed by the Certificate Majority at the time of the delivery of such notice.

 

ARTICLE V

 

Certain Duties

 

Section 5.1.            Accounting
and Records to the Noteholders, Certificateholders, the Internal Revenue
Service and Others.  Subject to
Sections 12.1(b)(iii) and 12.1(c) of the Master Sale and Servicing Agreement,
the Master Servicer, on behalf of the Trust and Depositor, shall (a) maintain
or cause to be maintained the books of the Trust on a calendar year basis on
the accrual method of accounting, including, without limitation, the
allocations of net income under Section 2.11, (b) deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1, if applicable) to enable each Certificateholder to prepare its federal
and state income tax returns, (c) file or cause to be filed, if necessary, such
tax returns relating to the Trust (including a partnership information return,
Form 1065, if applicable), and direct the Owner Trustee to or may itself, as
the case may be, make such elections as may from time to time be required or
appropriate under any applicable state or federal statute or rule or regulation
thereunder so as to maintain the Trust’s characterization as a disregarded
entity, or if applicable, as a partnership, for federal income tax purposes and
(d) collect or cause to be collected any withholding tax as described in and in
accordance with the Master Sale and Serving Agreement or the Series Supplement
with respect to income or distributions to Certificateholders and the
appropriate forms relating thereto.  The
Owner Trustee or the Master Servicer, as the case may be, shall make all
elections pursuant to this Section 5.1 as directed in writing by the
Depositor.  The Owner Trustee shall sign
all tax information returns, if any, filed pursuant to this Section 5.1
and any other returns as may be required by law, and in doing so shall rely
entirely upon, and shall have no liability for information provided by, or
calculations provided by, the Depositor or the Master Servicer.  The Owner Trustee shall elect under
Section 1278 of the Code to include in income currently any market discount
that accrues with respect to the Receivables. 
The Owner Trustee shall not make the election provided under
Section 754 of the Code unless required by law.

 

Section 5.2.            Signature
on Returns; Tax Matters Partner. 
(a)  Notwithstanding the provisions of Section 5.1 and in
the event that the Trust is characterized as a partnership for federal income
tax purposes, the Owner Trustee shall sign on behalf of the Trust the tax
returns of the Trust, unless applicable law requires a Certificateholder to
sign such documents, in which case such documents shall be signed by the
Depositor.

 

17

 

(b)           In the
event that the Trust is characterized as a partnership for federal income tax
purposes, the Depositor shall be the “tax matters partner” of the Trust
pursuant to the Code.

 

ARTICLE VI

 

Authority and Duties of
Owner Trustee

 

Section 6.1.            General
Authority.  The Owner Trustee is
authorized and directed to execute and deliver on behalf of the Trust the Basic
Documents to which the Trust is named as a party and each certificate or other
document attached as an exhibit to or contemplated by the Basic Documents to
which the Trust is named as a party and any amendment thereto, in each case, in
such form as the Depositor shall approve as evidenced conclusively by the Owner
Trustee’s execution thereof, and on behalf of the Trust, to direct the Administrator
to authenticate and deliver the Notes. 
In addition to the foregoing, the Owner Trustee is authorized, but shall
not be obligated, to take all actions required of the Trust pursuant to the
Basic Documents.  The Owner Trustee is
further authorized from time to time to take such action as the Certificate
Majority recommends with respect to the Basic Documents so long as such
activities are consistent with the terms of the Basic Documents.

 

Section 6.2.            General
Duties.  It shall be the duty of the
Owner Trustee to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and to administer the
Trust in accordance with the provisions of this Agreement and in the interest
of the Holders, subject to the Basic Documents. 
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Master Servicer has agreed in the Master Sale and
Servicing Agreement to perform any act or to discharge any duty of the Trust or
the Owner Trustee hereunder or under any Basic Document and the Owner Trustee
shall not be liable for the default or failure of the Master Servicer to carry
out its obligations under the Master Sale and Servicing Agreement.

 

Section 6.3.            Action
upon Instruction.  (a)  Subject to Article IV, the Certificate
Majority shall have the exclusive right to direct the actions of the Owner
Trustee in the management of the Trust, so long as such instructions are not
inconsistent with the express terms set forth herein or in any Basic
Document.  The Certificate Majority shall
not instruct the Owner Trustee in a manner inconsistent with this Agreement or
the Basic Documents.

 

(b)           The Owner
Trustee shall not be required to take any action hereunder or under any Basic
Document if the Owner Trustee shall have reasonably determined, or shall have
been advised by counsel, that such action is likely to result in liability on
the part of the Owner Trustee or is contrary to the terms hereof or of any
Basic Document or is otherwise contrary to law.

 

18

 

(c)           Whenever
the Owner Trustee is unable to decide between alternative courses of action
permitted or required by the terms of this Agreement or any Basic Document, the
Owner Trustee shall promptly give notice (in such form as shall be appropriate
under the circumstances) to the Certificate Majority requesting instruction as
to the course of action to be adopted, and to the extent the Owner Trustee acts
in good faith in accordance with any written instruction of the Certificate
Majority, the Owner Trustee shall not be liable on account of such action to
any Person.  If the Owner Trustee shall
not have received appropriate instruction within ten days of such notice (or
within such shorter period of time as reasonably may be specified in such
notice or may be necessary under the circumstances) it may, but shall be under
no duty to, take or refrain from taking such action, not inconsistent with this
Agreement or the Basic Documents or as it shall deem to be in the best
interests of the Certificateholders, and shall have no liability to any Person
for such action or inaction.

 

(d)           In the
event that the Owner Trustee is unsure as to the application of any provision
of this Agreement or any Basic Document or any such provision is ambiguous as
to its application, or is, or appears to be, in conflict with any other
applicable provision, or in the event that this Agreement permits any determination
by the Owner Trustee or is silent or is incomplete as to the course of action
that the Owner Trustee is required to take with respect to a particular set of
facts, the Owner Trustee may give notice (in such form as shall be appropriate
under the circumstances) to the Certificate Majority requesting instruction
and, to the extent that the Owner Trustee acts or refrains from acting in good
faith in accordance with any such instruction received, the Owner Trustee shall
not be liable, on account of such action or inaction, to any Person.  If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action
or inaction.

 

Section 6.4.            No
Duties Except as Specified in this Agreement or in Instructions.  The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement or in any document or written
instruction received by the Owner Trustee pursuant to Section 6.3; and no
implied duties or obligations shall be read into this Agreement or any Basic
Document against the Owner Trustee.  The
Owner Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Basic Document. 
The Owner Trustee nevertheless agrees that it will, at its own cost and
expense, promptly take all action as may be necessary to discharge any Liens on
any part of the Owner Trust Estate that result from actions by, or claims
against, the Owner

 

19

 

Trustee (solely in its individual capacity) and that are not related to
the ownership or the administration of the Owner Trust Estate.

 

Section 6.5.            No
Action Except under Specified Documents or Instructions.  The Owner Trustee shall not manage, control,
use, sell, dispose of or otherwise deal with any part of the Owner Trust Estate
except (i) in accordance with the powers granted to and the authority conferred
upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the
Basic Documents or any Related Document and (iii) in accordance with any
document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.

 

Section 6.6.            Restrictions.  The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in
Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee,
would result in the Trust’s becoming taxable as a corporation or a publicly
traded partnership for federal income tax purposes.  The Certificateholders shall not direct the
Owner Trustee to take action that would violate the provisions of this Section.

 

ARTICLE VII

 

Concerning the Owner
Trustee

 

Section 7.1.            Acceptance
of Trust and Duties.  The Owner
Trustee accepts the trust hereby created and agrees to perform its duties
hereunder with respect to such trust but only upon the terms of this
Agreement.  The Owner Trustee and the
Certificate Paying Agent also agree to disburse all monies actually received by
it constituting part of the Owner Trust Estate upon the terms of this Agreement
or the Basic Documents.  The Owner
Trustee shall not be answerable or accountable hereunder or under any Basic
Document under any circumstances, except (i) for its own willful misconduct,
bad faith or negligence, (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.3 expressly made by the
Owner Trustee in its individual capacity, (iii) for liabilities arising from
the failure of the Owner Trustee to perform obligations expressly undertaken by
it in the last sentence of Section 6.4 hereof, (iv) for any investments
issued by the Owner Trustee or any branch or affiliate thereof in its commercial
capacity or (v) for taxes, fees or other charges on, based on or measured by,
any fees, commissions or compensation received by the Owner Trustee.  In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):

 

(a)           the Owner
Trustee shall not be liable for any error of judgment made by a Responsible
Officer of the Owner Trustee;

 

(b)           the Owner
Trustee shall not be liable with respect to any action taken or omitted to be
taken by it in accordance with the instructions of the Certificate Majority,
the Depositor, the Master Servicer or any Certificateholder;

 

20

 

(c)           no
provision of this Agreement or any Basic Document shall require the Owner
Trustee to expend or risk funds or otherwise incur any financial liability in
the performance of any of its rights or powers hereunder or under any Basic
Document if the Owner Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured or provided to it;

 

(d)           under no
circumstances shall the Owner Trustee be liable for indebtedness evidenced by
or arising under any of the Basic Documents or any Related Document, including
the principal of and interest on the Notes;

 

(e)           the Owner
Trustee shall not be responsible for or in respect of the validity or
sufficiency of this Agreement or for the due execution hereof by the Depositor
or for the form, character, genuineness, sufficiency, value or validity of any
of the Owner Trust Estate or for or in respect of the validity or sufficiency
of the Basic Documents or any Related Document, other than the certificate of
authentication on the Certificates, and the Owner Trustee shall in no event assume
or incur any liability, duty or obligation to the Depositor, any Support
Provider, the Indenture Trustee, the Administrator, the Certificate Paying
Agent, any Noteholder or to any Certificateholder, other than as expressly
provided for herein or in the Basic Documents;

 

(f)            the Owner
Trustee shall not be liable for the default or misconduct of the Depositor, any
Support Provider, the Indenture Trustee, the Administrator or the Master
Servicer under any of the Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations under this
Agreement or the Basic Documents that are required to be performed by the
Depositor or the Certificate Paying Agent under this Agreement, by the
Indenture Trustee or the Administrator under the Indenture, the Series
Supplement or any Related Document or the Master Servicer under the Master Sale
and Servicing Agreement or the Series Supplement; and

 

(g)           the Owner
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Agreement, or to institute, conduct or defend any
litigation under this Agreement or otherwise or in relation to this Agreement
or any Basic Document at the request, order or direction of the Certificate
Majority or any of the Certificateholders, unless such Certificate Majority or
Certificateholders have offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby.  The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any Basic Document shall
not be construed as a duty, and the Owner Trustee shall not be answerable for
other than its negligence, bad faith or willful misconduct in the performance
of any such act.

 

Section 7.2.            Furnishing
of Documents.  The Owner Trustee
shall furnish to the Certificateholders promptly upon receipt of a written
request therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.

 

21

 

Section 7.3.            Representations
and Warranties.  The Owner Trustee
hereby represents and warrants, in its individual capacity, to the Depositor,
the Holders and any Support Provider (which shall have relied on such
representations and warranties in issuing any policy relating to Series
Support), that:

 

(a)           It is a New
York banking corporation, duly organized, validly existing and in good standing
under the laws of the United States.  It has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement.

 

(b)           It has
taken all actions necessary to authorize the execution and delivery by it of
this Agreement, and this Agreement will be executed and delivered by one of its
officers who is duly authorized to execute and deliver this Agreement on its
behalf.

 

(c)           Neither
the execution nor the delivery by it of this Agreement, nor the consummation by
it of the transactions contemplated hereby nor compliance by it with any of the
terms or provisions hereof will contravene any federal or New York state law,
governmental rule or regulation governing the banking or trust powers of it or
any judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be bound.

 

(d)           This
Agreement constitutes the legal, valid and binding obligation of the Owner
Trustee, enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity.

 

Section 7.4.            Reliance;
Advice of Counsel. 
(a)  The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper believed
by it to be genuine and believed by it to be signed by the proper party or
parties.  The Owner Trustee may accept a
certified copy of a resolution of the board of directors or other governing
body of any corporate party as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and
effect.  As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Owner Trustee for any
action taken or omitted to be taken by it in good faith in reliance thereon.

 

(b)           In the
exercise or administration of the trusts hereunder and in the performance of
its duties and obligations under this Agreement or the Basic Documents, the
Owner Trustee (i) may act directly or through its agents or attorneys pursuant
to agreements entered into with any of them, and the Owner Trustee shall not be
liable for the conduct or misconduct of such agents or attorneys if such agents
or attorneys shall

 

22

 

have been selected by the Owner Trustee with reasonable care, and (ii)
may consult with counsel, accountants and other skilled persons to be selected
with reasonable care and employed by it. 
The Owner Trustee shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the written opinion or advice of
any such counsel, accountants or other such persons and according to such
opinion not contrary to this Agreement or any Basic Document.

 

Section 7.5.            Not
Acting in Individual Capacity. 
Except as provided in this Article VII, in accepting the trusts hereby
created the Owner Trustee acts solely as Owner Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any Basic
Document shall look only to the Owner Trust Estate for payment or satisfaction
thereof.

 

Section 7.6.            Owner
Trustee Not Liable for Certificates or Receivables.  The recitals contained herein and in
certificated Certificates (other than the signature and countersignature of the
Owner Trustee on such Certificates) shall be taken as the statements of the
Depositor and the Owner Trustee assumes no responsibility for the correctness
thereof.  The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on certificated Certificates) or the
Notes, or of any Receivable or related documents.  The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any
security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments
to be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including, without limitation:  the existence, condition and ownership of any
Financed Vehicle; the existence and enforceability of any insurance thereon;
the existence and contents of any Receivable on any computer or other record
thereof; the validity of the assignment of any Receivable to the Trust or of
any intervening assignment; the completeness of any Receivable; the performance
or enforcement of any Receivable; the compliance by the Depositor, the Master
Servicer or any other Person with any warranty or representation made under any
Basic Document or in any related document or the accuracy of any such warranty
or representation or any action of the Indenture Trustee, the Administrator or
the Master Servicer or any subservicer taken in the name of the Owner Trustee.

 

Section 7.7.            Owner
Trustee May Own Certificates and Notes. 
The Owner Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates or Notes and may deal with the Depositor, the
Indenture Trustee, the Administrator and the Master Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.

 

Section 7.8.            Payments
from Owner Trust Estate  All payments
to be made by the Owner Trustee or any Certificate Paying Agent under this
Agreement or any of the Basic Documents shall be made only from the income and
proceeds of the Owner

 

23

 

Trust Estate and only to the extent that the Owner Trustee shall have
received income or proceeds from the Owner Trust Estate to make such payments
in accordance with the terms hereof.  The
Owner Trustee, or any successor thereto, in its individual capacity, shall not
be liable for any amounts payable under this Agreement or any of the Basic
Documents.

