exv10w28



 






Exhibit 10.28



Execution
Copy



FIRST AMENDED AND RESTATED

HSBC SETTLEMENT PRODUCTS

SERVICING AGREEMENT




Dated as of November 13, 2006



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: [***].





 









 








Table of Contents




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE I DEFINITIONS	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 1.1.
	 	Definitions
	 	 	2	 
	 

	 	Section 1.2.
	 	Rules of Construction
	 	 	6	 
	 

	 	Section 1.3.
	 	Corporate Reorganizations
	 	 	6	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II RETENTION OF SERVICER	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 2.1.
	 	Engagement
	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III SERVICES TO BE PERFORMED	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 3.1.
	 	Services as Settlement Product Servicer
	 	 	7	 
	 

	 	Section 3.2.
	 	Accounts
	 	 	8	 
	 

	 	Section 3.3.
	 	Authorized Withdrawals Related to Unparticipated HSBC RALs
	 	 	8	 
	 

	 	Section 3.4.
	 	Authorized Withdrawals Related to Participated HSBC RALs
	 	 	10	 
	 

	 	Section 3.5.
	 	Authorized Withdrawals Related to RACs, Denied Classic RALs and Denied
Classic eRALs
	 	 	12	 
	 

	 	Section 3.6.
	 	Authorized Withdrawals of Amounts Recorded on the IMA Collection
Ledger
	 	 	14	 
	 

	 	Section 3.7.
	 	Priority
	 	 	15	 
	 

	 	Section 3.8.
	 	No Set-off
	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV STATEMENTS AND REPORTS	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 4.1.
	 	Reporting by the Servicer
	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V SERVICER COMPENSATION AND EXPENSES	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 5.1.
	 	HSBC Servicing Fee and Block Servicing Fee
	 	 	18	 
	 

	 	Section 5.2.
	 	Defaulted RAL/IMA Collection Fee; Defaulted RAL/IMA Collection Fee
Credit
	 	 	18	 
	 

	 	Section 5.3.
	 	Servicing Expense
	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI THE SERVICER, THE ORIGINATOR AND THE PARTICIPANTS	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 6.1.
	 	Subservicing
	 	 	19	 
	 

	 	Section 6.2.
	 	Servicer Not to Assign
	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BLOCK COMPANIES	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 7.1.
	 	Representations Incorporated by Reference
	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF THE HSBC COMPANIES	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 8.1.
	 	Representations Incorporated by Reference
	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX DEFAULT OF BFC AND REMEDIES OF HSBC COMPANIES AND THE SERVICER	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 9.1.
	 	BFC Events of Default
	 	 	19	 






i









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	Section 9.2.
	 	Remedies
	 	 	20	 
	 

	 	Section 9.3.
	 	Default Rate
	 	 	20	 
	 

	 	Section 9.4.
	 	Waiver
	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X DEFAULT OF HSBC COMPANIES AND REMEDIES OF BFC AND THE SERVICER	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 10.1.
	 	HSBC Company Events of Default
	 	 	21	 
	 

	 	Section 10.2.
	 	Remedies
	 	 	21	 
	 

	 	Section 10.3.
	 	Default Rate
	 	 	22	 
	 

	 	Section 10.4.
	 	Waiver
	 	 	22	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI DEFAULT OF THE SERVICER AND REMEDIES OF BFC AND HSBC COMPANIES	 	 	22	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 11.1.
	 	Servicer Events of Default
	 	 	22	 
	 

	 	Section 11.2.
	 	Remedies
	 	 	23	 
	 

	 	Section 11.3.
	 	Default Rate
	 	 	24	 
	 

	 	Section 11.4.
	 	Substitute Servicer
	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII TERMINATION; TRANSFER OF PARTICIPATED HSBC RALS AND IMAS	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 12.1.
	 	Term
	 	 	24	 
	 

	 	Section 12.2.
	 	Termination
	 	 	24	 
	 

	 	Section 12.3.
	 	Termination of Agreement
	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII MISCELLANEOUS PROVISIONS	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Section 13.1.
	 	Survival
	 	 	25	 
	 

	 	Section 13.2.
	 	No Waivers; Remedies Cumulative
	 	 	25	 
	 

	 	Section 13.3.
	 	Notices
	 	 	25	 
	 

	 	Section 13.4.
	 	Severability
	 	 	25	 
	 

	 	Section 13.5.
	 	Amendments and Waivers
	 	 	25	 
	 

	 	Section 13.6.
	 	Successors and Assigns
	 	 	25	 
	 

	 	Section 13.7.
	 	Headings
	 	 	25	 
	 

	 	Section 13.8.
	 	Alternative Dispute Resolution
	 	 	26	 
	 

	 	Section 13.9.
	 	Governing Law; Submission to Jurisdiction
	 	 	26	 
	 

	 	Section 13.10.
	 	Waiver of Jury Trial
	 	 	26	 
	 

	 	Section 13.11.
	 	Counterparts
	 	 	26	 
	 

	 	Section 13.12.
	 	Entire Agreement
	 	 	26	 
	 

	 	Section 13.13.
	 	Reinstatement
	 	 	27	 
	 

	 	Section 13.14.
	 	Advice of Counsel
	 	 	27	 
	 

	 	Section 13.15.
	 	No Strict Construction
	 	 	27	 
	 

	 	Section 13.16.
	 	Conflict of Terms
	 	 	27	 
	 

	 	Section 13.17.
	 	Further Execution
	 	 	27	 
	 

	 	Section 13.18.
	 	Expenses
	 	 	27	 
	 

	 	Section 13.19.
	 	No Implied Relationship
	 	 	28	 
	 

	 	Section 13.20.
	 	No Third Party Beneficiaries
	 	 	28	 
	 

	 	Section 13.21.
	 	Force Majeure
	 	 	28	 






ii









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	Section 13.22.
	 	Limitation of Scope of Representations and Warranties and Other
Disclosures
	 	 	28	 
	 

	 	Section 13.23.
	 	Inspection and Audit Rights
	 	 	28	 






iii









 





FIRST AMENDED AND RESTATED



HSBC SETTLEMENT PRODUCTS SERVICING AGREEMENT




     This First Amended and Restated HSBC Settlement Products Servicing Agreement (this
“Servicing Agreement”), dated as of November 13, 2006, is made by and among the following
parties:



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



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



     HSBC Trust Company (Delaware), N.A., a national banking association (“HSBC Trust”);
and



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



RECITALS




     A. HSBC NA offers banking products and services, including Settlement Products offered through
Block Offices in Retained Locations.



     B. HSBC Trust offers banking products and services, including RALs and RACs offered through
Block Offices in Assigned Locations and through the Block Digital Channel.



     C. HSBC TFS purchases loans and participation interests in loans originated by HSBC NA and
HSBC Trust.



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



     E. HSBC TFS is in the business of servicing loans and other financial products and services,
including Settlement Products, for HSBC Bank, HSBC Trust and other financial services companies.



     F. HSBC NA, HTMAC, HSBC TFS and certain of their Affiliates, and BFC and certain of its
Affiliates, previously entered into the HSBC Settlement Products Retail Distribution Agreement,
dated as of September 23, 2005, as amended by that certain Joinder and First Amendment to Program
Contracts, dated as of November 10, 2006 pursuant to which, inter alia, HTMAC was removed as a
party to the Program Contracts and HSBC TFS replaced HTMAC as a party thereto, as further amended
by that certain Second Amendment to Program Contracts, dated as of the date hereof, and as from
time to time further amended, restated, supplemented or otherwise modified (the “Retail
Distribution Agreement”), and other agreements related thereto.



     G. Simultaneously with the execution of this Servicing Agreement, HSBC NA, HSBC Trust, HSBC
TFS and BFC are entering into the Amended and Restated HSBC Refund Anticipation Loan and Instant
Money Advance Participation Agreement, as from time to time amended, restated or otherwise modified
(the “Participation Agreement”), pursuant to which



 









 







HSBC Bank may sell, and BFC may purchase, Participation Interests in certain Settlement
Products originated by HSBC Bank.



     H. HSBC NA, HSBC TFS, HTMAC and BFC previously entered into a Servicing Agreement, dated as of
September 23, 2005 (the “Original Servicing Agreement”) to appoint HSBC TFS as the Servicer
of the Settlement Products and to administer all Refunds Paid with respect to such Settlement
Products.



     I. HSBC NA, HSBC Trust, HSBC TFS and BFC desire to amend and restate the Original Servicing
Agreement to reflect the addition of HSBC Trust as the Originator for the Assigned Locations, to
reflect the removal of HTMAC as a party, to reflect the replacement of HTMAC by HSBC TFS and to
make certain other modifications to the terms of the Original Servicing Agreement, each as more
fully set forth herein.



