exv10w29



 





Exhibit 10.29




 

 






CREDIT AND GUARANTEE AGREEMENT




dated as of




January 2, 2007




among




BLOCK FINANCIAL CORPORATION,

as Borrower,




H&R BLOCK, INC.,

as Guarantor,




and




HSBC FINANCE CORPORATION,

as Lender




$3,000,000,000 REVOLVING CREDIT FACILITY



 

 

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	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 1.1.
	 	Defined Terms
	 	 	1	 
	 

	 	SECTION 1.2.
	 	Terms Generally
	 	 	14	 
	 

	 	SECTION 1.3.
	 	Accounting Terms; GAAP
	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II THE CREDITS	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 2.1.
	 	Commitment
	 	 	15	 
	 

	 	SECTION 2.2.
	 	Loans
	 	 	15	 
	 

	 	SECTION 2.3.
	 	Funding of Loans
	 	 	15	 
	 

	 	SECTION 2.4.
	 	Termination and Reduction of Commitment
	 	 	15	 
	 

	 	SECTION 2.5.
	 	Repayment of Loans; Evidence of Debt
	 	 	16	 
	 

	 	SECTION 2.6.
	 	Prepayment of Loans
	 	 	16	 
	 

	 	SECTION 2.7.
	 	Interest
	 	 	17	 
	 

	 	SECTION 2.8.
	 	Alternate Rate of Interest
	 	 	18	 
	 

	 	SECTION 2.9.
	 	Increased Costs
	 	 	18	 
	 

	 	SECTION 2.10.
	 	Taxes
	 	 	19	 
	 

	 	SECTION 2.11.
	 	Payments Generally
	 	 	20	 
	 

	 	SECTION 2.12.
	 	Mitigation Obligations
	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 3.1.
	 	Organization; Powers
	 	 	20	 
	 

	 	SECTION 3.2.
	 	Authorization; Enforceability
	 	 	21	 
	 

	 	SECTION 3.3.
	 	Governmental Approvals; No Conflicts
	 	 	21	 
	 

	 	SECTION 3.4.
	 	Financial Condition; No Material Adverse Change
	 	 	21	 
	 

	 	SECTION 3.5.
	 	Properties
	 	 	22	 
	 

	 	SECTION 3.6.
	 	Litigation and Environmental Matters
	 	 	22	 
	 

	 	SECTION 3.7.
	 	Compliance with Laws and Agreements
	 	 	22	 
	 

	 	SECTION 3.8.
	 	Investment Company Status
	 	 	22	 
	 

	 	SECTION 3.9.
	 	Taxes
	 	 	22	 
	 

	 	SECTION 3.10.
	 	ERISA
	 	 	23	 
	 

	 	SECTION 3.11.
	 	Disclosure
	 	 	23	 
	 

	 	SECTION 3.12.
	 	Federal Regulations
	 	 	23	 
	 

	 	SECTION 3.13.
	 	Subsidiaries
	 	 	23	 
	 

	 	SECTION 3.14.
	 	Insurance
	 	 	23	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV CONDITIONS	 	 	24	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 4.1.
	 	Effective Date
	 	 	24	 
	 

	 	SECTION 4.2.
	 	Closing Date
	 	 	24	 






-i-









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 4.3.
	 	Each Loan
	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V AFFIRMATIVE COVENANTS	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 5.1.
	 	Financial Statements and Other Information
	 	 	25	 
	 

	 	SECTION 5.2.
	 	Notices of Material Events
	 	 	27	 
	 

	 	SECTION 5.3.
	 	Existence; Conduct of Business
	 	 	27	 
	 

	 	SECTION 5.4.
	 	Payment of Taxes
	 	 	27	 
	 

	 	SECTION 5.5.
	 	Maintenance of Properties; Insurance
	 	 	27	 
	 

	 	SECTION 5.6.
	 	Books and Records; Inspection Rights
	 	 	27	 
	 

	 	SECTION 5.7.
	 	Compliance with Laws
	 	 	28	 
	 

	 	SECTION 5.8.
	 	Use of Proceeds
	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI NEGATIVE COVENANTS	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 6.1.
	 	Adjusted Net Worth
	 	 	28	 
	 

	 	SECTION 6.2.
	 	Indebtedness
	 	 	28	 
	 

	 	SECTION 6.3.
	 	Liens
	 	 	31	 
	 

	 	SECTION 6.4.
	 	Fundamental Changes; Sale of Assets
	 	 	32	 
	 

	 	SECTION 6.5.
	 	Transactions with Affiliates
	 	 	33	 
	 

	 	SECTION 6.6.
	 	Restrictive Agreements
	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII GUARANTEE	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 7.1.
	 	Guarantee
	 	 	34	 
	 

	 	SECTION 7.2.
	 	Delay of Subrogation
	 	 	35	 
	 

	 	SECTION 7.3.
	 	Amendments, etc. with respect to the Obligations; Waiver of Rights
	 	 	35	 
	 

	 	SECTION 7.4.
	 	Guarantee Absolute and Unconditional
	 	 	35	 
	 

	 	SECTION 7.5.
	 	Reinstatement
	 	 	36	 
	 

	 	SECTION 7.6.
	 	Payments
	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII EVENTS OF DEFAULT	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	[RESERVED]	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X MISCELLANEOUS	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	 

	 	SECTION 10.1.
	 	Notices
	 	 	39	 
	 

	 	SECTION 10.2.
	 	Waivers; Amendments
	 	 	40	 
	 

	 	SECTION 10.3.
	 	Expenses; Indemnity; Damage Waiver
	 	 	40	 
	 

	 	SECTION 10.4.
	 	Successors and Assigns
	 	 	41	 
	 

	 	SECTION 10.5.
	 	Survival
	 	 	42	 
	 

	 	SECTION 10.6.
	 	Counterparts; Integration; Effectiveness
	 	 	42	 






-ii-









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	SECTION 10.7.
	 	Severability
	 	 	43	 
	 

	 	SECTION 10.8.
	 	Right of Setoff
	 	 	43	 
	 

	 	SECTION 10.9.
	 	Governing Law; Jurisdiction; Consent to Service of Process
	 	 	43	 
	 

	 	SECTION 10.10.
	 	WAIVER OF JURY TRIAL
	 	 	44	 
	 

	 	SECTION 10.11.
	 	Headings
	 	 	44	 
	 

	 	SECTION 10.12.
	 	Confidentiality
	 	 	44	 
	 

	 	SECTION 10.13.
	 	Interest Rate Limitation
	 	 	45	 
	 

	 	SECTION 10.14.
	 	USA Patriot Act
	 	 	45	 
	 

	 	SECTION 10.15.
	 	Alternative Dispute Resolution
	 	 	45	 






	 	 	 
	SCHEDULES:
	 
	 	 
	Schedule 3.4(a)

	 	Guarantee Obligations
	Schedule 3.6

	 	Disclosed Matters
	Schedule 3.13

	 	Subsidiaries
	Schedule 6.2

	 	Existing Indebtedness
	Schedule 6.3

	 	Existing Liens
	Schedule 6.4(b)

	 	Additional Businesses
	Schedule 6.6

	 	Existing Restrictions
	 
	 	 
	EXHIBITS:
	 
	 	 
	Exhibit A

	 	Form of Security Agreement
	Exhibit B

	 	Form of Control Agreement
	Exhibit C

	 	Form of HSBC TFS Letter
	Exhibit D

	 	Form of Opinion of Stinson Morrison Hecker LLP







-iii-









 





CREDIT AND GUARANTEE AGREEMENT




          CREDIT AND GUARANTEE AGREEMENT, dated as of January 2, 2007, among BLOCK FINANCIAL
CORPORATION, a Delaware corporation, as Borrower, H&R BLOCK, INC., a Missouri corporation, as
Guarantor, and HSBC FINANCE CORPORATION, a Delaware corporation, as Lender.




          WHEREAS, the Borrower has requested that the Lender provide a short-term revolving credit
facility in an amount of $3,000,000,000;




          WHEREAS, the Guarantor has agreed to guarantee all of the Borrower’s obligations hereunder;
and




          WHEREAS, the Lender is willing to provide a short-term revolving credit facility to the
Borrower on the terms and conditions set forth herein.




          NOW, THEREFORE, in consideration of the agreements herein and in reliance upon the
representations and warranties set forth herein, the parties agree as follows:




ARTICLE I




DEFINITIONS





          SECTION 1.1. Defined Terms. Capitalized terms used in this Agreement that are not defined below or
otherwise herein shall have the meanings set forth in the Appendix of Defined Terms and Rules of
Construction attached as Appendix A to the Retail Settlement Products Distribution Agreement. As
used in this Agreement, the following terms have the meanings specified below:




     “Adjusted Net Worth” means, at any time, Consolidated Net Worth of the
Guarantor without giving effect to reductions in stockholders’ equity as a result of
repurchases by the Guarantor of its own Capital Stock subsequent to April 30, 2005 in an
aggregate amount not exceeding $350,000,000.




     “Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified. For the avoidance of doubt, neither the
Guarantor nor any of its Subsidiaries shall be deemed to Control any of its franchisees by
virtue of provisions in the relevant franchise agreement regulating the business and
operations of such franchisee.




     “Agreement” means this Credit and Guarantee Agreement.




     “Availability Period” means the period from and including January 2, 2007 (or,
if later, the Closing Date) to but excluding the earlier of the Revolving Termination Date
and the date of termination of the Commitments.









 



2







     “Average Weekly LIBOR” means [***] .




     “Bank Revolvers” means, collectively, (i) the Five-Year Credit and Guarantee
Agreement dated as of August 10, 2005 among the Borrower, the Guarantor, various financial
institutions and JPMorgan Chase Bank N.A., as Administrative Agent, and any restatement,
extension, renewal and replacement thereof (regardless of whether the amount available
thereunder is changed or the term thereof is modified) and (ii) the Amended and Restated
Five-Year Credit and Guarantee Agreement, dated as of August 10, 2005, among the Borrower,
the Guarantor, various financial institutions and JPMorgan Chase Bank, N.A., as
Administrative Agent, and any restatement, extension, renewal and replacement thereof
(regardless of whether the amount available thereunder is changed or the term thereof is
modified).




     “Board” means the Board of Governors of the Federal Reserve System of the
United States of America.




     “Borrower” means Block Financial Corporation, a Delaware corporation and a
wholly-owned indirect Subsidiary of the Guarantor.




     “Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to remain closed;
provided that, when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in dollar deposits
in the London interbank market.




     “Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of such Person under
GAAP, and the amount of such obligations shall be the capitalized amount thereof determined
in accordance with GAAP.




     “Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all warrants or
options to purchase any of the foregoing.




     “Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case maturing within
one year from the date of acquisition; (b) certificates of deposit, time deposits,
eurodollar time deposits or overnight bank deposits having maturities of six months or less
from the date of acquisition issued by (i) any “Lender” as defined in a Bank Revolver, (ii)
any commercial bank organized under the laws of the United States or any state thereof
having combined capital and surplus of not less than $500,000,000 or (iii) any other bank
if, and to the extent, covered by FDIC insurance; (c) commercial paper of an issuer rated at
least A-1 by S&P or P-1 by Moody’s, or carrying an equivalent rating









 



3



by a nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing within six
months from the date of acquisition; (d) repurchase obligations of any “Lender” as defined
in a Bank Revolver or of any commercial bank satisfying the requirements of clause (b) of
this definition, having a term of not more than 30 days, with respect to securities issued
or fully guaranteed or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign government,
the securities of which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least A by S&P or A2 by
Moody’s; (f) securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by any “Lender” as defined in a Bank Revolver or
any commercial bank satisfying the requirements of clause (b) of this definition; (g) money
market mutual or similar funds that invest exclusively in assets satisfying the requirements
of clauses (a) through (f) of this definition; (h) money market funds that (i) comply with
the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as
amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at
least $1,000,000,000; (i) interests in privately offered investment funds under Section
3(c)(7) of the U.S. Investment Company Act of 1940 where such interests are (i) freely
transferable and (ii) rated AAA by S&P or Aaa by Moody’s; and (j) one month LIBOR floating
rate asset backed securities that are (i) freely transferable and (ii) rated AAA by S&P or
Aaa by Moody’s.




     “Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the meaning of the
Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange
Commission thereunder as in effect on the date hereof) of shares representing more than 25%
of the aggregate ordinary voting power represented by the issued and outstanding Capital
Stock of the Guarantor; (b) occupation of a majority of the seats (other than vacant seats)
on the board of directors of the Guarantor by Persons who were neither (i) nominated by the
board of directors of the Guarantor nor (ii) appointed by directors so nominated; (c) the
acquisition of direct or indirect Control of the Guarantor by any Person or group; or (d)
the failure of the Guarantor to own, directly or indirectly, shares representing 100% of the
aggregate ordinary voting power represented by the issued and outstanding Capital Stock of
the Borrower.




     “Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the date of this
Agreement or (c) compliance by the Lender (or, for purposes of Section 2.9(b), by any
lending office of the Lender or by the Lender’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.




     “Charges” has the meaning assigned to such term in Section 10.13.









 



4



     “Closing Date” means the date on which the conditions specified in Section 4.2
are satisfied (or waived in accordance with Section 10.2).




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




     “Commitment” means the commitment of the Lender to make Loans, subject to the
terms and conditions of this Agreement, in an amount not to exceed (i) $3,000,000,000 from
January 2, 2007 through and including March 30, 2007 and (ii) thereafter, $120,000,000, as
such commitment may be reduced from time to time pursuant to Section 2.4.




     “Consolidated Net Worth” means, at any time, the total amount of stockholders’
equity of the Guarantor and its consolidated Subsidiaries at such time determined on a
consolidated basis in accordance with GAAP.




     “Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or undertaking to which such Person is
a party or by which it or any of its property is bound.




     “Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise. “Controlling” and
“Controlled” have meanings correlative thereto.




     “Control Agreement” means the Investment Account Control Agreement between the
Borrower, the Lender and the Securities Intermediary referred to therein in substantially
the form of Exhibit B hereto.




     “Credit Parties” means the collective reference to the Borrower and the
Guarantor.




     “Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become an Event of
Default.




     “Disclosed Matters” means (a) matters disclosed in the Borrower’s public
filings with the Securities and Exchange Commission prior to December 12, 2006 and (b) the
actions, suits, proceedings and environmental matters disclosed in Schedule 3.6.




     “dollars” or “$” refers to lawful money of the United States of
America.




     “Effective Date” means the date on which the conditions specified in Section
4.1 are satisfied (or waived in accordance with Section 10.2).




     “Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated
or entered into by any Governmental Authority, relating in any way to the









 



5



environment, preservation or reclamation of natural resources, to the management,
release or threatened release of any Hazardous Material or to health and safety matters.




     “Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines, penalties
or indemnities), of any Credit Party or any Subsidiary directly or indirectly resulting from
or based upon (a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to
any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials
into the environment or (e) any contract, agreement or other consensual arrangement pursuant
to which liability is assumed or imposed with respect to any of the foregoing.




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




     “ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under Section 414(b)
or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the
Code, is treated as a single employer under Section 414 of the Code.




     “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an event for
which the 30-day notice period is waived); (b) the existence with respect to any Plan of an
“accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by any Credit Party or any of their ERISA Affiliates
of any liability under Title IV of ERISA with respect to the termination of any Plan; (e)
the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a plan administrator
of any notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by any Credit Party or any of their ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from any Credit Party or any ERISA
Affiliate of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.




     “Eurodollar”, when used in reference to any Loan, means that such Loan is
bearing interest at a rate determined by reference to the LIBO Rate.




     “Events of Default” has the meaning assigned to such term in Article VIII.




     “Excluded Taxes” means, with respect to the Lender or any payment to be made by
or on account of any obligation of the Borrower hereunder, (a) income or franchise









 



6



taxes imposed on (or measured by) its net income by the United States of America, or by
the jurisdiction under the laws of which the Lender is organized or in which its
principal office is located or in which its applicable lending office is located and (b) any
branch profits taxes imposed by the United States of America or any similar tax imposed by
any other jurisdiction in which the Borrower is located.




     “Federal Funds Effective Rate” means for each day, the rate per annum which is
the average of the rates on the offered side of the Federal funds market quoted by three
interbank Federal funds brokers, selected by the Lender, at approximately 2:00 p.m., New
York City time, on such day for dollar deposits in immediately available funds, in an amount
comparable to the outstanding principal amount of the Loans, as determined by the Lender and
rounded upwards, if necessary, to the nearest 1/100 of 1%.




     “Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower or the Guarantor, as the context may
require.




     “GAAP” means generally accepted accounting principles in the United States of
America.




     “Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state, provincial or local,
and any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or administrative
powers or functions of or pertaining to government.




     “Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of
the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation or (d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation; provided that the term
Guarantee shall not include endorsements for collection or deposit in the ordinary course of
business.




     “Guarantee Obligation” means, as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other
obligations (the “primary obligations”) of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, including any obligation of
such Person, whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii) to maintain working
capital or









 



7



equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of business.
The amount of any Guarantee Obligation shall be deemed to be an amount equal as of any date
of determination to the stated determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made (unless such Guarantee Obligation shall be expressly
limited to a lesser amount, in which case such lesser amount shall apply) or, if not stated
or determinable, the amount as of any date of determination of the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good faith.




     “Guarantor” means H&R Block, Inc., a Missouri corporation.




     “Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including petroleum or
petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls,
radon gas, infectious or medical wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law.




     “Hedging Agreement” means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging arrangement.




     “HSBC RAL” means “HSBC RAL” as such term is defined in the Appendix of Defined
Terms and Rules of Construction attached as Appendix A to Retail Settlement Products
Distribution Agreement.




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




     “HSBC TFS Letter” means a letter agreement between the Borrower, HSBC TFS and
the Lender in substantially the form of Exhibit C hereto.




     “Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid, (d) all
obligations of such Person under conditional sale or other title retention agreements
relating to property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current accounts payable
and accrued expenses incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on









 



8



property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit and letters of
guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances and (k) for purposes of Section 6.2 only, all preferred stock issued by
a Subsidiary of such Person. The Indebtedness of any Person shall include the Indebtedness
of any other entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person’s ownership interest in
or other relationship with such entity, except to the extent the terms of such Indebtedness
provide that such Person is not liable therefor. Indebtedness of a Person shall not include
obligations with respect to funds held by such Person in custody for, or for the benefit of,
third parties which are to be paid at the direction of such third parties (and are not used
for any other purpose).




     “Indemnified Taxes” means Taxes other than Excluded Taxes.




     “Indemnitee” has the meaning assigned to such term in Section 10.3(b).




     “Indirect RAL Participation Transaction” means any transaction by the Guarantor
or any Subsidiary involving (a) an investment in a partnership, limited partnership, limited
liability company, limited liability partnership, business trust or other pass-through
entity which is partially owned by the Guarantor or any Subsidiary, (b) the purchase by such
pass-through entity of refund anticipation loans or participation interests in refund
anticipation loans (and/or related rights and interests), and (c) the distribution of cash
flow received by such pass-through entity with respect to such refund anticipation loans or
participation interests therein to the owners of such pass-through entity.




     “Information” has the meaning assigned to such term in Section 10.12.




     “LIBO Rate” means [***] .




     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b)
the interest of a vendor or a lessor under any conditional sale agreement, capital lease or
title retention agreement (or any financing lease having substantially the same economic
effect as any of the foregoing) relating to such asset and (c) in the case of securities,
any purchase option, call or similar right of a third party with respect to such securities;
provided that clause (c) above shall be deemed not to include stock options granted
by any Person to its directors, officers or employees with respect to the Capital Stock of
such Person.




     “Loan Documents” means this Agreement, the Security Agreement, the Control
Agreement, the HSBC TFS Letter and the Notes, if any.




     “Loans” means the loans made by the Lender to the Borrower pursuant to this
Agreement.









 



9



     “Margin” means [***] % per annum.




     “Margin Stock” means any “margin stock” as defined in Regulation U of the
Board.




     “Material Adverse Effect” means a material adverse effect on (a) the business,
assets, property or condition (financial or otherwise) of the Guarantor and the Subsidiaries
taken as a whole, (b) the ability of any Credit Party to perform any of its obligations
under this Agreement or (c) the rights of or benefits available to the Lenders under this
Agreement.




     “Material Indebtedness” means Indebtedness (other than the Loans), or
obligations in respect of one or more Hedging Agreements, of any one or more of the Credit
Parties and any Subsidiaries in an aggregate principal amount exceeding $40,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the obligations of
any Credit Party or any Subsidiary in respect of any Hedging Agreement at any time shall be
the aggregate amount (giving effect to any netting agreements) that the Credit Party or such
Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.




     “Material Proceeding” means any suit, action or proceeding brought by the
Lender against the Borrower or the Guarantor or both to collect payment of Obligations in
the aggregate amount of $300,000,000 or more which are past due.




