EX-10.2






Exhibit 10.2




 

 








CREDIT AND GUARANTEE AGREEMENT




dated as of




January 14, 2009




among




BLOCK FINANCIAL LLC,

as Borrower,




H&R BLOCK, INC.,

as Guarantor,




and




HSBC FINANCE CORPORATION,

as Lender




$2,500,000,000 REVOLVING CREDIT FACILITY




 

 






 









 












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
	 	 	15	 
	 
	 	 	 	 
	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
	 	 	16	 
	SECTION 2.5. Repayment of Loans; Evidence of Debt
	 	 	16	 
	SECTION 2.6. Prepayment of Loans
	 	 	17	 
	SECTION 2.7. Interest
	 	 	18	 
	SECTION 2.8. Alternate Rate of Interest
	 	 	18	 
	SECTION 2.9. Increased Costs
	 	 	19	 
	SECTION 2.10. Taxes
	 	 	20	 
	SECTION 2.11. Payments Generally
	 	 	20	 
	SECTION 2.12. Mitigation Obligations
	 	 	21	 
	 
	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES
	 	 	21	 
	 
	 	 	 	 
	SECTION 3.1. Organization; Powers
	 	 	21	 
	SECTION 3.2. Authorization; Enforceability
	 	 	21	 
	SECTION 3.3. Governmental Approvals; No Conflicts
	 	 	21	 
	SECTION 3.4. Financial Condition; No Material Adverse Change
	 	 	22	 
	SECTION 3.5. Properties
	 	 	22	 
	SECTION 3.6. Litigation and Environmental Matters
	 	 	23	 
	SECTION 3.7. Compliance with Laws and Agreements
	 	 	23	 
	SECTION 3.8. Investment Company Status
	 	 	23	 
	SECTION 3.9. Taxes
	 	 	23	 
	SECTION 3.10. ERISA
	 	 	24	 
	SECTION 3.11. Disclosure
	 	 	24	 
	SECTION 3.12. Federal Regulations
	 	 	24	 
	SECTION 3.13. Subsidiaries
	 	 	24	 
	SECTION 3.14. Insurance
	 	 	24	 






-i-









 






	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE IV CONDITIONS
	 	 	24	 
	 
	 	 	 	 
	SECTION 4.1. Effective Date
	 	 	24	 
	SECTION 4.2. Closing Date
	 	 	25	 
	SECTION 4.3. Each Loan
	 	 	26	 
	 
	 	 	 	 
	ARTICLE V AFFIRMATIVE COVENANTS
	 	 	26	 
	 
	 	 	 	 
	SECTION 5.1. Financial Statements and Other Information
	 	 	26	 
	SECTION 5.2. Notices of Material Events
	 	 	28	 
	SECTION 5.3. Existence; Conduct of Business
	 	 	28	 
	SECTION 5.4. Payment of Taxes
	 	 	28	 
	SECTION 5.5. Maintenance of Properties; Insurance
	 	 	28	 
	SECTION 5.6. Books and Records; Inspection Rights
	 	 	29	 
	SECTION 5.7. Compliance with Laws
	 	 	29	 
	SECTION 5.8. Use of Proceeds
	 	 	29	 
	SECTION 5.9 Additional Collateral
	 	 	29	 
	 
	 	 	 	 
	ARTICLE VI NEGATIVE COVENANTS
	 	 	29	 
	 
	 	 	 	 
	SECTION 6.1. Adjusted Net Worth
	 	 	29	 
	SECTION 6.2. Indebtedness
	 	 	29	 
	SECTION 6.3. Liens
	 	 	32	 
	SECTION 6.4. Fundamental Changes; Sale of Assets
	 	 	34	 
	SECTION 6.5. Transactions with Affiliates
	 	 	34	 
	SECTION 6.6. Restrictive Agreements.
	 	 	35	 
	 
	 	 	 	 
	ARTICLE VII GUARANTEE
	 	 	35	 
	 
	 	 	 	 
	SECTION 7.1. Guarantee
	 	 	35	 
	SECTION 7.2. Delay of Subrogation
	 	 	36	 
	SECTION 7.3. Amendments, etc. with respect to the Obligations; Waiver of Rights
	 	 	37	 
	SECTION 7.4. Guarantee Absolute and Unconditional
	 	 	37	 
	SECTION 7.5. Reinstatement
	 	 	38	 
	SECTION 7.6. Payments
	 	 	38	 
	 
	 	 	 	 
	ARTICLE VIII EVENTS OF DEFAULT
	 	 	38	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	41	 
	 
	 	 	 	 
	[RESERVED]
	 	 	41	 
	 
	 	 	 	 
	ARTICLE X MISCELLANEOUS
	 	 	41	 






-ii-









 






	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 10.1. Notices
	 	 	41	 
	SECTION 10.2. Waivers; Amendments
	 	 	42	 
	SECTION 10.3. Expenses; Indemnity; Damage Waiver
	 	 	42	 
	SECTION 10.4. Successors and Assigns
	 	 	43	 
	SECTION 10.5. Survival
	 	 	44	 
	SECTION 10.6. Counterparts; Integration; Effectiveness
	 	 	44	 
	SECTION 10.7. Severability
	 	 	44	 
	SECTION 10.8. Right of Setoff
	 	 	45	 
	SECTION 10.9. Governing Law; Jurisdiction; Consent to Service of Process
	 	 	45	 
	SECTION 10.10. WAIVER OF JURY TRIAL
	 	 	45	 
	SECTION 10.11. Headings
	 	 	46	 
	SECTION 10.12. Confidentiality
	 	 	46	 
	SECTION 10.13. Interest Rate Limitation
	 	 	46	 
	SECTION 10.14. USA Patriot Act.
	 	 	47	 






	 	 	 
	 
	 	 
	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 14, 2009, among BLOCK FINANCIAL LLC, a
Delaware limited liability company, 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 $2,500,000,000;




          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 the first day in 2009
on which the U.S. Internal Revenue Service accepts electronic filings of personal tax









 



2



returns (or, if later, the Closing Date) to but excluding the earlier of the Revolving
Termination Date and the date of termination of the Commitments.




