exv10w27



 





Exhibit 10.27




Execution copy




FIRST AMENDED AND RESTATED



HSBC REFUND ANTICIPATION LOAN



AND IMA



PARTICIPATION AGREEMENT



NOTE: CERTAIN MATERIAL HAS BEEN OMMITTED FROM THIS AGREEMENT PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 24b-2. THE LOCATIONS OF THESE OMISSIONS ARE INDICATED THROUGHOUT
THE AGREEMENT BY THE FOLLOWING MARKINGS: [***].




Dated as of November 13, 2006




 









 





Table of Contents




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page(s)
	ARTICLE I	 	DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 1.1.
	 	Definitions
	 	 	2	 
	 

	 	Section 1.2.
	 	Rules of Construction
	 	 	2	 
	 

	 	Section 1.3.
	 	Corporate Reorganizations
	 	 	2	 
	 

	 	Section 1.4.
	 	Funding for Purchases of Participation Interests in HSBC RALs
and HSBC IMAs
	 	 	3	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II	 	REPRESENTATIONS AND WARRANTIES OF HSBC BANK

AND HSBC TFS	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 2.1.
	 	Representations Incorporated by Reference
	 	 	4	 
	 

	 	Section 2.2.
	 	Representations and Warranties of HSBC Bank and HSBC TFS
	 	 	4	 
	 

	 	Section 2.3.
	 	Representations and Warranties of HSBC TFS Relating to
Participated HSBC RALs and Participated HSBC IMAs
	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III	 	REPRESENTATIONS AND WARRANTIES OF BFC	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 3.1.
	 	Representations Incorporated by Reference
	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV	 	PURCHASE AND SALE OF PARTICIPATION INTERESTS	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 4.1.
	 	Purchase and Sale of Participation Interests in HSBC RALs
and HSBC IMAs
	 	 	5	 
	 

	 	Section 4.2.
	 	Purchase Price
	 	 	6	 
	 

	 	Section 4.3.
	 	Payment
	 	 	6	 
	 

	 	Section 4.4.
	 	Right to Exclude Certain RALs and IMAs
	 	 	6	 
	 

	 	Section 4.5.
	 	Certain Rights of HSBC TFS
	 	 	7	 
	 

	 	Section 4.6.
	 	Information to be Furnished by HSBC TFS to BFC
	 	 	7	 
	 

	 	Section 4.7.
	 	True Sale and Nonconsolidation Opinions
	 	 	7	 
	 

	 	Section 4.8.
	 	Right of BFC to Sell Participation Rights
	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V	 	SERVICING OF PARTICIPATED HSBC RALS AND HSBC IMAS	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 5.1.
	 	Servicing Agreement
	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI	 	REPURCHASE OF PARTICIPATION INTERESTS	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 6.1.
	 	Repurchase Events
	 	 	9	 
	 

	 	Section 6.2.
	 	Repurchase Remedy
	 	 	10	 






i









 





Table
of Contents (cont’d)



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page(s)
	 

	 	Section 6.3.
	 	Procedures for Repurchase
	 	 	10	 
	 

	 	Section 6.4.
	 	Impairment
	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII	 	TERM AND TERMINATION	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 7.1.
	 	Term
	 	 	10	 
	 

	 	Section 7.2.
	 	Termination
	 	 	11	 
	 

	 	Section 7.3.
	 	Effect of Termination
	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII	 	DEFAULT OF HSBC BANK AND HSBC TFS AND REMEDIES OF BFC	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 8.1.
	 	HSBC TFS Events of Default
	 	 	11	 
	 

	 	Section 8.2.
	 	Remedies
	 	 	12	 
	 

	 	Section 8.3.
	 	Default Rate
	 	 	12	 
	 

	 	Section 8.4.
	 	Waiver
	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX	 	DEFAULT OF BFC AND REMEDIES OF HSBC TFS	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 9.1.
	 	BFC Events of Default
	 	 	12	 
	 

	 	Section 9.2.
	 	Remedies
	 	 	13	 
	 

	 	Section 9.3.
	 	Default Rate
	 	 	13	 
	 

	 	Section 9.4.
	 	Waiver
	 	 	13	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X	 	MISCELLANEOUS	 	 	13	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 10.1.
	 	Independent Evaluation
	 	 	13	 
	 

	 	Section 10.2.
	 	Survival
	 	 	13	 
	 

	 	Section 10.3.
	 	No Waivers; Remedies Cumulative
	 	 	14	 
	 

	 	Section 10.4.
	 	Notices
	 	 	14	 
	 

	 	Section 10.5.
	 	Severability
	 	 	14	 
	 

	 	Section 10.6.
	 	Amendments and Waivers
	 	 	14	 
	 

	 	Section 10.7.
	 	Successors and Assigns
	 	 	14	 
	 

	 	Section 10.8.
	 	Headings
	 	 	14	 
	 

	 	Section 10.9.
	 	Alternative Dispute Resolution
	 	 	14	 
	 

	 	Section 10.10.
	 	Governing Law; Submission To Jurisdiction
	 	 	15	 
	 

	 	Section 10.11.
	 	Waiver of Jury Trial
	 	 	15	 
	 

	 	Section 10.12.
	 	Counterparts
	 	 	15	 
	 

	 	Section 10.13.
	 	Entire Agreement
	 	 	15	 
	 

	 	Section 10.14.
	 	Reinstatement
	 	 	15	 
	 

	 	Section 10.15.
	 	Advice of Counsel
	 	 	16	 
	 

	 	Section 10.16.
	 	No Strict Construction
	 	 	16	 
	 

	 	Section 10.17.
	 	Conflict of Terms
	 	 	16	 
	 

	 	Section 10.18.
	 	Further Execution
	 	 	16	 






ii









 




Table
of Contents (cont’d)



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page(s)
	 

	 	Section 10.19.
	 	Expenses
	 	 	16	 
	 

	 	Section 10.20.
	 	No Implied Relationship
	 	 	16	 
	 

	 	Section 10.21.
	 	No Third Party Beneficiaries
	 	 	17	 
	 

	 	Section 10.22.
	 	Limitation of Scope of Representations and Warranties and
Other Disclosures
	 	 	17	 






iii









 





FIRST AMENDED AND RESTATED

HSBC REFUND ANTICIPATION LOAN AND IMA



PARTICIPATION AGREEMENT




     This First Amended and Restated HSBC Refund Anticipation Loan and IMA Participation Agreement
(this “First A&R Participation Agreement”), dated as of November 13, 2006, is made by and
among the following parties:


Block Financial Corporation, a Delaware corporation (“BFC”);



HSBC Bank USA, National Association, a national banking association (“HSBC NA”);



HSBC Trust Company (Delaware), National Association (“HSBC Trust”); and



HSBC Taxpayer Financial Services, Inc., a Delaware corporation (“HSBC TFS”).




