Refund Anticipation Loan Participation Agreement - Block Financial Corp., Household Tax Masters Inc. and Household Tax Masters Acquisition Corp.
EXECUTION COPY
THIRD AMENDED AND RESTATED
REFUND ANTICIPATION LOAN
PARTICIPATION AGREEMENT
THIS THIRD AMENDED AND RESTATED REFUND ANTICIPATION LOAN
PARTICIPATION AGREEMENT (this "Agreement"), dated as of January 1, 2004, is made
by and among BLOCK FINANCIAL CORPORATION, a Delaware corporation ("BFC"),
HOUSEHOLD TAX MASTERS INC., a Delaware corporation ("Tax Masters"), and
HOUSEHOLD TAX MASTERS ACQUISITION CORPORATION, a Delaware corporation ("HTMAC").
RECITALS
A. BFC, Tax Masters and Household Bank, f.s.b., a federal savings
bank ("HB"), are parties to the Amended and Restated Refund Anticipation Loan
Participation Agreement, dated as of January 6, 2003 (the "First Amended and
Restated RAL Participation Agreement"), where BFC agreed to purchase from Tax
Masters and Tax Masters agreed to sell to BFC a participation interest in refund
anticipation loans made to customers of both H&R Block Tax Services, Inc., a
Delaware corporation ("Block Tax Services"), and its affiliates and certain
franchisees of HRB Royalty, Inc., a Delaware corporation ("Royalty") and their
affiliates.
B. HB ceased its operations and in connection therewith, Tax Masters
engaged Imperial Capital Bank, a California state-chartered commercial bank
("ICB"), to perform the origination function for Refund Anticipation Loans
("RALs") and issuing function for Refund Anticipation Checks ("RACs") for 2003
and 2004.
C. Tax Masters, HTMAC and ICB entered into an Amended and Restated
Sale and Servicing Agreement for RALs and RACs, dated as of January 3, 2003 (the
"Sale and Servicing Agreement"), which represents the basic agreement between
Tax Masters, HTMAC and ICB regarding the RAL program pursuant to which (i) Tax
Masters services the loans originated by ICB under the RAL program, and (ii)
HTMAC purchases participation interests in RALs from ICB. Redacted copies of the
Sale and Servicing Agreement and all amendments thereto will be delivered by Tax
Masters or HTMAC to BFC.
D. H&R Block Services, Inc., a Missouri corporation ("Block
Services"), on behalf of itself and its subsidiaries, Block Tax Services, and
Royalty (Block Services, Block Tax Services and Royalty are collectively
referred to herein as "Block Companies"), Tax Masters and Beneficial Franchise
Company, Inc., a Delaware corporation ("Beneficial Franchise") (Tax Masters and
Beneficial Franchise are collectively referred to herein as "Household
Companies"), and for certain limited purposes, HB, have entered into an Amended
and Restated Refund Anticipation Loan Operations Agreement, dated as of January
6, 2003 (the "First Amended and Restated RAL Operations Agreement").
E. Block Companies and Household Companies are parties to a letter
agreement, dated November 11, 2002 (the "First ICB Consent Letter"), pursuant to
which Block Companies consented to ICB as the RAL originator under the First
Amended and Restated RAL
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Operations Agreement, subject to the right of Block Companies in their sole
discretion, during the ten (10) day period from June 1 through June 10, 2003, to
provide written notice to Tax Masters, Beneficial Franchise and ICB that ICB is
not acceptable as the RAL originator and RAC issuer for future Tax Periods, in
which event Household Companies agree to substitute a financial institution
chartered by the Office of Thrift Supervision or the Office of the Comptroller
of the Currency (a "Federally Chartered Financial Institution") as the RAL
originator and RAC issuer for future Tax Periods (the "Block ICB Termination
Right").
F. Block Companies and Household Companies have entered into a
Second ICB Consent Letter, dated June 9, 2003 (the "Second ICB Consent Letter"),
pursuant to which Block Companies have agreed to refrain from exercising the
Block ICB Termination Right for the 2004 Tax Period, on certain terms and
conditions, subject to Block Companies' absolute right in their sole discretion
during the ten (10) day period from June 1 through June 10 of any year, to
provide written notice to Tax Masters, Beneficial Franchise and ICB, that ICB is
not acceptable as the RAL originator and RAC issuer for future Tax Periods, in
which event Household Companies agree to substitute a Federally Chartered
Financial Institution as the RAL Originator and RAC issuer for future Tax
Periods, provided that any entity selected by Household Companies (other than an
Affiliate of Household Companies that is a Federally Chartered Financial
Institution having sufficient capital to fulfill its anticipated obligations
with respect to the RAL Program) shall be subject to the consent of Block
Companies, which consent shall not be unreasonably withheld.
G. The Block Companies and the Household Companies have entered into
a Second Amended and Restated RAL Operations Agreement, dated as of June 9, 2003
(the "Second Amended and Restated RAL Operations Agreement").
H. BFC and Tax Masters are parties to the Second Amended and
Restated Refund Anticipation Loan Participation Agreement, dated as of June 9,
2003 (the "Second Amended and Restated RAL Participation Agreement"), which
reflected the continuation of ICB as the RAL originator and RAC issuer for the
2004 Tax Period, subject to the terms and conditions of the Second ICB Consent
Letter and the Second Amended and Restated RAL Participation Agreement.
I. Pursuant to a Waiver of Rights Under Amended and Restated Refund
Anticipation Loan Participation Agreement, dated January 6, 2003, BFC waived its
right to purchase Participation Interests with respect to RALs originated from
January 1, 2003 to April 30, 2003, therefore, an amendment to the Second Amended
and Restated RAL Participation Agreement to reflect the fact that HTMAC (not Tax
Masters) is the owner of the Participation Interests being sold to BFC, was not
necessary in the past.
J. The parties desire to amend and restate the Second Amended and
Restated RAL Participation Agreement as hereinafter set forth to reflect that
fact that HTMAC, rather than Tax Masters, is the seller of the Participation
Interests to BFC.
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AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and of the
agreements of the parties hereto and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, BFC, HTMAC and Tax
Masters hereby covenant and agree that the Second Amended and Restated RAL
Participation Agreement is hereby amended and restated in its entirety with
respect to Participation Interests purchased by BFC and certain other acts and
events that occur from and after the effective date hereof, by deleting the
provisions of Sections 1.1 through 7.17 as the same now appear and by
substituting therefor the following Sections 1.1 through 7.17:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following
terms shall have the meaning set forth below:
"Affiliate" of any Person shall mean any other Person controlling,
controlled by or under common control with such Person.
"Applicable Percentage" shall mean the percentage set forth for a
particular Tax Period in Section 2.5.
"Applicable Tax Period" shall mean any of the ten consecutive Tax
Periods commencing with and including the Tax Period beginning January 1, 1997
and ending with and including the Tax Period beginning January 1, 2006.
"BFC" shall mean Block Financial Corporation, a Delaware
corporation.
"Block Franchise" shall mean an office owned by a franchisee of
Block Services or its subsidiaries that operates under the "H&R Block" name that
is open to the public for the preparation of tax returns.
"Block ICB Termination Right" shall have the meaning set forth in
Recital E.
"Block Office" shall mean (i) an office owned by Block Services or
its subsidiaries that operates under the "H&R Block" name and is open to the
public for the preparation of tax returns and (ii) a Corporate Franchise.
"Block Services" shall mean H&R Block Services, Inc., a Missouri
corporation.
"Block Tax Services" shall mean H&R Block Tax Services, Inc., a
Missouri corporation.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a day on which banking institutions in Bridgewater, New Jersey are authorized or
obligated by law or executive order to be closed.
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"Claim" shall have the meaning set forth in Section 6.2.
"Closing Date" shall mean with respect to a Participation Interest,
the date on which such Participation Interest is sold to BFC pursuant to this
Agreement.