     “Average Weekly LIBOR” means for each day the average of the LIBO Rate in
effect for each of the preceding five Business Days.




     “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, as amended by the First
Amendment thereto dated as of November 28, 2006 and the Second Amendment thereto dated as of
November 19, 2007, 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, as amended by the First Amendment
thereto dated as of November 28, 2006 and the Second Amendment thereto dated as of November
19, 2007, 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 LLC, a Delaware limited liability company 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









 



3



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 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









 



4



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.




     “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) $2,500,000,000 from
the first day in 2009 on which the U.S. Internal Revenue Service accepts electronic filings
of personal tax returns through and including March 30, 2009 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 January 13, 2009 and (b) the
actions, suits, proceedings and environmental matters disclosed in Schedule 3.6.









 



5



     “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 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.









 



6



     “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 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%.




     “Federal Funds Margin” means the Federal Funds Margin specified in the Pricing
Letter.




     “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









 



7



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 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.









 



8



     “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 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 for each day the rate appearing on the Reuters “LIBOR 01”
page (or such other page as may replace such page on that service or such other service or
services as may be nominated by the British Bankers’ Association for the purpose of
displaying London interbank offered rates for U.S. dollar deposits) at approximately 11:00
a.m., London time, two London business days prior to such day, as the rate for dollar
deposits with a one week maturity. In the event that such rate is not available at









 



9



such time for any reason, then the “LIBO Rate” shall be determined for each day by
reference to such other comparable publicly available service for displaying eurodollar
rates as may be selected by the Lender at approximately 11:00 a.m., London time, two
Business Days prior to such day.




     “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 Pricing Letter, 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.




     “Margin” means the Margin specified in the Pricing Letter.




     “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 Subsidiary” means any Subsidiary of any Credit Party, other than Sand
Canyon Corporation, 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









 



10



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
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 Pricing Letter, 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).




     “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 First Amended and Restated HSBC Refund
Anticipation Loan and IMA Participation Agreement, dated as of November 13, 2006, as amended
from time to time, and any restatement, extension, renewal and replacement thereof, by and
among the Borrower, HSBC Bank USA, National Association, HSBC TFS 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.









 



11



     “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;




     (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.




     “Pricing Letter” means the separate letter agreement, dated the date of this
Agreement, among the Borrower, the Guarantor and the Lender, setting forth certain fees and
margins payable by the Borrower in connection with this Agreement.




     “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.









 



12



     “Prime Rate Margin” means the Prime Rate Margin specified in the Pricing
Letter.




     “Proceeding” means any suit, action or proceeding arising out of or relating to
this Agreement, the Pricing Letter, the Security Agreement, the Control Agreement or the
HSBC TFS Letter, or for recognition or enforcement of any judgment.




     “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 any such third party in
connection with any RAL Receivables Transaction.




     “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 by
the Joinder and First Amendment to Program Contracts dated as of November 10, 2006, the
Second Amendment to Program Contracts dated as of November 13, 2006, and the Third Amendment
to Program Contracts dated as of December 5, 2008, and as further amended from time to time,
and any restatement,









 



13



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, 2009 and (ii)
the first day after April 15, 2009 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 $60,000,000.



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



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



     “Sand Canyon Corporation” means Sand Canyon Corporation (formerly known as
Option One Mortgage Corporation), a California corporation, and all of its subsidiaries.



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



     “Servicing Agreement” means the First Amended and Restated HSBC Settlement
Products Servicing Agreement dated as of November 13, 2006 , as amended from time to time,
and any restatement, extension, renewal and replacement thereof, among HSBC Bank USA,
National Association, HSBC TFS, HSBC Trust Company (Delaware), N.A., 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, plus the aggregate amount of Indebtedness
at such time under the Bank Revolvers, 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 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









 



14



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.



          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










 



15



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) and in the Pricing Letter, 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. 




          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










 



16



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 discussion with a representative of the Person
being notified (and not by voicemail or other form of recorded message) 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, 2009 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.




          (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










 



17



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 discussion with a representative of
the Lender (and not by voicemail or other form of recorded message) (confirmed by telecopy) of
any voluntary prepayment of Loans under Section 2.6(a)(i), not later than 10:00 a.m., 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) At any time when there is outstanding unpaid principal on the Loans, the Borrower shall
prepay the principal of the Loans in an amount equal to (i) 100% of the amount of all payments
constituting repayment of HSBC RALs in which the Borrower has purchased a Participation Interest
which are remitted to the Borrower by HSBC TFS under Section 3.4(b)(iii) of the Servicing
Agreement, and (ii) 100% 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
purchased by the Borrower. In the HSBC TFS Letter, the Borrower will irrevocably authorize and
instruct HSBC TFS, as Servicer under the Servicing Agreement, at any time when there is
outstanding unpaid principal on the Loans, (A) to pay
100% of all amounts from time to time to be remitted to the Borrower by the Servicer under
Section 3.4(b)(iii) of the Servicing Agreement in respect of Participation Interests purchased by
the Borrower directly to the Lender for application to the prepayment of the Loans under this
Section 2.6(c) and (B) to pay 100% 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 purchased by the Borrower 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










 



18



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 the sum of (i)
the Average Weekly LIBO Rate for such day plus (ii) the Margin. The principal amount of any Loan
that is made by the Lender pursuant to Section 2.3 and is prepaid by the Borrower pursuant to
Section 2.6(a)(i) on the same Business Day shall not bear any interest for such Business Day.