 

Section 7.9.            Doing
Business in Other Jurisdictions. 
Notwithstanding anything contained herein to the contrary, the Owner
Trustee (in its individual and trustee capacities) shall not be required to
take any action in any jurisdiction other than in the State of Delaware if the
taking of such action will, even after the appointment of a co-trustee or
separate trustee in accordance with Section 10.5 hereof, (i) require the
consent or approval or authorization or order of or the giving of notice to, or
the registration with or the taking of any other action in respect of, any
state or other governmental authority or agency of any jurisdiction other than
the State of Delaware; (ii) result in any fee, tax or other governmental charge
under the laws of the State of Delaware becoming payable by the Owner Trustee
(in its individual capacity); or (iii) subject the Owner Trustee (in its
individual capacity) to personal jurisdiction in any jurisdiction other than
the State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by the Owner Trustee (in its individual and
trustee capacities) contemplated hereby.

 

ARTICLE VIII

 

Compensation of Owner
Trustee and Delaware Trustee

 

Section 8.1.            Owner
Trustee’s and Delaware Trustee’s Fees and Expenses.  The Owner Trustee and the Delaware Trustee shall
receive as compensation for their respective services hereunder such fees as
have been separately agreed upon before the date hereof between HSBC Finance
and the Owner Trustee and the Delaware Trustee, respectively, and each of the Owner
Trustee and the Delaware Trustee shall be entitled to be reimbursed by the
Depositor for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee or the Delaware Trustee, as the case
may be, may employ in connection with the exercise and performance of its
respective rights and duties hereunder or under the Basic Documents.

 

Section 8.2.            Indemnification.  To the fullest extent permitted by applicable
law, the Depositor shall be liable as primary obligor for, and shall indemnify
the Owner Trustee and Delaware Trustee (in their respective individual and
trustee capacities) and their respective officers, directors, successors,
assigns, agents and servants (collectively, the “Indemnified Parties”) from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature
whatsoever (collectively, “Expenses”) which may at any time be imposed on,
incurred by, or asserted against the Owner Trustee or the Delaware Trustee (in their
trust or individual capacities) or any Indemnified Party in any way relating to
or arising out of this Agreement or the Basic Documents, the Owner Trust
Estate, the

 

24

 

administration of the Owner Trust Estate or the action or inaction of
the Owner Trustee or the Delaware Trustee hereunder, except only that the
Depositor shall not be liable for or required to indemnify the Owner Trustee or
the Delaware Trustee from and against Expenses arising or resulting from any of
the matters described in the third sentence of Section 7.1 with respect to
the Owner Trustee and Section 10A.2(c) with respect to the Delaware Trustee.  The indemnities contained in this
Section 8.2 and the rights under Section 8.1 shall survive the
resignation or termination of the Owner Trustee or the Delaware Trustee or the
termination of this Agreement.  In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee’s and Delaware Trustee’s choice of
legal counsel shall be subject to the approval of the Depositor which approval
shall not be unreasonably withheld.

 

Section 8.3.            Payments
to the Owner Trustee and Delaware Trustee. 
Any amounts paid to the Owner Trustee or Delaware Trustee, as
applicable, in their respective trustee capacities pursuant to this Article
VIII shall be deemed not to be a part of the Owner Trust Estate immediately
after such payment and any amounts so paid to the Owner Trustee or the Delaware
Trustee, as applicable, in either of their respective individual capacities
shall not be so paid out of the Owner Trust Estate but shall be the property of
the Owner Trustee in its individual capacity or the Delaware Trustee in its
individual capacity, as applicable.

 

Section 8.4.            Non-recourse
Obligations.  Notwithstanding
anything in this Agreement or any Basic Document, (i) the Owner Trustee agrees
in its individual capacity and in its capacity as Owner Trustee for the Trust
that all obligations of the Trust to the Owner Trustee individually or as Owner
Trustee for the Trust shall be recourse to the Owner Trust Estate only and
specifically shall not be recourse to the assets of any Certificateholder and
(ii) the Delaware Trustee agrees in its individual capacity and in its capacity
as Delaware Trustee for the Trust that all obligations of the Trust to the
Delaware Trustee individually or as Delaware Trustee for the Trust shall be
recourse to the Owner Trust Estate only and specifically shall not be recourse
to the assets of any Certificateholder.

 

ARTICLE IX

 

Termination of Agreement

 

Section 9.1.            Termination
of Agreement.  (a)  This
Agreement shall terminate and the Trust shall dissolve, wind up, terminate and
be of no further force or effect upon the latest to occur of (i) the maturity
or other liquidation of the last Receivable (including the optional purchase by
the Depositor or the Master Servicer of the corpus of the Trust as described in
Section 11.1 of the Master Sale and Servicing Agreement) and the
subsequent distribution of amounts in respect of such Receivables as provided
in the Basic Documents and, with respect to amounts released from the Lien of
the Indenture, distribution thereof to the Certificateholders, or (ii) the
payment to Noteholders and Certificateholders of all amounts required to be
paid to them pursuant to the Indenture and this Agreement, including, with
respect to amounts released from the Lien of the Indenture, distribution
thereof to the Certificateholders and the payment to

 

25

 

any Support Provider of all amounts payable or reimbursable to it
pursuant to the Series Supplement; provided, however, that the
rights to indemnification under Section 8.2 and the rights under
Section 8.1 shall survive the termination of the Trust.  The Master Servicer shall promptly notify the
Owner Trustee of any prospective termination pursuant to this
Section 9.1.  The bankruptcy,
liquidation, dissolution, death or incapacity of any Certificateholder shall
not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder’s legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.

 

(b)           Except as
provided in clause (a), neither the Depositor nor any other Certificateholder
shall be entitled to revoke or terminate the Trust.

 

(c)           If any
Certificates are in certificated form, notice of any termination of a Series
Trust Estate, specifying the Distribution Date upon which the
Certificateholders of such Series shall surrender their Certificates to the
Certificate Paying Agent for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders of such Series mailed within five Business Days of receipt
of notice of such termination given pursuant to Section 9.1(a) hereof, stating
(i) the Distribution Date upon or with respect to which final payment of the
Certificates of such Series shall be made upon presentation and surrender of
the Certificates of such Series at the office of the Certificate Paying Agent
therein designated, (ii) the amount of any such final payment, (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates of
such Series at the office of the Certificate Paying Agent therein specified and
(iv) interest will cease to accrue on the Certificates of such Series.  The Owner Trustee shall give such notice to
the Certificate Registrar (if other than the Owner Trustee) and the Certificate
Paying Agent at the time such notice is given to Certificateholders.  Upon presentation and surrender of the
Certificates of such Series, the Certificate Paying Agent shall cause to be
distributed to Certificateholders of such Series amounts distributable pursuant
to the Series Supplement.

 

(d)           If any
Certificates are in certificated form, in the event that all of the
Certificateholders holding certificated Certificates of such Series shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Certificate Paying Agent
shall give a second written notice to the remaining Certificateholders holding
certificated Certificates of such Series to surrender their Certificates for
cancellation and receive the final distribution with respect thereto.  If within one year after the second notice
all the certificated Certificates of such Series shall not have been
surrendered for cancellation, the Certificate Paying Agent may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders holding certificated Certificates concerning surrender of
their Certificates, and the cost thereof shall be paid out of the funds and
other Series Trust Estate assets that shall remain subject to this Agreement.  Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to

 

26

 

applicable escheat laws, by the Certificate Paying Agent to the
Depositor and Holders shall look solely to the Depositor for payment.

 

(e)           Any funds
remaining in the Trust after funds for final distribution have been distributed
or set aside for distribution in accordance with Section 3808 of the Statutory
Trust Statute shall be distributed by the Certificate Paying Agent to the
Depositor.

 

(f)            Upon the
winding up of the Trust and its termination, the Owner Trustee shall cause the
Certificate of Trust to be canceled by filing a certificate of cancellation
with the Secretary of State in accordance with the provisions of Section 3810
of the Statutory Trust Statute.

 

ARTICLE X

 

Successor Owner Trustees
and Delaware Trustees and Additional Owner Trustees

 

Section 10.1.          Eligibility
Requirements for Owner Trustee and Delaware Trustee.  The Delaware Trustee shall at all times be a
corporation or national banking association satisfying the provisions of
Section 3807(a) of the Statutory Trust Statute. 
The Owner Trustee shall at all times be a corporation or national
banking association (i) authorized to exercise corporate trust powers; (ii)
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authorities; (iii) having (or
having a parent which has) a rating of at least Baa3 by Moody’s or A-1 by
Standard & Poors; and (iv) acceptable to the Certificateholders.  If such corporation shall publish reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published.  In case at
any time the Owner Trustee shall cease to be eligible in accordance with the provisions
of this Section, the Owner Trustee shall resign immediately in the manner and
with the effect specified in Section 10.2.

 

Section 10.2.          Resignation
or Removal of Owner Trustee or Delaware Trustee.  The Owner Trustee or the Delaware Trustee may
at any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Depositor (or in the event that the Depositor is
not the sole Certificateholder, the Certificate Majority), any Support Provider
and the Master Servicer.  Upon receiving
such notice of resignation, the Depositor shall promptly appoint a successor
Owner Trustee or Delaware Trustee, as applicable, in each case meeting the
qualifications set forth in Section 10.1 herein, by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee or Delaware Trustee and one copy to the successor Owner Trustee
or Delaware Trustee; provided  that the Depositor shall have
received written confirmation from each of the Rating Agencies that the
proposed appointment will not result in an increased capital charge to any
Support Provider by either of the Rating Agencies.  If no successor Owner Trustee or Delaware
Trustee, as applicable, shall have been so appointed and have accepted
appointment

 

27

 

within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or Delaware Trustee, as applicable, or any Support
Provider may petition any court of competent jurisdiction for the appointment
of a successor Owner Trustee or Delaware Trustee.

 

If at any time the Owner Trustee or Delaware Trustee shall
cease to be eligible in accordance with the provisions of Section 10.1 and
shall fail to resign after written request therefor by the Depositor, or if at
any time the Owner Trustee or Delaware Trustee shall be legally unable to act,
or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee
or Delaware Trustee or of its respective property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or Delaware
Trustee or of its respective property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Depositor may remove the
Owner Trustee or Delaware Trustee, as applicable.  If the Depositor shall remove the Owner
Trustee or the Delaware Trustee under the authority of the immediately
preceding sentence, the Depositor shall promptly appoint a successor Owner
Trustee or Delaware Trustee, as applicable, meeting the qualifications set
forth in Section 10.1 herein, by written instrument, in triplicate, one
copy of which instrument shall be delivered to the outgoing Owner Trustee or
Delaware Trustee so removed, one copy to any Support Provider and one copy to
the successor Owner Trustee or Delaware Trustee.

 

Any resignation or removal of the Owner Trustee or the
Delaware Trustee and appointment of a successor Owner Trustee or Delaware
Trustee pursuant to any of the provisions of this Section 10.2 shall not become
effective until acceptance of appointment by the successor Owner Trustee or
Delaware Trustee pursuant to Section 10.3 and payment of all fees and
expenses owed to the outgoing Owner Trustee or Delaware Trustee, as applicable.  The Depositor shall provide notice of such
resignation or removal of the Owner Trustee or Delaware Trustee, as applicable,
to each of the Rating Agencies.

 

Section 10.3.          Successor
Owner Trustee or Delaware Trustee. 
Any successor Owner Trustee or Delaware Trustee appointed pursuant to
Section 10.2 shall execute, acknowledge and deliver to the Depositor, the
Master Servicer, any Support Provider and to its predecessor Owner Trustee or
Delaware Trustee, as applicable, an instrument accepting such appointment under
this Agreement, and thereupon the resignation or removal of its predecessor
shall become effective and the successor Owner Trustee or Delaware Trustee, as
applicable, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee
or Delaware Trustee, as applicable.  The
predecessor Owner Trustee or Delaware Trustee, as applicable, shall upon
payment of its fees and expenses deliver to the successor Owner Trustee or
Delaware Trustee, as applicable, all documents and statements and monies held
by it under this Agreement; and the Depositor and the predecessor Owner Trustee
or Delaware Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee or Delaware Trustee all such rights,
powers, duties and obligations.

 

28

 

No successor Owner Trustee or Delaware Trustee shall
accept appointment as provided in this Section 10.3 unless at the time of such
acceptance such successor Owner Trustee or Delaware Trustee, as applicable, shall
be eligible pursuant to Section 10.1.

 

Upon acceptance of appointment by a successor Owner
Trustee or Delaware Trustee pursuant to this Section, the Master Servicer shall
mail notice of the successor of such Owner Trustee or Delaware Trustee, as
applicable, to all Certificateholders, the Indenture Trustee, the
Administrator, the Noteholders and the Rating Agencies.  If the Master Servicer shall fail to mail
such notice within 10 days after acceptance of appointment by the successor
Owner Trustee or Delaware Trustee, as applicable, the successor Owner Trustee or
Delaware Trustee, as applicable, shall cause such notice to be mailed at the
expense of the Master Servicer.

 

Any successor Delaware Trustee appointed pursuant to
this Section 10.3 shall promptly file an amendment to the Certificate of Trust
with the Secretary of State identifying the name and principal place of
business of such successor Delaware Trustee in the State of Delaware.

 

Section 10.4.          Merger
or Consolidation of Owner Trustee or Delaware Trustee.  Any corporation into which the Owner Trustee or
the Delaware Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee or the Delaware Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Owner Trustee or the Delaware Trustee, shall be
the successor of the Owner Trustee or the Delaware Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided,
further, that the Owner Trustee or the Delaware Trustee, as applicable, shall
mail notice of such merger or consolidation to the Rating Agencies, the
Depositor and the Master Servicer.

 

Section 10.5.          Appointment
of Co-Trustee or Separate Trustee. 
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate or any Financed Vehicle may at the time be
located, the Master Servicer and the Owner Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee and any Support Provider to act as co-trustee,
jointly with the Owner Trustee, or separate trustee or separate trustees, of
all or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Owner Trustee may consider necessary or
desirable.  If the Master Servicer shall
not have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Owner Trustee and subject to the approval of the
Certificate Majority (which approval shall not be unreasonably withheld), shall
have the power to make such appointment. 
No co-trustee or separate trustee under this Agreement

 

29

 

shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 10.1 and no notice of the appointment of any co-trustee
or separate trustee shall be required pursuant to Section 10.3.