"Collections" shall mean (i) all finally collected funds received by
Tax Masters as servicer for the RAL Originator and applied to Participated Pool
RALs, whether such finally collected funds arise from receipt of cash, checks,
wire transfers, ATM transfers, exercise of rights of offset or other form of
payment, (ii) promissory notes and/or other evidence of indebtedness accepted by
Tax Masters as servicer for the RAL Originator from or on behalf of Obligors in
payment of Participated Pool RALs (in which case such Collections shall be
deemed to be received by the RAL Originator for purposes of this Agreement on
the Business Day on which such promissory note or evidence of indebtedness was
received by the RAL Originator) and (iii) all fees charged by the RAL Originator
to customers of Block Offices for issuing Pool RACs (in which case such
Collections shall be deemed to be received by the RAL Originator for purposes of
this Agreement on the Business Day on which such RAC is delivered to the
customer).
"Corporate Pool RAL" shall have the meaning given such term in the
definition of "Pool RAL."
"Corporate Franchise" or "Corporate Franchisee" shall mean a Person
authorized directly by Block Services (or an Affiliate of Block Services)
pursuant to a corporate franchise agreement to operate a Block Office. Corporate
Franchise or Corporate Franchisee does not include a Person authorized by a
major franchise agreement between a Major Franchisee and Block Services, or an
Affiliate of Block Services, to operate a Block Franchise and to subfranchise
others to operate a Block Franchise within a specified territory, or a
subfranchisee of a Major Franchisee.
"Defaulted Pool RAL" shall mean each Participated Pool RAL which, in
accordance with the RAL Guidelines and Tax Masters' customary and usual
servicing procedures for RALs, the RAL Originator has charged off as
uncollectible; provided, however, that no Pool RAL originated during any Tax
Period shall be classified as a Defaulted Pool RAL prior to January 1 of the
following year.
"Eligible RAL" shall mean each Pool RAL:
(a) that was created by the RAL Originator, and is in compliance in
all material respects, with the Second Amended and Restated RAL Operations
Agreement (or a Major Franchisee RAL Agreement, as the case may be) and
the federal Equal Credit Opportunity Act, 15 U.S.C. Sections 1691 et seq.;
(b) (i) as to which any blank preprinted form of disclosure
statement supplied by Tax Masters on behalf of the RAL Originator to the
tax preparation office at which such Pool RAL was originated for use in
connection with the origination of such Pool RAL complied, as to form
(subject to proper completion), with the requirements of the federal
Truth-in-Lending Act, 15 U.S.C. Sections 1601 et seq. ("TILA") (it being
understood that the foregoing shall not be deemed a warranty by Tax
Masters that such form has
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been properly completed) and (ii) that was created in compliance with the
other requirements of TILA; and
(c) as to which, at the time of the sale of the Participation
Interest in such Pool RAL to BFC, HTMAC had good and marketable title
thereto free and clear of all Liens arising under or through HTMAC or any
of its Affiliates.
"ERA Operations Agreement" shall mean the ERA Operations Agreement
as in effect from time to time between BFC, Royalty, Tax Masters and Beneficial
Franchise.
"Excluded RAL" shall have the meaning set forth in Section 5.2.
"Federally Chartered Financial Institution" shall have the meaning
set forth in Recital E.
"First Amended and Restated RAL Participation Agreement" shall have
the meaning set forth in Recital A.
"First ICB Consent Letter " shall have the meaning set forth in
Recital E.
"Governmental Authority" shall mean the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative judicial, regulatory or administrative functions
pertaining to government.
"HB" shall mean Household Bank, f.s.b., a federal savings bank.
"HTMAC" shall mean Household Tax Masters Acquisition Corporation, a
Delaware corporation.
"ICB" shall mean Imperial Capital Bank, a California state chartered
commercial bank.
"Ineligible RAL" shall have the meaning set forth in Section 4.4(c).
"Lien" shall mean any pledge, hypothecation, assignment,
encumbrance, security interest, lien (statutory or other) or other security
agreement of any kind or nature whatsoever, including (without limitation) any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing.
"Major Franchisee" shall mean, subject to the terms of Section 7.17
hereof, the Person authorized by a major franchise agreement with Block
Services, or with an Affiliate of Block Services, to operate a Block Office and
to subfranchise others to operate Block Office within a specified territory.
"Major Franchisee Pool RAL" shall have the meaning given such term
in the definition of "Pool RAL."
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"Major Franchisee RAL Agreement" shall mean an agreement from time
to time between Tax Masters and/or any one or more Affiliates of Tax Masters and
a Major Franchisee pursuant to which RALs are made to customers of Block Offices
of such Major Franchisee or its subfranchisees, as the same may be amended,
modified or supplemented from time to time.
"No Fee RAL" shall mean any RAL for which no RAL fee is charged to a
customer.
"Notifying Party" shall have the meaning set forth in Section 5.2.
"Obligor" shall mean, with respect to any RAL, the Person or Persons
obligated to make payments to the RAL Originator, or an Affiliate of the RAL
Originator, with respect to such RAL.
"Originator Party" shall mean any Person or entity through whom Pool
RALs or Pool RACs are made or serviced, and any other Person or entity that
prepares or arranges for the preparation of a tax return for a Pool RAL or Pool
RAC customer, or that files, makes or transmits or assists or arranges for the
filing, making or transmission of any such tax return, refund request or Pool
RAL or Pool RAC request, or that acts as a network or service bureau in
connection with any of the foregoing, or that owns, distributes, licenses or
otherwise has an interest in any software or other intellectual property used in
connection with any of the foregoing or in any trademark, service mark or brand
name under which Pool RALs or Pool RACs are promoted.
"Participated Pool RAL" shall mean any Pool RAL in which a
Participation Interest has been sold to BFC pursuant to Section 2.1 and has not
been reassigned to HTMAC or repurchased by HTMAC pursuant to this Agreement.
"Participation Interest" shall have the meaning set forth in Section
2.1.
"Person" shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental entity or other entity of
similar nature.
"Pool RAC" shall mean any RAC issued by the RAL Originator through a
Block Office owned by Block Services, a Corporate Franchise, a Major Franchisee,
a subfranchisee of a Major Franchisee or any Affiliate of any of the foregoing.
"Pool RAL" shall mean (a) any RAL made by the RAL Originator through
a Block Office owned by Block Services, a Corporate Franchise or either of their
Affiliates, pursuant to or under color of (i) the Second Amended and Restated
RAL Operations Agreement or (ii) a referral to the RAL Originator by Block
Services, such Corporate Franchise or such Affiliates pursuant to a contractual
electronic filing arrangement with any other Person and (b) any electronic
refund advance ("ERA") made by the RAL Originator originated through On-Line Tax
Preparation ("OTP") software pursuant to the ERA Operations Agreement (a RAL or
ERA described in subclause (a) or (b) may hereinafter be referred to as a
"Corporate Pool RAL") and (c) any RAL made during any Tax Period by a Major
Franchisee or a subfranchisee of a Major Franchisee, pursuant to or under color
of (i) a Major Franchisee RAL Agreement or (ii) a
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referral to the RAL Originator by a Major Franchisee, or a subfranchisee or such
Major Franchisee, of an Obligor whose federal income tax return was filed
electronically by such Major Franchisee, or subfranchisee of such Major
Franchisee, pursuant to a contractual electronic filing arrangement between such
Major Franchisee or subfranchisee and any other Person (a RAL described in this
subclause (c) may hereinafter be referred to as a "Major Franchisee Pool RAL").
Notwithstanding the foregoing, "Pool RAL", "Corporate Pool RAL", and "Major
Franchisee Pool RAL", shall not include any RAL for which no RAL fee is charged
to a customer (a "No Fee RAL").
"Principal Amount" of a RAL, shall mean:
(a) the aggregate amount paid or payable by the RAL Originator to or
for the account of an Obligor in connection with a RAL, and shall in any
event include (i) the amount of any check properly issued or authorized to
be issued by the RAL Originator to the order of any such Obligor, and (ii)
any amounts paid or payable by the RAL Originator for the account of
Obligor to any Originator Party, the Internal Revenue Service or any other
Person (whether or not the RAL Originator has a right, contingent or
otherwise, to withhold or retain any portion of such amount). The
"Principal Amount" of a RAL shall not include any financing fee or refund
account fee payable by such Obligor to the RAL Originator for such RAL.
