Description of HSBC USA INC.'s zero coupon callable accreting notes due January 15, 2043 and zero coupon callable accreting notes due January 29, 2043

The following key terms relate to the January 15 Notes: 

The following key terms relate to the January 29 Notes: 

The Notes constitute direct unsecured obligations of HSBC USA and rank on a parity with all of the other unsecured and unsubordinated indebtedness of HSBC USA, present and future, except such obligations as are preferred by operation of law. The Notes were issued under a senior debt indenture, dated as of March 31, 2009 (the “Senior Indenture”), by and between HSBC USA and Wells Fargo Bank, National Association, as trustee (the “trustee”).

            The Notes are not deposit liabilities or other obligations of a bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency of the United States or any other jurisdiction. The Senior Indenture and the Notes do not limit the aggregate principal amount of Debt Securities (as defined in the Senior Indenture) that we may issue.

          The Notes were issued in minimum denominations of $1,000, increased in multiples of $1,000; provided, however, that any purchaser of Notes domiciled in a member state of the European Union is required either to be a qualified investor for purposes of the Prospectus Directive or to purchase and, while holding any such Notes, hold no less than $200,000 of such Notes.

            We have defined some of the terms that we use frequently in this exhibit below:

            A “business day” means any day, other than a Saturday or Sunday, (i) that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close (a) for all Notes, in the City of New York or (b) for Notes denominated in a specified currency other than U.S. dollars or euro, in the principal financial center of the country of the specified currency.

            “Clearstream, Luxembourg” means Clearstream Banking, société anonyme.

            “Depositary” means The Depository Trust Company, New York, New York.

            “Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear System.

            An “interest payment date” for any note means a date on which, under the terms of that note, regularly scheduled interest is payable.

            The “record date” for any interest payment date is the date 15 calendar days prior to that interest payment date, whether or not that date is a business day, unless another date is specified in the applicable pricing supplement.

            References in this exhibit to “U.S. dollar,” or “U.S.$” or “$” are to the currency of the United States of America.

            We offered the Notes only in fully registered form as book-entry notes. References to “holders” mean those who own Notes registered in their own names, on the books that we or the trustee maintain for this purpose, but not those who own beneficial interests in Notes registered in street name or in Notes issued in book-entry form through one or more depositaries.

            Book-Entry Notes.    We issued one or more global note certificates representing the entire issue of Notes. Except as set forth in the prospectus under “Book-Entry Procedures,” purchasers of the Notes may not exchange book-entry Notes or interests in book-entry Notes for certificated Notes.

            Each global note certificate representing book-entry Notes was deposited with, or on behalf of, the Depositary and registered in the name of the Depositary or nominee of the Depositary. These certificates name the Depositary or its nominee as the owner of the Notes. The Depositary maintains a computerized system that reflects the interests held by its participants in the global Notes. An investor's beneficial interest is reflected in the records of the Depositary's direct or indirect participants through an account maintained by the investor with its broker/dealer, bank, trust company or other representative. A further description of the Depositary's procedures for global Notes representing book-entry Notes is set forth in the prospectus under “Book-Entry Procedures.”

            Payments, Exchanges and Transfers.    Holders may present Notes for payment, register the transfer of the Notes and exchange the Notes at the corporate offices of HSBC Bank USA, N.A., as our current agent for payment, transfer and exchange of the Notes pursuant to a Paying Agent and Securities Registrar Agreement, dated June 1, 2009, between us and HSBC Bank USA, N.A. We refer to HSBC Bank USA, N.A., acting in this capacity, as the paying agent. However, beneficial owners of Notes represented by global Notes may transfer and exchange their Notes only in the manner and to the extent set forth under “Book-Entry Procedures” in the prospectus.

            We are not required to:

            No service charge will be made for any registration or transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with the registration of transfer or exchange of Notes.