RECITALS




     A. HSBC Bank and HSBC Trust offer banking products and services, including HSBC RALs and HSBC
IMAs offered through Block Offices and the Block Digital Channel.



     B. HSBC TFS purchases participation interests in HSBC RALs and HSBC IMAs originated by HSBC
Bank and HSBC Trust.



     C. BFC offers financial products and services to individuals and business entities, and
purchases loans and participation interests in loans originated by third party lenders.



     D. HSBC Bank, HTMAC, HSBC TFS and certain of their Affiliates and certain Affiliates of BFC
entered into the HSBC Retail Settlement Products Distribution Agreement, dated as of September 23,
2005 (the “Original Retail Distribution Agreement”), which was subsequently amended by the
Joinder and First Amendment to Program Contracts, dated as of November 10, 2006 (the “First
Amendment”), pursuant to which, inter alia, HSBC Trust was added and HTMAC was removed to
reflect the replacement of HTMAC by HSBC TFS as a party to the Program Contracts, and which was
further amended by the Second Amendment to Program Contracts, dated the date hereof (the
“Second Amendment”), pursuant to which, inter alia, IMAs were added as a type of Settlement
Product offered to Clients (the Original Retail Distribution Agreement, as amended by the First
Amendment and the Second Amendment, the “Retail Distribution Agreement”).



     E. HSBC Bank, HTMAC, HSBC TFS and BFC entered into the HSBC Settlement Products Servicing
Agreement, dated as of September 23, 2005 (the “Original Servicing Agreement”), to set
forth the terms and conditions pursuant to which HSBC TFS would service, administer and collect
HSBC Settlement Products originated by HSBC Bank, which was subsequently amended by the First
Amendment, pursuant to which, inter alia, HSBC Trust was added as a party thereto, HTMAC was
removed as a party thereto, and HSBC TFS replaced HTMAC as a party thereto, and which was further
amended and restated pursuant to the First Amended and Restated HSBC Settlement Products Servicing
Agreement, dated the date hereof (the “First A&R Servicing Agreement”), to provide for,
inter alia, the servicing, administration



 









 







and collection of IMAs (the Original Servicing Agreement, as amended by the First Amendment
and the First A&R Servicing Agreement, the “Servicing Agreement”).



     F. HSBC Bank, HTMAC, HSBC TFS and BFC entered into the HSBC Refund Anticipation Loan
Participation Agreement, dated September 23, 2005 (the “Original Participation Agreement”),
to set forth the terms and conditions of HTMAC’s sales to BFC, and BFC’s purchases from HTMAC, of
Participation Interests in certain HSBC RALs originated by HSBC Bank, as amended by the First
Amendment, pursuant to which, inter alia, HSBC Trust was added, HTMAC was removed and HSBC TFS
replaced HTMAC as a party thereto.



     G. HSBC Bank, HSBC Trust, HSBC TFS and BFC now desire to enter into this First A&R
Participation Agreement to amend and restate the Original Participation Agreement, as amended by
the First Amendment, to reflect the addition of IMAs as a type of Settlement Product in which BFC
desires to purchase, and HSBC TFS desires to sell, participation interests (the Original
Participation Agreement, as amended by the First Amendment and this First A&R Participation
Agreement, the “Participation Agreement”).



AGREEMENT




     ACCORDINGLY, the parties to this First A&R Participation Agreement hereby agree as follows:



ARTICLE I



DEFINITIONS




     Section 1.1. Definitions. For all purposes of this First A&R Participation Agreement,
except as otherwise expressly provided herein or unless the context otherwise requires, capitalized
terms not otherwise defined herein shall have the meanings assigned to such terms in the Appendix
of Defined Terms and Rules of Construction attached to the Original Retail Distribution Agreement
as Appendix A, as amended pursuant to the First Amendment, and as further amended pursuant to the
Second Amendment (as amended, the “Appendix of Defined Terms and Rules of Construction”),
which is hereby incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein. In the event that any definition specified in this First A&R
Participation Agreement for any capitalized term is inconsistent with the definition specified for
such term in the Appendix of Defined Terms and Rules of Construction, the definition in the
Appendix of Defined Terms and Rules of Construction shall govern.



     Section 1.2. Rules of Construction. For all purposes of this First A&R Participation
Agreement, unless the context otherwise requires, the rules of construction set forth in the
Appendix of Defined Terms and Rules of Construction shall be applicable to this First A&R
Participation Agreement.



     Section 1.3. Corporate Reorganizations.



          (a) The Block Companies may assign their rights and obligations under this Participation
Agreement to one or more Subsidiaries of H&R Block without the consent of the HSBC Companies if (i)
such assignment is desirable in connection with a reorganization of the




2









 







business operations of H&R Block’s Subsidiaries, (ii) such contemplated assignment will not
materially adversely affect any right or obligation of any HSBC Company under this Participation
Agreement, and (iii) the contemplated assignee (A) is a wholly owned (direct or indirect)
Subsidiary of H&R Block and (B) has the operational and financial capacity to meet all obligations
of the assigning Block Company under this Participation Agreement contemplated to be assigned to it
(a “Permitted Block Assignment”). The assigning Block Companies shall provide each of the
HSBC Companies at least sixty (60) days prior written notice of any contemplated Permitted Block
Assignment. The parties hereto agree to amend this Participation Agreement to the extent necessary
to reflect such Permitted Block Assignment.




          (b) The HSBC Companies may assign their rights and obligations under this Participation
Agreement to one or more Subsidiaries of HSBC North American Holdings, Inc. without the consent of
the Block Companies if (i) such assignment is desirable in connection with a reorganization of the
business operations of HSBC North American Holdings, Inc.’s Subsidiaries, (ii) such contemplated
assignment will not materially adversely affect any right or obligation of any Block Company under
this Participation Agreement, and (iii) the contemplated assignee (A) is a wholly owned (direct or
indirect) Subsidiary of HSBC North American Holdings, Inc., (B) only with respect to any assignment
by HSBC Bank or HSBC Trust under this Section 1.3(b), is a national bank or federal savings
association and (C) has the operational and financial capacity to meet all obligations of the
assigning HSBC Company under this Participation Agreement contemplated to be assigned to it (a
“Permitted HSBC Assignment”). The assigning HSBC Companies shall provide each of the Block
Companies at least sixty (60) days prior written notice of any contemplated Permitted HSBC
Assignment. The parties hereto agree to amend this Participation Agreement to the extent necessary
to reflect such Permitted HSBC Assignment.