          (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










 



19



any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day plus
the Prime Rate Margin, and (b) the Federal Funds Effective Rate in effect on such day plus the
Federal Funds Margin. Any change in the Prime 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










 



20



retroactive, then the six-month period referred to above shall be extended to include the period
of retroactive effect thereof.




          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, National Association, Buffalo, N.Y., ABA #021001088, HFC 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).

















 





21




          (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, 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. The Borrower was converted from a Delaware corporation known as “Block
Financial Corporation” on January 1, 2008 pursuant to Section 18-214 of the Delaware Limited
Liability Company Act.




          SECTION 3.2. Authorization; Enforceability. The Transactions are within each Credit Party’s corporate or limited liability company, as
the case may be, powers and have been duly authorized by all necessary corporate or limited
liability company, as the case may be, and, if required, stockholder or member, as the case may be,
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










 



22



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, operating agreement 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 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, 2008 (A) reported on by Deloitte & Touche
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, 2008. 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, 2008 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, 2008.




          (b) From April 30, 2008 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










 



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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 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.










 



24




          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 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):









 



25


          (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 a 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.




          (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 $60,000,000 in the HSBC Investor Prime Money Market
Fund managed by HSBC Global Asset Management (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.










 



26




          (i) The Lender shall have received a counterpart of the Pricing Letter, duly executed and
delivered by the Borrower and the Guarantor, and the Borrower shall have paid such consideration as
is set forth in the Pricing Letter.



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.



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 Deloitte & Touche 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;










 



27




          (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 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) RSM McGladrey, Inc. and its Subsidiaries,
including Birchtree Financial Services, Inc., (B) RSM Equico, Inc. and its Subsidiaries, including
McGladrey Capital Markets, LLC, (C) Sand Canyon Corporation, (D) H&R Block Canada, Inc. and (E)
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.










 



28




          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 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.










 



29




          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.




          SECTION 5.9 Additional Collateral. The Borrower shall provide additional collateral
to the Lender from time to time as provided in the Security Agreement.




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;










 



30




          (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 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;










 



31




          (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;




          (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, (ii) 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;










 



32




          (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), 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 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










 



33



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 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;










 



34




          (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 Person, (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 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 Sand Canyon Corporation.










 



35




          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.




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,










 



36



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.










 



37




          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










 



38



or any right of offset with respect
thereto, and any failure by the Lender to pursue such other 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










 



39



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;




          (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), 5.8 or 5.9 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;










 



40




          (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 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;




          (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 that is 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 HSBC TFS Letter;



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















 





41



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 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 HSBC Finance Corporation, 26525 N. Riverwoods Road, Mettawa,
Illinois 60070, attention: Treasurer, (Telecopy No.(224) 552-4408), with a copy to HSBC Finance
Corporation, 26525 N. Riverwoods Road, Mettawa, Illinois 60045, attention: Executive Vice
President, Deputy General Counsel and Corporate Secretary (Telecopy No.(224) 552 -2941), HSBC
Securities, Inc., 425 Fifth Avenue, Lower Level, New York, N.Y. 10018 (Telecopy No. (212)
525-2570), attention Jimmy Tse, HSBC Taxpayer Financial Services Inc., 200 Somerset Corporate
Boulevard, Bridgewater, N.J. 08807 (Telecopy No. (908) 203-4211, attention: EVP and President, 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 2.3 need only be given to Mr. Kyle Hartung at
telephone number (224) 544-4023, confirmed by telecopy at (224) 552-4023.










 



42



Any party hereto may change its address, telephone number 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 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.










 



43




          (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
Pricing Letter, the Security Agreement, the Control Agreement or the HSBC TFS Letter, or the
transaction contemplated hereby or thereby.




          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 or reduction 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










 



44



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.




          (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










 



45



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 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










 



46



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.




          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










 



47



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
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.




[THIS SPACE LEFT BLANK INTENTIONALLY]










 



 




     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 LLC, as Borrower

 	 
	 	By:  	/s/ Becky S. Shulman
 	 
	 	 	Name:  	Becky S. Shulman 	 
	 	 	Title:  	Senior Vice President and Treasurer 	 
	 



	 	 	 	 	 
	 	H&R BLOCK, INC., as Guarantor

 	 
	 	By:  	/s/ Becky S. Shulman
 	 
	 	 	Name:  	Becky S. Shulman 	 
	 	 	Title:  	Senior Vice President and Treasurer 	 









 



2

	 	 	 	 	 



	 	 	 	 	 
	 	HSBC FINANCE CORPORATION, as Lender

 	 
	 	By:  	/s/ William H. Kesler
 	 
	 	 	Name:  	William H. Kesler 	 
	 	 	Title:  	Executive Vice President and Treasurer	 












 



 


SCHEDULE 3.4(a)




Guarantee Obligations




None.










 



 


SCHEDULE 3.6




Disclosed Matters




None.