Each of the foregoing elements of a RAL shall be deemed to be made for
purposes of this Agreement on the Business Day on which the RAL check
clears the bank account used by the RAL Originator for the disbursement of
RALs and such fact has been recorded in the computer files the RAL
Originator uses for administering RALs; and
(b) shall also include any payment made at any time by the RAL
Originator with respect to any lost, altered or stopped check issued by or
on behalf of the RAL Originator in connection with a RAL described in
paragraph (a) (the "Underlying RAL"), as well as any payment by the RAL
Originator with respect to any lost, altered or stopped replacement check.
Payments on any RAL described in this paragraph (b) shall be deemed to be
made for purposes of this Agreement on the Business Day when the
replacement RAL check clears the bank account used by the RAL Originator
for the disbursement of RALs and such fact has been recorded in the
computer files the RAL Originator uses for administering RALs.
"Purchase Price" shall mean the purchase price for a Participation
Interest to be paid by BFC to HTMAC as calculated pursuant to Section 2.3.
"RAC" means a check issued by the RAL Originator and delivered to a
taxpayer pursuant to a Refund Anticipation Check Service.
"RAL" shall mean any refund anticipation loan from time to time made
by the RAL Originator.
"RAL Guidelines" shall mean the RAL Originator's policies and
procedures from time to time relating to the operation of its refund
anticipation loan business, including (without limitation) the policies and
procedures for determining the credit worthiness of refund
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anticipation loan customers, the extension of credit to refund anticipation loan
customers and relating to the collection and charge off of refund anticipation
loans.
"RAL Originator" shall mean the insured depository institution
engaged by Tax Masters (subject to the Block Companies' rights under the Letter
Agreement and the Second ICB Consent Letter) to serve as the originator under
the RAL Program.
"RAL Participation Agreement" shall have the meaning set forth in
Recital D.
"RAL Program" shall have the meaning assigned to it in the Second
Amended and Restated RAL Operations Agreement.
"Reassignment Amount" shall have the meaning set forth in Section
4.3.
"Reassignment Date" shall have the meaning set forth in Section 4.3.
"Refund Anticipation Check Service" shall mean a service pursuant to
which a check in the amount of a taxpayer's federal income tax refund, less the
sum of (a) fees charged for the making of the check, (b) tax preparation fees
and (c) other properly withheld amounts, is delivered to a taxpayer on account
of a direct deposit refund (other than in connection with a RAL made in advance
of receipt of the related refund). "Refund Anticipation Check Service" includes
the delivery of a direct deposit refund check to a taxpayer in connection with
such taxpayer's denied RAL application.
"Repurchase Value" of a Participated Pool RAL at any time shall mean
the Principal Amount of such Participated Pool RAL, less any Collections
received with respect to such Participated Pool RAL.
"Sale and Servicing Agreement " shall have the meaning set forth in
Recital C.
"Second Amended and Restated RAL Operations Agreement" shall have
the meaning set forth in Recital G.
"Second Amended and Restated RAL Participation Agreement" shall have
the meaning set forth in Recital H.
"Second ICB Consent Letter" shall have the meaning set forth in
Recital F.
"Tax Period" for any year shall mean the period from and including
January 1 of such year to and including August 15 of such year.
"Tax Masters" shall mean Household Tax Masters, Inc., a Delaware
corporation.
"UCC" shall mean the Uniform Commercial Code, as amended from time
to time, as in effect in any specified jurisdiction.
"Underlying RAL" shall have the meaning given that term in paragraph
(b) of the definition of "Principal Amount".
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Section 1.2. Other Definitional Provisions. Unless the context of
this Agreement otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the plural. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section and subsection references contained in this
Agreement are references to Sections and subsections in this Agreement unless
otherwise specified.
ARTICLE II
PURCHASE AND SALE OF INTERESTS IN POOL RALS
Section 2.1. Purchase and Sale of Participation Interests in Pool
RALs.
(a) Purchase and Sale. Subject to the conditions set forth in this
Agreement, HTMAC agrees to sell to BFC, and BFC agrees to purchase from
HTMAC, from time to time, on a "checks cleared" basis, an undivided
ownership interest in, and in an amount equal to the Applicable Percentage
of, all of HTMAC's right, title and interest in and to each Pool RAL
hereafter created, including all monies due or to become due with respect
thereto and all Collections pertaining thereto and other proceeds (as
defined in the UCC as in effect in the State of Delaware) thereof (a
"Participation Interest"). Subject to the conditions set forth herein BFC
agrees to pay for, purchase and accept all Participation Interests from
time to time as provided herein. Except for the representations and
warranties expressly made by HTMAC and Tax Masters in this Agreement,
Participation Interests (and acquisition thereof by BFC) shall be without
recourse to HTMAC. Tax Masters and HTMAC represent and warrant to BFC that
the Pool RALs were originated in compliance with the Final Credit Criteria
and Final RAL and RAC Fees (as defined in the Second Amended and Restated
RAL Operations Agreement) and applicable law, excluding, however, any
failure to comply which results from (i) any misrepresentation or omission
to state a material fact by a RAL Customer, or (ii) action or inaction by
any Block Office, Major Franchisee or subfranchisee of a Major Franchisee
to perform its explicit obligations under this Agreement, or a corporate
franchise agreement between Block Services and a Corporate Franchise, a
Major Franchisee RAL Agreement, or a subfranchisee agreement relating to
the RAL Program between a Major Franchisee and a subfranchisee, as
applicable (except for any action or inaction by such entities due to
changes to the RAL Program required by the RAL Originator or Tax Masters
outside of the deadlines set forth in this Agreement for any such
changes).
(b) Conveyance of Participation Interest. The conveyance by HTMAC to
BFC of a Participation Interest in a Pool RAL shall be deemed to occur at
the time when HTMAC receives full payment from BFC of the Purchase Price
in respect to such Participation Interest corresponding to such
Participated Pool RAL and all other Participated Pool RALs of HTMAC
arising on the same day. Upon such conveyance, BFC shall be the owner, to
the extent of the Applicable Percentage, of a Participation Interest in
such Pool RAL. The parties intend that if and to the extent that any
conveyance of a Participation Interest in a Pool RAL is not deemed a sale
of a Participation Interest, HTMAC shall be deemed to have granted to BFC
a security interest in the Participation Interest that was purportedly
conveyed and that this
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Agreement shall constitute a security agreement under applicable law.
HTMAC agrees to authorize the filing of financing and continuation
statements as BFC may from time to time reasonably request with respect to
Participation Interests hereafter created or arising.