 

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

 

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

 

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

 

(iii)          the Master Servicer and
the Owner Trustee acting jointly may at any time accept the resignation of or
remove any separate trustee or co-trustee.

 

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

 

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

 

30

 

ARTICLE X-A

 

Authority and Duties of
Delaware Trustee

 

Section 10A.1.              Acceptance
of Trust.  The Delaware Trustee accepts
the trust hereby created and agrees to perform its duties hereunder with
respect to such trust but only upon the terms of this Agreement.

 

Section 10A.2.              Duties
of Delaware Trustee.  (a)  It is understood and agreed that the duties
and responsibilities of the Delaware Trustee shall be limited to
(i) accepting legal process served on the Trust in the State of Delaware
and (ii) the execution and delivery of all documents, and the maintenance
of all records, necessary to form and maintain the existence of the Trust under
the Statutory Trust Statute.

 

(b)           Except as
otherwise expressly required by Section 10A.2(a) above, the Delaware Trustee
shall not have any duty or liability with respect to the administration of the
Trust, the investment of the Owner Trust Estate or the Series Trust Estate or
the payment of dividends or other distributions of income or principal to the
Certificateholder or any of the Trust’s beneficiaries.

 

(c)           The
Delaware Trustee shall not be answerable or accountable hereunder or under any
Basic Document under any circumstances, except (i) for its own willful
misconduct, bad faith or negligence, (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 10A.3 expressly made by
the Delaware Trustee in its individual capacity, (iii) for any investments
issued by the Delaware Trustee or any branch or affiliate thereof in its
commercial capacity or (iv) for taxes, fees or other charges on, based on or
measured by, any fees, commissions or compensation received by the Delaware
Trustee.  In particular, but not by way
of limitation (and subject to the exceptions set forth in the preceding
sentence):

 

(A)          the Delaware Trustee
shall not be liable for any error of judgment made by a Responsible Officer of
the Delaware Trustee;

 

(B)           the Delaware Trustee
shall not be liable with respect to any action taken or omitted to be taken by
it in accordance with the instructions of the Certificate Majority, the
Depositor, the Master Servicer or any Certificateholder;

 

(C)           no provision of this
Agreement or any Basic Document shall require the Delaware Trustee to expend or
risk funds or otherwise incur any financial liability in the performance of any
of its rights or powers hereunder or under any Basic Document if the Delaware
Trustee shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured or provided to it;

 

(D)          under no circumstances
shall the Delaware Trustee be liable for indebtedness evidenced by or arising
under any of the Basic

 

31

 

Documents or any Related Document, including the principal of and
interest on the Notes;

 

(E)           the Delaware Trustee
shall not be responsible for or in respect of the validity or sufficiency of
this Agreement or for the due execution hereof by the Depositor or for the
form, character, genuineness, sufficiency, value or validity of any of the
Owner Trust Estate or for or in respect of the validity or sufficiency of the
Basic Documents or any Related Document, and the Delaware Trustee shall in no
event assume or incur any liability, duty or obligation to the Depositor, any
Support Provider, the Indenture Trustee, the Certificate Paying Agent, any Noteholder
or to any Certificateholder, other than as expressly provided for herein or in
the Basic Documents;

 

(F)           the Delaware Trustee
shall not be liable for the default or misconduct of the Depositor, any Support
Provider, the Indenture Trustee or the Master Servicer under any of the Basic
Documents or otherwise and the Delaware Trustee shall have no obligation or
liability to perform the obligations under this Agreement or the Basic
Documents that are required to be performed by the Depositor or the Certificate
Paying Agent under this Agreement, by the Indenture Trustee under the
Indenture, the Series Supplement or any Related Document or the Master Servicer
under the Master Sale and Servicing Agreement or the Series Supplement;

 

(G)           the Delaware Trustee
shall be under no obligation to exercise any of the rights or powers vested in
it by this Agreement, or to institute, conduct or defend any litigation under
this Agreement or otherwise or in relation to this Agreement or any Basic
Document at the request, order or direction of the Certificate Majority or any
of the Certificateholders, unless such Certificate Majority or
Certificateholders have offered to the Delaware Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Delaware Trustee therein or thereby.  The right of the Delaware Trustee to perform
any discretionary act enumerated in this Agreement or in any Basic Document
shall not be construed as a duty, and the Delaware Trustee shall not be
answerable for other than its negligence, bad faith or willful misconduct in
the performance of any such act; and

 

(H)          the Delaware Trustee
shall be entitled to any other rights, benefits and protection provided to the
Owner Trustee in this Agreement.

 

Section
10A.3.              Representations and
Warranties.  The Delaware Trustee hereby
represents and warrants, in its individual capacity, to the Depositor, the
Holders, any Support Provider (which shall have relied on such representations
and warranties in issuing any policy related to the Series Supplement), that:

 

32

 

(d)           It is a Delaware
banking corporation, duly organized and validly existing under the laws of the
United States.  It has requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.

 

(e)           It has
taken all corporate action necessary to authorize the execution and delivery by
it of this Agreement, and this Agreement will be executed and delivered by one
of its officers who is duly authorized to execute and deliver this Agreement on
its behalf.

 

(f)            Neither
the execution nor the delivery by it of this Agreement, nor the consummation by
it of the transactions contemplated hereby nor compliance by it with any of the
terms or provisions hereof will contravene any Federal or Delaware state law,
governmental rule or regulation governing the banking or trust powers of it or
any judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.

 

(g)           This
Agreement constitutes the legal, valid and binding obligation of the Delaware
Trustee, enforceable against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity.

 

(h)           It is
authorized to exercise trust powers in the State of Delaware as and to the
extent contemplated herein and it has a principal place of business in the
State of Delaware.

 

Section 10A.4.              Not
Acting in Individual Capacity.  Except as
provided in this Article XA, in accepting the trusts hereby created the
Delaware Trustee acts solely as Delaware Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Delaware
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.

 

ARTICLE XI

 

Miscellaneous

 

Section 11.1.          Supplements
and Amendments.  (a)  This Agreement may be amended from time to
time by the parties hereto by a written instrument signed by each of them,
without the consent of any of the Securityholders; provided that an
Opinion of Counsel for the Depositor (which Opinion of Counsel may, as to
factual matters, rely upon Officer’s Certificates of the Depositor) is
addressed and delivered to the Owner Trustee and the Delaware Trustee, dated
the date of any such amendment, to the effect that the conditions precedent to
any such amendment have been satisfied and the Depositor shall have delivered
to the Owner Trustee and the Delaware Trustee an Officer’s Certificate dated
the date of any such Amendment, stating that the Depositor

 

33

 

reasonably believes that such Amendment will not have a material
adverse effect on the Securityholders.

 

(b)           This
Agreement may also be amended from time to time with the consent of the
Noteholders evidencing not less than a majority of the Outstanding Amount of
the Notes, and the consent of the Certificateholders representing at least a
50% Percentage Interest, for which the Seller has not delivered an Officer’s
Certificate stating that there is no material 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
Securityholders; provided, however, that no such amendment shall
(i) reduce in any manner the amount of, or delay the timing of, payments
received that are required to be distributed on any Security without the
consent of the related Securityholder, or (ii) reduce the aforesaid
percentage of Securities the Holder of which are required to consent to any
such amendment, without the consent of the Holders of all such Certificates
then outstanding or (iii) for federal income purposes, cause the Trust to be
treated as an association or publicly traded partnership taxable as a
corporation, or the Notes to fail to be treated as indebtedness.

 

Prior to the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the substance
of such amendment or consent to each Certificateholder, the Indenture Trustee,
the Administrator and each of the Rating Agencies.

 

It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent,
but it shall be sufficient if such consent shall approve the substance
thereof.  The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization
of the execution thereof by Certificateholders shall be subject to such
reasonable requirements as the Owner Trustee may prescribe.  Promptly after the execution of any amendment
to the Certificate of Trust, including, without limitation, amendments pursuant
this Section, the Owner Trustee shall cause the filing of such amendment with
the Secretary of State.

 

(c)           The Owner
Trustee and the Delaware Trustee shall not be required to enter into any
amendment to this Agreement which adversely affects their respective rights,
duties or immunities under this Agreement.

 

Section 11.2.          No
Legal Title to Owner Trust Estate in Certificateholders.  The Certificateholders shall not have legal
title to any part of the Series Trust Estate. 
The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles III, V and IX.  No transfer, by
operation of law or otherwise, of any right, title or interest of the
Certificateholders to and in their ownership interest in the Series Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal title
to any part of the Series Trust Estate.

 

34

 

Section 11.3.          Limitations
on Rights of Others.  The provisions
of this Agreement are solely for the benefit of the Owner Trustee, the
Depositor, the Certificateholders, the Master Servicer and any Support
Provider, the Indenture Trustee, the Administrator and the Noteholders, and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.

 

Section 11.4.          Notices.  (a)  Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be in writing and
shall be deemed given upon receipt personally delivered, delivered by overnight
courier or mailed first class mail or certified mail, in each case return
receipt requested, and shall be deemed to have been duly given upon receipt, if
to the Owner Trustee or the Delaware Trustee, addressed to its respective Corporate
Trust Office; if to the Depositor, addressed to HSBC Auto Receivables Corporation,
1111 Town Center Drive, Las Vegas, Nevada 89144, with a copy to HSBC Finance
Corporation, 2700 Sanders Road, Prospect Heights, Illinois 60070, Attn:
Treasurer; if to any Support Provider, at the address of such Support Provider
as set forth in the Series Supplement; or, as to each party, at such other
address 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 Certificateholder shall be given by
first-class mail, postage prepaid, at the address of such Holder as shown in
the Certificate Register.  Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.

 

Section 11.5.          Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

Section 11.6.          Separate
Counterparts.  This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.

 

Section 11.7.          Assignments;
Support Provider.  This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. 
This Agreement shall also inure to the benefit of any Support Provider.  Without limiting the generality of the
foregoing, all covenants and agreements in this Agreement which confer rights
upon any Support Provider shall be for the benefit of and run directly to any
Support Provider, and any Support Provider shall be entitled to rely on and
enforce such covenants, subject, however, to the limitations on such rights
provided in this Agreement and the Basic Documents.  The Support Provider, if any, may disclaim
any of its rights and powers under this Agreement (but not its duties

 

35

 

and obligations under any Series Support) upon delivery of a written
notice to the Owner Trustee.

 

Section 11.8.          Covenants
of the Depositor.  The Depositor will
not at any time institute against the Trust any bankruptcy proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, this Agreement or any
of the Basic Documents.

 

Section 11.9.          No
Petition.  To the fullest extent
permitted by applicable law, the Owner Trustee and the Delaware Trustee (not in
their respective individual capacities but solely as Owner Trustee or Delaware
Trustee, as applicable), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee, the
Administrator and each Noteholder by accepting the benefits of this Agreement,
hereby covenants and agrees that they will not at any time institute against
the Depositor, or join in any institution against the Depositor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates,
the Notes, this Agreement, any of the Basic Documents, the Series Supplement or
any Related Documents.

 

Section 11.10.        No
Recourse.  Each Certificateholder by
accepting a Certificate acknowledges that such Certificateholder’s Certificates
represent beneficial interests in the Owner Trust Estate only and do not represent
interests in or obligations of the Master Servicer, the Depositor, the Owner
Trustee, the Delaware Trustee, the Indenture Trustee, the Administrator, any
Support Provider or any Affiliate thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated in this Agreement, the Certificates, the Basic Documents, the
Series Supplement or any Related Documents.

 

Section 11.11.        Headings.  The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

 

Section 11.12.        GOVERNING
LAW.  THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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.

 

Section 11.13.        Master
Servicer.  The Master Servicer is
authorized to prepare, or cause to be prepared, execute and deliver on behalf
of the Trust all such documents, reports, filings, instruments, certificates
and opinions as it shall be the duty of the Trust, the Delaware Trustee or the Owner
Trustee to prepare, file or deliver pursuant to the Basic Documents, the Series
Supplement or any Related Documents. 
Upon written request, the Owner Trustee shall execute and deliver to the
Master Servicer a limited power of attorney appointing the Master Servicer the
Trust’s agent and attorney-in-fact to

 

36

 

prepare, or cause to be prepared, execute and deliver all such
documents, reports, filings, instruments, certificates and opinions.

 

 

[Signature Page Follows]

 

37

 

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

 

 

	
   

  	
  THE BANK OF NEW YORK,

  
	
   

  	
   as Owner Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Palladino

  	
   

  
	
   

  	
   

  	
  Name: Michael Palladino

  
	
   

  	
   

  	
  Title: Assistant
  Treasurer

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK

  (DELAWARE),

  
	
   

  	
   as Delaware Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kristine K. Gullo

  	
   

  
	
   

  	
   

  	
  Name: Kristine K. Gullo

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC AUTO RECEIVABLES

  CORPORATION,

  
	
   

  	
  as Depositor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven H. Smith

  	
   

  
	
   

  	
   

  	
  Name: Steven H. Smith

  
	
   

  	
   

  	
  Title: Vice
  President and Assistant

  Treasurer

  
	
  Acknowledged and Agreed:

  	
   

  
	
  HSBC FINANCE CORPORATION,

  	
   

  
	
  as Master Servicer

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William H. Kesler

  	
   

  	
   

  
	
   

  	
  Name: William H. Kesler

  	
   

  
	
   

  	
  Title: Vice President and Assistant Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HSBC BANK USA, NATIONAL ASSOCIATION,

  	
   

  
	
  not in its individual capacity

  	
   

  
	
  but solely as Certificate Paying Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Susie Moy

  	
   

  	
   

  
	
   

  	
  Name: Susie Moy

  	
   

  
	
   

  	
  Title: Vice President

  	
   

  

 

[Signature Page for
Amended and Restated Trust Agreement]

 

 

EXHIBIT A

 

[FORM OF CERTIFICATE]

NUMBER

HSBC AUTOMOTIVE TRUST 2005-2

CERTIFICATE

 

SEE REVERSE FOR CERTAIN
DEFINITIONS

 

THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT
AND SUCH STATE SECURITIES LAWS.  NO
RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS SUCH RESALE OR
TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 3.4 OF THE AMENDED AND RESTATED
TRUST AGREEMENT PERTAINING TO THE HSBC AUTOMOTIVE TRUST 2005-2 (THE “AGREEMENT”)
AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii) TO THE SELLER
OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN OTHER REQUIREMENTS SPECIFIED
IN THE AGREEMENT.  NEITHER THE DEPOSITOR,
THE MASTER SERVICER, THE TRUST NOR THE OWNER TRUSTEE IS OBLIGATED TO REGISTER
THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES
LAWS.

