Document:

Unassociated Document

    EXHIBIT
      4.2

     

    FORM
      OF GLOBAL NOTE

     

    HSBC
      USA INC.

     

    THIS
      SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
      REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
      THIS GLOBAL SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
      REGISTERED, AND NO TRANSFER OF THIS GLOBAL SECURITY IN WHOLE OR IN PART MAY
      BE
      REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
      THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
      INDENTURE.

     

    UNLESS
      AND UNTIL THIS GLOBAL SECURITY IS EXCHANGED IN WHOLE OR IN PART FOR THE
      INDIVIDUAL SECURITY REPRESENTED THEREBY, THIS GLOBAL SECURITY MAY NOT BE
      TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
      OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
      DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY
      OR
      A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

     

    UNLESS
      THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
      TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
      TO
      HSBC USA INC., OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
      AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
      SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
      ANY
      PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
      AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
      FOR
      VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
      OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    HSBC
      USA INC.

     

    ELEMENTS
      Linked to the S&P Commodity Trends Indicator ― Total Return due
      June
      16, 2023 

     

    
      	REGISTERED No:	
              $250,000,000

            

    

     

    CUSIP:
      4042EP 602

     

    Title:
      ELEMENTS Linked to the S&P Commodity Trends Indicator ― Total Return
due
      June
      16, 2023
      (the
“Securities”)

     

    Index:
      The Securities are linked to the
      S&P
      Commodity Trends Indicator ― Total Return, which we refer to as the
“Index”.

     

    Principal
      Amount: $10.00 per Security

     

    Trade
      Date: June 11, 2008

     

    Settlement
      Date: June 16, 2008

     

    Final
      Valuation Date: June 12, 2023, subject to adjustment as described
      herein.

     

    Maturity
      Date: June 16, 2023. The Maturity Date is subject to adjustment as described
      herein.

    

    Payment
      at Maturity: The holder of this Note shall receive a cash payment on the
      Maturity Date that will be equal to the then outstanding principal amount of
      this Note times
      the
      Index Factor on the Final Valuation Date times
      the Fee
      Factor on the Final Valuation Date, as determined by the Calculation Agent
      referred to below.  

     

    Index
      Factor: Calculated on the Final Valuation Date will be calculated by the
      Calculation Agent and will be equal to the average of the closing levels of
      the
      Index for the five Trading Days immediately prior to and including the Final
      Valuation Date divided
      by the
      Initial Index Level. On any other Valuation Date the Index Factor will be
      calculated by the Calculation Agent and will be equal to the closing level
      of
      the Index on that day divided
      by the
      Initial Index Level.

     

    Initial
      Index Level: The closing level of the Index on the inception date and is equal
      to      .

     

    Fee
      Factor: As of any Valuation Date will be equal to one minus the aggregate
      investor fee, which is the product of (i) the Annual Investor Fee and
      (ii) the number of days elapsed from the inception date (June 10, 2008) to
      and including such Valuation Date divided
      by 365.

     

    Annual
      Investor Fee: 0.75%.

     

    Trading
      Day: Any day on which (i) the level of the Index is calculated and
      published, (ii) trading is generally conducted on the New York Stock
      Exchange, NYSE Arca, the Nasdaq Stock Market and the American Stock Exchange
      and
      (iii) trading is generally conducted on the markets on which the futures
      contracts underlying the Index are traded, in each case as determined by the
      Calculation Agent in its sole discretion.

    

    
      
        
        

      

      
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    Payment
      upon Repurchase:
      Prior
      to the Maturity Date, the holder of this Note may elect to offer all or a
      portion of the principal amount of this Note for repurchase by the Issuer on
      any
      Business Day during the term of this Note, beginning on June 17, 2008 and ending
      on May 25, 2023, in a principal amount of at least $2,500,000. The
      Issuer will have the right to repurchase this Note in whole but not in part
      on
      or after June 16, 2011, if, on any Business Day, on or after June 16, 2011,
      the
      outstanding principal amount of this Note is $5,000,000 or
      less. If
      this
      Note is repurchased (either at the Issuer’s option or the holder’s), on the
      corresponding Repurchase Date, the holder will receive a cash payment in an
      amount equal to the daily Repurchase Value, which is the principal amount of
      this Note so subject to repurchase times
      the
      Index Factor on the applicable Valuation Date times
      the Fee
      Factor on the applicable Valuation Date, as determined by the Calculation Agent.
      

     

    Repurchase
      Date: The
      third
      Business Day following a Valuation Date.

    

    Business
      Day: A Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on
      which
      banking institutions in New York City generally are authorized or obligated
      by
      law, regulation or executive order to close.

     

    Index
      Component: At any time, any of the commodity
      futures contracts included in the Index at such time.

     

    Valuation
      Date: Each Trading Day from June 18, 2008 to June 12, 2023 inclusive, unless
      the
      Calculation Agent reasonably determines that a Market Disruption Event (as
      defined herein) occurs or is continuing on that day with respect to an Index
      Component.  A Valuation Date with respect to a repurchase is the Business
      Day after notice of such repurchase is delivered to DTC.  A
      Valuation Date may be postponed due to a Market Disruption Event with respect
      to
      an Index Component. 

     

    Calculation
      Agent: HSBC USA Inc. or one of its affiliates.

     

    FOR
      VALUE
      RECEIVED, the undersigned HSBC USA Inc., a corporation under the laws of
      Maryland (the “Issuer”)
      hereby
      promises to pay to Cede & Co., as nominee for The Depository Trust Company,
      or its registered assigns (i) the Payment at Maturity on the Maturity Date,
      (ii)
      the Payment upon Repurchase on the Repurchase Date, (iii) the accelerated
      payment as determined by the Calculation Agent in the same general manner as
      described in “Specific Terms of the Securities - Default Amount on Acceleration”
in the Prospectus (as defined on the reverse hereof) upon the unpaid principal
      of Securities becoming due and payable at an earlier date by declaration of
      acceleration and/or (iv) an amount as otherwise provided below and in
      the Indenture. 

     

    REFERENCE
      IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS GLOBAL SECURITY SET FORTH
      ON
      THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE
      SAME EFFECT AS IF SET FORTH AT THIS PLACE. 

     

    
      
        
        

      

      
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    Unless
      the certificate of authentication hereon has been executed by the Trustee
      referred to on the reverse hereof by manual signature, this Global Security
      shall not be entitled to any benefit under the Indenture (as defined on the
      reverse hereof) or be valid or obligatory for any purpose.

     

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Issuer has caused this Note to be duly
      executed.

     

    
      	
              Dated:

            	
              June
                16, 2008

            

    

     

    
      	 	 	 
	 	
              HSBC
                USA INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

            
	 	Title 

    

    
      	 	 	 
	 	 
	ATTEST:	 
 	 
 

    

     

    
      
        
        

      

      
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    TRUSTEE’S
      CERTIFICATE OF AUTHENTICATION

     

     

    This
      is
      one of the Debt Securities of the series designated therein issued under the
      within-mentioned Indenture.

     

    DEUTSCHE
      BANK TRUST COMPANY AMERICAS, as Trustee

     

    By:  

         
      Authorized Signatory

    
      
        
        

      

      
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    REVERSE
      OF SECURITY

     

    1. General.
      

     

    This
      Note
      is one of a duly authorized issue of Notes of the Issuer (the “Notes”)
      to be
      issued under that certain Senior Indenture dated as of March 31, 2006, as
      amended, modified or supplemented from time to time (the “Indenture”)
      between the Issuer and Deutsche Bank Trust Company Americas, as trustee (the
      “Trustee,”
which
      term includes any successor trustee as permitted under the Indenture). The
      aggregate principal amount Outstanding under this Note shall not exceed
      U.S.$250,000,000.

     

    This
      Note
      is subject to the respective rights, limitations of rights, duties and
      immunities under the Indenture of the Issuer, the Trustee and the holder of
      this
      Note and the terms upon which this Note are, and are to be, authenticated and
      delivered. 

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the meanings
      set
      forth in the Indenture.

     

    Reference
      is made to the (i) the Prospectus related to the Note, dated April 5, 2006;
      (ii)
      the Prospectus Supplement, dated October 12, 2007; (iii) the Prospectus Addendum
      dated December 12, 2007; and (iv) the Pricing Supplement, dated June 10, 2008,
      (together, the “Prospectus”).
      The
      terms and conditions of this Note as fully set forth in the Prospectus are
      hereby incorporated by reference in their entirety into this Note and binding
      upon the parties hereto. In the event of a conflict between the terms the
      Prospectus and the terms of this Note, the Prospectus will control. Copies
      of
      the Prospectus are available from the Issuer or any underwriter or any dealer
      participating in the offering by calling toll free, 1-888-800-4722.