     Section 1.4. Funding for Purchases of Participation Interests in HSBC RALs.



          (a) HSBC TFS shall use its best efforts to obtain board of directors’ and all other required
approvals of one of its Affiliates, or of a third party lender, on or before July 1, 2006, to
furnish a commitment to BFC for funding of the purchase of Participation Interests in HSBC RALs
pursuant to this Participation Agreement; provided, that BFC timely furnishes such
information as is reasonably requested by such lender, such funding to be provided to BFC at an
interest rate [***] . BFC shall provide a preliminary written notice to HSBC TFS no later than
September 1st of the year preceding each Tax Period during the Term requesting funding for the
purchase of Participation Interests during the next Tax Period, which preliminary request shall be
confirmed by BFC pursuant to a final written notice to HSBC TFS to be delivered no later than
October 1st of such year preceding such Tax Period.




          (b) Each Affiliate of HSBC TFS or third party lender, as applicable, and BFC shall pay their
own legal fees and expenses to document the funding arrangements described in this Section 1.4.




3









 








ARTICLE II



REPRESENTATIONS AND WARRANTIES OF HSBC BANK, HSBC TRUST AND HSBC TFS




     Section 2.1. Representations Incorporated by Reference. HSBC Bank, HSBC Trust and
HSBC TFS each represent and warrant, with respect to itself only, to BFC that each representation
and warranty made by it in Article IV of the Retail Distribution Agreement is true and correct,
each and all of which are made as of the date hereof and (except the representations and warranties
in Section 4.6 of the Retail Distribution Agreement) as of each day during the term of this
Participation Agreement.



     Section 2.2. Representations and Warranties of HSBC Bank, HSBC Trust and HSBC TFS.
HSBC Bank, HSBC Trust and HSBC TFS hereby represent and warrant to BFC, as of each Closing Date
(prior to a purchase of BFC of a participation interest hereunder), that HSBC Bank and HSBC Trust
each has sold and HSBC TFS has purchased a one hundred percent (100%) participation interest in all
of HSBC Bank’s and HSBC Trust’s respective right, title and interest in and to each HSBC RAL and
HSBC IMA, free and clear of any Lien of any Person claiming under or through HSBC Bank, HSBC Trust
or any of its Affiliates.



     Section 2.3. Representations and Warranties of HSBC TFS Relating to Participated HSBC RALs
and HSBC IMAs. HSBC TFS hereby represents and warrants to BFC, as of each Closing Date:



          (a) Eligible RALs and Eligible HSBC IMAs. Each Participated HSBC RAL is an Eligible
RAL, and each Participated HSBC IMA is an Eligible IMA.




          (b) Sale and Ownership; Title. Each conveyance of a Participation Interest by HSBC
TFS to BFC on such Closing Date constitutes either (i) a valid sale, transfer, assignment, set over
and conveyance to BFC of all right, title and interest of HSBC TFS in and to such Participation
Interest, free and clear of any Lien of any Person claiming through or under HSBC TFS or any of its
Affiliates, or (ii) if it is ultimately determined by a court of competent jurisdiction that a sale
of a Participation Interest from HSBC TFS to BFC did not occur, then such conveyance constitutes a
grant of a security interest (as defined in the UCC as in effect in the applicable state) by HSBC
TFS to BFC in each Participation Interest purportedly conveyed and this Participation Agreement
constitutes a security agreement with respect thereto. On each Closing Date, immediately prior to
any such sale of (or grant of a security interest in) a Participation Interest, HSBC TFS will be
the sole legal and beneficial owner of, and will have marketable title to, the Participation
Interest, free and clear of any Lien (other than the interests of BFC contemplated by this
Participation Agreement). Neither HSBC TFS nor any Person claiming through or under HSBC TFS or
any of its Affiliates shall have any claim to or interest in such Participation Interest, except
for any interest of HSBC TFS therein as a “debtor” (specifically, as seller of payment intangibles)
for purposes of Article 9 of the UCC.




4









 








ARTICLE III



REPRESENTATIONS AND WARRANTIES OF BFC




     Section 3.1. Representations Incorporated by Reference. BFC hereby represents and
warrants to HSBC TFS that each representation and warranty made by BFC in Article III of the Retail
Distribution Agreement is true and correct, each and all of which are made as of the date hereof
and (except the representations and warranties in Section 3.6 of the Retail Distribution Agreement)
as of each day during the term of this Participation Agreement.



ARTICLE IV



PURCHASE AND SALE OF PARTICIPATION INTERESTS




     Section 4.1. Purchase and Sale of Participation Interests in HSBC RALs and HSBC IMAs.



          (a) Purchase and Sale of Participation Interests. Except as otherwise provided
herein, HSBC TFS shall sell to BFC, and BFC shall purchase from HSBC TFS, a Participation Interest
in each HSBC RAL and HSBC IMA originated pursuant to any Distribution Agreement. Each such
Participation Interest shall be purchased by BFC on the first Business Day following the Business
Day on which the Disbursement Check for such HSBC RAL or HSBC IMA has been presented to HSBC Bank
or HSBC Trust, as the case may be, for payment or Electronic Disbursement for such HSBC RAL or HSBC
IMA, has been made by HSBC Bank or HSBC Trust, as the case may be. HSBC TFS shall convey each
Participation Interest to BFC upon BFC’s payment to HSBC TFS of the Purchase Price with respect to
each such Participation Interest as set forth in Section 4.3. If and to the extent that any
conveyance of a Participation Interest is not deemed a sale of a Participation Interest, (i) HSBC
TFS hereby grants to BFC a security interest in each Participation Interest that was purportedly
conveyed, (ii) this Participation Agreement shall constitute a security agreement with respect to
such Participation Interest under applicable Law and (iii) HSBC TFS authorizes the filing of such
financing and continuation statements with respect to Participation Interests hereafter created or
arising. Except for the representations and warranties expressly made by HSBC TFS in this
Participation Agreement, Participation Interests (and the acquisition thereof by BFC) shall be
without recourse to HSBC TFS.