 

CERTIFICATE

 

evidencing a beneficial ownership interest in the assets of the Trust
relating to the Series Trust Estate, which includes a pool of motor vehicle
retail installment sale contracts sold to the Trust by HSBC Auto Receivables
Corporation.

 

(This Certificate does not represent an interest in or obligation of HSBC
Auto Receivables Corporation or any of its Affiliates, except to the extent
described below.)

 

THIS CERTIFIES THAT HSBC Auto Receivables Corporation
is the registered owner of a fully-paid and, to the fullest extent permitted by
applicable law, nonassessable beneficial ownership interest representing a 100%
Percentage Interest in the assets of HSBC Automotive Trust 2005-2 (the “Trust”)
formed by HSBC Auto

 

A-1

 

Receivables Corporation, a Nevada corporation (the “Depositor”)
and the Series Trust Estate.

 

 

OWNER TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

This is one of the
Certificates referred to in the within-mentioned Agreement.

 

THE BANK OF NEW YORK,

not in its individual

capacity but solely as

Owner Trustee

 

by                                                                                                                                                                         
Authenticating Agent

by                                                                                                                                                                                                           

 

HSBC Automotive Trust 2005-2 (the “Trust”), was
created pursuant to a Trust Agreement, dated as of July 20, 2005 (the “Agreement”),
between the Depositor, The Bank of New York, as owner trustee (the “Owner Trustee”)
and The Bank of New York (Delaware), as Delaware Trustee, as amended and
restated as of July 27, 2005 and as supplemented by a Series Supplement dated
as of July 27, 2005 (the “Series Supplement”). 
A summary of certain of the pertinent provisions of the Agreement and
Series Supplement is set forth below.  To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Agreement and the Series Supplement.

 

This certificate is one of the duly authorized
certificates of Trust of HSBC Automotive Trust 2005-2 designated as
Certificates.

 

This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Series Supplement, to
which Agreement the holder of this Certificate by virtue of the acceptance
hereof assents and by which such holder is bound.  The property of the Trust consists of the
Series Trust Estate which includes a pool of motor vehicle retail installment
sale contracts (the “Receivables”), all monies due thereunder on or after
specified Cut-off Dates, security interests in the vehicles financed thereby,
certain bank accounts and the proceeds thereof, proceeds from claims on certain
insurance policies and certain other rights under the Agreement and the Master
Sale and Servicing Agreement and each related Transfer Agreement, all right, to
and interest of, the Depositor in and to (i) the Master Receivables Purchase
Agreement dated as of November 18, 2002 between HSBC Auto Finance Inc.
(formerly Household Automotive Finance Corporation) and the Depositor, as such
agreement may be amended or supplemented from time to time, and (ii) the Master
Receivables Purchase Agreement dated as of August 8, 2002 between HSBC Auto
Credit Inc. (formerly Household Automotive Credit Corporation) and the
Depositor, as such agreement may be amended or supplemented from time to time.

 

A-2

 

The Notes have been issued pursuant to an Indenture
dated as of July 27, 2005 (the “Indenture”), among the Trust, HSBC Bank USA,
National Association, as Administrator and U.S. Bank National Association, as
Indenture Trustee and the Series Supplement.

 

Under the Series Supplement, there will be distributed
on the 17th day of each month or, if such 17th day is not a Business Day, the
next Business Day (the “Distribution Date”), commencing on August 17, 2005, to
the Person in whose name this Certificate is registered at the close of
business on the Business Day preceding such Distribution Date (the “Record Date”)
such Certificateholder’s fractional undivided interest in any amount to be
distributed to Certificateholders on such Distribution Date.

 

The holder of this Certificate acknowledges and agrees
that its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as described in the Master Sale
and Servicing Agreement, the Indenture, the Agreement and the Series
Supplement, as applicable.

 

Distributions on this Certificate will be made as
provided in the Agreement by the Owner Trustee by wire transfer or check mailed
to the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon.  Except as otherwise provided in
the Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Corporate Trust Office.

 

Reference is hereby made to the further provisions of
this Certificate set forth on the reverse hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon shall
have been executed by an authorized officer of the Owner Trustee, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Agreement or the Master Sale and Servicing Agreement or be valid for
any purpose.

 

THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, 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-3

 

IN WITNESS WHEREOF, the Owner Trustee, on behalf of
the Trust and not in its individual capacity, has caused this Certificate to be
duly executed.

 

 

	
   

  	
  HSBC AUTOMOTIVE TRUST 2005-2

  
	
   

  	
   

  
	
   

  	
  By: THE BANK OF NEW YORK,

  
	
   

  	
  not in its individual capacity but solely as

  Owner Trustee

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-4

 

(Reverse of Certificate)

 

The Certificates do not represent an obligation of, or
an interest in, the Depositor, the Master Servicer, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein or in
the Agreement, the Indenture, the Basic Documents or any Related
Documents.  In addition, this Certificate
is not guaranteed by any governmental agency or instrumentality and is limited
in right of payment to certain collections with respect to the Receivables, as
more specifically set forth herein and in the Master Sale and Servicing
Agreement.  A copy of each of the Master
Sale and Servicing Agreement, the Agreement and the Series Supplement may be
examined during normal business hours at the principal office of the Depositor,
and at such other places, if any, designated by the Depositor, by any
Certificateholder upon written request.

 

As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Corporate Trust Office, accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder’s
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. 
The initial Certificate Registrar appointed under the Agreement is the
Owner Trustee.

 

The Certificates are issuable as registered
Certificates in any Percentage Interest not to exceed 100%.  As provided in the Agreement and subject to
certain limitations therein set forth, Certificates are exchangeable for new
Certificates in authorized denominations evidencing the same aggregate
Percentage Interest, as requested by the holder surrendering the same.  No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.

 

The Owner Trustee and the Certificate Registrar and
any agent of the Owner Trustee or the Certificate Registrar may treat the
person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Owner Trustee, the Certificate Registrar nor any such
agent shall be affected by any notice to the contrary.

 

The Certificates may not be acquired by or for the
account of (a) an employee benefit plan (as defined in § 3(3) of ERISA)
that is subject to the provisions of Title I of ERISA, (b) a plan (as defined
in § 4975(e) (1) of the Code) that is subject to § 4975 of the Code
or (c) any entity whose underlying assets include plan assets by reason of such
plan’s investment in the entity (each, a “Benefit Plan”).  The Certificate Registrar shall not register
the transfer of a Certificate unless the transferee has delivered to the Owner
Trustee a representation letter in form and substance satisfactory to the

 

A-5

 

Owner Trustee to the effect that the transferee is
not, and is not acquiring the Certificate for the account of, a Benefit Plan.

 

The recitals contained herein shall be taken as the
statements of the Depositor or the Master Servicer, as the case may be, and the
Owner Trustee assumes no responsibility for the correctness thereof.  The Owner Trustee makes no representations as
to the validity or sufficiency of this Certificate or of any Receivable or
related document.

 

Unless the certificate of authentication hereon shall
have been executed by an authorized officer of the Owner Trustee, by manual or
facsimile signature, this Certificate shall not entitle the holder hereof to
any benefit under the Agreement or the Master Sale and Servicing Agreement or
be valid for any purpose.

 

A-6

 

ASSIGNMENT

 

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto

PLEASE INSERT SOCIAL SECURITY

OR OTHER IDENTIFYING NUMBER

OF ASSIGNEE

 

 

(Please print or type
name and address, including postal zip code, of assignee)

 

 

the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing

 

                                       
Attorney to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.

 

Dated:

 

 

	
   

  	
   

  	
   *

  
	
   

  	
  Signature Guaranteed:

  	
   

  
	
   

  	
   

  	
   *

  

 

*              NOTICE:  The signature to this assignment must correspond
with the name of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any change
whatever.  Such signature must be
guaranteed by an “eligible guarantor institution” meeting the requirements of
the Certificate Registrar, which requirements include membership or
participation in STAMP or such other “signature guarantee program” as may be
determined by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

A-7

 

EXHIBIT B

 

[FORM OF CERTIFICATE OF
TRUST]

 

CERTIFICATE OF TRUST

OF

HSBC AUTOMOTIVE TRUST 2005-2

 

THIS Certificate of Trust of HSBC Automotive Trust 2005-2
(the “Trust”) is being duly executed and filed on behalf of the Trust by the
undersigned, as trustee, to form a statutory trust under the Delaware Statutory
Trust Act (12 Del. C. § 3801 et seq.) (the “Act”).

 

1.             Name.  The name of the statutory trust formed by
this Certificate of Trust is HSBC Automotive Trust

2005-2.

 

2.             Delaware Trustee.  The
name and business address of the trustee of the Trust with a principal place of
business in the State of Delaware are The Bank of New York (Delaware), 502
White Clay Center, Route 273, P.O. Box 6973, Newark, Delaware 19711.

 

3.             Effective
Date.  This Certificate of Trust
shall be effective upon filing.

 

IN WITNESS WHEREOF, the
undersigned have duly executed this Certificate of Trust in accordance with
Section 3811(a)(1) of the Act.

 

	
   

  	
  THE BANK OF NEW YORK,

  
	
   

  	
  not in its individual capacity but solely as

  Owner Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK

  (DELAWARE),

  
	
   

  	
  not in its individual capacity but solely as

  Delaware Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-1Exhibit 4.3

 

EXECUTION COPY

 

 

 

 

MASTER SALE AND SERVICING AGREEMENT

among

HSBC AUTOMOTIVE TRUST 2005-2,

as Issuer,

HSBC AUTO RECEIVABLES CORPORATION,

as Seller,

HSBC FINANCE CORPORATION,

as Master Servicer

U.S. BANK NATIONAL ASSOCIATION,

as Indenture Trustee

and

HSBC BANK USA, NATIONAL ASSOCIATION,

as Administrator

Dated as of July 27, 2005

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
   

  
	
   

  	
   

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
  Definitions

  	
   

  
	
  SECTION 1.2.

  	
  Other
  Interpretive Provisions

  	
   

  
	
  SECTION 1.3.

  	
  Usage of
  Terms

  	
   

  
	
  SECTION 1.4.

  	
  Certain
  References

  	
   

  
	
  SECTION 1.5.

  	
  No Recourse

  	
   

  
	
  SECTION 1.6.

  	
  Action by
  or Consent of Noteholders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  	
   

  
	
  Conveyance of Receivables

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  Conveyance
  of Receivables

  	
   

  
	
  SECTION 2.2.

  	
  Further
  Encumbrance of Owner Trust Estate

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  	
   

  
	
  The Receivables

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  Representations
  and Warranties of Seller

  	
   

  
	
  SECTION 3.2.

  	
  Repurchase
  upon Breach

  	
   

  
	
  SECTION 3.3.

  	
  Custody of
  Receivables Files

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  	
   

  
	
  Administration and Servicing
  of Receivables

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.1.

  	
  Duties of
  the Master Servicer

  	
   

  
	
  SECTION 4.2.

  	
  Collection
  of Receivable Payments; Modifications of Receivables

  	
   

  
	
  SECTION 4.3.

  	
  Realization Upon Receivables

  	
   

  
	
  SECTION 4.4.

  	
  Insurance

  	
   

  
	
  SECTION 4.5.

  	
  Maintenance of Security Interests in Vehicles

  	
   

  
	
  SECTION 4.6.

  	
  Covenants, Representations, and Warranties of Master Servicer

  	
   

  
	
  SECTION 4.7.

  	
  Repurchase of Receivables Upon Breach of Covenant

  	
   

  
	
  SECTION 4.8.

  	
  Total Servicing Fee; Payment of Certain Expenses by Master Servicer

  	
   

  
	
  SECTION 4.9.

  	
  Master Servicer’s Certificate

  	
   

  
	
  SECTION 4.10.

  	
  Annual Statement as to Compliance, Notice of Master Servicer
  Termination Event

  	
   

  
	
  SECTION 4.11.

  	
  Annual Independent Accountants’ Report

  	
   

  

 

 

	
  SECTION 4.12.

  	
  Access to Certain Documentation and Information Regarding Receivables

  	
   

  
	
  SECTION 4.13.

  	
  Fidelity Bond and Errors and Omissions Policy

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  	
   

  
	
  Trust
  Accounts; Distributions;

  	
   

  
	
  Statements
  to Certificateholders and Noteholders

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  Establishment of Trust Accounts

  	
   

  
	
  SECTION 5.2.

  	
  Certain Reimbursements to the Master Servicer

  	
   

  
	
  SECTION 5.3.

  	
  Application of Collections

  	
   

  
	
  SECTION 5.4.

  	
  Additional Deposits

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  	
   

  
	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  	
   

  
	
  RESERVED

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  	
   

  
	
  The Seller

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  Representations of Seller

  	
   

  
	
  SECTION 8.2.

  	
  Corporate Existence

  	
   

  
	
  SECTION 8.3.

  	
  Liability of Seller; Indemnities

  	
   

  
	
  SECTION 8.4.

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

  	
   

  
	
  SECTION 8.5.

  	
  Limitation on Liability of Seller and Others

  	
   

  
	
  SECTION 8.6.

  	
  Seller May Own Certificates or Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
   

  	
   

  	
   

  
	
  The Master Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  Representations of Master Servicer

  	
   

  
	
  SECTION 9.2.

  	
  Liability of Master Servicer; Indemnities

  	
   

  
	
  SECTION 9.3.

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

  	
   

  
	
  SECTION 9.4.

  	
  Limitation on Liability of Master Servicer and Others

  	
   

  
	
  SECTION 9.5.

  	
  Delegation of Duties

  	
   

  
	
  SECTION 9.6.

  	
  Master Servicer Not to Resign

  	
   

  
	
  SECTION 9.7.

  	
  Subservicing Agreements Between Master Servicer and Subservicers

  	
   

  
	
  SECTION 9.8.

  	
  Successor Subservicers

  	
   

  

 

ii

 

	
  ARTICLE X

  	
   

  
	
   

  	
   

  	
   

  
	
  Default

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1.

  	
  Master Servicer Termination Event

  	
   

  
	
  SECTION 10.2.

  	
  Consequences of a Master Servicer Termination Event

  	
   

  
	
  SECTION 10.3.

  	
  Appointment of Successor

  	
   

  
	
  SECTION 10.4.

  	
  Notification to Noteholders and Certificateholders

  	
   

  
	
  SECTION 10.5.

  	
  Waiver of Past Defaults

  	
   

  
	
  SECTION 10.6.

  	
  Successor to Master Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  
	
   

  	
   

  	
   

  
	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.1.

  	
  Optional Purchase of All Receivables

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  
	
   

  	
   

  	
   

  
	
  Administrative Duties of the Master Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.1.

  	
  Administrative Duties.