AGREEMENT




     ACCORDINGLY, the parties to this Servicing Agreement agree as follows:



ARTICLE I



DEFINITIONS




     Section 1.1. Definitions. For all purposes of this Servicing 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 Retail Distribution Agreement as Appendix A, which
is hereby incorporated by reference herein. All other capitalized terms used herein shall have the
meanings set forth below. In the event that any definition specified in this Servicing Agreement
for any capitalized term is inconsistent with the definition specified for such term in the
Appendix of Defined Terms and Rules of Construction attached to the Retail Distribution Agreement
as Appendix A, the definition in the Appendix of Defined Terms and Rules of Construction attached
to the Retail Distribution Agreement as Appendix A shall govern.


“2005 Baseline Percentage” shall mean the IRS Collections Percentage for the 2005 Tax Year.



“Base Servicing Fee Factor” shall mean, for each applicable Calculation Period, an amount (i)
reasonably determined by the Servicer to cover its anticipated base servicing expenses for such
Calculation Period, and (ii) set forth in a notice delivered to the other HSBC Companies and the
Block Companies on or before the first December 15th of such Calculation Period;
provided, however, that for each Calculation Period such amount shall not exceed
the following:




2









 








	 	 	 	 	 
	Calculation Period	 	Maximum Amount
	Nov. 1, 2006 — Dec. 31, 2007

	 	[***] 

	Nov. 1, 2007 — Dec. 31, 2008

	 	[***] 

	Nov. 1, 2008 — Dec. 31, 2009

	 	[***] 

	Nov. 1, 2009 — Dec. 31, 2010

	 	[***] 

	Nov. 1, 2010 — Dec. 31, 2011

	 	[***] 

	Nov. 1, 2011 — Dec. 31, 2012

	 	$0 if the Participation Agreement is not
renewed for such Calculation Period; and, if
the Participation Agreement is renewed for
such Calculation Period, an amount as agreed
to by the Servicer and BFC on or before the
commencement of the Renewal Term (as defined
in the Participation Agreement) related to
such Calculation Period; provided, however,
that if no such amount is agreed to, then
such amount shall be deemed to be [***] .

	 
	 	 	 	 
	Nov. 1, 2012 — Dec. 31, 2013

	 	$0 if the Participation Agreement is not
renewed for such Calculation Period; and, if
the Participation Agreement is renewed for
such Calculation Period, an amount as agreed
to by the Servicer and BFC on or before the
commencement of the Renewal Term (as defined
in the Participation Agreement) related to
such Calculation Period; provided, however,
that if no such amount is agreed to, then
such amount shall be deemed to be [***] .

	 
	 	 	 	 
	Nov. 1, 2013 and thereafter

	 	$ 0	 	 





“Base Servicing Fee Percentage” shall mean, with respect to a Calculation Period, an amount,
expressed as a percentage rounded to six decimal places, equal to the weighted average of (A) with
respect to HSBC RALs, the remainder of (I) the product of (a) [***] percent ([***] %),
multiplied by (b) the ratio of (i) the RAL and IMA Net Revenues for such
Calculation Period, divided by (ii) the portion of Gross RAL and IMA Loan Volume
represented by HSBC RALs for such Calculation Period, minus (II) the applicable Service
Carry Percentage, but in no event less than zero percent (0%), and (B) with respect to HSBC IMAs,
the product of (a) [***] percent ([***] %), multiplied by (b) the ratio of (i) the
RAL and IMA Net Revenues for such Calculation
Period, divided by (ii) the portion of Gross RAL and IMA Loan Volume represented by
HSBC IMAs for such Calculation Period.



“Block Servicing Fee” shall mean, with respect to a Calculation Period, an amount equal to the
product of (a) the remainder (but not less than zero) of (i) the Base Servicing Fee Factor for such
Calculation Period, minus (ii) the HSBC Base Servicing Fee for such Calculation Period,
multiplied by (b) a percentage equal to the sum of one hundred percent (100%) plus the
applicable TVM.



“Defaulted RAL/IMA Collection Fee Adjustment Factor” shall mean, with respect to all HSBC RALs and
HSBC IMAs (computed separately with respect to all HSBC RALS and all


3









 






HSBC IMAs) collected during a
Tax Year but originated in a specific earlier Calculation Period, a percentage rounded to six
decimal points, computed as follows



[{A multiplied by (1 – B)} divided by C] divided by D,



where



A = the HSBC Base Servicing Fee for the Calculation Period of origination,



B = the applicable Defaulted RAL/IMA Collection Fee Percentage for the Calculation Period of
collection,



C = the weighted average Applicable Percentage (by original Principal Amount) for all Participated
HSBC RALs and Participated HSBC IMAs originated during such Calculation Period of origination, and



D = the RAL and IMA Net Revenues for such Calculation Period of origination.



“Defaulted RAL/IMA Collection Fee” shall mean, with respect to each Defaulted HSBC RAL and
Defaulted HSBC IMA, a collection fee payable to the Servicer equal to the product of (a) the
applicable Defaulted RAL/IMA Collection Fee Percentage multiplied by (b) certain amounts
otherwise distributable to the Originator, a Participant or other creditor, as set forth in the
provisos to Sections 3.4(b), 3.5(b) and 3.6(b) of this Servicing Agreement.



“Defaulted RAL/IMA Collection Fee Credit” shall mean, as of the first day of any Tax Period, the
remainder of [***] .



“Defaulted RAL/IMA Collection Fee Percentage” shall be, (a) with respect to all Defaulted HSBC IMAs
collected during a specific Calculation Period, [***] percent ([***] %), and (b) with respect to
all Defaulted HSBC RALs collected during a specific Tax Year, [***] percent ([***] %), unless the
IRS Collections Percentage for the immediately preceding Calculation Period was less than the 2005
Baseline Percentage by at least [***] percent ([***] %), in which
event the Defaulted RAL/IMA Collection Fee Percentage for HSBC RALs shall be determined as follows:




	 	 	 	 	 
	Reduction in IRS Collections Percentage	 	 
	During the Calculation Period Compared to	 	Defaulted RAL/IMA
	2005 Baseline Percentage	 	Collection Fee Percentage
	at least [***] % but less than [***] %
	 	 	[***] 	%
	at least [***] % but less than [***] %
	 	 	[***] 	%
	at least [***] % but less than [***] %
	 	 	[***] 	%
	at least [***] % but less than [***] %
	 	 	[***] 	%
	at least [***] % but less than [***] %
	 	 	[***] 	%






     By way of example only, if the 2005 Base Percentage was [***] % and the IRS Collections
Percentage for the 2007 Tax Year was [***] % (i.e., a reduction of the IRS Collections Percentage
by [***] %), the Defaulted RAL/IMA Collection Fee Percentage for all HSBC RALs collected during the
2008 Calculation Period would be [***] %.



4









 




“Defaulted RAL/IMA Pool Collection Fee Credit” shall mean, in any computation of the Defaulted
RAL/IMA Collection Fee Credit generated in a particular Calculation Period with respect to HSBC
RALs and HSBC IMAs originated in a specific Calculation Period (such amounts computed separately
with respect to all HSBC RALS and all HSBC IMAs, then combined to determine the overall credit),
the product of [***] .



“Delinquent ERO Charge Collection Fee” shall mean an amount equal to [***] percent ([***] %) of
those amounts collected by the Servicer on account of those Delinquent ERO Charges which BFC has
identified in writing to the Servicer and specifically authorized the Servicer to collect on behalf
of the related ERO.



“Gross RAL and IMA Loan Volume” shall mean, with respect to a Calculation Period, the aggregate
gross initial principal amounts of all HSBC RALs and HSBC IMAs made during such Calculation Period.



“HSBC Base Servicing Fee” shall mean, with respect to a Calculation Period, the product of [***] .



“HSBC Servicing Agreement” shall have the meaning set forth in Section 3.1.



“HSBC Servicing Fee” shall mean, with respect to any Calculation Period, the sum of (i) the HSBC
Base Servicing Fee, plus (ii) the HSBC Variable Servicing Fee.



“HSBC Variable Servicing Fee” shall mean, with respect to any Calculation Period, the product of
[***] .



“IRS Collections Percentage” shall mean, as to any Tax Year, the percentage of [***] .



“Permitted Block Assignment” shall have the meaning set forth in Section 1.3(a).



“Permitted HSBC Assignment” shall have the meaning set forth in Section 1.3(b).