          (b) Applicable Percentage. The Applicable Percentage for each Calculation Period
during the term of this Participation Agreement shall be 49.999999%; provided,
however, that (i) BFC may elect to reduce the Applicable Percentage to zero (0) for a
particular Calculation Period, by giving notice of BFC’s election to HSBC TFS on or before
September 1 immediately prior to such Calculation Period; (ii) BFC may elect to reduce the
Applicable Percentage to zero (0) for any applicable Calculation Period (or any remaining portion
thereof) from and after January 30 of such Calculation Period, by giving notice of BFC’s election
to HSBC TFS on or before January 20 of such Calculation Period for which the election is
applicable; and (iii) BFC may elect to reduce the Applicable Percentage to zero (0) at any time if
BFC has exceeded its internal funding limit, by giving notice thereof as soon as practicable, but
no later than 8:30 a.m., New York time, on the date of the reduction of the Applicable Percentage
to zero (0), it being understood that the reduction of the Applicable Percentage to




5









 







zero (0) shall only be in effect during the periods of time BFC has exceeded its internal
funding limit.




     Section 4.2. Purchase Price. The Purchase Price for each Participation Interest on
each Closing Date shall be equal to the product of (a) the Applicable Percentage on such Closing
Date, multiplied by (b) the Principal Amount minus (1) in the case of an HSBC RAL, the RAL
Fees and the Refund Account Fees of the HSBC RAL, or (2) in the case of an HSBC IMA, the IMA Fees,
in which a Participation Interest is being purchased.



     Section 4.3. Payment. Each Business Day, not later than 8:30 a.m., New York time,
HSBC TFS shall provide to BFC a list of the number and amount of Disbursement Checks presented to
HSBC Bank or HSBC Trust for payment and Electronic Disbursements made by HSBC Bank and HSBC Trust
for HSBC RALs and HSBC IMAs on the previous Business Day (excluding those Disbursement Checks and
Electronic Disbursements related to any HSBC RALs and HSBC IMAs excluded pursuant to Section 4.4),
together with the aggregate Purchase Price for the Participation Interests corresponding to such
HSBC RALs and HSBC IMAs. BFC shall pay to HSBC TFS the full amount of such Purchase Price not
later than 4:30 p.m., New York time, on the Business Day on which such notice is received. Such
payment shall be made via wire transfer to such domestic account designated by HSBC TFS by notice
to BFC from time to time, in United States dollars.



     Section 4.4. Right to Exclude Certain HSBC RALs and HSBC IMAs.



          (a) BFC may in its reasonable discretion elect not to purchase Participation Interests in any
group or groups of HSBC RALs and HSBC IMAs, for any remaining portion of a Calculation Period
and/or for any future Calculation Periods, for any of the following reasons: (i) to comply with
applicable Laws on advice of BFC’s counsel; (ii) to comply with a court order or a cease and desist
order; (iii) to comply with an agreement with any federal or state regulatory authority; or (iv)
any combination of the foregoing reasons.




          (b) HSBC TFS or HSBC Bank or HSBC Trust may in its reasonable discretion elect not to sell
Participation Interests in any group or groups of HSBC RALs and HSBC IMAs, for any remaining
portion of a Calculation Period and/or for any future Calculation Periods, for any of the following
reasons: (i) to comply with applicable Laws; (ii) to comply with a court order or a cease and
desist order; (iii) to comply with an agreement with any federal or state regulatory authority; or
(iv) any combination of the foregoing reasons. Upon any such election, the parties shall negotiate
in good faith to promptly amend this Participation Agreement to the extent necessary to achieve
economic results for BFC that are comparable to the economic results that BFC would have achieved
had such election not been made.




          (c) Either BFC or HSBC TFS shall make such elections to exclude certain RALs and HSBC IMAs by
giving notice of such election to the other party, which notice shall specify the group or groups
of HSBC RALs and HSBC IMAs that the notifying party elects to exclude, the reason for such
exclusion and the remaining portion of a Calculation Period or future Calculation Periods with
respect to which such RALs and HSBC IMAs shall be excluded, which election shall become effective
ten (10) days after the giving of such notice.




6









 








     Section 4.5. Certain Rights of HSBC TFS. The following obligations of BFC under this
Section 4.5 shall survive any termination of the obligations of HSBC TFS to sell, and the
obligations of BFC to purchase, Participation Interests in HSBC RALs and HSBC IMAs pursuant to
Section 4.1 and all other events and conditions whatever:



          (a) Reimbursement. If, at any time, HSBC TFS is required to return or pay over any
payment received by, or application of funds made by, HSBC TFS on account of any Participated HSBC
RAL or Participated HSBC IMA, BFC, promptly upon notice from HSBC TFS, shall pay to HSBC TFS an
amount equal to the Applicable Percentage of the amount (net of related Defaulted RAL/IMA
Collection Fees (as that term is defined in the Servicing Agreement), as the case may be, retained
by the Servicer pursuant to the Servicing Agreement) so returned or paid over, together with the
Applicable Percentage of any interest or penalties payable with respect to such Participated HSBC
RAL or HSBC IMA, as the case may be.




          (b) Payover. If BFC receives any payment for any HSBC RAL or HSBC IMA, BFC shall
deliver such payment to the Servicer for deposit into the applicable Deposit Account and, where
applicable, allocation to the IMA Collection Ledger as provided in Section 3.2 of the Servicing
Agreement.




     Section 4.6. Information to be Furnished by HSBC TFS to BFC. HSBC TFS shall provide
to BFC, as of January 31, April 30, July 31, and October 31 of each year during the Term, a listing
by Calculation Period of the Principal Amounts and other amounts owing on all unpaid Participated
HSBC RALs and Participated HSBC IMAs, unique customer identifiers related thereto, type of
Settlement Product including, if applicable, type of HSBC RAL, EIC indicator and any other
information related thereto mutually agreeable to the parties, such information to be provided
within five (5) Business Days after such dates. BFC shall not use such information for any purpose
other than asset verification and trend analysis and agrees to hold such information in confidence
and not to disclose such information to any party other than its accountants and its legal counsel,
subject to the terms and conditions of Section 16.1 of the Retail Distribution Agreement.