     

    The
      Securities are subject to redemption as provided in Article XIII of the
      Indenture.

     

    The
      term
“Issuer” as used in this Note includes any respective successor to the Issuer
      under the Indenture.

     

    The
      “Principal
      Amount”
of
      each
      Security is $10 per Security.

     

    2. Payment
      at Maturity

     

    The
      holder of this Note shall receive a cash payment on the Maturity Date that
      will
      be equal to the then outstanding principal amount of this Note times
      the
      Index Factor on the Final Valuation Date times
      the Fee
      Factor on the Final Valuation Date, as determined by the Calculation Agent
      referred to below.  On or prior to 10:30 A.M. on the Business Day
      prior to the Maturity Date, the Issuer shall, or shall cause the Calculation
      Agent, to provide written notice to the Trustee, on which notice the Trustee
      may
      conclusively rely, of the cash amount due with respect to each $10 principal
      amount of this Note. The Issuer shall deliver to the Trustee by 10:30 AM on
      the
      Maturity Date the aggregate amount due with respect to this Note for delivery
      to
      the holder hereof.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    The
      “Index
      Factor”
      calculated on the Final Valuation Date will be calculated by the Calculation
      Agent and will be equal to the average of the closing levels of the Index for
      the five Trading Days immediately prior to and including the Final Valuation
      Date (the “Calculation Period”) divided
      by the
      Initial Index Level.

     

    The
      “Index”
is
      the
      S&P Commodity Trends
      Indicator ― Total Return.

    

    The
      “Initial
      Index Level”
is
      the
      closing level of the Index on the inception date (June 10, 2008) and is equal
      to
       .

     

    The
      “Fee
      Factor”
as
      of
      any Valuation Date will be equal to one minus the aggregate investor fee, which
      is the product of (i) the Annual Investor Fee and (ii) the number of
      days elapsed from the inception date (June 10, 2008) to and including such
      Valuation Date divided
      by 365.

    

    The
      “Annual
      Investor Fee”
is
      equal to 0.75%.

     

    The
      “Final
      Valuation Date”
is
      June
      12, 2023.

     

    If
      the
      Calculation Agent determines that a Market Disruption Event occurs or
      is
      continuing during the Calculation Period, the level of the Index will be
      calculated by reference to the values of the Index Components unaffected by
      Market Disruption Events on the scheduled Trading Days during the Calculation
      Period and by reference to the values of the affected Index Components on the
      Trading Days during the Calculation Period when there is no Market Disruption
      Event occurring.  If a Market Disruption Event occurs or is occurring on
      any scheduled Trading Day during the Calculation Period, the value of the
      affected Index Component on such Trading Day will be the value of the affected
      Index Component on the next Trading Day on which no Market Disruption Event
      occurs or is occurring with respect to such Index Component.  If a Market
      Disruption Event occurs or is occurring on the Final Valuation Date, the
      Calculation Agent will postpone the Final Valuation Date until the next Trading
      Day when there is no Market Disruption Event occurring with respect to such
      affected Index Component, but in no event will the Final Valuation Date be
      postponed by more than five scheduled Trading Days.  If a Market Disruption
      Event with respect to an Index Component continues for five scheduled Trading
      Days after the scheduled Final Valuation Date, then the level of the Index
      will
      be calculated by reference to the value of such affected Index Component for
      the
      applicable scheduled Trading Days on which a Market Disruption Event was
      occurring, determined (or, if not determinable, estimated) by the Calculation
      Agent in a manner that is commercially reasonable under the circumstances on
      the
      Final Valuation Date, as postponed.  If the Final Valuation Date is
      postponed due to a Market Disruption Event as described above, the Maturity
      Date
      will also be postponed by an equal number of Business Days up to five Business
      Days.

     

    
      
        
        

      

      
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    In
      the
      event that the Maturity Date of this Note is postponed due to the postponement
      of the Final Valuation Date, as described in the immediately preceding
      paragraph, the Issuer will give the Trustee and the holder of this Note written
      notice of such postponement, and, once it has been determined, of the date
      to
      which the Maturity Date has been rescheduled.  The Issuer will give such
      notice as promptly as possible, and in no case later than (i) with respect
      to notice of postponement of the Maturity Date, the Business Day immediately
      following the scheduled Final Valuation Date and (ii) with respect to the
      notice of the date to which the Maturity Date has been rescheduled, the Business
      Day immediately following the actual Final Valuation Date.

    

    If
      the
      scheduled Maturity Date is not a Business Day, the Maturity Date will be the
      next following Business Day. In the event that Payment at Maturity is deferred
      beyond the scheduled Maturity Date as provided herein, no interest or other
      amount will accrue or be payable with respect to that deferred
      payment.

     

    A
      “Business
      Day”
a
      Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which
      banking institutions in New York City generally are authorized or obligated
      by
      law, regulation or executive order to close.

     

    An
      “Index
      Component”
is
      at
      any time, any of the commodity futures contracts included in the Index at such
      time.

     

    A
      “Trading
      Day”
is
      any
      day on which (i) the level of the Index is calculated and published,
      (ii) trading is generally conducted on the New York Stock Exchange, NYSE
      Arca, the Nasdaq Stock Market and the American Stock Exchange and
      (iii) trading is generally conducted on the markets on which the futures
      contracts underlying the Index are traded, in each case as determined by the
      Calculation Agent in its sole discretion.

     

    The
      “Maturity
      Date”
is
      expected to be June 16, 2023. The Maturity Date is subject to adjustment as
      described herein.

     

    3. Payment
      upon Repurchase

     

    Prior
      to
      the Maturity Date, the holder of this Note may elect to offer all or a portion
      of the principal amount (provided that such portion is an intergral of the
      $10
      principal amount per Security) of this Note for repurchase by the Issuer on
      any
      Business Day during the term of this Note, beginning on June 17, 2008, in a
      principal amount of at least $2,500,000 by following the procedures set forth
      below:

     

    
      	 	
              §

            	
              Cause
                its broker to deliver a completed irrevocable Offer for Repurchase
                (in the
                form attached hereto) to the Issuer by 5:00 p.m., New York City time,
                on the Business Day immediately preceding the Valuation Date related
                to
                the applicable Repurchase Date. The holder, as beneficial owner of
                this
                Note, must complete one portion of the Offer to Repurchase and its
                broker
                must complete the other portion. The Issuer must acknowledge receipt
                from
                the broker in order for the offer to repurchase to be
                effective;

            

    

    

    
      
        
        

      

      
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              §

            	
              Cause
                its broker to book a delivery vs. payment trade with respect to the
                principal amount of this Note offered for repurchase on such Repurchase
                Date at a price equal to the applicable daily Repurchase Value, facing
                the
                Issuer; and

            

    

    

    
      	 	
              §

            	
              Cause
                its broker to make its DTC custodian deliver the trade as booked
                for
                settlement via DTC at or prior to 10:00 a.m., New York City time, on
                the applicable Repurchase Date.

            

    

     

    Upon
      compliance with the foregoing procedures, the Issuer will be obliged to
      repurchase the principal amount of this Note so requested to be
      repurchased.

     

    The
      Issuer will have the right to repurchase this Note in whole but not in part
      on
      or after June 16, 2011, if, on or after June 16, 2011, the outstanding principal
      amount of this Note is $5,000,000 or less.  Any portion of the principal
      amount of this Note previously repurchased by the Issuer at the holder’s option
      will be cancelled by the Trustee on the relevant Repurchase Date. 
Consequently, as of such Repurchase Date, the principal amount of this Note
      so
      repurchased will no longer be considered outstanding for purposes of determining
      whether the Issuer has the ability to exercise its repurchase right.  To
      call the Notes for repurchase, the Issuer will deliver an irrevocable call
      notice to DTC (the holder of this Global Note).

     

    The
      Issuer will give the Trustee a copy of the irrevocable call notice at the same
      time that it delivers such notice to DTC.  On or prior to 10:30 A.M.
      on the Business Day prior to the Repurchase Date, the Issuer shall, or shall
      cause the Calculation Agent, to provide written notice to the Trustee, on which
      notice the Trustee may conclusively rely, of the cash amount due with respect
      to
      each $10 principal amount of this Note.  The Issuer shall deliver to the
      Trustee by 10:30 AM on the Repurchase Date the aggregate amount due in
      connection with such repurchase, for delivery to the holder of this
      Note.