  	
   

  
	
  SECTION 12.2.

  	
  Records

  	
   

  
	
  SECTION 12.3.

  	
  Additional Information to be Furnished to the Issuer

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  
	
   

  	
   

  	
   

  
	
  Miscellaneous Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.1.

  	
  Amendments

  	
   

  
	
  SECTION 13.2.

  	
  Protection of Title to Series Trust Estate

  	
   

  
	
  SECTION 13.3.

  	
  Notices

  	
   

  
	
  SECTION 13.4.

  	
  Assignment

  	
   

  
	
  SECTION 13.5.

  	
  Limitations on Rights of Others

  	
   

  
	
  SECTION 13.6.

  	
  Severability

  	
   

  
	
  SECTION 13.7.

  	
  Separate Counterparts

  	
   

  
	
  SECTION 13.8.

  	
  Headings

  	
   

  
	
  SECTION 13.9.

  	
  Governing Law

  	
   

  
	
  SECTION 13.10.

  	
  Assignment to Indenture Trustee

  	
   

  
	
  SECTION 13.11.

  	
  Nonpetition Covenants

  	
   

  
	
  SECTION 13.12.

  	
  Limitation of Liability of the Owner Trustee and the Indenture Trustee

  	
   

  
	
  SECTION 13.13.

  	
  Limitation of Liability of Issuer

  	
   

  
	
  SECTION 13.14.

  	
  Independence of the Master Servicer.

  	
   

  
	
  SECTION 13.15.

  	
  No Joint Venture

  	
   

  

 

iii

 

	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Form of Transfer Agreement

  	
   

  
				

 

iv

 

MASTER SALE AND SERVICING
AGREEMENT dated as of July 27, 2005, among HSBC AUTOMOTIVE TRUST 2005-2, a
Delaware statutory trust (the “Issuer” or the “Trust”), HSBC AUTO RECEIVABLES
CORPORATION, a Nevada corporation (the “Seller”), HSBC FINANCE CORPORATION, a
Delaware corporation (the “Master Servicer”), U.S. BANK NATIONAL ASSOCIATION, a
national banking association, in its capacity as Indenture Trustee, and HSBC
BANK USA, NATIONAL ASSOCIATION, a national banking association, in its capacity
as Administrator.

 

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

 

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

 

WHEREAS the Master
Servicer is willing to service all such Receivables;

 

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

 

ARTICLE I

Definitions

 

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

 

“Accountants’ Report”
means the report of a firm of nationally recognized independent accountants
described in Section 4.11.

 

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

 

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

 

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

 

“Addition Notice” means,
with respect to any transfer of Receivables to the Trust pursuant to Section 2.1
of this Agreement, notice of the Seller’s election to

 

 

transfer
Receivables to the Trust, such notice to designate the related Transfer Date,
and the approximate principal amount of Receivables to be transferred on such
Transfer Date.

 

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

 

“Administrative Agent”
means the Person, if any, specified in the Note Purchase Agreement.

 

“Administrator” means
HSBC Bank USA, National Association, a national banking association, as
Administrator under the Indenture and the other Basic Documents to which it is
a party, or any successor administrator under the Indenture appointed in
accordance with such agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Certificateholder” means
the holders of the Certificates.

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  by
another Person (not a securities intermediary) (1) acquiring possession of
such certificated security on behalf of the Administrator, provided that if the
certificated security is in registered form, it shall be indorsed to, or
registered in the name of, the Administrator or indorsed in blank, or (2) having
acquired possession of such certificated security, acknowledging that it holds
such certificated security for the Administrator, and, in either such case,
continuously maintaining possession of such certificated security; and

 

4

 

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

 

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

 

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

 

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

 

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

 

(i)                                     transfer
thereof:

 

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

 

(B)                                by
another Person (not a securities intermediary) (1) becoming the registered
owner of the uncertificated security on behalf of the Administrator, or (2) having
become the registered owner of the uncertificated security, acknowledging that
it holds such uncertificated security for the Administrator; or

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

continuously
indicating by book entry that such asset is credited to the related Trust
Account.

 

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

 

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

 

“Determination Date”
means, unless otherwise provided in the Series Supplement, the earlier of
the fifth calendar day (or if such day is not a Business Day, the immediately
following Business Day) or the third Business Day preceding each Distribution
Date.

 

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

 

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

 

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

 

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

 

“Eligible Investments”
shall mean, except as otherwise provided in a Series Supplement, (i) negotiable
instruments or securities represented by instruments in bearer or registered
form (or, in the case of Eligible Investments described in clause (a) of

 

7

 

this definition,
book-entry securities representing such obligations), or (ii) securities
entitlements (as defined in Article 8 of the UCC) arising from Delivery of
any such negotiable instruments or securities in accordance with the provisions
of clause (1)(f) of the definition of such term, or (iii) in the case
of deposits described below, deposit accounts held in the name of the Administrator
in trust for the benefit of the Holders of the Securities, subject to the
exclusive custody and control of the Administrator and for which the Administrator
has sole signature authority, which evidence or arise out of, as the case may
be:

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)                                 (x)
time deposits (having maturities not later than the succeeding Distribution
Date) other than as referred to in clause (e) above, with a Person the
commercial paper of which has a credit rating satisfactory to the Rating Agency
or (y) notes which are payable on demand issued by HSBC Finance Corporation; provided
such notes will constitute Eligible Investments only if HSBC Finance
Corporation has, at the time of the Trust’s investment in such notes, a
commercial paper rating of not less than A-1 by Standard & Poor’s, P-1
by Moody’s and F1 by Fitch (or such other rating as shall be satisfactory to
such Rating Agency); or

 

8

 

(h)                                 any
other investment of a type or rating that is acceptable to the Rating Agency.

 

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

 

“Eligible Servicer” means
HSBC Finance Corporation which at the time of its appointment as Master
Servicer, (i) is servicing a portfolio of motor vehicle retail installment
sales contracts and/or motor vehicle installment loans, (ii) is legally
qualified and has the capacity to service the Receivables, (iii) has
demonstrated the ability professionally and competently to service a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans similar to the Receivables with reasonable skill and care, (iv) is
qualified and entitled to use, pursuant to a license or other written
agreement, and agrees to maintain the confidentiality of, the software which
the Master Servicer uses in connection with performing its duties and
responsibilities under this Agreement or otherwise has available software which
is adequate to perform its duties and responsibilities under this Agreement and
(v) has a net worth of at least $50,000,000.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

“Issuer” means HSBC
Automotive Trust 2005-2, a Delaware statutory trust formed under the laws of
the State of Delaware.

 

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

 

“Lien Certificate” means,
with respect to a Financed Vehicle, an original certificate of title,
certificate of lien or other notification issued by the Registrar of Titles of
the applicable state to a secured party which indicates that the lien of the
secured party

 

10

 

on the Financed
Vehicle is recorded on the original certificate of title.  In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term “Lien
Certificate” shall mean only a certificate or notification issued to a secured
party.

 

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

 

“Managing Agent” means,
with respect to any Purchaser Group, the Person specified as the Managing Agent
for such Purchaser Group from time to time pursuant to the Note Purchase
Agreement (including, without limitation, Schedule I thereto) or any Joinder
Agreement thereto or any Assignment and Acceptance Agreement thereto.

 

“Majority Purchaser” has
the meaning assigned to such term in the Note Purchase Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

“Monthly Records” means
all records and data maintained by the Master Servicer with respect to the
Receivables, including the following with respect to each Receivable:  the account number; the originating Dealer,
if any; Obligor name; Obligor address; Obligor home phone number; Obligor
business phone number; original Principal Balance; original term; Annual
Percentage Rate; current Principal Balance; current remaining term; origination
date; first payment date; final scheduled payment date; next payment due date;
date of most recent payment; new/used classification; collateral description;
days currently delinquent; number of contract extensions (months) to date;
amount of Scheduled Payment; current Insurance Policy expiration date; and past
due late charges.

 

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

 

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

 

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

 

“Note Purchase Agreement”
has the meaning, if any, assigned to such term in the Series Supplement.

 

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

 

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

 

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

 

“Opinion of Counsel”
means an opinion of counsel who may be counsel to the Master Servicer or the
Seller, acceptable to the Indenture Trustee or the Administrator, as the case
may be.

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

“Securities” means the
Notes and the Certificates.

 

“Securityholders” means
the Noteholders and the Certificateholders.

 

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

 

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

 

“Series 2005-2 Notes”
shall have the meaning assigned to such term in the Series Supplement.

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

“Trust” means the Issuer.

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)                                 In
the event that with respect to the Series, the Indenture and Series Supplement
do not provide for an Administrative Agent or any Managing Agent, any
references herein or in any other Basic Document to an Administrative Agent
shall be deemed to be deleted.

 

SECTION 1.3.                       Usage of
Terms.  With respect to all terms
used in this Agreement, the singular includes the plural and the plural
includes the singular; words

 

17

 

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

 

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

 

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

 

SECTION 1.6.                       Action
by or Consent of Noteholders. 
Whenever any provision of this Agreement refers to action to be taken,
or consented to, by Noteholders, such provision shall be deemed to refer to the
Noteholders of record as of the Record Date immediately preceding the date on
which such action is to be taken, or consent given, by Noteholders.  Solely for the purposes of any action to be
taken, or consented to, by Noteholders, any Note registered in the name of HAFI
or any Affiliate thereof shall be deemed not to be outstanding; provided, however,
that, solely for the purpose of determining whether the Indenture Trustee is
entitled to rely upon any such action or consent, only Notes which a Trust
Officer of the Indenture Trustee actually knows to be so owned shall be so
disregarded.

 

ARTICLE II

Conveyance of Receivables

 

SECTION 2.1.                       Conveyance
of Receivables.  (a)  Subject to
the conditions set forth in paragraph (b) below, in consideration of the
Issuer’s delivery to or upon the order of the Seller on a Transfer Date (which
may include the Closing Date) of the net proceeds of the issuance of Notes or
from any Additional Principal Amount thereunder and the other amounts to be
distributed from time to time to the Seller in accordance with the terms of
this Agreement and the Series Supplement, the Seller shall, from time to
time, sell, transfer, assign, set over and otherwise convey to the Issuer,

 

18

 

without recourse (subject
to the obligations set forth herein), all right, title and interest of the
Seller in and to:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

(b)                                 The
Seller shall transfer to the Issuer the Receivables and the other property and
rights related thereto described in paragraph (a) above only upon the
satisfaction of each of the following conditions on or prior to the related
Transfer Date (if the Transfer Date is not also the Closing Date):

 

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

 

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

 

(iii)                               the Master Servicer, on
behalf of the Issuer, shall have delivered to the Indenture Trustee and the
Administrator a supplemental schedule to the Series Supplement (which
may be in

 

20

 

electronic format), listing the Receivables to be pledged to the
Indenture Trustee under the Indenture;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

purposes, or cause the Notes to fail to qualify as debt for federal
income tax purposes;

 

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

 

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

 

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

 

It is the intention of
the Seller that the transfer and assignment contemplated by this Agreement and
each related Transfer Agreement shall constitute a sale of the related
Receivables, other than for federal income tax purposes, and the related Other
Conveyed Property from the Seller to the Issuer and the beneficial interest in
and title to such property shall not be part of the Seller’s estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.  In the event that,
notwithstanding the intent of the Seller, the transfer and assignment
contemplated hereby and thereby is held not to be a sale, this Agreement and
the related Transfer Agreement and financing statements described in this
Agreement, shall constitute a Grant by the Seller of a valid and continuing first
priority perfected security interest in the property referred to in this Section 2.1
to the Issuer.  The Seller hereby
authorizes the Issuer to file such financing statements as it deems necessary
in connection with the security interest granted pursuant to the preceding
sentence.

 

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

 

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

 

22

 

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

 

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

 

(d)                                 The
Indenture Trustee shall, at such time as there are no Securities outstanding
and all sums due to the Indenture Trustee or any agent or counsel thereof
pursuant to the Indenture as supplemented by the Series Supplement, have
been paid, pursuant to Section 4.1 of the Indenture, and subject to
satisfaction of the conditions set forth therein, release the Lien of the Series Supplement
and the Indenture with respect to the Series Trust Estate.

 

ARTICLE III

The Receivables

 

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

 

SECTION 3.2.                       Repurchase
upon Breach.  (a)  The Seller,
the Master Servicer, any Trust Officer of the Indenture Trustee, the
Administrator or the Owner Trustee, as the case may be, shall inform each of
the other parties to this Agreement promptly, in writing, upon the discovery of
any breach of the Seller’s representations and warranties made pursuant to Section 3.1;
provided, however,
that the failure to give any

 

23

 

such notice shall not
derogate from any obligations of the Seller under this Section 3.2.  As of the last day of the second (or, if the
Seller so elects, the first, or with respect to any exceptions appearing on any
exception report delivered by the Indenture Trustee, the first) month following
the discovery by the Seller or receipt by the Seller of notice of such breach
(or such longer period not in excess of 120 days, as may be agreed upon by the
Indenture Trustee and the Master Servicer), unless such breach is cured by such
date, the Seller shall have an obligation to repurchase or cause HAFI or an
Affiliate of HAFI that is the seller under a Master Receivables Purchase
Agreement or HSBC Finance Corporation, as applicable, to repurchase any
Receivable in which the interests of the Securityholders are materially and
adversely affected by any such breach. 
In consideration of and simultaneously with the repurchase of the
Receivables, the Seller shall remit, or cause HAFI or an Affiliate of HAFI that
is the seller under a Master Receivables Purchase Agreement or HSBC Finance
Corporation, as applicable, to remit, to the Collection Account the Repurchase
Amount in the manner specified in Section 5.4 and the Issuer shall execute
such assignments and other documents reasonably requested by such person in
order to effect such repurchase.  The
sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Administrator and the related holders with respect to a breach of
representations and warranties pursuant to Section 3.1 and the agreement
contained in this Section shall be the repurchase by the Seller of the
Receivables pursuant to this Section, subject to the conditions contained
herein or to enforce the obligation of HAFI or an Affiliate of HAFI that is the
seller under a Master Receivables Purchase Agreement or HSBC Finance
Corporation, as applicable, to the Seller to repurchase such Receivables
pursuant to the related Master Receivables Purchase Agreement.  None of the Owner Trustee, the Indenture
Trustee or the Administrator shall have a duty to conduct any affirmative
investigation as to the occurrence of any conditions requiring the repurchase
of any Receivable pursuant to this Section.