“RAL and IMA Loan Volume Corridor Peak” shall mean, with respect to any Calculation Period, the
following amounts:




	 	 	 	 	 
	Calculation Period	 	Amount
	Nov. 1, 2006 - Dec. 31, 2007
	 	 	[***]	 
	Nov. 1, 2007 - Dec. 31, 2008
	 	 	[***]	 
	Nov. 1, 2008 - Dec. 31, 2009
	 	 	[***]	 
	Nov. 1, 2009 - Dec. 31, 2010
	 	 	[***]	 
	Nov. 1, 2010 - Dec. 31, 2011
	 	 	[***]	 
	Nov. 1, 2011 - Dec. 31, 2012
	 	 	[***]	 
	Nov. 1, 2012 - Dec. 31, 2013
	 	 	[***]	 





"RAL and IMA Loan Volume Overage” shall mean, with respect to a Calculation Period, [***] .




5









 







“RAL and IMA Net Revenues” shall mean, with respect to a Calculation Period, the remainder of (a)
the aggregate amount of all RAL Fees, IMA Fees and Refund Account Fees charged or accrued by the
Originator with respect to HSBC RALs and HSBC IMAs made during such Calculation Period,
plus the RAL and IMA Price Reduction Amount minus (b) the aggregate unpaid
Principal Amount of all outstanding HSBC RALs and HSBC IMAs that were made during such Calculation
Period, determined as of the December 31st that is the last day of such Calculation
Period.



“Service Carry Percentage” shall mean, with respect to a Calculation Period, an amount expressed as
a percentage (rounded to six decimal points) equal to [***] .



“Settlement Products Servicing” shall have the meaning set forth in Section 3.1.



“TVM” shall mean a percentage equal to the 12 month average of one year LIBOR for the preceding 12
months (measured on each December 15 following a Tax Period) plus 0.20% (20 basis points).



Section 1.2. Rules of Construction. For all purposes of this Servicing Agreement,
unless the context otherwise requires, the rules of construction set forth in the Appendix of
Defined Terms and Rules of Construction attached to the Retail Distribution Agreement as Appendix A
shall be applicable to this Servicing Agreement.




     Section 1.3. Corporate Reorganizations.



          (a) The Block Companies may assign their rights and obligations under this Servicing 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 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 Servicing 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 Servicing 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 Servicing Agreement to the extent necessary to reflect such Permitted
Block Assignment.




          (b) The HSBC Companies may assign their rights and obligations under this Servicing 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
Servicing 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 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
Servicing




6









 







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 Servicing Agreement to the extent necessary to reflect such Permitted HSBC Assignment.




          (c) If HSBC Bank assigns this Servicing Agreement by a Permitted HSBC Assignment, then HSBC
Bank shall also assign to such Subsidiary(ies) its rights and obligations under the HSBC Servicing
Agreement with respect to this Servicing Agreement.




ARTICLE II



RETENTION OF SERVICER




     Section 2.1. Engagement. The Originator hereby appoints the Servicer, and the
Servicer hereby accepts such appointment, to act exclusively as the agent of the Originator to
perform the Settlement Products Servicing (as defined in Section 3.1 below) with respect to each of
the Settlement Products throughout the term of this Servicing Agreement or for such other period of
time as set forth herein, upon and subject to the terms, covenants and provisions hereof.



ARTICLE III



SERVICES TO BE PERFORMED




     Section 3.1. Services as Settlement Product Servicer. The Servicer hereby agrees to
serve as the servicer with respect to each of the Settlement Products on behalf of the Originator
and for the benefit of each Participant. The Servicer shall service and administer each Settlement
Product upon and subject to the terms of this Servicing Agreement and that certain Amended and
Restated Services Agreement (as amended from time to time, the “HSBC Servicing Agreement”),
dated as of January 20, 2005, by and between HSBC TFS and HSBC Bank (“Settlement Products
Servicing”). In the event of any inconsistency between the terms and provisions of this
Servicing Agreement and the HSBC Servicing Agreement, the terms and provisions of this Servicing
Agreement shall govern and control. The HSBC Servicing Agreement shall not be terminated or
permitted to lapse during the term of this Servicing Agreement, except as provided in Section
11.2(a)(ii). Notwithstanding any provision of this Servicing Agreement to the contrary, Originator
and Servicer may amend the HSBC Servicing Agreement without the consent of any Participant if such
amendment (a) (i) to the extent it pertains to refund anticipation loan programs, pertains
uniformly to all refund anticipation loan programs serviced by the Servicer and (ii) to the extent
it pertains to instant money advance loan programs, pertains uniformly to all instant money advance
loan programs serviced by the Servicer, and (b) does not cause a Material Adverse Effect with
respect to any Participant, Block Company or Affiliate thereof, or Franchisee. The Originator and
the Servicer shall give prompt notice to each Participant of any breach by the Servicer of its
obligations under the HSBC Servicing Agreement, or any termination of the HSBC Servicing Agreement.
The Originator hereby makes to each Participant the representations and warranties set forth in
Section 13(a) of the HSBC Servicing Agreement (provided that all references therein to “Agreement”
shall mean the HSBC Servicing Agreement) as of the date hereof. The Servicer hereby makes to each
Participant the representations and warranties set forth in Section 13(b) of the HSBC Servicing



7









 







Agreement (provided that all references therein to “Agreement” shall mean the HSBC Servicing
Agreement) as of the date hereof.



     Section 3.2. Accounts.



          (a) Deposit Accounts. With respect to each HSBC RAL and HSBC RAC, the Servicer shall
establish and maintain, as appropriate, one Refund Deposit Account or one General Collection
Deposit Account, or both, in compliance, as applicable, with the Internal Revenue Code and other
applicable law, the RAL Documents and/or the Program Contracts, for the benefit, as applicable, of
the relevant Settlement Product Client, and the owners of, and participants in, the relevant
Settlement Product, for the purposes set forth herein. The Servicer shall deposit into the related
Refund Deposit Account, on the day of receipt, any refund paid on account of any HSBC RAL or HSBC
RAC. The Servicer shall deposit into the related General Collections Deposit Account, on the day
of receipt, all payments and collections received by it on or after the date hereof with respect to
the related HSBC RAL or HSBC RAC which do not constitute the Refund Paid.




          (b) IMA Collection Ledger. With respect to the HSBC IMAs, the Servicer shall
establish and maintain an appropriate ledger system (the “IMA Collection Ledger”) in
compliance with applicable law, the IMA Documents and the Program Contracts, for the benefit of the
owners or, and the participants in, the HSBC IMAs, for the purposes set forth herein. The Servicer
shall record on the IMA Collection Ledger all amounts deposited in any Deposit Account with respect
to the HSBC IMAs pursuant to Section 3.3, Section 3.4 or Section 3.5, as applicable, of this
Servicing Agreement, all payments and collections received by it through the cross collection
process on account of any delinquent HSBC IMA, to the extent HSBC Companies elect to participate in
cross collections with respect to IMAs, and all other payments and collections received by the
Servicer on account of a HSBC IMA.




     Section 3.3. Authorized Withdrawals Related to Unparticipated HSBC RALs. With respect
to any Deposit Account related to an Unparticipated HSBC RAL and in accordance with the
corresponding Application and other related documents including, without limitation, any related
RAL Document, the Servicer, following the deposit of any payment or collection into such Deposit
Account pursuant to Section 3.2, shall make allocations and withdrawals from such Deposit Account
only as follows (the order set forth below constituting an order of priority for such allocations
and withdrawals); provided, however, that if the Servicer has established and is
maintaining both a Refund Deposit Account and a General Collections Deposit Account with respect to
such Unparticipated HSBC RAL and deposits are made concurrently into such accounts, then
allocations and withdrawals of such concurrent deposits shall be made first from the related
General Collections Deposit Account and then from the related Refund Deposit Account:



          (a) to withdraw any amount deposited in such Deposit Account which was not required to be
deposited therein;




          (b) except as otherwise specified below, to allocate on its servicing records all amounts on
deposit in such Deposit Account (that represent good funds, net of any prior withdrawals or
allocations from the Deposit Account pursuant to this Section 3.3) no later than




8









 







4:30 p.m. Eastern
time on the Business Day following receipt, in the order listed below; provided,
however, that except as provided below, amounts on deposit must be received by the Servicer
prior to 8:00 p.m. Eastern time on a Business Day; provided, further, that except
as provided below, any amounts received at or after 8:00 p.m. Eastern time on a Business Day
shall be deemed to have been received on the following Business Day:





     (i) to the applicable ERO, the Delinquent ERO Charges (payable solely out of the Refund
Paid), in the manner and at such times as set forth in Section 9.8(a) of the Retail
Distribution Agreement, net of Delinquent ERO Charge Collection Fees (if any, but in any
event subject to Section 5.2(b)), which shall be retained by the Servicer;