 



 


SCHEDULE 3.13




Subsidiaries





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



	 	 	 
	 	 	Domestic
	Company Name	 	Jurisdiction
	 
	 	 
	Aculink Mortgage Solutions, LLC

	 	Florida
	AcuLink of Alabama, LLC

	 	Alabama
	Ada Services Corporation

	 	Massachusetts
	BFC Transactions, Inc.

	 	Delaware
	Birchtree Financial Services, Inc.

	 	Oklahoma
	Birchtree Insurance Agency, Inc.

	 	Missouri
	Block Financial LLC

	 	Delaware
	Burr Oak Technical Solutions, Inc.

	 	Delaware
	CFS-McGladrey, LLC

	 	Massachusetts
	Cfstaffing, Ltd.

	 	British Columbia
	Cityfront, Inc.

	 	Delaware
	Companion Insurance, Ltd.

	 	Bermuda
	Companion Mortgage Corporation

	 	Delaware
	Creative Financial Staffing of Western Washington, LLC

	 	Massachusetts
	EquiCo, Inc.

	 	California
	Express Tax Service, Inc.

	 	Delaware
	Financial Marketing Services, Inc.

	 	Michigan
	Financial Stop Inc.

	 	British Columbia
	FM Business Services, Inc.

	 	Delaware
	Franchise Partner, Inc.

	 	Nevada
	H&R Block (India) Private Limited

	 	India
	H&R Block (Nova Scotia), Incorporated

	 	Nova Scotia
	H&R Block Bank

	 	Missouri
	H&R Block Canada Financial Services, Inc.

	 	Federally Chartered
	H&R Block Canada, Inc.

	 	Federally Chartered
	H&R Block Eastern Enterprises, Inc.

	 	Missouri
	H&R Block Enterprises LLC

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

	 	Hong Kong
	H&R Block Group, Inc.

	 	Delaware
	H&R Block Insurance Agency, Inc.

	 	Delaware
	H&R Block Limited

	 	New South Wales
	H&R Block Management, LLC

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

	 	Delaware
	H&R Block Tax Institute, LLC

	 	Missouri
	H&R Block Tax Services LLC

	 	Missouri
	H&R Block, Inc.

	 	Missouri
	HRB Advance LLC

	 	Delaware
	HRB Center LLC

	 	Missouri
	HRB Concepts LLC

	 	Delaware












 



 


	 	 	 
	 	 	Domestic
	Company Name	 	Jurisdiction
	HRB Corporate Enterprises LLC

	 	Delaware
	HRB Corporate Services LLC

	 	Missouri
	HRB Digital LLC

	 	Delaware
	HRB Digital Technology Resources LLC

	 	Delaware
	HRB Expertise LLC

	 	Missouri
	HRB Innovations, Inc.

	 	Delaware
	HRB International LLC

	 	Missouri
	HRB Products LLC

	 	Missouri
	HRB Professional LLC

	 	Delaware
	HRB Progression LLC

	 	Delaware
	HRB Support Services LLC

	 	Delaware
	HRB Tax & Technology Leadership LLC

	 	Missouri
	HRB Tax Group, Inc.

	 	Missouri
	HRB Technology Holding LLC

	 	Delaware
	HRB Technology LLC

	 	Missouri
	McGladrey Capital Markets Canada Inc.

	 	Federally Chartered
	McGladrey Capital Markets Europe Limited

	 	United Kingdom
	McGladrey Capital Markets LLC

	 	Delaware
	OOMC Holdings LLC

	 	Delaware
	OOMC Residual Corporation

	 	New York
	O’Rourke Career Connections, LLC

	 	California
	Pension Resources, Inc.

	 	Illinois
	Provident Mortgage Services, Inc.

	 	Delaware
	RedGear Technologies, Inc.

	 	Missouri
	RSM (Bahamas) Global, Ltd.

	 	The Bahamas
	RSM Employer Services Agency of Florida, Inc.

	 	Florida
	RSM Employer Services Agency, Inc.

	 	Georgia
	RSM EquiCo, Inc.

	 	Delaware
	RSM McGladrey Business Services, Inc.

	 	Delaware
	RSM McGladrey Business Solutions, Inc.

	 	Delaware
	RSM McGladrey Employer Services, Inc.

	 	Georgia
	RSM McGladrey Insurance Services, Inc.

	 	Delaware
	RSM McGladrey TBS, LLC

	 	Delaware
	RSM McGladrey, Inc.

	 	Delaware
	Sand Canyon Acceptance Corporation

	 	Delaware
	Sand Canyon Corporation

	 	California
	Sand Canyon Securities Corp.

	 	Delaware
	Sand Canyon Securities II Corp.

	 	Delaware
	Sand Canyon Securities III Corp.

	 	Delaware
	Sand Canyon Securities IV LLC

	 	Delaware
	ServiceWorks, Inc.

	 	Delaware
	TaxNet Inc.

	 	California
	TaxWorks, Inc.

	 	Delaware
	Vantive Partners LLC

	 	Missouri
	West Estate Investors, LLC

	 	Missouri
	Woodbridge Mortgage Acceptance Corporation

	 	Delaware







 











 





SCHEDULE 6.2




Existing Indebtedness





	•	 	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.
	 
	•	 	Irrevocable Standby Letter of Credit issued on December 30, 2008 by U.S. Bank N.A. in
favor of Old Republic Insurance Company for an amount up to $2,692,024.
	 
	•	 	Irrevocable Standby Letter of Credit issued on October 23, 2007 by Comerica Bank N.A. in
favor of Axis Insurance Company for an amount up to $500,000.
	 