     Section 4.7. True Sale and Nonconsolidation Opinions. Upon BFC’s request, HSBC TFS
agrees to use commercially reasonable efforts to obtain for BFC (a) a “true sale” opinion of
counsel to HSBC TFS with respect to the sale by HSBC TFS and the purchase by BFC or its Affiliates
of the Participation Interests in the HSBC RALs and HSBC IMAs, and (b) a “nonconsolidation” opinion
of counsel to HSBC TFS with respect to HSBC TFS and any other Affiliate of HSBC TFS that owns the
Participation Interests prior to such sale and purchase, in both cases in form and substance
typically employed in off-balance sheet financing or sale transactions generally; provided,
however, that in connection with such efforts (A) HSBC TFS shall not be obligated to
restructure the terms of any Program Contract in any way that will have a Material Adverse Effect
upon the economic interests of HSBC TFS or its Affiliates, and (B) the failure of HSBC TFS to
obtain such opinions (after making commercially reasonable efforts to do so) shall not constitute a
breach of any of HSBC TFS’s obligations under this Participation Agreement and shall in no event
give rise to any liability on the part of HSBC TFS or any of its Affiliates. With respect to such
opinions for a particular Calculation Period, (i) BFC shall request such opinions as soon as
reasonably possible during the immediately preceding calendar year, and in any event, no later than
September 1st of such preceding calendar year absent major



7









 







structural changes to the terms of any Program Contract made or proposed by HSBC TFS or its
Affiliates, (ii) BFC shall identify the entity, if any, with whom it intends to effectuate any
financing or sale transaction, and the proposed structure of such financing or sale transaction, as
soon as reasonably possible during the immediately preceding calendar year, and in any event, no
later than September 1st of such preceding calendar year absent major structural changes to the
terms of any Program Contract made or proposed by HSBC TFS or its Affiliates, and (iii) BFC, HSBC
TFS and its Affiliates shall cooperate and use commercially reasonable efforts to complete all
changes to the terms of all Program Contracts, if any, and the legal documents and agreements
reflecting such changes, if any, as soon as reasonably possible during the immediately preceding
calendar year, and in any event no later than October 15th of such preceding calendar year absent
major structural changes to any such agreement made or proposed by BFC or HSBC TFS or its
Affiliates. BFC shall be solely responsible for all legal fees of the parties associated with any
opinion undertaken pursuant to this Section 4.7. In connection with any request by BFC for an
opinion pursuant to this Section 4.7 for a particular Calculation Period, HSBC TFS shall, upon
reasonable request by BFC, provide to BFC copies of all material operative agreements executed by
HSBC TFS or its Affiliates relating to the origination of HSBC RALs and HSBC IMAs by the
Originator, or the sale and servicing of HSBC TFS’s retained interests in the HSBC RALs and HSBC
IMAs, for such Calculation Period, as well as all material operative agreements executed by HSBC
TFS or its Affiliates relating to the financing or sale of such retained interests for such
Calculation Period, in each case only to the extent (y) such agreements are reasonably necessary to
be reviewed by BFC in connection with the opinions contemplated by this Section 4.7, and (z) the
terms of such agreements permit disclosure to third parties; provided, however,
that HSBC TFS shall not add any provision to any such agreement that unreasonably prohibits
disclosure to BFC, its accountants or counsel engaged in connection with the issuance of any
opinion pursuant to this Section 4.7, or the entity, if any, engaged by BFC to effectuate any
financing or sale transaction. BFC hereby agrees to hold all such agreements in strict confidence
and not to provide any copies or disclose any terms therein to any party other than its
accountants, its counsel and the entity, if any, with whom BFC proposes to effectuate any financing
or sale transaction, subject to the terms and provisions of Section 16.1 of the Retail Distribution
Agreement (provided that references therein to any Program Contract shall be deemed to be
references to such material operative agreements for purposes of this sentence); provided,
however, that, notwithstanding any other provision in this Participation Agreement, if such
entity or an Affiliate of such entity is deemed by HSBC TFS to be a competitor of HSBC TFS in the
making or servicing of RALs or IMAs, then the disclosure of such agreements to such entity may be
restricted by HSBC TFS to the extent deemed necessary by HSBC TFS, in its sole discretion, to
protect its business interests and trade secrets.



     Section 4.8. Right of BFC to Sell Participation Rights. If BFC has elected not to
purchase a Participation Interest as to any Calculation Period, BFC shall have the right to sell,
assign and transfer its rights to purchase Participation Interests as to such Calculation Period
without the consent of HSBC TFS if (a) such contemplated sale and assignment will not materially
adversely affect any right or obligation of HSBC TFS under this Participation Agreement, and (b)
the contemplated purchasers and assignees (i) have the operational and financial capacity to meet
all obligations of BFC under this Participation Agreement contemplated to be assigned to them and
(ii) are not, and will not become upon effectiveness of such contemplated purchase and assignment,
subject to any Law or consent that could reasonable



8









 







be deemed to require any Governmental Approval or third-party consent, that has not been
obtained, to carry out any of the obligations contemplated to be purchased and assigned to them.
BFC shall provide HSBC TFS at least five (5) Business Days prior notice of any contemplated sale
and assignment, which notice shall specify the portion of BFC’s rights to purchase Participation
Interests which it proposes to sell, the Person or Persons to whom it proposes to sell such rights,
the price and the terms and conditions of the proposed sale of such rights contained in any bona
fide offer to purchase such rights (the “Offer”). Within five (5) Business Days after such
notice, HSBC TFS or its Affiliates may elect, upon notice to BFC, to purchase from BFC the rights
to purchase Participation Interests proposed to be sold, at the price and on the terms and
conditions set forth in the Offer. If HSBC TFS or its Affiliates do not so elect to purchase BFC’s
rights, BFC shall have the right to sell such rights to the Person or Persons, at the price and on
the terms and conditions specified in the Offer, for a period of forty (40) days after BFC’s notice
of the Offer to HSBC TFS.



ARTICLE V



SERVICING OF PARTICIPATED HSBC RALS AND HSBC IMAS




     Section 5.1. Servicing Agreement. HSBC Bank, HSBC Trust, BFC and HSBC TFS (on its own
behalf and as Servicer) are parties to the First A&R Servicing Agreement executed concurrently
herewith. Pursuant to the terms of the Servicing Agreement, the Servicer shall perform all
servicing acts with respect to Participated HSBC RALs and Participated HSBC IMAs including, but not
limited to, performing payment processing, record keeping, collecting and monitoring all payments
made with respect to Participated HSBC RALs and Participated HSBC IMAs, other routine customer
service functions and distribution of funds.



ARTICLE VI



REPURCHASE OF PARTICIPATION INTERESTS




     Section 6.1. Repurchase Events.



          (a) If HSBC TFS shall breach any of its representations and warranties made in Section 2.3 and
the HSBC RAL or HSBC IMA, as the case may be, underlying such Participation Interest was not fully
collected (i) with respect to such HSBC RAL, by December 31 immediately following the Tax Period in
which such HSBC RAL was originated, or (ii) with respect to such HSBC IMA, by December 31
immediately following the Calculation Period in which such HSBC IMA was originated, then BFC shall
have the repurchase rights set forth in Section 6.2.