     (ii) to allocate to the IMA Collection Ledger, all amounts outstanding with respect to
any HSBC IMA originated during the related Calculation Period on which the related
Settlement Product Client is the obligor;




     (iii) to the Originator, the related RAL Principal Amount;




     (iv) to the Originator, the Late Fees, if any;




     (v) to the applicable creditor or creditors, the First Priority Prior Indebtedness
(payable in order of oldest to most recent First Priority Prior Indebtedness, in each case
allocated in accordance with the priorities set forth in Section 3.4(b) or Section 3.6(b),
as applicable, of this Servicing Agreement); provided, however, that if the
source of payment of such amounts is the Refund Paid and if the Servicer receives an
information file from the IRS regarding such Refund Paid on or before the second Business
Day preceding receipt of such Refund Paid, then if the calendar day following receipt is not
a Business Day, such amounts shall be allocated no later than 4:30 p.m. Eastern time on the
day of receipt;




     (vi) to the applicable creditor or creditors, via ACH credit or otherwise in accordance
with the servicing standard specified in the HSBC Servicing Agreement, the Second Priority
Prior Indebtedness;




     (vii) to the applicable Person or Persons entitled thereto, via ACH credit or otherwise
in accordance with the servicing standard specified in the HSBC Servicing Agreement, the
Other Required Deductions;




     (viii) to the Person or Persons entitled thereto, via ACH credit or otherwise in
accordance with the servicing standard specified in the HSBC Servicing Agreement, such other
Authorized Deductions as the Settlement Products Client shall have authorized in writing,
including any custodian for an XIRA; and




     (ix) to the Settlement Product Client, any remaining amounts to be processed as a
Disbursement by the Originator;




provided, with respect to amounts specified in clauses (i), (iv), (v), (vi) and
(vii) of Section 3.3(b) above, the Servicer shall on the later of (A) 38 days following the
date of



9









 







Application, or (B) such later date as may be required by applicable law, transfer
to the appropriate account or withdraw and remit to the appropriate recipient, pursuant to
wiring instructions from the Originator, all funds allocated pursuant to Section 3.3(b); and
with
respect to all other amounts specified in Section 3.3(b), the Servicer shall withdraw and
remit such amounts to the appropriate recipient, pursuant to wiring instructions from the
Originator, on such date of allocation; and further provided, that if any
such amount is the subject of a dispute with any Settlement Product Client or third Person,
no such disputed amounts shall be allocated or withdrawn from any Deposit Account until a
final decision has been made by the Servicer regarding such disputed amount; and, then



          (c) to clear and terminate such Deposit Account upon the termination of the Servicer’s
obligations with respect to such Deposit Account under this Servicing Agreement.



The parties hereto acknowledge that, with respect to Unparticipated HSBC RALs, any related ERO
Charges shall have already been paid out of related RAL proceeds pursuant to Section 9.8 of the
Retail Distribution Agreement. Notwithstanding the foregoing, the order of priority of allocations
and distributions specified in clause (b) above shall be subject to the priority of distributions
specified in any existing collection agreement related to applicable Second Priority Prior
Indebtedness and to which the Servicer is party; provided, however, that any new
collection agreement entered into by the Servicer (which shall include any existing collection
agreement to which the Servicer is party and as to which the Servicer exercises an option held by
it to extend the term of such collection agreement beyond December 31, 2007) shall provide for
priority of distributions consistent with clause (b) above.




     Section 3.4. Authorized Withdrawals Related to Participated HSBC RALs. With respect
to any Deposit Account related to a Participated HSBC RAL and in accordance with the corresponding
Application and other related documents including, without limitation, any related RAL Document,
the Servicer, following the deposit of any payment or collection into such Deposit Account pursuant
to Section 3.2, shall make allocations and withdrawals from such Deposit Account only as follows
(unless otherwise provided below, the order set forth below constituting an order of priority for
such allocations and withdrawals) ); provided, however, that if the Servicer has
established and is maintaining both a Refund Deposit Account and a General Collections Deposit
Account with respect to such Participated HSBC RAL and deposits are made concurrently into such
accounts, then allocations and withdrawals of such concurrent deposits shall be made first from the
related General Collections Deposit Account and then from the related Refund Deposit Account:



          (a) to withdraw any amount deposited in such Deposit Account which was not required to be
deposited therein;




          (b) except as otherwise specified below, to allocate on its servicing records all amounts on
deposit in such Deposit Account (that represent good funds, net of any prior withdrawals or
allocations from the Deposit Account pursuant to this Section 3.4) no later than 4:30 p.m. Eastern
time on the Business Day following receipt, in the order listed below; provided,
however, that except as provided below, amounts on deposit must be received by the Servicer
prior to 8:00 p.m. Eastern time on a Business Day; provided, further, that except
as




10









 







provided below, any amounts received at or after 8:00 p.m. Eastern time on a Business Day shall
be deemed to have been received on the following Business Day:





          (i) to the applicable ERO, the Delinquent ERO Charges, (payable solely out of the
Refund Paid), in the manner set forth in Section 9.8(a) of the Retail Distribution
Agreement, net of Delinquent ERO Charge Collection Fees (if any, but in any event subject to
Section 5.2(b)), which shall be retained by the Servicer;




          (ii) to allocate to the IMA Collection Ledger, all amounts outstanding with respect to
any HSBC IMA originated during the related Calculation Period on which the related
Settlement Product Client is the obligor;




          (iii) to the Originator in accordance with its RAL Ownership Interest, to each
Participant in accordance with its respective Participation Interest, and to each holder of
any other related participation interest in accordance with such interest (such rights of
each Participant and holder under this clause (ii) being pari passu with the rights of the
Originator and each other under this clause (ii)), the related RAL Principal Amount;
provided, however, that if the source of payment of such amounts is the
Refund Paid and if the Servicer receives an information file from the IRS regarding such
Refund Paid on or before the second Business Day preceding receipt of such Refund Paid, then
if the calendar day following receipt is not a Business Day, such amounts shall be allocated
no later than 4:30 p.m. Eastern time on the day of receipt;




          (iv) to the Originator in accordance with its RAL Ownership Interest, to each
Participant in accordance with its respective Participation Interest, and to each holder of
any other related participation interest in accordance with such interest (such rights of
each Participant and holder under this clause (iii) being pari passu with the rights of the
Originator and each other under this clause (iii)), the Late Fees, if any; provided,
however, that if the source of payment of such amounts is the Refund Paid and if the
Servicer receives an information file from the IRS regarding such Refund Paid on or before
the second Business Day preceding receipt of such Refund Paid, then if the calendar day
following receipt is not a Business Day, such amounts shall be allocated no later than 4:30
p.m. Eastern time on the day of receipt;




          (v) to the applicable creditor or creditors, the First Priority Prior Indebtedness
(payable in order of oldest to most recent First Priority Prior Indebtedness, in each case
allocated in accordance with the priorities set forth in Section 3.4(b) or Section 3.6(b),
as applicable, of this Servicing Agreement); provided, however, that if the
source of payment of such amounts is the Refund Paid and if the Servicer receives an
information file from the IRS regarding such Refund Paid on or before the second Business
Day preceding receipt of such Refund Paid, then if the calendar day following receipt is not
a Business Day, such amounts shall be allocated no later than 4:30 p.m. Eastern time on the
day of receipt;




          (vi) to the applicable creditor or creditors, via ACH credit or otherwise in accordance
with the servicing standard specified in the HSBC Servicing Agreement, the Second Priority
Prior Indebtedness;



11









 






          (vii) to the applicable Person or Persons entitled thereto, via ACH credit or otherwise
in accordance with the servicing standard specified in the HSBC Servicing Agreement, the
Other Required Deductions;




          (viii) to the Person or Persons entitled thereto, via ACH credit or otherwise in
accordance with the servicing standard specified in the HSBC Servicing Agreement, such other
Authorized Deductions as the Settlement Products Client shall have authorized in writing,
including any custodian for an XIRA; and




          (ix) to the Settlement Product Client, any remaining amounts to be processed as a
Disbursement by the Originator;




provided, however, that if the Participated HSBC RAL is a Defaulted HSBC
RAL, then the Servicer shall collect the applicable Defaulted RAL Collection Fee by
withholding and retaining an amount (subject to Section 5.2(b)) equal to the product of (a)
the applicable Defaulted RAL/IMA Collection Fee Percentage multiplied by (b) the applicable
amounts otherwise distributable pursuant to subparagraphs (iii), (iv) and (v) above; and
further provided, with respect to amounts specified in clauses (i), (iv),
(v), (vi) and (vii) of Section 3.4(b) above, the Servicer shall on the later of (A) 38 days
following the date of Application), or (B) such later date as may be required by applicable
law, transfer to the appropriate account or withdraw and remit to the appropriate recipient,
pursuant to wiring instructions from the Originator, all funds allocated pursuant to Section
3.4(b); and with respect to all other amounts specified in Section 3.4(b), the Servicer
shall withdraw and remit such amounts to the appropriate recipient, pursuant to wiring
instructions from the Originator, on such date of allocation; and further
provided, that if any such amount is the subject of a dispute with any Settlement
Product Client or third Person, no such disputed amounts shall be allocated or withdrawn
from any Deposit Account until a final decision has been made by the Servicer regarding such
disputed amount; and, then



          (c) to clear and terminate such Deposit Account upon the termination of the Servicer’s
obligations with respect to such Deposit Account under this Servicing Agreement.