     “Material Subsidiary” means any Subsidiary of any Credit Party, other than
OOMC, the aggregate assets or revenues of which, as of the last day of the most recently
ended fiscal quarter for which the Borrower has delivered financial statements pursuant to
Section 5.1(a) or (b), when aggregated with the assets or revenues of all other Subsidiaries
with respect to which the actions contemplated by Section 6.4 are taken, are greater than 5%
of the total assets or total revenues, as applicable, of the Guarantor and its consolidated
Subsidiaries, in each case as determined in accordance with GAAP.




     “Maximum Rate” has the meaning assigned to such term in Section 10.13.




     “Moody’s” means Moody’s Investors Service, Inc.




     “Multiemployer Plan” means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.




     “Notes” means the collective reference to any promissory note evidencing Loans.




     “Obligations” means, collectively, the unpaid principal of and interest on the
Loans and all other obligations and liabilities of the Borrower (including interest accruing
at the then applicable rate provided herein after the maturity of the Loans and interest
accruing at the then applicable rate provided herein after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like proceeding,
relating to the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) to the Lender, whether direct or indirect, absolute or









 



10



contingent, due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, this Agreement, the Security Agreement, the
Control Agreement, the HSBC TFS Letter, any Note or any other document made, delivered or
given in connection herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including all fees and
disbursements of counsel to the Lender that are required to be paid by the Borrower pursuant
to the terms of any of the foregoing agreements).




     “OOMC” means Option One Mortgage Corporation, a California corporation, and all
of its subsidiaries.




     “Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise with respect to,
this Agreement.




     “Participant” has the meaning assigned to such term in Section 10.4(c).




     “Participation Agreement” means the HSBC Refund Anticipation Loan Participation
Agreement, dated as of September 23, 2005, as amended from time to time, and any
restatement, extension, renewal and replacement thereof, by and among Household Tax Masters
Acquisition Corporation, the Borrower, HSBC Bank USA, National Association, HSBC Taxpayer
Financial Services, Inc. and HSBC Trust Company (Delaware), National Association.




     “Participation Interest” means a “Participation Interest” as defined in the
Participation Agreement.




     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined
in ERISA and any successor entity performing similar functions.




     “Permitted Encumbrances” means:




     (a) judgment Liens in respect of judgments not constituting an Event of Default under
clause (k) of Article VIII;




     (b) Liens imposed by law for taxes that are not yet due or are being contested in
compliance with Section 5.4;




     (c) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like
Liens imposed by law, arising in the ordinary course of business and securing obligations
that are not overdue by more than 30 days or are being contested in compliance with Section
5.4;




     (d) pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or regulations;









 



11



     (e) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business; and




     (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the affected property
or interfere with the ordinary conduct of business of the Credit Parties or any Subsidiary;




provided that the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness.




     “Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority or other
entity.




     “Plan” means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section
302 of ERISA, and in respect of which any Credit Party or any ERISA Affiliate is (or, if
such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer”
as defined in Section 3(5) of ERISA.




     “Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A., as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective from and including the date
such change is publicly announced as being effective.




     “Proceeding” means any suit, action or proceeding described in clauses (1)
through (4) of Section 10.15.




     “Purchase Price” means “Purchase Price” as such term is defined in the Appendix
of Defined Terms and Rules of Construction attached as Appendix A to Retail Settlement
Products Distribution Agreement.




     “RAL Receivables Amount” means, at any time, the difference (but not less
than zero) between (i) the aggregate amount of funds received by the Guarantor, any
Subsidiary or any qualified or unqualified special purpose entity created by any Subsidiary
with respect to the transfer of refund anticipation loans, or participation interests in
refund anticipation loans (and/or related rights and interests), to any third party in any
RAL Receivables Transaction, at or prior to such time, minus (ii) the aggregate
amount received by all such third parties with respect to the transferred refund
anticipation loans, or participation interests in refund anticipation loans (and/or related
rights and interests), in all RAL Receivables Transactions, at or prior to such time,
excluding from the amounts received by such third parties, the aggregate amount of
any origination, set up, structuring or similar fees, all implicit or explicit financing
expenses and all indemnification and reimbursement payments paid to such any third party in
connection with any RAL Receivables Transaction.









 



12



     “RAL Receivables Transaction” means any securitization, on — or off — balance
sheet financing or sale transaction, involving refund anticipation loans, or participation
interests in refund anticipation loans (and/or related rights and interests), that were
acquired by the Guarantor, any Subsidiary or any qualified or unqualified special purpose
entity created by any Subsidiary.




     “Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and advisors of such
Person and such Person’s Affiliates.




     “Restricted Margin Stock” means all Margin Stock owned by the Guarantor and its
Subsidiaries to the extent the value of such Margin Stock does not exceed 25% of the value
of all assets of the Guarantor and its Subsidiaries (determined on a consolidated basis)
that are subject to the provisions of Section 6.3 and 6.4.




     “Retail Settlement Products Distribution Agreement” means the HSBC Retail
Settlement Products Distribution Agreement, dated as of September 23, 2005, as amended from
time to time, and any restatement, extension, renewal and replacement thereof, by and among
the parties thereto, including, the Lender and the Guarantor.




     “Revolving Credit Exposure” means with respect to the Lender at any time, the
outstanding principal amount of the Lender’s Loans.




     “Revolving Termination Date” means the earlier of (i) June 30, 2007 and (ii)
the first day after April 15, 2007 on which the aggregate outstanding amount of the
Participation Interests purchased by the Borrower in HSBC RALs under the Participation
Agreement which have been financed by the making of Loans is less than $50,000,000.




     “RSM” means RSM McGladrey, Inc., a Delaware corporation.




     “S&P” means Standard & Poor’s Ratings Services.




     “Security Agreement” means a Security Agreement between the Borrower and the
Lender in substantially the form of Exhibit A hereto.




     “Servicing Agreement” means the HSBC Settlement Products Servicing Agreement
dated as of September 23, 2005 , as amended from time to time, and any restatement,
extension, renewal and replacement thereof, among HSBC Bank USA, National Association, HSBC
TFS, Household Tax Masters Acquisition Corporation, and the Borrower.




     “Short-Term Debt” means, at any time, the aggregate amount of Indebtedness of
the Guarantor and its Subsidiaries at such time (excluding seasonal Indebtedness of H&R
Block Canada, Inc.) having a final maturity less than one year after such time, determined
on a consolidated basis in accordance with GAAP, minus (a) to the extent otherwise included
therein, Indebtedness outstanding at such time (i) under mortgage facilities secured by
mortgages and related assets, (ii) incurred to fund servicing obligations required as part
of servicing mortgage backed securities in the ordinary course of









 



13



business, (iii) incurred and secured by broker-dealer Subsidiaries in the ordinary
course of business and (iv) deposits and other customary banking related liabilities
incurred by banking Subsidiaries in the ordinary course of business, (b) the excess, if any,
of (i) the aggregate amount of cash and Cash Equivalents held at such time in accounts of
the Guarantor and its Subsidiaries (other than broker-dealer Subsidiaries and banking
Subsidiaries) to the extent freely transferable to the Credit Parties and capable of being
applied to the Obligations without any contractual, legal or tax consequences over (ii)
$15,000,000 and (c) to the extent otherwise included therein, the current portion of long
term debt.




     “Subsidiary” means, with respect to any Person (the “parent”) at any
date, any corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the parent’s
consolidated financial statements if such financial statements were prepared in accordance
with GAAP as of such date, as well as any other corporation, limited liability company,
partnership, association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership interests
are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more Subsidiaries of the parent or by the parent and one
or more Subsidiaries of the parent. Notwithstanding the foregoing, no entity shall be
considered a “Subsidiary” solely as a result of the effect and application of FASB
Interpretation No. 46R (Consolidation of Variable Interest Entities). Unless the context
shall otherwise require, all references to a “Subsidiary” or to “Subsidiaries” in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Guarantor, including the
Borrower and the Subsidiaries of the Borrower.




     “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.




     “Total Facility Commitments” means the sum of the total “Commitments” under and
as defined in the Bank Revolvers.




     “Total Facility Loan Outstandings” has the meaning assigned to such term in
Section 6.2.




     “Transactions” means the execution, delivery and performance by the Credit
Parties of the Loan Documents, the borrowing of Loans, the use of the proceeds thereof, and
the granting of the security provided for in the Security Agreement.




     “Unrestricted Margin Stock” means all Margin Stock owned by the Guarantor and
its Subsidiaries other than Restricted Margin Stock.




     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in
Part I of Subtitle E of Title IV of ERISA.









 



14


          SECTION 1.2. Terms Generally. The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”. Unless the context
requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.




          SECTION 1.3. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of
an accounting or financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided that, if the Borrower notifies the Lender that the Borrower requests
an amendment to any provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision (or if the Lender
notifies the Borrower that the Lender requests an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect
and applied immediately before such change shall have become effective until such notice shall
have been withdrawn or such provision amended in accordance herewith.




ARTICLE II




THE CREDITS




          SECTION 2.1. Commitment. Subject to the terms and conditions set forth herein (including the
proviso at the end of Section 6.2), the Lender agrees to make revolving loans (“Loans”) to
the Borrower from time to time during the Availability Period in an aggregate principal amount that
will not result in the Lender’s Revolving Credit Exposure exceeding the Lender’s Commitment as then
in effect. Within the foregoing limits and subject to the terms and conditions set forth herein,
the Borrower may borrow, prepay and reborrow Loans.




          SECTION 2.2. Loans. Subject to Section 2.8, all Loans shall be comprised entirely of Eurodollar
Loans in accordance herewith. The Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.







 



15





          SECTION 2.3. Funding of Loans. As provided in the HSBC TFS Letter, HSBC TFS shall notify the
Lender of the aggregate amount of the Purchase Price for the Participation Interests to be
purchased by the Borrower under the Participation Agreement on any Business Day at the same time as
HSBC TFS notifies the Borrower of such amount, but in any event not later than 9:30 a.m. New York
City time on such Business Day. Subject to the terms and conditions of this Agreement, the Lender
shall make a Loan in the amount so notified in respect of each Business Day by wire transfer of
immediately available funds to or as instructed by HSBC TFS by 4:30 p.m., New York City time, on
such Business Day; provided, that if the Borrower shall notify the Lender and HSBC TFS not later
than one hour after the notification by HSBC TFS referred to in the preceding sentence that the
Borrower does not wish to borrow all or some of the amount so notified by HSBC TFS, then the Lender
shall make a Loan in such lesser amount, if any, specified in such notice of the Borrower. The
Borrower hereby irrevocably (i) authorizes and instructs the Lender to make Loans by transfer of
Loan proceeds directly to or as instructed by HSBC TFS as provided in the preceding sentence and
(ii) acknowledges and agrees that Loans will not be disbursed in any other manner or for any other
purpose than to fund the purchase by the Borrower of Participation Interests in HSBC RALs under the
Participation Agreement. Notices under this Section 2.3 shall be made by telephone and promptly
confirmed by fax. Absent manifest error, the Lender shall be entitled to rely without further
inquiry on notices and information received from HSBC TFS or the Borrower as contemplated in this
Section 2.3




          SECTION 2.4. Termination and Reduction of Commitment. (a) Unless previously terminated, the
Commitment shall terminate on the Revolving Termination Date.




          (b) The Borrower may at any time terminate, or from time to time reduce, the Commitment;
provided that (i) each reduction of the Commitment shall be in an amount that is an
integral multiple of $1,000,000 and not less than $25,000,000 and (ii) the Borrower shall not
terminate or reduce the Commitment if, after giving effect to any concurrent prepayment of the
Loans in accordance with Section 2.6, the Revolving Credit Exposure would exceed the Commitment.




          (c) The Borrower shall notify the Lender of any election to terminate or reduce the Commitment
under paragraph (b) of this Section at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date thereof. Each
notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided
that a notice of termination of the Commitment delivered by the Borrower may state that such notice
is conditioned upon the effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower (by notice to the Lender) on or prior to the specified
effective date if such condition is not satisfied. Any termination or reduction of the
Commitment shall be permanent.




          SECTION 2.5. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally
promises to pay to the Lender (i) the unpaid principal amount of the Loans on March 31, 2007 to
the extent that such principal amount exceeds the Commitment on such date and (ii) the then unpaid
principal amount of each Loan on the Revolving Termination Date.








 





16




          (b) The Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to the Lender resulting from each Loan made by
the Lender, including the amounts of principal and interest payable and paid to the Lender from
time to time hereunder.




          (c) The entries made in the account maintained pursuant to paragraph (b) of this Section shall
be prima facie evidence of the existence and amounts of the obligations recorded
therein; provided that the failure of the Lender to maintain such account or any error
therein shall not in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.




          (d) The Lender may request that Loans made by it be evidenced by a promissory note. In such
event, the Borrower shall prepare, execute and deliver to the Lender a promissory note payable to
the order of the Lender (or, if requested by the Lender, to the Lender and its assigns) and in a
form approved by the Lender. Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by
one or more promissory notes in such form payable to the order of the payee named therein. In
addition, upon receipt of an affidavit of an officer of the Lender as to the loss, theft,
destruction or mutilation of the promissory note, the Borrower will issue, in lieu thereof, a
replacement promissory note in the same principal amount thereof and otherwise of like tenor.




          SECTION 2.6. Prepayment of Loans. (a) The Borrower (i) shall have the right at any time and from
time to time voluntarily to prepay the Loans in whole or in part without premium or penalty,
subject to prior notice in accordance with paragraph (b) of this Section, and (ii) shall prepay the
Loans from time to time in whole or in part without premium or penalty in accordance with paragraph
(c) of this Section.




          (b) The Borrower shall notify the Lender by telephone (confirmed by telecopy) of any
voluntary prepayment of Loans under Section 2.6(a)(i), not later than 12:00 noon, New York City
time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of Loans to be prepaid; provided that, if a notice
of prepayment is given in connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.4, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.4.




          (c) The Borrower shall prepay the principal of the Loans in an amount equal to (i) 97% of the
amount of all payments constituting repayment of HSBC RALs in which the Borrower has purchased a
Participation Interest that has been financed by the Lender which are remitted to the Borrower by
HSBC TFS under Section 3.4(b)(ii) of the Servicing Agreement, and (ii) 97% of the amount of all
repurchases of Participation Interests by HSBC TFS under Section 6 of the Participation Agreement
as to Participation Interests that have been financed by the Lender. In the HSBC TFS Letter, the
Borrower will irrevocably authorize and instruct (A) HSBC TFS, as Servicer under the Servicing
Agreement, to pay 97% of all amounts from time to time to be remitted to the Borrower by the
Servicer under Section 3.4(b)(ii) of the Servicing
Agreement in respect of Participation Interests financed by the Lender directly to the Lender
for application to the prepayment of the Loans under this Section 2.6(c) and (B) HSBC TFS to pay










 



17



97% of all amounts otherwise payable to the Borrower in respect of the repurchase under Section 6
of the Participation Agreement of Participation Interests in HSBC RALs that have been financed by
the Lender directly to the Lender for application to the prepayment of the Loans under this Section
2.6(c). The Lender shall be entitled to rely without further inquiry on notices and information
received from HSBC TFS as contemplated in this Section 2.6(c). The Lender shall credit payments
received from HSBC TFS under this Section 2.6(c) to prepayment of the principal of the Loans on the
date of receipt.




          SECTION 2.7. Interest. (a) The Loans shall bear interest for each day at a rate per annum equal
to [***] .




          (b) Notwithstanding the foregoing, if any principal of or interest on any Loan or any other
amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon
acceleration or otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to 3% plus the rate of interest otherwise applicable to the
Loans hereunder.




          (c) Accrued interest on each Loan shall be payable monthly in arrears on the fifth Business
Day of the following month and on the Revolving Termination Date; provided that interest
accrued pursuant to paragraph (b) of this Section shall be payable on demand. On the second
Business Day of such following month, the Lender shall deliver to the Borrower and HSBC TFS by
e-mail an invoice for the amount of accrued interest on the Loans for the preceding month, together
with a schedule in reasonable detail showing how such amount was calculated.




          (d) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Prime Rate under Section 2.8 shall be computed on the basis
of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last day). The LIBO Rate
(and in the case of determinations under Section 2.8, the Federal Funds Effective Rate and the
Prime Rate) shall be determined by the Lender, and such determination shall be conclusive absent
manifest error. The Lender shall as soon as practicable notify the Borrower of the effective date
and the amount of each change in interest rate.




          SECTION 2.8. Alternate Rate of Interest. If at any time:




          (a) the Lender determines (which determination shall be conclusive absent manifest error) that
adequate and reasonable means do not exist for ascertaining the LIBO Rate; or




          (b) the Lender determines that the LIBO Rate will not adequately and fairly reflect the cost
to the Lender of making or maintaining Loans;



then the Lender shall give notice thereof to the Borrower by telephone or telecopy as promptly as
practicable thereafter and, until the Lender notifies the Borrower that the circumstances giving
rise to such notice no longer exist, the Loans shall bear interest at a rate per annum equal to,
for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day
[***] , and (b) the Federal Funds Effective Rate in effect on such day [***] . Any change in the
Prime










 



18



Rate or the Federal Funds Effective Rate shall be effective from and including the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.




          SECTION 2.9. Increased Costs. (a) If any Change in Law shall:





     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, the Lender; or




     (ii) impose on the Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by the Lender;


and the result of any of the foregoing shall be to increase the cost to the Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
increase the cost to the Lender or to reduce the amount of any sum received or receivable by the
Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to the
Lender such additional amount or amounts as will compensate the Lender for such additional costs
incurred or reduction suffered.




          (b) If the Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on the Lender’s capital or on the capital of
the Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by the
Lender to a level below that which the Lender or the Lender’s holding company could have achieved
but for such Change in Law (taking into consideration the Lender’s policies and the policies of the
Lender’s holding company with respect to capital adequacy), then from time to time the Borrower
will pay to the Lender such additional amount or amounts as will compensate the Lender or the
Lender’s holding company for any such reduction suffered.




          (c) A certificate of the Lender setting forth the amount or amounts necessary to compensate
the Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this
Section (together with a statement of the reason for such compensation and a calculation thereof in
reasonable detail) shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay the Lender the amount shown as due on any such certificate within 10
days after receipt thereof.




          (d) Failure or delay on the part of the Lender to demand compensation pursuant to this Section
shall not constitute a waiver of the Lender’s right to demand such compensation; provided
that the Borrower shall not be required to compensate the Lender pursuant to this Section for any
increased costs or reductions incurred more than six months prior
to the date that the Lender notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of the Lender’s intention to claim compensation therefor;
provided, further, that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the six-month period referred to above shall be extended to
include the period of retroactive effect thereof.










 



19




          SECTION 2.10. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower
or the Guarantor hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower or the Guarantor shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the Lender receives an amount
equal to the sum it would have received had no such deductions been made, (ii) the Borrower or the
Guarantor shall make such deductions and (iii) the Borrower or the Guarantor shall pay the full
amount deducted to the relevant Governmental Authority in accordance with applicable law.




          (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority
in accordance with applicable law.




          (c) The Borrower shall indemnify the Lender, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section) paid by the Lender
and any penalties, interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by the Lender shall be conclusive absent manifest error.




          (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Lender the original or a
certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment reasonably satisfactory to
the Lender.




          SECTION 2.11. Payments Generally. (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal or interest, or under Section 2.9 or 2.10, or otherwise) prior to
12:00 noon, New York City time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may, in the discretion
of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the Lender at its account at HSBC
Bank USA, N.A., Buffalo, N.Y., ABA #021001088, Cash Ops W/T, A/C #001842609, or at such other bank
or account as it shall specify from time to time by notice in writing to the Borrower. If any
payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments hereunder shall
be made in dollars. Notwithstanding the foregoing, this Section 2.11 shall not apply to payments
by HSBC TFS as contemplated by Section 2.6(c).




          (b) If at any time insufficient funds are received by and available to the Lender to pay fully
all amounts of principal, interest and any other amounts then due hereunder,







 



20




such funds shall be
applied (i) first, to pay interest then due hereunder,
(ii) second, to pay principal then due hereunder, and (iii) third, any other amounts due and owing hereunder.




          SECTION 2.12. Mitigation Obligations. If the Lender requests compensation under Section 2.9, or if
the Borrower is required to pay any additional amount to the Lender or any Governmental Authority
for the account of the Lender pursuant to Section 2.10, then the Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches or affiliates, if,
in the judgment of the Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.9 or 2.10, as the case may be, in the future and (ii) would not
subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous
to the Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by the
Lender in connection with any such designation or assignment.




ARTICLE III




REPRESENTATIONS AND WARRANTIES




          Each of the Credit Parties represents and warrants to the Lender that:




          SECTION 3.1. Organization; Powers. Each of the Credit Parties and the Subsidiaries is duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
organization, has the power and authority to carry on its business as now conducted and, except
where the failure to be so, individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect, is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required.