 

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

 

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

 

24

 

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

 

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

 

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

 

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

 

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

 

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

 

25

 

ARTICLE IV

Administration and Servicing of Receivables

 

SECTION 4.1.                       Duties
of the Master Servicer.  The Master
Servicer is hereby authorized to act as agent for the Trust (and also on behalf
of the Indenture Trustee and the Noteholders) and in such capacity shall
manage, service, administer and make collections on the Receivables, and
perform the other actions required by the Master Servicer under this Agreement,
the Indenture and the Series Supplement. 
The Master Servicer agrees that its servicing of the Receivables shall
be carried out in accordance with customary and usual procedures of
institutions which service motor vehicle retail installment sales contracts
and, to the extent more exacting, the degree of skill and attention that the
Master Servicer exercises with respect to all comparable motor vehicle
receivables that it services for itself or others.  In performing such duties, so long as HSBC
Finance Corporation is the Master Servicer, it shall comply with the standard
and customary procedures for servicing all of its comparable motor vehicle
receivables.  The Master Servicer’s
duties shall include, without limitation, collection and posting of all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending monthly billing statements to Obligors, reporting any
required tax information to Obligors, monitoring the collateral, accounting for
collections and furnishing monthly and annual statements to the Indenture
Trustee, the Administrator and the Noteholders with respect to distributions,
monitoring the status of Insurance Policies with respect to the Financed
Vehicles and performing the other duties specified herein.  The Master Servicer shall also administer and
enforce all rights and responsibilities of the holder of the Receivables
provided for in the Dealer Agreements (and HSBC Finance Corporation shall make
commercially reasonable efforts to obtain possession of the Dealer Agreements,
to the extent it is necessary to do so), the Dealer Assignments, the Master
Receivables Purchase Agreements, and the Insurance Policies, to the extent that
such Dealer Agreements, Dealer Assignments, the Master Receivables Purchase
Agreements, and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors.  To the extent
consistent with the standards, policies and procedures otherwise required
hereby, the Master Servicer shall follow its customary standards, policies, and
procedures and shall have full power and authority, acting alone, to do any and
all things in connection with such managing, servicing, administration and
collection that it may deem necessary or desirable.  In performing such duties, the Master
Servicer or any Subservicer may delegate their duties in accordance with Section 9.5
hereof.  Without limiting the generality
of the foregoing, the Master Servicer is hereby authorized and empowered by the
Trust to execute and deliver, on behalf of the Trust, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge,
and all other comparable instruments, with respect to the Receivables and with
respect to the Financed Vehicles.  The
Master Servicer is hereby authorized to commence, in its own name or in the
name of the Trust, a legal proceeding to enforce a Receivable pursuant to Section 4.3
or to commence or participate in any other legal proceeding (including, without
limitation, a bankruptcy proceeding) relating to or involving a Receivable, an
Obligor or a Financed Vehicle.  If the
Master Servicer commences or participates in such a legal proceeding in its own
name, the Trust shall thereupon be deemed to have automatically assigned such
Receivable to the Master Servicer solely for purposes of

 

26

 

commencing or
participating in any such proceeding as a party or claimant, and the Master
Servicer is authorized and empowered by the Trust to execute and deliver in the
Master Servicer’s name any notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceeding.  The Indenture Trustee and
the Owner Trustee shall furnish the Master Servicer with any powers of attorney
and other documents which the Master Servicer may reasonably request and which
the Master Servicer deems necessary or appropriate and take any other steps
which the Master Servicer may deem reasonably necessary or appropriate to
enable the Master Servicer to carry out its servicing and administrative duties
under this Agreement.

 

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

 

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

 

(c)                                  The
Master Servicer may grant payment extensions on, or other modifications or amendments
to, a Receivable in accordance with its customary procedures if the Master
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received with respect to such Receivable, and is otherwise in the best

 

27

 

interests of the Trust; provided, however,
that if the Master Servicer extends the
date for final payment by the Obligor of any Receivable beyond the last day of
the Collection Period immediately preceding the Final Scheduled
Distribution Date of the Notes, the
Master Servicer will (or will cause HAFI as subservicer to) promptly purchase
such Receivable by depositing the related Repurchase Amount into the
Collection Account.

 

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

 

(e)                                  Subject
to the express terms of the Series Supplement, but notwithstanding
anything else in this Agreement to the contrary, for so long as (i) HSBC
Finance Corporation remains the Master Servicer and maintains a commercial
paper rating of not less than A-1 by Standard & Poor’s, P-1 by Moody’s
and F1 by Fitch (or such other rating as shall be satisfactory to such Rating
Agency), in each case only if such Person is a Rating Agency, and for five
Business Days following any reduction of any such rating or (ii) a Master
Servicer Credit Facility is maintained in effect by the Master Servicer in form
and substance acceptable to the Rating Agency (such acceptability to be
evidenced in writing by the Rating Agency to the effect that failure to make
the aforementioned deposit on the basis of the maintenance of the Master
Servicer Credit Facility will not adversely affect the then current rating of
the Notes) issued by a Master Servicer Credit Facility Issuer having a rating
on its (A) short-term obligations of at least P-1 by Moody’s, A-1 by
Standard & Poor’s and F1 by Fitch (or such other rating as shall be
satisfactory to such Rating Agency), in each case only if such Person is a
Rating Agency, and (B) long term obligations of at least A2 by Moody’s, A
by Standard & Poor’s, and A by Fitch, in each case only if such Person
is a Rating Agency, the Master Servicer shall not be required to make deposits
of Collections on or with respect to Receivables as provided in Section 4.2(d),
but may make one or more deposits of Collections (excluding any portion of such
funds which the Master Servicer may retain in accordance with Section 4.8 or
pay directly to the Seller in its capacity as Certificateholder in accordance
with Section 5.1(f)) with respect to the Series Trust Estate with
respect to a Collection Period into the Collection Account in immediately
available funds not later than 1:00 P.M., Central time, on the Business
Day immediately preceding the related Distribution Date.  The Master Servicer shall give written notice
to the Indenture Trustee and the Administrator if it is required to deposit
funds in accordance with Section 4.2(d). 
If, during any Collection Period that the Master Servicer is required to
deposit funds in accordance with Section 4.2(d), the Master Servicer
satisfies either condition of the first sentence of this Section 4.2(e) such
that the Master Servicer is no longer required to deposit funds in accordance
with Section 4.2(d), the Master Servicer may, as of the date of such
satisfaction but subject to the provisions of this Section 4.2(e),
withdraw from the Collection Account all of the Collections which it has deposited
thereto in accordance with Section 4.2(d) during such Collection
Period, and retain such funds in the manner provided in the first sentence of
this Section 4.2(e).

 

28

 

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

 

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

 

SECTION 4.3.                       Realization
Upon Receivables.  (a) 
Consistent with the standards, policies and procedures required by this
Agreement, the Master Servicer shall use its best efforts to repossess (or
otherwise comparably convert the ownership of) and liquidate any Financed
Vehicle securing a Receivable with respect to which the Master Servicer has
determined that payments thereunder are not likely to be resumed, as soon as is
practicable after default on such Receivable but in no event later than the
date on which 10% or more of a Scheduled Payment has become 150 days delinquent
(other than in the case of Financed Vehicles where neither the Financed Vehicle
nor the Obligor can be physically located by the Master Servicer (using
procedures consistent with the standards, policies and procedures of the Master
Servicer required by this Agreement) and other than in the case of an Obligor
who is subject to a bankruptcy proceeding); provided,
however, that the Master Servicer may elect
not to repossess a Financed Vehicle within such time period if in its good
faith judgment it determines that the proceeds ultimately recoverable with
respect to such Receivable would be increased by forbearance.  The Master Servicer is authorized to follow
such customary practices and procedures as it

 

29

 

shall deem necessary or
advisable, consistent with the standard of care required by Section 4.1,
which practices and procedures may include reasonable efforts to realize upon
any recourse to Dealers, the sale of the related Financed Vehicle at public or
private sale, the submission of claims under an Insurance Policy and other
actions, including, without limitation, entering into settlements with
Obligors, by the Master Servicer in order to realize upon such a Receivable.  The foregoing is subject to the provision
that, in any case in which the Financed Vehicle shall have suffered damage, the
Master Servicer shall not expend funds in connection with any repair or towards
the repossession of such Financed Vehicle unless it shall determine in its discretion
that such repair and/or repossession shall increase the proceeds of liquidation
of the related Receivable by an amount greater than the amount of such
expenses.  The Master Servicer shall be
entitled to recover all reasonable expenses incurred by it in the course of
repossessing and liquidating a Financed Vehicle but only from the liquidation
proceeds of the vehicle or under the related Dealer Agreement.  The Master Servicer shall pay on behalf of
the Trust any personal property taxes assessed on repossessed Financed
Vehicles.  The Master Servicer shall be
entitled to reimbursement of any such tax from Net Liquidation Proceeds with
respect to such Receivable.

 

(b)                                 If
the Master Servicer elects to commence a legal proceeding to enforce a Dealer
Agreement or Dealer Assignment, the act of commencement shall be deemed to be
an automatic assignment from the Trust to the Master Servicer of the rights
under such Dealer Agreement and Dealer Assignment for purposes of collection
only.  If, however,
in any enforcement suit or legal proceeding it is held that the Master Servicer
may not enforce a Dealer Agreement or Dealer Assignment on the grounds that it
is not a real party in interest or a Person entitled to enforce the Dealer
Agreement or Dealer Assignment, the Indenture Trustee, at the Master Servicer’s
written direction and expense, or the Seller, at the Seller’s expense, shall
take such steps as the Master Servicer deems reasonably necessary to enforce
the Dealer Agreement or Dealer Assignment, including bringing suit in its name
or the name of the Seller, the Trust or the Owner Trustee.  All amounts recovered shall be remitted
directly by the Master Servicer as provided in Section 4.2(d) or
4.2(e), as applicable.

 

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

 

30

 

out its customary
servicing procedures to enforce the rights of the holder of the Receivable
under the Receivable to require the Obligor to obtain such physical loss and
damage insurance in accordance with its customary servicing policies and
procedures.

 

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

 

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

 

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

 

The Master Servicer
covenants as follows:

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 4.7.                       Repurchase
of Receivables Upon Breach of Covenant. 
Upon discovery by any of the Master Servicer, the Seller, or a Trust
Officer of any of the Owner Trustee, the Indenture Trustee or the Administrator
of a breach of any of the covenants set forth in Sections 4.5 or 4.6, the party
discovering such breach shall give

 

32

 

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

 

SECTION 4.8.                       Total
Servicing Fee; Payment of Certain Expenses by Master Servicer.  So as long as:  (i) HSBC Finance Corporation is the
Master Servicer, (ii) the Master Servicer is permitted to make deposits of
Collections in accordance with Section 4.2(e) hereof and (iii) the
Master Servicer’s Certificate delivered with respect to such Distribution Date
indicates that Available Funds with respect to such Distribution Date are
sufficient to make the distributions required to be made on such Distribution
Date in respect of the Servicing Fee payable to HSBC Finance Corporation as
Master Servicer (and all other distributions required to be made on such
Distribution Date having a higher priority than the distribution of the
Servicing Fee payable to HSBC Finance Corporation as Master Servicer), the
Master Servicer shall be entitled to retain out of amounts otherwise to be
deposited in the Collection Account with respect to a Collection Period, the
Servicing Fee payable to HSBC Finance Corporation as Master Servicer for such
Collection Period.  The Master Servicer
shall be required to pay all expenses incurred by it in connection with its
activities under this Agreement (including taxes imposed on the Master
Servicer, expenses incurred in connection with distributions and reports made
by the Master Servicer to Securityholders, all fees and expenses of the Owner
Trustee, the Indenture Trustee and the Administrator), except taxes levied or
assessed against the Trust, and claims against the Trust in respect of
indemnification, which taxes and claims in respect of indemnification against
the Trust are expressly stated to be for the account of HSBC Finance
Corporation.  The Master Servicer shall
be liable for the fees, charges and expenses of the Owner Trustee, the
Indenture Trustee, the Administrator any Subservicer and their respective
agents.

 

SECTION 4.9.                       Master
Servicer’s Certificate.  No later
than 10:00 a.m. Central time on each Determination Date, the Master
Servicer shall deliver, and cause to be delivered via access to its or its
Affiliate’s web-site address, to the Rating Agencies, the Indenture Trustee,
the Administrator and the Owner Trustee, a Master Servicer’s Certificate
executed by a responsible officer or agent of the Master Servicer containing
among other things, all information necessary to enable the Administrator to
make the distributions with respect to the related Distribution Date pursuant
to the Series Supplement.  In
addition to the information set forth in the preceding sentence, the

 

33

 

Master Servicer’s
Certificate shall also contain the information required by the Series Supplement.

 

SECTION 4.10.                 Annual
Statement as to Compliance, Notice of Master Servicer Termination Event.  (a)  The Master Servicer shall deliver
or cause to be delivered to the Indenture Trustee, the Administrator and the
Owner Trustee on or before April 30 (or 120 days after the end of the
Master Servicer’s fiscal year, if other than December 31) of each year,
beginning on April 30 in calendar year 2006, an Officer’s Certificate
signed by any responsible officer of the Master Servicer, or such Eligible
Subservicer who is performing the servicing duties of the Master Servicer,
dated as of December 31 (or other applicable date) of the immediately
preceding year, stating that (i) a review of the activities of the Master
Servicer, or such Eligible Subservicer who is performing the servicing duties
of the Master Servicer, during the preceding 12-month period (or such shorter or
longer, as applicable, period since the Closing Date) and of its performance
under this Agreement has been made under such officer’s supervision, and (ii) to
such officer’s knowledge, based on such review, the Master Servicer, or such
Eligible Subservicer who is performing the servicing duties of the Master
Servicer, has in all material respects fulfilled all its obligations under this
Agreement throughout such period, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof.

 

(b)                                 The
Master Servicer, or such Eligible Subservicer who is performing the servicing
duties of the Master Servicer, shall deliver to the Indenture Trustee, the
Administrator and the Owner Trustee, and, in the event that such notice is
delivered by the Subservicer, to the Master Servicer, promptly after having
obtained knowledge thereof, but in no event later than two (2) Business
Days thereafter, written notice in an Officer’s Certificate of any event which
with the giving of notice or lapse of time, or both, would become a Master
Servicer Termination Event under Section 10.1(a).  The Seller or the Master Servicer shall
deliver to the Indenture Trustee, the Administrator, the Owner Trustee, the
Master Servicer or the Seller (as applicable) promptly after having obtained
knowledge thereof, but in no event later than two (2) Business Days
thereafter, written notice in an Officer’s Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Master Servicer
Termination Event under any other clause of Section 10.1.