The parties hereto acknowledge that, with respect to Participated HSBC RALs, any related ERO
Charges shall have already been paid out of related RAL proceeds pursuant to Section 9.8 of the
Retail Distribution Agreement. Notwithstanding the foregoing, the order of priority of
distributions specified in clause (b) above shall be subject to the priority of distributions
specified in any existing collection agreement related to applicable Second Priority Prior
Indebtedness and to which the Servicer is party; provided, however, that any new
collection agreement entered into by the Servicer (which shall include any existing collection
agreement to which the Servicer is party and as to which the Servicer exercises an option held by
it to extend the term of such collection agreement beyond December 31, 2007) shall provide for
priority of distributions consistent with clause (b) above.




     Section 3.5. Authorized Withdrawals Related to RACs, Denied Classic RALs and Denied
Classic eRALs. With respect to any Deposit Account related to a RAC, Denied Classic RAL or
Denied Classic eRAL, and in accordance with the corresponding Application and other



12









 







related documents, the Servicer, following the deposit of any payment or collection into such
Deposit Account pursuant to Section 3.2, shall make allocations and withdrawals from such Deposit
Account only as follows (the order set forth below constituting an order of priority for such
allocations and withdrawals):



          (a) to withdraw any amount deposited in such Deposit Account which was not required to be
deposited therein;




          (b) except as otherwise specified below, to allocate on its servicing records all amounts on
deposit in such Deposit Account (that represent good funds, net of any prior allocations or
withdrawals from the Deposit Account pursuant to this Section 3.5) no later than 4:30 p.m. Eastern
time on the Business Day following receipt, in the order listed below; provided,
however, that except as provided below, amounts on deposit must be received by the Servicer
prior to 8:00 p.m. Eastern time on a Business Day; provided, further, that except
as provided below, any amounts received at or after 8:00 p.m. Eastern time on a Business Day shall
be deemed to have been received on the following Business Day:





          (i) to the applicable ERO, the ERO Charges, (payable solely out of the Refund Paid), in
the manner and at such times as set forth in Section 9.8(a) or Section 9.8(b), as
applicable, of the Retail Distribution Agreement;




          (ii) to the applicable ERO, the Delinquent ERO Charges, (payable solely out of the
Refund Paid), in the manner set forth in Section 9.8(a) of the Retail Distribution
Agreement, net of Delinquent ERO Charge Collection Fees (if any, but in any event subject to
Section 5.2(b)), which shall be retained by the Servicer;




          (iii) to the Originator, the Refund Account Fee;




          (iv) to allocate to the IMA Collection Ledger, all amounts outstanding with respect to
any HSBC IMA originated during the related Calculation Period on which the related
Settlement Product Client is the obligor;




          (v) to the applicable creditor or creditors, the First Priority Prior Indebtedness
(payable in order of oldest to most recent First Priority Prior Indebtedness, in each case
allocated in accordance with the priorities set forth in Section 3.4(b) or Section 3.6(b),
as applicable, of this Servicing Agreement); provided, however, that if the
source of payment of such amounts is the Refund Paid and if the Servicer receives an
information file from the IRS regarding such Refund Paid on or before the second Business
Day preceding receipt of such Refund Paid, then if the calendar day following receipt is not
a Business Day, such amounts shall be allocated no later than 4:30 p.m. Eastern time on the
day of receipt;




          (vi) to the applicable creditor or creditors, via ACH credit or otherwise in accordance
with the servicing standard specified in the HSBC Servicing Agreement, the Second Priority
Prior Indebtedness;



13









 






          (vii) to the Person or Persons entitled thereto, via ACH credit or otherwise in
accordance with the servicing standard specified in the HSBC Servicing Agreement, the Other
Required Deductions;




          (viii) to the Person or Persons entitled thereto, via ACH credit or otherwise in
accordance with the servicing standard specified in the HSBC Servicing Agreement, such other
Authorized Deductions as the Settlement Products Client shall have authorized in writing,
including any custodian for an XIRA; and




          (ix) to the Settlement Product Client, any remaining amounts to be processed as a RAC;




provided, however, that the Servicer shall collect the applicable Defaulted
RAL Collection Fee, if any, by withholding and retaining an amount (subject to Section
5.2(b)) equal to the product of (a) the applicable Defaulted RAL Collection Fee Percentage
multiplied by (b) the applicable amounts otherwise distributable pursuant to subparagraph
(v) above; and further provided, with respect to amounts specified in
clauses (ii), (v), (vi) and (vii) of Section 3.5(b) above, the Servicer shall on the later
of (A) 38 days following the date of Application, or (B) such later date as may be required
by applicable law, transfer to the appropriate account or withdraw and remit to the
appropriate recipient, pursuant to wiring instructions from the Originator, all funds
allocated pursuant to Section 3.5(b); and with respect to all other amounts specified in
Section 3.5(b), the Servicer shall withdraw and remit such amounts to the appropriate
recipient, pursuant to wiring instructions from the Originator, on such date of allocation;
and further provided, that if any such amount is the subject of a dispute
with any Settlement Product Client or third Person, no such disputed amounts with shall be
allocated or withdrawn from any Deposit Account until a final decision has been made by the
Servicer regarding such disputed amount; and, then



          (c) to clear and terminate such Deposit Account upon the termination of the Servicer’s
obligations with respect to such Deposit Account under this Servicing Agreement.



Notwithstanding the foregoing, the order of priority of distributions specified in clause (b) above
shall be subject to the priority of distributions specified in any existing collection agreement
related to applicable Second Priority Prior Indebtedness and to which the Servicer is party;
provided, however, that any new collection agreement entered into by the Servicer
(which shall include any existing collection agreement to which the Servicer is party and as to
which the Servicer exercises an option held by it to extend the term of such collection agreement
beyond December 31, 2007) shall provide for priority of distributions consistent with clause (b)
above.




     Section 3.6. Authorized Withdrawals of Amounts Recorded on the IMA Collection Ledger.
With respect to any amount recorded on the IMA Collection Ledger and in accordance with the
corresponding Application and other related documents including, without limitation, any related
IMA Document, the Servicer, following the deposit of any payment or collection into such Deposit
Account pursuant to Section 3.2 shall make withdrawals on account of the IMAs recorded on the IMA
Collection Ledger only as follows (unless otherwise provided below, the order set forth below
constituting an order of priority for such withdrawals):



14









 





          (a) to reallocate any such amount recorded on such IMA Collection Ledger which was not
required to be recorded thereon;




          (b) except as otherwise specified below, to remit all such amounts recorded on such IMA
Collection Ledger (that represent good funds, net of any prior withdrawals or reallocations of
amount recorded on the IMA Collection Ledger pursuant to this Section 3.6) no later than 4:30 p.m.
Eastern time on the Business Day following receipt, pursuant to wiring instructions from the
Originator, in the order listed below; provided, however, that except as provided
below, any such amounts on deposit must be received by the Servicer prior to 8:00 p.m. Eastern time
on a Business Day; provided, further, that except as provided below, any such
amounts received at or after 8:00 p.m. Eastern time on a Business Day shall be deemed to have been
received on the following Business Day:





          (i) with respect to each related HSBC IMA, to the Originator in accordance with its IMA
Ownership Interest, to each Participant in accordance with its respective Participation
Interest, and to each holder of any other related participation interest in accordance with
such interest (such rights of each Participant and holder under this clause (i) being pari
passu with the rights of the Originator and each other under this clause (i)), the related
IMA Fee;




          (ii) with respect to each related HSBC IMA, to the Originator in accordance with its
IMA Ownership Interest, to each Participant in accordance with its respective Participation
Interest, and to each holder of any other related participation interest in accordance with
such interest (such rights of each Participant and holder under this clause (ii) being pari
passu with the rights of the Originator and each other under this clause (ii)), the related
Principal Amount;




          (iii) with respect to each related HSBC IMA, to the Originator in accordance with its
IMA Ownership Interest, to each Participant in accordance with its respective Participation
Interest, and to each holder of any other related participation interest in accordance with
such interest (such rights of each Participant and holder under this clause (iii) being pari
passu with the rights of the Originator and each other under this clause (iii), the Late
Fees, if any;




provided, however, that if any such HSBC IMA is a Defaulted HSBC IMA and
that the Servicer has not already collected the applicable Defaulted RAL/IMA Collection Fee
pursuant to Section 3.4(b) or Section 3.5(b), then the Servicer shall collect the applicable
Defaulted RAL/IMA Collection Fee by withholding and retaining an amount (subject to Section
5.2(b)) equal to the product of (a) the applicable Defaulted RAL/IMA Collection Fee
Percentage multiplied by (b) the applicable amounts otherwise distributable pursuant to
subparagraphs (i), (ii) and (iii) above; and



          (c) to clear and terminate such Deposit Account upon the termination of the Servicer’s
obligations with respect to such Deposit Account under this Servicing Agreement.