	•	 	Irrevocable Standby Letter of Credit assumed by RSM McGladrey, Inc. on June 1, 2007 and
issued by U.S. Bank N.A. in favor of OOC Owner, LLC for an amount up to $75,000.
	 
	•	 	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 14, 2009 between BLOCK FINANCIAL LLC
(“Debtor”), a Delaware limited liability company, 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 14, 2009 (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:



     “Additional Collateral Amount” means, at any time there is a Collateral Deficiency,
the amount by which the Required Collateral Amount exceeds the fair market value of the Securities
Account, as determined by the Securities Intermediary or the Transfer Agent or another service
provider.



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



     “Collateral” is defined in Section 2 hereof.



     “Collateral Deficiency” means at any time that the fair market value of the Collateral
held in the Securities Account, as determined by the Securities Intermediary or the Transfer Agent
or another service provider, shall be less than the Required Collateral Amount.



     “Contract Obligor” means any Person that is obligated to Debtor under a BFC 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, 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., HRB Digital LLC (successor by merger to H&R Block Digital Tax Solutions, LLC),
H&R Block and Associates, L.P. (now dissolved), HRB Innovations Inc. (formerly known as HRB
Royalty, Inc.) and Debtor, as amended by the Joinder and First Amendment to Program Contracts dated
as of November 10, 2006, the Second Amendment to Program Contracts dated as of November 13, 2006,
and the Third Amendment to Program Contracts dated as of December 5, 2008, and as further amended
from time to time, and any restatement, extension, renewal and replacement thereof.



     “Participation Agreement” means the First Amended and Restated HSBC Refund
Anticipation Loan and IMA Participation Agreement, dated as of November 13, 2006, as amended from
time to time, and any restatement, extension, renewal and replacement thereof, by and among the
Borrower, the 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.



     “Required Collateral Amount” means at any time the greater of (i) $60,000,000 and (ii)
the remainder of the (X) the Delinquent RAL Amount less (Y) the sum of (I) the Prepayment Amount
and (II) the BFC Purchase Amount. For purposes of this definition, the “Delinquent RAL Amount”
means at any time the quotient of (a) the amount determined in good faith by the Secured Party (or
HSBC TFS on its behalf) to be the excess of (A) its forecast of the amount of delinquent HSBC RALs
originated in 2009 as of December 31, 2009 (without consideration of any subsequent recoveries)
over (B) $54,040,000, divided by (b) .89, which quotient shall be multiplied by .49999999; the
“Prepayment Amount” means at any time the aggregate amount of



 









 




voluntary prepayments made by the Debtor at or prior to such time under Section 2.6(a)(i) of the Credit Agreement; and the “BFC
Purchase Amount” means at any time the aggregate amount of the Participation Interests purchased by
the Debtor at or prior to such time and not financed by the Secured Party by virtue of the Debtor’s giving notice under Section 2.3 of the Credit
Agreement that it does not wish to borrow all or some of a Loan as provided therein. The Secured
Party (or HSBC TFS on its behalf), acting in good faith, may compute the Required Collateral
Amount from time to time in its discretion, and any such computation of the Required Collateral
Amount shall be based on the Secured Party’s (or HSBC TFS’s) statistical and reasonable judgmental
forecast and models and methods in accordance with its practices and policies then in effect and
shall be conclusive and binding in the absence of manifest error. The Secured Party’s (or HSBC
TFS’s) forecast of the amount of delinquent HSBC RALs originated in 2009 as of December 31, 2009
(without consideration of any subsequent recoveries) as of the date of this Agreement is
$54,039,461. Notwithstanding the foregoing, for purposes of this definition of “Required
Collateral Amount” and related provisions of this Agreement, the Secured Party may rely on
determinations, computations and forecasts made by HSBC TFS as to the amount of HSBC RALs.




     “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 First Amended and Restated HSBC Settlement Products
Servicing Agreement dated as of November 13, 2006 , as amended from time to time, and any
restatement, extension, renewal and replacement thereof, among HSBC Bank USA, National Association,
HSBC TFS, HSBC Trust Company (Delaware), N.A., and Debtor.



     “Transfer Agent” has the meaning specified in the Control Agreement.



     “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 (including without limitation any Additional Collateral
Amount deposited therein pursuant to Section 5(d) hereof); 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) Additional Collateral. Not later than one Business Day after the date of any
written demand by the Secured Party made upon the Debtor at any time after February 15, 2009 when
there is a Collateral Deficiency, the Borrower shall deposit into the Securities Account cash in
the amount of the Additional Collateral Amount stated in such demand, which shall thereupon
constitute part of the Collateral. Any such demand shall include a computation of the Additional
Collateral Amount and the Secured Party’s (or HSBC TFS’s) forecast of the amount of delinquent HSBC
RALs originated during 2009 as of December 31, 2009 and shall be conclusive and binding in the
absence of manifest error. Without limiting the foregoing, the Additional Collateral Amount so
deposited shall be made available from funds of the Debtor and not from collections distributable
to the Secured Party under the Direct Pay Provisions.



     (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 formation.
Debtor



 









 




shall notify Secured Party promptly in writing prior to any change in Debtor’s name,
identity, limited liability company structure or state of formation.




     (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 BFC 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 LLC

 	 
	 	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 14, 2009 among BLOCK FINANCIAL LLC, a
Delaware limited liability company (“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 14, 2009 (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, including any Additional Collateral Amount (as defined in the Security Agreement) deposited
into the Securities Account at any time and all securities entitlements relative thereto
(collectively, “Collateral”), (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. (a) The Debtor may from time to time
deposit in the Securities Account cash as Additional Collateral Amounts as provided in the Security
Agreement.