(c) True Sale and Nonconsolidation Opinions. Upon BFC's request, Tax
Masters and HTMAC agree to use all commercially reasonably efforts to
obtain for BFC (i) a "true sale" opinion of counsel to Tax Masters and
HTMAC with respect to the sale by HTMAC and the purchase by BFC of the
Participation Interests in the Pool RALs, and (ii) a "nonconsolidation"
opinion of counsel to Tax Masters and HTMAC with respect to HTMAC and any
other subsidiary of Tax Masters that owns the Participation Interests
prior to such sale and purchase, in both cases in form and substance
typically employed in off-balance sheet financing or sale transactions
generally; provided, however, that in connection with such efforts (A)
neither Tax Masters nor HTMAC shall be obligated to restructure the terms
of any agreement relating to the RAL Program, or any aspect of the RAL
Program itself, in any way that adversely affects the economic interests
of Tax Masters, HTMAC or their Affiliates, and (B) the failure of Tax
Masters and HTMAC to obtain such opinions (after making commercially
reasonable efforts to do so) shall not constitute a breach of any of Tax
Masters' or HTMAC's obligations under this Agreement and shall in no event
give rise to any liability on the part of Tax Masters, HTMAC or any of
their Affiliates. With respect to such opinions and the RAL Program for a
particular Tax Year, (1) BFC shall use all commercially reasonable efforts
to request such opinions as soon as reasonably possible during the
immediately preceding calendar year, and in any event, no later than
September 1st of such preceding calendar year absent major structural
changes to the RAL Program made or proposed by Tax Masters or HTMAC, (2)
BFC shall use all commercially reasonable efforts to identify the entity,
if any, with whom it intends to effectuate any financing or sale
transaction, and the proposed structure of such financing or sale
transaction, as soon as reasonably possible during the immediately
preceding calendar year, and in any event, no later than September 1st of
such preceding calendar year absent major structural changes to the RAL
Program made or proposed by Tax Masters or HTMAC, and (3) BFC, HTMAC and
Tax Masters shall cooperate and use all commercially reasonable efforts to
complete all changes to the RAL Program, if any, and the legal documents
and agreements reflecting such changes, if any, as soon as reasonably
possible during the immediately preceding calendar year, and in any event
no later than October 15th of such preceding calendar year absent major
structural changes to the RAL Program made or proposed by BFC, HTMAC or
Tax Masters. BFC shall be solely responsible for all legal fees of the
parties associated with any opinion undertaken pursuant to this Section
2.1(c). In connection with any request by BFC for an opinion pursuant to
this Section 2.1(c) for a particular Tax Year, Tax Masters and HTMAC
shall, upon reasonable request by BFC, provide to BFC copies of all
material operative agreements executed by Tax Masters, HTMAC or their
Affiliates relating to the origination of RALs by the RAL Originator, or
the sale and servicing of HTMAC's retained interest in the Pool RALs, for
such Tax Year, as well as all material operative agreements executed by
Tax Masters, HTMAC or their Affiliates relating to the financing or sale
of such retained interest for such Tax Year, in each case only to the
extent (i) such agreements are reasonably necessary to be reviewed by BFC
in connection with the opinions contemplated by this Section 2.1(c), and
(ii) the terms of such agreements permit disclosure to third parties;
provided, however, that neither Tax
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Masters nor HTMAC shall add any provision to any such agreement that
unreasonably prohibits disclosure to BFC, its accountants or counsel
engaged in connection with the issuance of any opinion pursuant to this
Section 2.1(c), or the entity, if any, engaged by BFC to effectuate any
financing or sale transaction. BFC hereby agrees to hold all such
agreements in strict confidence and not provide any copies or disclose any
terms therein to any party other than its accountants, its counsel and the
entity, if any, with whom BFC proposes to effectuate any financing or sale
transaction; provided, however, that, notwithstanding any other provision
in this Agreement, if such entity or an Affiliate of such entity is deemed
by Tax Masters to be a competitor of Tax Masters in the making or
servicing of RALs, then the disclosure of such agreements to such entity
may be restricted by Tax Masters to the extent deemed necessary by Tax
Masters, in its sole discretion, to protect its business interests and
trade secrets. To the extent that the terms and conditions of this Section
2.1(c) are inconsistent with the terms and conditions of the Second ICB
Consent Letter, the terms and conditions of the Second ICB Consent Letter
shall control.
Section 2.2. Payment. Each Business Day, not later than 9:00 a.m.,
New Jersey time, Tax Masters as servicer for the RAL Originator shall give
notice to BFC (which notice may be by telephone, e-mail or facsimile) of the
number and Principal Amount of Pool RALs made by the RAL Originator and in which
HTMAC has purchased a Participation Interest on the preceding Business Day (it
being understood that, for such purpose, a Pool RAL shall be deemed to be made
at the time set forth in the definition of "Principal Amount" in this
Agreement), together with the Purchase Price for the Participation Interest
corresponding to such Pool RALs. Not later than 4:00 p.m., New Jersey time, on
such Business Day, BFC shall pay to HTMAC the full amount of such Purchase
Price. Such payment shall be made to HTMAC at such domestic account designated
by HTMAC by notice to BFC from time to time, in United States dollars and in
funds immediately available at such office at such time, without setoff,
withholding, counterclaim or other deduction of any nature whatsoever.
Section 2.3. Purchase Price. The Purchase Price for a Participation
Interest shall be equal to the sum, for each Pool RAL corresponding to such
Participation Interest, of the product of (i) the Applicable Percentage
applicable to such Pool RAL, times (ii) the Principal Amount of such Pool RAL
(the aggregate amount referred to in this Section being referred to as the "
Purchase Price" with respect to such Participation Interest).
Section 2.4. Float Adjustment. Tax Masters shall pay to BFC an
amount equal to the product of $.50 times the number of Pool RACs (other than
Pool RACs issued through a Major Franchisee or a subfranchisee of a Major
Franchisee) issued during the Tax Period. Such amount shall be due and payable
by Tax Masters by wire transfer not later than thirty (30) days after the last
day that RACs are offered for such Tax Period.
Section 2.5. Applicable Percentages. The Applicable Percentage for
Corporate Pool RALs shall be 40%; provided, however, the Applicable Percentage
for Corporate Pool RALs shall be 49.999999% for each Tax Period during which Tax
Masters (or any of its Affiliates) is the exclusive facilitator of a Refund
Anticipation Check Service to customers of Block Offices owned by Block
Services, Corporate Franchisees and any of Block Services' Affiliates. The
Applicable Percentage for a Major Franchisee Pool RAL shall be 25%.
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Notwithstanding the foregoing provisions of this Section 2.5, any Applicable
Percentage (a) for a particular Tax Period may be such lesser percentage as
specified by BFC by giving written notice to Tax Masters and HTMAC on or before
September 1 immediately prior to such Tax Period (it being understood that (i)
such lesser percentage shall pertain only to the particular Tax Period for which
such notice is given and (ii) if no such notice is given for a particular Tax
Period, the Applicable Percentages shall be the percentages as set forth in this
Section 2.5), or (b) for any portion of a particular Tax Period shall be reduced
to zero if BFC has exceeded its internal funding limit (it being understood that
(i) the reduction of the percentage to zero shall only be in effect during the
periods of time BFC has exceeded its internal funding limit and (ii) for the
periods of time BFC has not exceeded its internal funding limit, the Applicable
Percentages shall be the percentages as set forth in this Section 2.5).
ARTICLE III
SERVICING, ADMINISTRATION AND COLLECTION OF POOL RALS
Section 3.1. Servicing and Administration of Participated Pool RALs.
Tax Masters as servicer for the RAL Originator shall underwrite, service and
administer the Participated Pool RALs and shall collect payments due under the
Participated Pool RALs in accordance with its customary and usual servicing
procedures for servicing RALs made by the RAL Originator through Block Offices
or Major Franchisees or subfranchisees of Major Franchisees and in accordance
with the RAL Guidelines, and in which HTMAC has purchased a Participation
Interest. Tax Masters as servicer for the RAL Originator shall, subject to the
terms of this Section 3.1, have full power and authority, acting alone or
through any party properly designated by it hereunder, to do any and all things
in connection with such servicing and administration that it may deem necessary
or desirable. Without limiting the generality of the foregoing, Tax Masters as
servicer for the RAL Originator is hereby authorized and empowered to execute
and deliver, on behalf of BFC, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Participated Pool RALs and, after
the delinquency of any Participated Pool RAL and to the extent permitted under
and in compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Participated Pool RALs. In addition, without
limiting the generality of the foregoing, Tax Masters as servicer for the RAL
Originator is hereby authorized and empowered, in the ordinary course of
collecting any Defaulted Pool RAL, to sell or transfer such Defaulted Pool RAL
free and clear of any interest of BFC (proceeds of such sale or transfer being
treated as Collections for purposes of Section 3.2). BFC shall furnish Tax
Masters with any documents necessary or appropriate to enable Tax Masters to
carry out its servicing and administrative duties hereunder. Tax Masters shall
not be obligated to use servicing procedures, offices, employees or accounts for
servicing the Participated Pool RALs that are separate from the procedures,
offices, employees and accounts used by Tax Masters in connection with servicing
other refund anticipation loans.