     Section 3.7. Priority. The Servicer shall not withdraw from any Deposit Account and
remit to any party any amounts in satisfaction of any indebtedness, obligations or
otherwise of



15









 







any Settlement Products Client prior to satisfaction of all obligations,
indebtedness and otherwise of such Settlement Products Client under subsections (a) and (b) of
Sections 3.3, 3.4 or 3.5, as applicable.



     Section 3.8. No Set-off. Except as otherwise specifically provided in this Article
III with respect to retention of Defaulted RAL/IMA Collection Fees, none of the Servicer, the
Originator or any Affiliate thereof shall have any right to set-off against amounts payable
hereunder to any Participant or any Affiliate thereof. The parties agree that the preceding
sentence shall not be construed to limit or adversely affect the ability of any Block Company to
apply or offset the Defaulted RAL/IMA Collection Fee Credit against amounts payable to any HSBC
Company in the manner set forth in Section 5.2.



ARTICLE IV



STATEMENTS AND REPORTS




     Section 4.1. Reporting by the Servicer.



          (a) The Servicer shall provide, or cause to be provided, as applicable, to the relevant
Originator and each Participant the following:





          (i) No later than 8:30 a.m. Eastern time on each Business Day, a report setting forth
(A) the aggregate amount of collections processed by Servicer on the immediately preceding
Business Day and the Originator’s and each Participant’s share thereof, (B) the number of
and aggregate amount outstanding of HSBC RALs and HSBC IMAs as of the close of business on
the immediately preceding Business Day and the relevant Originator’s and each Participant’s
share thereof, and (C) the number and principal amount of HSBC RALs and HSBC IMAs funded by
such Originators on the immediately preceding Business Day on a “checks cleared” basis and
such Originators’ and each Participant’s share of collections related thereto;




          (ii) On the second Business Day following December 15 of each Tax Year, estimates
(based upon information available as of December 15 of such Tax Year) of (a) the IRS
Collections Percentage with respect to such Tax Year and the Defaulted RAL/IMA Collection
Fee Credit, and (b) the HSBC Servicing Fee and the Block Servicing Fee for the related
Calculation Period, along with supporting data, documentation and computations for each such
estimate;




          (iii) On the second Business Day following the conclusion of each Tax Year, its
determination (as of the end of such Tax Year) of (a) the IRS Collections Percentage with
respect to such Tax Year and the Defaulted RAL/IMA Collection Fee Credit, and (b) the HSBC
Servicing Fee and the Block Servicing Fee for the related Calculation Period, along with
supporting data, documentation and computations for each such determination;




          (iv) Unless a Type II SAS 70 report (or any equivalent thereof or successor thereto)
has been previously delivered pursuant to Section 6.10 of the Retail Distribution Agreement
in the then-current calendar year, on the thirtieth (30th) day of the



16









 







second month immediately following the end of each of the Originator’s and Servicer’s
fiscal year, as applicable, a report prepared by a nationally recognized independent
accounting firm regarding its evaluation of the Originator’s or Servicer’s, as applicable,
internal accounting controls relative to its respective obligations under the Program
Contracts with respect to the Settlement Products, such report including an opinion
(assuming the accuracy of any reports generated by the agents of Originator or Servicer, as
applicable) of such accounting firm that the systems of internal accounting controls of the
Originator or the Servicer, as applicable, in effect on the day set forth in the report were
sufficient for the prevention and detection of errors for such exceptions, errors or
irregularities as such firm shall believe to be immaterial to the financial statements of
the Originator or the Servicer, as applicable, and such other exceptions, errors or
irregularities as shall be set forth in such report; provided, however, that
the HSBC Companies and the Block Companies shall split equally expenses incurred by the HSBC
Companies in connection with the preparation of any such reports; provided,
further, that the Block Companies’ portion of such expenses shall not exceed Fifty
Thousand Dollars ($50,000) in any year of the Term of this Servicing Agreement;




          (v) At the request of any Participant (but not more often than annually), on or before
June 30 of each year, a special report that the Servicer shall obtain from its independent
certified public accountants (in such form and subject to such assumptions, limitations and
qualifications as such accountants generally require for special reports of such type) that
shall in effect state that the amounts calculated for the Servicer’s Block Servicing Fee,
the HSBC Servicing Fee, the IRS Collections Percentage, the Defaulted RAL/IMA Collection
Fee Percentage and the Defaulted RAL/IMA Collection Fee Credit for the previous Calculation
Period or Tax Year, as applicable, under Article V hereof are in compliance with the terms
of this Servicing Agreement or stating the nature of any variance from the terms of this
Servicing Agreement, provided, that each requesting Participant and the Servicer
shall share the cost of such report equally (with each such Participant reimbursing the
Servicer for such Participant’s share such cost); and




          (vi) Any statement, report or information reasonably requested by the Originator or any
Participant; provided, however, that the Servicer shall not be required to
provide copies of any statement, report or information requested by, or provided to, any
applicable regulatory agency; provided, further, that the preceding proviso
shall not preclude the provision of the same or similar information to the extent that the
request therefor is not specifically framed in the context of responses to requests of
applicable regulatory agencies.



          (b) Unless otherwise specifically stated herein, if the Servicer is required to deliver any
statement, report or information under any provision of this Servicing Agreement, the Servicer
shall satisfy such obligation by delivering such statement, report or information in a commonly
used electronic format.




17









 








ARTICLE V



SERVICER COMPENSATION AND EXPENSES




     Section 5.1. HSBC Servicing Fee and Block Servicing Fee.



     (a) In consideration for the Settlement Products Servicing performed by the Servicer pursuant
to this Servicing Agreement, as soon as possible after December 31st, but in any event
on or before the fifth Business Day after such date, following each Tax Period during the Term of
the Retail Distribution Agreement (beginning in December 2007):



     (i) HSBC TFS shall pay to the Servicer the applicable HSBC Servicing Fee; and



     (ii) BFC shall pay to the Servicer the applicable Block Servicing Fee;


in each case via wire transfer of immediately available funds to an account designated in writing
by the Servicer.




     (b) The Servicer shall not have a right of set-off to collect the HSBC Servicing Fee or the
Block Servicing Fee from any funds held, or amount payable, by the Servicer pursuant to the
Servicing Agreement. The Servicer shall not have any lien on amounts payable to any Participant
hereunder.



     Section 5.2. Defaulted RAL/IMA Collection Fee; Defaulted RAL/IMA Collection Fee
Credit.



          (a) In addition to the servicing fees described in section 5.1 above, as consideration for
collection of certain Defaulted HSBC RALs and Defaulted HSBC IMAs, the Servicer shall be entitled
to receive a Defaulted RAL/IMA Collection Fee for each Defaulted HSBC RAL and Defaulted HSBC IMA
solely from the funds, and in accordance with the payment provisions, specified in Article III of
this Servicing Agreement.




          (b) Notwithstanding any provision of any Program Contract to the contrary, the Defaulted
RAL/IMA Collection Fee Credit shall, at the sole option of the applicable Block Company, be offset
against any amount owed (either directly or by way of allocation of losses) by any of the Block
Companies to any of the HSBC Companies with respect to the Settlement Products Program, including
but not limited to any portion of Defaulted RAL/IMA Collection Fees or Delinquent ERO Charge
Collection Fees allocable to a Block Company (or an Affiliate thereof, but in no event allocable to
a Franchisee) in its capacity as a Participant or an ERO.




     Section 5.3. Servicing Expense. The Servicer shall pay all expenses incurred by it in
connection with its Settlement Products Servicing activities hereunder and shall not be entitled to
reimbursement thereof except as specifically provided for herein or as provided in the HSBC
Servicing Agreement (but only to the extent that the HSBC Servicing Agreement does not provide for
payment of such amounts by any Participant out of its own funds or by retention or offset of
amounts otherwise payable to any Participant hereunder or the Participation Agreement).