 

SECTION 4.11.                 Annual
Independent Accountants’ Report.  (a) 
The Master Servicer shall cause a firm of nationally recognized independent
certified public accountants (the “Independent Accountants”), who may also
render other services to the Master Servicer or to the Seller, to deliver to
the Indenture Trustee, the Administrator and the Owner Trustee on or before April 30
(or 120 days after the end of the Master Servicer’s fiscal year, if other than December 31)
of each year, beginning on April 30 in calendar year 2006 with respect to
the twelve months (or shorter applicable period) ended the immediately
preceding December 31 (or other applicable date), a report showing that,
for the prior calendar year the
accounting firm has performed procedures in order to provide a report on
management’s assertion that the servicing of receivables has been conducted in
compliance with the terms and conditions set forth in Articles IV and V of

 

34

 

this
Agreement and applicable provisions of the Series Supplement related to
the servicing of receivables and the reporting thereof and that assertion is
fairly presented.

 

(b)                                 On
or before April 30 of each calendar year, beginning with April 30 in
calendar year 2006, the Master Servicer shall cause a firm of nationally
recognized independent public accountants (who may also render other services
to the Master Servicer or the Seller) to furnish an agreed-upon procedures
report to the Indenture Trustee, the Administrator and the Master Servicer to
the effect that they have applied certain agreed-upon procedures comparing the
mathematical calculations of each amount set forth in the Master Servicer’s
Certificates delivered pursuant to Section 4.9 during the period covered
by such report with the Master Servicer’s computer reports which were the
source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.

 

(c)                                  In
the event such Independent Accountants require the Indenture Trustee and/or the
Administrator to agree to the procedures to be performed by such firm in any of
the reports required to be prepared pursuant to this Section 4.11, the
Master Servicer shall direct the Indenture Trustee and/or the Administrator in
writing to so agree; it being understood and agreed that the Indenture Trustee and/or
the Administrator will deliver such letter of agreement in conclusive reliance
upon the direction of the Master Servicer, and the Indenture Trustee and/or the
Administrator has not made any independent investigation as to, and shall have
no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures.

 

SECTION 4.12.                 Access to
Certain Documentation and Information Regarding Receivables.  The Master Servicer shall provide to
representatives of the Indenture Trustee and the Owner Trustee reasonable
access to the documentation regarding the Receivables.  In each case, such access shall be afforded
without charge but only upon reasonable request and during normal business
hours.  Nothing in this Section shall
derogate from the obligation of the Master Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors, and the
failure of the Master Servicer to provide access as provided in this Section as
a result of such obligation shall not constitute a breach of this Section.

 

SECTION 4.13.                 Fidelity Bond
and Errors and Omissions Policy.  The
Master Servicer or such Eligible Subservicer that is performing the servicing
duties of the Master Servicer, has obtained, and shall continue to maintain in
full force and effect, a Fidelity Bond and Errors and Omissions Policy of a
type and in such amount as is customary for servicers engaged in the business
of servicing motor vehicle receivables.

 

35

 

ARTICLE V

Trust Accounts; Distributions;

Statements to Certificateholders and Noteholders

 

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

 

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

 

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

 

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

 

36

 

Eligible Account and shall be included in Available
Funds (as defined in the Series Supplement) for the succeeding
Distribution Date.  All Eligible
Investments will be held to maturity.

 

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

 

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

 

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

 

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

 

37

 

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

 

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

 

SECTION 5.4.                       Additional
Deposits.  

 

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

 

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

 

ARTICLE VI

RESERVED

 

ARTICLE VII

RESERVED

 

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ARTICLE VIII

The Seller

 

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

 

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

 

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

 

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

 

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

 

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

 

39

 

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

 

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

 

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

 

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

 

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

 

40

 

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

 

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

 

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

 

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

 

(i)                                     the
Seller shall not engage in any other business other than as provided in Article THIRD
of Seller’s Articles of Incorporation.

 

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

 

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

 

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

 

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

 

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

 

41

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)                                 The
Seller shall indemnify, defend and hold harmless the Issuer, the Owner Trustee,
the Delaware Trustee, the Indenture Trustee and the Administrator against any
loss, liability or expense incurred by reason of (i) the Seller’s willful
misfeasance, bad faith or negligence in the performance of its duties under
this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement and (ii) the Seller’s or the Issuer’s
violation of federal or state securities laws in connection with the offering
and sale of the Notes.

 

42

 

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

 

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

 

SECTION 8.4.                       Merger
or Consolidation of, or Assumption of the Obligations of, Seller.  Any Person (a) into which the Seller may
be merged or consolidated, (b) which may result from any merger or
consolidation to which the Seller shall be a party or (c) which may
succeed to the properties and assets of the Seller substantially as a whole,
which Person in any of the foregoing cases (x) has articles of incorporation
containing provisions relating to limitations on business and other matters
substantially identical to those contained in the Seller’s articles of
incorporation and (y) executes an agreement of assumption to perform every
obligation of the Seller under this Agreement and the other Related Documents
shall be the successor to the Seller hereunder without the execution or filing
of any document or any further act by any of the parties to this Agreement.

 

SECTION 8.5.                       Limitation
on Liability of Seller and Others.  (a) 
The Seller and any director or officer or employee or agent of the Seller may
rely in good faith on the written advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising under any Basic Document. 
The Seller shall not be under any obligation to appear in, prosecute or
defend any legal action that shall not be incidental to its obligations under
this Agreement, and that in its opinion may involve it in any expense or
liability.  Except as provided in Section 8.3
hereof, neither the Seller nor any of the directors, officers, employees or
agents of the Seller acting in such capacities shall be under any liability to
the Trust, the Securityholders, any Support Provider or any other Person for
any action taken or for refraining from the taking of any action in good faith
in such capacities pursuant to this Agreement; provided, however,
that this provision shall not protect the Seller or any such person against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.

 

43

 

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

 

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

 

ARTICLE IX

The Master Servicer

 

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

 

(i)                                     Organization
and Good Standing.  The Master
Servicer has been duly organized and is validly existing and in good standing
under the laws of its jurisdiction of organization, with power, authority and
legal right to own its properties and to conduct its business as such
properties are currently owned and such business is currently conducted, and
had at all relevant times, and now has, power, authority and legal right to
enter into and perform its obligations under this Agreement and the other
Related Documents to which it is a party.

 

(ii)                                  Due
Qualification.  The Master Servicer
is duly qualified to do business as a foreign corporation in good standing and
has obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of property or the

 

44

 

conduct of its business (including the servicing of the Receivables as
required by this Agreement) requires or shall require such qualification; except
where the failure to qualify or obtain licenses or approvals would not have a
material adverse effect on its ability to perform its obligations as Master
Servicer under this Agreement and the other Related Documents to which it is a
party.

 

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

 

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

 

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

 

45

 

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

 

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

 

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

 

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

 

SECTION 9.2.                       Liability
of Master Servicer; Indemnities.  (a) 
The Master Servicer (in its capacity as such) shall be liable hereunder only to
the extent of the obligations in this Agreement specifically undertaken by the
Master Servicer and the representations made by the Master Servicer.

 

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

 

46

 

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

 

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

 

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

 

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

 

47

 

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

 

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

 

SECTION 9.4.                       Limitation
on Liability of Master Servicer and Others. 
(a)  None of the Master Servicer, the Administrator, the Indenture
Trustee, or any of the directors or officers or employees or agents of any such
Persons shall be under any liability to the Trust, except as provided in this
Agreement and each Related Document, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or a Related Document;
provided, however,
that this provision shall not protect the Master Servicer, the Administrator, the
Indenture Trustee or any such Persons against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
(excluding errors in judgment) in the performance of duties (including
negligence with respect to the Master Servicer’s indemnification obligations
hereunder), by reason of reckless disregard of obligations and duties under
this Agreement and each Related Document or any violation of law by the Master
Servicer, the Administrator, the Indenture Trustee or such person, as the case
may be; provided, further, that this provision shall not affect
any liability to indemnify the Indenture Trustee, the Administrator, the
Delaware Trustee or the Owner Trustee for costs, taxes, expenses, claims,
liabilities, losses or damages paid by the Indenture Trustee, the

 

48

 

Administrator, the
Delaware Trustee or the Owner Trustee, in their individual capacities.  The Master Servicer, the Administrator, the
Indenture Trustee and any director, officer, employee or agent of such Persons
may rely in good faith on the written advice of counsel or on any document of
any kind prima facie properly executed and submitted by any Person pertaining
to any matters arising under this Agreement. 
The Indenture Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure
of risk of such funds or incurrence of financial liability.

 

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

 

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

 

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

 

SECTION 9.6.                       Master
Servicer Not to Resign.  Subject to
the provisions of Section 9.3, the Master Servicer shall not resign from
the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are
no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it or its
subsidiaries or Affiliates, or (ii) upon satisfaction of the following
conditions:  (a) the Master Servicer
has proposed a successor servicer to the Indenture Trustee in writing and such
proposed successor servicer is reasonably acceptable to the Indenture Trustee and
the Administrative Agent, where one exists, or otherwise, the Managing Agents; (b) such

 

49

 

proposed successor
servicer has agreed in writing to assume the obligations of Master Servicer
hereunder and under each Basic Document to which it is a party and (c) the
Master Servicer has delivered to the Indenture Trustee an Opinion of Counsel to
the effect that all conditions precedent to the resignation of the Master
Servicer and the appointment of and acceptance by the proposed successor
servicer have been satisfied; provided, however, that, in the case of clause (i) above, no such
resignation by the Master Servicer shall become effective until the Indenture
Trustee shall have assumed the Master Servicer’s responsibilities and
obligations hereunder or the Indenture Trustee shall have designated a
successor servicer in accordance with Section 10.3 which shall have
assumed such responsibilities and obligations. 
Any such resignation shall not relieve the Master Servicer of
responsibility for any of its obligations hereunder arising prior to the
effective date of such resignation.  Any
such determination permitting the resignation of the Master Servicer pursuant
to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Indenture Trustee.

 

SECTION 9.7.                       Subservicing
Agreements Between Master Servicer and Subservicers. The Master Servicer
initially appoints HAFI to subservice the Receivables.  From time to time after the Closing Date, the
Master Servicer may enter into a subservicing agreement with any Person other
than HAFI which is an Eligible Subservicer and is in compliance with the laws
of each state necessary to enable it to perform the obligations of the Master
Servicer pursuant to this Agreement.  Any
such subservicing agreement shall be consistent with and not violate the provisions
of this Agreement.  The Master Servicer
shall not be relieved of its obligations under this Agreement and each Basic
Document to which it is a party notwithstanding any agreement relating to
subservicing and the Master Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Receivables.  For
purposes of this Agreement and each Related Document, the Master Servicer shall
be deemed to have received payments on Receivables when any Subservicer has
received such payments.  The parties
hereto acknowledge that with respect to statements or certificates required to
be delivered by the Master Servicer in accordance with this Agreement and the Series Supplement,
including, but not limited to, Sections 4.9, 4.10 and 4.11 hereof, that a
statement or certificate delivered by a subservicer shall be sufficient to
discharge the Master Servicer’s obligation to deliver such certificate or
statement.

 

SECTION 9.8.                       Successor
Subservicers.  The Master Servicer
may terminate any Subservicer and either directly service the related
Receivables itself or enter into an agreement with a successor Subservicer that
is an Eligible Subservicer.  None of the
Owner Trustee, the Administrator or the Indenture Trustee shall have a duty or
obligation to monitor or supervise the performance of any Subservicer.

 

50

 

ARTICLE X

Default

 

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

 

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

 

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

 

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

 

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

 

51

 

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

 

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

 

SECTION 10.2.                 Consequences
of a Master Servicer Termination Event. 
If a Master Servicer Termination Event shall occur and be continuing,
the Indenture Trustee (to the extent a Trust Officer of the Indenture Trustee
has actual knowledge or has received written notice thereof), by notice given
in writing to the Rating Agencies and the Master Servicer may and shall, at the
written direction of the Controlling Party, terminate all of the rights and
obligations of the Master Servicer, including in its capacity as custodian,
under this Agreement and the other Basic Documents to which it is a party.  On or after the receipt by the Master
Servicer of such written notice, all authority, power, obligations and
responsibilities of the Master Servicer, including in its capacity as
custodian, under this Agreement, whether with respect to the Notes, the
Receivables or the Other Conveyed Property or otherwise, automatically shall
pass to, be vested in, and become obligations and responsibilities, of the
Indenture Trustee (or such other Successor Master Servicer appointed by the
Controlling Party pursuant to Section 10.3); provided, however, that the Successor
Master Servicer shall have (i) no liability with respect to any obligation
which was required to be performed by the terminated Master Servicer prior to
the date that the Successor Master Servicer becomes the Master Servicer or any
claim of a third party based on any alleged action or inaction of the
terminated Master Servicer, (ii) no obligation to perform any repurchase
or advancing obligations, if any, of the terminated Master Servicer, (iii) no
obligation to pay any of the fees and expenses of any other party involved in
this transaction not expressly assumed by the Master Servicer and (iv) no
liability or obligation with respect to any Master Servicer indemnification
obligations of any prior master servicer including the original master
servicer.

 

52

 

Notwithstanding anything
contained in this Agreement to the contrary, the Indenture Trustee as Successor
Master Servicer and any other Successor Master Servicer, are authorized to
accept and rely on all of the accounting, records (including computer records)
and work of the prior Master Servicer relating to the Receivables
(collectively, the “Predecessor Servicer Work Product”) without any audit or
other examination thereof, and the Indenture Trustee or other Successor Master
Servicer shall have no duty, responsibility, obligation or liability for the
acts and omissions of the prior Master Servicer.  If any error, inaccuracy, omission or
incorrect or non-standard practice or procedure (collectively, “Errors”) exist
in any Predecessor Servicer Work Product and such Errors make it materially
more difficult to service or should cause or materially contribute to the
Indenture Trustee or other Successor Master Servicer making or continuing any
Errors (collectively, “Continued Errors”), the Indenture Trustee or other Successor
Master Servicer, as the case may be, shall have no duty, responsibility,
obligation or liability for such Continued Errors; provided, however, that the Indenture Trustee or other Successor Master
Servicer agrees to use its best efforts to prevent further Continued
Errors.  In the event that the Indenture
Trustee or other Successor Master Servicer becomes aware of Errors or Continued
Errors, such Indenture Trustee or other Successor Master Servicer shall, with
the prior consent of Noteholders representing 66-2/3% of the outstanding Notes,
use its best efforts to reconstruct and reconcile such data as is commercially
reasonable to correct such Errors and Continued Errors and to prevent future
Continued Errors.