          (b) If a Participated HSBC RAL or Participated HSBC IMA is not an Eligible RAL or Eligible
IMA, as the case may be, as a result of the failure to satisfy the conditions set forth in the
definition of Eligible RAL or Eligible IMA (contingent on that failure not being caused by any
action or inaction by BFC to perform its explicit obligations under this Participation Agreement),
and such Participated HSBC RAL or Participated HSBC IMA was not fully collected (i) with respect to
such HSBC RAL, by December 31 immediately following the Tax Period in which such HSBC RAL was
originated, or (ii) with respect to such HSBC IMA, by December 31 immediately following the
Calculation Period in which such HSBC IMA was originated, then BFC shall have the repurchase rights
set forth in Section 6.2.




9









 








     Section 6.2. Repurchase Remedy. In the event of a breach as set forth in Section 6.1,
then, upon the earlier to occur of the discovery by BFC of such breach or event, or receipt by BFC
of notice from HSBC TFS of such breach or event, BFC may by notice then given in writing to HSBC
TFS direct HSBC TFS to repurchase the Participation Interest in each such Participated HSBC RAL or
Participated HSBC IMA, as the case may be, within thirty (30) days of such notice (or within such
longer period as may be specified in such notice but in no event later than one hundred twenty
(120) days) on a date specified by BFC occurring within such applicable period, on the terms and
conditions set forth in Section 6.3.



     Section 6.3. Procedures for Repurchase. When the provisions of Section 6.2 require
repurchase of a Participation Interest, HSBC TFS shall purchase such Participation Interest by
remitting to BFC an amount equal to the Repurchase Value of the Participation Interest as of the
date of such repurchase. Such remittance shall be made to BFC at such account designated by BFC by
notice to HSBC TFS, in United States dollars and in immediately available funds, without setoff,
withholding, counterclaim or other deduction of any nature whatsoever. Upon such remittance, BFC
shall automatically and without further action be deemed to transfer, assign, set over and
otherwise convey to HSBC TFS, without recourse, representation or warranty (except for the warranty
that since the date of conveyance by HSBC TFS to BFC, BFC has not sold, transferred or encumbered
any such Participation Interest), all right, title and interest of BFC in and to such Participation
Interest. BFC shall execute such documents and instruments of transfer and assignment and take
other actions as shall reasonably be requested by HSBC TFS to evidence the conveyance of such
Participation Interest, all monies due or to become due with respect thereto and all proceeds
thereof pursuant to this Section 6.3. The obligation of HSBC TFS to repurchase Participation
Interests in HSBC RALs and HSBC IMAs in accordance with this Section 6.3 shall constitute the sole
remedy respecting the occurrence of the events specified in Section 6.1.



     Section 6.4. Impairment. For the purposes of this Article VI, no proceeds of a HSBC
RAL or HSBC IMA shall be deemed to be impaired hereunder solely because such proceeds are held by
HSBC TFS for more than the applicable period under Section 9-315(d) of the UCC as in effect in the
State of Delaware.



ARTICLE VII



TERM AND TERMINATION




     Section 7.1. Term. The “Initial Term” of this Participation Agreement shall
commence as of July 1, 2006 and shall expire on June 30, 2011. In the event the Block Companies
elect to renew the Retail Distribution Agreement for not more than two (2) successive one year
periods (each such one year period is referred to as a “Renewal Term”), this Participation
Agreement shall be automatically renewed for each Renewal Term so elected by the Block Companies,
unless BFC elects not to renew this Participation Agreement for a Renewal Term by providing written
notice to HSBC Bank, HSBC Trust and HSBC TFS not later than ninety (90) days prior to the
expiration of the Initial Term or, if the Participation Agreement was renewed, the Renewal Term.
The Initial Term and any Renewal Term(s) are collectively referred to as the “Term”.
Notwithstanding the provisions of this Section 7.1, this Participation Agreement may be terminated
prior to the expiration of the Initial Term or any Renewal Term in accordance with the provisions
of Section 7.2.



10









 





     Section 7.2. Termination.



          (a) This Participation Agreement may be terminated as follows:




               (1) upon the mutual written agreement of all of the parties hereto;



               (2) upon the expiration or termination of the Retail Distribution Agreement;



               (3) by BFC in accordance with Section 18.2(b) of the Retail Distribution Agreement; or



               (4) by HSBC TFS in accordance with Section 19.2(b) of the Retail Distribution
Agreement.



          (b) BFC may terminate this Participation Agreement pursuant to Section 8.2(b).




          (c) HSBC TFS may terminate this Participation Agreement pursuant to Section 9.2(b).




     Section 7.3. Effect of Termination. Termination pursuant to Section 7.2 shall not
affect the rights or obligations of the parties to this Participation Agreement or any other
Program Contract arising prior to the termination of this Participation Agreement, including the
obligations of the Servicer under the Servicing Agreement.



ARTICLE VIII



DEFAULT OF HSBC BANK, HSBC TRUST AND HSBC TFS AND REMEDIES OF BFC




     Section 8.1. HSBC TFS Events of Default. The occurrence of any one or more of the
following events for any reason whatsoever (whether voluntary or involuntary, by operation of Law
or otherwise) shall constitute an event of default with respect to HSBC TFS. The occurrence of any
one or more of the following events with respect to HSBC Bank or HSBC Trust, as applicable, for any
reason whatsoever (whether voluntary or involuntary, by operation of Law or otherwise) shall
constitute an event of default with respect to HSBC Bank or HSBC Trust, as applicable.



          (a) HSBC Bank, HSBC Trust or HSBC TFS, as applicable, fails to observe or perform any covenant
applicable to it contained in this Participation Agreement (or, in the event such covenant does not
contain a Material Adverse Effect qualification, so long as such failure could reasonably be
expected to have a Material Adverse Effect), following receipt of notice of such failure and the
same shall remain unremedied for five (5) days or more following receipt of such notice;




          (b) any representation, warranty, certification or statement made by HSBC Bank, HSBC Trust or
HSBC TFS, as applicable, in this Participation Agreement is incorrect in
any respect (or, in the event such representation, warranty, certification or statement made
in this Participation Agreement does not contain a Material Adverse Effect qualification, so long
as




11









 







such incorrect representation, warranty, certification or statement could reasonably be expected
to have a Material Adverse Effect); or




          (c) a HSBC Event of Default occurs under the Retail Distribution Agreement.