          SECTION 3.2. Authorization; Enforceability. The Transactions are within each Credit Party’s
corporate powers and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by each Credit Party and
constitutes a legal, valid and binding obligation of each Credit Party, enforceable in accordance
with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.




          SECTION 3.3. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent
or approval of, registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect, (b) will not violate
any applicable law or regulation or the charter, by-laws or other organizational documents of any
Credit Party or any Subsidiary or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, material agreement or other instrument (other than those
to be terminated on or prior to the Closing Date) binding upon any Credit Party or any Subsidiary
or their assets, or give rise to a right thereunder










 



21



to require any payment to be made by any Credit
Party or any Subsidiary, and (d) except as provided in the Loan Documents, will not result in the
creation or imposition of any Lien on any asset of any Credit Party or any Subsidiary.




          SECTION 3.4. Financial Condition; No Material Adverse Change. (a) Each Credit Party has
heretofore furnished to the Lender consolidated balance sheets and statements of income and cash
flows (and, in the case of the Guarantor, of stockholders’ equity) (i) as of and for the fiscal
year ended April 30, 2006 (A) reported on by KPMG LLP, an independent registered public accounting
firm, in respect of the financial statements of the Guarantor, and (B) certified by its chief
financial officer, in respect of the financial statements of the Borrower, and (ii) as of and for
the fiscal quarter and the portion of the fiscal year ended October 31, 2006. Such financial
statements present fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its consolidated Subsidiaries and of the Guarantor
and its consolidated Subsidiaries as of such date and for such period in accordance with GAAP.
Except as set forth on Schedule 3.4(a), neither the Guarantor nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or
unusual forward or long-term commitment, including any interest rate or foreign currency swap or
exchange transaction not in the ordinary course of business, which is not reflected in the
foregoing statements or in the notes thereto. During the period from April 30, 2006 to and
including the date hereof, and except as disclosed in filings made by the Guarantor with the U.S.
Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, there has been no sale, transfer or other disposition
by the Guarantor or any of its consolidated Subsidiaries of any material part of its business or
property other than in the ordinary course of business and no purchase or other acquisition of any
business or property (including any Capital Stock of any other Person), material in relation to the
consolidated financial condition of the Guarantor and its consolidated Subsidiaries at April 30,
2006.




          (b) From April 30, 2006 through the Effective Date, there has been no material adverse change
in the business, assets, property or condition (financial or otherwise) of the Guarantor and its
Subsidiaries, taken as a whole.




          SECTION 3.5. Properties. (a) Each of the Credit Parties and the Subsidiaries has good title to,
or valid leasehold interests in, all its real and personal property material to its business,
except for minor defects in title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.




          (b) Each of the Credit Parties and the Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Credit Parties and the Subsidiaries does not infringe upon the
rights of any other Person, except for any such infringements that, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse Effect.




          SECTION 3.6. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings
by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any
Credit Party, threatened against or affecting any Credit Party or any










 



22



Subsidiary that (i) have not
been disclosed in the Disclosed Matters and as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, would reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect or (ii) challenge or would reasonably
be expected to affect the legality, validity or enforceability of this Agreement.




          (b) Except for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, would not reasonably be expected to result in a Material Adverse
Effect, neither of the Credit Parties nor any Subsidiary (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or (iv) knows of any
basis for any Environmental Liability.




          SECTION 3.7.  Compliance with Laws and Agreements. Each of the Credit Parties and the Subsidiaries
is in compliance with all laws, regulations and orders of any Governmental Authority applicable to
it or its property and all indentures, agreements and other instruments binding upon it or its
property, except where the failure to be so, individually or in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect.




          SECTION 3.8. Investment Company Status. Neither of the Credit Parties nor any of the Subsidiaries
is an “investment company” as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended.




          SECTION 3.9. Taxes. Each of the Credit Parties and the Subsidiaries has timely filed or caused to
be filed all Tax returns and reports required to have been filed and has paid or caused to be paid
all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Guarantor, the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to
do so would not reasonably be expected to result in a Material Adverse Effect.




          SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events for which liability is reasonably expected to
occur, would reasonably be expected to result in a Material Adverse Effect. The present value of
all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $25,000,000 the fair market value
of the assets of such Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $25,000,000 the fair market value of the assets of all such
underfunded Plans.




          SECTION 3.11. Disclosure. None of the reports, financial statements, certificates or other
information furnished by or on behalf of the Credit Parties to the Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or










 



23



omits to state any material
fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial information,
the Credit Parties represent only that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time.




          SECTION 3.12. Federal Regulations. No part of the proceeds of any Loans will be used for
“purchasing” or “carrying” any “margin stock” (within the respective meanings of each of the quoted
terms under Regulation U of the Board as now and from time to time hereafter in effect) in a manner
or in circumstances that would constitute or result in non-compliance by any Credit Party or the
Lender with the provisions of Regulations U, T or X of the Board. If requested by the Lender, the
Borrower will furnish to the Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U.




          SECTION 3.13. Subsidiaries. As of the date hereof, the Guarantor has only the Subsidiaries set
forth on Schedule 3.13.




          SECTION 3.14. Insurance. Each Credit Party and each Subsidiary of each Credit Party maintains
(pursuant to a self-insurance program and/or with financially sound and reputable insurers)
insurance with respect to its properties and business and against at least such liabilities,
casualties and contingencies and in at least such types and amounts as is customary in the case of
companies engaged in the same or a similar business or having similar properties similarly
situated.




ARTICLE IV




CONDITIONS




          SECTION 4.1. Effective Date. Except as otherwise provided in Sections 4.2 and 4.3, this Agreement
shall become effective on the date on which each of the following conditions is satisfied (or
waived in accordance with Section 10.2):




          (a) The Lender (or its counsel) shall have received from each party hereto a counterpart of
this Agreement signed on behalf of such party.




          SECTION 4.2. Closing Date. The obligations of the Lender to make Loans hereunder shall not become
effective until the date on which each of the following conditions is satisfied (or waived in
accordance with Section 10.2):




          (a) The Effective Date shall have occurred.




          (b) The Lender shall have received reasonably satisfactory written opinion (addressed to the
Lender and dated the Closing Date) of Stinson Morrison Hecker LLP, special counsel for the Credit
Parties, substantially in the form of Exhibit D hereto, and covering such other matters relating to
the Credit Parties, the Loan Documents or the Transactions as the Lender shall reasonably request.
The Credit Parties hereby request such counsel to deliver such opinion.










 



24




          (c) The Lender shall have received such documents and certificates as the Lender or its
counsel may reasonably request relating to the organization, existence and good standing of the
Credit Parties, the authorization of the Transactions and any other legal matters relating to the
Credit Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to
the Lender and its counsel.




          (d) The Lender shall have received a certificate, dated the Closing Date and signed by the
President, a Vice President or a Financial Officer of each Credit Party, confirming compliance with
the conditions set forth in paragraphs (a) and (b) of Section 4.3.




          (e) All governmental and material third party approvals necessary in connection with the
execution, delivery and performance of this Agreement, the Security Agreement, the Control
Agreement and the HSBC TFS Letter shall have been obtained and be in full force and effect.




          (f) The Lender shall have received a counterpart of the Security Agreement, duly executed
and delivered by the Borrower, and a counterpart of the HSBC TFS Letter, duly executed and
delivered by the parties thereto; and all filings and other actions necessary or appropriate to
perfect the security interest created by the Security Agreement shall have been made or taken.




          (g) The Lender shall have received the results of searches of Uniform
Commercial Code filings in such jurisdictions as it shall deem appropriate and such searches shall
not reveal any filing that remains in effect and that describes any of the “Collateral” referred to
in the Security Agreement.







          (h) The Borrower shall have invested $50,000,000 in the HSBC Investor Money Market Fund
managed by HSBC Investments (USA), Inc. and the Lender shall have received a counterpart of the
Control Agreement with respect to that investment, duly executed and delivered by the parties
thereto.



The Lender shall notify the Borrower of the Closing Date, and such notice shall be conclusive and
binding. Notwithstanding the foregoing, the obligation of the Lender to make Loans hereunder
shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant
to Section 10.2) at or prior to the Closing Date.




          SECTION 4.3. Each Loan. The obligation of the Lender to make each Loan is subject to the
satisfaction of the following conditions:




          (a) The representations and warranties of the Credit Parties set forth in Article III of this
Agreement (other than the representations and warranties set forth in subsections 3.4(b), 3.6(a)(i)
and 3.6(b)) shall be true and correct in all material respects on and as of the date of such Loan
(except to the extent related to a specific earlier date).




          (b) At the time of and immediately after giving effect to such Loan, no Event of Default shall
have occurred and be continuing.










 



25



Each Loan shall be deemed to constitute a representation and warranty by each of the Credit Parties
on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.




ARTICLE V




AFFIRMATIVE COVENANTS




          Until the Commitment has expired or been terminated and the principal of and interest on each
Loan shall have been paid in full, each of the Credit Parties covenants and agrees with the Lender
that:




          SECTION 5.1. Financial Statements and Other Information. The Borrower will furnish to the Lender:




          (a) within 90 days after the end of each fiscal year of the Guarantor, an audited consolidated
balance sheet and related statements of operations, stockholders’ equity and cash flows of the
Guarantor and its consolidated Subsidiaries as of the end of and for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP
or another independent registered public accounting firm of recognized national standing (without a
“going concern” or like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial statements present fairly
in all material respects the financial condition and results of operations of the Guarantor and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;




          (b) (i) in the case of the Guarantor, within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Guarantor and (ii) in the case of the Borrower, within
90 days after the end of each fiscal year of the Borrower, consolidated balance sheets and related
statements of operations and cash flows of the Borrower and the Guarantor and their consolidated
Subsidiaries, and the consolidated statement of stockholders’ equity of the Guarantor, as of the
end of and for such fiscal quarter (in the case of the Guarantor) and the then elapsed portion of
the fiscal year, setting forth in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal
year, all certified by a Financial Officer of the Borrower and the Guarantor as presenting fairly
in all material respects the financial condition and results of operations of the Borrower and the
Guarantor and their consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;




          (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a
certificate of a Financial Officer of the Borrower and the Guarantor (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 6.1 and (iii) stating whether any change in GAAP
or in the application thereof has occurred since the date of the
audited financial










 



26



statements
referred to in Section 3.4 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;




          (d) promptly after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials (other than (i) statements of ownership such as Forms
3, 4 and 5 and Schedule 13G, (ii) routine filings relating to employee benefits, such as Forms S-8
and 11-K, and (iii) routine filings by (A) HRB Financial Corporation and its Subsidiaries,
including H&R Block Financial Advisors, Inc., (B) RSM McGladrey, Inc. and its Subsidiaries,
including Birchtree Financial Services, Inc., (C) RSM Equico, Inc. and its Subsidiaries, including
RSM Equico Capital Markets, LLC, (D) Option One Mortgage Corporation, (E) H&R Block Canada, Inc.
and (F) H&R Block Limited) filed by any Credit Party or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national
securities exchange, or distributed by any Credit Party to its shareholders generally, as the
case may be;




          (e) a copy of any notice given by the Borrower under Section 4.1(b), Section 4.4(c) or Section
4.8 of the Participation Agreement, such copy to be provided at the same time as such notice is
given under the Participation Agreement; and




          (f) promptly following any request therefor, such other information regarding the operations,
business affairs and financial condition of any Credit Party or any Subsidiary, or compliance with
the terms of this Agreement, as the Lender may reasonably request.




          SECTION 5.2. Notices of Material Events. The Borrower will furnish to the Lender prompt written
notice of the following:




          (a) the occurrence of any Default;




          (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or affecting any Credit Party or any Affiliate thereof that is
reasonably likely to be adversely determined and, if so determined, would reasonably be expected to
result in a Material Adverse Effect;




          (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, would reasonably be expected to result in liability of the Borrower, the Guarantor
or any Subsidiary in an aggregate amount exceeding $25,000,000; and




          (d) any other development that results in, or would reasonably be expected to result in, a
Material Adverse Effect.



Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer
or other executive officer of the Borrower and the Guarantor setting forth the details of the event
or development requiring such notice and any action taken or proposed to be taken with respect
thereto.




          SECTION 5.3. Existence; Conduct of Business. Each Credit Party will, and will cause each of the
Subsidiaries to, do or cause to be done all things necessary to preserve, renew










 



27



and keep in full
force and effect its legal existence and the rights, licenses, permits, privileges and franchises
material to the conduct of its business; provided that the foregoing shall not prohibit any
merger, consolidation, liquidation, disposition or dissolution permitted under Section 6.4.




          SECTION 5.4. Payment of Taxes. Each Credit Party will, and will cause each of the Subsidiaries to,
pay its Tax liabilities that, if not paid, would reasonably be expected to have a Material Adverse
Effect before the same shall become delinquent, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Credit Party or such
Subsidiary has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (c) the failure to make payment pending such contest would not reasonably be expected
to result in a Material Adverse Effect.




          SECTION 5.5. Maintenance of Properties; Insurance. Each Credit Party will, and will cause each of
the Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted, and (b) maintain (pursuant to a
self-insurance program and/or with financially sound and reputable insurers) insurance in such
amounts and against such risks as is customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations.




          SECTION 5.6. Books and Records; Inspection Rights. Each Credit Party will, and will cause each of
the Subsidiaries to, keep proper books of record and account in which full, true and correct
entries are made of all dealings and transactions in relation to this Agreement and the
transactions contemplated hereby. Each Credit Party will, and will cause each of the Subsidiaries
to, permit any representatives designated by the Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested; provided that so long as no Event of
Default exists, each Credit Party and each Subsidiary shall have the right to be present and
participate in any discussions with its independent accountants. Nothing in this Section 5.6 shall
permit the Lender to examine or otherwise have access to the tax returns or other confidential
information of any customer of either Credit Party or any of their respective Subsidiaries.




          SECTION 5.7. Compliance with Laws. Each Credit Party will, and will cause each of the Subsidiaries
to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to
it or its property, except where the failure to do so, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect.




          SECTION 5.8. Use of Proceeds. The proceeds of the Loans will be used only to purchase
Participation Interests in HSBC RALs pursuant to the Participation Agreement. No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the regulations of the Board, including Regulations U and X.










 



28




ARTICLE VI




NEGATIVE COVENANTS




          Until the Commitment has expired or terminated and the principal of and interest on each Loan
have been paid in full, each of the Credit Parties covenants and agrees with the Lender that:




          SECTION 6.1. Adjusted Net Worth. The Guarantor will not permit Adjusted Net Worth as at the last
day of any fiscal quarter of the Guarantor to be less than $1,000,000,000.




          SECTION 6.2. Indebtedness. The Credit Parties will not, and will not permit any Subsidiary to
create, incur, assume or permit to exist any Indebtedness, except:




          (a) subject to the proviso at the end of this Section 6.2, Indebtedness created under the Bank
Revolvers;




          (b) Indebtedness existing on the date hereof and set forth in Schedule 6.2 and extensions,
renewals and replacements of any such Indebtedness that do not increase the outstanding principal
amount thereof;




          (c) seasonal Indebtedness of H&R Block Canada, Inc., provided that the aggregate
principal amount of all such Indebtedness incurred pursuant to this subsection (c) shall not exceed
250,000,000 Canadian dollars at any time outstanding;




          (d) Indebtedness of the Borrower and the Guarantor, provided that (i) the obligations
of the Credit Parties hereunder shall rank at least pari passu with such
Indebtedness (including with respect to security) and (ii) the aggregate principal amount of all
Indebtedness permitted by this subsection (d) shall not exceed $2,000,000,000 at any time
outstanding;




          (e) subject to the proviso at the end of this Section 6.2, (i) Indebtedness in connection with
commercial paper issued in the United States through the Borrower which is guaranteed by the
Guarantor and (ii) Indebtedness under bank lines of credit or similar facilities;




          (f) Indebtedness in connection with Guarantees of the performance of any Subsidiary’s
obligations under or pursuant to (i) indemnity, fee, daylight overdraft and other similar customary
banking arrangements between such Subsidiary and one or more financial institutions in the ordinary
course of business, (ii) any office lease entered into in the ordinary course of business, and
(iii) any promotional, joint-promotional, cross-promotional, joint marketing, service, equipment or
supply procurement, software license or other similar agreement entered into by such Subsidiary
with one or more vendors, suppliers, retail businesses or other third parties in the ordinary
course of business, including indemnification obligations relating to such Subsidiary’s failure to
perform its obligations under such lease or agreement;




          (g) acquisition-related Indebtedness (either incurred or assumed) and Indebtedness in
connection with the Guarantor’s guarantees of the payment or performance of primary obligations of
Subsidiaries of the Guarantor in connection with acquisitions by such










 



29



Subsidiaries, or Indebtedness
secured by Liens permitted under subsection 6.3(f); provided that, during any fiscal year,
the aggregate outstanding principal amount of all Indebtedness incurred pursuant to this subsection
6.2(g) shall not exceed at any time $325,000,000;




          (h) Indebtedness of any Credit Party to any other Credit Party, of any Credit Party to any
Subsidiary, of any Subsidiary to any Credit Party and of any Subsidiary to any other Subsidiary;
provided that such Indebtedness shall not be prohibited by Section 6.5;




          (i) Indebtedness in connection with repurchase agreements pursuant to which mortgage loans of
a Credit Party or a Subsidiary are sold with the simultaneous agreement to repurchase the mortgage
loans at the same price plus interest at an agreed upon rate; provided that the aggregate
outstanding principal amount of all Indebtedness incurred pursuant to this subsection 6.2(i) shall
not at any time exceed $500,000,000; provided, further, that no agreed upon
repurchase date shall be later than 90 business days after the date of the corresponding repurchase
agreement;




          (j) Indebtedness in connection with Guarantees or Guarantee Obligations which are made, given
or undertaken as representations and warranties, indemnities or assurances of the payment or
performance of primary obligations in connection with securitization transactions or other
transactions permitted hereunder, as to which primary obligations the primary obligor is a Credit
Party, a Subsidiary or a securitization trust or similar securitization vehicle to which a Credit
Party or a Subsidiary sold, directly or indirectly, the relevant mortgage loans;




          (k) Indebtedness of RSM, a Subsidiary of the Guarantor, to McGladrey & Pullen, LLP
(“M&P”) and certain related trusts under (i) that certain Asset Purchase Agreement dated as
of June 28, 1999 among RSM, M&P, the Guarantor and certain other parties signatory thereto (the
“M&P Purchase Agreement”) and (ii) the Retired Partners Agreement and the Loan Agreement
(as such terms are defined in the M&P Purchase Agreement); provided that the aggregate
outstanding principal amount payable in respect of such Indebtedness permitted under this paragraph
(k) shall not exceed $200,000,000 at any time;




          (l) Indebtedness in connection with (i) Capital Lease Obligations in an aggregate outstanding
principal amount not at any time exceeding $50,000,000 (excluding any Capital Lease Obligations
permitted by subsection 6.2(p)), (ii) obligations under existing mortgages in an aggregate
outstanding principal amount not exceeding $12,000,000 at any time, (iii) securities sold and not
yet purchased, provided that the aggregate outstanding principal amount of all Indebtedness
incurred pursuant to this clause (iii) (other than Indebtedness of Subsidiaries which act as
broker-dealers) shall not at any time exceed $15,000,000, (iv) customer deposits in the ordinary
course of business, (v) payables to brokers and dealers in the ordinary course of business and (vi)
reimbursement obligations of broker-dealers relating to letters of credit in favor of a clearing
corporation or Indebtedness of broker-dealers under other credit facilities, provided that
(A) such letters of credit or such other credit facilities are used solely to satisfy margin
deposit requirements and (B) the aggregate outstanding exposure of the Guarantor
and the Subsidiaries under all such letters of credit and all such other credit facilities
shall not exceed $200,000,000 at any time;










 



30




          (m) subject to the proviso at the end of this Section 6.2, Indebtedness incurred in connection
with the Borrower’s Refund Anticipation Loan Program, including any Indirect RAL Participation
Transaction; provided that (i) such Indebtedness is incurred during the period beginning on
January 2 of any year and ending on June 29 of such year, (iii) such Indebtedness is repaid in full
by June 30 of the year in which such Indebtedness is incurred and (iii) the covenants contained in
any agreement relating to such Indebtedness, or guarantee thereof (other than covenants specific to
the Borrower’s Refund Anticipation Loan Program and the operation thereof), are no more restrictive
than the covenants contained in this Agreement;




          (n) subject to the proviso at the end of this Section 6.2, liabilities related to the RAL
Receivables Transactions to the extent consistent with the definition thereof;




          (o) Indebtedness in respect of letters of credit in an aggregate outstanding principal amount
not to exceed $100,000,000;




          (p) Indebtedness in an amount not exceeding $150,000,000 in connection with the acquisition,
development or construction of the Guarantor’s new headquarters;




          (q) deposits and other liabilities incurred by banking Subsidiaries in the ordinary course of
business;




          (r) customary liabilities of broker-dealers incurred by broker-dealer Subsidiaries in the
ordinary course of business;




          (s) Indebtedness issued by a Subsidiary of the Borrower and primarily secured by mortgage
loans sold as contemplated by Section 6.5(c) hereof to such Subsidiary by another Subsidiary of the
Borrower;




          (t) Indebtedness secured by Liens permitted by subsection 6.3(d) or 6.3(e);




          (u) Indebtedness incurred solely to finance businesses described on Schedule 6.4(b) after the
date hereof that neither the Credit Parties nor their respective Subsidiaries are currently engaged
in to any material extent on the date hereof; provided that the aggregate principal amount
of all Indebtedness incurred pursuant to this clause (u) shall not at any time exceed $400,000,000;
and




          (v) other Indebtedness (excluding Indebtedness of the types described in subsections 6.2(a),
6.2(b)(ii), 6.2(e) and 6.2(m)) in an aggregate principal amount not at any time exceeding
$20,000,000;



provided, that the sum of the aggregate outstanding principal amount of all Indebtedness
permitted pursuant to subsections 6.2(a), 6.2(e) and 6.2(m) plus the RAL Receivables Amount
shall not at any time exceed the greater of (x) the Total Facility Commitments then in effect or
(y) the sum of the then outstanding principal amount of the “Loans” under the Bank Revolvers (such
sum, the “Total Facility Loan Outstandings”), except that, during the period from
January
2 of any year through June 30 of such year, such sum may exceed the greater of the Total Facility
Commitments then in effect or the then Total Facility Loan Outstandings by an amount















 




31




up to the total of (A) the aggregate outstanding principal amount of Indebtedness described in Section 6.2(m) and (B) $500,000,000.