            Book-Entry Notes.    The paying agent makes payments to the account of the Depositary or its nominee, as holder of book-entry Notes, by wire transfer of immediately available funds. We understand that the Depositary, upon receipt of any payment, immediately credits its participants' accounts in amounts proportionate to their respective beneficial interests in the book-entry Notes as shown on the records of the Depositary. We also understand that payments by the Depositary's participants to owners of beneficial interests in the book-entry Notes are governed by standing customer instructions and customary practices and are the responsibility of those participants.

            Optional Redemption.    The terms of our option to redeem the Notes are described above. The Notes are callable in whole but not in part on each Optional Redemption Date, upon at least five Business Days' prior written notice. The Notes are not subject to any sinking fund.

            Open Market Purchases.    We may purchase notes at any price in the open market or otherwise. Notes so purchased by us may, at our discretion, be held or resold or surrendered to the relevant trustee for cancellation.

            Under the Senior Indenture, we may consolidate with or merge into any other corporation or convey, transfer or lease our properties and assets substantially as an entirety to any person without the consent of the holders of any of the Notes, provided that:

(d) certain other conditions are met.

            The Senior Indenture provides that we and the trustee may modify or amend the Senior Indenture with the consent of the holders of 66²/3% in principal amount of the outstanding Notes of each series affected by a particular modification or amendment; provided, however, that any modification or amendment may not, without the consent of the holder of each outstanding Note affected thereby:

            The holders of 66²/3% in principal amount of the outstanding Notes of each series may, on behalf of all holders of Notes of that series, waive, insofar as that series is concerned, compliance by us with certain terms,

conditions and provisions of the Senior Indenture. The holders of not less than a majority in principal amount of the outstanding Notes of any series may, on behalf of all holders of Notes of that series, waive any past default under the Senior Indenture with respect to Notes of that series and its consequences, except that a default in the payment of principal or premium, if any, or interest, if any, or in respect of a covenant or provision which under Article XI of the Indenture cannot be modified or amended without the consent of the holder of each outstanding Notes of the affected series.

            The Senior Indenture provides that, in determining whether the holders of the requisite principal amount of the outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver thereunder or are present at a meeting of holders for quorum purposes, and for making calculations required under Section 313 of the Trust Indenture Act, the principal amount of a discount security that may be counted in making the determination or calculation and that will be deemed to be outstanding will be the amount of principal thereof that would be due and payable as of the time of the determination upon acceleration of the maturity thereof.

            We may elect:

in either case by:

            If we exercise our covenant defeasance option with respect to any series of Notes and those Notes are declared due and payable because of the occurrence of any Event of Default other than with respect to a covenant as to which there has been covenant defeasance as described above, the money and U.S. Government Obligations on deposit with the trustee will be sufficient to pay amounts due on the Notes at their stated maturity but may not be sufficient to pay amounts due on the Notes at the time of acceleration relating to the Event of Default. However, we would remain liable to make payment of the amounts due at the time of acceleration.

The following are Events of Default under the Senior Indenture with respect to a series of Notes:

(a) failure to pay principal on the Notes of that series at maturity;

(b) failure to perform any of our covenants or warranties in the Senior Indenture (other than a covenant or warranty included in the Senior Indenture solely for the benefit of a series of Debt Securities other than such series of Notes) or established in or pursuant to a board resolution or supplemental indenture, as the case may be, pursuant to which the Notes of such series were issued, which failure continues for 60 days after written notice to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the outstanding Notes of that series as provided in the Senior Indenture;

(c) default under any bond, debenture, note, mortgage, indenture, other instrument or other evidence of indebtedness for money borrowed in an aggregate principal amount exceeding $5 million by us or the Bank or our or the Bank's successors (including a default with respect to Debt Securities of another series) under the terms of the instrument or instruments by or under which the indebtedness is evidenced, issued or secured, which default results in the acceleration of the indebtedness, if this acceleration is not rescinded or annulled, or the indebtedness is not discharged, within 10 days after written notice to us by the trustee or to us and the trustee by the holders of at least 25% in principal amount of the outstanding Notes of that series as provided in the Senior Indenture;

(d) certain events in bankruptcy, insolvency or reorganization involving us or any substantial part of our property.