     Section 8.2. Remedies. If any event of default by HSBC TFS under Section 8.1 has
occurred and is continuing and adversely affects BFC, the following actions may be taken:



          (a) Termination. BFC may terminate this Participation Agreement. If BFC terminates,
this Participation Agreement under this Section 8.2(a), BFC shall promptly provide written notice
to HSBC TFS. The effective date of termination shall be the date such corresponding notice was
received by HSBC TFS.




          (b) Other Rights and Remedies. BFC may exercise any rights and remedies provided to
it under this Participation Agreement or at law or equity.




     Section 8.3. Default Rate. If any event of default of HSBC TFS has occurred and is
continuing, and all or any portion of the Obligations hereunder of HSBC TFS are outstanding, such
Obligations or any portion thereof shall bear interest at the Default Rate until such Obligations
or such portion thereof plus all interest thereon are paid in full.



     Section 8.4. Waiver. BFC may waive, in writing, any event of default of HSBC Bank,
HSBC Trust or HSBC TFS, as applicable. Upon any such waiver of a past event of default of HSBC
Bank, HSBC Trust or HSBC TFS, as applicable, such event of default shall cease to exist;
provided, however, that such waiver shall not excuse or discharge any Obligations
relating to or liabilities arising from such event of default. No such waiver shall extend to any
subsequent or other event of default of HSBC Bank, HSBC Trust or HSBC TFS, as applicable, or impair
any right consequent thereon except to the extent expressly so waived.



ARTICLE IX



DEFAULT OF BFC AND REMEDIES OF HSBC TFS




     Section 9.1. BFC Events of Default. The occurrence of any one or more of the
following events for any reason whatsoever (whether voluntary or involuntary, by operation of Law
or otherwise) shall constitute an event of default with respect to BFC:



          (a) BFC fails to observe or perform any covenant applicable to it contained in this
Participation Agreement (or, in the event such covenant does not contain a Material Adverse Effect
qualification, so long as such failure could reasonably be expected to have a Material Adverse
Effect), and the same shall remain unremedied for five (5) days or more following receipt of
written notice of such failure;




          (b) any representation, warranty, certification or statement made by BFC in or pursuant to
this Participation Agreement is incorrect in any respect (or, in the event such representation,
warranty, certificate or statement made in this Participation Agreement does not contain a Material
Adverse Effect qualification, so long as such incorrect representation,
warranty, certification or statement could reasonably be expected to have a Material Adverse
Effect); or




12









 








          (c) a Block Event of Default occurs under the Retail Distribution Agreement.




     Section 9.2. Remedies. If any event of default by BFC under Section 9.1 has occurred
and is continuing and adversely affects HSBC Bank, HSBC Trust or HSBC TFS, as applicable, the
following actions may be taken:



          (a) Termination. HSBC Bank, HSBC Trust or HSBC TFS, as applicable, may terminate
this Participation Agreement. If any of HSBC Bank, HSBC Trust or HSBC TFS, as applicable,
terminates this Participation Agreement under this Section 9.2(a), such party shall promptly
provide written notice to BFC. The effective date of termination shall be the date such
corresponding notice was received by BFC.




          (b) Other Rights and Remedies. HSBC Bank, HSBC Trust or HSBC TFS, as applicable, may
exercise any rights and remedies provided to it under this Participation Agreement or at law or
equity.




     Section 9.3. Default Rate. If any event of default of BFC has occurred and is
continuing, and all or any portion of the Obligations hereunder of BFC are outstanding, such
Obligations or any portion thereof shall bear interest at the Default Rate until such Obligations
or such portion thereof plus all interest thereon are paid in full.



     Section 9.4. Waiver. HSBC Bank, HSBC Trust or HSBC TFS, as applicable, may waive, in
writing, any event of default of BFC. Upon any such waiver of a past event of default of BFC, such
event of default of BFC shall cease to exist; provided, however, that such waiver
shall not excuse or discharge any Obligations relating to or liabilities arising from such event of
default of BFC. No such waiver shall extend to any subsequent or other event of default of BFC or
impair any right consequent thereon except to the extent expressly so waived.



ARTICLE X



MISCELLANEOUS




     Section 10.1. Independent Evaluation. BFC expressly acknowledges that except as
provided in Article II and the other Program Contracts, HSBC Bank, HSBC Trust and HSBC TFS have not
made any representation or warranty, express or implied, to BFC and no act by HSBC Bank, HSBC Trust
or HSBC TFS heretofore or hereafter taken shall be deemed to constitute any representation or
warranty by HSBC Bank, HSBC Trust or HSBC TFS to BFC; and (b) in connection with its entry into and
its performance of its obligations under this Participation Agreement, BFC has made and shall
continue to make its own independent investigation of the economic and credit risks associated with
the purchase of Participation Interests.



     Section 10.2. Survival.



          (a) The rights and obligations of the parties hereto under Sections 1.1, 1.2, 1.3, 1.4(b), 4.5
and 4.6, Article V and Article VI of this Participation Agreement, shall survive
the expiration or termination of this Participation Agreement until such time as no
obligations of such parties thereunder are due and owing.




13









 








          (b) The (i) representations and warranties of the parties hereto and (ii) the rights and
obligations of the parties hereto under Sections 8.2, 8.3, 9.2 and 9.3 and Article X of this
Participation Agreement shall survive the expiration or termination of this Participation Agreement
indefinitely.




     Section 10.3. No Waivers; Remedies Cumulative. No failure or delay by any party
hereto in exercising any right, power or privilege under this Participation Agreement shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies provided by law, by
other agreement or otherwise.



     Section 10.4. Notices. All notices, requests and other communications to any party
hereunder shall be provided in the manner set forth in Section 22.3 of the Retail Distribution
Agreement.



     Section 10.5. Severability. In case any provision of, or obligation under, this
Participation Agreement shall be invalid, illegal or unenforceable in any applicable jurisdiction,
the validity, legality and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be affected or impaired
thereby.



     Section 10.6. Amendments and Waivers. Any provision of this Participation Agreement
may be amended or waived only if such amendment or waiver is in writing and is signed by all of the
parties hereto.



     Section 10.7. Successors and Assigns. The provisions of this Participation Agreement
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, no such party may assign or otherwise
transfer any of its rights under this Participation Agreement without the prior written consent of
all parties signatory hereto except as provided in Sections 1.3, 4.8 or Article VI hereof.



     Section 10.8. Headings. Headings and captions used in this Participation Agreement
(including all exhibits and schedules thereto) are included herein for convenience of reference
only and shall not constitute a part of this Participation Agreement for any other purpose or be
given any substantive effect.