          SECTION 6.3. Liens. Each Credit Party will not, and will not permit any Subsidiary to, create, incur, assume or
permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign
or sell any income or revenues (including accounts receivable) or rights in respect of any thereof,
except:




          (a) Permitted Encumbrances;




          (b) (i) any Lien created under or securing a Bank Revolver and (ii) any Lien on any property
or asset of any Credit Party or any Subsidiary existing on the date hereof and set forth in
Schedule 6.3; provided that (i) such Lien shall not apply to any other property or asset of
any Credit Party or any Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;




          (c) any Lien existing on any property or asset prior to the acquisition thereof by any Credit
Party or any Subsidiary or existing on any property or asset of any Person that becomes a
Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary;
provided that (i) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not
apply to any other property or assets of any Credit Party or any Subsidiary and (iii) such Lien
shall secure only those obligations which it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;




          (d) Liens and transfers in connection with the securitization, financing or other transfer of
any mortgage loans or mortgage servicing reimbursement rights (and/or, in each case, related
rights, interests and servicing assets) owned by the Borrower or any of its Subsidiaries;




          (e) Liens and transfers in connection with the securitization or other transfer of any credit
card receivables (and/or related rights and interests) owned by the Borrower or any of its
Subsidiaries;




          (f) Liens on fixed or capital assets acquired, constructed or improved by any Credit Party or
any Subsidiary to secure Indebtedness of such Credit Party or such Subsidiary incurred to finance
the acquisition, construction or improvement of such fixed or capital assets; provided that
(i) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after
such acquisition or the completion of such construction or improvement, (ii) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed
or capital assets and (iii) such Liens shall not apply to any other property or assets of any
Credit Party or any Subsidiary;




          (g) Liens arising in connection with repurchase agreements contemplated by Section 6.2(i);
provided that such security interests shall not apply to any property or assets of










 





32





any Credit Party or any Subsidiary except for the mortgage loans or securities, as applicable, subject
to such repurchase agreements;




          (h) Liens arising in connection with Indebtedness permitted by Sections 6.2(l)(v) or 6.2(q),
which Liens are granted in the ordinary course of business;




          (i) Liens not otherwise permitted by this Section 6.3 so long as the Obligations hereunder are
contemporaneously secured equally and ratably with the obligations secured thereby;




          (j) Liens not otherwise permitted by this Section 6.3, so long as the aggregate outstanding
principal amount of the obligations secured thereby does not exceed (as to the Credit Parties and
all Subsidiaries) $250,000,000 at any one time;




          (k) Liens and transfers in connection with the RAL Receivables Transaction;




          (l) Liens securing Indebtedness permitted by subsection 6.2(u); and




          (m) Liens on Unrestricted Margin Stock.




          SECTION 6.4. Fundamental Changes; Sale of Assets. (a) Each Credit Party will not, and will not permit any Material Subsidiary to, merge into
or consolidate with any other Person, or permit any other Person to merge into or consolidate with
it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets (other than Unrestricted Margin Stock), or all
or substantially all of the stock or assets related to its tax preparation business or liquidate or
dissolve, except (i) transfers in connection with the RAL Receivables Transaction and other
securitizations otherwise permitted hereby, (ii) sales and other transfers of mortgage loans
(and/or related rights and interests and servicing assets) and (iii) if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be continuing, (A) any
Material Subsidiary other than the Borrower may merge into a Credit Party in a transaction in which
the Credit Party is the surviving corporation, (B) any wholly owned Material Subsidiary other than the Borrower may merge into any other wholly owned Material Subsidiary in a
transaction in which the surviving entity is a wholly owned Subsidiary, (C) any Material Subsidiary
other than the Borrower may sell, transfer, lease or otherwise dispose of its assets to the
Guarantor or to another Material Subsidiary and (D) any Material Subsidiary other than the Borrower
may liquidate or dissolve if the Guarantor determines in good faith that such liquidation or
dissolution is in the best interests of the Guarantor and is not materially disadvantageous to the
Lender; provided that any such merger involving a Person that is not a wholly owned
Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section
6.5.




          (b) Except as set forth on Schedule 6.4(b), the Credit Parties will not, and will not permit
any Material Subsidiary to, engage to any material extent in any business other than businesses of
the type conducted by the Credit Parties and the Subsidiaries on August 10, 2005 and businesses
reasonably related thereto.




          SECTION 6.5. Transactions with Affiliates. Each Credit Party will not, and will not permit any Subsidiary to, sell, lease or otherwise
transfer any property or assets to, or








 





33





purchase, lease or otherwise acquire any property or assets
from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less favorable to such Credit
Party or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third
parties, (b) transactions between or among the Guarantor and/or its Subsidiaries not involving any
other Affiliate, and (c) transactions involving the transfer of mortgage loans and other assets for
cash and other consideration of not less than the sum of (i) the lesser of (x) the fair market
value of such mortgage loans and (y) the outstanding principal amount of such mortgage loans, and
(ii) the fair market value of such other assets, to a Subsidiary of the Borrower that issues
Indebtedness permitted by Section 6.2(s); provided, that this Section 6.5 shall not apply to any
transactions with OOMC.




          SECTION 6.6. Restrictive Agreements. The Credit Parties will not, and will not permit any Subsidiary to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that by its terms
prohibits, restricts or imposes any condition upon (a) the ability of any Credit Party or any
Subsidiary to create, incur or permit to exist any Lien upon any of its material property or assets
(unless such agreement or arrangement does not prohibit, restrict or impose any condition upon the
ability of either Credit Party or any Subsidiary to create, incur or permit to exist any Lien in
favor of the Lender created under the Loan Documents), or (b) the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its capital stock or to make or
repay loans or advances to the Guarantor or any other Subsidiary or to Guarantee Indebtedness of
the Guarantor or any other Subsidiary; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply
to restrictions and conditions existing on the date hereof identified on Schedule 6.6 (but shall
apply to any extension, renewal, amendment or modification expanding the scope of any such
restriction or condition), (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the securitization, financing or other transfer of
mortgage loans (and/or related rights and interests and servicing assets) owned by the Borrower or
any of its Subsidiaries, (v) clause (a) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to secured obligations permitted by this Agreement
(including obligations secured by Liens permitted by Section 6.3(j)) if such restrictions or
conditions apply only to the property or assets securing such obligations, (vi) clause (a) of the
foregoing shall not apply to customary provisions in leases and other contracts restricting the
assignment thereof and (vii) clause (a) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to Indebtedness permitted hereunder pursuant to
subsection 6.2(m) or the RAL Receivables Transaction.










 





34





ARTICLE VII




GUARANTEE




          SECTION 7.1. Guarantee. (a) The Guarantor hereby unconditionally and irrevocably guarantees to the Lender and its
successors, indorsees, transferees and assigns, the prompt and complete payment and performance by
the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations.




          (b) The Guarantor further agrees to pay any and all expenses (including all fees and
disbursements of counsel) which may be paid or incurred by the Lender in enforcing, or obtaining
advice of counsel in respect of, any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under
this Article. This Article shall remain in full force and effect until the Obligations and the
obligations of the Guarantor under the guarantee contained in this Article shall have been
satisfied by payment in full and the Commitment shall be terminated, notwithstanding that from time
to time prior thereto the Borrower may be free from any Obligations.




          (c) No payment or payments made by any Credit Party, any other guarantor or any other Person
or received or collected by the Lender from any collateral security or Credit Party or any other
Person by virtue of any action or proceeding or any set-off or appropriation or application, at any
time or from time to time, in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Guarantor hereunder which shall,
notwithstanding any such payment or payments, remain liable hereunder for the Obligations until the
Obligations are paid in full and the Commitment is terminated.




          (d) The Guarantor agrees that whenever, at any time or from time to time, it shall make any
payment to the Lender on account of its liability hereunder, it will notify the Lender in writing
that such payment is made under this Article for such purpose.




          SECTION 7.2. Delay of Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, or any set-off or
application of funds of the Guarantor by the Lender, the Guarantor shall not be entitled to be
subrogated to any of the rights of the Lender against the Borrower or against any collateral
security or guarantee or right of offset held by the Lender for the payment of the Obligations, nor
shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower
in respect of payments made by the Guarantor hereunder, until all amounts owing to the Lender by
the Borrower on account of the Obligations are paid in full and the Commitment is terminated. If
any amount shall be paid to the Guarantor on account of such subrogation rights at any time when
all of the Obligations shall not have been paid in full, such amount shall be held by the Guarantor
in trust for the Lender, segregated from other funds of the Guarantor, and shall, forthwith upon
receipt by the Guarantor, be turned over to the Lender in the exact form received by the Guarantor
(duly indorsed by the Guarantor to the Lender, if required) to be applied against the Obligations,
whether matured or unmatured, in such order as the Lender may determine. The provisions of this
Section shall be effective notwithstanding the termination of this Agreement and the payment in
full of the Obligations and the termination of the Commitment.










 






35





          SECTION 7.3. Amendments, etc. with respect to the Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor, and without notice to or further assent by the
Guarantor, any demand for payment of any of the Obligations made by the Lender may be rescinded by
the Lender, and any of the Obligations continued, and the Obligations, or the liability of any
other party upon or for any part thereof, or any collateral security or guarantee therefor or right
of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by the Lender, and
this Agreement and any other documents executed and delivered in connection herewith may be
amended, modified, supplemented or terminated, in whole or in part, in accordance with the
provisions hereof as the Lender may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Lender for the payment of the Obligations may
be sold, exchanged, waived, surrendered or released. The Lender shall not have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations
or for this Agreement or any property subject thereto. When making any demand hereunder against
the Guarantor, the Lender may, but shall be under no obligation to, make a similar demand on the
Borrower or any other guarantor, and any failure by the Lender to make any such demand or to
collect any payments from the Borrower or any such other guarantor or any release of the Borrower
or such other guarantor shall not relieve the Guarantor of its obligations or liabilities
hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a
matter of law, of the Lender against the Guarantor. For the purposes hereof “demand” shall include
the commencement and continuance of any legal proceedings.




          SECTION 7.4. Guarantee Absolute and Unconditional. The Guarantor waives any and all notice of the creation, renewal, extension or accrual of
any of the Obligations and notice of or proof of reliance by the Lender upon this Agreement or
acceptance of this Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Agreement; and all dealings between the Borrower and the Guarantor, on the one hand, and
the Lender, on the other, shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Agreement. The Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower and the Guarantor with respect
to the Obligations. This Article shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or enforceability of this
Agreement, any other documents executed and delivered in connection herewith, any of the
Obligations or any other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any time be available to
or be asserted by the Guarantor against the Lender, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Borrower or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of
the Guarantor under this Article, in bankruptcy or in any other instance. When pursuing its rights
and remedies hereunder against the Guarantor, the Lender may, but shall be under no obligation to,
pursue such rights and remedies as it may have against the Borrower or any other Person or against
any collateral security or guarantee for the Obligations or any right of offset with respect
thereto, and any failure by the Lender to pursue such other










 





36





rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security
or guarantee or to exercise any such right of offset, or any release of the Borrower or any such
other Person or of any such collateral security, guarantee or right of offset, shall not relieve
the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Lender against the Guarantor.
This Article shall remain in full force and effect and be binding in accordance with and to the
extent of its terms upon the Guarantor and its successors and assigns, and shall inure to the
benefit of the Lender and its successors, indorsees, transferees and assigns, until all the
Obligations and the obligations of the Guarantor under this Agreement shall have been satisfied by
payment in full and the Commitment shall be terminated, notwithstanding that from time to time
during the term of this Agreement the Borrower may be free from any Obligations.




          SECTION 7.5. Reinstatement. This Article shall continue to be effective, or be reinstated, as the case may be, if at
any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Credit Party or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, any Credit Party or any
substantial part of its property, or otherwise, all as though such payments had not been made.




          SECTION 7.6. Payments. The Guarantor hereby agrees that all payments required to be made by it hereunder will be
made to the Lender without set-off or counterclaim in accordance with the terms of the Obligations,
including in the currency in which payment is due.




ARTICLE VIII




EVENTS OF DEFAULT




          If any of the following events (“Events of Default”) shall occur:




          (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or
otherwise;




          (b) the Borrower shall fail to pay any interest on any Loan or any other amount (other than an
amount referred to in clause (a) of this Article) payable under this Agreement, when and as the
same shall become due and payable, and such failure shall continue unremedied for a period of five
business days;




          (c) any representation or warranty made or deemed made by any Credit Party (or any of its
officers) in or in connection with this Agreement or any amendment or modification hereof, or in
any report, certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof, shall prove to have been
incorrect in any material respect when made or deemed made;










 





37






          (d) any Credit Party shall fail to observe or perform any covenant, condition or agreement
contained in Section 5.2, 5.3 (with respect to the Credit Parties’ existence) or 5.8 or in Article
VI;




          (e) any Credit Party shall fail to observe or perform any covenant, condition or agreement
contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article),
and such failure shall continue unremedied for a period of 30 days after notice thereof from the
Lender to the Borrower;




          (f) any Credit Party or any Subsidiary shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness, when and as the same
shall become due and payable (after expiration of any applicable grace or cure period);




          (g) any event or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity; provided that this clause (g) shall not apply to (i) secured
Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness or (ii) any obligation under a Hedging Agreement that becomes due
as a result of a default by a party thereto other than a Credit Party or a Subsidiary;




          (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of any Credit Party or any Material Subsidiary or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Credit Party or any Material Subsidiary or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days
or an order or decree approving or ordering any of the foregoing shall be entered;




          (i) any Credit Party or any Material Subsidiary shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii)
consent to the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower or any Material Subsidiary or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose
of effecting any of the foregoing;




          (j) any Credit Party or any Material Subsidiary shall become unable, admit in writing or fail
generally to pay its debts as they become due;




          (k) one or more final judgments for the payment of money shall be rendered against the
Guarantor, the Borrower, any Subsidiary or any combination thereof and either (i) a creditor shall
have commenced enforcement proceedings upon any such judgment in an aggregate amount (to the extent
not covered by insurance as to which the relevant insurance










 





38





company has not denied coverage) in excess of $40,000,000 (a “Material Judgment”) or (ii) there shall be a period of 30
consecutive days during which a stay of enforcement of any Material Judgment shall not be in effect
(by reason of pending appeal or otherwise) (it being understood that, notwithstanding the
definition of “Default”, no “Default” shall be triggered solely by the rendering of such a judgment
or judgments prior to the commencement of enforcement proceedings or the lapse of such 30
consecutive day period, so long as such judgments are capable of satisfaction by payment at any
time);




          (l) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together
with all other ERISA Events that have occurred, would reasonably be expected to result in a
Material Adverse Effect;




          (m) a Change in Control shall occur;




          (n) the Guarantee contained in Article VII herein shall cease, for any reason, to be in full
force and effect in any material respect or any Credit Party shall so assert; or




          (o) the Security Agreement, the Control Agreement or the HSBC TFS Letter shall for any reason
cease to be valid and binding on or enforceable against any Credit Party thereto; or any Credit
Party shall so state in writing or bring an action to limit its obligations or liabilities
thereunder;




          (p) the Security Agreement shall for any reason (other than pursuant to the terms thereof)
cease to create a valid, perfected and first priority security interest in the Collateral purported
to be covered thereby;




          (q) any representation or warranty made or deemed made by any Credit Party in the Security
Agreement, the Control Agreement or the HSBC TFS Letter shall prove to have been incorrect in any
material respect when made or deemed made; or




          (r) any Credit Party shall fail to observe or perform any covenant or agreement (other than
as specified in clauses (o), (p) and (q) of this Article) contained in the Security Agreement, the
Control Agreement or the TFS Letter Agreement;



then, and in every such event (other than an event with respect to the Credit Parties described in
clause (h) or (i) of this Article), and at any time thereafter during the continuance of such
event, the Lender may, by notice to the Borrower, take either or both of the following actions, at
the same or different times: (i) terminate the Commitment, and thereupon the Commitment shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole
(or in part, in which case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other Obligations of the Credit
Parties accrued hereunder, shall become due and payable immediately, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Credit Parties; and in
case of any event with respect to the Credit Parties described in clause (h) or (i) of this
Article, the Commitment shall automatically terminate and the principal









 





39





of the Loans then outstanding, together with accrued interest thereon and all fees and other Obligations of the
Credit Parties accrued hereunder, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by the Credit Parties.




ARTICLE IX




[RESERVED]




ARTICLE X




MISCELLANEOUS




          SECTION 10.1. Notices. Except in the case of notices and other communications expressly permitted to be given by
telephone and except as otherwise provided in Sections 2.3, 2.6 and 2.8, all notices and other
communications provided for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as follows:




          (a) if to the Borrower or the Guarantor, to it at One H&R Block Way, Kansas City, Missouri
64105, Attention of Becky Shulman (Telecopy No. (816) 854-8043), David Staley (Telecopy No. (816)
854-8043) and Andrew Somora (Telecopy No. (816) 802-1043); and




          (b) if to the Lender, to it at 2700 Sanders Road, Prospect Heights, Illinois 60070,
attention: Treasurer (Telecopy No. (847) 205-7538), with copies to 2700 Sanders Road, Prospect
Heights, Illinois 60070, attention: Deputy General Counsel- Corporate Law (Telecopy No.(847)
564-6366), HSBC Securities, Inc., 425 Fifth Avenue, Lower Level, New York, N.Y. 10018 (Telecopy No.
(212) 525-2479), attention Peter Nealon, HSBC Taxpayer Financial Services Inc., 200 Somerset
Corporate Boulevard, Bridgewater, N.J. 08807 (Telecopy No. (908) 203-4211, attention: CEO and
Managing Director, and HSBC Taxpayer Financial Services Inc., 90 Christiana Road, New Castle, DE
19707 (Telecopy No. (302) 327-2507, attention: General Counsel; provided, that notices under
Section 10.3 need only be given to Mr. Kyle Hartung at telephone number (847) 564-6281, confirmed
by telecopy at (847) 564-6138.



Any party hereto may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto. All notices and other communications given to any
party hereto in accordance with the provisions of this Agreement shall be deemed to have been given
on the date of receipt. For so long as any Affiliate of the Lender is a “Lender” under either of
the Bank Revolvers, the Lender will accept delivery of any financial statement or other information
to be delivered under Section 5.1(a), (b) and(d) hereunder that is posted to Intralinks. The
Lender, the Borrower or the Guarantor may, in its









 





40





discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices or
communications.




          SECTION 10.2. Waivers; Amendments. (a) No failure or delay by the Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The rights and remedies
of the Lender hereunder are cumulative and are not exclusive of any rights or remedies that they
would otherwise have. No waiver of any provision of this Agreement or consent to any departure by
the Credit Parties therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of
whether the Lender may have had notice or knowledge of such Default at the time.




          (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Credit Parties and the
Lender.




          SECTION 10.3. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay all reasonable and documented out-of-pocket expenses incurred by
the Lender, including the reasonable and documented fees, charges and disbursements of any counsel
for the Lender, in connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with the Loans made
hereunder, including in connection with any workout, restructuring or negotiations in respect
thereof.




     (b) The Credit Parties shall jointly and severally indemnify the Lender and each Related
Party of the Lender (each such Person being called an “Indemnitee”), against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses,
including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a result of the material
breach by any Credit Party of any representation, warranty, covenant or agreement in this
Agreement, the Security Agreement, the Control Agreement or the HSBC TFS Letter; provided
that such indemnity shall not be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful misconduct of any
Indemnitee or any of its Related Parties.