18









 





ARTICLE VI



THE SERVICER, THE ORIGINATOR AND



THE PARTICIPANTS




     Section 6.1. Subservicing. The Servicer shall provide oversight and supervision with
regard to the performance of all subcontracted services and any subservicing agreement shall be
consistent with and subject to the provisions of this Servicing Agreement. Neither the existence
of any subservicing agreement nor any of the provisions of this Servicing Agreement relating to
subservicing shall relieve the Servicer of its obligations hereunder. Notwithstanding any such
subservicing agreement, the Servicer shall be obligated to the same extent and under the same terms
and conditions as if the Servicer alone was servicing and administering the related Settlement
Products in accordance with the terms of this Servicing Agreement. The Servicer shall be solely
liable for all fees owed by it to any subservicer, regardless of whether the Servicer’s
compensation hereunder is sufficient to pay such fees.



     Section 6.2. Servicer Not to Assign. Except as otherwise provided in Section 1.3(b),
the Servicer may not assign this Servicing Agreement or any of its rights, powers, duties or
obligations hereunder without the written consent of the Originator and each Participant.



ARTICLE VII



REPRESENTATIONS AND WARRANTIES OF THE BLOCK COMPANIES




     Section 7.1. Representations Incorporated by Reference. Each Block Company that is a
party to this Servicing Agreement represents and warrants, with respect to itself only, to each of
the HSBC Companies that is a party to this Servicing Agreement that each representation and
warranty made by it in Article III of the Retail Distribution Agreement is true and correct, each
and all of which are made as of the date hereof (except the representations and warranties in
Section 3.6 of the Retail Distribution Agreement) and as of each day during the term of this
Servicing Agreement.



ARTICLE VIII



REPRESENTATIONS AND WARRANTIES OF THE HSBC COMPANIES




     Section 8.1. Representations Incorporated by Reference. Each HSBC Company that is a
party to this Servicing Agreement represents and warrants, with respect to itself only, to each of
the Block Companies that is a party to this Servicing Agreement 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 Servicing
Agreement.



ARTICLE IX



DEFAULT OF BFC AND REMEDIES OF HSBC COMPANIES AND THE SERVICER




     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:



19









 





          (a) BFC fails to observe or perform any covenant applicable to it contained in this Servicing
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 this Servicing
Agreement shall prove to have been incorrect in any respect (or, in the event such representation,
warranty, certificate or statement made in this Servicing 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




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




     Section 9.2. Remedies.



          (a) If any event of default by BFC under Section 9.1 has occurred and is continuing and
adversely affects any HSBC Company party hereto, other than the Servicer, the following actions may
be taken:





          (i) Termination. Any HSBC Company other than the Servicer may terminate itself
as a party to this Servicing Agreement. Such HSBC Company terminating itself as a party to
this Servicing Agreement under this Section 9.2(a)(i) shall promptly provide written notice
to BFC and the Servicer. The effective date of any termination shall be the date such
corresponding notice was received by BFC. For purposes of this Section 9.2(a)(i), a
termination by such HSBC Company shall only be with respect to itself as a party to this
Servicing Agreement and shall not be deemed to be a termination of this Servicing Agreement
with respect to any other party.




          (ii) Other Rights and Remedies. Subject to Section 9.2(b), any HSBC Company
may exercise any rights and remedies provided to it under the Servicing Agreement or at law
or equity.



          (b) If any event of default by BFC under Section 9.1 has occurred and is continuing and
adversely affects the Servicer, the Servicer may exercise any rights and remedies provided to it
under the Servicing Agreement or at law or equity; provided, however, the Servicer
shall be prohibited from terminating this Servicing Agreement or suspending, in whole or in part,
its performance hereunder.




     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. Any HSBC Company 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



20









 







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



DEFAULT OF HSBC COMPANIES AND REMEDIES OF BFC AND THE SERVICER




     Section 10.1. HSBC Company 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 any HSBC Company party
hereto:



          (a) such HSBC Company fails to observe or perform any covenant applicable to it contained in
this Servicing 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 such HSBC Company in this
Servicing Agreement is incorrect in any respect (or, in the event such representation, warranty,
certificate or statement made in this Servicing 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




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




     Section 10.2. Remedies.



          (a) If any event of default by any HSBC Company under Section 10.1 has occurred and is
continuing and adversely affects BFC, the following actions may be taken:





          (i) Termination. BFC may terminate this Servicing Agreement. In the event BFC
terminates this Servicing Agreement under this Section 10.2(a)(i), it shall promptly provide
written notice to each HSBC Company and the Servicer. The effective date of any termination
shall be the earliest date such corresponding notice was received by any HSBC Company.




          (ii) Other Rights and Remedies. BFC may exercise any rights and remedies
provided to it under the Servicing Agreement or at law or equity.



          (b) If any event of default by any HSBC Company under Section 10.1 has occurred and is
continuing and adversely affects the Servicer, the Servicer may exercise any rights and remedies
provided to it under the Servicing Agreement or at law or equity; provided,
however, the Servicer shall be prohibited from terminating this Servicing Agreement or
suspending, in whole or in part, its performance hereunder.




21









 








     Section 10.3. Default Rate. If any event of default of any HSBC Company has occurred
and is continuing, and all or any portion of the Obligations hereunder of the HSBC Companies
parties hereto 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 10.4. Waiver. BFC may waive, in writing, any event of default of any HSBC
Company. Upon any such waiver of a past event of default of any HSBC Company, such event of
default of such HSBC Company 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 such HSBC Company. No such waiver shall extend to any subsequent or other
event of default of any HSBC Company or impair any right consequent thereon except to the extent
expressly so waived.



ARTICLE XI



DEFAULT OF THE SERVICER AND REMEDIES OF BFC AND HSBC COMPANIES




     Section 11.1. Servicer 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 the Servicer (each, a
“Servicer Event of Default”):



          (a) the Servicer fails to remit to HSBC Bank or any Participant any payment required to be so
remitted by the Servicer under the terms of this Servicing Agreement when and as due;




          (b) the Servicer fails to observe or perform any other covenant applicable to it contained in
the HSBC Servicing Agreement or this Servicing 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 ten (10) days or more following receipt of such notice;




          (c) any representation, warranty, certification or statement made by the Servicer in this
Servicing Agreement shall prove to have been incorrect in any respect (or, in the event such
representation, warranty, certificate or statement made in this Servicing 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);




          (d) a HSBC Event of Default occurs under the Retail Distribution Agreement; or




          (e) any termination of the HSBC Servicing Agreement.




22









 








     Section 11.2. Remedies.



          (a) If any Servicer Event of Default has occurred and is continuing and adversely affects HSBC
Bank, the following actions may be taken:





          (i) Termination. HSBC Bank may terminate itself as a party to this Servicing
Agreement. In the event HSBC Bank terminates itself as a party to this Servicing Agreement
under this Section 11.2(a)(i), it shall promptly provide written notice to the Servicer and
the Participants. The effective date of any termination shall be the date such
corresponding notice was received by the Servicer. For purposes of this Section 11.2(a)(i),
a termination by HSBC Bank shall only be with respect to itself as a party to this Servicing
Agreement and shall not be deemed to be a termination of this Servicing Agreement with
respect to any other party.




          (ii) Replacement of the Servicer. HSBC Bank may terminate this Servicing
Agreement and the HSBC Servicing Agreement; provided, that the effective date of such
termination shall be the date on which a substitute servicer reasonably acceptable to HSBC
Bank and the Participants has entered into a substitute servicing agreement, substantially
similar to this Servicing Agreement, with HSBC Bank and the Participants, and the HSBC
Servicing Agreement, with HSBC Bank, immediately prior to such termination of Servicer as a
party to this Servicing Agreement and the HSBC Servicing Agreement.




          (iii) Other Rights and Remedies. HSBC Bank may exercise any rights and
remedies provided to it under the Servicing Agreement or at law or equity.



          (b) If any Servicer Event of Default has occurred and is continuing and adversely affects any
Participant, the following actions may be taken:





          (i) Termination. Such Participant may terminate itself as a party to this
Servicing Agreement. Any Participant terminating itself as a party to this Servicing
Agreement under this Section 11.2(b)(i) shall promptly provide written notice to the
Servicer and HSBC Bank. The effective date of any termination shall be the date such
corresponding notice was received by the Servicer. For purposes of this Section
11.2(b)(ii), a termination by any Participant shall only be with respect to itself as a
party to this Servicing Agreement and shall not be deemed to be a termination of this
Servicing Agreement with respect to any other party.