 

The Successor Master
Servicer is authorized and empowered by this Agreement to execute and deliver,
on behalf of the terminated Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice
of termination, whether to complete the transfer and endorsement of the Owner
Trust Estate and related documents to show the Trust as lienholder or secured
party on the related Lien Certificates, or otherwise.  The terminated Master Servicer agrees to
cooperate with the Successor Master Servicer in effecting the termination of
the responsibilities and rights of the terminated Master Servicer, including in
its capacity as custodian, under this Agreement, including, without limitation,
the transfer to the Successor Master Servicer for administration by it of all
cash amounts that shall at the time be held by the terminated Master Servicer
for deposit, or have been deposited by the terminated Master Servicer, in a
Trust Account and the delivery to the Successor Master Servicer of all
Receivable Files being held by the terminated Master Servicer in its capacity
as custodian, Monthly Records and Collection Records and a computer tape in
readable form as of the most recent Business Day containing all information
necessary to enable the Successor Master Servicer to service the Owner Trust
Estate.  If requested by the Controlling
Party, the Successor Master Servicer shall direct the Obligors to make all
payments under the Receivables directly to the Successor Master Servicer (in
which event the Successor Master Servicer shall process such payments in
accordance with Section 4.2(d) or 4.2(e), as applicable).  The terminated Master Servicer shall grant
the Indenture Trustee and the Successor Master Servicer reasonable access to
the terminated Master Servicer’s premises at the terminated Master Servicer’s
expense.

 

53

 

SECTION 10.3.                 Appointment of
Successor.  (a)  On and after
the time the Master Servicer receives a notice of termination pursuant to Section 10.2
or upon the resignation of the Master Servicer pursuant to Section 9.6,
the Master Servicer shall continue to perform all servicing functions under
this Agreement until the date specified in such termination notice or until
such resignation becomes effective or until a date mutually agreed upon by the
Master Servicer and the Indenture Trustee. 
The Indenture Trustee shall as promptly as possible after such
termination or resignation appoint an Eligible Servicer as a successor servicer
(the “Successor Master Servicer”), and such Successor Master Servicer shall
accept its appointment by a written assumption in a form reasonably acceptable
to the Indenture Trustee.  In the event
that a Successor Master Servicer has not been appointed or has not accepted its
appointment at the time when the Master Servicer ceases to act as Master
Servicer, the Indenture Trustee without further action shall automatically be
appointed the Successor Master Servicer. 
The Indenture Trustee may delegate any of its servicing obligations to
an Affiliate or agent in accordance with Section 9.5.  Notwithstanding the foregoing, the Indenture
Trustee shall, if it is legally unable so to act, petition a court of competent
jurisdiction to appoint any established institution qualifying as an Eligible
Servicer as the Successor Master Servicer hereunder.  The Indenture Trustee or the Successor Master
Servicer, as the case may be, shall be the successor in all respects to the
Master Servicer in its capacity as servicer under this Agreement and the
transactions set forth or provided for in this Agreement, and shall be subject
to all the rights, responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Master Servicer by the
terms and provisions of this Agreement, except as otherwise stated herein.  The Indenture Trustee or
the Successor Master Servicer, as the case may be, shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.  The Successor Master
Servicer shall be subject to termination under Section 10.2 upon the
occurrence of any Master Servicer Termination Event applicable to it as Master
Servicer.

 

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

 

(c)                                  Any
Successor Master Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) equal to the compensation
the Master Servicer would have been entitled to under this Agreement if the
Master Servicer had not resigned or been terminated hereunder or such other
amount as may be agreed to by the Successor Master Servicer and the Indenture
Trustee and consented to by the Holders of a majority of the Outstanding Amount
of Notes.  In addition, any Successor
Master Servicer shall be entitled to reasonable transition expenses incurred in
acting as Successor Master Servicer payable by the outgoing Master Servicer,
and to the extent such transition expenses have not been paid by the outgoing
Master Servicer, such Successor Master Servicer shall be entitled to
reimbursement for such reasonable expenses pursuant to the Series Supplement.

 

54

 

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

 

SECTION 10.5.                 Waiver of Past
Defaults.  The Controlling Party or,
with the consent of the Controlling Party, a majority of the Noteholders may,
on behalf of all Securityholders, waive any default by the Seller or the Master
Servicer in the performance of their obligations hereunder and its
consequences, except the failure to make any distributions required to be made
to Noteholders or to make any required deposits of any amounts to be so
distributed.  Upon any such waiver of a
past default, such default shall cease to exist, and any default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement.  No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.

 

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

 

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

 

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

 

ARTICLE XI

Termination

 

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

 

(b)                                 Upon
any sale of the assets included in the Series Trust Estate permitted by
the Series Supplement, the Master Servicer shall instruct the Indenture
Trustee to deposit the proceeds from such sale after all payments and reserves

 

55

 

therefrom (including the expenses of such sale) have
been made in the Collection Account.

 

(c)                                  Notice
of any termination of the Trust shall be given by the Master Servicer to the Owner
Trustee, the Indenture Trustee and the Administrator as soon as practicable
after the Master Servicer has received notice thereof.

 

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

 

ARTICLE XII

Administrative Duties of the Master Servicer

 

SECTION 12.1.                 Administrative
Duties.

 

(a)                                  Duties
with Respect to the Indenture.  The
Master Servicer shall perform all its duties and the duties of the Issuer under
the Indenture.  In addition, the Master
Servicer shall consult with the Owner Trustee as the Master Servicer deems
appropriate regarding the duties of the Issuer under the Indenture.  The Master Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer’s duties under the Indenture.  The Master Servicer shall prepare for
execution by the Issuer or shall cause the preparation by other appropriate
Persons of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer to prepare, file or deliver
pursuant to the Indenture.  In
furtherance of the foregoing, the Master Servicer shall take all necessary
action that is the duty of the Issuer to take pursuant to the Indenture,
including, without limitation, pursuant to Sections 2.7, 3.3, 3.4, 3.5, 3.6,
3.7, 3.9, 3.10, 3.17, 7.3, 8.3, 9.2, 9.3, 11.1 and 11.15 of the Indenture.

 

(b)                                 Duties
with Respect to the Issuer.

 

(i)                                     In
addition to the duties of the Master Servicer set forth in this Agreement or
any of the Related Documents, the Master Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner
Trustee, or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Issuer or the Owner Trustee, to prepare, file or
deliver pursuant to this Agreement or any of the Related Documents or under
state and federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the Issuer to
take pursuant to this Agreement

 

56

 

or any of the Basic Documents, including, without limitation, pursuant
to Sections 2.6 and 2.11 of the Trust Agreement.  In accordance with the directions of the
Issuer or the Owner Trustee, the Master Servicer shall administer, perform or
supervise the performance of such other activities in connection with the Owner
Trust Estate (including the Related Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or the Owner
Trustee and are reasonably within the capability of the Master Servicer.

 

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

 

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

 

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

 

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

 

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

 

57

 

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 Master Servicer’s opinion, no less favorable to the Issuer in any material
respect.

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                                    Neither
the Indenture Trustee nor any Successor Master Servicer shall be responsible
for any obligations or duties of a predecessor Master Servicer under Section 12.1.

 

58

 

SECTION 12.2.                 Records.  The Master Servicer shall maintain appropriate
books of account and records relating to services performed under this
Agreement, which books of account and records shall be accessible for
inspection by the Issuer and the Indenture Trustee at any time during normal
business hours.

 

SECTION 12.3.                 Additional
Information to be Furnished to the Issuer. 
The Master Servicer shall furnish to the Issuer and the Indenture
Trustee, from time to time such additional information regarding the Owner
Trust Estate as the Issuer and the Indenture Trustee shall reasonably request.

 

ARTICLE XIII

Miscellaneous Provisions

 

SECTION 13.1.                 Amendments.  (a)  This Agreement may be amended by
the parties hereto at any time when no Securities are outstanding without the
requirement of any consents or the satisfaction of any conditions set forth
below.

 

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

 

(c)                                  Except
as otherwise provided in the Series Supplement, subject to Section 13.2(h) hereof,
this Agreement may also be amended from time to time by the Master Servicer,
the Seller, the Indenture Trustee and the Administrator, with the prior written
consent of the Administrative Agent, where one exists, or otherwise the
Managing Agents, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying
in any manner the rights of the Securityholders; provided, however,
that no such amendment shall (i) reduce in any manner the amount of or
delay the timing of any distributions to be made to Securityholders or deposits
of amounts to be so distributed or the amount available under any Series Support
without the consent of each affected Securityholder, (ii) change the
definition of or the manner of calculating the interest of any Securityholder
without the consent of each affected Securityholder, or (iii) reduce the
aforesaid percentage of Noteholders required to consent to any such amendment.

 

59

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

60

 

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

 

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

 

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

 

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

 

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

 

(1)                                  simultaneously
with the execution and delivery of the Agreement and, if required pursuant to Section 13.1,
of each amendment, an Opinion of

 

61

 

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

 

(2)                                  on
or before March 31 of each year beginning with March 31, 2006, dated
as of a date during such period, stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the interest
of the Trust and the Indenture Trustee in the Series Trust Estate or (B) no
such action shall be necessary to preserve and protect such interest.

 

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

 

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

 

SECTION 13.4.                 Assignment.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns.  Notwithstanding
anything to the contrary contained herein, except as provided in Sections 8.4
and 9.3 and as provided in the provisions of this Agreement concerning the
resignation of the Master Servicer, this Agreement may not be assigned by the
Seller or the Master Servicer, the Owner Trustee, the Administrator, the
Indenture Trustee and the Administrative Agent, where one exists, or otherwise,
the Managing Agents.  In the event that a
successor Issuer is formed as permitted by the Series Supplement, such
Issuer shall succeed to all of the rights and obligations of the predecessor
Issuer hereunder; and all references to the Issuer hereunder shall thereafter
be deemed to be references to such successor Issuer.

 

SECTION 13.5.                 Limitations on
Rights of Others.  The provisions of
this Agreement are solely for the benefit of the parties hereto and for the
benefit of the

 

62

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 13.11.           Nonpetition
Covenants.  (a)  Notwithstanding
any prior termination of this Agreement or the Series Supplement, none of
the Master Servicer, the Seller, the Administrative Agent, any Managing Agent
or any Secured Party shall, prior to the date which is one year and one day
after the termination of this Agreement and the payment in full of all
obligations of the Issuer under the Basic Documents, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or

 

63

 

government authority for
the purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Issuer or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Issuer.

 

(b)                                 Notwithstanding
any prior termination of this Agreement or the Series Supplement, none of
the Master Servicer, any Managing Agent, the Administrative Agent or any
Secured Party shall, prior to the date that is one year and one day after the
termination of this Agreement, acquiesce to, petition or otherwise invoke or
cause the Seller to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Seller under any federal
or state bankruptcy, insolvency or similar law, appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator, or other similar
official of the Seller or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Seller.

 

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

 

(b)                                 Notwithstanding
anything contained herein to the contrary, this Agreement has been executed and
delivered by the Persons acting as the Indenture Trustee and the Administrator not
in their individual capacity but solely as Indenture Trustee or Administrator,
as applicable, and in no event shall such Person have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer.

 

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

 

SECTION 13.14.           Independence of the
Master Servicer.  For all purposes of
this Agreement, the Master Servicer shall be an independent contractor and
shall not be subject to the supervision of the Issuer, the Indenture Trustee,
the Administrator or the

 

64

 

Owner Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder.  Unless expressly
authorized by this Agreement or the Series Supplement, the Master Servicer
shall have no authority to act for or represent the Issuer or the Owner Trustee
in any way and shall not otherwise be deemed an agent of the Issuer or the
Owner Trustee.

 

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

 

65

 

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

 

 

	
   

  	
  HSBC AUTOMOTIVE TRUST
  2005-2

  
	
   

  	
   

  
	
   

  	
  By:

  	
  The Bank of New York,

  
	
   

  	
   

  	
  not in its individual
  capacity but solely as

  Owner Trustee on behalf of the Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Palladino

  
	
   

  	
   

  	
  Name: Michael Palladino

  
	
   

  	
   

  	
  Title: Assistant
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC AUTO RECEIVABLES CORPORATION,

  
	
   

  	
   

  	
  as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven H. Smith

  
	
   

  	
   

  	
  Name: Steven H. Smith

  
	
   

  	
   

  	
  Title: Vice President
  and Assistant Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC FINANCE
  CORPORATION,

  
	
   

  	
   

  	
  as Master Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William H. Kesler

  
	
   

  	
   

  	
  Name: William H. Kesler

  
	
   

  	
   

  	
  Title: Vice President
  and Assistant Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL
  ASSOCIATION, not in its individual capacity but solely as Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia M. Child

  
	
   

  	
   

  	
  Name: Patricia M. Child

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC BANK USA, NATIONAL
  ASSOCIATION,

  
	
   

  	
   

  	
  as Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susie Moy

  
	
   

  	
   

  	
  Name: Susie Moy

  
	
   

  	
   

  	
  Title: Vice President

  
				

 

2

 

EXHIBIT A

 

FORM OF TRANSFER AGREEMENT

 

TRANSFER No.                           
of Receivables dated as of                             
pursuant to the Master Sale and Servicing Agreement dated as of July 27,
2005 (the “Sale and Servicing Agreement”), among HSBC AUTOMOTIVE TRUST 2005-2,
a Delaware statutory trust (the “Issuer” or the “Trust”), HSBC AUTO RECEIVABLES
CORPORATION, a Nevada corporation (the “Seller”), HSBC FINANCE CORPORATION, a
Delaware corporation (the “Master Servicer”), U.S. BANK NATIONAL ASSOCIATION, a
national banking association in its capacity as Indenture Trustee (the “Indenture
Trustee”) and HSBC BANK USA, NATIONAL ASSOCIATION, a national banking
association in its capacity as Administrator (the “Administrator”).

 

W I T N E S S E T H:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-3

 

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

 

A-4

 

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

 

	
   

  	
  HSBC AUTOMOTIVE TRUST
  2005-2

  
	
   

  	
   

  
	
   

  	
  By:

  	
  The Bank of New York,

  
	
   

  	
   

  	
  not in its individual
  capacity but solely as Owner Trustee on behalf of the Trust

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC AUTO RECEIVABLES
  CORPORATION,

  
	
   

  	
   

  	
  as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSBC FINANCE
  CORPORATION,

  
	
   

  	
   

  	
  as Master Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

A-5

 

Acknowledged and
Accepted:

 

	
  U.S. BANK NATIONAL
  ASSOCIATION,

  	
   

  
	
   

  	
  not in its individual
  capacity but solely as

  	
   

  
	
   

  	
  Indenture Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  HSBC BANK USA, NATIONAL
  ASSOCIATION,

  	
   

  
	
   

  	
  as Administrator

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

A-6

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