            If an Event of Default with respect to Notes of any series at the time outstanding occurs and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes of that series may declare an amount equal to the public offering price per $1,000 in principal amount of the Notes plus accrued interest from the Issue Date at the rate equal to the Annual Yield for that series, calculated on the basis of a 360-day year consisting of twelve 30-day months, on all such Notes to be due and payable immediately, by a written notice to us (and to the trustee, if given by holders), and upon such a declaration this principal amount (or specified amount) shall become immediately due and payable. At any time after a declaration of acceleration with respect to Notes of any series has been made, but before a judgment or decree for payment of the money due has been obtained, the holders of a majority in principal amount of outstanding Notes of that series may, under certain circumstances, rescind and annul the declaration and its consequences, if all Events of Default have been cured, or if permitted, waived, and all payments due (other than those due as a result of acceleration) have been made or provided for.

            The Senior Indenture provides that, subject to the duty of the trustee during an Event of Default to act with the required standard of care, the trustee will be under no obligation to exercise any of its rights or powers under the Senior Indenture at the request or direction of any of the holders Notes of any series, unless the relevant holders shall have offered to the trustee reasonable indemnity or security against the costs, expenses and liabilities which may be incurred. Subject to certain provisions, the holders of a majority in principal amount of the outstanding Notes of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect to the Notes of that series.

           We are required to deliver to the trustee annually an officers' certificate as to whether we are in default in the performance and observance of any of the terms, provisions and conditions of the Senior Indenture. We also are required to deliver written notice to the trustee promptly after any of our officers has knowledge of the occurrence of any event that with the giving of notice or the lapse of time or both would constitute under the Senior Indenture the type of Event of Default described in clause (b) above.

           Upon payment by the holder of expenses that we or the trustee may incur, we may, in our discretion replace any Notes that become mutilated, destroyed, lost or stolen or are apparently destroyed, lost or stolen. The mutilated Notes must be surrendered to the trustee or the paying agent or satisfactory evidence of the destruction, loss or theft of the Notes must be delivered to us, the paying agent and the trustee. At the expense of the holder, an indemnity that is satisfactory to us, the principal paying agent and the trustee may be required before a replacement Note will be issued.

            Wells Fargo Bank, National Association, the trustee under the Senior Indenture, has a designated corporate trust office at 45 Broadway, 14^th Floor, New York, New York 10006. We and our banking subsidiaries maintain banking relationships with the trustee.

            Any notice required to be given to a holder of a Note that is a registered security will be mailed to the last address of the holder set forth in the applicable security register, and any notice so mailed shall be deemed to have been received by the holder, whether or not the holder actually receives the notice.

            The Notes are governed by and construed in accordance with the laws of the State of New York.

You should carefully consider the matters set forth in “U.S. Federal Income Tax Considerations” in the prospectus supplement.  We and each holder of Notes (in the absence of an administrative determination, judicial ruling or other authoritative guidance to the contrary) agree to treat the Notes for U.S. federal income tax purposes as indebtedness issued by us.  The Notes were issued with original issue discount (“OID”).  A U.S. Holder (as defined in the prospectus supplement) must include OID in income as ordinary interest as it accrues, generally in advance of receipt of cash attributable to such income. U.S. holders should review the discussion set forth in “U.S. Federal Income Tax Considerations-U.S. Federal Income Tax Treatment of the Notes as Indebtedness for U.S. Federal Income Tax Purposes-Original Issue Discount” in the prospectus supplement.  In general, gain or loss realized on the sale, exchange or other disposition of the Notes will be capital gain or loss. A non-U.S. holder (as defined below) should review the discussion set forth in “U.S. Federal Income Tax Considerations-Tax Treatment of Non-U.S. Holders” in the prospectus supplement.