Section 3.2. Collections. On each Business Day not later than 4:00
p.m., New Jersey time, Tax Masters as servicer for the RAL Originator shall
distribute the Applicable Percentage in all Collections (except those payments
received from the Internal Revenue Service ("IRS") in the normal processing of
refunds designated for direct deposit) with respect to each Participated Pool
RAL received by Tax Masters as servicer for the RAL Originator (or any of its
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Affiliates) on the preceding Business Day (less collection fees payable by BFC
to Tax Masters or its Affiliates pursuant to Section 3.4). Such distribution
shall be made to BFC at such domestic account designated by BFC by notice to Tax
Masters from time to time, in United States dollars and in funds immediately
available at such office at such time, without setoff, withholding, counterclaim
or other deduction of any nature whatsoever and regardless of the form of
Collection received by Tax Masters as servicer for the RAL Originator (or any of
its Affiliates). Funds received from the IRS as part of the normal processing of
refunds designated for direct deposit will be distributed to BFC in the manner
provided herein on the day that RAL Originator receives such funds in its
designated account(s) at the applicable United States Federal Reserve Bank;
provided, that one day's interest shall be deducted by Tax Masters as servicer
for the RAL Originator from each such payment in order to reflect the fact that
the fundings of Participated Pool RALs are on a one-day delayed basis. For the
purpose of the above-referenced interest deduction, interest shall be calculated
on the basis of a 365 day year (or a 366 day year in a leap year) at the 30 day
dealer placed commercial paper rate as published in the Money Rates section of
the Wall Street Journal for the previous Business Day.
Section 3.3. Reports; Records for BFC.
(a) Daily Reports. On each Business Day during an Applicable Tax
Period, Tax Masters as servicer for the RAL Originator shall prepare and
forward to BFC a report setting forth (i) the aggregate amount of
Collections processed by Tax Masters as servicer for the RAL Originator
(or any of its Affiliates) with respect to Participated Pool RALs on the
preceding Business Day and BFC's share thereof, (ii) the number of, and
aggregate outstanding amount of, Participated Pool RALs as of the close of
business on the preceding Business Day and BFC's share thereof, and (iii)
the number of Pool RACs made by the RAL Originator on the preceding
Business Day and BFC's share of RAC fees pertaining thereto. Tax Masters
as servicer for the RAL Originator shall at all times maintain its
computer files with respect to Pool RACs and Participated Pool RALs in
such a manner so that Pool RACs and Participated Pool RALs may be
specifically identified.
(b) Monthly Reports. On the 8th day of each calendar month, or if
such day is not a Business Day, the immediately preceding Business Day,
Tax Masters as servicer for the RAL Originator shall forward to BFC a
report setting forth (i) the aggregate amount of Collections processed
with respect to Participated Pool RALs during the preceding calendar month
and BFC's share thereof, (ii) the aggregate amount of Participated Pool
RALs outstanding as of the end of the last day of the preceding calendar
month and BFC's share thereof, (iii) an aging of Participated Pool RALs
outstanding as of the end of the last day of the preceding calendar month,
(iv) the aggregate Defaulted Pool RALs as of the end of the last day of
the preceding calendar month and BFC's share thereof, (v) the number of
Pool RACs made during the preceding calendar month and BFC's share of
Collections pertaining thereto, and (vi) the aggregate Participated Pool
RALs that are not Defaulted Pool RALs but with respect to which payment
has not been received within 30 days after such Participated Pool RALs
were made by the RAL Originator and a participation interest therein was
purchased by BFC, and BFC's share thereof. Such report shall be
accompanied by an officer's certificate, stating that to the best of such
officer's knowledge such report is complete and accurate.
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(c) Independent Accountants' Reports. BFC may cause a firm of
nationally recognized independent accountants (who may also render
services to Tax Masters) to furnish, at the expense of BFC, a report to
BFC, HTMAC and Tax Masters to the effect that such firm has made a study
and evaluation of the RAL Originator's, HTMAC's and Tax Masters' internal
accounting controls relative to the making of Pool RACs and servicing of
Participated Pool RALs under this Agreement, and that, on the basis of
such study and evaluation, such firm is of the opinion (assuming the
accuracy of any reports generated by the RAL Originator's, HTMAC's and Tax
Masters' third party agents) that the systems of internal accounting
controls in effect on the date set forth in such report relating to making
of Pool RALs by the RAL Originator and servicing procedures performed by
Tax Masters as servicer for the RAL Originator pursuant to the terms of
this Agreement, taken as a whole, were sufficient for the prevention and
detection of errors for such exceptions, errors or irregularities as such
firm shall believe to be immaterial to the financial statements of the RAL
Originator, HTMAC and Tax Masters and such other exceptions, errors or
irregularities as shall be set forth in such report.
Section 3.4. Collection Fee for Defaulted Pool RALs. BFC shall pay
to Tax Masters as servicer for the RAL Originator a collection fee in an amount
equal to the Applicable Percentage with respect to a Defaulted Pool RAL, times
25% of the Principal Amount of each Defaulted Pool RAL collected by collection
offices of Tax Masters as servicer for the RAL Originator or any of its
Affiliates. Such fee shall be paid in the form of a deduction from Collections
remitted to Tax Masters (or an Affiliate of Tax Masters) pursuant to Section 3.2
pertaining to such Participated Pool RAL.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. General Representations and Warranties of Tax Masters
and HTMAC. Tax Masters and HTMAC hereby represent and warrant to BFC as of the
date hereof (which representations and warranties shall survive any purchase and
sale of Participation Interests pursuant to this Agreement):
(a) Organization and Good Standing. ICB is a commercial bank duly
organized and validly existing under the laws of the State of California,
has its principal banking office located in the State of California and
has a bank branch located and authorized to conduct banking operations in
the State of Nevada. ICB has full corporate power and authority to own its
properties and conduct its business as such properties are presently owned
and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement. Each of Tax Masters and
HTMAC is a corporation duly organized and validly existing under the laws
of the State of Delaware and has full corporate power and authority to own
its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver
and perform its obligations under this Agreement.
(b) Due Authorization. The execution and delivery of this Agreement
and the consummation of the transactions provided for in this Agreement
have been duly authorized by each of HTMAC and Tax Masters by all
necessary corporate action on
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their part and this Agreement will remain, from the time of its execution,
an official record of Tax Masters and HTMAC.
(c) No Conflict. The execution and delivery of this Agreement, the
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof will not conflict with, result in any
breach of the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default under, any
indenture, contract, agreement mortgage, deed of trust, or other
instrument to which Tax Masters or HTMAC is a party or by which it or any
of their properties are bound.
(d) ICB's Deposit Accounts. Deposits in ICB's deposit accounts are
insured to the limits provided by law by the Bank Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Section 4.2. Representations and Warranties of HTMAC Relating to the
Participated Pool RALs. Tax Masters and HTMAC hereby represent and warrant to
BFC as of each Closing Date (which representations and warranties shall survive
any purchase and sale of Participation Interests pursuant to this Agreement):
(a) Eligible RAL. Each Participated Pool RAL is an Eligible RAL as
of the Closing Date relating to the Participation Interest sold to BFC
with respect to such Participated Pool RAL.
(b) Sale and Ownership; Title. Each sale 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 (and the
Applicable Percentage in the underlying Pool RALs), 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 from HTMAC to BFC did not occur, then 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
pursuant to such sale. 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 in the underlying Pool
RALs, free and clear of any Lien, claim or encumbrance (other than the
interests of BFC contemplated by this Agreement). Neither HTMAC nor any
Person claiming through or under HTMAC shall have any claim to or interest
in such Participation Interest, except for the interest of HTMAC therein
as a "debtor" (specifically, as seller of payment intangibles) for
purposes of Article 9 of the UCC.
Section 4.3. Remedy For Breach of Representations and Warranties. In
the event of a breach of any of the representations and warranties set forth in
Section 4.1, BFC may by notice then given in writing to HTMAC direct HTMAC to
accept reassignment of the Participation Interests within 30 days of such notice
(or within such longer period as may be specified in such notice but in no event
later than 120 days), and HTMAC shall be obligated to
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accept reassignment of the Participation Interests on a date specified by BFC
(the "Reassignment Date") occurring within such applicable period on the terms
and conditions set forth below; provided, however, that no such reassignment
shall be required to be made if, at any time during such applicable period, the
representations and warranties contained in Section 4.1 shall then be true and
correct in all material respects. In connection with such reassignment, HTMAC
shall remit to BFC on the Reassignment Date an amount equal to the aggregate of
the respective Applicable Percentages of the Repurchase Values of each
Participated Pool RAL (the "Reassignment Amount"). Such remittance shall be made
to BFC at such domestic account designated by BFC by notice to HTMAC, in United
States dollars and in funds immediately available at such office at such time,
without setoff, withholding, counterclaim or other deduction of any nature
whatsoever. Except as provided in Section 5.1, the obligation of HTMAC to
purchase the Participation Interests in accordance with this Section 4.3 shall
constitute the sole remedy respecting any breach of the representations and
warranties set forth in Section 4.1 available to BFC.