     (b) The Securities Intermediary shall, or shall cause the Transfer Agent or another servicer
provider to, determine the fair market value of the assets in the Securities Account from time to
time in accordance with its then current policies and procedures on the request of the Secured
Party and shall notify, or cause the Transfer Agent or such other service provider to notify, the
Secured Party of such fair market value.



     (c) 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”), which
the Securities Intermediary and the Debtor agree remains in full force and effect in accordance
with its terms. 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 The Securities Intermediary shall have no liability under
this Agreement except in the case of its gross negligence or willful misconduct. 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

26525 N. Riverwoods Road

Mettawa, Illinois 60045
	 
	 	 	 	 
	 

	 	 	 	Attention: Treasurer
	 
	 	 	 	 
	 

	 	 	 	Fax no.: (224) 552-4408
	 
	 	 	 	 
	 

	 	 	 	with copies to:
	 
	 	 	 	 
	 

	 	 	 	HSBC Finance Corporation

26525 N. Riverwoods Road

Mettawa, Illinois 60045

Attention: Executive Vice President, Deputy

General Counsel and Corporate Secretary

Fax no.: (224) 552-2941
	 
	 	 	 	 
	 

	 	 	 	HSBC Securities, Inc.

425 Fifth Avenue, Lower Level

New York, N.Y. 10018

(Telecopy No. (212) 525-2479)

Attention: Jimmy Tse
	 
	 	 	 	 
	 

	 	 	 	HSBC Taxpayer Financial Services Inc.

200 Somerset Corporate Boulevard

Bridgewater, N.J. 08807

(Telecopy No. (908) 203-4211)

attention: EVP and President
	 
	 	 	 	 
	 

	 	 	 	HSBC Taxpayer Financial Services Inc.

90 Christiana Road

New Castle, DE 19707

(Telecopy No. (302) 327-2507)

attention: General Counsel






 









 






	 	 	 	 	 
	 

	 	Debtor:
	 	Block Financial LLC

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 Global Asset Management

(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 Global Asset Management (USA)

Inc.

452 Fifth Avenue

New York, NY 10018

Attention: James M. Curtis

Telephone: 212 525-6961

Fax No.: 917 229-5219
	 
	 	 	 	 
	 

	 	Transfer Agent:
	 	Citi Fund Services Ohio, Inc.

3455 Stelzer Road

Columbus, Ohio 43219

Attention: Ayre Spencer

TA Risk Management

Telephone: 1-877-244-2424

Telecopy: (614) 428-3061





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 LLC

 	 
	 	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 14, 2009




HSBC Finance Corporation

26525 N. Riverwoods Road

Mettawa, IL 60045




Block Financial LLC

One H&R Block Way

Kansas City, MO 64105




Ladies and Gentlemen:




     HSBC Taxpayer Financial Services Inc. (“HSBC TFS”) acknowledges that HSBC Finance
Corporation (the “Lender”) and Block Financial LLC (the “Borrower”) have notified
HSBC TFS that they are party to (1) a Credit and Guarantee Agreement dated as of January 14, 2009
(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 14, 2009 (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.



     As provided herein, the Borrower directs that 100% of all amounts payable to the Borrower
under the Participation Agreement from the repurchase or repayment of HSBC RALs shall be paid by
HSBC TFS directly to the Lender to repay the Loans until such time as all outstanding principal of
the Loans has been paid in full.



     The parties are entering into this letter agreement to set forth certain agreements among
them.



 









 





HSBC Finance Corporation

January 14, 2009

Page 2




     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 on any Business Day, 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, on such Business Day; (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 all or part of the Purchase Price of Participation
Interests to be purchased on such Business Day, to the extent of the amount of such Loans; (3) at
any time when there is outstanding unpaid principal on the Loans, to pay 100% of all amounts then
payable to the Borrower by HSBC TFS under Section 6 of the Participation Agreement in respect of
the repurchase of Participation Interests that have been purchased by the Borrower directly to the
Lender, to such account as it shall specify from time to time, to be applied to the payment
principal due on the Loans; (4) at any time when there is outstanding unpaid principal on the
Loans, to pay 100% of all amounts then to be remitted to the Borrower by HSBC TFS under Section
3.4(b)(iii) of the Servicing Agreement in respect of principal or interest collected or recovered
on HSBC RALs in which the Borrower has purchased Participation Interests directly to the Lender, to
such account as it shall specify from time to time, to be applied to the payment of principal due
on the Loans; (5) at any time when there is no outstanding unpaid principal on the Loans, to pay
100% of all amounts then payable to the Borrower by HSBC TFS under Section 6 of the Participation
Agreement in respect of the repurchase of Participation Interests that have been purchased by the
Borrower directly to the Borrower, to such account as the Borrower shall specify from time to time;
and (6) at any time when there is no outstanding unpaid principal on the Loans, to pay 100% of all
amounts then to be remitted to the Borrower by HSBC TFS under Section 3.4(b)(iii) of the Servicing
Agreement in respect of principal or interest collected or recovered on HSBC RALs in which the
Borrower has purchased Participation Interests directly to the Borrower, to such account as the
Borrower 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 given to it 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 Lender in this letter agreement shall terminate.