     (c) No party to this Agreement shall be liable for lost profits, incidental, consequential,
exemplary, special or punitive damages arising under or in connection with this Agreement, the
Security Agreement, the Control Agreement or the HSBC TFS Letter, or the transaction contemplated
hereby or thereby.









 





41




          SECTION 10.4. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby, except that no Credit
Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Lender (and any attempted assignment or transfer by any Credit Party without
such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of
the Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.




          (b) The Lender may assign to one or more assignees all or a portion of its rights under this
Agreement (including all or a portion of the Loans at the time owing to it); provided that
the Borrower must give its prior written consent to such assignment (which consent shall not be
unreasonably withheld); provided, further, that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default has
occurred and is continuing. Any assignment or transfer by the Lender of rights under this
Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement
as a sale by the Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.




          (c) The Lender may, without the consent of any Credit Party, sell participations to one or
more banks or other entities (a “Participant”) in all or a portion of the Lender’s rights
and obligations under this Agreement (including all or a portion of its Commitment and the Loans
owing to it); provided that (i) the Lender’s obligations under this Agreement shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the
performance of the obligations and (iii) the Credit Parties shall continue to deal solely and
directly with the Lender in connection with the Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which the Lender sells such a participation
shall provide that the Lender shall retain the sole right to enforce this Agreement and to approve
any amendment, modification or waiver of any provision of this Agreement; provided that
such agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver of or under this Agreement that shall
(i) increase the Commitment, (ii) reduce the principal amount of any Loan or reduce the rate of
interest thereon, (iii) postpone the scheduled date of payment of the principal amount of any Loan,
or any interest thereon, or reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of the Commitment, (iv) release any security provided for in the
Security Agreement, (v) release the guarantee contained in Article VII or (vi) change any of the
provisions of this Section. Subject to paragraph (d) of this Section, the Borrower agrees that
each Participant shall be entitled to the benefits of Sections 2.9 and 2.10 to the same extent as
if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this
Section.




          (d) A Participant shall not be entitled to receive any greater payment under Section 2.9 or
2.10 than the Lender would have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant is made with the
Borrower’s prior written consent.











 





42





          (e) The Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of the Lender, including any such pledge or
assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of a security
interest shall release the Lender from any of its obligations hereunder or substitute any such
assignee for the Lender as a party hereto.




          SECTION 10.5. Survival. All covenants, agreements, representations and warranties made by the Credit Parties herein
and in the certificates or other instruments delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans regardless of any
investigation made by any such other party or on its behalf and notwithstanding that the Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and shall continue in full
force and effect as long as the principal of or any accrued interest on any Loan or any other
amount payable under this Agreement is outstanding and unpaid and so long as the Commitment has not
expired or terminated. The provisions of Sections 2.9, 2.10, 10.3, 10.9, 10.10 and 10.l5 shall
survive and remain in full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitment or
the termination of this Agreement or any provision hereof.




          SECTION 10.6. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Agreement and the documents provided for herein
constitute the entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.1, this Agreement shall become effective
when it shall have been executed by the Lender and when the Lender shall have received counterparts
hereof which, when taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this
Agreement.




          SECTION 10.7. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and enforceability of the
remaining provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.




          SECTION 10.8. Right of Setoff. If an Event of Default shall have occurred and be continuing, the Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all indebtedness at any time owing by the Lender to or for the credit or the
account of either Credit Party against any of and all the obligations of such Credit Party now or
hereafter existing under this Agreement held by the Lender, irrespective of whether or not the
Lender shall have made any demand under this










 





43





Agreement and although such obligations may be
unmatured. The rights of the Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.




          SECTION 10.9. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the
State of New York.




          (b) Each Credit Party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in
New York County and of the United States District Court of the Southern District of New York, and
any appellate court from any thereof, in connection with any Proceeding, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect of any Proceeding
may be heard and determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any such Proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. Nothing in this Agreement shall affect any right that the Lender may
otherwise have to bring any Proceeding relating to this Agreement against any Credit Party or its
properties in the courts of any jurisdiction.




          (c) Each Credit Party hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter have to the laying
of venue of any Proceeding arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such
Proceeding in any such court.




          (d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 10.1 in connection with a Proceeding. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any other manner permitted
by law in connection with a Proceeding.




          SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.










 






44





          SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of
reference only, are not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.




          SECTION 10.12. Confidentiality. The Lender agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations under this Agreement,
(g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section by it or (ii) becomes available to the
Lender on a nonconfidential basis from a source other than any Credit Party; provided, that the
Lender may file this Agreement with the Securities and Exchange Commission. For the purposes of
this Section, “Information” means all information received from any Credit Party relating
to any Credit Party or its business, other than any such information that is available to the
Lender on a nonconfidential basis prior to disclosure by such Credit Party; provided that,
in the case of information received from any Credit Party after the date hereof, such information
is clearly identified at the time of delivery as confidential. The Lender shall be considered to
have complied with its obligation under this Section if it has exercised the same degree of care to
maintain the confidentiality of such Information as it would accord to its own confidential
information.




          SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate
applicable to any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of
interest payable in respect of such Loan hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges payable to the Lender in
respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor)
until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by the Lender.




          SECTION 10.14. USA Patriot Act.




          The Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is











 





45





required to obtain, verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will allow the Lender to
identify the Borrower in accordance with the Act.




          SECTION 10.15.Alternative Dispute Resolution. EXCEPT IN THE CASE OF (1) A MATERIAL
PROCEEDING, (2) JUDICIAL ACTION FOR SPECIFIC PERFORMANCE, (3) INJUNCTIVE RELIEF OR (4) ENFORCEMENT
OF ANY MEDIATION OR ARBITRATION AWARD, ANY DISPUTE BETWEEN OR AMONG THE PARTIES HERETO ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE SECURITY AGREEMENT, THE CONTROL AGREEMENT, OR THE HSBC TFS
LETTER, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY 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 SETTLEMENT PRODUCTS DISTRIBUTION AGREEMENT, WHICH ARE INCORPORATED HEREIN BY
REFERENCE.










 








THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION

WHICH MAY BE ENFORCED BY THE PARTIES.




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



	 	 	 	 	 
	 	BLOCK FINANCIAL CORPORATION, as Borrower

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	H&R BLOCK, INC., as Guarantor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	HSBC FINANCE CORPORATION, as Lender

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 










 





SCHEDULE 3.4(a)




Guarantee Obligations





	•	 	Guarantee Obligations with respect to obligations (including obligations under operating
leases) reflected on the Guarantor’s consolidated balance sheet as of April 30, 2006 or in
the notes thereto.




 









 











SCHEDULE 3.6




Disclosed Matters





	•	 	On December 18, 2006, the New York Attorney General re-filed the lawsuit related to the
Express IRA product, as more particularly described in the Guarantor’s quarterly report on
Form 10-Q for the quarter ended October 31, 2006.




 









 











SCHEDULE 3.13




Subsidiaries




          The following is a list of the direct and indirect subsidiaries of H&R Block, Inc., a
Missouri corporation.




	 	 	 	 	 
	Name	 	Jurisdiction	 	 
	 
	1) H&R Block Group, Inc.

	 	Delaware	 	 
	2) HRB Management, Inc.

	 	Missouri	 	 
	3) H&R Block Tax and Financial Services Limited

	 	United Kingdom	 	 
	4) Companion Insurance, Ltd.

	 	Bermuda	 	 
	5) H&R Block Services, Inc.

	 	Missouri	 	 
	6) H&R Block Tax Services, Inc.

	 	Missouri	 	 
	7) HRB Partners, Inc.

	 	Delaware	 	 
	8) HRB Texas Enterprises, Inc.

	 	Missouri	 	 
	9) H&R Block and Associates, L.P.

	 	Delaware	 	 
	10) H&R Block Canada, Inc.

	 	Canada	 	 
	11) Financial Stop, Inc.

	 	British Columbia	 	 
	12) H&R Block Canada Financial Services, Inc.

	 	Canada	 	 
	13) H&R Block (Nova Scotia) Incorporated

	 	Nova Scotia	 	 
	14) H&R Block Enterprises, Inc.

	 	Missouri	 	 
	15) H&R Block Eastern Enterprises, Inc.

	 	Missouri	 	 
	16) The Tax Man, Inc.

	 	Massachusetts	 	 
	17) HRB Royalty, Inc.

	 	Delaware	 	 
	18) H&R Block Limited.

	 	New South Wales	 	 






 









 






	 	 	 	 	 
	Name	 	Jurisdiction	 	 
	 
	19) West Estate Investors, LLC

	 	Missouri	 	 
	20) H&R Block Global Solutions (Hong Kong) Limited

	 	Hong Kong	 	 
	21) Black Orchard Financial, Inc.

	 	Delaware	 	 
	22) H&R Block Tax and Business Services, Inc.

	 	Delaware	 	 
	23) H&R Block Tax Institute, LLC

	 	Missouri	 	 
	24) Block Financial Corporation

	 	Delaware	 	 
	25) Option One Mortgage Corporation

	 	California	 	 
	26) Option One Mortgage Acceptance Corporation

	 	Delaware	 	 
	27) Option One Mortgage Securities Corp.

	 	Delaware	 	 
	28) Option One Mortgage Securities II Corp.

	 	Delaware	 	 
	29) Premier Trust Deed Services, Inc.

	 	California	 	 
	30) Premier Mortgage Services of Washington, Inc.

	 	Washington	 	 
	31) H&R Block Mortgage Corporation

	 	Massachusetts	 	 
	32) Option One Insurance Agency, Inc. (d/b/a H&R
Block Insurance Agency)

	 	California	 	 
	33) Woodbridge Mortgage Acceptance Corporation

	 	Delaware	 	 
	34) Option One Loan Warehouse Corporation

	 	Delaware	 	 
	35) Option One Advance Corporation

	 	Delaware	 	 
	36) AcuLink Mortgage Solutions, LLC

	 	Florida	 	 
	37) AcuLink of Alabama, LLC

	 	Alabama	 	 
	38) Option One Mortgage Corporation (India) Pvt Ltd

	 	India	 	 
	39) Option One Mortgage Capital Corporation

	 	Delaware	 	 
	40) First Option Asset Management Services, LLC

	 	California	 	 
	41) Premier Property Tax Services, LLC

	 	California	 	 






 









 






	 	 	 	 	 
	Name	 	Jurisdiction	 	 
	 
	42) First Option Asset Management Services, Inc.

	 	California	 	 
	43) Companion Mortgage Corporation

	 	Delaware	 	 
	44) Franchise Partner, Inc.

	 	Nevada	 	 
	45) HRB Financial Corporation

	 	Michigan	 	 
	46) H&R Block Financial Advisors, Inc.

	 	Michigan	 	 
	47) OLDE Discount of Canada

	 	Canada	 	 
	48) H&R Block Insurance Agency of Massachusetts,
Inc.

	 	Massachusetts	 	 
	49) HRB Property Corporation

	 	Michigan	 	 
	50) HRB Realty Corporation

	 	Michigan	 	 
	51) 4230 West Green Oaks, Inc.

	 	Michigan	 	 
	52) Financial Marketing Services, Inc.

	 	Michigan	 	 
	53) 2430472 Nova Scotia Co.

	 	Nova Scotia	 	 
	54) H&R Block Digital Tax Solutions, LLC

	 	Delaware	 	 
	55) TaxNet Inc.

	 	California	 	 
	56) H&R Block Bank

	 	Federal	 	 
	57) BFC Transactions, Inc.

	 	Delaware	 	 
	58) RSM McGladrey Business Services, Inc.

	 	Delaware	 	 
	59) RSM McGladrey, Inc.

	 	Delaware	 	 
	60) RSM McGladrey Financial Process Outsourcing,
L.L.C.

	 	Minnesota	 	 
	61) RSM McGladrey Financial Process Outsourcing
India Pvt. Ltd (70% ownership)

	 	India	 	 
	62) Birchtree Financial Services, Inc.

	 	Oklahoma	 	 
	63) Birchtree Insurance Agency, Inc.

	 	Missouri	 	 
	64) Pension Resources, Inc.

	 	Illinois	 	 






 









 






	 	 	 	 	 
	Name	 	Jurisdiction	 	 
	 
	65) FM Business Services, Inc. (d/b/a Freed Maxick
ABL Services)

	 	Delaware	 	 
	66) O’Rourke Career Connections, LLC (50% ownership)

	 	California	 	 
	67) Credit Union Jobs, LLC

	 	California	 	 
	68) RSM McGladrey TBS, LLC

	 	Delaware	 	 
	69) PDI Global, Inc.

	 	Delaware	 	 
	70) RSM Equico, Inc.

	 	Delaware	 	 
	71) RSM Equico Capital Markets, LLC

	 	Delaware	 	 
	72) Equico, Inc.

	 	California	 	 
	73) Equico Europe Limited

	 	United Kingdom	 	 
	74) RSM Equico Canada, Inc.

	 	Canada	 	 
	75) RSM McGladrey Business Solutions, Inc. (d/b/a
RSM McGladrey Retirement Resources)

	 	Delaware	 	 
	76) CFS-McGladrey, LLC (50% ownership)

	 	Massachusetts	 	 
	77) Creative Financial Staffing of Western
Washington, LLC (50% ownership)

	 	Massachusetts	 	 
	78) Cfstaffing, Ltd. (25% ownership)

	 	British Columbia	 	 
	79) RSM McGladrey Insurance Services, Inc.

	 	Delaware	 	 
	80) PWR Insurance Services, Inc.

	 	California	 	 
	81) RSM McGladrey Employer Services, Inc.

	 	Georgia	 	 
	82) RSM Employer Services Agency, Inc.

	 	Georgia	 	 
	83) RSM Employer Services Agency of Florida, Inc.

	 	Florida	 	 
	84) H&R Block (India) Pvt. Ltd.

	 	India	 	 
	85) RSM (Bahamas) Global, Ltd.

	 	Bahamas	 	 







 









 





SCHEDULE 6.2




Existing Indebtedness





	•	 	The Irrevocable Standby Letter of Credit issued on March 22, 2004 by KeyBank National
Association in favor of Old Republic Insurance Company for an amount up to $16,509,269.






	•	 	Irrevocable Standby Letter of Credit issued on December 18, 2003 by KeyBank National
Association in favor of Pacific Employer’s Insurance Company and ACE American Insurance
Company for an amount up to $865,650.






	•	 	Irrevocable Standby Letter of Credit issued on February 16, 2005 by KeyBank National
Association in favor of Chubb National Company for an amount up to $3,500,000.






	•	 	Promissory Note dated December 6, 2001 in the principal amount of $5,500,000 between
MyBenefitSource.com, Inc. (now RSM McGladrey Employer Services, Inc.) and AUSA Holdings
Company.






	•	 	The Guarantor’s and Subsidiaries’ obligations under surety bonds and fidelity bonds
issued pursuant to state mortgage licensing requirements.




 









 











SCHEDULE 6.3




Existing Liens




None.





 









 








SCHEDULE 6.4(b)




ADDITIONAL BUSINESSES





	•	 	Businesses that offer products and services typically provided by finance companies,
banks and other financial service providers, including consumer finance and mortgage-loan
related products and services, credit products, insurance products, check cashing, money
orders, wire transfers, stored value cards, bill payment services, notary services and
similar products and services.






	•	 	Businesses that offer financial, or financial-related, products and services that can be
marketed, provided or distributed by leveraging the retail locations of Guarantor’s
Subsidiaries or the relationships of such Subsidiaries with their clients as a tax return
preparer or financial advisor or service provider.




 









 











SCHEDULE 6.6




Existing Restrictions





	•	 	Indenture dated as of October 20, 1997, by and between the Credit Parties and Bankers
Trust Company, as trustee (the “October 20, 1997 Indenture”).






	•	 	Any other Indenture entered into by any Credit Party to the extent that (a) the
Indebtedness thereunder is permitted by Section 6.2(d) of this Agreement and (b) such other
Indenture has substantially similar terms to the October 20, 1997 Indenture.






	•	 	Repurchase Agreements of the type referred to in Section 6.2(i) of this Agreement.






	•	 	Certain Subsidiaries must maintain capital requirements which could impair their ability
to pay dividends or other distributions.




 









 











EXHIBIT A




[FORM OF SECURITY AGREEMENT]




SECURITY AGREEMENT




     SECURITY AGREEMENT dated as of January 2, 2007 between BLOCK FINANCIAL CORPORATION
(“Debtor”), a Delaware corporation, and HSBC FINANCE CORPORATION (“Secured Party”),
a Delaware corporation.



     WHEREAS, Debtor, Secured Party and H&R Block, Inc. have entered into a Credit and Guarantee
Agreement dated as of January 2, 2007 (as amended, restated or otherwise modified and in effect
from time to time, the “Credit Agreement”) pursuant to which Secured Party has agreed,
subject to the terms and conditions thereof, to make loans to Debtor from time to time.



     WHEREAS, Secured Party has required, as a condition to its making loans under the Credit
Agreement, that Debtor execute and deliver this Agreement.



     NOW, THEREFORE, in consideration of the premises and to induce Secured Party to make loans to
Debtor under the Credit Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:



     1. Definitions. Capitalized terms used herein without definition are used herein as
defined in the Credit Agreement. In addition, the following terms shall have the following
meanings:



     “BFC Program Contracts” means, collectively, the Indemnification Agreement, the
Participation Agreement and the Servicing Agreement.



     “Collateral” is defined in Section 2 hereof.



     “Contract Obligor” means any Person that is obligated to Debtor under a Program
Contract.



     “Control Agreement” means the Investment Account Control Agreement between Debtor,
Secured Party and the Securities Intermediary with respect to the Securities Account, in
substantially the form of Exhibit B to the Credit Agreement.



     “Direct Pay Provisions” means the provisions of paragraph 2 of the HSBC TFS
Letter. 



     “HSBC RAL” means “HSBC RAL” as such term is defined in the Appendix of Defined Terms
and Rules of Construction attached as Appendix A to Retail Settlement Products Distribution
Agreement.



 









 





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



     “HSBC TFS Letter” means a letter agreement between Debtor, HSBC TFS and Secured Party
in substantially the form of Exhibit C to the Credit Agreement.



     “Indemnification Agreement” means the HSBC Settlement Products Indemnification
Agreement dated as of September 23, 2005 among HSBC Bank USA, N.A., HSBC TFS, Household Tax Masters
Acquisition Corporation, Beneficial Franchise Company, Inc., H&R Block Services, Inc., H&R Block
Tax Services, Inc., H&R Block Enterprises, Inc., H&R Block Eastern Enterprises, Inc., H&R Block
Digital Tax Solutions, LLC, Block Associates, L.P., HRB Royalty, Inc. and Debtor, as amended from
time to time, and any restatement, extension, renewal and replacement thereof.



     “Participation Agreement” means the HSBC Refund Anticipation Loan Participation
Agreement, dated as of September 23, 2005, as amended from time to time, and any restatement,
extension, renewal and replacement thereof, by and among Household Tax Masters Acquisition
Corporation, the Borrower, HSBC Bank USA, National Association, HSBC TFS and HSBC Trust Company
(Delaware), National Association.



     “Participation Interest” means a “Participation Interest” under and as defined in the
Credit Agreement.



     “Securities Account” means account number 615878 maintained by Debtor with the
Securities Intermediary, all cash balances, securities, instruments, financial assets and
investment property at any time and from time to time credited to, received or receivable in
respect of such account, and all securities entitlements and claims thereunder or in connection
therewith.



     “Securities Intermediary” means HSBC Investor Funds.



     “Servicing Agreement” means the HSBC Settlement Products Servicing Agreement dated as
of September 23, 2005 , as amended from time to time, and any restatement, extension, renewal and
replacement thereof, among HSBC Bank USA, National Association, HSBC TFS, Household Tax Masters
Acquisition Corporation, and Debtor.



     “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to
time in the State of New York; provided, however, if, by reason of mandatory provisions of law, the
attachment, perfection or priority of Secured Party’s security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New
York, the term “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such provisions.



     The terms “control”, entitlement holder”, “entitlement order”,
“financial asset”, “instrument”, “investment property”,
“proceeds”, “security”, “security entitlement”, “securities
intermediary” and “supporting obligation” shall have the respective meanings set forth
in the Uniform Commercial Code.



 









 





     2. Security Interest. As collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations, Debtor hereby
assigns and pledges to Secured Party and grants to Secured Party a security interest in and to all
of Debtor’s right, title and interest in the following property and interests in property, whether
now owned or hereafter acquired by Debtor and wherever located (collectively, the
“Collateral”):




     (a) the BFC Program Contracts, including (without limitation) the Participation
Interests purchased by Debtor under the Participation Agreement, all rights of Debtor
related to the HSBC RALs to which such Participation Interests relate, and all monies due
and to become due in respect thereof; provided, that the security interest created hereby
shall not extend to the rights reserved to Debtor pursuant to the proviso in Section 3
hereof;




     (b) the Securities Account; and




     (c) all proceeds, supporting obligations, income, benefits, substitutions, additions
and replacements of and to any of the property described in this Section 2
including, without limitation, all rights, claims and benefits against any Contract Obligor
or other Person obligated on any Collateral, and all related books, correspondence, files,
records, invoices and other papers, including, without limitation, all computer runs,
programs and files.