On the date on which the Reassignment Amount has been paid to BFC,
the Participation Interests in the uncollected Participated Pool RALs, all
monies due or to become due with respect thereto and all proceeds thereof shall
be released to HTMAC, or its designee or assignee, and BFC shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, representation or warranty (except only for the warranty that since
the date of sale by HTMAC to BFC, BFC has not sold, transferred or encumbered
any such Participated Pool RALs or interest therein), as shall reasonably be
requested by HTMAC to vest in HTMAC, or its designee or assignee, all right,
title and interest of BFC in and to the Participation Interests in the
uncollected Participated Pool RALs, all monies due or to become due with respect
thereto and all proceeds thereof. BFC's right to resell and HTMAC's obligation
to repurchase a Participation Interest pursuant to this Section 4.3 shall apply
only to a Participation Interest that is adversely affected by or impaired as a
result of a breach of a representation or warranty.
Section 4.4. Transfer of Ineligible RALs.
(a) Repurchase. In the event of a breach with respect to a
Participated Pool RAL of any representations and warranties set forth in
Section 4.2(b)(i), or in the event that a Participated Pool RAL is not an
Eligible RAL as a result of the failure to satisfy the conditions set
forth in clause (c) of the definition of Eligible RAL, and as a result of
such breach of event such Participated Pool RAL is charged off as
uncollectible or BFC's rights in, to or under the Participation Interest
therein are materially impaired, then, upon the earlier to occur of the
discovery by BFC of such breach or event, or receipt by BFC of written
notice from HTMAC of such breach or event, BFC may by notice then given in
writing to HTMAC direct HTMAC to repurchase the Participation Interest in
each such Participated Pool RAL within 30 days of such notice (or within
such longer period as may be specified in such notice but in no event
later than 120 days) on a date specified by BFC occurring within such
applicable period on the terms and conditions set forth in Section 4.4(c).
(b) Repurchase After Cure Period. In the event of a breach of any of
the representations and warranties set forth in Sections 4.2 and 2.1(a),
or in the event that a
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Participated Pool RAL is not an Eligible RAL as a result of the failure to
satisfy the conditions set forth in the definition of Eligible RAL or Pool
RAL (contingent on that failure not being caused by (i) any
misrepresentation or omission to state a material fact by a RAL Customer,
or (ii) action or inaction of any Block Office, Major Franchisee, or
subfranchisee of a Major Franchisee to perform its explicit obligations
under this Agreement, or a corporate franchise agreement between Block
Services and a Corporate Franchise a Major Franchisee RAL Agreement, or a
subfranchisee agreement relating to the RAL Program between a Major
Franchisee and a subfranchisee, as applicable (except for any action or
inaction by such entities due to changes to the RAL Program required by
the RAL Originator, HTMAC or Tax Masters outside of the deadlines set
forth in this Agreement for any such changes), other than a breach or
event as set forth in Section 4.4(a), and as a result of such breach any
Participated Pool RAL becomes a Defaulted Pool RAL or BFC's rights in, to
or under the Participated Pool RAL or its proceeds are materially
impaired, then, upon the expiration of 60 days (or such longer period as
may be agreed to by BFC, but in not event later than 120 days) from the
earlier to occur of the discovery of any such event by BFC or receipt by
BFC of written notice from Tax Masters or HTMAC of any such event, BFC may
by notice then given in writing to Tax Masters and HTMAC direct HTMAC to
repurchase the Participation Interest in each such Participated Pool RAL
within 30 days of such notice (or within such longer period as may be
specified in such notice but in no event later than 120 days) on the terms
and conditions set forth in Section 4.4(c); provided, however, that no
such repurchase shall be required to be made if, on any day prior to such
repurchase, such representations and warranties with respect to such
Participated Pool RAL shall then be true and correct in all material
respects as if such Participated Pool RAL had been created on such day.
(c) Procedures for Repurchase. When the provisions of Sections
4.4(a) or 4.4(b) require repurchase of a Participation Interest in a
Participated Pool RAL (such Participated Pool RAL being hereinafter
referred to as an "Ineligible RAL"), HTMAC shall accept reassignment of
such Participation by remitting to BFC an amount equal to the Applicable
Percentage of the Repurchase Value of the Ineligible RAL as of the date of
such repurchase. Such remittance shall be made to BFC at such domestic
account designated by BFC by notice to HTMAC, in United States dollars and
in funds immediately available at such office at such time, without
setoff, withholding, counterclaim or other deduction of any nature
whatsoever. Upon such remittance, BFC shall automatically and without
further action be deemed to transfer, assign, set over and otherwise
convey to HTMAC, without recourse, representation or warranty (except for
the warranty that since the date of conveyance by HTMAC to BFC, BFC has
not sold, transferred or encumbered any such Participation Interest), all
right, title and interest of BFC in and to such Participation Interest.
BFC shall execute such documents and instruments of transfer or assignment
and take other actions as shall reasonably be requested by HTMAC to
evidence the conveyance of such Participation Interest in the Ineligible
RALs, all monies due or to become due with respect thereto and all
proceeds thereof pursuant to this Section 4.4(c). The obligation of HTMAC
to repurchase Participation Interests in Ineligible RALs in accordance
with this Section 4.4(c) shall constitute the sole remedy respecting any
breach of the representations and warranties set forth in Section 4.2
available to BFC.
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(d) Impairment. For the purposes of Sections 4.4(a) and (b) above,
proceeds of a Participated Pool RAL shall not be deemed to be impaired
hereunder solely because such proceeds are held by HTMAC for more than the
applicable period under Section 9-315(d) of the UCC as in effect in the
State of Delaware.
ARTICLE V
TERM
Section 5.1. Termination of Purchase and Sale Obligations. The
obligations of HTMAC to sell Participation Interests in Pool RALs pursuant to
Section 2.1 that are RALs described in paragraph (a) of the definition of
"Principal Amount" in this Agreement and the obligations of BFC to purchase
Participation Interests in such Pool RALs pursuant to Section 2.1, may be
terminated:
(a) by the mutual written agreement of BFC and HTMAC;
(b) by either party, if the Second Amended and Restated RAL
Operations Agreement has been terminated;
(c) by Tax Masters or HTMAC, if (i) there is a failure by BFC to
perform or observe any material term, covenant or agreement contained in
this Agreement, and any such failure shall remain unremedied for 10 days
after written notice of such failure shall have been given to BFC by Tax
Masters or HTMAC, (ii) there is an order or decree restraining, enjoining,
prohibiting, invalidating or otherwise preventing the transactions
contemplated by this Agreement or Tax Masters's or HTMAC's performance of
any of their material obligations under this Agreement, (iii) there shall
be pending, or any Governmental Authority shall have notified Tax Masters
or HTMAC of its intention to institute, any action, suit or proceeding
against Tax Masters or HTMAC to restrain, enjoin, prohibit, invalidate or
otherwise prevent the transactions contemplated by this Agreement or Tax
Masters's or HTMAC's performance of any of their material obligations
under this Agreement, (iv) any Participated Pool RAL or purchase or sale
of a Participation Interest in a Participated Pool RAL, or Tax Masters's
or HTMAC's performance of any of their material obligations under this
Agreement, would be illegal, and there are no reasonable steps that Tax
Masters or HTMAC could take to prevent such illegality; or (v) there is a
dissolution, termination of existence, insolvency, appointment of a
receiver of any part of the property of, or assignment for the benefit of
creditors by, or the commencement of any proceeding by or against BFC
under any bankruptcy or insolvency law;
(d) by BFC, if (i) there is a failure by Tax Masters or HTMAC to
perform or observe any material term, covenant or agreement contained in
this Agreement and any such failure shall remain unremedied for 10 days
after written notice of such failure shall have been given to Tax Masters
and HTMAC by BFC, (ii) there is an order or decree restraining, enjoining,
prohibiting, invalidating or otherwise preventing BFC's performance of any
of its material obligations hereunder, (iii) there shall be pending, or
any Governmental Authority shall have notified BFC of its intention to
institute, any action, suit or proceeding against BFC to restrain, enjoin,
prohibit, invalidate or otherwise
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prevent BFC's performance of any of its material obligations hereunder,
(iv) BFC's performance of any of its material obligations hereunder would
be illegal and there are no reasonable steps that BFC could take to
prevent such illegality, or (v) there is a dissolution, termination of
existence, insolvency, appointment of a receiver of any part of the
property of, or assignment for the benefit of creditors by, or the
commencement of any proceeding by or against Tax Masters or HTMAC under
any bankruptcy or insolvency law; or
(e) by BFC, if as of any September 15, any representation or
warranty of Tax Masters or HTMAC set forth in Section 4.1 would not be
true, if repeated as of such date; provided that BFC gives notice of such
termination not later than the September 30 next following such September
15.