     Section 10.9. Alternative Dispute Resolution. ANY DISPUTE BETWEEN OR AMONG THE
PARTIES HERETO ARISING OUT OF OR RELATING TO THIS PARTICIPATION AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREIN (EXCEPT JUDICIAL ACTION FOR SPECIFIC PERFORMANCE OR INJUNCTIVE RELIEF) SHALL BE
RESOLVED AMONG THE PARTIES TO SUCH DISPUTE BY NEGOTIATION, MEDIATION AND ARBITRATION IN ACCORDANCE
WITH THE PROVISIONS OF ARTICLE XXI OF THE RETAIL DISTRIBUTION AGREEMENT, WHICH ARE INCORPORATED
HEREIN BY REFERENCE.



     Section 10.10. Governing Law; Submission To Jurisdiction. THIS PARTICIPATION
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH



14









 







THE INTERNAL LAWS OF THE STATE OF
MISSOURI. WITHOUT LIMITING THE EFFECT OF SECTION 10.9 HEREOF AND ARTICLE XXI OF THE RETAIL
DISTRIBUTION AGREEMENT, EACH OF THE PARTIES HERETO HEREBY (A) SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL AND/OR STATE COURTS SITTING IN ST. LOUIS, MISSOURI FOR PURPOSES OF ALL LEGAL
PROCEEDINGS FOR SPECIFIC PERFORMANCE OR INJUNCTIVE RELIEF PERMITTED BY SECTION 21.12 OF THE RETAIL
DISTRIBUTION AGREEMENT, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM, (C) IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN SUCH PROCEEDING
THE MANNER PROVIDED FOR NOTICES IN SECTION 10.4 AND (D) AGREES THAT NOTHING IN THIS PARTICIPATION
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS PARTICIPATION AGREEMENT TO SERVE PROCESS IN
ANY SUCH PROCEEDING IN ANY OTHER MANNER PERMITTED BY LAW.



     Section 10.11. Waiver of Jury Trial. WITHOUT LIMITING THE EFFECT OF SECTION 10.9,
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING OUT OF OR RELATING TO THIS PARTICIPATION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.



     Section 10.12. Counterparts. This Participation Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Participation Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties hereto.



     Section 10.13. Entire Agreement. This Participation Agreement and the other Program
Contracts, as amended through the date hereof, constitute the entire agreement and understanding
among the parties hereto, and supersede and extinguish any and all prior agreements and
understandings, oral or written relating to the operation of the Settlement Products Program on and
after July 1, 2006. For the avoidance of doubt, (i) this Participation Agreement and the other
Program Contracts, as amended through the date hereof, shall govern the operation of the Settlement
Products Program on and after July 1, 2006, (ii) the Prior Program Agreements shall continue to
govern the operation of the current program until their expiration on June 30, 2006 in accordance
with their terms, and (iii) nothing in this Participation Agreement or the other Program Contracts
shall affect the rights and obligations of the parties to the Prior Program Agreements, whenever
arising, under such Prior Program Agreements, which remain valid and enforceable in accordance with
their terms.



     Section 10.14. Reinstatement. This Participation Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or against any party hereto
for liquidation or reorganization, should any party hereto become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or trustee be
appointed for all or any significant part of any party’s assets or properties, and shall continue
to be effective



15









 







or to be reinstated, as the case may be, if at any time payment and performance of
the obligations hereunder, or any part thereof, is, pursuant to applicable Law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of such obligations,
whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the obligations hereunder shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or returned.



     Section 10.15. Advice of Counsel. Each of the parties represents to each other party
hereto that it has discussed this Participation Agreement with its counsel.



     Section 10.16. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Participation Agreement. In the event any ambiguity or
question of intent or interpretation arises, this Participation Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this Participation
Agreement.



     Section 10.17. Conflict of Terms. Except as otherwise provided in this Participation
Agreement or any of the other Program Contracts by specific reference to the applicable provisions
of this Participation Agreement, if any provision contained in this Participation Agreement
conflicts with any provision in any of the other Program Contracts, other than the Indemnification
Agreement or the Retail Distribution Agreement, the provisions contained in this Participation
Agreement shall govern and control. If there is a conflict between this Participation Agreement
and the Retail Distribution Agreement (but not the Indemnification Agreement), then the Retail
Distribution Agreement shall control. If there is a conflict between this Participation Agreement
and the Indemnification Agreement, the Indemnification Agreement shall control.



     Section 10.18. Further Execution. Each party hereto shall execute any and all
documents as are necessary or desirable to consummate the transactions contemplated hereby.



     Section 10.19. Expenses. Except as otherwise provided herein or in any Program
Contract, each party hereto shall pay its own expenses, including the expenses of its own counsel
and its own accountants, in connection with the consummation of the transactions contemplated by
this Participation Agreement.



     Section 10.20. No Implied Relationship. Notwithstanding any provision herein to the
contrary:



          (a) This Participation Agreement shall not be construed to establish a partnership or joint
venture between the parties hereto.




          (b) All personnel employed or otherwise engaged by any party hereto to perform the obligations
and duties of such party hereunder shall not be deemed to be employees of any other party hereto.
In addition, the party employing or otherwise engaging such
employees, shall at all times be responsible for the compensation of, and payment of
applicable




16









 







state and federal income taxes with respect to, any personnel employed by such party to
perform any services hereunder.




     Section 10.21. No Third Party Beneficiaries. This Participation Agreement is for the
sole benefit of the parties hereto and their permitted successors and assigns and nothing in this
Participation Agreement, express or implied, is intended to or shall confer upon any other person
any legal or equitable right, benefit or remedy, of any nature whatsoever under or by reason of
this Participation Agreement.



     Section 10.22. Limitation of Scope of Representations and Warranties and Other
Disclosures. The representations, warranties and other disclosures set forth by each party
hereto are only made for the benefit of the parties hereto and the purpose of the transactions
contemplated hereby and are not intended for use by any person with respect to any acquisition or
disposition of any security of any party hereto.



[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]




17









 





     THIS PARTICIPATION AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.



     IN WITNESS WHEREOF, the parties hereto have caused this HSBC Refund Anticipation Loan
Participation Agreement to be executed by their respective duly authorized officers as of the date
set forth above.



	 	 	 	 	 	 	 
	 	 	HSBC BANK USA, NATIONAL ASSOCIATION,	 	 
	 	 	a national banking association	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC TRUST COMPANY (DELAWARE), N.A.,	 	 
	 	 	a national banking association	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC TAXPAYER FINANCIAL SERVICES, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	BLOCK FINANCIAL CORPORATION,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 






18