     

    If
      this
      Note is repurchased (either at the Issuer’s option or the holder’s), on the
      corresponding Repurchase Date, the holder will receive a cash payment in an
      amount equal to the daily “Repurchase
      Value”,
      which
      is the principal amount of this Note so subject to repurchase times
      the
      Index Factor on the applicable Valuation Date times
      the Fee
      Factor on the applicable Valuation Date, as determined by the Calculation
      Agent.

     

    The
      Index
      Factor on the applicable Valuation Date will be calculated by the Calculation
      Agent and will be equal to the closing level of the Index on that day
divided
      by the
      Initial Index Level.

     

    A
      “Valuation
      Date”
is
      each
      Trading Day from June 18, 2008 to June 12, 2023 inclusive, unless the
      Calculation Agent reasonably determines that a Market Disruption Event occurs
      or
      is continuing on that day with respect to an Index Component.  A Valuation
      Date with respect to a repurchase is the Business Day after such notice is
      delivered to DTC.  A Valuation Date may be postponed due to a Market
      Disruption Event with respect to an Index Component up to four scheduled Trading
      Days.  If a Market Disruption Event with respect to an Index Component
      occurs, the level of the Index with respect to any related Repurchase Date
      will
      be calculated by reference to the values of the unaffected Index Components
      on
      the Valuation Date and by reference to the values of the affected Index
      Component on the first Trading Day after the scheduled Valuation Date on which
      no Market Disruption Event occurs or is continuing, up to four scheduled Trading
      Days after the scheduled Valuation Date.  If a Market Disruption Event with
      respect to an Index Component is continuing after four scheduled Trading Days,
      the level of the Index for such Repurchase Date will be calculated by reference
      to the value of the affected Index Component determined (or, if not
      determinable, estimated) by the Calculation Agent in a manner that is
      commercially reasonable under the circumstances on the fourth scheduled Trading
      Day after the scheduled Valuation Date, which shall be such Valuation Date,
      as
      postponed.  If the Valuation Date is postponed due to a Market Disruption
      Event with respect to an Index Component, the Repurchase Date will also be
      postponed by an equal number of Business Days.

     

    
      
        
        

      

      
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    In
      the
      event that a Repurchase Date is postponed due to the postponement of the
      applicable Valuation Date, as described in the immediately preceding paragraph,
      the Issuer will give the Trustee and the holder of this Note written notice
      of
      such postponement, and, once it has been determined, of the date to which such
      Repurchase Date has been rescheduled. The Issuer will give such notice as
      promptly as possible, and in no case later than (i) with respect to notice
      of postponement of such Repurchase Date, the Business Day immediately following
      the scheduled applicable Valuation Date and (ii) with respect to the notice
      of the date to which such Repurchase Date has been rescheduled, the Business
      Day
      immediately following the actual applicable Valuation Date.

     

    A
      “Repurchase
      Date”
is
      the
      third
      Business Day following a Valuation Date. Unless the scheduled Repurchase Date
      is
      postponed due to a Market Disruption Event as described above, the final day
      on
      which the Issuer will repurchase the Notes will be June 1, 2023. As such, a
      holder must offer its Notes for repurchase no later than May 25,
      2023.

     

    In
      the
      event that payment upon repurchase by the Issuer is deferred beyond the original
      Repurchase Date, as described above, no interest or other amount will accrue
      or
      be payable with respect to that deferred payment.

    

    “Market
      Disruption Event”
Any
      of
      the following will be a Market Disruption Event, as determined by the
      Calculation Agent:

    

    
      	 	
              §

            	
              any
                material limitation, suspension or disruption in the trading of any
                Index
                Component which results in a failure by the trading facility on which
                the
                relevant contract is traded to report a daily contract reference
                price
                (the price of the relevant contract that is used as a reference or
                benchmark by market participants);

            

    

    

    
      	 	
              §

            	
              the
                daily contract reference price for any Index Component is a “limit price”,
                which means that the daily contract reference price for such contract
                has
                increased or decreased from the previous day’s daily contract reference
                price by the maximum amount permitted under the applicable rules or
                procedures of the relevant trading
                facility;

            

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
      	 	
              §

            	
              if
                in the future, such markets become relevant to the calculation or
                hedging
                of the Index, any suspension of or material limitation on trading
                on the
                primary exchanges that trade options contracts or futures contracts
                related to an Index Component as determined by the Calculation Agent
                (without taking into account any extended or after-hours trading
                session),
                whether by reason of movements in price otherwise exceeding levels
                permitted by the relevant exchange or otherwise, in option contracts
                or
                futures contracts related to the Index, or any successor
                index;

            

    

    

    
      	 	
              §

            	
              failure
                of the applicable trading facility or other price source to announce
                or
                publish the daily contract reference price for one or more Index
                Components; or

            

    

    

    
      	 	
              §

            	
              any
                other event, if the Calculation Agent reasonably determines, after
                consultation with the Issuer and the hedge counterparties and agreement
                among such parties, that the event materially interferes with the
                ability
                of the hedge counterparties’ ability to unwind all or a material portion
                of a hedge with respect to the Notes that the Issuer or its affiliates
                have effected or may effect.

            

    

    

    For
      purpose of the first bullet of this section above, the following events will
      not
      be Market Disruption Events:

    

    
      	 	
              §

            	
              a
                limitation on the hours in a Trading Day and/or numbers of days of
                trading
                on a trading facility on which any Index Component is traded, but
                only if
                the limitation results from an announced change in the regular business
                hours of the relevant market; or

            

    

    

    
      	 	
              §

            	
              a
                decision by the relevant trading facility to permanently discontinue
                trading in any Index Component.

            

    

    

    A
      suspension of or material limitation on trading on the relevant trading on
      the
      relevant trading facility will not include any time when that facility is closed
      for trading under ordinary circumstances, and any limitations on trading during
      significant market fluctuations under New York Stock Exchange (“NYSE”)
      Rule 80B, or any applicable rule or regulation enacted or promulgated
      by the NYSE or any other self regulatory organization or the Securities and
      Exchange Commission of similar scope as determined by the Calculation Agent,
      will not be considered “material”

     

    Payment
      of the principal, if any, and return, if any, due and payable under this Note
      at
      the Maturity Date will be made in immediately available funds upon surrender
      of
      this Note at the office or agency of the Paying Agent, as defined below,
      maintained for that purpose in the Borough of Manhattan, The City of New York,
      or at such other paying agency as the Issuer may determine.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    The
      Trustee initially shall act as the paying agent (the “Paying
      Agent”,
      which
      term includes any additional or successor Paying Agent appointed by the Issuer)
      with respect to the Note. The Trustee maintains an office in The City of New
      York.

     

    The
      Issuer or one of its affiliates will act as the Calculation Agent (the
“Calculation
      Agent”,
      which
      term includes any additional or successor Calculation Agent appointed by the
      Issuer) with respect to the Note.

     

    4. Acceleration
      upon Event of Default.

     

    If
      an
      Event of Default (as defined in the Indenture) with respect to the Notes shall
      have occurred and be continuing, the Trustee or the holders of not less than
      25%
      in principal amount of Securities may declare the principal of all Securities
      due and payable in the manner and with the effect provided in the Indenture.
      In
      that case, the amount payable will be the daily Repurchase Value, with such
      value determined by referencing the Trading Day immediately succeeding the
      date
      of such declaration as the Valuation Date. If a Market Disruption Event exists
      on that scheduled Trading Day, then the Final Valuation Date for the Index
      will
      be postponed for up to five scheduled Trading Days (in the same general manner
      used for postponing the originally scheduled Final Valuation Date). The
      accelerated Maturity Date will be the third business day following the
      accelerated Final Valuation Date. If this Note has become immediately due and
      payable following an Event of Default, the holder of this Note will not be
      entitled to any additional payments with respect to this Note.  

     

    “Event
      of
      Default” means any event of default set forth in Article V of the
      Indenture.

     

    5. Discontinuance
      or Modification of the Index.

    

    If
      Standard & Poor’s reasonably determines that it is necessary to discontinue
      publication of the Index and Standard & Poor’s or any other person or entity
      calculates and publishes an index that the Calculation Agent, after consultation
      with the Issuer, reasonably determines is comparable to the Index and approves
      as a successor index, then the Calculation Agent will determine the level of
      the
      Index on the applicable Valuation Date and the amount payable on the
      Maturity Date or Repurchase Date by reference to such successor index for
      the period following the discontinuation of the Index. 

     

    If
      the
      Calculation Agent reasonably determines that the publication of the Index is
      discontinued and that there is no successor index, the Calculation Agent, after
      consultation with the Issuer, will determine the amount payable by a computation
      methodology that the Calculation Agent determines will as closely as reasonably
      possible replicate the Index. 

     

    If
      the
      Calculation Agent reasonably determines that the Index, the Index Components
      or
      the method of calculating the Index has been changed at any time in any
      significant respect, whether the change is made by Standard & Poor’s under
      its existing policies or following a modification of those policies, is due
      to
      the publication of a successor index, is due to events affecting one or more
      of
      the Index Components, or is due to any other reason—then the Calculation Agent,
      after consultation with the Issuer, will be permitted (but not required) to
      make
      such adjustments to the Index or method of calculating the Index as it
      reasonably believes are appropriate to ensure that the level of the Index used
      to determine the amount payable on the Maturity Date or upon repurchase by
      the
      Issuer replicates as fully as possible the economic character of the Index.
      

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    All
      determinations made by the Calculation Agent will be at the sole discretion
      of
      the Calculation Agent and will be conclusive for all purposes and binding on
      the
      holder of Notes, absent manifest error.

     

    5. Other
      Provisions

     

    No
      service charge shall be made for exchanging or registering the transfer of
      this
      Note, but the Trustee may require payment of a sum sufficient to cover any
      tax
      or other governmental charge payable in connection therewith.

     

    This
      Note
      constitutes a direct unsecured obligation of the Issuer and will rank on a
      parity with all of the other unsecured and unsubordinated indebtedness of the
      Issuer, present and future, except for such obligations as are preferred by
      operation of law. This Note is not a deposit liability of the Issuer and is
      not
      insured by the United States Federal Deposit Insurance Corporation or any other
      governmental agency of the United States or any other jurisdiction.

     

    All
      notices regarding this Note shall be given to the registered holder of this
      Note
      by first class mail postage prepaid to the address of the holder of the Note
      that appears in the Security Register (as defined in the Indenture). In the
      event of suspension of regular mail service or by reason of any other cause
      it
      shall be impracticable to give notice by mail, then such notification as shall
      be given with the approval of the Trustee shall constitute sufficient notice
      for
      every purpose hereunder.

     

    The
      remedies of the Trustee or the holder of this Note, as provided herein or in
      the
      Indenture, shall be cumulative and concurrent. No failure on the part of the
      holder of the Note or of the Trustee in exercising any right or remedy hereunder
      or under the Indenture shall operate as a waiver or release thereof, nor shall
      any single or partial exercise of any such right or remedy preclude any other
      further exercise thereof or the exercise of any other right or remedy hereunder
      or under the Indenture. 

     

    AS
      PROVIDED IN THE INDENTURE, THE INDENTURE AND THIS NOTE SHALL BE CONSTRUED IN
      ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
      TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT
      OF
      LAWS PRINCIPLES THEREOF.

     

    Unless
      the certificate of authentication hereon has been executed by the Trustee by
      the
      manual signature of one of its Authorized Officers, this Note shall not be
      entitled to any benefit under the Indenture or be valid or obligatory for any
      purpose.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    ASSIGNMENT
      FORM

     

    
      	For
              value received  	 

    

    

    hereby
      sell, assign and transfer unto

     

      
        

      

    

     

    
      

    

    Please
      insert social security or other identifying number of assignee

     

    Please
      print or type name and address, including zip code of assignee:

     

      
        

      

    

     

    
      

    

     

    
      

    

     

    
      

    

    
    

     

    the
      within Note and does hereby irrevocably constitute and appoint _______________
      Attorney to transfer the Note on the books of the Issuer with full power of
      substitution in the premises.

     

    
      	Date:	
               

            	
            	 Your
              Signature:	 
	 	 	 	
              (Sign
                exactly as your name appears on this
                Note)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    FORM
      OF OFFER FOR REPURCHASE 

     

    TO
      BE
      COMPLETED BY THE BENEFICIAL OWNER 

     

    Dated: __________________

    [insert
      date]

     

    HSBC
      USA
      Inc. (“HSBC USA”)

     

    Email:
      ETN.Notes.Group@us.hsbc.com

     

    Re:
      ELEMENTSSM
      Linked
      to the S&P Commodity Trends Indicator — Total Return due June 16, 2023
      issued by HSBC USA Inc. (the “ELEMENTS”) 

     

    Ladies
      and Gentlemen: 

     

    The
      undersigned beneficial owner hereby irrevocably offers to HSBC USA the right
      to
      repurchase the ELEMENTS, as described in the Pricing Supplement dated June
      10,
      2008, in the amounts and on the date set forth below. 

     

    Name
      of
      beneficial holder: _________________________________________________________

    [insert
      name of beneficial owner]

     

    Stated
      principal amount of ELEMENTS offered for repurchase (You must offer at least
      250,000 ELEMENTS ($2,500,000 stated principal amount) for repurchase at one
      time
      for your offer to be valid.):

     

    ______________________________________________________________

    [insert
      principal amount of ELEMENTS offered for repurchase by HSBC
      USA]

     

    Applicable
      valuation date: ______________, 20__

     

    Applicable
      repurchase date: ______________, 20__

    
      	 	[insert a date that is three business
              days following the applicable valuation
              date]

    

     

    Contact
      Name:

    ________________________________________________________________________

    [insert
      the name of a person or entity to be contacted with respect to this Offer for
      Repurchase]

     

    Telephone
      #: 

    ________________________________________________________________________

    [insert
      the telephone number at which the contact person or entity can be
      reached]

     

    My
      ELEMENTS are held in the following DTC Participant’s Account (the
      following information is available from the broker through which you hold your
      ELEMENTS):
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Name:

    DTC
      Account Number (and any relevant sub-account):

    Contact
      Name:

    Telephone
      Number: 

     

    Acknowledgement:
      In addition to any other requirements specified in the Pricing Supplement being
      satisfied, I acknowledge that the ELEMENTS specified above will not be
      repurchased unless (i) this Offer for Repurchase, as completed and signed by
      the
      DTC Participant through which my ELEMENTS are held (the “DTC Participant”), is
      delivered to HSBC USA by 5:00 p.m., New York City time, on the business day
      immediately preceding the applicable valuation date, (ii) the DTC Participant
      has booked a “delivery vs. payment” (“DVP”) trade on the applicable valuation
      date facing HSBC USA and (iii) the DTC Participant instructs DTC to deliver
      the
      DVP trade to HSBC USA as booked for settlement via DTC at or prior to 10:00
      a.m., New York City time, on the applicable repurchase date. 

     

    The
      undersigned acknowledges that HSBC USA will not be responsible for any failure
      by the DTC Participant through which such undersigned’s ELEMENTS are held to
      fulfill the requirements for repurchase set forth above. 

     

    ______________________________

    [Beneficial
      Holder] 

     

    PART
      B OF
      THIS NOTICE IS TO BE COMPLETED BY THE DTC PARTICIPANT IN WHOSE ACCOUNT THE
      ELEMENTS ARE HELD AND DELIVERED TO HSBC USA BY 5:00 P.M., NEW YORK CITY TIME,
      ON
      THE BUSINESS DAY IMMEDIATELY PRECEDING THE APPLICABLE VALUATION DATE

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    BROKER’S
      CONFIRMATION OF REPURCHASE

     

    [PART
      B:
      TO BE COMPLETED BY BROKER] 

     

    Dated: __________________

    [insert
      date]

     

    HSBC
      USA
      Inc. (“HSBC USA”)

     

    Re:
      ELEMENTSSM
      Linked
      to the S&P Commodity Trends Indicator — Total Return due June 16, 2023
      issued by HSBC USA Inc. (the “ELEMENTS”) 

     

    Ladies
      and Gentlemen: 

     

    The
      undersigned holder of ELEMENTSSM
      Linked
      to the S&P Commodity Trends Indicator — Total Return due June 16, 2023
      issued by HSBC USA Inc., CUSIP No. 4042EP 602 (the “ELEMENTS”) hereby
      irrevocably offers to HSBC USA the right to repurchase, on the Repurchase Date
      of ________________, with respect to the number of the ELEMENTS indicated below
      as described in the Pricing Supplement dated June 10, 2008 relating to the
      ELEMENTS (the “Pricing Supplement”). Terms not defined herein have the meanings
      given to such terms in the Pricing Supplement. 

     

    The
      undersigned certifies to you that it will (i) book a delivery vs. payment trade,
      facing HSBC USA (DTC # ),
      on the
      valuation date with respect to the stated principal amount of ELEMENTS specified
      below at a price per ELEMENT equal to the repurchase value and (ii) deliver
      the
      trade as booked for settlement via DTC at or prior to 10:00 a.m., New York
      City
      time, on the repurchase date. 

     

    Very
      truly yours,

     

    [NAME
      OF
      DTC PARTICIPANT HOLDER] 

     

    
      
        

      

    

     

    Contact
      Name:

    Title:

    Telephone:

    Fax:

    E-mail:
      

     

    Stated
      principal amount of ELEMENTS offered for repurchase (You must offer at least
      250,000 ELEMENTS ($2,500,000 stated principal amount) for repurchase at one
      time
      for your offer to be valid.): 

     

      
        

      

    

     

    DTC
      #
      (and any relevant sub-account):EXHIBIT
      10.1

     

    LICENSE
      AGREEMENT 

     

         This
      License Agreement (“Agreement”)
      is
      entered into as of September 1, 2006, by and between National Quality Care,
      Inc., a Delaware corporation (“Licensor”),
      and
      Xcorporeal, Inc. (“Licensee”)
      (each,
      a “Party;”
      collectively, the “Parties”).
      The
      Parties hereby agree as follows: 

     

    1.
      Defined
      Terms. 

     

         For
      purposes of this Agreement, the following definitions will apply: 

     

         “Affiliate”
means,
      when applied to a Party, any entity that is controlled by, controls, or is
      under
      common control with, such Party. 

     

         “Confidential
      Information”
means
      and includes any non-public information relating to or concerning a Party hereto
      (the “Disclosing
      Party”),
      or
      any of its Affiliates, that is provided or made available to the other Party
      (the “Receiving
      Party”),
      either before or after the Effective Date of this Agreement, directly or
      indirectly, in any form whatsoever, including in writing, orally, and in
      electronic or other machine readable form, including, but not be limited to,
      designs, know-how, inventions, technical data, ideas, uses, processes, methods,
      formulae, research and development records and materials, work in process,
      scientific, engineering and/or manufacturing records or materials, marketing
      plans, business plans, financial or personnel records or materials, present
      or
      future products, sales, suppliers, customers, employees, investors or business,
      information about this Agreement, and any other non-public business records
      and
      information, the use or disclosure of which might reasonably be construed to
      be
      contrary to the interests of the Disclosing Party or any of its Affiliates,
      including non-public information of third parties that is possessed by the
      Disclosing Party is subject to confidentiality obligations and that the
      Disclosing Party is lawfully allowed to disclose to the Receiving Party.

     

         “Derivative
      Works”
means
      (a) for Licensor material subject to copyright or mask work right
      protection, any work that as a whole represents an original work of authorship,
      and is based upon one or more pre-existing works, such as a revision,
      modification, translation, abridgment, condensation, expansion, collection,
      compilation or any other form in which such pre-existing works may be recast,
      transformed or adapted; (b) for Licensor patentable materials, any
      adaptation, subset, addition, improvement or combination of such materials;
      (c) for Licensor material subject to trade secret protection, any new
      material, information or data relating to and derived from such material,
      including new material that may be protectable by copyright, patent or other
      proprietary rights; and (d) with respect to each of the above, any material
      the preparation, use and/or distribution of which, in the absence of this
      Agreement or other authorization from Licensor, would constitute infringement
      or
      misappropriation under applicable law. 

     

         “Gross
      Sales”
means
      the total amount actually received by Licensee as revenue from the exploitation
      of the Technology (as defined below) by Licensee, its Affiliates and sub
      licensees, collectively, less separately stated freight payable to third
      parties, commercially reasonable special packaging, and duties, sales, use,
      excise, value added and other taxes, discounts, returns, and allowances.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

         “Intellectual
      Property Rights”
means
      all of the following worldwide legal rights owned, held or controlled by
      Licensor: (a) patents, patent applications, and patent rights; (b)
      trademarks, trademark registrations and applications therefor, trade names,
      rights in trade dress and packaging; (c) rights associated with works of
      authorship (including audiovisual works), including copyrights, copyright
      applications, and copyright registrations; (d) rights relating to the
      protection of trade secrets, confidential information, technical information,
      know-how, ideas, concepts, processes, procedures, techniques, discoveries,
      and
      inventions; (e) Moral Rights (as defined below); (f) design rights;
      (g) rights in name, likeness and other rights of commercial publicity;
      (h) any rights analogous to those set forth in the preceding clauses and
      any other proprietary rights relating to intangible property; and
      (i) divisions, continuations, renewals, reissues, and extensions of the
      foregoing (as applicable) now existing or hereafter filed, issued, or acquired.
      

     

         “Know-How”
means
      all (i) information and data possessed by Licensor, exclusive of any of the
      independent claims contained in the Licensor Patents (but including all other
      information and data contained in, or related to, any patent application filed
      by or on behalf of Licensor), relating to the exploitation and/or use of the
      Licensed Products (as defined below), including without limitation:
      (a) sources of materials; (b) methods, processes and procedures (and
      related test results and design data) for the extraction, isolation, creation,
      purification, and/or chemical modification of materials used in the production
      of the Licensed Products; (c) methods, processes and procedures used in the
      design, development, creation, modification, manufacture, production,
      processing, storage, packaging, testing and/or evaluation of the Licensed
      Products, including without limitation all biological and toxicological tests
      (and results thereof) together with all correspondence, notes, memoranda, and
      other information and/or data provided to, or received from, all health
      regulatory authorities; and (ii) trade secrets, data, formulae,
      compositions, processes, designs, sketches, photographs, graphs, drawings,
      samples, program proposals, presentations, inventions and ideas, past, current,
      and planned research and development, current and planned manufacturing or
      distribution methods and processes, market studies, business plans, computer
      software and programs, systems, structures and architectures (and related
      processes, formulae, composition, improvements, devices, inventions,
      discoveries, concepts, ideas, designs, methods and information), and any other
      information, however documented, that is not generally known to the public
      or
      that constitutes a trade secret under any applicable trade secret law.

     

         “Licensed
      Products”
means
      all products based on or derived from the Technology (as defined below), and
      any
      products sold in connection with the use of such products, including, but not
      limited to the Wearable Kidney and all related devices, whether now-existing
      or
      hereafter developed, that where sold, would infringe or misappropriate one
      or
      more of Licensor’s Intellectual Property Rights or Know-How, including, without
      limitation, the Licensor Patents or Licensor Patent Applications. 

     

         “Licensor
      Patents”
means
      the patents (and all re-issues and extensions) listed on the Schedule
      attached
      hereto and the patents, when issued, based upon the Licensor Patent Applications
      and in all divisions, continuations and continuations in part relating thereto.
      

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

         “Licensor
      Patent Applications”
means
      the patent applications listed on the Schedule
      attached
      hereto and any substitutions and continuations together with any patent
      applications based on, or related to, the Technology that may be filed by
      Licensor from the date hereof. 

     

         “Moral
      Rights”
means
      any rights of paternity or integrity, any right to claim authorship, to object
      to or prevent any distortion, mutilation or modification of, or other derogatory
      action in relation to the subject work, whether or not such would be prejudicial
      to the author’s honor or reputation, to withdraw from circulation or control the
      publication or distribution of the subject work, and any similar right, existing
      under judicial or statutory law of any country in the world, or under any
      treaty, regardless of whether or not such right is denominated or generally
      referred to as a “moral right.” 

     

         “Net
      Sales”
means
      Gross Sales less the following: (a) all direct costs and expenses of
      Licensee attributable to the research, development, production, marketing,
      sale
      and exploitation of the Licensed Products, including, without limitation, costs
      of materials and direct labor costs; and (b) all indirect costs of Licensee
      properly allocated under generally accepted accounting principles to the
      research, development, production, marketing, sale and/or exploitation of the
      Licensed Products, including, without limitation, overhead and selling, general
      and administrative expenses. 

     

         “Technology”
means
      and includes all existing and hereafter developed Intellectual Property,
      Know-How, Licensor Patents, Licensor Patent Applications, Derivative Works,
      and
      any other technology invented, improved or developed by Licensor, or as to
      which
      Licensor owns or holds any rights, arising out of or relating to the research,
      development, design, manufacture or use of: (a) any medical device,
      treatment or method as of the date of this Agreement, (b) any portable or
      continuous dialysis methods or devices, specifically including any wearable
      artificial kidney, or Wearable Kidney, and related devices, (c) any device,
      methods or treatments for congestive heart failure, and (d) any artificial
      heart or coronary device. 

     

         “Territory”
means
      anywhere in the universe. 

     

    2.
      Grant Of Exclusive License. Subject
      to Licensee’s continuing full compliance and complete and timely performance of
      all of the material obligations, terms and conditions imposed on it by this
      Agreement, Licensor hereby grants to Licensee, with right to grant sublicenses,
      the sole and exclusive license, during the Term and throughout the Territory,
      to
      use, improve, expand and otherwise exploit the Technology, to make (and have
      made), use, and sell the Licensed Products, and otherwise to practice the
      inventions and the art that is embodied or described in the Licensor Patents,
      the Licensor Patent Applications, and any improvements thereto made in whole
      or
      in part by Licensor (whether or not patented) in connection with the Technology
      (the “License”),
      provided,
      however,
      that
      the terms of any sublicense shall expressly conform and be made subject to
      the
      terms and conditions of this Agreement. 

     

    3.
      License Fees, Reports And Records. 

     

         A. License
      Fees.
      

     

              (1) During
      the Term of this Agreement, Licensee shall pay to Licensor a license fee of
      seven percent (7.0 %) of Net Sales (the “Royalty”);
      provided,
      however,
      that

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Licensee
      shall pay to Licensor a minimum aggregate annual Royalty of two hundred fifty
      thousand dollars ($250,000.00) (the “Minimum
      Royalty”).
      Within ninety (90) days of each anniversary of the date of this Agreement,
      Licensee shall pay Licensor the remaining difference, if any, between the
      Minimum Royalty and the aggregate of all Royalty payments for the preceding
      year. All payments due hereunder will be paid by wire transfer or check payable
      in United States currency. Whenever conversion of payments from any foreign
      currency is required, such conversion will be made at the rate of exchange
      reported in The Wall Street Journal on the last business day of the applicable
      reporting period. Unless earlier terminated as provided hereinafter, the
      obligation of Licensee to pay Royalties to Licensor shall expire upon the date
      that none of the Licensed Products infringe any of the Licensor Patents.

     

         (2) Notwithstanding
      the foregoing Section 3(A)(1),
      in the
      event that the Merger Agreement of even date herewith among the Parties and
      NQCI
      Acquisition Corporation, a Delaware corporation (the “Merger
      Agreement”)
      is
      terminated pursuant to Section 6(A) thereof, the Royalty pursuant to this
      Agreement will thereafter be as follows: 

     

         (a)
      If notice of termination is given pursuant to Section 6(A)(3), six and
      one-half percent (6.5%) of Gross Sales; 

     

         (b)
      If notice of termination is given pursuant to Section 6(A)(1), (5) or
      (6), seven and one-half percent (7.5%) of Gross Sales; and 

     

         (c)
      If notice of termination is given pursuant to Section 6(A)(2) or (4), eight
      and one-half percent (8.5%) of Gross Sales; 

     

    provided,
      however,
      that if
      it is later determined by an arbitrator or court of competent jurisdiction
      that
      a notice of termination was improper, or that the Merger Agreement was
      terminated on a different basis or pursuant to a different provision, the
      Royalty rate will be retroactively adjusted to the correct rate pursuant to
      one
      of the foregoing subsections, and any difference between the Royalty paid and
      the Royalty rate determined to be correct will be paid by the appropriate Party
      to the other within ninety (90) days of any such final determination.

     

         B. Reports.
      Within
      thirty (30) days following the end of each fiscal quarter, Licensee shall
      deliver to Licensor a report setting forth the calculation of the Royalty for
      the applicable fiscal period, including the number of Licensed Products sold
      by
      Licensee and all sublicensees (if any), the Gross Sales and Net Sales, as
      applicable, a reasonable breakdown of expenses in arriving at the foregoing,
      any
      other transactions involving Licensed Products, and the Gross Sales or Net
      Sales, as applicable, resulting from all such transactions during such fiscal
      quarter, and accompanied by payment of the Royalty due thereon. 

     

         C. Records.
      Licensee and its sublicensees (if any) shall maintain records of the
      transactions involving Licensed Products, Gross Sales, Net Sales, permitted
      expense deductions, and all Royalties paid thereon for a period of four
      (4) years following the end of the quarter following sale. 

     

              (a)
      Audits.
      Licensor may appoint an independent certified public accountant, who shall
      have
      the right to examine the records required under this Section 3.C
      during
      normal business hours on reasonable notice. Licensee shall, as a condition
      to
      the grant of any 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    sublicense,
      obtain the agreement of the sublicensee to make such records available for
      inspection by Licensor’ independent auditor. 

     

              (b) Audit
      Expenses.
      Licensor shall initially bear all costs and expenses of any audit conducted
      by
      Licensor’s independent accountant. If there is an underpayment of Royalties in
      excess of five percent (5%), Licensee shall remit the amount of such
      underpayment to Licensor, together with a reimbursement for the reasonable
      costs
      and expenses of Licensor in connection with the audit. If there is an
      overpayment of Royalties in excess of five percent (5%), Licensor shall remit
      the amount of such overpayment to Licensee, together with reimbursement for
      the
      reasonable costs and expenses of Licensee in connection with the audit. Any
      disputes concerning Royalty amounts due will be resolved by expedited, final
      offer (baseball style) arbitration. 

     

    4.
      Term. 

     

         A. Term.
      This
      Agreement and the License granted hereby shall, subject to all terms and
      conditions set forth herein, remain in full force and effect for ninety-nine
      (99) years from the date hereof (the “Term”);
      provided, however, that the Term shall end as to each of the Licensor Patents
      and copyrights upon the expiration of the term thereof, and as to each other
      item of Intellectual Property Rights when, if and as they cease to be
      protectible or fall into the public domain through no fault, action or inaction
      on the part of either of the Parties. 

     

         B. Termination.
      Either
      Party shall have the right to terminate this Agreement: (1) for uncured material
      breach of a material term of this Agreement by the other Party, by giving formal
      written notice specifying the breach, and such breach has continued without
      cure
      for a period of (a) thirty (30) days after such notice or (b) if
      the Party receiving such a notice (i) concludes in good faith that there the
      conduct alleged to be occurring is not occurring or does not constitute a
      material breach of this Agreement, and (ii) timely initiates an arbitration
      proceeding in accordance with Section 9.H,
      thirty
      (30) days after entry of the arbitration award; or (2) in the event
      that the other Party files for protection under the U.S. Bankruptcy Code, or
      makes an assignment for the benefit of creditors. Upon termination of this
      Agreement pursuant to this Section 4.B,
      (a) Licensee, and all sublicensees (if any), shall cease to use the
      Technology in any way, (b) Licensee, and all sublicensees (if any), shall
      return to Licensor all Licensor Confidential Information, and (c) the
      Parties shall remain liable for all of their respective obligations under this
      Agreement that accrued prior to the date of termination. 

     

    5.
      Intellectual Property Rights. 

     

         A. Prosecution
      of Patent Applications.
      Licensor shall diligently prosecute all of the Licensor Patent Applications
      at
      its own expense including, without limitation, in those foreign countries
      described in the Schedule
      attached
      hereto. If, at any time, Licensor intends to allow any Licensor Patent
      Application or Licensor Patent to lapse or to become abandoned or forfeited,
      Licensor shall notify Licensee, in writing, of its intention at least sixty
      (60) days before the date upon which said patent or application is due to
      lapse or become abandoned or forfeited. In the event that Licensee desires
      itself to continue to prosecute any such Licensor Patent Application, or to
      take
      the necessary action to maintain in force any such Licensor Patents, then
      Licensee shall, within thirty (30) days following Licensor’s written notice
      of intent to abandon, give 

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    written
      notice to Licensor of Licensee’s intent to prosecute and/or maintain such patent
      rights and Licensor shall thereupon promptly assign the entire right, title
      and
      interest, legal and equitable, in and to that patent or application to Licensee.
      Licensee shall be under no obligation to prosecute or maintain in force any
      Licensor Patents, Licensor Patent Applications or other Intellectual Property
      Rights. 

     

         B. Option
      to Purchase Limited Patent and Intellectual Property Rights.
      In the
      event that Licensor files a petition in Bankruptcy under the U.S. Bankruptcy
      Code, or has filed against it a petition of involuntary bankruptcy that is
      not
      dismissed with 60 days thereafter, Licensor will be deemed to have sold to
      Licensee, the day prior to the filing of said petition, the Licensor Patents
      and
      Licensor Patent Applications and all other Intellectual Property Rights
      pertaining to the Technology for a purchase price equal to the amount of the
      Royalties paid to that time and the further Royalties that would otherwise
      have
      become payable by Licensee to Licensor over the remainder of the then-current
      Term of this Agreement. The prospective portion of the purchase price shall
      be
      paid in the same manner and at the same time as the future Royalties would
      otherwise have been paid hereunder. 

     

         C. Infringement.
      

     

              (1) If
      Licensor discovers that a third party is manufacturing or selling products
      in
      the Territory that infringe the Licensor Patents or any other legally
      enforceable Intellectual Property Rights pertaining to the Technology, it shall
      notify Licensee of such infringement and give such Party all appropriate
      information in its possession relating to the infringement. This section shall
      not impose any obligation on either Licensor or Licensee to maintain any ongoing
      investigative program to detect any third party infringement. 

     

              (2) Licensee
      shall have the sole right and authority to take such steps as it deems
      reasonable and appropriate in its sole discretion to determine whether
      actionable infringement is occurring and, if it is, to stop the infringement
      in
      the Territory during the Term, including but not limited to filing a legal
      action against the alleged infringer in its own name. 

     

              (3) Licensee
      shall have the sole right to direct and control the prosecution of such an
      action, including selection of counsel and deciding to settle, dismiss or
      continue the prosecution of the action on such terms and in the manner it deems
      reasonable and appropriate in its sole discretion, and shall, subject to
Section 5.C(4),
      bear
      all costs and expenses of such action, and shall retain all damages and other
      remedies recovered in such action. 

     

              (4) Licensee
      shall have the right to offset all damages and losses awarded by any Court
      of
      competent jurisdiction relating to any infringement of the Intellectual Property
      Rights or the sale or use of the Licensed Products, including Licensee’s legal
      fees, costs and expenses, against any Royalty otherwise payable to Licensor.
      

     

         D. Development
      and Expenses.
      

     

              (1)
      Development.
      Licensee shall make commercially reasonable efforts to develop and commercially
      exploit the Technology to generate revenues during the Term. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

              (2)
      Requested
      Expenses.
      Upon
      Licensee’s request, Licensor shall make commercially reasonable efforts to
      continue and advance the research and development program to prepare the
      Technology for commercial exploitation, and Licensee shall pay all reasonable
      and necessary research and development costs and expenses arising therefrom.
      

     

              (3)
      Monthly
      Expenses.
      No
      later than the earlier of (i) thirty (30) days after the date on which
      Licensee has obtained total debt or equity investment of at least three million
      five hundred thousand dollars ($3,500,000.00) or (ii) ninety (90) days
      after the date hereof, Licensee shall reimburse Licensor’s reasonable and
      necessary expenses incurred in the ordinary course of business consistent with
      past practices (“Licensor
      Expenses”),
      during the period from the date hereof to the Closing (as defined therein)
      or
      termination of the Merger Agreement. All such Licensor Expenses shall:
      (a) be only for the specific persons, services and expenses listed in
      reasonable detail on the Budget contained in the Company Disclosure Schedule
      to
      the Merger Agreement, (b) be payable hereunder only to the extent not paid
      pursuant to the Merger Agreement, (c) be mutually agreed upon in advance of
      being reimbursed with regard to all Professional Fees set forth in the Budget,
      and (d) include, but not be limited to, expenses already paid or accrued
      relating to human clinical trials carried out or to be carried out on behalf
      of
      Licensor in Italy and the United Kingdom as set forth in the Budget.

     

    6.
      Confidentiality.
      

     

         A. Each
      Party agrees that during the performance of this Agreement, it may disclose
      to
      the other Confidential Information of such Disclosing Party. Each Receiving
      Party shall not, at any time or in any manner, disclose, copy, modify,
      distribute or otherwise transfer the Disclosing Party’s Confidential
      Information, or any part thereof, to any other person, except as permitted
      by
      this Agreement. 

     

         B. A
      Receiving Party may disclose Confidential Information (1) to professional
      advisors of the Receiving Party in accordance with customary business practices
      in connection with the Agreement, and (2) to the Disclosing Party’s
      employees who have a specific need to know in order to perform that Party’s
      obligations hereunder, provided,
      however,
      that
      all such permitted disclosees shall be required to maintain the confidentiality
      of the Confidential Information in accordance with this Agreement, and each
      Receiving Party shall be responsible for all of its employees’ actions. Each
      Party shall use the other Party’s Confidential Information only to properly
      fulfill its obligations hereunder, and not for any other purpose. Upon request
      of a Party, and in any event promptly following termination of this Agreement
      under Section 4.C
      above,
      each Receiving Party shall immediately return the originals and all copies
      of
      any Confidential Information to the Disclosing Party. 

     

         C. The
      obligations and restrictions set forth in this Section 6
      shall
      not apply to any Confidential Information that falls within any of the following
      exceptions: 

     

              (1) is
      or becomes part of the public domain without breach of this Agreement by a
      Receiving Party; 

     

              (2) is
      lawfully in the possession of a Receiving Party prior to receiving it from
      the
      Disclosing Party hereunder; 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

              (3) is
      independently developed by or for a Receiving Party completely apart from the
      disclosures hereunder; 

     

              (4) is
      received from a third party who lawfully acquires such information without
      restriction, and without breach of this Agreement by a Receiving Party; or
      

     

              (5) is
      released to the public or to a third party without a duty of confidentiality,
      pursuant to a binding court order or government regulation, provided that the
      Receiving Party delivers a copy of such order or action to the Disclosing Party
      and cooperates with the Disclosing Party if it elects to contest such
      disclosure. 

     

    Nothing
      provided for in this Section 6
      shall be
      construed to preclude or inhibit Licensee’s rights to exploit any of its rights
      under the License. 

     

    7.
      Representations And Warranties. 

     

         A. Representations
      and Warrants by Licensor.
      Licensor represents and warrants, as of the date first set forth above and
      upon
      the Effective Date and upon the date each Licensor Patent issues that:

     

              (1) Licensor
      has the right to enter into this Agreement and there are no outstanding
      assignments, grants, licenses, encumbrances, obligations or agreements, whether
      written, oral or implied, that are inconsistent with this Agreement;

     

              (2) Licensor
      is the owner of the entire right, title and interest in and to invention and
      the
      art claimed in the Licensor Patent Applications and the claims contained in
      any
      Licensor Patent Rights that issues and that it has the sole right to grant
      the
      licenses granted to Licensee herein; 

     

              (3) The
      Licensor Patents will not have been fraudulently procured, and Licensor has
      no
      reason to believe that the claims contained in the Licensor Patent Applications
      will not be issued in a manner that will protect sales of the Licensed Products
      in the Territory from competitors utilizing the invention or its equivalent;
      

     

              (4) Licensor
      has no knowledge of any circumstances that would render the Licensor Patents,
      when issued, invalid; and 

     

              (5) Licensor
      has not granted any license to or under the Technology to any other person
      or
      entity for its use within the Territory. 

     

         B. Representations
      by Licensee. Licensee represents and warrants that it has the right enter into
      and deliver this Agreement and undertake the duties provided for in this
      Agreement. 

     

    8.
      Indemnification. 

     

         A. Indemnification
      by Licensor.
      Licensor agrees to hold harmless, defend and indemnify each of Licensee and
      its
      officers, directors, shareholders, employees, members, 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    partners,
      managers, attorneys and agents, from and against any liability, claims, demands,
      actions, costs, expenses, including reasonable attorneys’ fees, or causes of
      action whatsoever (collectively, “Claims”)
      arising on account of: 

     

              (1) Any
      breach by Licensor of its representations and warranties contained herein;
      

     

              (2) Licensee’s
      lawful and non-negligent use of any Intellectual Property Rights licensed by
      Licensor hereunder; 

     

              (3) Any
      Claims that Licensee’s use of the Intellectual Property Rights in conformity of
      this Agreement infringes upon or misappropriates the intellectual property
      rights of any third party; or 

     

              (4) Licensor’s
      operations or conduct prior to the date of this Agreement with regard to the
      research, development, or production of the Technology and/or Licensed Products.
      Such Claims shall include, without limitation, any product liability claims
      or
      Claims on account of any injury or death of persons or damage to property based
      on alleged defects in the Technology existing as of the effective date of this
      Agreement or based on actions or omissions of Licensor, regardless of whether
      such Claims are made prior to or at any time after the date of this Agreement.
      

     

         B. Indemnification
      by Licensee.
      Licensee agrees to hold harmless, defend and indemnify each of Licensor and
      its
      officers, directors, shareholders, employees, members, partners, managers,
      attorneys and agents, from and against any Claims arising on account of any
      breach by Licensee of it representations and warranties contained herein.

     

    9.
      General. 

     

         A. Reformation/Severability.
      If any
      provision of this Agreement is declared invalid by any tribunal, then such
      provision shall be deemed automatically adjusted to the minimum extent necessary
      to conform to the requirements for validity as declared at such time and, as
      so
      adjusted, shall be deemed a provision of this Agreement as though originally
      included herein. In the event that the provision invalidated is of such a nature
      that it cannot be so adjusted, the provision shall be deemed deleted from this
      Agreement as though such provision had never been included herein. In either
      case, the remaining provisions of this Agreement shall remain in effect.

     

         B. Binding
      Effect.
      All of
      the terms of this Agreement shall be binding upon, and inure to the benefit
      of,
      and be enforceable by, the Parties and their successors and permitted assigns,
      if any. 

     

         C. Schedules.
      All
      schedules attached hereto and referred to herein, are an integral part of this
      Agreement and are incorporated herein by reference hereby. 

     

         D. Subject
      Headings.
      The
      subject headings of the sections of this Agreement are included solely for
      purposes of convenience and reference only, and shall not be deemed to

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    explain,
      modify, limit, amplify or aid in the meaning, construction or interpretation
      of
      any of the provisions of this Agreement. 

     

         E. Interpretations
      and Definitions.
      In this
      Agreement whenever the context so requires, the gender includes the neuter,
      feminine and masculine and the number includes the singular and the plural
      and
      the words “person” and “party” include individuals, corporations, partnerships,
      firms, trusts or associations. 

     

         F. Waiver.
      Any
      waiver by any Party of any breach of any term or condition of this Agreement
      shall not be deemed a waiver of any other breach of such term or of any other
      term or condition, nor shall the failure of any Party to enforce such provision
      constitute a waiver of such provision or any other provision, nor shall such
      action be deemed a waiver or release of the other Party for any claims arising
      out of or connected with this Agreement. 

     

         G. Choice
      of Law.
      This
      Agreement and all matters or issues collateral hereto shall be construed in
      accordance with, and governed by, the laws of the State of Delaware.

     

         H. Arbitration.
      Any
      dispute, controversy or claim arising out of or relating to this Agreement,
      shall be resolved by final and binding arbitration before a retired judge at
      JAMS or its successor in Santa Monica, California. The expenses of arbitration,
      the reasonable fees and costs of legal counsel, experts, and evidence shall
      be
      awarded to the prevailing Party. Any interim or final award of the arbitrator
      may be entered in any court of competent jurisdiction. 

     

         I. Successors
      and Assigns.
      Neither
      this Agreement nor any of the rights or obligations hereunder shall be
      assignable by any Party hereto without the written consent of the other Party
      first obtained and any attempted assignment without such written consent shall
      be void and confer no rights upon any third party. Subject to the foregoing,
      this Agreement shall be binding upon and shall inure to the benefit of the
      parties hereto and their respective representatives, successors and permitted
      assigns. 

     

         J. No
      Joint Venture.
      This
      Agreement does not constitute and shall not be construed to constitute an
      agency, a partnership or a joint venture between the Parties. Neither Party
      shall have any power or right, nor shall it represent itself as having any
      power
      or right to obligate or bind the other Party in any manner whatsoever and
      nothing contained in this Agreement shall give or is intended to give any rights
      of any nature to third party. This is an agreement between separate entities
      and
      neither is the agent of the other for any purpose whatsoever. 

     

         K. Notice.
      All
      written notices or other written communications required under this Agreement
      shall be deemed properly given when provided to the parties entitled thereto
      by
      personal delivery (including delivery by commercial services such as messengers
      and airfreight forwarders), by electronic means (such as by electronic mail,
      telex or facsimile transmission) or by mail sent registered or certified mail,
      postage prepaid at the following addresses (or to such other address of a Party
      designated in writing by such Party to the others): 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    If
      to
      Licensee: 

     

    Xcorporeal,
      Inc.

    Attn:
      Terren S. Peizer

    c/o
      Greenberg Traurig, LLP

    2450
      Colorado Avenue, Suite 400E

    Santa
      Monica, California 90404

    Attn:
      John C. Kirkland, Esq.

    Fax:
      (310) 586-0286 

     

    With
      a
      copy to: 

     

    Greenberg
      Traurig, LLP

    2450
      Colorado Avenue, Suite 400E

    Santa
      Monica, California 90404

    Attn:
      John C. Kirkland, Esq.

    Fax:
      (310) 586-0286 

     

    If
      to
      Licensor: 

     

    National
      Quality Care, Inc.

    9033
      Wilshire Boulevard, Suite 501

    Beverly
      Hills, California 90211

    Attention:
      Robert M. Snukal

    Fax:
      (310) 840-5681 

     

    With
      a
      copy to: 

     

    Jenkins
      & Gilchrist, LLP

    12100
      Wilshire Boulevard, 15th Floor

    Los
      Angeles, California 90025

    Attn:
      Jeffrey P. Berg, Esq.

    Fax:
      (310) 820-8859 

     

    All
      notices given by electronic means shall be confirmed by delivering to the Party
      entitled thereto a copy of said notice by certified or registered mail, postage
      prepaid, return receipt requested. All written notices shall be deemed delivered
      and properly received upon the earlier of two (2) days after mailing the
      confirmation notice or upon actual receipt of the notice provided by personal
      delivery or electronic means. 

     

         L. Further
      Documents.
      Each
      Party shall execute and deliver, at any time and from time to time, upon the
      request of the other such further instruments, papers or documents as may be
      necessary or appropriate to consummate the transactions contemplated hereby
      and
      to take such other action as the other Party may reasonably request to
      effectuate the purposes of this Agreement. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

         M. Amendment.
      This
      Agreement may only be amended, modified or changed by a written document
      executed by both Parties. 

     

         N. Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument. 

     

         O. Entire
      Agreement.
      This
      instrument contains the entire agreement between the Parties, and supersedes
      all
      prior or contemporaneous understandings or agreements, whether written or oral.
      Neither Party has relied upon any promise, representation or undertaking not
      expressly set forth herein. 

     

         IN
      WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
      as
      of the day and date first set forth above. 

     

    LICENSOR: 

     

    NATIONAL
      QUALITY CARE, INC. 

     

    
      	
              By:
                

            	
               

            	
              /s/
                Victor Gura

            	
               

            	
               

            
	
              Name:
                

            	
               

            	
              Victor
                Gura, M.D. 

            	
               

            	
               

            
	
              Title:
                

            	
               

            	
              Chief
                Scientific Officer

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            
	
              By:
                

            	
               

            	
              /s/
                Robert M. Snukal

            	
               

            	
               

            
	
              Name:
                

            	
               

            	
              Robert
                M. Snukal 

            	
               

            	
               

            
	
              Title:
                

            	
               

            	
              Chief
                Executive Officer

            	
               

            	
               

            

    

    

     

    
      	
               

            	
               

            	
              LICENSEE:

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            
	
               

            	
               

            	
              XCORPOREAL,
                INC.

            	
               

            	
               

            
	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            	
               

            
	
               
                

            	
               

            	
              By:
                

            	
               

            	
              /s/
                Terren S. Peizer

            	
               

            	
               

            
	
               
                

            	
               

            	
              Name:
                

            	
               

            	
              Terren
                S. Peizer 

            	
               

            	
               

            
	
               
                

            	
               

            	
              Title:
                

            	
               

            	
              Chairman
                of the Board

            	
               

            	
               

            

    

     

    
      
        
        

      

      
        12

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