     3. Certain Rights of Debtor. Notwithstanding any other term or provision of this
Agreement, as long as no Event of Default has occurred, Debtor may exercise all of its rights under
the BFC Program Contracts, other than the following, which Debtor may not exercise: (a) the right
to receive payments from HSBC TFS under the Direct Pay Provisions of the amounts to be transferred
by HSBC TFS to Secured Party thereunder, (b) the right to sell, assign, pledge or grant a security
interest in or Lien on the Collateral and (c) its right to modify, amend or waive its rights under
the BFC Program Contracts that would affect in any way the Participation Interests that have been
financed by Secured Party pursuant to the Credit Agreement, provided, further, that
even after an Event of Default has occurred and is continuing under the Credit Agreement, Debtor
will have the right, on a prospective basis, (i) under Section 4.1 of the Participation Agreement,
to participate or not participate in subsequently originated HSBC RALs and to change the Applicable
Percentage (as defined in the Participation Agreement) with respect thereto, (ii) under Section 4.4
of the Participation Agreement, to elect not to purchase a participation interest in certain groups
of subsequently originated HSBC RALs; and (iii) under Section 4.8 of the Participation Agreement to
sell, assign or transfer its right to purchase participation interests on subsequently originated
HSBC RALs that are not financed by Secured Party.



     4. Representations and Warranties of Debtor. Debtor represents and warrants to
Secured Party as follows:



     (a) Binding Effect. This Agreement has been, and the Control Agreement and the HSBC
TFS Letter will be, duly executed and delivered by Debtor, and this Agreement



 









 




constitutes, and the Control Agreement and the HSBC TFS Letter will constitute, legal, valid
and binding agreements of Debtor, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.




     (b) Ownership and Liens. Debtor is and will be the owner of the Collateral and no
Lien exists or will exist upon such Collateral at any time except as provided for in this
Agreement. Debtor is the sole entitlement holder with respect to the Securities Account.



     (c) Perfection. This Agreement is effective to create in favor of Secured Party a
valid security interest in and Lien upon all of Debtor’s right, title and interest in and to the
Collateral and, upon the filing of an appropriate Uniform Commercial Code financing statement in
the Office of the Secretary of State of the State of Delaware, such security interest will be a
duly perfected security interest in all of the Collateral and no further recordings or filings are
or will be required in connection with the creation, perfection or enforcement of such security
interest and Lien, other than (i) the filing of continuation statements or financing change
statements in accordance with applicable law and (ii) additional filings if Debtor changes its
name, identity or organizational structure or the jurisdiction in which it is organized.



     5. Agreements of Debtor. Debtor hereby agrees with Secured Party as follows:



     (a) Direct Payment to Secured Party. Debtor shall enter into the HSBC TFS Letter
with Secured Party and HSBC TFS. Debtor shall, forthwith upon becoming aware or being made aware
that it has received any amount in payment under the Direct Pay Provisions at any time, pay such
amount to Secured Party, and any such amount which may be so received by Debtor shall, from the
time of Debtor being or becoming aware of such receipt, not be commingled by Debtor with any of its
other funds or property but, until paid to Secured Party, shall be held separate and apart from
such other funds and property and in trust for Secured Party. Debtor authorizes and empowers
Secured Party (i) to ask, demand, receive, receipt and give acquittance for any and all amounts
which may be or become due or payable at any time to Debtor under the Direct Pay Provisions and
(ii) in its discretion to file any claims or take any action or proceeding, either in its own name
or in the name of Debtor or otherwise, which Secured Party may deem to be necessary or advisable to
collect amounts due under the Direct Pay Provisions.



     (b) Performance of BFC Program Contracts. Debtor shall remain liable under the BFC
Program Contracts to perform all of its obligations thereunder and shall duly and punctually
perform and observe all of the terms and provisions of the BFC Program Contracts on the part of
Debtor to be performed or observed, subject to any applicable grace or cure periods contained in
the BFC Program Contracts. Secured Party does not assume and shall not have any obligations or
liabilities under the BFC Program Contracts by reason of or arising out of this Agreement, nor
shall Secured Party be obligated to make any inquiry as to the nature or sufficiency of any payment
received under the BFC Program Contracts or to collect or enforce the BFC Program Contracts.
Debtor shall not agree to or suffer or permit any amendment, modification or waiver of or under the
BFC Program Contracts that would affect in any way the Participation Interests that have been
financed by Secured Party pursuant to the Credit Agreement.



 









 





     (c) Other Documents and Actions. Debtor shall, within 10 days of request by Secured
Party, give, execute, deliver, file or record any financing statement, notice, instrument,
agreement or other document that may be necessary or desirable in the reasonable judgment of
Secured Party to create, preserve, perfect or validate the security interest granted pursuant
hereto or to enable Secured Party to exercise and enforce the rights of Secured Party hereunder
with respect to such security interest.



     (d) [RESERVED]




     (e) Control Agreement. Debtor shall take any and all actions required or requested
by Secured Party from time to time to cause Secured Party to maintain exclusive control the
Securities Account and for that purpose Debtor shall enter into the Control Agreement with Secured
Party and the Securities Intermediary. Debtor agrees that Debtor shall not withdraw any money or
property from the Securities Account or modify or terminate the Control Agreement or any customer
agreement relating to the Securities Account without the prior written consent of Secured Party.



     (f) Other Liens. Debtor shall not create, permit or suffer to exist, and shall
defend the Collateral against and take such other action as is necessary to remove, any Lien on the
Collateral and shall defend the right, title and interest of Secured Party in and to the Collateral
and in and to all Proceeds thereof against the claims and demands of all Persons whatsoever.



     (g) Preservation of Rights. Whether or not any Event of Default has occurred or is
continuing, Secured Party may, but shall not be required to, take any actions Secured Party
reasonably deems necessary or appropriate to preserve any Collateral or any rights against third
parties to any of the Collateral and Debtor shall, within 30 days of demand by Secured Party, pay,
or reimburse Secured Party for, all expenses incurred in connection therewith.



     (h) Changes in Name, etc. The name of Debtor that appears above its signature on
this Agreement is its full and correct legal name as it appears in its certificate of
incorporation. Debtor shall notify Secured Party promptly in writing prior to any change in
Debtor’s name, identity, corporate structure or state of incorporation.



     (i) Financing Statements. Debtor hereby irrevocably authorizes Secured Party, at
Debtor’s expense, to file such financing and continuation statements relating to this Agreement,
without Debtor’s signature, as Secured Party may deem appropriate, and appoints Secured Party as
Debtor’s attorney-in-fact to execute any such statements in Debtor’s name and to perform all other
acts which Secured Party deems appropriate to perfect and continue the security interest created
hereby.



     6. Remedies. During the period during which an Event of Default shall have occurred
and be continuing:



     (a) Secured Party shall have, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a Secured Party upon default under the
Uniform Commercial Code (whether or not the Uniform Commercial Code applies to



 









 




the affected Collateral) and Secured Party may, without notice, demand or legal process of any
kind except as may be required by law, at any time or times (i) if Secured Party shall have
requested that Debtor assemble any tangible Collateral pursuant to Section 6(a)(ii) hereof and
Debtor shall have failed to do so in a commercially reasonable time, enter Debtor’s premises and
take physical possession of such tangible Collateral and maintain such possession on Debtor’s
premises, at no cost to Secured Party, or remove such tangible Collateral or any part thereof to
such other place or places as Secured Party may desire, (ii) require Debtor to, and Debtor hereby
agrees to, assemble any tangible Collateral as directed by Secured Party and make it available to
Secured Party at a place to be designated by Secured Party which is reasonably convenient to
Secured Party and Debtor and (iii) without notice except as specified below, sell, lease, assign,
grant an option or options to purchase or otherwise dispose of the Collateral or any part thereof
at public or private sale, at any exchange, broker’s board or at any of the offices of Secured
Party or elsewhere, for cash, on credit or for future delivery, and upon such other terms as
Secured Party may deem commercially reasonable. Debtor agrees that, to the extent notice of sale
shall be required by law, at least 10 days’ notice to Debtor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor and such sale may, without further
notice, be made at the time and place to which it was so adjourned;




     (b) Secured Party may make any compromise or settlement deemed desirable with respect to any
of the Collateral and may extend the time of payment, arrange for payment in installments or
otherwise modify the terms of, any of the Collateral;



     (c) Secured Party may, in the name of Secured Party or in the name of Debtor or otherwise,
demand, sue for, collect or receive any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and



     (d) Secured Party may take any action and exercise any right or remedy available to it under
the Control Agreement, including any right to give instructions or entitlement orders to the
Securities Intermediary under the Control Agreement and to dispose of any Collateral in the
Securities Account as provided in Section 6(a).



     7. Deficiency; Application of Proceeds. If the proceeds of sale, collection or other
realization of or upon the Collateral are insufficient to cover the costs and expenses of such
realization and the payment in full of the Obligations, Debtor shall remain liable for any
deficiency. The proceeds of any collection, sale or other realization of all or any part of the
Collateral shall be applied first, to payment of all expenses payable or reimbursable by Debtor
under the Loan Documents in connection with such collection, sale or other realization on the
Collateral, and then as provided in the Credit Agreement.



     8. Power of Attorney. Debtor hereby irrevocably constitutes and appoints Secured
Party, with full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Debtor and in the name of Debtor or in
its own



 









 




name, from time to time in the discretion of Secured Party, after the occurrence and during
the continuance of an Event of Default, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any and all documents
and instruments which may be necessary or desirable to accomplish the purposes of this Agreement
and, without limiting the generality of the foregoing, hereby gives Secured Party the power and
right, on behalf of Debtor, without notice to or assent by Debtor, to do the following upon the
occurrence and during the continuance of an Event of Default:




     (a) to ask, demand, collect, receive and give acquittance and receipts for any and all moneys
due and to become due under any Collateral and, in the name of Debtor or its own name or otherwise,
to take possession of and endorse and collect any checks, drafts, notices acceptances or other
instruments for the payment of monies due under any Collateral and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise deemed appropriate by Secured
Party for the purpose of collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding or otherwise deemed
appropriate by Secured Party for the purpose of collecting any and all such moneys due under any
Collateral;



     (b) to pay or discharge charges or Liens levied or placed on or threatened against the
Collateral;



     (c) to direct any Contract Obligor or other party liable under any of the Collateral to make
payment of any and all monies due and to become due thereunder directly to Secured Party or as
Secured Party may direct, and to receive payment of and receipt for any and all moneys, claims and
other amounts due and to become due in respect of or arising out of any Collateral;



     (d) to sign and indorse any invoices, drafts against debtors, assignments, verifications and
notices in connection with or relating to the Collateral;



     (e) to commence and prosecute any suits, actions or proceedings to collect the Collateral or
any part thereof and to enforce any other right in respect of any Collateral;



     (f) to participate in the defense of any suit, action or proceeding brought against Debtor
with respect to any Collateral, or to defend same with Debtor’s consent;



     (g) to settle, compromise or adjust any such suit, action or proceeding as it relates to the
Collateral and, in connection therewith, to give such discharges or releases as Secured Party may
deem appropriate;



     (h) to notify each Contract Obligor in respect of any BFC Program Contracts that such
Collateral has been assigned to Secured Party and that any payments due or to become due in respect
of such Collateral are to be made directly to Secured Party; and to communicate in its own name
with any party to any Program Contract with regard to the assignment of the right, title and
interest of Debtor in and under the BFC Program Contracts hereunder and other matters relating
thereto;



 









 





     (i) to execute, in connection with any sale of Collateral provided for in Section 6
hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect
to the Collateral; and



     (j) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Secured Party were the absolute owner
thereof for all purposes and to do, at Secured Party’s option and at Debtor’s expense, at any time
or from time to time, all acts and things which Secured Party reasonably deems necessary to
protect, preserve or realize upon the Collateral and Secured Party’s Lien therein, in order to
effect the intent of this Agreement, all as fully and effectively as Debtor might do.


The power of attorney granted hereunder is a power coupled with an interest, shall be irrevocable
until this Agreement is terminated pursuant to Section 9, and shall not limit the rights of Secured
Party when no Event of Default shall have occurred and be continuing.




     9. Termination. This Agreement and the security interests granted hereunder shall not
terminate until the termination of the Commitment of the Secured Party under the Credit Agreement
and the full and complete payment and satisfaction of all Obligations (regardless of whether the
Credit Agreement shall have earlier terminated), at which time Secured Party shall notify (i) the
Securities Intermediary of the termination of the Control Agreement pursuant to Section 15 thereof
and (ii) HSBC TFS of the termination of the HSBC TFS Letter pursuant to paragraph 3 thereof.



     10. Further Assurances. At any time and from time to time, within 10 days of request
of Secured Party, and at the sole expense of Debtor, Debtor shall duly execute and deliver any and
all such further instruments, documents and agreements and take such further actions as Secured
Party may reasonably require in order for Secured Party to obtain the full benefits of this
Agreement, including, without limitation, using Debtor’s best efforts to secure all consents and
approvals necessary or appropriate for the assignment to Secured Party of any Collateral held by
Debtor or in which Debtor has any rights not heretofore assigned.



     11. Limitation on Duty of Secured Party. The powers conferred on Secured Party under
this Agreement are solely to protect the Secured Party’s interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral
in its possession and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any of the Collateral. Secured Party shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers and neither Secured
Party nor any of its officers, directors, employees or agents shall be responsible to Debtor for
any act or failure to act, except for gross negligence or willful misconduct. Without limiting the
foregoing, Secured Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if such Collateral is accorded treatment
substantially equivalent to that which Secured Party, in its individual capacity, accords its own
property consisting of the type of Collateral involved, it being understood and agreed that Secured
Party shall have no responsibility for taking any necessary steps, other than steps taken



 









 




in accordance with the standard of care set forth above, to preserve rights against any Person
with respect to any Collateral.




     12. Private Sales. Debtor recognizes that Secured Party may be unable to
effect a public sale of certain of the Collateral by reason of prohibitions contained in the
Securities Act of 1933, as amended, and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group of purchasers which
will be obliged to agree, among other things, to acquire such Collateral for their own account for
investment and not with a view to the distribution or resale thereof. Debtor acknowledges and
agrees that any such private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that, solely by reason of
such circumstances, any such private sale shall be deemed to have been made in a commercially
reasonable manner; provided, that nothing in this Section 12 shall otherwise relieve Secured Party
of any duty to proceed in a commercially reasonable manner in connection with such private sale.
Secured Party shall be under no obligation to delay a sale of any of the Collateral for the period
of time necessary to permit registration of any Collateral for public sale under such Act or
applicable state securities laws.



     13. Miscellaneous.



     (a) No Waiver. No failure on the part of Secured Party to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by Secured Party of any
right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. The rights and remedies hereunder provided are cumulative and
may be exercised singly or concurrently, and are not exclusive of any rights and remedies provided
by law.



     (b) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.



     (c) Notices. All notices, demands and requests that any party is required or elects
to give to any other party shall be given in accordance with the provisions of the Credit
Agreement.



     (d) Amendments. The terms of this Agreement may be waived, altered or amended only by
an instrument in writing duly executed by Debtor and Secured Party.



     (e) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of each of the parties hereto; provided, that
Debtor shall not assign or transfer its rights or delegate its obligations hereunder without the
prior written consent of Secured Party.



     (f) Counterparts; Headings. This Agreement may be executed in any number of
counterparts and by any party on any counterpart, all of which together shall constitute one and
the same instrument. The headings in this Agreement are for convenience of reference only and
shall not alter or otherwise affect the meaning hereof.



 









 





     (g) Severability. If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally construed in favor of
Secured Party in order to carry out the intentions of the parties hereto as nearly as may be
possible, and the invalidity or unenforceability of any provision in any jurisdiction shall not
affect the validity or enforceability of such provision in any other jurisdiction.



     IN WITNESS WHEREOF, the parties have caused this Security Agreement to be duly executed and
delivered as of the date first written above.



	 	 	 	 	 
	 	BLOCK FINANCIAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	HSBC FINANCE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 










 





EXHIBIT B




[FORM OF CONTROL AGREEMENT]




INVESTMENT ACCOUNT CONTROL AGREEMENT




     INVESTMENT ACCOUNT CONTROL AGREEMENT dated as of January 2, 2007 among BLOCK FINANCIAL
CORPORATION, a Delaware corporation (“Debtor”), HSBC FINANCE CORPORATION (“Secured
Party”), a Delaware corporation, and HSBC INVESTOR FUNDS (the “Securities
Intermediary”), a Massachusetts business trust.



     WHEREAS, Debtor, Secured Party and H&R Block, Inc. have entered into a Credit and Guarantee
Agreement dated as of January 2, 2007 (as amended, restated or otherwise modified and in effect
from time to time, the “Credit Agreement”) pursuant to which Secured Party has agreed,
subject to the terms and conditions thereof, to make loans to Debtor from time to time.



     WHEREAS, Secured Party has required, as a condition to its making loans under the Credit
Agreement, that Debtor execute and deliver to Secured Party a Security Agreement (as amended,
restated or otherwise modified and in effect from time to time, the “Security Agreement”),
which Security Agreement creates a security interest in certain property of Debtor, including the
Securities Account, as hereinafter defined, maintained with Securities Intermediary by Debtor in
which certain cash balances, securities, financial assets and other investment property are held.



     WHEREAS, Secured Party, Debtor and Securities Intermediary have agreed to enter into this
Agreement to perfect Secured Party’s security interests in the Collateral, as defined below.



     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:



     Section 1. Meaning of “UCC”. All references herein to the “UCC” shall mean
the Uniform Commercial Code as in effect in the State of New York.



     Section 2. Establishment of Securities Account. The Securities Intermediary hereby
confirms that (i) the Securities Intermediary has established account number 615878 in the name
Debtor (such account and any successor account, the “Securities Account”), (ii) the
Securities Account is a “securities account” as such term is defined in Section 8-501(a) of the
UCC, (iii) pursuant to that the Security Agreement, Secured Party has a security interest in
Debtor’s right, title and interest in and to such Securities Account and all cash balances,
securities, instruments, investment property and financial assets maintained therein from time to
time (collectively, “Collateral”) and all securities entitlements relative thereto, (iv)
the Securities Intermediary shall, subject to the terms of this Agreement, treat Secured Party as
entitled to exercise the rights relating to any Collateral credited to the Securities Account, (v)
all property delivered to the Securities Intermediary pursuant to the Security Agreement will be
promptly credited to the Securities Account and become Collateral, and (vi) all Collateral credited
to the Securities Account shall be registered in the name of the Secured Party, endorsed to the
Secured Party or in blank, and in no case will any Collateral credited to the Securities Account be
registered in the



 









 




name of the Debtor, payable to the order of the Debtor or specially endorsed to
the Debtor except to the extent the foregoing have been specially endorsed to the Secured Party or
in blank.




     Section 3. “Financial Assets” Election. The Securities Intermediary hereby agrees
that each item of property (whether investment property, financial asset, security, instrument or
cash) credited to the Securities Account shall be treated as a “financial asset” within the meaning
of Section 8-102(a)(9) of the UCC.



     Section 4. Sole Control. Secured Party shall have sole control over the Securities
Account. Securities Intermediary shall not accept any direction, instructions, or entitlement
orders with respect to the Securities Account or the Collateral credited thereto from any person
other than Secured Party, except as provided in Section 6 and unless otherwise ordered by a court
of competent jurisdiction.



     Section 5. Entitlement Orders. The Securities Intermediary hereby agrees that if
Secured Party delivers to the Securities Intermediary and its transfer agent identified in Section
14 (the “Transfer Agent”) an “entitlement order” (within the meaning of Section 8-102(a)(8) of the
UCC) relating to the Securities Account, the Securities Intermediary shall comply with such
entitlement order (and shall cause the Transfer Agent to so comply) without further consent by the
Debtor or any other person, and Debtor hereby irrevocably authorizes such compliance. Secured
Party will only issue an entitlement order following an “Event of Default” under the Credit
Agreement and for the purpose of directing the Securities Intermediary to distribute Collateral to
the Secured Party for application to the obligations of the Debtor under the Credit Agreement and
the Security Agreement.



     Section 6. Procedures for Securities Account. Without Secured Party’s prior written
consent: (i) neither Debtor nor any party other than Secured Party may withdraw any Collateral from
the Securities Account and (ii) the Securities Intermediary will not comply with any entitlement
order or request to withdraw any Collateral from the Securities Account given by any party other
than Secured Party.