 









 





HSBC Finance Corporation

January 14, 2009

Page 3




     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
	 
	 	26525 N. Riverwoods Road
	 
	 	Mettawa, Illinois 60045
	 
	 	Attention: Treasurer
	 
	 	Fax no.: (224) 552-4408
	 
	 	 
	 
	 	with a copy to:
	 
	 	 
	 
	 	HSBC Finance Corporation
	 
	 	26525 N. Riverwoods Road
	 
	 	Mettawa, Illinois 60045
	 
	 	Attention: Executive Vice President,
	 
	 	Deputy General Counsel and Corporate
	 
	 	Secretary
	 
	 	Fax no.: (224) 552-2941
	 
	 	 
	 
	 	HSBC Securities, Inc.
	 
	 	425 Fifth Avenue, Lower Level
	 
	 	New York, N.Y. 10018
	 
	 	(Telecopy No. (212) 525-2479)
	 
	 	Attention:  Jimmy Tse
	 
	 	 
	 
	 	HSBC Taxpayer Financial Services Inc.
	 
	 	200 Somerset Corporate Boulevard
	 
	 	Bridgewater, N.J. 08807
	 
	 	(Telecopy No. (908) 203-4211)
	 
	 	attention: EVP and President
	 
	 	 
	 
	 	HSBC Taxpayer Financial Services Inc.
	 
	 	90 Christiana Road
	 
	 	New Castle, DE 19707
	 
	 	(Telecopy No. (302) 327-2507)
	 
	 	attention: General Counsel
	 
	 	 
	Borrower:
	 	Block Financial LLC






 









 






HSBC Finance Corporation

January 14, 2009

Page 4




	 	 	 
	 
	 	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: EVP and President
	 
	 	Telephone: 908-203-4441
	 
	 	Fax No.: 302-327-2533





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, each of 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.



 









 





HSBC Finance Corporation

January 14, 2009

Page 5




     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:  	 	 
	 




 









 





HSBC Finance Corporation

January 14, 2009

Page 6




	 	 	 	 	 
	 	Accepted and agreed:





BLOCK FINANCIAL LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 











 





EXHIBIT D




[FORM OF OPINION OF STINSON MORRISON HECKER LLP]




January ___, 2009




HSBC Finance Corporation

26525 N. Riverwoods Road

Mettawa, Illinois 60045



Ladies and Gentlemen:




     We have acted as special counsel for Block Financial LLC (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 14, 2009 (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. This opinion letter is being delivered to you at the
request of the Credit Parties in accordance with Section 4.2 (b) of the Credit 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 14, 2009 (the “Security
Agreement”), between the Borrower and the Lender;
	 
	 	(c)	 	the Investment Account Control Agreement dated as of January 14, 2009 (the
“Control Agreement”), among the Borrower, the Lender and HSBC Investor Funds (the
“Securities Intermediary”);
	 
	 	(d)	 	the letter agreement, dated as of January 14, 2009 (the “HSBC TFS Letter”)
among the Borrower, the Lender and HSBC TFS;
	 
	 	(e)	 	the pricing letter dated as of January 14, 2009 between the Credit Parties and
the Lender;





 









 





HSBC Finance Corporation

January ___, 2009

Page 2





	 	(f)	 	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”);
	 
	 	(g)	 	the following documents regarding the Borrower: (i) the certificate of
conversion and certificate of formation and any amendments thereto certified as of the
date hereof by the Secretary of the Borrower, (ii) the Operating Agreement dated as of
January 1, 2008 and any amendments thereto certified as of the date hereof by the
Secretary of the Borrower, (iii) a copy of the resolutions of the sole member of the
Borrower certified as of the date hereof by the Secretary of the Borrower and (iv) a
certificate of good standing dated January ___, 2009 issued by the Secretary of State of
Delaware;
	 
	 	(h)	 	the following documents regarding the Guarantor: (i) the articles 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 January ___,
2009 issued by the Secretary of State of Missouri; and
	 
	 	(i)	 	such other agreements, instruments, 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 (e) 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



 









 





HSBC Finance Corporation

January ___, 2009

Page 3



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.



 









 





HSBC Finance Corporation

January ___, 2009

Page 4




     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 limited liability company 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 limited liability company or
corporate (as applicable) 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 April 30, 2008, 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 liability company or corporate (as applicable) 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 limited liability company or corporate (as applicable)
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 the
Borrower’s certificate of formation or Operating Agreement dated January 1, 2008 or the Guarantor’s
articles or certificate of incorporation or by-laws, as the case may be, (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
binding upon such Credit Party of which we have knowledge of any court or other Governmental
Authority, 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 BFC Program Contracts listed on Exhibit 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



 









 





HSBC Finance Corporation

January ___, 2009

Page 5



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:




	 	A.	 	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.
	 
	 	B.	 	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




 









 











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	 	 	 	in a proceeding at law or in equity, and the limitations imposed by applicable
procedural requirements of applicable state or federal law.
	 
	 	C.	 	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.
	 
	 	D.	 	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.
	 
	 	E.	 	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.
	 
	 	F.	 	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




 









 











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	 	 	 	the value
of collateral securing guaranteed obligations to the detriment of such guarantor or grantor
or (ii) the guaranteed obligations are materially modified.
	 
	 	G.	 	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.”
	 
	 	H.	 	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.




 









 











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	 	(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.




	 	I.	 	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




 









 











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	 	 	 	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).
	 
	 	J.	 	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.
	 
	 	K.	 	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.
	 
	 	L.	 	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.
	 
	 	M.	 	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





 









 











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	 	 	 	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.
	 