          (ii) Replacement of the Servicer. Such Participant may terminate this
Servicing Agreement; provided, that the effective date of such termination shall be the date
on which a substitute servicer reasonably acceptable to HSBC Bank and the Participants has
entered into a substitute servicing agreement, substantially similar to this Servicing
Agreement, with HSBC Bank and the Participants immediately prior to such termination of
Servicer as a party to this Servicing Agreement.




          (iii) Other Rights and Remedies. Such Participant may exercise any rights and
remedies provided to it under the Servicing Agreement or at law or equity.



23









 





     Section 11.3. Default Rate. If any Servicer Event of Default has occurred and is
continuing, and all or any portion of the Obligations hereunder of the Servicer 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 11.4. Substitute Servicer. On or after the receipt by the Servicer of such
written notice of termination of this Servicing Agreement, and if applicable, the HSBC Servicing
Agreement, all authority and power of the Servicer under this Servicing Agreement, and if
applicable, the HSBC Servicing Agreement, whether with respect to the Settlement Products or
otherwise, shall pass to and be vested in the substitute servicer, and the Servicer agrees to
cooperate with HSBC Bank and each Participant in terminating the Servicer’s rights and
responsibilities hereunder and under the HSBC Servicing Agreement, including, without limitation,
the transfer to the substitute servicer of the servicing files and the funds held in the accounts
as set forth in this Servicing Agreement.



ARTICLE XII



TERMINATION; TRANSFER OF PARTICIPATED HSBC RALS AND IMAS




     Section 12.1. Term. The term of this Servicing Agreement shall begin as of October
15, 2006 and shall terminate in accordance with Section 12.2; provided, however, that
notwithstanding any other provision of this Servicing Agreement, in the event HSBC Trust shall not
have received by October 15, 2006 all regulatory approvals required for it to become subject to the
terms of this Servicing Agreement that HSBC Trust deems reasonably necessary, this Servicing
Agreement shall be effective as to HSBC Trust, and the term of this Servicing Agreement shall begin
as to HSBC Trust, only on such later date, if any, as all such approvals are received.



     Section 12.2. Termination.



          (a) This Servicing Agreement shall terminate immediately, upon the mutual written agreement of
all of the parties hereto.




          (b) This Servicing Agreement shall terminate in accordance with Section 11.2(a)(ii) and
Section 11.2(b)(ii).




     Section 12.3. Termination of Agreement.



          (a) In no event shall the Settlement Product Servicing obligations of the Servicer terminate
prior to HSBC Bank and each Participant entering into a servicing agreement substantially similar
hereto with a substitute servicer reasonably acceptable to HSBC Bank and each Participant.




          (b) Termination pursuant to this Article XII or as otherwise provided herein shall be without
prejudice to any rights of HSBC Bank, any Participant or the Servicer which may have accrued
through the date of termination hereunder. Upon such termination, the Servicer shall (i) remit
all funds in the Deposit Accounts to such Person as is designated in writing by HSBC Bank and the
Participants; (ii) deliver all related servicing files to the Persons designated in writing by
HSBC Bank and the Participants; and (iii) fully cooperate with HSBC


24









 







           Bank, the Participants and any substitute servicer to effectuate an orderly transition of
Settlement Product Servicing of the related Settlement Products.




ARTICLE XIII



MISCELLANEOUS PROVISIONS




     Section 13.1. Survival.



          (a) The rights and obligations of the parties hereto under Articles I, II, III, IV, V, VI,
VII, VIII and XII of this Servicing Agreement shall survive the termination or expiration of this
Servicing Agreement until such time as no liabilities hereunder are due and owing to the Originator
or any Participant; except that Section 3.3(b)(i), Section 3.4(b)(i), Section 3.5(b)(i) and Section
3.5(b)(ii) shall survive the termination or expiration of this Servicing Agreement to and including
December 31 occurring in the Tax Year in which the Participation Agreement is terminated or
expires.




          (b) The (i) representations and warranties of the parties hereto and (ii) the rights and
obligations of the parties hereto under Articles IX, X, XI and XIII of this Servicing Agreement
shall survive the termination or expiration of this Servicing Agreement indefinitely.




     Section 13.2. No Waivers; Remedies Cumulative. No failure or delay by any party
hereto in exercising any right, power or privilege under this Servicing 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 13.3. 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 13.4. Severability. In case any provision of or obligation under this
Servicing 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 13.5. Amendments and Waivers. Any provision of this Servicing 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 13.6. Successors and Assigns. The provisions of this Servicing 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 Servicing Agreement without the prior written consent of all
parties signatory hereto except as otherwise provided in Section 1.3 and Section 6.1 hereof.



     Section 13.7. Headings. Headings and captions used in this Servicing Agreement
(including all exhibits and schedules thereto) are included herein for convenience of reference



25









 







only and shall not constitute a part of this Servicing Agreement for any other purpose or be
given any substantive effect.



     Section 13.8. Alternative Dispute Resolution. ANY DISPUTE BETWEEN OR AMONG THE
PARTIES HERETO ARISING OUT OF OR RELATING TO THIS SERVICING 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 NEGOTIATIONS, MEDIATION AND ARBITRATION IN ACCORDANCE
WITH THE PROVISIONS OF ARTICLE XXI OF THE RETAIL DISTRIBUTION AGREEMENT, WHICH ARE INCORPORATED
HEREIN BY REFERENCE.



     Section 13.9. Governing Law; Submission to Jurisdiction. THIS SERVICING AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MISSOURI.
WITHOUT LIMITING THE EFFECT OF SECTION 13.8 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 ANY SUCH PROCEEDING IN THE MANNER PROVIDED
FOR NOTICES IN SECTION 13.3 AND AGREES THAT NOTHING IN THIS SERVICING AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY TO THIS SERVICING AGREEMENT TO SERVE PROCESS IN ANY SUCH PROCEEDING IN ANY OTHER
MANNER PERMITTED BY LAW.



     Section 13.10. Waiver of Jury Trial. WITHOUT LIMITING THE EFFECT OF SECTION 13.8
HEREOF, 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 SERVICING AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.



     Section 13.11. Counterparts. This Servicing 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 Servicing Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.



     Section 13.12. Entire Agreement. This Servicing Agreement and the other Program
Contracts 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



26









 







avoidance of doubt, (i) this Servicing Agreement and the other Program Contracts 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 Servicing 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 13.13. Reinstatement. This Servicing 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 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 13.14. Advice of Counsel. Each of the parties represents to each other party
hereto that it has discussed this Servicing Agreement with its counsel.



     Section 13.15. No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Servicing Agreement. In the event any ambiguity or
question of intent or interpretation arises, this Servicing 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 provision of this Servicing Agreement.



     Section 13.16. Conflict of Terms. Except as otherwise provided in this Servicing
Agreement or any of the other Program Contracts by specific reference to the applicable provisions
of this Servicing Agreement, if any provision contained in this Servicing Agreement conflicts with
any provision in any of the other Program Contracts, other than the Indemnification Agreement and
the Retail Distribution Agreement, the provisions contained in this Servicing Agreement shall
govern and control. If there if a conflict between this Servicing Agreement and the Retail
Distribution Agreement (but not the Indemnification Agreement), then the Retail Distribution
Agreement shall control. If there is a conflict between the Servicing Agreement and the
Indemnification Agreement, the Indemnification Agreement shall control.



     Section 13.17. Further Execution. Each party hereto shall execute any and all
documents as are necessary or desirable to consummate the transactions contemplated hereby.



     Section 13.18. 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 Servicing Agreement.



27









 





     Section 13.19. No Implied Relationship. Notwithstanding any provision herein to the
contrary:



          (a) This Servicing 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 state and federal income taxes with
respect to, any personnel employed by such party to perform any services hereunder.




     Section 13.20. No Third Party Beneficiaries. This Servicing Agreement is for the sole
benefit of the parties hereto and their permitted successors and assigns and nothing in this
Servicing 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
Servicing Agreement.



     Section 13.21. Force Majeure. No party hereto shall be liable for failure to satisfy
or delays in the satisfaction of its Obligations, except failure or delay with respect to its
payment obligations, as a result of a Force Majeure Event.



     Section 13.22. 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.



     Section 13.23. Inspection and Audit Rights. Each Participant shall have those
inspection and audit rights set forth in Section 6.7 of the Retail Distribution Agreement.



[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]




28









 





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



     IN WITNESS WHEREOF, the parties hereto have caused this HSBC Settlement Products Servicing
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 TAXPAYER FINANCIAL SERVICES, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC TRUST COMPANY (DELAWARE), NATIONAL ASSOCIATION,	 	 
	 	 	a national banking association	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	BLOCK FINANCIAL CORPORATION,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title: