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Refund Anticipation Loan Participation Agreement

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HSBC REFUND ANTICIPATION LOAN
PARTICIPATION AGREEMENT


DATED AS OF SEPTEMBER 23, 2005


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


Table of Contents


Page
---- ARTICLE I DEFINITIONS.................................................................. 2
Section 1.1. Definitions.................................................................. 2
Section 1.2. Rules of Construction........................................................ 2
Section 1.3. Corporate Reorganizations.................................................... 2
Section 1.4. Funding for Purchases of Participation Interests in HSBC RALs................ 3


ARTICLE II REPRESENTATIONS AND WARRANTIES OF HSBC BANK, HSBC TFS AND HTMAC.............. 3
Section 2.1. Representations Incorporated by Reference.................................... 3
Section 2.2. Representations and Warranties of HSBC Bank and HTMAC........................ 3
Section 2.3. Representations and Warranties of HTMAC Relating to Participated HSBC RALs... 3


ARTICLE III REPRESENTATIONS AND WARRANTIES OF BFC........................................ 4
Section 3.1. Representations Incorporated by Reference.................................... 4


ARTICLE IV PURCHASE AND SALE OF PARTICIPATION INTERESTS................................. 4
Section 4.1. Purchase and Sale of Participation Interests in HSBC RALs.................... 4
Section 4.2. Purchase Price............................................................... 5
Section 4.3. Payment...................................................................... 5
Section 4.4. Right to Exclude Certain RALs................................................ 5
Section 4.5. Certain Rights of HTMAC...................................................... 6
Section 4.6. Information to be Furnished by HTMAC to BFC.................................. 6
Section 4.7. True Sale and Nonconsolidation Opinions...................................... 6
Section 4.8. Right of BFC to Sell Participation Rights.................................... 7


ARTICLE V SERVICING OF PARTICIPATED HSBC RALS.......................................... 8
Section 5.1. Servicing Agreement.......................................................... 8


ARTICLE VI REPURCHASE OF PARTICIPATION INTERESTS........................................ 8
Section 6.1. Repurchase Events............................................................ 8
Section 6.2. Repurchase Remedy............................................................ 8
Section 6.3. Procedures for Repurchase.................................................... 9
Section 6.4. Impairment................................................................... 9


ARTICLE VII TERM AND TERMINATION......................................................... 9
Section 7.1. Term......................................................................... 9
Section 7.2. Termination.................................................................. 9
Section 7.3. Effect of Termination........................................................ 10


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ARTICLE VIII DEFAULT OF HTMAC, HSBC BANK AND HSBC TFS AND REMEDIES OF BFC................. 10
Section 8.1. HTMAC Events of Default...................................................... 10
Section 8.2. Remedies..................................................................... 10
Section 8.3. Default Rate................................................................. 11
Section 8.4. Waiver....................................................................... 11


ARTICLE IX DEFAULT OF BFC AND REMEDIES OF HTMAC......................................... 11
Section 9.1. BFC Events of Default........................................................ 11
Section 9.2. Remedies..................................................................... 11
Section 9.3. Default Rate................................................................. 12
Section 9.4. Waiver....................................................................... 12


ARTICLE X MISCELLANEOUS................................................................ 12
Section 10.1. Independent Evaluation....................................................... 12
Section 10.2. Survival..................................................................... 12
Section 10.3. No Waivers; Remedies Cumulative.............................................. 12
Section 10.4. Notices...................................................................... 13
Section 10.5. Severability................................................................. 13
Section 10.6. Amendments and Waivers....................................................... 13
Section 10.7. Successors and Assigns....................................................... 13
Section 10.8. Headings..................................................................... 13
Section 10.9. Alternative Dispute Resolution............................................... 13
Section 10.10. Governing Law; Submission To Jurisdiction.................................... 13
Section 10.11. Waiver of Jury Trial......................................................... 14
Section 10.12. Counterparts................................................................. 14
Section 10.13. Entire Agreement............................................................. 14
Section 10.14. Reinstatement................................................................ 14
Section 10.15. Advice of Counsel............................................................ 15
Section 10.16. No Strict Construction....................................................... 15
Section 10.17. Conflict of Terms............................................................ 15
Section 10.18. Further Execution............................................................ 15
Section 10.19. Expenses..................................................................... 15
Section 10.20. No Implied Relationship...................................................... 15
Section 10.21. No Third Party Beneficiaries................................................. 15
Section 10.22. Limitation of Scope of Representations and Warranties and Other Disclosures.. 16


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HSBC REFUND ANTICIPATION LOAN
PARTICIPATION AGREEMENT


This HSBC Refund Anticipation Loan Participation Agreement (this "Participation Agreement"), dated as of September 23, 2005, is made by and among the following parties:


Household Tax Masters Acquisition Corporation, a Delaware corporation ("HTMAC");


Block Financial Corporation, a Delaware corporation ("BFC");


HSBC Bank USA, National Association, a national banking association ("HSBC Bank"); and


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


RECITALS


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


B. HTMAC purchases participation interests in HSBC RALs originated by HSBC Bank.


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


D. Simultaneously with the execution of this Participation Agreement, HSBC Bank, HTMAC, HSBC TFS and certain of their Affiliates and BFC and certain of its Affiliates are entering into the HSBC Settlement Products Retail Distribution Agreement, dated as of the date hereof, as from time to time amended, restated, supplemented or otherwise modified (the "Retail Distribution Agreement"), and other agreements related thereto.


E. Simultaneously with the execution of this Participation Agreement, HSBC Bank, HTMAC, HSBC TFS and BFC are entering into the Servicing Agreement to set forth the terms and conditions pursuant to which HSBC TFS will service, administer and collect HSBC RALs originated by HSBC Bank.


F. HSBC Bank, HTMAC, HSBC TFS and BFC desire to enter into this Participation Agreement to set forth the terms and conditions of HTMAC's sales to BFC, and BFC's purchases from HTMAC, of Participation Interests in certain HSBC RALs originated by HSBC Bank.


AGREEMENT


ACCORDINGLY, the parties to this Participation Agreement hereby agree as follows:


ARTICLE I
DEFINITIONS


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


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


Section 1.3. Corporate Reorganizations.


(a) The Block Companies may assign their rights and obligations under this Participation Agreement to one or more Subsidiaries of H&R Block without the consent of the HSBC Companies if (i) such assignment is desirable in connection with a reorganization of the business operations of H&R Block's Subsidiaries, (ii) such contemplated assignment will not materially adversely affect any right or obligation of any HSBC Company under this Participation Agreement, and (iii) the contemplated assignee (A) is a wholly owned (direct or indirect) Subsidiary of H&R Block and (B) has the operational and financial capacity to meet all obligations of the assigning Block Company under this Participation Agreement contemplated to be assigned to it (a "Permitted Block Assignment"). The assigning Block Companies shall provide each of the HSBC Companies at least sixty (60) days prior written notice of any contemplated Permitted Block Assignment. The parties hereto agree to amend this Participation Agreement to the extent necessary to reflect such Permitted Block Assignment.


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


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written notice of any contemplated Permitted HSBC Assignment. The parties hereto agree to amend this Participation Agreement to the extent necessary to reflect such Permitted HSBC Assignment.


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


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


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


ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HSBC BANK, HSBC TFS AND HTMAC


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


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


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


(a) Eligible RAL. Each Participated HSBC RAL is an Eligible RAL.


(b) Sale and Ownership; Title. Each conveyance of a Participation Interest by HTMAC to BFC on such Closing Date constitutes either (i) a valid sale, transfer, assignment, set over and conveyance to BFC of all right, title and interest of HTMAC in and to such Participation Interest, free and clear of any Lien of any Person claiming through or under HTMAC or any of its Affiliates, or (ii) if it is ultimately determined by a court of competent jurisdiction that a sale of a Participation Interest from HTMAC to BFC did not occur, then such


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conveyance constitutes a grant of a security interest (as defined in the UCC as in effect in the applicable state) by HTMAC to BFC in each Participation Interest purportedly conveyed and this Participation Agreement constitutes a security agreement with respect thereto. On each Closing Date, immediately prior to any such sale of (or grant of a security interest in) a Participation Interest, HTMAC will be the sole legal and beneficial owner of, and will have marketable title to, the Participation Interest, free and clear of any Lien (other than the interests of BFC contemplated by this Participation Agreement). Neither HTMAC nor any Person claiming through or under HTMAC or any of its Affiliates shall have any claim to or interest in such Participation Interest, except for any interest of HTMAC therein as a "debtor" (specifically, as seller of payment intangibles) for purposes of Article 9 of the UCC.


ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BFC


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


ARTICLE IV
PURCHASE AND SALE OF PARTICIPATION INTERESTS


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


(a) Purchase and Sale of Participation Interests. Except as otherwise provided herein, HTMAC shall sell to BFC, and BFC shall purchase from HTMAC, a Participation Interest in each HSBC RAL originated pursuant to any Distribution Agreement. Each such Participation Interest shall be purchased by BFC on the first Business Day following the Business Day on which the Disbursement Check for such HSBC RAL has been presented to HSBC Bank for payment or Electronic Disbursement for such HSBC RAL has been made by HSBC Bank. HTMAC shall convey each Participation Interest to BFC upon BFC's payment to HTMAC of the Purchase Price with respect to each such Participation Interest as set forth in Section 4.3. If and to the extent that any conveyance of a Participation Interest is not deemed a sale of a Participation Interest, (i) HTMAC hereby grants to BFC a security interest in each Participation Interest that was purportedly conveyed, (ii) this Participation Agreement shall constitute a security agreement with respect to such Participation Interest under applicable Law and (iii) HTMAC authorizes the filing of such financing and continuation statements with respect to Participation Interests hereafter created or arising. Except for the representations and warranties expressly made by HTMAC in this Participation Agreement, Participation Interests (and the acquisition thereof by BFC) shall be withou
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