     Section 7. Subordination of Lien; Waiver of Set-Off. In the event that the Securities
Intermediary has or subsequently obtains by agreement, operation of law or otherwise a security
interest in the Securities Account or any Collateral credited thereto, the Securities Intermediary
hereby agrees that such security interest shall be subordinate to the security interest of the
Secured Party. The Collateral will not be subject to deduction, set-off, banker’s lien, or any
other right in favor any person other than the Secured Party except for the payment of the
customary fees and expenses of the Securities Intermediary.



     Section 8. Choice of Law. Both this Agreement and the Securities Account shall be
governed by the laws of the State of New York. Regardless of any provision in any other agreement,
for purposes of the UCC, New York shall be deemed to be the Securities Intermediary’s location and
the Securities Account (as well as the securities entitlements related thereto) shall be governed
by the laws of the State of New York.



     Section 9. Conflict with other Agreements. There are no other agreements entered into
between the Securities Intermediary and the Debtor with respect to the Securities Account except
for a certain account application dated December 15, 2006 (the “Account Agreement”).



 









 




In
the event of any conflict between this Agreement (or any portion thereof) and any other agreement
now existing (including the Account Agreement) or hereafter entered into, the terms of this
Agreement shall prevail.




     Section 10. Indemnification Debtor agrees to indemnify Securities Intermediary and
Transfer Agent against all claims, liabilities and expenses incurred, sustained or payable by
Securities Intermediary or Transfer Agent arising out of this Agreement except to the extent
directly caused by the Securities Intermediary’s or the Transfer Agent’s gross negligence or
willful misconduct.



     Section 11. Amendments. No amendment or modification of this Agreement or waiver of
any right hereunder shall be binding on any party hereto unless it is in writing and is signed by
all of the parties hereto.



     Section 12. Notice of Adverse Claims. Except for the claims and interests of the
Secured Party and of Debtor in the Securities Account, the Securities Intermediary does not know of
any claim to, or interest in, the Securities Account or in any financial asset credited thereto.
If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment,
judgment, warrant of attachment, execution or similar process) against the Securities Account or in
any Collateral carried therein, the Securities Intermediary will promptly notify the Secured Party
and Debtor thereof.



     Section 13. Successors. The terms of this Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective corporate successors or heirs and
personal representatives.



     Section 14. Notices. All notices and other communications provided for herein shall
be in writing and shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:



	 	 	 	 	 
	 

	 	Secured Party:
	 	HSBC Finance Corporation
	 

	 	 	 	2700 Sanders Road
	 

	 	 	 	Prospect Heights, IL 60070
	 

	 	 	 	Attention: Treasurer
	 
	 	 	 	 
	 

	 	 	 	Fax no.: . (847) 205-7538
	 
	 	 	 	 
	 

	 	 	 	with copies to:
	 
	 	 	 	 
	 

	 	 	 	HSBC Finance Corporation
	 

	 	 	 	2700 Sanders Road
	 

	 	 	 	Prospect Heights, IL 60070
	 

	 	 	 	Attention: Deputy General Counsel-Corporate
	 

	 	 	 	Law Fax no.: (847) 564-6366
	 
	 	 	 	 
	 

	 	 	 	HSBC Securities, Inc.
	 

	 	 	 	425 Fifth Avenue, Lower Level
	 

	 	 	 	New York, N.Y. 10018






 









 






	 	 	 	 	 
	 

	 	 	 	(Telecopy No. (212) 525-2479)
	 

	 	 	 	Attention: Peter Nealon
	 
	 	 	 	 
	 

	 	 	 	HSBC Taxpayer Financial Services Inc.
	 

	 	 	 	200 Somerset Corporate Boulevard
	 

	 	 	 	Bridgewater, N.J. 08807
	 

	 	 	 	(Telecopy No. (908) 203-4211)
	 

	 	 	 	attention: CEO and Managing Director
	 
	 	 	 	 
	 

	 	 	 	HSBC Taxpayer Financial Services Inc.
	 

	 	 	 	90 Christiana Road
	 

	 	 	 	New Castle, DE 19707
	 

	 	 	 	(Telecopy No. (302) 327-2507)
	 

	 	 	 	attention: General Counsel
	 
	 	 	 	 
	 

	 	Debtor:
	 	Block Financial Corporation
	 

	 	 	 	One H&R Block Way
	 

	 	 	 	Kansas City, MO 64105
	 

	 	 	 	Attention: Becky Shulman (Telecopy
	 

	 	 	 	No. (816) 854-8043), David Staley
	 

	 	 	 	(Telecopy No. (816) 854-8043) and Andrew
	 

	 	 	 	Somora (Telecopy No. (816) 802-1043)
	 
	 	 	 	 
	 

	 	Securities Intermediary:
	 	HSBC Investor Funds
	 

	 	 	 	c/o HSBC Investments (USA) Inc.
	 

	 	 	 	452 Fifth Avenue
	 

	 	 	 	New York, NY 10018
	 

	 	 	 	Attention: Richard Fabietti
	 

	 	 	 	Telephone: 212 525-2387
	 

	 	 	 	Fax No.: 917 525-1032
	 
	 	 	 	 
	 

	 	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	HSBC Investments (USA) Inc.
	 

	 	 	 	452 Fifth Avenue
	 

	 	 	 	New York, NY 10018
	 

	 	 	 	Attention: James M. Curtis
	 

	 	 	 	Telephone: 212 525-6961
	 

	 	 	 	Fax No.: 917 229-5219
	 
	 	 	 	 
	 

	 	Transfer Agent:
	 	Bisys Fund Services, Inc.
	 

	 	 	 	3455 Stelzer Road
	 

	 	 	 	Columbus, Ohio 43219
	 

	 	 	 	Attention: Michael Bryan, Analyst






 









 






	 	 	 	 	 
	 

	 	 	 	TA Risk Management
	 

	 	 	 	Telephone: (614) 470-8676
	 

	 	 	 	Facsimile: (614) 470-8326





Any party hereto may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto. All notices and other communications given to any
party hereto in accordance with the provisions of this Agreement shall be deemed to have been given
on the date of receipt. Debtor, Secured Party or Securities Intermediary may, in its sole
discretion, agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of such
procedures may be limited to particular notices or communications.




     Section 15. Termination. The rights and powers granted herein to the Secured Party
have been granted in order to perfect its security interests in the Securities Account, are powers
coupled with an interest and will neither be affected by the bankruptcy of Debtor nor by the lapse
of time. This Agreement, the rights and powers granted herein to the Secured Party, and the
obligations of the Securities Intermediary hereunder shall automatically terminate upon the
termination of the Secured Party’s security interests pursuant to the terms of the Security
Agreement. The Secured Party shall promptly provide written notice of such termination to the
Securities Intermediary.



     Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any party hereto may
execute this Agreement by signing and delivering one or more counterparts.



 









 





     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first written above.



	 	 	 	 	 
	 	BLOCK FINANCIAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 
	 	HSBC FINANCE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 
	 	HSBC INVESTOR FUNDS,

as Securities Intermediary

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 









 






	 	 	 	 	 



EXHIBIT C




[FORM OF HSBC TFS LETTER]




HSBC TAXPAYER FINANCIAL SERVICES, INC.

90 Christiana Road

New Castle, Delaware 19720




As of January 2, 2007




HSBC Finance Corporation

2700 Sanders Road

Prospect Heights, IL 60070




Block Financial Corporation

One H&R Block Way

Kansas City, MO 64105




Ladies and Gentlemen:





     HSBC Taxpayer Financial Services (“HSBC TFS”) acknowledges that HSBC Finance
Corporation (the “Lender”) and Block Financial Corporation (the “Borrower”) have
notified HSBC TFS that they are party to (1) a Credit and Guarantee Agreement dated as of January
2, 2007 (as amended, restated or otherwise modified and in effect from time to time, the
“Credit Agreement”) with H&R Block, Inc., as Guarantor, pursuant to which the Lender has
agreed, subject to the terms and conditions thereof, to make loans to the Borrower from time to
time and (2) a Security Agreement dated as of January 2, 2007 (as amended, restated or otherwise
modified and in effect from time to time, the “Security Agreement”) pursuant to which the
Borrower has granted to the Lender a security interest in certain property, including the
Borrower’s right, title and interest in and to the Servicing Agreement and the Participation
Agreement to secure the obligations of the Borrower under the Credit Agreement. The parties are
entering into this letter agreement to set forth certain agreements among them.



     1. Definitions. Capitalized terms used herein that are not otherwise defined herein
shall have the meanings set forth in the Credit Agreement.



 









 





     2. Instructions. As contemplated in the Credit Agreement and the Security
Agreement, the Borrower hereby authorizes and instructs HSBC TFS: (1) to give notice to the Lender
of the Purchase Price of all Participation Interests to be purchased by the Borrower under the
Participation Agreement, such notice to be given to the Lender simultaneously with the giving of
notice to the Borrower under Section 4.3 of the Participation Agreement but in any case not later
than 9:30 a.m., New York City time; (2) to accept from the Lender for the account of the Borrower
the proceeds of Loans made by the Lender to the Borrower under the Credit Agreement in payment of
the Purchase Price of Participation Interests to the extent of the amount of such Loans; (3) to pay
97% of all amounts from time to time payable to the Borrower by HSBC TFS under Section 6 of the
Participation Agreement in respect of the repurchase of Participation Interests which have been
financed by the Lender direct to the Lender to such account as it shall specify from time to time;
and (4) to pay 97% of all amounts from time to time to be remitted to the Borrower by HSBC TFS
under Section 3.4(b)(ii) of the Servicing Agreement in respect of principal of HSBC RALs in which
the Borrower has purchased Participation Interests which have been financed by the Lender directly
to the Lender to such account as it shall specify from time to time; provided, that so long as no
Event of Default has occurred and is continuing under the Credit Agreement, HSBC TFS is authorized
and instructed to pay 3% of all amounts from time to time to be remitted to the Borrower by HSBC
TFS under Section 3.4(b)(ii) of the Servicing Agreement in respect of HSBC RALs in which the
Borrower has purchased Participation Interests which have been financed by the Lender directly to
the Borrower to such account as it shall specify from time to time.



     The Borrower and HSBC TFS agree that the authorizations and instructions in the preceding
paragraph may not be waived, modified or revoked without the prior written agreement of the Lender.
HSBC TFS hereby acknowledges and agrees to the instructions in the preceding paragraph. The
Lender agrees that it shall give prompt written notice to HSBC TFS and the Borrower when all Loans
borrowed and other amounts payable under the Credit Agreement have been paid in full and no further
Commitment exists thereunder, at which time the authorizations and instructions in the preceding
paragraph and the agreements of the parties in this letter agreement shall terminate.



     3. Miscellaneous. Except as provided in paragraph 2, all notices and other
communications provided for in this letter agreement shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as
follows:



	 	 	 	 	 
	 

	 	Lender:
	 	HSBC Finance Corporation
	 

	 	 	 	2700 Sanders Road
	 

	 	 	 	Prospect Heights, IL 60070
	 

	 	 	 	Attention: Treasurer
	 

	 	 	 	Fax no.: (847) 205-7538
	 

	 	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	HSBC Finance Corporation
	 

	 	 	 	2700 Sanders Road
	 

	 	 	 	Prospect Heights, IL 60070






 









 






	 	 	 	 	 
	 

	 	 	 	Attention: Deputy General Counsel—Corporate Law
	 
	 	 	 	 
	 

	 	 	 	Fax no.: (847) 564-6366
	 

	 	 	 	HSBC Securities, Inc.
	 

	 	 	 	425 Fifth Avenue, Lower Level
	 

	 	 	 	New York, N.Y. 10018
	 

	 	 	 	(Telecopy No. (212) 525-2479)
	 

	 	 	 	Attention: Peter Nealon
	 
	 	 	 	 
	 

	 	 	 	HSBC Taxpayer Financial Services Inc.
	 

	 	 	 	200 Somerset Corporate Boulevard
	 

	 	 	 	Bridgewater, N.J. 08807
	 

	 	 	 	(Telecopy No. (908) 203-4211)
	 

	 	 	 	attention: CEO and Managing Director
	 
	 	 	 	 
	 

	 	 	 	HSBC Taxpayer Financial Services Inc.
	 

	 	 	 	90 Christiana Road
	 

	 	 	 	New Castle, DE 19707
	 

	 	 	 	(Telecopy No. (302) 327-2507)
	 

	 	 	 	attention: General Counsel
	 
	 	 	 	 
	 

	 	Borrower:
	 	Block Financial Corporation
	 

	 	 	 	One H&R Block Way
	 

	 	 	 	Kansas City, MO 64105
	 

	 	 	 	Attention: Becky Shulman (Telecopy
	 

	 	 	 	No. (816) 854-8043), David Staley
	 

	 	 	 	(Telecopy No. (816) 854-8043) and Andrew
	 

	 	 	 	Somora (Telecopy No. (816) 802-1043)
	 
	 	 	 	 
	 

	 	HSBC TFS:
	 	HSBC Taxpayer Financial Services Inc.
	 

	 	 	 	90 Christiana Road
	 

	 	 	 	New Castle, Delaware 19720
	 

	 	 	 	Attention: CEO and Managing Director
	 

	 	 	 	Telephone: 908-203-4441
	 

	 	 	 	Fax No.: 908-203-4211





Any party hereto may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto. All notices and other communications given to any
party hereto in accordance with the provisions of this letter agreement shall be deemed to have
been given on the date of receipt. Without limiting paragraph 2 hereof, the Lender, the Borrower
or HSBC TFS may, in its sole discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant


 









 







to procedures approved by it; provided that approval of such procedures may be limited to
particular notices or communications.




     This letter agreement shall be governed by and construed in accordance with the law of the
State of New York.



 









 





     By executing this letter agreement in the space below, each of the Borrower, HSBC TFS and the
Lender agree to the terms and provision of this letter agreement.



	 	 	 	 	 
	 	Very truly yours,



HSBC TAXPAYER FINANCIAL SERVICES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Accepted and agreed:



HSBC FINANCE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Accepted and agreed:



BLOCK FINANCIAL CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 









 






	 	 	 	 	 



EXHIBIT D




[FORM OF OPINION OF STINSON MORRISON HECKER LLP]




January ___, 2007




HSBC Finance Corporation

2700 Sanders Road

Prospect Heights, Illinois 60070




Ladies and Gentlemen:




          We have acted as special counsel for Block Financial Corporation (the “Borrower”) and H&R
Block, Inc. (the “Guarantor” and, together with the Borrower, the “Credit Parties”), in connection
with the Credit and Guarantee Agreement, dated as of January 2, 2007 (the “Credit Agreement”), by
and among the Borrower, the Guarantor and HSBC Finance Corporation (the “Lender”). Unless
otherwise defined herein, capitalized terms defined in the Credit Agreement and used herein shall
have the meanings given to them in the Credit Agreement, and capitalized terms defined in the
Security Agreement (defined below) and used herein, but not defined in the Credit Agreement, shall
have the meanings given to them in the Security Agreement.




          In connection with this opinion letter, we have examined originally executed counterparts or
other copies identified to our satisfaction of the following documents (the “Reviewed Documents”):





	 	(a)	 	the Credit Agreement;
	 
	 	(b)	 	the Security Agreement, dated as of January 2, 2007 (the “Security Agreement”),
between the Borrower and the Lender;
	 
	 	(c)	 	the Investment Account Control Agreement dated as of January 2, 2007 (the
“Control Agreement”), among the Borrower, the Lender and HSBC Investor Funds (the
“Securities Intermediary”);
	 
	 	(d)	 	the letter agreement, dated as of January 2, 2007 (the “HSBC TFS Letter”) among
the Borrower, the Lender and HSBC TFS;
	 
	 	(e)	 	the Form UCC-1 Financing Statement naming the Borrower, as Debtor, and the
Lender, as Secured Party, filed or to be filed by Lender in the office of the Secretary
of State of Delaware in the form attached hereto as Schedule A (the “Financing
Statement”);




 









 












	 	(f)	 	the following documents regarding the Borrower: (i) the certificate of
incorporation and any amendments thereto certified as of the date hereof by the
Secretary of the Borrower, (ii) the by-laws and any amendments thereto certified as of
the date hereof by the Secretary of the Borrower, (iii) a copy of the resolutions of
the Board of Directors of the Borrower certified as of the date hereof by the Secretary
of the Borrower and (iv) a certificate of good standing dated December ___, 2006 issued
by the Secretary of State of Delaware;
	 
	 	(g)	 	the following documents regarding the Guarantor: (i) the certificate of
incorporation and any amendments thereto certified as of the date hereof by the
Secretary of the Guarantor, (ii) the by-laws and any amendments thereto certified as of
the date hereof by the Secretary of the Guarantor, (iii) a copy of the resolutions of
the Board of Directors of the Guarantor certified as of the date hereof by the
Secretary of the Guarantor and (iv) a certificate of good standing dated December ___,
2006 issued by the Secretary of State of Missouri; and
	 
	 	(h)	 	such other, agreements, certificates, documents, orders, pleadings, records and
papers, including, without limitation, certificates of public officials and
certificates of representatives of the Borrower and the Guarantor, as we have deemed
appropriate, in our professional judgment, to render the opinions set forth below.





          The documents specified in items (a) through (d) above are hereinafter collectively called the
“Loan Documents” and individually, a “Loan Document.”




          In rendering the opinions and confirmations set forth herein, we have made, without
investigation on our part, the following assumptions:




     a. (i) Each Reviewed Document submitted to us as an original is authentic; (ii) each Reviewed
Document submitted to us as a certified, conformed, telecopied, photostatic, electronic or
execution copy conforms to the original of such document, and each such original is authentic;
(iii) all signatures appearing on Reviewed Documents are genuine; (iv) the execution, delivery and
performance of each Loan Document have been duly authorized by all requisite corporate, limited
liability company, partnership or other action on the part of, and each Loan Document has been duly
executed and delivered by, the parties thereto other than the Credit Parties, and each Loan
Document is, under all applicable laws, the valid and binding obligation of the parties thereto
(other than the Credit Parties) enforceable against such parties (other than the Credit Parties) in
accordance with its terms; (v) all natural persons who have signed or will sign any of the Reviewed
Documents had, or will have, as the case may be, the legal capacity to do so at the time of such
signature; and (vi) excluding Reviewed Documents, there is no agreement, understanding, course of
dealing or performance, usage of trade, or writing defining, supplementing, amending, modifying,
waiving or qualifying the terms of any of the Loan Documents.



 









 





     b. The statements, recitals, representations and warranties as to matters of fact set forth in
the Loan Documents are accurate and complete. All certificates and similar documents provided to
us by public officials are accurate and complete. The certificates provided to us by either or
both of the Credit Parties are accurate and complete as to the factual matters set forth therein.



     c. There is no circumstance (such as, but not limited to mutual mistake of fact or
misunderstanding, fraud in the inducement, duress, undue influence, waiver or estoppel) extrinsic
to the Loan Documents which might give rise to a defense against enforcement of any of the Loan
Documents.



     d. The conduct of the parties and their respective agents in connection with the Loan
Documents and the transactions contemplated thereby has complied with any requirements of good
faith, fair dealing, and conscionability.



     e. The Collateral exists, and the Borrower has sufficient rights in the Collateral to grant a
security interest therein under Section 9-203 of the New York UCC (defined below), the Missouri UCC
(defined below) or the Delaware UCC (defined below), as applicable, and we express no opinion as to
the nature or extent of the rights or title of the Borrower in and to any of the Collateral.



     f. Each opinion recipient is without notice of any defense against enforcement of any rights
created by, or any adverse claim to any property or security interest transferred or created as a
part of or contemplated by, the Loan Documents.



     g. The Financing Statement has been, or will be, properly filed and indexed in the Uniform
Commercial Code records of the Secretary of State of Delaware.



     h. The Securities Intermediary is a “securities intermediary” (as defined in § 8-102(a)(14) of
the New York UCC) with respect to the Collateral which is the subject of the Control Agreement.



          Based upon the foregoing, and subject to the assumptions, qualifications and limitations set
forth herein, we are of the opinion that as of this date:




          1. Borrower is a corporation validly existing and in good standing under the laws of the State
of Delaware, Guarantor is a corporation validly existing and in good standing under the laws of the
State of Missouri, and each Credit Party has the corporate power to own its properties and to carry
on its business as presently conducted by it as described in the

 









 








Guarantor’s Form 10-K for the year ended December 31, 2005, as amended, or any of the
Guarantor’s subsequent filings with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.




          2. Each Credit Party has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Loan Documents to which it is a party and has taken all necessary
corporate action to authorize the execution and delivery of, and the performance of its obligations
under, the Loan Documents to which it is a party.




          3. Each Credit Party has duly executed and delivered the Loan Documents to which it is a party
and such Loan Documents constitute the legal, valid and binding agreements of such Credit Party,
enforceable against such Credit Party in accordance with their respective terms.