	 	N.	 	We are expressing no opinion as to the priority of any lien or security interest
created by the Loan Documents.
	 
	 	O.	 	We call your attention that Section 552 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.
	 
	 	P.	 	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.
	 
	 	Q.	 	We express no opinion with respect to any laws, rules or regulations governing the
issuance or sale of securities.
	 
	 	R.	 	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.
	 
	 	S.	 	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




 









 











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	 	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 Delaware Limited Liability Act, 6
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 TO UCC-1 FINANCING STATEMENT



BLOCK FINANCIAL LLC, as Debtor (“Debtor”)



HSBC FINANCE CORPORATION, as Secured Party (“Secured Party”)




     1. Collateral. The “Collateral” is 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 (certain terms used in this paragraph 1 are defined in paragraph 2):




     (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 Collateral shall not include the
rights of Debtor, (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;




     (b) the Securities Account; and




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



     2. Definitions. In this Exhibit to Financing Statement, the following terms shall
have the following meanings:



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



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



 









 





     “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.



     “Indemnification Agreement” means 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., HRB Digital LLC (successor by merger to H&R Block Digital Tax Solutions, LLC),
H&R Block and Associates, L.P. (now dissolved), HRB Innovations Inc. (formerly known as HRB
Royalty, Inc.) and Debtor, as amended by the Joinder and First Amendment to Program Contracts dated
as of November 10, 2006, the Second Amendment to Program Contracts dated as of November 13, 2006,
and the Third Amendment to Program Contracts dated as of December 5, 2008, and as further amended
from time to time, and any restatement, extension, renewal and replacement thereof.



     “Participation Agreement” means the First Amended and Restated HSBC Refund
Anticipation Loan and IMA Participation Agreement, dated as of November 13, 2006, as amended from
time to time, and any restatement, extension, renewal and replacement thereof, by and among the
Debtor, 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.



     “Retail Settlement Products Distribution Agreement” means 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., HRB Digital LLC (successor by merger to H&R Block Digital Tax
Solutions, LLC), H&R Block and Associates, L.P. (now dissolved), HRB Innovations Inc. (formerly
known as HRB Royalty, Inc.), HSBC Finance Corporation and H&R Block, Inc., as amended by the
Joinder and First Amendment to Program Contracts dated as of November 10, 2006, the Second
Amendment to Program Contracts dated as of November 13, 2006, and the Third Amendment to Program
Contracts dated as of December 5, 2008, by and among the parties thereto, and as further amended
from time to time, and any restatement, extension, renewal and replacement thereof.



     “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 First Amended and Restated HSBC Settlement Products
Servicing Agreement dated as of November 13, 2006, as amended from time to time, and any
restatement, extension, renewal and replacement thereof, among HSBC Bank USA, National Association,
HSBC TFS, HSBC Trust Company (Delaware), N.A., 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 “financial asset”, “instrument”, “investment property”,
“proceeds”, “security”, “security entitlement”, and “supporting
obligation” shall have the respective meanings set forth in the Uniform Commercial Code.




 









 








EXHIBIT B




Financing Agreements and Instruments





	1.	 	Indenture dated October 20, 1997 among Block Financial LLC (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 Officers’ Certificate of the Company dated October 26, 2004
establishing the terms of the Notes described in c. below.
	 
	 	c.	 	The Company’s 5.125% Notes due 2014, which are guaranteed by the
Guarantor pursuant to the guarantees endorsed on said Notes.
	 
	 	d.	 	The Officers’ Certificate of the Company dated January 11, 2008
establishing the terms of the Notes described in e. below.
	 
	 	e.	 	The Company’s 7.875% Notes due 2013, 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 and the Second Amendment dated
as of November 19, 2007 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 and the Second
Amendment dated as of November 19, 2007 among the Company, the Guarantor, the Lender parties
and the Administrative Agent.






	4.	 	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., HRB Digital
LLC (successor by merger to H&R Block Digital Tax




 









 












	 	 	Solutions, LLC), H&R Block and Associates,
L.P. (now dissolved), HRB Innovations Inc. (formerly known as HRB Royalty, Inc.), HSBC Finance
Corporation and the Guarantor, as amended by the Joinder and First Amendment to Program
Contracts dated as of November 10, 2006, the Second Amendment to Program Contracts dated as of November 13,
2006, and the Third Amendment to Program Contracts dated as of December 5, 2008 by and among
the parties thereto, including, the Lender and the Guarantor, and as further amended from
time to time, and any restatement, extension, renewal and replacement thereof.
	 
	5.	 	The First Amended and Restated HSBC Refund Anticipation Loan and IMA Participation Agreement,
dated as of November 13, 2006, by and among the Borrower, 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.
	 
	6.	 	The First Amended and Restated HSBC Settlement Products Servicing Agreement dated as of
November 13, 2006, among HSBC Bank USA, National Association, HSBC TFS, HSBC Trust Company
(Delaware), N.A., and the Borrower, as amended from time to time, and any restatement,
extension, renewal and replacement thereof.
	 
	7.	 	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., HRB
Digital LLC (successor by merger to H&R Block Digital Tax Solutions, LLC), H&R Block and
Associates, L.P. (now dissolved), HRB Innovations Inc. (formerly known as HRB Royalty, Inc.)
and the Company, as amended by the Joinder and First Amendment to Program Contracts dated as
of November 10, 2006, the Second Amendment to Program Contracts dated as of November 13,
2006, and the Third Amendment to Program Contracts dated as of December 5, 2008, and as
further amended from time to time, and any restatement, extension, renewal and replacement
thereof.