Tax Masters, HTMAC or BFC shall exercise a right of termination provided above
by written notice to the other party. Upon such termination, all obligations of
HTMAC to sell Participation Interests in Pool RALs pursuant to Section 2.1 that
are RALs described in paragraph (a) of the definition of "Principal Amount" in
this Agreement and all obligations of BFC to purchase Participation Interests in
such Pool RALs pursuant to Section 2.1 shall automatically cease and BFC shall
have no further obligation to purchase additional Participation Interests
corresponding to such Participated Pool RALs. Termination pursuant to this
Section shall not otherwise affect the rights or obligations of the parties
hereto under this Agreement. Without limitation, such termination shall not
affect the obligations of HTMAC to sell Participation Interests pursuant to
Section 2.1 with respect to Pool RALs that are RALs described in paragraph (b)
of the definition of "Principal Amount" in this Agreement to the extent that the
Underlying RAL is itself a Participated Pool RAL with respect to which a
Participation Interest was sold to BFC prior to such termination, and shall not
affect the obligation of BFC to purchase a Participation Interest with respect
to such Pool RAL pursuant to Section 2.1.
Section 5.2. Right to Exclude Certain RALs. If, from time to time,
BFC, HTMAC or Tax Masters believes in good faith that any specified RALs (of the
type described in paragraph (a) of the definition of "Principal Amount" in this
Agreement) that otherwise would constitute Pool RALs may violate or conflict
with any requirement of law in any jurisdiction, such party (the "Notifying
Party") may give notice to the other parties of such fact, specifying the
applicable jurisdictions, and specifying such further actions on the part of
BFC, Block Tax Services, the RAL Originator or other Persons, if any, as would
in the opinion of the Notifying Party prevent such violation or conflict. Unless
such steps have been taken within seven days after receipt of such notice, then,
effective from and after such seventh day such RALs made after such day in such
specified jurisdiction shall not constitute Pool RALs (such RALs being
hereinafter referred to as "Excluded RALs"). If such steps subsequently are
taken, and the other party gives notice to the Notifying Party of such fact,
then the Notifying Party, shall, as promptly as practicable after such notice,
by further notice to such other party, revoke its earlier designation of such
RALs as Excluded RALs, and RALs of the specified type made after the date of
such revocation shall not constitute Excluded RALs (and hence shall constitute
Pool RALs).
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ARTICLE VI
CERTAIN RIGHTS OF TAX MASTERS AND HTMAC
Section 6.1. Certain Rights of Tax Masters and HTMAC.
(a) Rescission. If any payment received or application of funds made
by Tax Masters or HTMAC on account of any Participated Pool RAL shall be
rescinded or otherwise shall be required (or if Tax Masters or HTMAC
believes in good faith that such payment or application of funds is or may
be required) to be returned or paid over by Tax Masters or HTMAC at any
time, BFC, promptly upon notice from Tax Masters or HTMAC, shall pay to
HTMAC an amount equal to the Applicable Percentage of the amount so
rescinded or returned or paid over, together with the Applicable
Percentage of any interest or penalties payable with respect thereto.
(b) Payover. If BFC receives any payment or makes any application on
account of its Participation Interest in any Participated Pool RAL, BFC
shall promptly pay over to HTMAC the amount in excess of the Applicable
Percentage of the amount so received or applied and until so paid over,
the same shall be held by BFC in trust for HTMAC.
Section 6.2. Indemnification. Immediately upon Tax Masters' or
HTMAC's demand therefor, BFC shall reimburse and indemnify Tax Masters and HTMAC
for and against the Applicable Percentage share of any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of every kind and nature whatsoever that may be
imposed upon, incurred by or asserted against Tax Masters or HTMAC, acting
pursuant hereto, or in any way relating to or arising out of this Agreement or
any Participated Pool RAL or the origination or servicing thereof, or any action
taken or omitted by Tax Masters or HTMAC under this Agreement or any
Participated Pool RAL, including, without limitation, any amounts payable by Tax
Masters pursuant to the Second Amended and Restated RAL Operations Agreement
(pursuant to indemnification provisions thereof or otherwise), and any amounts
that Tax Masters or HTMAC shall be required to pay or repay to any statutory
representative of any Obligor or Originator Party or to creditors of any such
Obligor or Originator Party acting as such statutory representative (all of the
foregoing being referred to collectively as "Claims"); provided, however, that
BFC shall not be liable under this Section 6.2 for its Applicable Percentage of
(i) any obligation of HTMAC to repurchase Participation Interests in accordance
with Sections 4.3 and 4.4, (ii) any out-of-pocket expenses of Tax Masters on
account of origination of ordinary and routine servicing of Participated Pool
RALs, to the extent duplicative of amounts as to which BFC has paid its
Applicable Percentage share pursuant to Article II, (iii) attorneys' fees and
related litigation expenses incurred by Tax Masters or HTMAC with respect to
Claims (it being understood that each party shall be responsible for its own
attorneys' fees and related litigation expenses with respect to Claims), (iv)
any Claim attributable to a Participated Pool RAL failing to be an Eligible RAL,
(v) any Claim attributable to a breach by Tax Masters or HTMAC of an express
obligation of Tax Masters or HTMAC under this Agreement, or (vi) any Claim
attributable to the gross negligence or willful misconduct of Tax Masters or
HTMAC. Notwithstanding any other provision herein, if BFC breaches any of its
obligations hereunder and any such breach results in a claim for indemnification
by the RAL Originator against Tax Masters or HTMAC, Tax Masters and
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HTMAC shall have the right to indemnification from BFC to the extent Tax Masters
or HTMAC is required to indemnify the RAL Originator.
Nothing in this Section 6.2 shall be construed to make BFC liable
for (i) any portion of any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements imposed upon,
incurred by or asserted against Tax Masters, HTMAC or any of their Affiliates
relating solely to or arising solely from any RAL other than a Participated Pool
RAL or a RAC other than a Pool RAC or (ii) any Claim with respect to which Tax
Masters or HTMAC is indemnified by any third party (including, without
limitation, Block Tax Services or any other Originator Party). Tax Masters or
HTMAC shall remit to BFC the Applicable Percentage of any amount received by Tax
Masters or HTMAC as indemnification from a third party to the extent such
indemnification pertains to a Claim for which BFC previously indemnified Tax
Masters or HTMAC pursuant to this Section 6.2.
If different Applicable Percentages apply to Pool RALs with respect
to which a Claim arises, then (A) to the extent the Claim is identifiable to a
particular Pool RAL or to Pool RALs made in a particular Tax Period, the
Applicable Percentage applicable to BFC's indemnification obligation with
respect to such Claim shall be equal to the Applicable Percentage applicable to
such particular Pool RAL or to such Tax Period, as the case may be and (B)
otherwise, the Applicable Percentage applicable to BFC's indemnification
obligation with respect to such Claim shall be a weighted average of the
Applicable Percentages applicable to the Pool RALs or the Tax Period with
respect to which such Claim arose.