          4. The execution and delivery by each Credit Party of each Loan Document to which it is a
party do not, and the performance of its obligations thereunder will not, (a) violate such Credit
Party’s articles or certificate of incorporation or by-laws, (b) violate any applicable law,
statute or regulation of the United States or the State of Missouri that we, based upon the scope
of our representation of and our experience with such Credit Party, reasonably recognize as
applicable to such Credit Party with respect to transactions of the type contemplated by the Loan
Documents, (c) violate any order, writ, judgment, injunction, decree, determination or award of any
court or other Governmental Authority binding upon such Credit Party of which we have knowledge, or
(d) breach, constitute a default under, result in the acceleration of (or entitle any party to
accelerate) the maturity of, any obligation of a Credit Party under, or result in or require the
creation of any lien upon or security interest in (other than pursuant to the Loan Documents) any
of its property pursuant to the terms of, the Bank Revolvers, the other financing agreements and
instruments and the Program Contracts listed on Schedule B attached hereto.




          5. No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority of the United States, the State of Missouri or the State of Delaware is
required for the execution and delivery by a Credit Party, or the validity or enforceability
against such Credit Party, of each Loan Document to which it is a party other than (i) such as have
been obtained, made or given and are in full force in effect, (ii) the filing of financing
statements (including the Financing Statement) under the Uniform Commercial Code pursuant to the
requirements of the Loan Documents and (iii) any authorization, approval, notice, filing or other
action which is not a condition required to be satisfied on or before the Effective Date but is
itself a future obligation of such Credit Party under a Loan Document.




          6. To our knowledge, there is no suit, action or proceeding pending against either Credit
Party before any court, governmental or regulatory authority, agency or commission, or board of
arbitration or overtly threatened against either Credit Party in writing which (whether pending or
threatened) challenges the legality, validity or enforceability of any Loan Document.




          7. The Security Agreement is effective to create in favor of the Lender a valid security
interest in all right, title and interest of the Borrower in the Collateral described in the
Security Agreement to secure the Obligations. Assuming that the Financing Statement was





 









 




filed in the office of the Secretary of State of Delaware (the “Filing Office”), the
security interest of the Lender in the Collateral has been duly perfected in that portion of the
Collateral in which a security interest may be perfected by the filing of a financing statement
under the Delaware UCC. Without limiting the foregoing, the security interest of the Lender in the
Securities Account has been perfected pursuant to the execution and delivery of the Control
Agreement.




          8. The making of the Loans and the application of the proceeds thereof as provided in the
Credit Agreement do not violate Regulations T, U and X of the Board of Governors of the Federal
Reserve Board.




          9. The Borrower is not an “investment company” or a company “controlled by” an “investment
company,” as such terms are defined in the Investment Company Act of 1940, as amended.




     Our opinions set forth above are subject to the following additional qualifications and
limitations:




	1.	 	The enforceability of each Loan Document is subject to the effect of applicable bankruptcy,
insolvency, reorganization, receivership, arrangement, moratorium, assignment for the benefit
of creditors and other similar laws affecting the rights and remedies of creditors. This
qualification includes, without limitation, the avoidance, fraudulent transfer and preference
provisions of the federal Bankruptcy Code of 1978 (11 U.S.C. §§ 101 et seq.), as amended, and
the fraudulent transfer and conveyance laws of the State of Missouri, and we render no opinion
that any transaction provided for in the Loan Documents would not be subject to avoidance or
otherwise adversely affected under such provisions or laws.






	2.	 	The enforceability of each Loan Document is subject to the effect of principles of equity
(including those respecting the availability of specific performance), whether considered in a
proceeding at law or in equity, and the limitations imposed by applicable procedural
requirements of applicable state or federal law.






	3.	 	The enforceability of each Loan Document is subject to (1) the effect of generally applicable
rules of law that limit or deny the enforceability of provisions (i) purporting to waive
defenses or rights or the obligations of good faith, fair dealing, diligence and
reasonableness; (ii) purporting to authorize a party to take discretionary independent actions
for the account of, or as agent or attorney-in-fact for, a Credit Party under a Loan Document;
or (iii) purporting to provide for the indemnification or exculpation of a party with respect
to such party’s intentional acts or gross negligence, with respect to securities law
violations or to the extent that such provisions violate public policy considerations; and (2)
the effect of generally applicable rules of law that may, where a portion of the contract may
be unenforceable, limit the enforceability of the balance of the contract to circumstances in
which the unenforceable portion is not an essential part of the transaction or contract.




 









 












	4.	 	We express no opinion as to the enforceability of (i) any contractual provision which either
directly or indirectly limits or tends to limit the time in which any suit or action
may be instituted by a party; (ii) any contractual provision which requires a party to
execute and deliver additional agreements or instruments other than agreements or
instruments which are limited in effect to effectuating the express terms of a Loan Document
and do not expand or modify such terms; (iii) any waiver by a party of personal service of
process or any consent of a party to service of process upon it in a manner that does not
satisfy the requirements of applicable law; (iv) any waiver by a party of its right to a
jury trial, (v) any provision of a Loan Document that purports to waive or modify the rules
identified in Section 9-602 of the applicable Uniform Commercial Code; and (vi) any
contractual provision which would have the effect of giving the Lender cumulative or
duplicative remedies, to the extent such cumulative or duplicate remedies purport to or
would have the effect of compensating the Lender in amounts in excess of the actual amount
of the indebtedness owed to the Lender and other loss suffered by the Lender.






	5.	 	The enforceability of any right of set-off in any of the Loan Documents is subject to the
effect of common law principles pertaining to set-off, such as mutuality of obligations,
maturity of obligations, and the like.






	6.	 	The enforceability of a Loan Document which purports to be a guarantee of, or the grant of a
lien or security interest for, the payment or performance of obligations of another person
(“guaranteed obligations”), including, without limitation, the applicable provisions
of the Credit Agreement, is subject to the effect of generally applicable rules of law that
may discharge the guarantor or grantor of such lien or security interest to the extent that
(i) action or inaction by the beneficiary of the guaranteed obligations impairs the value of
collateral securing guaranteed obligations to the detriment of such guarantor or grantor or
(ii) the guaranteed obligations are materially modified.






	7.	 	With respect to the recovery of attorneys’ fees under the Loan Documents, to the extent that
the laws of the State of Missouri are applicable, the provisions of Mo. Rev. Stat. § 408.092
limit the right to recover attorneys’ fees in connection with a “credit agreement” (as defined
in Mo. Rev. Stat. § 432.045.1) and reads in pertinent part as follows:






Notwithstanding any other provision of law to the contrary, attorneys’ fees
are permitted to enforce a credit agreement provided the enforcing attorney
is a licensed member of the Missouri Bar or is authorized to practice law in
Missouri, and such fees meet one of the following requirements:




     (1) Such fees are included in a written credit agreement, and are not
otherwise prohibited by law; or




     (2) Such fees do not exceed fifteen percent of the outstanding credit
balance in default, provided such credit was extended by a for-profit
business or credit union. ...



 









 






At the court’s discretion, additional fees may be awarded to the attorney
for the prevailing party.




A “credit agreement” is defined in Mo. Rev. Stat. § 432.045.1 as “an
agreement to lend or forebear repayment of money, to otherwise extend
credit, or to make other financial accommodation.”




	8.	 	With respect to the enforceability of any contractual provision stating that the Credit
Agreement or any of the other Loan Documents or the obligations, rights or remedies of the
parties thereunder shall be governed by or construed or determined in accordance with the laws
of the State of New York, we call your attention to the following: Missouri courts generally
apply the rules of Section 187 of the Restatement (Second) of Conflicts of Law (1971) in
deciding whether to give effect to the parties’ choice of the state whose law will govern the
interpretation of their contractual rights and duties. State ex rel. Geil v. Corcoran, 623
S.W.2d 557, 559 (Mo. Ct. App. 1981); Davidson & Associates, Inc. v. Internet Gateway, 334 F.
Supp. 2d 1164, 1175 (E.D. Mo. 2004). Section 187 of the Restatement provides in pertinent
part as follows:






	 	(1)	 	The law of the state chosen by the parties to govern their
contractual rights and duties will be applied if the particular issue is one
which the parties could have resolved by an explicit provision in their
agreement directed to that issue.
	 
	 	(2)	 	The law of the state chosen by the parties to govern their
contractual rights and duties will be applied even if the particular issue is
one which the parties could not have resolved by an explicit provision in their
agreement directed to that issue unless either:






	 	(a)	 	the chosen state has no substantial
relationship to the parties or the transaction and there is no
other reasonable basis for the parties’ choice, or
	 
	 	(b)	 	application of the law of the chosen
state would be contrary to a fundamental policy of a state
which has a materially greater interest than the chosen state
in the determination of the particular issue and which, under
the rule of § 188 [of the Restatement], would be the state of
the applicable law in the absence of an effective choice of law
by the parties.






     While the Missouri choice of law rules are, nevertheless, not entirely settled,
we believe that a state or federal court sitting in the State of Missouri, properly
presented with the question and properly applying the choice of law rules of the
State of Missouri should honor the provisions of a Loan Document stating that, to
the extent provided therein, the rights and duties of the parties thereto are to be
governed by the laws of the State of New York (except as to matters of procedure
which may be governed by the laws of the forum state) unless either (a) the State of
New York has no substantial relationship to the parties to such Loan Document or the
transactions contemplated by such Loan Document and there is



 









 






 no reasonable basis for
such parties’ choice or (b) application of the laws of the State of New York would
be contrary to a fundamental policy of the State of Missouri and the State of Missouri has materially greater interest than the
State of New York in the determination of the particular issue.




	9.	 	With respect to the enforceability of any contractual provision in the Credit Agreement or
any other Loan Document whereby the parties submit to the jurisdiction of the federal and New
York State courts located in the City or County of New York in connection with any suit,
action or proceeding related to such agreement or any of the matters contemplated thereby, we
call your attention to the following: Missouri courts generally follow the holding of the
Missouri Supreme Court in High Life Sales Co. v. Brown-Forman Corp., 823 S.W.2d 493 (Mo. 1992)
that a forum selection clause in a contract should be enforced unless it is unfair or
unreasonable to do so. Id. at 494. Factors considered by Missouri courts in determining the
fairness of enforcing forum selection clauses include (1) whether a forum selection clause is
a part of an adhesive contract (i.e., “one in which the parties have unequal standing in terms
of bargaining power (usually a large corporation versus an individual) and often involv[ing]
take-it-or-leave-it provisions in printed form contracts”, id. at 497), (2) whether the forum
selection clause was neutral and reciprocal (Id.) and (3) whether inclusion of the forum
selection clause in the contract was the product of fraud or coercion (Marano Enterprises v.
Z-Teca Restaurants, L.P., 254 F.3d 753, 757 (8th Cir. 2001)). There are also
Missouri cases which have found a forum selection clause to be unreasonable (e.g., High Life
Sales).
	 
	10.	 	In addition to the other qualifications set forth in this opinion letter regarding the
enforceability of a Loan Document under the laws of the State of Missouri, certain waivers,
procedures, remedies and other provisions of any Loan Document covered by such opinion may be
rendered unenforceable or limited by the laws, regulations or judicial decisions of the State
of Missouri within the scope of this opinion letter, but such laws, regulations and judicial
decisions would not render any of such Loan Documents invalid as a whole under the laws of the
State of Missouri and would not make the remedies available under such Loan Documents
inadequate for the practical realization of the principal rights and benefits purporting to be
afforded thereby, except for the economic consequences of any judicial, administrative or
other delay or procedure which may be imposed by applicable law.
	 
	11.	 	With respect to our opinions regarding security interests set forth in opinion paragraph 7
above, we advise you that (i) any security interest in “proceeds” (as defined in the New York
UCC, the Missouri UCC or the Delaware UCC, as applicable) of Collateral may be limited as to
perfection and effectiveness to the extent provided in Section 9-315 of the New York UCC, the
Missouri UCC or the Delaware UCC, as applicable; and (ii) the Lender’s rights under the Loan
Documents are subject to the rights of the following parties under circumstances described in
the applicable sections of the New York UCC, the Missouri UCC or the Delaware UCC, as
applicable, set forth below: (a) purchasers of chattel paper or instruments under the
circumstances described in Section 9-330 or (b) holders in due course of negotiable
instruments, holders to whom negotiable documents of title have been duly negotiated, or
protected purchasers of securities, in each case, under the circumstances described in Section
9-331.




 









 












	12.	 	We note that in order to continue the perfection of the security interest in that portion of
the Collateral which has been perfected by the filing of the Financing Statement under the
Delaware UCC for more than five (5) years, a continuation statement must be filed as to such
Financing Statement in the Filing Office within six (6) months prior to the expiration of each
consecutive five-year period (with the first such period commencing on the date the Financing
Statement was duly filed) and in all respects in compliance with Article 9, Part 5 of the
Delaware UCC.






	13.	 	We call your attention to the fact that with respect to any security interest in Collateral
perfected by the filing of the Financing Statement under the Delaware UCC, the Financing
Statement will not be effective to perfect a security interest under the Delaware UCC in (i)
any Collateral acquired by the Borrower more than four (4) months after it changes it name so
as to make the Financing Statement seriously misleading, unless a new appropriate financing
statement indicating its new name is properly filed before the expiration of such four (4)
months and (ii) any Collateral four (4) months after it changes its jurisdiction of
organization (or if earlier, when perfection under the Delaware UCC would have ceased) unless
such security interest is perfected in such new jurisdiction before that termination occurs.






	14.	 	We are expressing no opinion as to the priority of any lien or security interest created by
the Loan Documents.






	15.	 	We call your attention that Section 522 of the federal Bankruptcy Code limits the extent to
which property acquired by a debtor after the commencement of a case under the federal
Bankruptcy Code may be subject to a security interest arising from a security agreement
entered into by such debtor before the commencement of such case.






	16.	 	We do not express any opinion as to the attachment or perfection of a security interest in
deposit accounts, letter-of-credit rights, money or commercial tort claims as those terms are
defined in the New York UCC, the Missouri UCC or the Delaware UCC, as applicable.






	17.	 	We express no opinion with respect to any laws, rules or regulations governing the issuance
or sale of securities.






	18.	 	In connection with any matters confirmed by us with respect to the existence or absence of
facts, conditions or circumstances, the words “to our knowledge”, “of which we have
knowledge”, “known to us” and words of similar import mean that in the course of performing
legal services on behalf of any Credit Party, we are without conscious awareness of facts or
other information that such confirmed matters are untrue, and in preparing this opinion
letter, we have not undertaken any independent verification of such confirmed matters beyond
our recollection of legal services currently or previously performed by us for the Credit
Parties, and have made no investigation or inquiry with any Credit Party or any other persons
regarding such confirmed matters except as stated above in this opinion letter. For purposes
of the preceding sentence, the terms “to our knowledge”, “of which we have knowledge”, “known
to us” and similar phrases refer to the actual present knowledge of those lawyers of Stinson
Morrison Hecker LLP who




 









 












	     	 	have devoted substantive attention to the matters relating to the Loan Documents and the
other transactions of the Credit Parties occurring on the date hereof, and not to the
knowledge of Stinson Morrison Hecker LLP as a firm or its partners or employees generally.






	19.	 	Our opinions set forth in this opinion letter are based upon the facts in existence and the
laws in effect on the date hereof, and we expressly disclaim any obligation to update or
supplement our opinions in response to changes in the law becoming effective hereafter or
future events or circumstances affecting the transactions contemplated by the Loan Documents.





          Our opinions and statements expressed herein are restricted to matters governed by (a) the
federal laws of the United States of America; (b) the laws of the State of Missouri, including,
without limitation, the Uniform Commercial Code as in effect in the State of Missouri, Mo. Rev.
Stat. §§ 400.1-101 et seq. (the “Missouri UCC”); (c) with respect to the opinions given as to the
Borrower set forth in opinion paragraphs 1, 2, 3, 4(a) and 5, the General Corporation Law of
Delaware, 8 Del. Code Ann. §§ 101 et seq.; (d) with respect to the opinions given as to the
Borrower set forth in the first and third sentences of opinion paragraph 7, Article 9 of the
Uniform Commercial Code as in effect in the State of New York, 38 New York Consol. Laws §§ 9-101 et
seq. (the “New York UCC”); and (e) with respect to the opinions given as to the Borrower set forth
in opinion paragraph 5 and the second sentence of opinion paragraph 7, Article 9 of the Uniform
Commercial Code as in effect in the State of Delaware, 6 Del. Code Ann. §§ 9-101 et seq. (the
"Delaware UCC”). Except as indicated in the preceding sentence, we express no opinion as to any
matter rising under the laws of any other jurisdiction, including, without limitation, the
statutes, ordinances, rules and regulations of counties, towns, municipalities and special
political subdivisions of the State of Missouri. To the extent that any Reviewed Document is
governed by or subject to the laws of any state or jurisdiction not specified above in this
paragraph with respect to such opinion or confirmation, we have assumed that the laws of such state
or jurisdiction (without regard to conflicts of laws principles) are substantively identical to the
laws of the State of Missouri.




          This opinion letter is solely for the benefit of the addressee hereof in connection with the
execution and delivery of the Loan Documents and may not be relied upon for any other purpose or by
any other person for any purpose, without in each instance our prior written consent. We
understand that this opinion letter may be included in closing binders with respect to the
transactions contemplated by the Loan Documents.




	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	STINSON MORRISON & HECKER LLP






 









 






EXHIBIT A




Financing Statement




[Attached]




 









 





EXHIBIT B




Financing Agreements and Instruments





	1.	 	Indenture dated October 20, 1997 among Block Financial Corporation (the “Company”), H&R
Block, Inc. (the “Guarantor”) and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust
Company) (the “First Trustee”), together with:






	 	a.	 	The First Supplemental Indenture dated as of April 18, 2000 among the
Company, the Guarantor, the First Trustee and The Bank of New York, as separate
trustee under the Indenture (the “Second Trustee”).
	 
	 	b.	 	The Company’s 8.50% Notes due 2007, which are guaranteed by the
Guarantor pursuant to the guarantees endorsed on said Notes.
	 
	 	c.	 	The Officers’ Certificate of the Company dated October 26, 2004
establishing the terms of the Notes described in d. below.
	 
	 	d.	 	The Company’s 5.125% Notes due 2014, which are guaranteed by the
Guarantor pursuant to the guarantees endorsed on said Notes.






	2.	 	The Amended and Restated Five-year Credit and Guarantee Agreement dated as of August 10, 2005
among the Company, the Guarantor, the financial institutions which are Lender parties thereto,
and JP Morgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative
Agent”), as amended by the First Amendment dated as of November 28, 2006 among the Company,
the Guarantor, the Lender parties and the Administrative Agent.






	3.	 	The Five-Year Credit and Guarantee Agreement dated as of August 10, 2005 among the Company,
the Guarantor, the financial institutions which are Lender parties thereto, and the
Administrative Agent, as amended by the First Amendment dated as of November 28, 2006 among
the Company, the Guarantor, the Lender parties and the Administrative Agent.






	4.	 	The Credit and Guarantee Agreement to be dated as of January 2, 2007 among the Company, the
Guarantor and BNP Paribas.






	5.	 	The HSBC Retail Settlement Products Distribution Agreement, dated as of September 23, 2005
among HSBC Bank USA, National Association, HSBC TFS, Beneficial Franchise Company Inc.,
Household Tax Masters Acquisition Corporation, H&R Block Services, Inc., H&R Block Tax
Services, Inc., H&R Block Enterprises, Inc., H&R Block Eastern Enterprises, Inc., H&R Block
Digital Tax Solutions, LLC, H&R Block and Associates, L.P., HRB Royalty, Inc., HSBC Finance
Corporation and the Guarantor, as amended from time to time, and any restatement, extension,
renewal and replacement thereof.






	6.	 	The HSBC Refund Anticipation Loan Participation Agreement, dated as of September 23, 2005
among Household Tax Masters Acquisition Corporation, the Company, HSBC Bank USA, National
Association, HSBC TFS and HSBC Trust Company (Delaware),




 









 












	 	 	National Association, as amended from time to time, and any restatement, extension, renewal
and replacement thereof.






	7.	 	The HSBC Settlement Products Servicing Agreement dated as of September 23, 2005 among HSBC
Bank USA, National Association, HSBC TFS, Household Tax Masters Acquisition Corporation and
the Company, as amended from time to time, and any restatement, extension, renewal and
replacement thereof.






	8.	 	The HSBC Settlement Products Indemnification Agreement dated as of September 23, 2005 among
HSBC Bank USA, National Association, HSBC TFS, Household Tax Masters Acquisition Corporation,
Beneficial Franchise Company, Inc., H&R Block Services, Inc., H&R Block Tax Services, Inc.,
H&R Block Enterprises, Inc., H&R Block Eastern Enterprises, Inc., H&R Block Digital Tax
Solutions, LLC, H&R Block and Associates, L.P., HRB Royalty, Inc. and the Company, as amended
from time to time, and any restatement, extension, renewal and replacement thereof.