Section 6.3. Survival. The obligations of BFC under this Article VI
shall survive any termination under Section 5.1 and all other events and
conditions whatever. If and to the extent that any obligation of BFC under this
Article VI is unenforceable for any reason, BFC agrees to make the maximum
contribution to the payment and satisfaction of such obligation which is
permitted under applicable law.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Customer Lists. To the extent permitted by applicable
law, Tax Masters as servicer for the RAL Originator agrees to provide to BFC, or
any Affiliate of BFC during the term of this Agreement, within a reasonable time
after BFC's (or such Affiliate's) request but not more than twice during any
calendar year, a list of all persons (and, their full mailing addresses) to whom
the RAL Originator made and HTMAC purchased Pool RALs or Pool RACs during the
most recently ended Tax Period. Such list shall be provided in electronic form
and, to the extent reasonably practicable, in a form typical of mailing lists
purchased in the open market. Neither BFC nor its Affiliates shall use, or
permit the use of, such list for purposes of soliciting customers for credit
related products. BFC and such Affiliates shall take appropriate action by
agreement with third parties having access to such list to prohibit such third
parties from using such list for purposes of soliciting customers for credit
related products. Tax Masters or HTMAC shall be designated a third-party
beneficiary in any such agreement for purposes of enforcing such restricted use
of such list.
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Section 7.2. Independent Evaluation. BFC expressly acknowledges (i)
that, except as provided in Sections 2.1(a), 4.1 and 4.2, neither Tax Masters
nor HTMAC has any representation or warranty, express or implied, to BFC and no
act by Tax Masters or HTMAC heretofore or hereafter taken shall be deemed to
constitute any representation or warranty by Tax Masters or HTMAC to BFC; and
(ii) that, in connection with its entry into and its performance of its
obligations under this Agreement, BFC has made and shall continue to make its
own independent investigation of the economic and legal risks associated with
the making of RALs and purchase of Participation Interests.
Section 7.3. Notices. All notices required or permitted to be given
under this Agreement shall be in writing and shall be given by registered or
certified mail, return receipt requested, or by nationally recognized overnight
courier, addressed as follows:
If to BFC, to:
Block Financial Corporation
4400 Main Street
Kansas City, Missouri 64111
Attention: Jeffery A. Yabuki
If to Tax Masters, to:
Household Tax Masters Inc.
200 Somerset Corporate Blvd.
Bridgewater, New Jersey 08807
Attention: Paul Creatura
If to HTMAC, to:
Household Tax Masters Acquisition Corporation
200 Somerset Corporate Blvd.
Bridgewater, New Jersey 08807
Attention: Paul Creatura
Any party may change the address to which it desires notices to be
sent by giving the other parties ten (10) days prior notice of any such change.
Any notices shall be deemed given upon its receipt by the party to whom the
notice is addressed.
Section 7.4. Modification; No Waiver. This Agreement shall not be
modified or amended except by an instrument in writing signed by or on behalf of
the parties hereto. No waiver of any breach of, or failure to perform or
observe, any material term, covenant or agreement contained in this Agreement
shall constitute or be construed as a waiver by BFC, HTMAC or Tax Masters of any
subsequent breach or failure or of any breach of or failure with respect to any
of the other provisions of this Agreement.
Section 7.5. Prior Understandings. This Agreement supersedes all
prior oral understandings between the parties hereto relating to the
transactions provided herein.
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Section 7.6. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of Delaware, without regard
to choice of law rules thereof.
Section 7.7. Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary and convenient, and by the different
parties hereto in separate counterparts, each of which, when so executed, shall
be deemed to be an original, but all such counterparts together shall constitute
one and the same instrument.
Section 7.8. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of BFC, HTMAC and Tax Masters and their
representative successors and assigns and shall not be assigned by either party
hereto without the prior written consent of the other parties hereto, which
consent shall not unreasonably be withheld, conditioned or delayed, and any
purported assignment without such consent shall be void.
Section 7.9. Securitizations. Each of Tax Masters and HTMAC will use
its reasonable efforts to assist BFC with respect to the negotiation and
execution of all instruments and documents and to take all actions that are
reasonably necessary, or as BFC may reasonably request, in order to facilitate
the sale by BFC of the Participation Interests acquired by BFC pursuant to this
Agreement and the assignment by BFC of BFC's rights under this Agreement to an
Affiliate of BFC, and the resale of such Participation Interests and the
reassignment of such rights by the Affiliate to one or more liquidity providers.
Notwithstanding such assignment of its rights, BFC shall remain liable to
perform all of its covenants and obligations under this Agreement. To the extent
the terms and conditions of this Section 7.9 are inconsistent with the terms and
conditions of the Second ICB Consent Letter, the terms and conditions of the
Second ICB Consent Letter shall control.
Section 7.10. Headings. The Article, Section and any other headings
in this Agreement are for convenience of reference only and shall not be deemed
to alter or affect the meaning or interpretation of any of the provisions
hereof.
Section 7.11. Confidentiality. Without limitation of any other
obligations of confidentiality contained in this Agreement, the Second Amended
and Restated RAL Operations Agreement or otherwise arising (but subject to the
provisions of Section 7.1), all information, materials and documents heretofore
or hereafter furnished to BFC (or to its officers, directors, agents,
representatives or advisors) by Tax Masters or HTMAC, by Persons acting on
behalf of Tax Masters or HTMAC or at Tax Masters' or HTMAC's direction, or
otherwise in connection with this Agreement, either orally, in writing or by
inspection, regarding the Obligors, any RAL, any RAC, this Agreement or the
Second Amended and Restated RAL Operations Agreement shall be deemed
confidential and, except to the extent required by law, shall be kept in strict
confidence under appropriate safeguards by BFC and its officers, directors,
agents, representatives and advisors.
Section 7.12. Not a Joint Venture. Neither this Agreement nor the
transactions contemplated by this Agreement shall be deemed to give rise to a
partnership or joint venture between Tax Masters, HTMAC and BFC.
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Section 7.13. HTMAC and Tax Masters Not Tax Preparers. Nothing in
this Agreement or the Second Amended and Restated RAL Operations Agreement shall
be construed to imply that Tax Masters or HTMAC at any time is in any way
responsible for the preparation, filing or contents of any tax return of any
Obligor under a Pool RAL, and BFC shall indemnify Tax Masters and HTMAC from and
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of every kind and nature
whatsoever which may be imposed upon, incurred by or asserted against Tax
Masters or HTMAC arising from any claim, allegation or assertion that Tax
Masters or HTMAC is or may be in any way responsible for the preparation, filing
or contents of any such tax return, or that Tax Masters or HTMAC, by virtue of
its participation in the transactions contemplated by this Agreement, is engaged
in an activity that subjects Tax Masters or HTMAC to any penalty on account of
the negotiation of any tax refund check in violation of the Internal Revenue
Code of 1986, as amended.
Section 7.14. Events Prior to Amendment. The parties affirm that
they are responsible for performing all of their agreements, duties and
obligations under the Second Amended and Restated RAL Participation Agreement
arising out of events occurring prior to the effective date of this Agreement,
and the provisions of the Second Amended and Restated RAL Participation
Agreement shall survive and continue to define the rights and obligations of the
parties with respect to such prior events.
Section 7.15. Financial Privacy. Tax Masters, HTMAC and BFC agree to
comply with the financial privacy provisions of Section 7.2 of the Second
Amended and Restated RAL Operations Agreement.
Section 7.16. Effective Date. The effective date of this Agreement
shall be the date first written above.
Section 7.17. Acquisition of Major Franchisees. Tax Masters and
HTMAC acknowledge that Block Services and its Affiliates are in the process of
repurchasing the major franchise agreements from certain of the Major
Franchisees. The parties hereto expressly agree that, for purposes of this
Agreement, (a) any Major Franchisee that is acquired by Block Services or an
Affiliate of Block Services shall thereafter be considered a Block Office and
shall cease to be considered a Major Franchisee, and (b) any Major Franchisee
whose major franchise agreement is terminated and who enters into a corporate
franchise agreement shall thereafter be treated as a Corporate Franchisee and
shall cease to be treated as a Major Franchisee.
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IN WITNESS WHEREOF, the parties hereto have caused this Third
Amended and Restated Refund Anticipation Loan Participation Agreement to be
executed by their respective officers thereunto duly authorized as of the date
set forth above.
BLOCK FINANCIAL CORPORATION
By:
---------------------------------------
Name:
Title:
HOUSEHOLD TAX MASTERS INC.
By:
---------------------------------------
Name:
Title:
HOUSEHOLD TAX MASTERS ACQUISITION CORPORATION
By:
---------------------------------------
Name:
Title:
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